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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES AND
EXCHANGE ACT OF 1934
For the fiscal year ended DECEMBER 31, 1997
or
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from _______ to _______
Commission File Number: 1-13115
EQUITY OFFICE PROPERTIES TRUST
(Exact name of registrant as specified in its charter)
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MARYLAND 36-4151656
(State or other jurisdiction of incorporation or organization) (I.R.S. Employer Identification No.)
TWO NORTH RIVERSIDE PLAZA, 60606
SUITE 2200, CHICAGO, ILLINOIS (Zip Code)
(Address of principal executive offices)
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(312) 466-3300
(Registrant's telephone number, including area code)
SECURITIES REGISTERED PURSUANT TO SECTION 12(b) OF THE ACT:
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Title of each class Name of each exchange on which registered
Common Shares of Beneficial Interest, New York Stock Exchange
$.01 par value per share ("Common Shares")
8.98% Series A Cumulative Redeemable Preferred New York Stock Exchange
Shares of Beneficial Interest,
$.01 par value per share
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SECURITIES REGISTERED PURSUANT TO SECTION 12(g) OF THE ACT:
(None)
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (of for such shorter period that the
registrant was required to file such report), and (2) has been subject to such
filing requirements for the past 90 days. [X] Yes [ ] No
Indicate by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K is not contained herein, and will not be contained, to the
best of the registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-K or any
amendment to this Form 10-K. [ ]
The aggregate market value of the Common Shares held by non-affiliates of
the registrant as of March 25, 1998 was $7,544,940,330.
On March 25, 1998, 250,346,176 of the registrant's Common Shares were
outstanding.
DOCUMENTS INCORPORATED BY REFERENCE
Portions of the registrant's annual report to shareholders for the year
ended December 31, 1997 are incorporated by reference into Part II. Portions of
the registrant's proxy statement for the annual shareholders' meeting to be held
in 1998 are incorporated by reference into Part III.
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EQUITY OFFICE PROPERTIES TRUST
TABLE OF CONTENTS
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PART I. PAGE
Item 1. Business 1
Item 2. Properties 29
Item 3. Legal Proceedings 52
Item 4. Submission of Matters to a Vote of Security Holders 52
PART II.
Item 5. Market for the Registrant's Common Equity and Related Shareholder
Matters 52
Item 6. Selected Financial Data 54
Item 7. Management's Discussion and Analysis of Financial Condition and
Results of Operations 54
Item 7A. Quantitative and Qualitative Disclosure About Market Risk 54
Item 8. Financial Statements and Supplementary Data 54
Item 9. Changes in and Disagreements with Accountants on Accounting and
Financial Disclosure 54
PART III.
Item 10. Trustees and Executive Officers of the Registrant 54
Item 11. Executive Compensation 54
Item 12. Security Ownership of Certain Beneficial Owners and Management 55
Item 13. Certain Relationships and Related Transactions 55
PART IV.
Item 14. Exhibits, Financial Statement Schedules, and Reports on Form 8-K 55
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PART I
ITEM 1. BUSINESS
THE COMPANY
Equity Office Properties Trust (the "Company") was formed in 1996 as a
Maryland real estate investment trust and commenced operations effective with
the completion of its initial public offering (the "IPO") of 28,750,000 common
shares of beneficial interest, $.01 par value per share (the "Common Shares"),
on July 11, 1997. The Company, together with EOP Operating Limited Partnership,
a Delaware limited partnership (the "Operating Partnership"), was formed to
continue and expand the national office property business organized by Mr.
Samuel Zell, Chairman of the Board of Trustees of the Company. The Company, a
self-administered and self-managed real estate investment trust ("REIT"), is the
managing general partner of the Operating Partnership. As of December 31, 1997,
the Company owned, directly or indirectly, 89.5% of the outstanding partnership
interests in the Operating Partnership. The Company owns all of its assets and
conducts substantially all of its business through the Operating Partnership and
its subsidiaries. The term "Company" includes, unless the context otherwise
requires, Equity Office Properties Trust, the Operating Partnership and their
subsidiaries, and the predecessors thereof. The term "Trust" means Equity
Office Properties Trust alone.
As of December 31, 1997, the Company owned or had an interest in 258 office
properties containing approximately 65.3 million rentable square feet of office
space (the "Office Properties") and owned or had an interest in 17 stand-alone
parking facilities containing approximately 16,749 parking spaces (the "Parking
Facilities" and, together with the Office Properties, the "Properties"). To
facilitate maintenance of the Company's qualification as a REIT for federal
income tax purposes, management of properties that are not wholly owned by the
Company and its subsidiaries is generally conducted through Equity Office
Properties Management Corp., a Delaware corporation ("EOP Management Company"),
and Beacon Property Management Corporation, a Delaware corporation ("Beacon
Management Company").
The Company's executive offices are located at Two North Riverside Plaza,
Suite 2200, Chicago, Illinois 60606, and its telephone number is (312) 466-3300.
ACQUISITION ACTIVITY
During the period from 1987 through 1997, the Company invested
approximately $10 billion, averaging $2.7 billion annually (calculated on a cost
basis) for the three years ended December 31, 1997, in acquisitions of
institutional quality office properties throughout the United States. During the
period from the Company's IPO in July 1997 through December 1997, the Company
completed a number of new acquisitions:
BEACON MERGER. On December 19, 1997, the Company, the Operating
Partnership, Beacon Properties Corporation, a Maryland corporation ("Beacon"),
and Beacon Properties, L.P., a Delaware limited partnership of which Beacon was
the sole general partner ("Beacon Partnership"), consummated the transactions
contemplated by the Agreement and Plan of Merger dated September 15, 1997, as
amended, among the Company, the Operating Partnership, Beacon and Beacon
Partnership (the "Merger Agreement"). Pursuant to the Merger Agreement, Beacon
merged with and into the Company and Beacon Partnership merged with and into the
Operating Partnership (the "Beacon Merger"). The acquisition cost of the Beacon
Merger was approximately $4.3 billion.
In the Beacon Merger, (i) the Company issued 80,596,117 Common Shares in
exchange for all of the outstanding shares of common stock, $0.01 par value per
share, of Beacon ("Beacon Common Shares"), (ii) the Company issued 8,000,000
8.98% Series A Cumulative Redeemable Preferred Shares, liquidation preference
$25.00 per share, of the Company ("Series A Preferred Shares") in exchange for
all of the outstanding shares of 8.98% Series A Cumulative Redeemable Preferred
Stock, liquidation preference $25.00 per share, of Beacon ("Beacon Preferred
Shares"), (iii) the Operating Partnership issued 8,570,886 common units of
limited partnership interest ("Units") of the Operating Partnership
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in exchange for the outstanding common partnership units of Beacon Partnership
exclusive of those held by Beacon, and (iv) the Operating Partnership issued to
the Company 80,596,117 Units in exchange for the outstanding common units of
Beacon Partnership held by Beacon when it merged into the Company and 8,000,000
Series A Cumulative Redeemable Preferred Units ("Series A Preferred Units") in
exchange for the corresponding preferred units of Beacon Partnership held by
Beacon when it merged with the Company. In addition, the Company assumed the
obligation to issue 4,732,822 Common Shares, of which 3,829,739 had been issued
as of December 31, 1997, upon the exercise of certain outstanding Beacon
employee stock options. The $4.3 billion acquisition cost is comprised of the
following: (i) based on a share price of $31.30, the Common Shares, including
the Common Shares issued for stock options, and Units were valued at
approximately $2.853 billion (which is net of a reduction for cash of $86
million received or to be received upon exercise of options); (ii) the issuance
of 8,000,000 Series A Preferred Shares valued at their liquidation value of $200
million; (iii) the assumption of approximately $627 million of secured debt and
$533 million of unsecured debt; (iv) transaction costs of approximately $85
million; and (v) net of the receipt of approximately $8 million of net assets.
As a result of the Beacon Merger, the Company acquired interests in 130
Office Properties (the "Beacon Properties") containing approximately 20.9
million rentable square feet of office space. The Beacon Properties are located
in 22 submarkets in six markets: Boston, Atlanta, Chicago, Los Angeles, San Jose
and Washington, D.C.
WRIGHT RUNSTAD ACQUISITION. On December 17, 1997, the Company acquired ten
Office Properties, containing an aggregate of approximately 3.34 million square
feet, located in Seattle, Washington, Portland, Oregon and Anchorage, Alaska,
from Wright Runstad Holdings L.P., Wright Runstad Asset Management L.P. and
Mellon Bank, N.A., as Trustee for First Plaza Group Trust ("First Plaza") (the
"Wright Runstad Acquisition"). The purchase price was approximately $640
million. The total consideration included the assumption of approximately $240
million of existing debt, $208.9 million in cash and $176.1 million in Units
valued at $29.11 per Unit, $100 million of which were exchanged by the sellers
for restricted Common Shares. The sellers also received five-year warrants
(valued at approximately $15 million) to purchase an additional five million
restricted Common Shares at an exercise price of $39.375 per share. In addition
EOP Office Company, a Delaware corporation, acquired a 30% noncontrolling
interest in Wright Runstad Asset Limited Partnership ("WRALP") for $16 million
in cash and $4 million in Units valued at $29.11 per unit and agreed to provide
up to $20 million in additional financing or credit support for future
development activities at WRALP.
OTHER ACQUISITIONS. In addition to the Beacon Merger and the Wright Runstad
Acquisition, during the period from the IPO through December 31, 1997, the
Company completed nine other acquisition transactions in which it acquired 27
Office Properties, containing an aggregate of approximately 8.8 million square
feet, located in New Orleans, Houston, Dallas, Philadelphia, Los Angeles,
Chicago, Washington, D.C. and Fairfax and Alexandria, Virginia (the "Other
Acquisitions"). The Company also acquired three Parking Facilities, containing
approximately 2,141 parking spaces in Chicago, New Orleans and Pittsburgh. The
aggregate consideration paid by the Company in these acquisitions was
approximately $1.47 billion, comprised of $1.26 billion in cash, $163 million in
Units and $48 million in assumed liabilities.
BUSINESS AND GROWTH STRATEGIES
The Company's primary business objective is to achieve sustainable
long-term growth in cash flow and portfolio value. The Company intends to
achieve this objective by owning and operating institutional quality office
buildings and providing a superior level of service to tenants in central
business districts ("CBDs") and suburban markets across the United States. The
Company intends to supplement this strategy by owning parking facilities.
INTERNAL GROWTH. Management believes that the Company's future internal
growth will come from (i) lease up of vacant space, (ii) tenant roll-over at
increased rents where market conditions permit, (iii) repositioning of certain
Properties which have not yet achieved stabilization, and (iv) increasing
economies of scale.
As of December 31, 1997, 3.9 million rentable square feet of Office
Property space was vacant. Of this amount, 735,700 square feet was leased at an
average rent of $26.62 per square foot, with occupancy to commence in whole or
in part
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during 1998. The Company's average operating expenses for the total vacant space
were $9.37 per square foot as of December 31, 1997.
During the period from December 31, 1997 through December 31, 2002, 4,673
leases for 36.5 million rentable square feet of space are scheduled to expire.
As of December 31, 1997, the average rent for this space was $21.77 per square
foot and the weighted average operating expenses were $8.80 per square foot. The
actual rental rates at which available space will be relet will depend on
prevailing market factors at the time.
The Company owns undeveloped land on 23 sites on which approximately 8.1
million square feet of office space could be developed. The Company's policy is
to develop land only if significant pre-leasing can be arranged or if such
development is necessary to protect the Company's investment in existing
Properties. The Company currently does not anticipate significant development
activities on this land.
EXTERNAL GROWTH. The Company is pursuing, and expects to continue to
actively pursue, acquisitions of additional office properties and parking
facilities. Properties may be acquired separately or as part of a portfolio, and
may be acquired for cash and/or in exchange for equity or debt securities of the
Company or the Operating Partnership, and such acquisitions may be customary
real estate transactions and/or mergers or other business combinations.
PARKING FACILITIES. The Company intends to focus its acquisition efforts
for parking facilities solely on municipal or private parking facilities that
have limited competition, no (or minimal) rental rate restrictions and/or a
superior location proximate to or affiliated with airports, CBDs, entertainment
projects or healthcare facilities.
EMPLOYEES
As of December 31, 1997, the Company had approximately 1,456 employees
providing in-house expertise in property management, leasing, finance, tax,
acquisition, development, disposition, marketing, accounting, information
systems and real estate law. The five most senior executives have an average
tenure of 11 years with the Company or its affiliates and an average of 23 years
experience in the real estate industry.
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RISK FACTORS
Set forth below are the risks that we believe are material to investors
who purchase or own the Trust's common or preferred shares of beneficial
interest (which we refer to as "Shares") or Units of limited partnership
interest of the Operating Partnership, which are redeemable on a one-for-one
basis for Common Shares or their cash equivalent. We refer to the Shares and the
Units together as our "securities," and the investors who own Shares and/or
Units as our "securityholders."
THERE CAN BE NO ASSURANCE THAT WE WILL EFFECTIVELY MANAGE OUR RAPID GROWTH AND
EXPANSION INTO NEW MARKETS
We are currently growing rapidly. As of December 31, 1997, we owned
interests in 258 Office Properties containing 65.3 million square feet. We also
owned interests in 17 Parking Facilities containing approximately 16,749 parking
spaces. Our office portfolio grew by 102% (on a square footage basis) and our
parking portfolio grew by 13% (based on the number of parking spaces) from the
time of our IPO in July 1997 through the end of the year. Additionally, the
Beacon Merger, which closed in December 1997, substantially expanded our
operations in Boston and extended our operations to San Jose. The Wright Runstad
acquisition, which also closed in December 1997, extended our operations to
Seattle, Washington, Portland, Oregon and Anchorage, Alaska. Other recent
acquisitions extended our operations to downtown New Orleans, suburban
Philadelphia, Minneapolis and Pittsburgh. We plan to continue this rapid growth
for the foreseeable future. We plan on managing this growth by applying our
experience to new markets and properties and expect to be successful in that
effort. If we do not effectively manage our rapid growth, however, we may not be
able to make expected distributions to our securityholders.
OUR PERFORMANCE AND SHARE VALUE ARE SUBJECT TO RISKS ASSOCIATED WITH THE REAL
ESTATE INDUSTRY
GENERAL. If our assets do not generate income sufficient to pay our
expenses, service our debt and maintain our properties, we may not be able to
make expected distributions to our securityholders. Several factors may
adversely affect the economic performance and value of our properties. These
factors include changes in the national, regional and local economic climate,
local conditions such as an oversupply of office properties or a reduction in
demand for office properties, the attractiveness of our properties to tenants,
competition from other available office properties, changes in market rental
rates and the need to periodically repair, renovate and relet space. Our
performance also depends on our ability to collect rent from tenants and to pay
for adequate maintenance, insurance and other operating costs (including real
estate taxes), which could increase over time. Also, the expenses of owning and
operating a property are not necessarily reduced when circumstances such as
market factors and competition cause a reduction in income from the property. If
a property is mortgaged and we are unable to meet the mortgage payments, the
lender could foreclose on the mortgage and take the property. In addition,
interest rate levels, the availability of financing, changes in laws and
governmental regulations (including those governing usage, zoning and taxes) and
the possibility of bankruptcies of tenants may adversely affect our financial
condition.
WE MAY BE UNABLE TO RENEW LEASES OR RELET SPACE AS LEASES EXPIRE. When
our tenants decide not to renew their leases upon their expiration, we may not
be able to relet the space. Even if the tenants do renew or we can relet the
space, the terms of renewal or reletting (including the cost of required
renovations) may be less favorable than current lease terms. Over the next five
years (through the end of 2002), leases will expire on a total of 56% of the
rentable square feet at our current properties. If we are unable to promptly
renew the leases or relet this space, or if the rental rates upon such renewal
or reletting are significantly lower than expected rates, then our results of
operations and financial condition will be adversely affected. Consequently, our
cash flow and ability to service debt and make distributions to securityholders
would be adversely affected.
NEW ACQUISITIONS MAY FAIL TO PERFORM AS EXPECTED AND COMPETITION FOR
ACQUISITIONS MAY RESULT IN INCREASED PRICES FOR PROPERTIES. We intend to
continue to actively acquire office and parking properties. Newly acquired
properties may fail to perform as expected. We may underestimate the costs
necessary to bring an acquired property up to standards established for its
intended market position. Additionally, we expect other major real estate
investors with significant capital will compete with us for attractive
investment opportunities. These competitors include publicly traded REITs,
private REITs, investment banking firms and private institutional investment
funds. This competition has increased prices for office properties. We expect to
acquire properties with cash from secured or unsecured financings and proceeds
from offerings of equity or debt. We may not be in a position or have the
opportunity in the future to make suitable property acquisitions on favorable
terms. See "Management's Discussion and Analysis of Financial Condition and
Results of Operations -- Liquidity and Capital Resources."
BECAUSE REAL ESTATE INVESTMENTS ARE ILLIQUID, WE MAY NOT BE ABLE TO
SELL PROPERTIES WHEN APPROPRIATE. Real estate investments generally cannot be
sold quickly. We may not be able to vary our portfolio promptly in response to
economic or other conditions. This inability to respond promptly to changes in
the performance of our investments could adversely affect our financial
condition and ability to service debt and make distributions to our
securityholders.
SOME POTENTIAL LOSSES ARE NOT COVERED BY INSURANCE. We carry
comprehensive liability, fire, extended coverage and rental loss insurance on
all of our properties. We believe the policy specifications and insured limits
of these policies are adequate and appropriate. There are, however, certain
types of losses, such as lease and other contract claims, that generally are not
insured. Should an uninsured loss or a loss in excess of insured limits occur,
we could lose all or a portion of the capital we
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have invested in a property, as well as the anticipated future revenue from the
property. In such an event, we might nevertheless remain obligated for any
mortgage debt or other financial obligations related to the property.
We carry earthquake insurance on all of our properties, including those
located in California. Our earthquake policies are subject to coverage
limitations which we believe are commercially reasonable. In light of the
California earthquake risk, California building codes since the early 1970s have
established construction standards for all new buildings. The current and
strictest construction standards were adopted in 1987. Of the 43 properties (as
of December 31, 1997) located in California, 12 have been built since January 1,
1988 and we believe they were constructed in full compliance with the applicable
standards existing at the time of construction. It is nevertheless a possibility
that material losses in excess of insurance proceeds will occur in the future.
DEBT FINANCING, FINANCIAL COVENANTS, DEGREE OF LEVERAGE, AND INCREASES IN
INTEREST RATES COULD ADVERSELY AFFECT OUR ECONOMIC PERFORMANCE
SCHEDULED DEBT PAYMENTS COULD ADVERSELY AFFECT OUR FINANCIAL CONDITION.
Our business is subject to risks normally associated with debt financing. Cash
flow could be insufficient to pay distributions at expected levels and meet
required payments of principal and interest. We may not be able to refinance
existing indebtedness (which in virtually all cases requires substantial
principal payments at maturity) and, if we can, the terms of such refinancing
might not be as favorable as the terms of existing indebtedness. The total
principal amount of our outstanding indebtedness was $4.28 billion as of
December 31, 1997. See "Management's Discussion and Analysis of Financial
Condition and Results of Operations -- Liquidity and Capital Resources -- Debt
Financing." If principal payments due at maturity cannot be refinanced, extended
or paid with proceeds of other capital transactions, such as new equity capital,
our cash flow will not be sufficient in all years to repay all maturing debt. If
prevailing interest rates or other factors at the time of refinancing (such as
the possible reluctance of lenders to make commercial real estate loans) result
in higher interest rates, increased interest expense would adversely affect cash
flow and our ability to service debt and make distributions to securityholders.
FINANCIAL COVENANTS COULD ADVERSELY AFFECT OUR FINANCIAL CONDITION. If
a property is mortgaged to secure payment of indebtedness and we are unable to
meet mortgage payments, the mortgagee could foreclose on the property, resulting
in loss of income and asset value. The mortgages on our properties contain
customary negative covenants which, among other things, limit our ability,
without the prior consent of the lender, to further mortgage the property, to
enter into new leases or materially modify existing leases, and to discontinue
insurance coverage. In addition, our credit facilities contain certain customary
restrictions, requirements and other limitations on our ability to incur
indebtedness, including total debt to assets ratios, secured debt to total
assets ratios, debt service coverage ratios and minimum ratios of unencumbered
assets to unsecured debt. The Indenture under which our senior unsecured
indebtedness is issued contains certain financial and operating covenants
including, among other things, certain coverage ratios, as well as limitations
on our ability to incur secured and unsecured indebtedness, sell all or
substantially all of our assets and engage in mergers and consolidations and
certain acquisitions. Foreclosure on mortgaged properties or an inability to
refinance existing indebtedness would likely have a negative impact on our
financial condition and results of operations.
OUR DEGREE OF LEVERAGE COULD LIMIT OUR ABILITY TO OBTAIN ADDITIONAL
FINANCING. Our Debt to Market Capitalization Ratio (total debt as a percentage
of total debt plus the market value of the outstanding Common Shares and Units)
is approximately 32.2% as of December 31, 1997. We have a policy of incurring
indebtedness for borrowed money only through the Operating Partnership and its
subsidiaries and only if upon such incurrence our Debt to Market Capitalization
Ratio would be approximately 50% or less. The degree of leverage could have
important consequences to securityholders, including affecting our ability to
obtain additional financing in the future for working capital, capital
expenditures, acquisitions, development or other general corporate purposes and
making us more vulnerable to a downturn in business or the economy generally.
RISING INTEREST RATES COULD ADVERSELY AFFECT CASH FLOW. We obtained the
$600 Million Credit Facility in July 1997 and the $1.5 Billion Credit Facility
in October 1997 and sold the $1.5 Billion Notes and MOPPRS in the February 1998
Notes Offering. See "Management's Discussion and Analysis of Financial Condition
and Results of Operations -- Liquidity and Capital Resources -- Debt Financing."
The $1.5 Billion Notes and MOPPRS have fixed interest rates, but advances under
the Credit Facilities bear interest at a variable rate based upon one-month
LIBOR. We had, as of December 31, 1997, interest rate hedging agreements for
approximately $1.0 billion of our floating rate debt to limit our exposure to
rising interest rates, but terminated these agreements when we paid down the
credit facilities with the proceeds of the February 1998 Notes Offering.
Although hedging agreements enable us to convert floating rate liabilities to
fixed rate liabilities, they expose us to the risk that the counterparties to
such hedge agreements may not perform, which could increase our exposure to
rising interest rates. Generally, however, the counterparties to hedging
agreements which would enter into are major financial institutions. We may
borrow additional money with variable interest rates in the future, and enter
other transactions to limit our exposure to rising interest rates as appropriate
and cost effective. Increases in interest rates, or the loss of the benefits of
hedging agreements, would increase our interest expenses, which would adversely
affect cash flow and our ability to service our debt and make distributions to
securityholders.
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SHAREHOLDERS' ABILITY TO EFFECT CHANGES IN CONTROL OF THE COMPANY IS LIMITED
PROVISIONS OF OUR DECLARATION OF TRUST AND BYLAWS COULD INHIBIT CHANGES
IN CONTROL. Certain provisions of our Declaration of Trust and Bylaws may delay
or prevent a change in control of the Company or other transaction that could
provide the shareholders with a premium over the then-prevailing market price of
their Shares or which might otherwise be in the best interest of our
securityholders. These include a staggered Board of Trustees and the Ownership
Limit described below. Also, any future series of Preferred Shares may have
certain voting provisions that could delay or prevent a change of control or
other transaction that might involve a premium price or otherwise be good for
our securityholders.
WE COULD ADOPT MARYLAND LAW LIMITATIONS ON CHANGES IN CONTROL. Certain
provisions of Maryland law applicable to real estate investment trusts prohibit
"business combinations" (including certain issuances of equity securities) with
any person who beneficially owns ten percent or more of the voting power of
outstanding shares, or with an affiliate of the trust who, at any time within
the two-year period prior to the date in question, was the beneficial owner of
ten percent or more of the voting power of the outstanding voting shares (an
"Interested Shareholder"), or with an affiliate of an Interested Shareholder.
These prohibitions last for five years after the most recent date on which the
Interested Shareholder became an Interested Shareholder. After the five-year
period, a business combination with an Interested Shareholder must be approved
by two super-majority shareholder votes unless, among other conditions, the
trust's common shareholders receive a minimum price for their shares and the
consideration is received in cash or in the same form as previously paid by the
Interested Shareholder for its common shares. The Board of Trustees opted out of
these business combination provisions. Consequently, the five-year prohibition
and the super-majority vote requirements will not apply to a business
combination involving the Trust. The Board of Trustees may however, repeal this
election (except with respect to a shareholder who became an Interested
Shareholder in connection with our formation in July 1997) and cause the Company
to become subject to these provisions in the future.
WE HAVE A SHARE OWNERSHIP LIMIT FOR REIT TAX PURPOSES. To remain
qualified as a REIT for federal income tax purposes, not more than 50% in value
of our outstanding Shares may be owned, directly or indirectly, by five or fewer
individuals (as defined in the federal income tax laws applicable to REITs) at
any time during the last half of any year. See "Federal Income Tax
Considerations --Taxation of the Company as a REIT --General" and "--
Requirements for Qualification as a REIT." To facilitate maintenance of our REIT
qualification, our Declaration of Trust, subject to certain exceptions,
prohibits ownership by any single shareholder of more than 9.9% (in value or
number of shares, whichever is more restrictive) of any class or series of
Shares. We refer to this as the "Ownership Limit." Our Declaration of Trust
permits the Board of Trustees to increase the Ownership Limit with respect to
any class or series of Shares. Further, the Board of Trustees is required to
waive or modify the Ownership Limit with respect to a shareholder who would not
be treated as an "individual" for purposes of the Code if such shareholder's
ownership in excess of the limit will not cause a shareholder who is an
individual to be treated as owning Shares in excess of the Ownership Limit or
otherwise jeopardize our REIT status. Absent any such exemption or waiver,
Shares acquired or held in violation of the Ownership Limit will be transferred
to a trust for the exclusive benefit of a designated charitable beneficiary, and
the shareholder's rights to distributions and to vote would terminate. Such
shareholder would be entitled to receive, from the proceeds of any subsequent
sale of the shares transferred to the charitable trust, the lesser of (i) the
price paid for the Shares or, if the owner did not pay for the Shares (for
example, in the case of a gift, devise of other such transaction), the market
price of the Shares on the date of the event causing the Shares to be
transferred to the charitable trust or (ii) the amount realized from such sale.
A transfer of Shares may be void if it causes a person to violate the Ownership
Limit. The Ownership Limit could delay or prevent a change in control and,
therefore, could adversely affect our shareholders' ability to realize a premium
over the then-prevailing market price for their Shares.
WE DO NOT CONTROL OUR MANAGED PROPERTIES OR MANAGEMENT AND NON-REIT SERVICES
BUSINESSES
THIRD-PARTY OWNERS OF MANAGED PROPERTIES CAN TERMINATE OUR MANAGEMENT
CONTRACTS. As of December 31, 1997, our Noncontrolled Subsidiaries were managing
31 properties owned by affiliates of Mr. Zell and three properties owned by
unrelated third parties. We sometimes refer to these properties as the "Managed
Properties." The management contracts with respect to the Managed Properties are
terminable by the property owners on 30 or 60 days' notice. Any such contract
would likely be terminated in connection with a sale of the property, over which
we have no control. When they expire, these contracts might not be renewed or
might be renewed on less favorable terms. Also, the rental revenues on which
management fees are based could decline as a result of general real estate
market conditions or specific market factors. This would result in decreased
management fee income. Affiliates of Mr. Zell are currently in the process of
selling certain of the Managed Properties. There can be no assurance that
management contracts will not be terminated in the future.
WE DO NOT CONTROL OUR MANAGEMENT AND SERVICES BUSINESS. To facilitate
maintenance of our REIT qualification, we have Noncontrolled Subsidiaries that
provide management and other services for properties that we do not wholly own.
As of December 31, 1997, we had five Noncontrolled Subsidiaries: Equity Office
Properties Management Corp. and Beacon Property Management Corporation (which we
refer to together as the "Management Companies"), which manage the Managed
Properties and certain properties held in joint ventures; Beacon Design Company,
which provides third-party tenant design services; Beacon Construction Company,
which provides third-party construction services; and EOP Office Company, which
owns a noncontrolling interest in Wright Runstad Asset Limited Partnership,
which provides third-party development services. While we generally own
substantially all (95% or 99%) of the economic interest in the Noncontrolled
Subsidiaries, their voting stock is
3
<PAGE> 9
owned directly or indirectly by private companies controlled by Mr. Zell. (See
"Mr. Zell's Affiliates Control Our Management Companies and Most of the Managed
Properties" below.) We therefore do not control the timing or amount of
distributions or the management and operation of the Noncontrolled Subsidiaries.
As a result, decisions relating to the declaration and payment of distributions
and the business policies and operations of the Noncontrolled Subsidiaries could
be adverse to our interests or could lead to adverse financial results, which
could adversely affect our financial condition and results of operations. Also,
there are certain services for our tenants that we would like to provide but are
prohibited from doing so by the REIT tax laws and regulations. Certain such
services are being provided by Tenant Services Corp., which is owned entirely by
affiliates of Mr. Zell. We have no control over, or ownership interest in,
Tenant Services Corp., which operates as an independent contractor.
Consequently, we are not able to assure that this service corporation will
conduct its day-to-day operations in a manner consistent with our best
interests. We may, however, terminate the services of this service corporation
at any time upon 30 days' notice.
CONFLICTS OF INTEREST COULD RESULT IN DECISIONS NOT IN THE COMPANY'S BEST
INTEREST
THERE WERE NO ARM'S LENGTH NEGOTIATIONS IN THE FORMATION TRANSACTIONS.
The transactions pursuant to which we formed the Company in July 1997, which we
sometimes refer to as the "Formation Transactions," were not negotiated at arm's
length. The representations and warranties made by the contributors of
properties to the Company in the Formation Transactions and the indemnification
provided for breach of such representations and warranties may not be as good as
they might have been had they been negotiated at arm's length. Such
indemnification is limited generally to an amount equal to 1% of the value of
consideration paid for the properties and to $15 million with respect to pre-IPO
liabilities of the management business contributed by affiliates of Mr. Zell. If
we incur losses attributable to breaches of the representations and warranties
made by the contributors of properties in the Formation Transactions and such
losses are in excess of the indemnification limit, they would have to be
satisfied out of our assets, with the potential consequence of decreasing cash
available for distribution to securityholders. To date, we have no knowledge of
any material breaches of the agreements (which we refer to collectively as the
"Contribution Agreement") pursuant to which the Formation Transactions occurred.
WE COULD SUFFER MONETARY LOSSES IF WE FAIL TO ENFORCE THE CONTRIBUTION
AGREEMENT. Mr. Zell has a substantial economic interest in the companies that
contributed properties and the management business to the Company in the
Formation Transactions. Consequently, Mr. Zell has a conflict of interest with
respect to his obligation as one of our officers and trustees to enforce the
terms of the Contribution Agreement. If circumstances arise where we should seek
to enforce such agreement, particularly the indemnification provisions and the
remedy provisions for breaches of representations and warranties, Mr. Zell might
assert a position contrary to the Company's. If this happens and Mr. Zell were
to prevail, we would not collect money we might otherwise be entitled to. Also,
the Common Shares and Units that are available to satisfy claims for such
indemnification will be, to the extent not used for this purpose, available for
distribution to entities in which Mr. Zell and several other of our executive
officers and trustees have an economic interest. This is in accordance with the
Contribution Agreement. Consequently, these executive officers and trustees also
have a conflict of interest in pursuing any claim the Company might have arising
out of the Formation Transactions.
MR. ZELL'S AFFILIATES CONTROL OUR MANAGEMENT COMPANIES AND MOST OF THE
MANAGED PROPERTIES. The Management Companies and Beacon Property Management,
L.P. provide property management services and, in most cases, asset management
services to 37 properties which are held in partnerships or subject to
participation agreements with unaffiliated third parties and to the 34 Managed
Properties, 31 of which are owned or controlled by affiliates of Mr. Zell. Most
of these management contracts were not negotiated on an arm's length basis.
While we believe that the management fees we receive from these properties are
at current market rates, there is no assurance that these management fees will
equal at all times those fees that would be charged by an unaffiliated third
party. In this regard, Mr. Zell controls and has a substantial interest in the
private company which has voting control of the Management Companies. See "We Do
Not Control Our Managed Properties or Management and Non-REIT Services
Businesses" above.
CERTAIN TRUSTEES AND OFFICERS HAVE CONFLICTS OF INTEREST AND COULD
EXERCISE INFLUENCE IN A MANNER INCONSISTENT WITH SHAREHOLDERS' BEST INTEREST.
Mr. Zell and Ms. Sheli Z. Rosenberg (one of the Company's trustees) own (as
determined in accordance with the SEC's rules) approximately 2.8%, and all other
trustees and executive officers of the Company as a group own approximately
1.7%, of the outstanding Common Shares (in each case including Common Shares
issuable upon exchange of Units). In addition, Mr. Zell and his affiliates may
receive distributions of up to approximately 11.3 million additional Units
(representing approximately 4.05% of the outstanding Common Shares) during the
two-year period ending July 11, 1999. These Units were set aside at the time of
the IPO and are issuable if we achieve certain performance objectives, based on
the market price of the Common Shares. In addition, options to purchase an
aggregate of 1,000,000 Common Shares exercisable at the IPO price of $21 per
share were granted to Mr. Zell, Ms. Rosenberg and our five highest paid
executive officers. Mr. Zell and Ms. Rosenberg have significant influence on the
management and operation of the Company. Such influence might be exercised in a
manner that is inconsistent with the interests of other securityholders.
MR. ZELL AND HIS AFFILIATES CONTINUE TO BE INVOLVED IN OTHER INVESTMENT
ACTIVITIES. Although Mr. Zell entered into a noncompetition agreement at the
time of the IPO, he and his affiliates have a broad and varied range of
investment interests, including interests in other real estate investment
companies. Mr. Zell and his affiliates may acquire interests in other
4
<PAGE> 10
companies. He may not be able to control whether any such company competes with
the Company. Consequently, Mr. Zell's continued involvement in other investment
activities could result in competition to the Company as well as management
decisions which might not reflect the interests of our securityholders.
We did not obtain noncompetition agreements with any of the former
Beacon officers or directors in connection with the Beacon Merger. Consequently,
any former officer or director of Beacon could engage in activities in
competition with activities of the Company except, in the case of Mr. Sidman,
who became one of our trustees, to the extent that his actions would violate his
fiduciary duties.
WE LEASE OUR CORPORATE OFFICES FROM AN AFFILIATE OF MR. ZELL. Our
corporate offices are at Two North Riverside Plaza in Chicago. We lease our
office space there from one of Mr. Zell's affiliates. We believe, however, that
the lease terms, including the rental rates, reflect current market terms.
ENVIRONMENTAL PROBLEMS ARE POSSIBLE AND CAN BE COSTLY
Federal, state and local laws and regulations relating to the
protection of the environment may require a current or previous owner or
operator of real estate to investigate and clean up hazardous or toxic
substances or petroleum product releases at such property. The owner or operator
may have to pay a governmental entity or third parties for property damage and
for investigation and clean-up costs incurred by such parties in connection with
the contamination. Such laws typically impose clean-up responsibility and
liability without regard to whether the owner or operator knew of or caused the
presence of the contaminants. Even if more than one person may have been
responsible for the contamination each person covered by the environmental laws
may be held responsible for all of the clean-up costs incurred. In addition,
third parties may sue the owner or operator of a site for damages and costs
resulting from environmental contamination emanating from that site.
Environmental laws also govern the presence, maintenance and removal of
asbestos. Such laws require that owners or operators of buildings containing
asbestos properly manage and maintain the asbestos, that they notify and train
those who may come into contact with asbestos and that they undertake special
precautions, including removal or other abatement, if asbestos would be
disturbed during renovation or demolition of a building. Such laws may impose
fines and penalties on building owners or operators who fail to comply with
these requirements and may allow third parties to seek recovery from owners or
operators for personal injury associated with exposure to asbestos fibers.
Independent environmental consultants have conducted Phase I
environmental site assessments at all of our properties. These assessments
included, at a minimum, a visual inspection of the properties and the
surrounding areas, an examination of current and historical uses of the
properties and the surrounding areas and a review of relevant state, federal and
historical documents. Where appropriate, on a property by property basis, these
consultants have conducted additional testing, including sampling for asbestos,
for lead in drinking water, for soil contamination where underground storage
tanks are or were located or where other past site usages create a potential
environmental problem, and for contamination in groundwater.
These environmental assessments have not revealed any environmental
liabilities at the properties that we believe would have a material adverse
effect on our business, assets, financial condition or results of operations nor
are we aware of any such material environmental liability. Asbestos is in a
number of the office properties, but most of these buildings contain only minor
amounts. We believe this asbestos is in good condition and almost none of it is
easily crumbled. We are currently properly managing and maintaining all of the
asbestos and we are following other requirements relating to asbestos. The
presence of asbestos should not present a significant risk as long as compliance
with these requirements continues.
For a few of the properties, the environmental assessments note
potential offsite sources of contamination, such as underground storage tanks.
For some of the properties, the environmental assessments note previous uses,
such as the former presence of underground storage tanks. In most of these
cases, follow-up soil and/or groundwater sampling has not identified evidence of
significant contamination. In the few cases where contamination has been found,
existing plans to mitigate and monitor the sites and/or financial commitments
from certain prior owners and tenants to cover costs related to mitigation
should prevent the contamination from becoming a significant liability.
We believe that our properties are in compliance in all material
respects with applicable environmental laws. We believe that the issues
identified in the environmental reports will not have a material adverse effect
if we continue to comply with environmental laws and with the recommendations
set forth in these reports. Unidentified environmental liabilities could arise,
however, and could have an adverse effect on our financial condition and
performance.
WE ARE DEPENDENT ON OUR KEY PERSONNEL
We depend on the efforts of our executive officers, particularly
Messrs. Zell and Callahan. If they resigned, our operations could be adversely
effected. We do not have employment agreements with either of these officers.
5
<PAGE> 11
CONTINGENT OR UNDISCLOSED LIABILITIES ACQUIRED IN MERGERS OR SIMILAR
TRANSACTIONS COULD ADVERSELY AFFECT OUR FINANCIAL CONDITION
When we formed the Company, we acquired all the assets of the ZML
Opportunity Partnerships (four real estate investment funds sponsored by Mr.
Zell) and certain assets of affiliates of Mr. Zell. These assets were acquired
subject to existing liabilities. Each of the ZML Opportunity Partnerships will
liquidate over the two-year period ending July 11, 1999, and the Units and other
assets (including cash from distributions), net of liabilities, will be
distributed to affiliates of Mr. Zell and the limited partners of the ZML
Opportunity Partnerships during such time period. Our recourse against
affiliates of Mr. Zell with respect to liabilities relating to the management
business they contributed when we formed the Company is limited to $15 million.
Our recourse for any unknown liabilities in connection with the contribution of
properties when we formed the Company is limited to 1% of the value of the
consideration paid for those assets and must be asserted prior to July 11, 1999.
Similarly, the assets we acquired in the Beacon Merger were acquired subject to
liabilities and without any recourse with respect to unknown liabilities.
Unknown liabilities with respect to properties acquired when we formed the
Company or in the Beacon Merger might include liabilities for clean-up or
remediation of undisclosed environmental conditions, claims of tenants, vendors
or other persons dealing with the entities prior to the IPO or the Beacon Merger
(if such claims had not been asserted prior to the respective closings of such
transactions), accrued but unpaid liabilities incurred in the ordinary course of
business, and claims for indemnification by general partners, directors,
officers and others indemnified by the ZML Opportunity Partnerships or Beacon.
Similarly, we succeeded to any liabilities that the ZML REITs may have had for
periods prior to the IPO and that Beacon may have had prior to the Beacon
Merger. We also succeeded to any liabilities, including claims for property
transfer taxes, arising out of the contribution to us of properties when we
formed the Company and in connection with the Beacon Merger. In the future, we
may face additional risks of contingent or undisclosed liabilities as a result
of mergers, other business combinations or similar transactions.
THE MARKET VALUE OF OUR PUBLICLY TRADED SECURITIES CAN BE ADVERSELY AFFECTED BY
A NUMBER OF FACTORS
THE LARGE NUMBER OF SHARES AVAILABLE FOR FUTURE SALE COULD ADVERSELY
AFFECT THE MARKET PRICE OF OUR PUBLICLY TRADED SECURITIES. As of December 31,
1997, a majority of our outstanding Common Shares were "Restricted Common
Shares" issued in private placement transactions, primarily the Formations
Transactions. These Shares are not traded in the public stock markets so long as
they remain restricted. Restricted Common Shares and Common Shares issued on
redemption of Units may be sold in the public market pursuant to registration
rights or pursuant to Rule 144 under the Securities Act or other available
exemptions from registration. In addition, we have reserved a number of Common
Shares for issuance pursuant to our employee benefit plans, and such Common
Shares will be available for sale from time to time. We have granted options to
purchase additional Common Shares to certain executive officers, employees,
trustees and consultants. The Common Shares issued in the Beacon Merger to
affiliates of Beacon are tradeable within the volume and manner of sale
limitations of Rule 144 under the Securities Act. We can not predict the effect
that future sales of Common Shares, or the perception that such sales could
occur, will have on the market prices of our equity securities.
CHANGES IN MARKET CONDITIONS COULD ADVERSELY AFFECT THE MARKET PRICE OF
OUR PUBLICLY TRADED SECURITIES. As with other publicly traded equity securities,
the value of our publicly traded securities depends on various market
conditions, which may change from time to time. Among the market conditions that
may affect the value of our publicly traded securities are the following: the
extent of institutional investor interest in the Company; the reputation of
REITs and office REITs generally and the attractiveness of their equity
securities in comparison to other equity securities (including securities issued
by other real estate companies); our financial condition and performance; and
general financial market conditions.
OUR EARNINGS AND CASH DISTRIBUTIONS WILL AFFECT THE MARKET PRICE OF OUR
PUBLICLY TRADED SECURITIES. We believe that the market value of a REIT's equity
securities is based primarily upon the market's perception of the REIT's growth
potential and its current and potential future cash distributions, and is
secondarily based upon the real estate market value of the underlying assets.
For that reason, Shares may trade at prices that are higher or lower than the
net asset value per Share. To the extent we retain operating cash flow for
investment purposes, working capital reserves or other purposes, these retained
funds, while increasing the value of our underlying assets, may not
correspondingly increase the market price of our Shares. Our failure to meet the
market's expectations with regard to future earnings and cash distributions
would likely adversely affect the market price of our publicly traded
securities.
MARKET INTEREST RATES MAY HAVE AN EFFECT ON THE VALUE OF OUR PUBLICLY
TRADED SECURITIES. One of the factors that investors consider important in
deciding whether to buy or sell shares of a REIT is the distribution rate on
such shares (as a percentage of the price of such shares) relative to market
interest rates. If market interest rates go up, prospective purchasers of REIT
shares may expect a higher distribution rate. Higher interest rates would not,
however, result in more funds for us to distribute and, in fact, would likely
increase our borrowing costs and potentially decrease funds available for
distribution. Thus, higher market interest rates could cause the market price of
our publicly traded securities to go down.
6
<PAGE> 12
WE ARE DEPENDENT ON EXTERNAL SOURCES OF CAPITAL
To qualify as a REIT, the Trust must distribute to its shareholders
each year at least 95% of its net taxable income (excluding any net capital
gain). See "Federal Income Tax Considerations -- Requirements for Qualification
as a REIT -- Annual Distribution Requirements Applicable to REITs." Because of
these distribution requirements, it is not likely that we will be able to fund
all future capital needs, including for acquisitions, from income from
operations. We therefore will have to rely on third-party sources of capital,
which may or may not be available on favorable terms or at all. Our access to
third-party sources of capital depends on a number of things, including the
market's perception of our growth potential and our current and potential future
earnings. Moreover, additional equity offerings may result in substantial
dilution of securityholders' interests, and additional debt financing may
substantially increase our leverage.
OUR SUCCESS AS A REIT IS DEPENDENT ON COMPLIANCE WITH FEDERAL INCOME TAX
REQUIREMENTS
FAILURE OF THE TRUST TO QUALIFY AS A REIT WOULD HAVE SERIOUS ADVERSE
CONSEQUENCES TO OUR SECURITYHOLDERS. We believe that, since the IPO in July
1997, the Trust has qualified for taxation as a REIT for federal income tax
purposes. We plan to continue to meet the requirements for taxation as a REIT.
Many of these requirements, however, are highly technical and complex. The
determination that the Trust is a REIT requires an analysis of various factual
matters and circumstances that may not be totally within our control. For
example, to qualify as a REIT, at least 95% of our gross income must come from
certain sources that are itemized in the REIT tax laws. The Trust is also
required to distribute to shareholders at least 95% of its REIT taxable income
(excluding capital gains). The fact that we hold our assets through the
Operating Partnership and its subsidiaries further complicates the application
of the REIT requirements. Even a technical or inadvertent mistake could
jeopardize our REIT status. Furthermore, Congress and the IRS might make changes
to the tax laws and regulations, and the courts might issue new interpretations
of the tax laws and regulations, such that it could become more difficult or
impossible for the Trust to remain qualified as a REIT. We do not believe,
however, that any pending or proposed tax law changes would jeopardize our REIT
status.
If the Trust fails to qualify as a REIT, the Trust would be subject to
federal income tax at regular corporate rates. Also, unless the IRS granted the
Trust relief under certain statutory provisions, the Trust would remain
disqualified as a REIT for four years following the year the Trust first failed
to qualify. If the Trust failed to qualify as a REIT, the Trust would have to
pay significant income taxes and would therefore have siginficantly less money
available for investments or for distributions to shareholders. This would
likely have a significant adverse affect of the value of our securities. In
addition, the Trust would no longer be required to make any distributions to
shareholders. See "Federal Income Tax Considerations -- Requirements for
Qualification as a REIT -- Failure of the Company to Qualify as a REIT."
WE PAY SOME TAXES. Even if the Trust qualifies as a REIT, it is
required to pay certain federal, state and local taxes on its income and
property. In addition, any net taxable income earned directly by the
Noncontrolled Subsidiaries is subject to federal and state income tax. See
"Federal Income Tax Considerations -- Other Tax Consequences for the Company,
Its Shareholders and the Noncontrolled Subsidiaries."
WE COULD BE DISQUALIFIED AS A REIT OR HAVE TO PAY TAXES IF OUR
PREDECESSORS OR BEACON DID NOT QUALIFY AS REITS. If one or more of the ZML REITs
that merged into the Trust at the time of the IPO or Beacon had failed to
qualify as a REIT throughout the duration of its existence, then it might have
had undistributed "C corporation earnings and profits." If that were the case
and the Trust did not distribute such earnings and profits prior to December 31,
1997, the Trust might not qualify as a REIT. We believe that each of the ZML
REITs and Beacon qualified as a REIT and that, in any event, neither any ZML
REIT nor Beacon had any undistributed "C corporation earnings and profits" at
the time of its merger into the Trust. If any ZML REIT or Beacon failed to
qualify as a REIT, an additional concern would be that it would have recognized
taxable gain at the time it was merged into the Trust (and the Trust would be
liable for the tax on such gain). This would be the case even though the
applicable merger qualified as a "tax-free reorganization," unless the Trust
makes a special election that is available under current law. The Trust will
make such an election with respect to each of the ZML REITs and Beacon. This
election will have the effect of requiring the Trust, if a ZML REIT or Beacon
was not qualified as a REIT, to pay corporate income tax on any gain existing at
the time of the applicable merger on assets acquired in the merger if such
assets are sold within 10 years after the merger of the ZML REITs or Beacon (as
applicable) into the Trust. Finally, if a ZML REIT did not qualify as a REIT,
the Trust could be precluded from electing REIT status for up to four years
after the year in which such ZML REIT failed to qualify if the Trust were
determined to be a "successor" to that ZML REIT. See "Federal Income Tax
Considerations -- Taxation of the Company as a REIT -- General" and "--
Requirements for Qualification as a REIT."
7
<PAGE> 13
[ARTICLE] 5
[MULTIPLIER] 1,000
<TABLE>
<S> <C>
[PERIOD-TYPE] YEAR
[FISCAL-YEAR-END] DEC-31-1997
[PERIOD-START] JAN-01-1997
[PERIOD-END] DEC-31-1997
[CASH] 254,625
[SECURITIES] 0
[RECEIVABLES] 52,581
[ALLOWANCES] 0
[INVENTORY] 0
[CURRENT-ASSETS] 468,147
[PP&E] 11,041,014
[DEPRECIATION] 64,695
[TOTAL-ASSETS] 11,751,672
[CURRENT-LIABILITIES] 307,380
[BONDS] 4,284,317
[PREFERRED-MANDATORY] 0
[PREFERRED] 0
[COMMON] 0
[OTHER-SE] 7,159,975
[TOTAL-LIABILITY-AND-EQUITY] 11,751,672
[SALES] 0
[TOTAL-REVENUES] 769,863
[CGS] 0
[TOTAL-COSTS] 0
[OTHER-EXPENSES] 463,595
[LOSS-PROVISION] 0
[INTEREST-EXPENSE] 157,156
[INCOME-PRETAX] 0
[INCOME-TAX] 0
[INCOME-CONTINUING] 0
[DISCONTINUED] 0
[EXTRAORDINARY] 16,640
[CHANGES] 0
[NET-INCOME] 132,472
[EPS-PRIMARY] .44
[EPS-DILUTED] .33
</TABLE>
<PAGE> 14
FEDERAL INCOME TAX CONSIDERATIONS
The following discussion summarizes certain federal income tax
considerations relating to the Company and to the acquisition, ownership and
disposition of Common Shares. The following description is for general
information only, is not exhaustive of all possible tax considerations, and is
not intended to be and should not be construed as tax advice. For example, this
summary does not give a detailed discussion of any state, local or foreign tax
consequences. In addition, this discussion is intended to address only those
federal income tax considerations that are generally applicable for all
shareholders in the Company. It does not discuss all aspects of federal income
taxation that might be relevant to a specific shareholder in light of its
particular investment or tax circumstances. The description does not purport to
deal with aspects of taxation that may be relevant to shareholders subject to
special treatment under the federal income tax laws, including, without
limitation, insurance companies, financial institutions or broker-dealers,
tax-exempt organizations (except to the extent discussed under the subheading
"-- Taxation of Tax - Exempt Shareholders of the Company") or foreign
corporations and persons who are not citizens or residents of the United States
(except to the extent discussed under the subheading "-- Taxation of Non - U.S.
Shareholders of the Company"). If the Company offers one or more additional
series of preferred shares or debt securities, there may be tax consequences for
the holders of such preferred shares or debt securities not discussed herein,
but which may be discussed in the documents pursuant to which such securities
are offered.
12
<PAGE> 15
The information in this section is based on the Code, current, temporary
and proposed Treasury Regulations, the legislative history of the Code, current
administrative interpretations and practices of the IRS (including its practices
and policies as endorsed in private letter rulings, which are not binding on the
IRS except with respect to the taxpayer that receives such a ruling), and court
decisions, all as of the date hereof. No assurance can be given that future
legislation, Treasury Regulations, administrative interpretations and court
decisions will not significantly change current law or adversely affect existing
interpretations of current law. Any such change could apply retroactively to
transactions preceding the date of the change. Except as described below in
"--Requirements for Qualification as a REIT--Income Tests Applicable to REITs,"
the Company has not requested and does not plan to request any rulings from the
IRS concerning the tax treatment of the Company or the Operating Partnership.
Thus no assurance can be provided that the statements set forth herein (which do
not bind the IRS or the courts) will not be challenged by the IRS or will be
sustained by a court if so challenged.
As used in this section, the term "the Company" refers solely to Equity
Office Properties Trust.
EACH PROSPECTIVE SHAREHOLDER IS URGED TO CONSULT WITH ITS OWN TAX ADVISOR
REGARDING THE SPECIFIC TAX CONSEQUENCES TO IT OF THE ACQUISITION, OWNERSHIP AND
SALE OF THE COMPANY'S SECURITIES IN LIGHT OF ITS SPECIFIC TAX AND INVESTMENT
SITUATIONS AND THE SPECIFIC FEDERAL, STATE, LOCAL AND FOREIGN TAX LAWS
APPLICABLE TO IT.
TAXATION OF THE COMPANY AS A REIT -- GENERAL
The Company plans to make an election to be taxed as a REIT under Sections
856 through 860 of the Code, commencing with its taxable year ended December 31,
1997, when it files its federal income tax return for 1997. The Company believes
that, commencing with its formation on July 11, 1997, it has been organized and
has operated in such a manner so as to qualify for taxation as a REIT under the
Code.
The sections of the Code and the corresponding Treasury Regulations
relating to qualification and operation as a REIT are highly technical and
complex. The following discussion sets forth certain material aspects of the
rules that govern the federal income tax treatment of a REIT and its
shareholders. The discussion is qualified in its entirety by the applicable Code
provisions, Treasury Regulations and administrative and judicial interpretations
thereof, all of which are subject to change prospectively or retroactively.
So long as the Company qualifies for taxation as a REIT, it generally will
not be subject to federal corporate income taxes on its net income that is
distributed currently to shareholders. This treatment substantially eliminates
the "double taxation" (i.e., taxation at both the corporate and shareholder
levels) that generally results from investment in a regular corporation. The
Company will, however, be subject to federal income tax in the following
circumstances. First, the Company will be taxed at regular corporate rates on
any undistributed REIT taxable income, including undistributed net capital
gains. Second, under certain circumstances, the Company may be subject to the
"alternative minimum tax" on any items of tax preference. Third, if the Company
has (i) net income from the sale or other disposition of certain "foreclosure
property" that is held primarily for sale to customers in the ordinary course of
business or (ii) other nonqualifying income from foreclosure property, it will
be subject to tax at the highest corporate rate on such income. Fourth, if the
Company has net income from prohibited transactions (which are, in general,
certain sales or other dispositions of property (other than foreclosure
property) held primarily for sale to customers in the ordinary course of
business), such income will be subject to a 100% tax. Fifth, if the Company
should fail to satisfy the 75% gross income test or the 95% gross income test
(discussed below), and nonetheless should maintain its qualification as a REIT
because certain other requirements have been met, it will be subject to a 100%
tax on the net income attributable to the greater of either the amount by which
it fails the 75% gross income test or the amount by which it fails the 95% gross
income test. Sixth, if the Company should fail to distribute during each
calendar year at least the sum of (i) 85% of its REIT ordinary income for such
year, (ii) 95% of its REIT capital gain net income for such year, and (iii) any
undistributed taxable income from prior periods, it will be subject to a 4%
excise tax on the excess of such required distribution over the amounts actually
distributed. Seventh, if the Company acquires or has acquired any asset from a C
corporation (i.e., a corporation generally subject to full corporate-level tax)
in a transaction in
13
<PAGE> 16
which the basis of the asset in the acquiror's hands is determined by reference
to the basis of the asset (or any other asset) in the hands of the C corporation
and the acquiror recognizes gain on the disposition of such asset during the
10-year period beginning on the date on which such asset was acquired by it,
then to the extent of such asset's "Built-In Gain" (i.e., the excess of (a) the
fair market value of such asset at the time of the acquisition by the Company
over (b) the adjusted basis in such asset, determined as of the time of such
acquisition), such gain will be subject to tax at the highest regular corporate
rate applicable, pursuant to anticipated Treasury Regulations that have not yet
been promulgated.
The results described above with respect to the recognition of Built-In
Gain assume that the Company will make an election pursuant to IRS Notice 88-19
with respect to any such acquisition. In this regard, the Built-In Gain rules
would apply with respect to any assets acquired by the Company from a ZML REIT
or Beacon if either a ZML REIT or Beacon had failed to qualify, for any reason,
as a REIT throughout the duration of its existence. If the Company were not to
make an election pursuant to IRS Notice 88-19 (or that election no longer were
available because of a change in applicable law) and a ZML REIT or Beacon failed
to qualify as a REIT at the time of its merger with the Company, the entity that
failed to so qualify would recognize taxable gain on such merger under the
Built-In Gain rules (and the Company would be liable for the tax thereon),
notwithstanding that such merger otherwise qualified as a "tax-free
reorganization." The Company believes that each of the ZML REITs and Beacon
qualified as a REIT at the time of its merger into the Company, but the Company
intends to make a protective election under Notice 88-19 with respect to the
merger of each of the ZML REITs and Beacon in order to avoid the adverse
consequences that otherwise could result.
REQUIREMENTS FOR QUALIFICATION AS A REIT
GENERAL. The Code defines a REIT as a corporation, trust or association (i)
that is managed by one or more trustees or directors; (ii) the beneficial
ownership of which is evidenced by transferable shares, or by transferable
certificates of beneficial interest; (iii) that would be taxable as a domestic
corporation, but for Sections 856 through 860 of the Code; (iv) that is neither
a financial institution nor an insurance company subject to certain provisions
of the Code; (v) the beneficial ownership of which is held by 100 or more
persons; (vi) not more than 50% in value of the outstanding shares of which is
owned directly or indirectly by five or fewer individuals (as defined in the
Code to include certain entities) during the last half of each taxable year (the
"5/50 Rule"); (vii) that makes an election to be a REIT (or has made such
election for a previous taxable year which has not been revoked or terminated)
and satisfies all relevant filing and other administrative requirements
established by the IRS that must be met in order to elect and maintain REIT
status; (viii) that uses a calendar year for federal income tax purposes and
complies with the recordkeeping requirements of the Code and Treasury
Regulations promulgated thereunder; and (ix) that meets certain other tests,
described below, regarding the nature of its income and assets. The Code
provides that conditions (i) to (iv) inclusive, must be met during the entire
taxable year and that condition (v) must be met during at least 335 days of a
taxable year of 12 months, or during a proportionate part of a taxable year of
less than 12 months. For purposes of determining stock ownership under the 5/50
Rule, a supplemental unemployment compensation benefits plan, a private
foundation or a portion of a trust permanently set aside or used exclusively for
charitable purposes generally is considered an individual. However, a trust that
is a qualified trust under Code Section 401(a) generally is not considered an
individual and beneficiaries of such trust are treated as holding shares of a
REIT in proportion to their actuarial interests in such trust for purposes of
the 5/50 Rule.
The Company believes that it has issued sufficient shares of beneficial
interest with sufficient diversity of ownership to allow it to satisfy the
conditions described in clauses (v) and (vi) above. In addition, the Declaration
of Trust contains restrictions regarding the transfer of shares of beneficial
interest that are intended to assist the Company in continuing to satisfy the
share ownership requirements described in clauses (v) and (vi) above. These
restrictions, however, may not ensure that the Company will, in all cases, be
able to satisfy the share ownership requirements described above. If the Company
fails to satisfy such share ownership requirements, the Company's status as a
REIT will terminate. See "-- Requirements for Qualification as a REIT."
In connection with the 5/50 Rule, a REIT is required to send annual letters
to its shareholders requesting information regarding the actual ownership of its
shares. Pursuant to the Taxpayer Relief Act of 1997 (the "1997 Act"), for the
Company's taxable years beginning on or after January 1, 1998, if the Company
complies with the annual letters requirement
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and it does not know or, exercising reasonable diligence, would not have known
of its failure to meet the 5/50 Rule, then it will be treated as having met the
5/50 Rule.
To qualify as a REIT, the Company cannot have at the end of any taxable
year any undistributed "earnings and profits" that are attributable to a "C
corporation" taxable year. The Company commenced operations in 1997 and will
make a REIT election for its first taxable year ended December 31, 1997. Hence,
the Company itself will not have any undistributed "C corporation earnings and
profits." However, the Company succeeded to various tax attributes of the ZML
REITs and Beacon, including any undistributed "earnings and profits." If each
ZML REIT and Beacon qualified as a REIT throughout the duration of its
existence, then any undistributed "earnings and profits" to which the Company
succeeded will not be "C corporation earnings and profits" and the Company will
satisfy this requirement. If, however, one or more of the ZML REITs or Beacon
failed to qualify as a REIT throughout the duration of its existence, then it
might have had undistributed "C corporation earnings and profits" that, if not
distributed by the Company prior to the end of its taxable year ended December
31, 1997, could prevent the Company from qualifying as a REIT. The Company
believes that each of the ZML REITs and Beacon qualified as a REIT throughout
the duration of its existence and that, in any event, neither a ZML REIT nor
Beacon should be considered to have had any undistributed "C corporation
earnings and profits" at the time of its merger into the Company. There can be
no assurance, however, that the IRS would not contend otherwise on a subsequent
audit of one or more of the ZML REITs or Beacon. Recently finalized Treasury
Regulations provide for certain "deficiency distribution" procedures. Although
the application of these Treasury Regulations is not entirely clear, it appears
that the Company may be able to use such "deficiency distribution" procedures to
distribute any "C corporation earnings and profits" deemed to have been acquired
from a ZML REIT or Beacon. In order to use this procedure, the Company would
have to make an additional distribution to shareholders (in addition to
distributions made for purposes of satisfying the normal REIT distribution
requirements), within 90 days of the IRS determination. In addition, the Company
would have to pay to the IRS an interest charge on 50% of the acquired "C
corporation earnings and profits" that were not distributed prior to the end of
the Company's taxable year ended December 31, 1997. There can be no assurance,
however, that the IRS would not take the position either that the procedure is
not available at all (in which case the Company would fail to qualify as a REIT)
or, alternatively, that even if the procedure is available, the Company cannot
qualify as a REIT for its taxable year ended December 31, 1997, but it could
qualify as a REIT for subsequent years.
Finally, if the Company were considered a "successor" to any ZML REIT and
such ZML REIT were determined not to have qualified as a REIT, the Company would
not be eligible to elect REIT status for up to four years after the year in
which such ZML REIT first failed to qualify as a REIT. The Company would be
considered a "successor" for these purposes, however, only if (i) persons who
own more than 50% of the Common Shares at any time during the Company's taxable
year ended December 31, 1997, owned, directly or indirectly, 50% or more in
value of the shares of such ZML REIT during the first year in which it ceased to
qualify as a REIT and (ii) a significant portion of the Company's assets were
assets owned by such ZML REIT.
CLOSING AGREEMENTS WITH THE IRS WITH RESPECT TO ZML REITS I AND II. In
December 1996, the IRS was advised that ZML REIT I and ZML REIT II each had
failed to comply with a technical requirement of a provision of the Code which
must be satisfied for a company to qualify as a REIT for federal income tax
purposes. More specifically, in connection with structuring certain real estate
investments made by ZML Opportunity Partnership I and ZML Opportunity
Partnership II during the period 1991-1993, all of the voting stock of certain
corporations formed to serve as general partners of limited partnership
subsidiaries of such ZML Opportunity Partnerships was issued to such ZML
Opportunity Partnerships. Based upon a Treasury Regulation interpreting the
statutory provision limiting permitted REIT investments, a portion of such ZML
Opportunity Partnerships' ownership of corporate voting stock would be imputed
to ZML REIT I and ZML REIT II and, in so doing, would cause ZML REIT I and ZML
REIT II to violate the prohibition on a REIT owning more than 10% of the voting
stock of a corporation other than a qualified REIT subsidiary.
Pursuant to closing agreements, the IRS agreed that neither ZML REIT I nor
ZML REIT II would be disqualified as a REIT as a result of the technical
violations disclosed to the IRS. In connection with the agreements, the ZML
Partners of ZML Opportunity Partnership I and ZML Opportunity Partnership II
made certain payments to the IRS. As a result of the
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closing agreements, the technical violations discussed above have caused no
adverse impact on either the REIT status of ZML REIT I and ZML REIT II for the
tax years at issue or the Company's subsequent ability to qualify as a REIT.
QUALIFIED REIT SUBSIDIARIES. Section 856(i) of the Code provides that a
corporation that is a "qualified REIT subsidiary" shall not be treated as a
separate corporation, and all assets, liabilities and items of income, deduction
and credit of a "qualified REIT subsidiary" shall be treated as assets,
liabilities and items of income, deduction and credit of the REIT. Pursuant to
the 1997 Act, for the Company's taxable years beginning on or after January 1,
1998, a "qualified REIT subsidiary" is a corporation all of the capital stock of
which is owned by the REIT. Accordingly, the Company will have the ability, if
it so chooses, to acquire an existing corporation that will qualify as a
"qualified REIT subsidiary," as opposed to having to form such a subsidiary. The
Company currently has two "qualified REIT subsidiaries." The Company may form or
acquire additional "qualified REIT subsidiaries" in the future. In applying the
income and asset tests described below, a "qualified REIT subsidiary" will be
ignored and all assets, liabilities and items of income, deduction and credit of
such "qualified REIT subsidiary" will be treated as assets, liabilities and
items of income, deduction and credit of the Company. A "qualified REIT
subsidiary" of the Company will not be subject to federal corporate income
taxation, although it may be subject to state and local taxation in certain
states.
OWNERSHIP OF PARTNERSHIP INTERESTS BY A REIT. In the case of a REIT which
is a partner in a partnership, Treasury Regulations provide that the REIT will
be deemed to own its proportionate share of the assets of the partnership and
will be deemed to be entitled to the income of the partnership attributable to
such share. In addition, the character of the assets and gross income of the
partnership retain the same character in the hands of the REIT for purposes of
Section 856 of the Code, including satisfying the gross income tests and the
asset tests. Thus, the Company's proportionate share of the assets and items of
income of the Operating Partnership (including the Operating Partnership's share
of such items of any subsidiaries of the Operating Partnership that are
partnerships or limited liability companies) will be treated as assets and items
of income of the Company for purposes of applying the requirements described
herein. The Company has direct control of the Operating Partnership, each of the
ZML Opportunity Partnerships, and each partnership or limited liability company
subsidiary of the Operating Partnership and intends to operate them in a manner
that is consistent with the requirements for qualification of the Company as a
REIT.
INCOME TESTS APPLICABLE TO REITS. To qualify as a REIT, the Company must
satisfy two gross income tests. First, at least 75% of the Company's gross
income (excluding gross income from prohibited transactions) for such taxable
year must be derived directly or indirectly from investments relating to real
property or mortgages on real property (including "rents from real property,"
gains on the disposition of real estate, dividends paid by another REIT and, in
certain circumstances, interest) or from certain types of temporary investments.
Second, at least 95% of the Company's gross income (excluding gross income from
"prohibited transactions") for such taxable year must be derived from such real
property investments, dividends, interest, certain payments under hedging
instruments and gain from the sale or disposition of stock, securities and
certain hedging instruments (or from any combination of the foregoing).
Rents received by the Company will qualify as "rents from real property" in
satisfying the gross income requirements for a REIT described above only if
several conditions are met. First, the amount of rent must not be based in whole
or in part on the income or profits of any person. However, an amount received
or accrued generally will not be excluded from the term "rents from real
property" solely by reason of being based on a fixed percentage or percentages
of receipts or sales. Second, rents received from a tenant will not qualify as
"rents from real property" in satisfying the gross income tests if the REIT, or
an actual or constructive owner of 10% or more of the REIT, actually or
constructively owns 10% or more of such tenant (a "Related Party Tenant").
Third, if rent attributable to personal property, leased in connection with a
lease of real property, is greater than 15% of the total rent received under the
lease, then the portion of rent attributable to such personal property will not
qualify as "rents from real property."
Generally, for rents received by the REIT to qualify as rents "from real
property" for the purpose of satisfying the gross income tests, the REIT may not
operate or manage the property or furnish or render services to the tenants of
such property other than through an independent contractor from whom the REIT
derives no revenue. However, a REIT may provide de minimis services directly to
the tenants of a property, provided, however, that if (i) the REIT operates or
manages
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a property or furnishes or renders services to the tenants at the property other
than through an independent contractor from whom the REIT derives no revenue
(not including services "usually or customarily rendered" in connection with the
rental of real property and not otherwise considered "rendered to the occupant")
and (ii) the amount received for so doing (the "Impermissible Tenant Service
Income") exceeds 1% of the total amount received by the REIT with respect to the
property, then no amount received by the REIT with respect to the property will
qualify as "rents from real property." If the Impermissible Tenant Service
Income is 1% or less of the total amount received by the REIT with respect to
the property, then only the Impermissible Tenant Service Income will not qualify
as "rents from real property." A REIT's Impermissible Tenant Service Income will
not be less than 150% of the REIT's direct cost in generating such income. To
the extent that services (other than those customarily furnished or rendered in
connection with the rental of real property) are rendered to the tenants of the
property by an independent contractor, the cost of the services must be borne by
the independent contractor. In this regard the Company has engaged Tenant
Services Corp. (owned by affiliates of the Equity Group Owners), which has been
structured to qualify as an independent contractor, to perform certain services
that the Company believes are customarily offered in institutional quality
office properties that might not be permissible for a REIT to perform directly.
In any event, for all taxable years, the REIT may directly manage and
operate a Property and may directly perform certain other services so long as
the management and operation provided and such other services performed are
"usually or customarily rendered" with respect thereto in connection with the
rental of space for occupancy only and are not otherwise considered "rendered to
the occupant" of the property. The Company, through the Operating Partnership,
will provide certain services to the Properties. Based upon the Company's
experience in the office rental markets in which the Properties are located, the
Company believes that all services provided to tenants by the Company either (i)
are "usually or customarily rendered" in connection with the rental of office
space for occupancy or (ii) will not result in Impermissible Tenant Service
Income in excess of the de minimis threshold described above, although there can
be no assurance that the IRS will not contend otherwise with respect to either
of these positions.
The Company does not and will not (i) charge rent for any property that is
based in whole or in part on the income or profits of any person (except by
reason of being based on a percentage of receipts or sales, as described above,
or unless the Company's Board of Trustees determines, in its discretion, that
the rent received from a particular tenant under such an arrangement is not
material and will not jeopardize the Company's status as a REIT), (ii) rent any
property to a Related Party Tenant (unless the Board determines, in its
discretion, that the rent received from such Related Party Tenant is not
material and will not jeopardize the Company's status as a REIT), (iii) derive
rental income attributable to personal property (other than personal property
leased in connection with the lease of real property, the amount of which is
less than 15% of the total rent received under the lease), or (iv) perform
services considered to be rendered to the occupant of the property, other than
through an independent contractor from whom the Company derives no revenue
(except to the extent that the Impermissible Tenant Service Income would not
exceed the 1% threshold described above or the Board of Trustees otherwise
determines, in its discretion, that the nonqualifying income resulting therefrom
is not material and will not jeopardize the Company's status as a REIT).
The Company has requested a ruling from the IRS to the effect that if the
Operating Partnership enters into agreements with third-party service companies
to operate attached parking facilities (the "Service Companies"), under which
agreements the Operating Partnership will bear the expenses incurred in
operating the parking facilities, such agreements will not affect the Company's
ability to satisfy the 95% and 75% gross income tests. Parking garages that are
located within a building, or are adjacent to, or are part of the same complex
as, a building generally are operated by Service Companies pursuant to parking
management agreements under which the Service Companies receive a management fee
which may be a fixed dollar amount or a percentage of gross or net revenues. The
Company believes that the income received pursuant to such agreements should
qualify as "rents from real property" for the purposes of the 95% and 75% gross
income tests and, in this regard, the Company has been advised informally by the
IRS that its request for a ruling to this effect will be granted.
All but one of the stand-alone garages held by the Operating Partnership
are operated by Service Companies under lease agreements whereby the Operating
Partnership and the Service Companies share the gross receipts from the parking
operation or the Operating Partnership receives fixed rental payments from the
Service Companies and bears none of the
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operational expenses. The income received by the Operating Partnership from the
stand-alone garages under such agreements should qualify as "rents from real
properties" for the purpose of the 95% and 75% gross income tests. One
stand-alone garage agreement provides for the receipt of a percentage of net
receipts by the Operating Partnership and, therefore, results in an
insignificant amount of non-qualifying gross income relative to the total gross
income of the Company. The Company believes that this income received under this
agreement should not affect its ability to satisfy the 95% and 75% gross income
tests in future taxable years.
"Interest" generally will not qualify under the 75% or 95% gross income
tests if it depends in whole or in part on the income or profits of any person.
However, interest will not fail to so qualify solely by reason of being based on
a fixed percentage or percentages of receipts or sales. The Company does not
expect to derive significant amounts of interest that will not qualify under the
75% and 95% gross income tests. In this regard, the Company currently holds,
through Beacon Management Company and Beacon Construction Company, options to
acquire loans secured by the Rowes Wharf property. Such loans provide for
payments of interest based upon cash flow. These loans could not be held
directly by the Company without jeopardizing their qualification as a REIT and
will continue to be held in a taxable "C corporation."
EOP Management Company and Beacon Management Company conduct third-party
management services with respect to properties not wholly owned by the Operating
Partnership; Beacon Design Company provides interior space design services with
respect to properties not wholly owned by the Operating Partnership; and EOP
Office Company, through its interest in WRALP, provides development services
with respect to properties that are not wholly owned by the Operating
Partnership (collectively, together with Beacon Construction Company (which is
expected to cease operations upon completion of its existing contracts), the
"Noncontrolled Subsidiaries"). The Operating Partnership owns 100% of the
non-voting stock of each of the Noncontrolled Subsidiaries, 1% of the voting
stock of Beacon Management Company, Beacon Design Company and Beacon
Construction Company, and none of the voting stock of any of the other
Noncontrolled Subsidiaries. Each of the Noncontrolled Subsidiaries is taxable as
a regular "C corporation." The Company's share of any dividends received from
the Noncontrolled Subsidiaries should qualify for purposes of the 95% gross
income test but not for purposes of the 75% gross income test. The Company does
not anticipate that it will receive sufficient dividends from the Noncontrolled
Subsidiaries to cause it to exceed the limit on non-qualifying income under the
75% gross income test.
If the Company fails to satisfy one or both of the 75% or 95% gross income
tests for any taxable year, it may nevertheless qualify as a REIT for such year
if it is entitled to relief under certain provisions of the Code. These relief
provisions will generally be available if (i) the Company's failure to meet such
tests is due to reasonable cause and not due to willful neglect and (ii) the
Company attaches a schedule of the sources of its income to its federal income
tax return and any incorrect information on such schedule is not due to fraud
with intent to evade tax. It is not possible, however, to state whether in all
circumstances the Company would be entitled to the benefit of these relief
provisions. For example, if the Company fails to satisfy the gross income tests
because non-qualifying income that the Company intentionally incurs exceeds the
limits on such income, the IRS could conclude that the Company's failure to
satisfy the tests was not due to reasonable cause. If these relief provisions
are inapplicable to a particular set of circumstances involving the Company, the
Company will fail to qualify as a REIT. As discussed above in "-- Taxation of
the Company as a REIT -- General," even if these relief provisions apply, a tax
would be imposed with respect to the excess net income. No similar relief
provision is available if the Company failed the 30% income test for its taxable
year ended December 31, 1997, pursuant to which, for the taxable year ended
December 31, 1997, short-term gain from the sale or other disposition of stock
or securities, gain from prohibited transactions and gain on the sale or other
disposition of real property held for less than four years (apart from
involuntary conversions and sales of foreclosure property) must represent less
than 30% of the Company's gross income (including gross income from "prohibited
transactions"). Accordingly, if the 30% gross income test was not met for such
taxable year, the Company will fail to qualify as a REIT. The 30% gross income
test was repealed by the 1997 Act for taxable years beginning on or after
January 1, 1998. The Company believes and has represented that the 30% gross
income test was met for its taxable year ended December 31, 1997.
Any gain realized by the Company on the sale of any property held as
inventory or other property held primarily for sale to customers in the ordinary
course of business (including the Company's share of any such gain realized by
the
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Operating Partnership) will be treated as income from a "prohibited transaction"
that is subject to a 100% penalty tax. Under existing law, whether property is
held as inventory or primarily for sale to customers in the ordinary course of a
trade or business is a question of fact that depends on all the facts and
circumstances with respect to the particular transaction. The Operating
Partnership intends to hold the Properties for investment with a view to
long-term appreciation, to engage in the business of acquiring, developing,
owning, and operating the Properties (and other properties) and to make such
occasional sales of the Properties as are consistent with the Operating
Partnership's investment objectives. There can be no assurance, however, that
the IRS might not contend that one or more of such sales is subject to the 100%
penalty tax.
ASSET TESTS APPLICABLE TO REITS. The Company, at the close of each quarter
of its taxable year, must also satisfy three tests relating to the nature of its
assets. First, at least 75% of the value of the Company's total assets must be
represented by real estate assets including (i) its allocable share of real
estate assets (including stock of a REIT) held by partnerships in which the
Company owns an interest (including its allocable share of the assets held
directly or indirectly through the Operating Partnership) and (ii) stock or debt
instruments held for not more than one year purchased with the proceeds of a
stock offering or long-term (at least five years) debt offering of the Company,
cash, cash items and government securities. Second, not more than 25% of the
Company's total assets may be represented by securities other than those in the
75% asset class. Third, of the investments included in the 25% asset class, the
value of any one issuer's securities owned by the Company may not exceed 5% of
the value of the Company's total assets, and, except for REITs or "qualified
REIT subsidiaries," the Company may not own more than 10% of any one issuer's
outstanding voting securities.
Stock interests owned by the Company in another REIT are qualifying real
estate assets for purposes of the 75% gross asset test, and, consequently, such
stock interests are not subject to the 10% voting stock limitation described
above. The Operating Partnership currently owns 51.6% of the outstanding stock
of BeaMetFed, Inc., which has elected to be taxed as a REIT for federal income
tax purposes. As a REIT, BeaMetFed, Inc. is subject to the various REIT
qualification requirements described herein. The Company believes that
BeaMetFed, Inc. has been organized and has operated in a manner so as to qualify
for taxation as a REIT for federal income tax purposes and will continue to be
organized and to operate in such a manner. If BeaMetFed, Inc. were to fail to
qualify as a REIT, the Company's stock interests in BeaMetFed, Inc. would cease
to be qualifying real estate assets for purposes of the 75% gross asset test and
would become subject to the 10% voting stock limitation generally applicable to
the Company's ownership in corporations which are neither REITs nor qualified
REIT subsidiaries. Since the Company owns 51.6% of the outstanding stock of
BeaMetFed, Inc., upon any failure of BeaMetFed, Inc. to qualify as a REIT, the
10% voting stock limitation would not be satisfied and the Company itself would
fail to qualify as a REIT.
The Operating Partnership does not own more than 1% of the voting stock of
any of the Noncontrolled Subsidiaries but it does own 100% of the nonvoting
stock of each of the Noncontrolled Subsidiaries. The Operating Partnership also
may own nonvoting stock, representing substantially all of the equity, in other
corporate entities that serve as partners or members in the various entities
that hold title to the Properties. The Company has represented, however, that
the Operating Partnership does not and will not own more than 10% of the voting
securities of any entity that would be treated as a corporation for federal
income tax purposes (other than stock of REITs, which are not taken into account
for purposes of this limitation). In addition, the Company and its senior
management believe, and the Company has represented, that the Company's pro rata
share of the value of the securities of each of the Noncontrolled Subsidiaries
does not exceed 5% of the total value of the Company's assets. There can be no
assurance, however, that the IRS might not contend either that the value of the
securities of the Noncontrolled Subsidiaries held by the Company (through the
ZML Opportunity Partnerships and the Operating Partnership) exceeds the 5% value
limitation or that nonvoting stock of the Noncontrolled Subsidiaries or another
corporate entity owned by the Operating Partnership should be considered "voting
stock" for this purpose.
After initially meeting the asset tests at the close of any quarter, the
Company will not lose its status as a REIT for failure to satisfy the asset
tests at the end of a later quarter solely by reason of changes in asset values.
If the failure to satisfy the asset tests results from an acquisition of
securities or other property during a quarter (including, for example, as a
result of the Company increasing its interest in the Operating Partnership as a
result of a merger, the exercise of Unit Redemption Rights or an additional
capital contribution of proceeds of an offering of shares of beneficial interest
by the Company), the failure can be cured by disposition of sufficient
nonqualifying assets within 30 days after the close of that quarter. The
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Company intends to maintain adequate records of the value of its assets to
ensure compliance with the asset tests and to take such other actions within 30
days after the close of any quarter as may be required to cure any
noncompliance. If the Company fails to cure noncompliance with the asset tests
within such time period, the Company would cease to qualify as a REIT.
ADMINISTRATION'S PROPOSED CHANGES TO REIT ASSET TEST. The Administration's
February 1998 budget proposal includes a proposal to amend the 10% voting
securities test by prohibiting a REIT from owning more than 10% of the vote or
value of all classes of stock of any corporation (other than a "qualified REIT
subsidiary" or another REIT). The proposed 10% vote or value limitation would be
applicable to stock acquired on or after the effective date of the proposal.
Stock owned by the Company prior to the effective date of the proposal generally
would be "grandfathered" (i.e., with respect to such grandfathered stock, the
Company would be subject to the existing 10% voting securities test described
above). However, if the corporation in which such grandfathered stock is held
were to engage in a new trade or business or acquire substantial new assets, the
grandfathered status would terminate with respect to such stock.
The Company owns the majority of the nonvoting stock of the Noncontrolled
Subsidiaries and, consequently, the Company would not satisfy the proposed 10%
value limitation with respect to its stock interest in the Noncontrolled
Subsidiaries. As the proposal is currently drafted, stock held by the Company in
the Noncontrolled Subsidiaries prior to the effective date of the proposal
should be grandfathered. However, if, after the effective date of the proposal,
the Company were to acquire additional stock of a Noncontrolled Subsidiary (or
were deemed to acquire additional stock of a Noncontrolled Subsidiary as a
result of making a contribution to the capital of such Noncontrolled
Subsidiary), such additional stock would not be grandfathered and would be
subject to the 10% vote or value limitation. In addition, if the Noncontrolled
Subsidiaries were to engage in new trades or businesses or acquire substantial
new assets, then grandfathered stock held by the Company in the Noncontrolled
Subsidiaries would lose its grandfathered status and the Company would fail to
qualify as a REIT. Moreover, the Company would not be able to own more than 10%
of the vote or value of any corporation (other than a qualified REIT subsidiary
or another REIT) formed after the effective date of the proposal. Thus, if
enacted as currently drafted, the proposal would materially impede the ability
of the Company to engage in new activities or to expand substantially its
current activities conducted through the Noncontrolled Subsidiaries.
ANNUAL DISTRIBUTION REQUIREMENTS APPLICABLE TO REITS. The Company, in order
to qualify as a REIT, is required to distribute dividends (other than capital
gain dividends) to its shareholders in an amount at least equal to (i) the sum
of (a) 95% of the Company's "REIT taxable income" (computed without regard to
the dividends paid deduction and the Company's net capital gain) and (b) 95% of
the net income (after tax), if any, from foreclosure property, minus (ii) the
sum of certain items of noncash income. In addition, if the Company disposes of
any Built-In Gain Assets during its Recognition Period, the Company will be
required, pursuant to Treasury Regulations which have not yet been promulgated,
to distribute at least 95% of the Built-In Gain (after tax), if any, recognized
on the disposition of such asset. See "-- General" above for a discussion of
"Built-In Gain Assets." Such distributions must be paid in the taxable year to
which they relate, or in the following taxable year if declared before the
Company timely files its tax return for such year and if paid on or before the
first regular dividend payment date after such declaration.
To the extent that the Company does not distribute all of its net capital
gain or distributes at least 95%, but less than 100%, of its "REIT taxable
income," as adjusted, it will be subject to tax thereon at regular ordinary and
capital gain corporate tax rates. The Company may elect to require the
shareholders to include the Company's undistributed net capital gains in their
income by designating, in a written notice to shareholders, those amounts as
undistributed capital gains in respect of its shareholders' shares. If the
Company makes such an election, the shareholders will (i) include in their
income as capital gains their proportionate share of such undistributed capital
gains and (ii) be deemed to have paid their proportionate share of the tax paid
by the Company on such undistributed capital gains and thereby receive a credit
or refund for such amount. A shareholder will increase the basis in its Common
Shares by the difference between the amount of capital gain included in its
income and the amount of the tax that the Company is deemed to have paid on the
shareholder's behalf. The earnings and profits of the Company will be adjusted
appropriately. For a more detailed description of the tax
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consequences to a shareholder of such a designation, see "-- Taxation of Taxable
U.S. Shareholders of the Company Generally."
In addition, if the Company should fail to distribute during each calendar
year at least the sum of (i) 85% of its REIT ordinary income for such year, (ii)
95% of its REIT capital gain income for such year, and (iii) any undistributed
taxable income from prior periods, the Company would be subject to a 4% excise
tax on the excess of such required distribution over the sum of amounts actually
distributed during the calendar year by the REIT and the amount, if any, on
which the REIT paid income tax for such year.
The Company intends to make timely distributions sufficient to satisfy its
annual distribution requirements. In this regard, the Agreement of Limited
Partnership of the Operating Partnership authorizes the Company, as managing
general partner, to take such steps as may be necessary to cause the Operating
Partnership to distribute to its partners an amount sufficient to permit the
Company to meet these distribution requirements. It is expected that the
Company's REIT taxable income will be less than its cash flow due to the
allowance of depreciation and other noncash charges in computing REIT taxable
income. Accordingly, the Company anticipates that it will generally have
sufficient cash or liquid assets to enable it to satisfy the distribution
requirements described above. It is possible, however, that the Company, from
time to time, may not have sufficient cash or other liquid assets to meet these
distribution requirements due to timing differences between (i) the actual
receipt of income and actual payment of deductible expenses and (ii) the
inclusion of such income and deduction of such expenses in arriving at taxable
income of the Company. If such timing differences occur, in order to meet the
distribution requirements, the Company may find it necessary to arrange for
short-term, or possibly long-term, borrowings or to pay dividends in the form of
taxable stock dividends.
Under certain circumstances, the Company may be able to rectify a failure
to meet the distribution requirement for a year by paying "deficiency dividends"
to shareholders in a later year, which may be included in the Company's
deduction for dividends paid for the earlier year. Thus, the Company may be able
to avoid being taxed on amounts distributed as deficiency dividends; however,
the Company will be required to pay interest based upon the amount of any
deduction taken for deficiency dividends.
RECORDKEEPING REQUIREMENTS. Pursuant to applicable Treasury Regulations,
the Company must comply with certain recordkeeping requirements to qualify for
taxation as a REIT.
FAILURE OF THE COMPANY TO QUALIFY AS A REIT. If the Company fails to
qualify for taxation as a REIT in any taxable year and if the relief provisions
do not apply, the Company will be subject to tax (including any applicable
alternative minimum tax) on its taxable income at regular corporate rates.
Distributions to shareholders in any year in which the Company fails to qualify
will not be deductible by the Company nor will they be required to be made. As a
result, the Company's failure to qualify as a REIT would significantly reduce
the cash available for distribution by the Company to its shareholders. In
addition, if the Company fails to qualify as a REIT, all distributions to
shareholders will be taxable as ordinary income, to the extent of the Company's
current and accumulated earnings and profits, and, subject to certain
limitations of the Code, corporate distributees may be eligible for the
dividends received deduction. Unless entitled to relief under specific statutory
provisions, the Company also will be disqualified from taxation as a REIT for
the four taxable years following the year during which qualification was lost.
It is not possible to state whether in all circumstances the Company would be
entitled to such statutory relief.
TAXATION OF TAXABLE U.S. SHAREHOLDERS OF THE COMPANY GENERALLY
As used herein, the term "U.S. Shareholder" means a holder of Common Shares
who (for United States federal income tax purposes) (i) is a citizen or resident
of the United States, (ii) is a corporation, partnership, or other entity
treated as a corporation or partnership for federal income tax purposes created
or organized in or under the laws of the United States or of any political
subdivision thereof, (iii) is an estate or trust the income of which is subject
to United States federal income
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taxation regardless of its source or (iv) a trust whose administration is
subject to the primary supervision of a United States court and which has one or
more United States persons who have the authority to control all substantial
decisions of the trust.
DISTRIBUTIONS BY THE COMPANY. As long as the Company qualifies as a REIT,
distributions made by the Company out of its current or accumulated earnings and
profits (and not designated as capital gain dividends) will constitute dividends
taxable to its taxable U.S. Shareholders as ordinary income. Such distributions
will not be eligible for the dividends received deduction in the case of U.S.
Shareholders that are corporations. To the extent that the Company makes
distributions (not designated as capital gain dividends) in excess of its
current and accumulated earnings and profits, such distributions will be treated
first as a tax-free return of capital to each U.S. Shareholder, reducing the
adjusted basis which such U.S. Shareholder has in its shares for tax purposes by
the amount of such distribution (but not below zero), with distributions in
excess of a U.S. Shareholder's adjusted basis in its shares taxable as capital
gains (provided that the shares have been held as a capital asset). Dividends
declared by the Company in October, November, or December of any year and
payable to a shareholder of record on a specified date in any such month shall
be treated as both paid by the Company and received by the shareholder on
December 31 of such year, provided that the dividend is actually paid by the
Company on or before January 31 of the following calendar year.
Distributions made by the Company that are properly designated by the
Company as capital gain dividends will be taxable to taxable U.S. Shareholders,
who are individuals, estates or trusts, as gain from the sale or exchange of a
capital asset held for more than one year (to the extent that they do not exceed
the Company's actual net capital gain for the taxable year) without regard to
the period for which a U.S. Shareholder has held its shares. In the event that
the Company designates any portion of a dividend as a "capital gain dividend," a
U.S. Shareholder's share of such capital gain dividend would be an amount which
bears the same ratio to the total amount of dividends paid to such U.S.
Shareholder for the year as the aggregate amount designated as a capital gain
dividend bears to the aggregate amount of all dividends paid on all classes of
shares for the year.
On November 10, 1997, the IRS issued IRS Notice 97-64, which provides
generally that the Company may classify portions of its designated capital gain
dividend as (i) a 20% rate gain distribution (which would be taxed as long-term
capital gain in the 20% group), (ii) an unrecaptured Section 1250 gain
distribution (which would be taxed as long-term capital gain in the 25% group),
or (iii) a 28% rate gain distribution (which would be taxed as long-term capital
gain in the 28% group). (If no designation is made, the entire designated
capital gain divided will be treated as a 28% rate gain distribution. For a
discussion of the 20%, 25% and 28% tax rates applicable to individuals, see "--
1997 Act Changes to Capital Gain Taxation" below.) IRS Notice 97-64 provides
that a REIT must determine the maximum amounts that it may designate as 20% and
25% rate capital gain dividends by performing the computation required by the
Code as if the REIT were an individual whose ordinary income were subject to a
marginal tax rate of at least 28%. The Notice further provides that designations
made by the REIT only will be effective to the extent that they comply with
Revenue Ruling 89-91, which requires that distributions made to different
classes of shares be composed proportionately of dividends of a particular type.
Distributions that are properly designated by the Company as capital gain
dividends will be taxable to taxable corporate U.S. Shareholders as long-term
capital gain (to the extent that capital gains dividends do not exceed the
Company's actual net capital gain for the taxable year) without regard to the
period for which such corporate U.S. Shareholder has held its shares. Such
corporate U.S. Shareholders may, however, be required to treat up to 20% of
certain capital gain dividends as ordinary income.
U.S. Shareholders may not include in their individual income tax returns
any net operating losses or capital losses of the Company. Instead, such losses
would be carried over by the Company for potential offset against future income
(subject to certain limitations). Distributions made by the Company and gain
arising from the sale or exchange by a U.S. Shareholder of shares will not be
treated as passive activity income, and, as a result, U.S. Shareholders
generally will not be able to apply any "passive losses" against such income or
gain. In addition, taxable distributions from the Company generally will be
treated as investment income for purposes of the investment interest
limitations. Capital gain dividends and capital gains from the disposition of
shares (including distributions treated as such), however, will be treated as
investment income only if the U.S. Shareholder so elects, in which case such
capital gains will be taxed at ordinary income rates. The Company will
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notify shareholders after the close of the Company's taxable year as to the
portions of distributions attributable to that year that constitute ordinary
income, return of capital and capital gain.
The Company may designate (by written notice to shareholders) its retained
net capital gain (i.e., net capital gain that is not actually distributed as
capital gain dividends, as described above) as undistributed capital gains in
respect of shareholders' shares. Pursuant to such a designation by the Company
with respect to retained net capital gains, a U.S. Shareholder would include its
proportionate share of such gain in income as capital gain and would be treated
as having paid its proportionate share of the tax paid by the REIT with respect
to the gain. The U.S. Shareholder's basis in its shares would be increased by
its share of such gain and decreased by its share of such tax. With respect to
such capital gain of a U.S. Shareholder that is an individual or an estate or
trust, the IRS, as described below in this section, has authority to issue
regulations that could apply the special tax rate applicable generally to the
portion of the long-term capital gains of an individual or an estate or trust
attributable to deductions for depreciation taken with respect to depreciable
real property.
SALES OF SHARES. Upon any sale or other disposition of shares, a U.S.
Shareholder will recognize gain or loss for federal income tax purposes in an
amount equal to the difference between (i) the amount of cash and the fair
market value of any property received on such sale or other disposition and (ii)
the holder's adjusted basis in such shares for tax purposes. Such gain or loss
will be capital gain or loss if the shares have been held by the U.S.
Shareholder as a capital asset. In the case of a U.S. Shareholder who is an
individual or an estate or trust, such gain or loss will be long-term capital
gain or loss, subject to a 28% tax rate, if such shares have been held for more
than one year but not more than 18 months, and long-term capital gain or loss,
subject to a 20% tax rate, if such shares have been held for more than 18
months. In the case of a U.S. Shareholder that is a corporation, such gain or
loss will be long-term capital gain or loss if such shares have been held for
more than one year. In general, any loss recognized by a U.S. Shareholder upon
the sale or other disposition of shares that have been held for six months or
less (after applying certain holding period rules) will be treated as a
long-term capital loss, to the extent of distributions received by such U.S.
Shareholder from the Company that were required to be treated as long-term
capital gains. For a U.S. Shareholder that is an individual, trust or estate,
the long-term capital loss would be apportioned among the applicable long-term
capital gain groups to the extent it appears that distributions received by such
U.S. Shareholder were previously so treated.
1997 ACT CHANGES TO CAPITAL GAIN TAXATION. The 1997 Act altered the
taxation of capital gain income. Under the 1997 Act, individuals, trusts and
estates that hold certain investments for more than 18 months may be taxed at a
maximum long-term capital gain rate of 20% on the sale or exchange of those
investments. Individuals, trusts and estates that hold certain assets for more
than one year but not more than 18 months may be taxed at a maximum long-term
capital gain rate of 28% on the sale or exchange of those investments. The 1997
Act also provides a maximum rate of 25% for "unrecaptured section 1250 gain" for
individuals, trusts and estates, special rules for "qualified 5-year gain," and
other changes to prior law. The 1997 Act allows the IRS to prescribe regulations
on how the 1997 Act's new capital gain rates will apply to sales of capital
assets by "pass-through entities," which include REITs, such as the Company, and
to sales of interests in "pass-through entities." For a discussion of new rules
under the 1997 Act that apply to the taxation of distributions by the Company to
its shareholders that are designated by the Company as "capital gain dividends,"
see "-- Distributions by the Company" above. Shareholders are urged to consult
with their own tax advisors with respect to the new rules contained in the 1997
Act.
BACKUP WITHHOLDING FOR THE COMPANY DISTRIBUTIONS
The Company will report to its U.S. Shareholders and the IRS the amount of
dividends paid during each calendar year, and the amount of tax withheld, if
any. Under the backup withholding rules, a shareholder may be subject to backup
withholding at the rate of 31% with respect to dividends paid unless such holder
(a) is a corporation or comes within certain other exempt categories and, when
required, demonstrates this fact or (b) provides a taxpayer identification
number, certifies as to no loss of exemption from backup withholding, and
otherwise complies with applicable requirements of the backup withholding rules.
A U.S. Shareholder that does not provide the Company with his correct taxpayer
identification number may also be subject to penalties imposed by the IRS. Any
amount paid as backup withholding will be creditable against the shareholder's
income tax liability. In addition, the Company may be required to withhold a
portion of capital gain
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distributions to any shareholders who fail to certify their nonforeign status to
the Company. See "-- Taxation of Non-U.S. Shareholders of the Company."
TAXATION OF TAX-EXEMPT SHAREHOLDERS OF THE COMPANY
The IRS has ruled that amounts distributed as dividends by a qualified REIT
do not constitute unrelated business taxable income ("UBTI") when received by a
tax-exempt entity. Based on that ruling, provided that a tax-exempt shareholder
(except certain tax-exempt shareholders described below) has not held its shares
as "debt financed property" within the meaning of the Code and such shares are
not otherwise used in a trade or business, the dividend income from the Company
will not be UBTI to a tax-exempt shareholder. Similarly, income from the sale of
shares will not constitute UBTI unless such tax-exempt shareholder has held such
shares as "debt financed property" within the meaning of the Code or has used
the shares in a trade or business.
For tax-exempt shareholders that are social clubs, voluntary employee
benefit associations, supplemental unemployment benefit trusts, and qualified
group legal services plans exempt from federal income taxation under Code
Sections 501 (c)(7), (c)(9), (c)(17) and (c)(20), respectively, income from an
investment in the Company will constitute UBTI unless the organization is able
to properly deduct amounts set aside or placed in reserve for certain purposes
so as to offset the income generated by its investment in the Company. Such
shareholders should consult their own tax advisors concerning these "set aside"
and reserve requirements.
Notwithstanding the above, however, the Code provides that a portion of the
dividends paid by a "pension held REIT" shall be treated as UBTI as to any trust
which (i) is described in Section 401(a) of the Code, (ii) is tax-exempt under
Section 501(a) of the Code, and (iii) holds more than 10% (by value) of the
interests in the REIT. Tax-exempt pension funds that are described in Section
401(a) of the Code are referred to below as "qualified trusts."
A REIT is a "pension held REIT" if (i) it would not have qualified as a
REIT but for the fact that Section 856(h)(3) of the Code provides that stock
owned by qualified trusts shall be treated, for purposes of the "not closely
held" requirement, as owned by the beneficiaries of the trust (rather than by
the trust itself) and (ii) either (a) at least one such qualified trust holds
more than 25% (by value) of the interests in the REIT or (b) one or more such
qualified trusts, each of which owns more than 10% (by value) of the interests
in the REIT, hold in the aggregate more than 50% (by value) of the interests in
the REIT. The percentage of any REIT dividend treated as UBTI is equal to the
ratio of (i) the UBTI earned by the REIT (treating the REIT as if it were a
qualified trust and therefore subject to tax on UBTI) to (ii) the total gross
income of the REIT. A de minimis exception applies where the percentage is less
than 5% for any year. The provisions requiring qualified trusts to treat a
portion of REIT distributions as UBTI will not apply if the REIT is able to
satisfy the "not closely held" requirement without relying upon the
"look-through" exception with respect to qualified trusts. Based on both the
current ownership of shares and the limitations on transfer and ownership of
shares contained in the Declaration of Trust, the Company does not expect to be
classified as a "pension held REIT."
TAXATION OF NON-U.S. SHAREHOLDERS OF THE COMPANY
The rules governing United States federal income taxation of the ownership
and disposition of Common Shares by persons that are, for purposes of such
taxation, nonresident alien individuals, foreign corporations, foreign
partnerships or foreign estates or trusts (collectively, "Non-U.S.
Shareholders") are complex, and no attempt is made herein to provide more than a
brief summary of such rules. Accordingly, the discussion does not address all
aspects of United States federal income tax and does not address state, local or
foreign tax consequences that may be relevant to a Non-U.S. Shareholder in light
of its particular circumstances. In addition, this discussion is based on
current law, which is subject to change, and assumes that the Company qualifies
for taxation as a REIT. Non-U.S. Shareholders should consult with their own tax
advisers to determine the impact of federal, state, local and foreign income tax
laws with regard to an investment in Common Shares, including any reporting
requirements.
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DISTRIBUTIONS BY THE COMPANY. Distributions by the Company to a Non-U.S.
Shareholder that are neither attributable to gain from sales or exchanges by the
Company of United States real property interests nor designated by the Company
as capital gains dividends will be treated as dividends of ordinary income to
the extent that they are made out of current or accumulated earnings and profits
of the Company. Such distributions ordinarily will be subject to withholding of
United States federal income tax on a gross basis (that is, without allowance of
deductions) at a 30% rate or such lower rate as may be specified by an
applicable income tax treaty, unless the dividends are treated as effectively
connected with the conduct by the Non-U.S. Shareholder of a United States trade
or business. Dividends that are effectively connected with such a trade or
business will be subject to tax on a net basis (that is, after allowance of
deductions) at graduated rates, in the same manner as domestic shareholders are
taxed with respect to such dividends, and are generally not subject to
withholding. Any such dividends received by a Non-U.S. Shareholder that is a
corporation may also be subject to an additional branch profits tax at a 30%
rate or such lower rate as may be specified by an applicable income tax treaty.
The Company expects to withhold United States income tax at the rate of 30% on
the gross amount of any such distributions made to a Non-U.S. Shareholder unless
(i) a lower treaty rate applies and any required form or certification
evidencing eligibility for that reduced rate is filed with the Company or (ii)
the Non-U.S. Shareholder files an IRS Form 4224 with the Company claiming that
the distribution is effectively connected income.
Distributions in excess of current or accumulated earnings and profits of
the Company will not be taxable to a Non-U.S. Shareholder to the extent that
they do not exceed the adjusted basis of the shareholder's Common Shares but
rather will reduce the adjusted basis of such Common Shares. To the extent that
such distributions exceed the adjusted basis of a Non-U.S. Shareholder's Common
Shares, they will give rise to gain from the sale or exchange of its Common
Shares, the tax treatment of which is described below. As a result of a
legislative change made by the Small Business Job Protection Act of 1996, it
appears that the Company will be required to withhold 10% of any distribution in
excess of the Company's current and accumulated earnings and profits.
Consequently, although the Company intends to withhold at a rate of 30% on the
entire amount of any distribution (or a lower applicable treaty rate), to the
extent that the Company does not do so, any portion of a distribution not
subject to withholding at a rate of 30% (or a lower applicable treaty rate) will
be subject to withholding at a rate of 10%. However, the Non-U.S. Shareholder
may seek a refund of such amounts from the IRS if it subsequently determined
that such distribution was, in fact, in excess of current or accumulated
earnings and profits of the Company, and the amount withheld exceeded the
Non-U.S. Shareholder's United States tax liability, if any.
Distributions to a Non-U.S. Shareholder that are designated by the Company
at the time of distribution as capital gains dividends (other than those arising
from the disposition of a United States real property interest) generally will
not be subject to United States federal income taxation unless (i) the
investment in the Common Shares is effectively connected with the Non-U.S.
Shareholder's United States trade or business, in which case the Non-U.S.
Shareholder will be subject to the same treatment as domestic shareholders with
respect to such gain (except that a shareholder that is a foreign corporation
may also be subject to the 30% branch profits tax, as discussed above) or (ii)
the Non-U.S. Shareholder is a nonresident alien individual who is present in the
United States for 183 days or more during the taxable year and has a "tax home"
in the United States, in which case the nonresident alien individual will be
subject to a 30% tax on the individual's capital gains.
Under the Foreign Investment in Real Property Tax Act ("FIRPTA"), taxable
distributions to a Non-U.S. Shareholder that are attributable to gain from sales
or exchanges by the Company of United States real property interests (whether or
not designated as a capital gain dividend) will cause the Non-U.S. Shareholder
to be treated as recognizing such gain as income effectively connected with a
United States trade or business. Non-U.S. Shareholders would thus generally be
taxed at the same rates applicable to domestic shareholders (subject to a
special alternative minimum tax in the case of nonresident alien individuals).
Also, such gain may be subject to a 30% branch profits tax in the hands of a
Non-U.S. Shareholder that is a corporation, as discussed above. The Company is
required to withhold 35% of any such distribution. That amount is creditable
against the Non-U.S. Shareholder's United States federal income tax liability.
Although the law is not entirely clear on the matter, it appears that
amounts designated by the Company pursuant to the 1997 Act as undistributed
capital gains in respect of shareholders' shares (see "-- Requirements for
Qualification as a REIT -- Annual Distribution Requirements Applicable to REITs"
above) would be treated with respect to Non-U.S. Shareholders in the manner
outlined in the preceding two paragraphs for actual distributions by the Company
of capital gain
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dividends. Under that approach, the Non-U.S. Shareholders would be able to
offset as a credit against their United States federal income tax liability
resulting therefrom their proportionate share of the tax paid by the Company on
such undistributed capital gains (and to receive from the IRS a refund to the
extent their proportionate share of such tax paid by the Company were to exceed
their actual United States federal income tax liability).
SALE OF COMMON SHARES. Gain recognized by a Non-U.S. Shareholder upon the
sale or exchange of Common Shares (including a redemption of Common Shares that
is not treated as a dividend) generally will not be subject to United States
taxation unless such shares constitute a "United States real property interest"
within the meaning of FIRPTA. The Common Shares will not constitute a "United
States real property interest" so long as the Company is a "domestically
controlled REIT." A "domestically controlled REIT" is a REIT in which at all
times during a specified testing period less than 50% in value of its stock is
held directly or indirectly by Non-U.S. Shareholders. Notwithstanding the
foregoing, gain from the sale or exchange of Common Shares not otherwise subject
to FIRPTA will be taxable to a Non-U.S. Shareholder if (i) the investment in the
Common Shares is effectively connected with the Non-U.S. Shareholder's United
States trade or business, in which case the Non-U.S. Shareholder will be subject
to the same treatment as domestic shareholders with respect to such gain (in
addition, a shareholder that is a foreign corporation may also be subject to the
30% branch profits tax, as discussed above) or (ii) the Non-U.S. Shareholder is
a nonresident alien individual who is present in the United States for 183 days
or more during the taxable year and has a "tax home" in the United States, in
which case the nonresident alien individual will be subject to a 30% tax on the
individual's capital gains.
The Company believes that it will continue to be a "domestically controlled
REIT," and therefore that the sale of Common Shares will not be subject to
taxation under FIRPTA. However, because the Common Shares are publicly traded,
no assurance can be given that the Company will continue to be a "domestically
controlled REIT." If the Company fails to qualify as a "domestically controlled
REIT," gain arising from the sale or exchange by a Non-U.S. Shareholder of
Common Shares still would not be subject to United States taxation under FIRPTA
as a sale of a "United States real property interest" if (i) the class or series
of shares being sold is "regularly traded" (as defined by applicable Treasury
Regulations) on an established securities market (e.g., the New York Stock
Exchange) and (ii) the selling Non-U.S. Shareholder held 5% or less of the value
of the outstanding class or series of shares being sold at all times during a
specified testing period. If gain on the sale or exchange of Common Shares were
subject to taxation under FIRPTA, the Non-U.S. Shareholder would be subject to
regular United States income tax with respect to such gain in the same manner as
a U.S. Shareholder (subject to any applicable alternative minimum tax and any
special alternative minimum tax in the case of nonresident alien individuals),
and the purchaser of the Common Shares would be required to withhold and remit
to the IRS 10% of the purchase price.
BACKUP WITHHOLDING TAX AND INFORMATION REPORTING. Backup withholding tax
(which generally is a withholding tax imposed at the rate of 31% on certain
payments to persons that fail to furnish certain information under the United
States information reporting requirements) and information reporting will
generally not apply to distributions paid to Non-U.S. Shareholders outside the
United States that are treated as (i) dividends subject to the 30% (or lower
treaty rate) withholding tax discussed above, (ii) capital gains dividends or
(iii) distributions attributable to gain from the sale or exchange by the
Company of United States real property interests. As a general matter, backup
withholding and information reporting will not apply to a payment of the
proceeds of a sale of Common Shares by or through a foreign office of a foreign
broker. Information reporting (but not backup withholding) will apply, however,
to a payment of the proceeds of a sale of Common Shares by a foreign office of a
broker that (a) is a United States person, (b) derives 50% or more of its gross
income for certain periods from the conduct of a trade or business in the United
States or (c) is a "controlled foreign corporation" (generally, a foreign
corporation controlled by United States shareholders) for United States tax
purposes unless the broker has documentary evidence in its records that the
holder is a Non-U.S. Shareholder and certain other conditions are met, or the
shareholder otherwise establishes an exemption. Payment to or through a United
States office of a broker of the proceeds of a sale of Common Shares is subject
to both backup withholding and information reporting unless the shareholder
certifies under penalty of perjury that the shareholder is a Non-U.S.
Shareholder or otherwise establishes an exemption. A Non-U.S. Shareholder may
obtain a refund of any amounts withheld under the backup withholding rules by
filing the appropriate claim for refund with the IRS.
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The United States Treasury Department has recently finalized regulations
regarding the withholding and information reporting rules discussed above. In
general, these regulations do not alter the substantive withholding and
information reporting requirements but unify certification procedures and forms
and clarify and modify reliance standards. Pursuant to IRS Notice 98-16, these
regulations generally are effective for payments made after December 31, 1999,
subject to certain transition rules. Valid withholding certificates that are
held on December 31, 1999 will remain valid until the earlier of December 31,
2000 or the date of expiration of the certificate under rules currently in
effect (unless otherwise invalidated due to changes in the circumstances of the
person whose name is on such certificate). A Non-U.S. Shareholder should consult
its own advisor regarding the effect of the new Treasury Regulations.
TAX ASPECTS OF THE COMPANY'S OWNERSHIP OF INTERESTS IN THE ZML OPPORTUNITY
PARTNERSHIPS, THE OPERATING PARTNERSHIP AND THE SUBSIDIARY PARTNERSHIPS
GENERAL. Substantially all of the Company's investments are held indirectly
through the ZML Opportunity Partnerships and the Operating Partnership. In
general, partnerships are "pass-through" entities which are not subject to
federal income tax. Rather, partners are allocated their proportionate shares of
the items of income, gain, loss, deduction and credit of a partnership, and are
potentially subject to tax thereon, without regard to whether the partners
receive a distribution from the partnership. The Company will include in its
income its proportionate share of the foregoing partnership items for purposes
of the various REIT income tests and in the computation of its REIT taxable
income. Moreover, for purposes of the REIT asset tests, the Company will include
its proportionate share of assets held through the ZML Opportunity Partnerships
and the Operating Partnership. See "-- Requirements for Qualification as a REIT
- -- Ownership of Partnership Interests by a REIT."
ENTITY CLASSIFICATION. The Company believes that each of the ZML
Opportunity Partnerships and the Operating Partnership will be treated as a
partnership for federal income tax purposes (and not as an association taxable
as a corporation). If any of the ZML Opportunity Partnerships, the Operating
Partnership, or the Subsidiary Partnerships were treated as an association, the
entity would be taxable as a corporation and therefore would be subject to an
entity level tax on its income. In such a situation, the character of the
Company's assets and items of gross income would change and would preclude the
Company from qualifying as a REIT (see "-- Requirements for Qualification as a
REIT -- Asset Tests Applicable to REITs" and "-- Income Tests Applicable to
REITs"). The same result could occur if any limited liability company failed to
qualify for treatment as a partnership (or were not disregarded for federal
income tax purposes).
Prior to January 1, 1997, an organization formed as a partnership or a
limited liability company was treated as a partnership for federal income tax
purposes rather than as a corporation only if it had no more than two of the
four corporate characteristics that the Treasury Regulations in effect at that
time used to distinguish a partnership from a corporation for tax purposes.
These four characteristics were (i) continuity of life, (ii) centralization of
management, (iii) limited liability and (iv) free transferability of interests.
Under final Treasury Regulations which became effective January 1, 1997, the
four factor test has been eliminated and an entity formed as a partnership or as
a limited liability company will be taxed as a partnership for federal income
tax purposes, unless it specifically elects otherwise. The Treasury Regulations
provide that the IRS will not challenge the classification of an existing
partnership or limited liability company for tax periods prior to January 1,
1997 so long as (1) the entity had a reasonable basis for its claimed
classification, (2) the entity and all its members recognized the federal income
tax consequences of any changes in the entity's classification within the 60
months prior to January 1, 1997, and (3) neither the entity nor any member of
the entity had been notified in writing on or before May 8, 1996 that the
classification of the entity was under examination by the IRS.
PARTNERSHIP ALLOCATIONS. Although a partnership agreement will generally
determine the allocation of income and loss among partners, such allocations
will be disregarded for tax purposes if they do not comply with the provisions
of Section 704(b) of the Code and the Treasury Regulations promulgated
thereunder. Generally, Section 704(b) and the Treasury Regulations promulgated
thereunder require that partnership allocations respect the economic arrangement
of the partners.
27
<PAGE> 30
If an allocation is not recognized for federal income tax purposes, the
item subject to the allocation will be reallocated in accordance with the
partners' interests in the partnership, which will be determined by taking into
account all of the facts and circumstances relating to the economic arrangement
of the partners with respect to such item. The allocations of taxable income and
loss provided for in the ZML Opportunity Partnership and the Operating
Partnership agreements are intended to comply with the requirements of Section
704(b) of the Code and the Treasury Regulations promulgated thereunder.
TAX ALLOCATIONS WITH RESPECT TO THE PROPERTIES. Pursuant to Section 704(c)
of the Code, income, gain, loss and deduction attributable to appreciated or
depreciated property that is contributed to a partnership in exchange for an
interest in the partnership must be allocated in a manner such that the
contributing partner is charged with, or benefits from, respectively, the
unrealized gain or unrealized loss associated with the property at the time of
the contribution. The amount of such unrealized gain or unrealized loss is
generally equal to the difference between the fair market value of contributed
property at the time of contribution and the adjusted tax basis of such property
at such time (a "Book-Tax Difference"). Such allocations are solely for federal
income tax purposes and do not affect the book capital accounts or other
economic or legal arrangements among the partners. Under Treasury Regulations
promulgated under Section 704 of the Code, similar rules apply when a
partnership elects to "revalue" its assets in certain situations, such as when a
contribution of property is made to a partnership by a new partner.
Treasury Regulations under Section 704(c) of the Code provide partnerships
with a choice of several methods of accounting for Book-Tax Differences,
including retention of the "traditional method" or the election of certain
alternative methods which would permit any distortions caused by a Book-Tax
Difference to be entirely rectified on an annual basis or with respect to a
specific taxable transaction such as a sale. The Operating Partnership and the
Company have determined to use the "traditional method" of accounting for
Book-Tax Differences with respect to the properties initially contributed to the
Operating Partnership in connection with its formation or subsequently acquired
by merger or contribution.
Based on the foregoing, in general, if any asset contributed to or revalued
by the Operating Partnership is determined to have a fair market value which is
greater than its adjusted tax basis, certain partners of the Operating
Partnership (including, as to certain Properties, the Company) will be allocated
lower amounts of depreciation deductions for tax purposes by the Operating
Partnership and increased taxable income and gain on sale. Such allocations will
tend to eliminate the Book-Tax Difference over the life of the Operating
Partnership. However, the special allocation rules of Section 704(c) of the Code
do not always entirely rectify the Book-Tax Difference on an annual basis or
with respect to a specific transaction such as a sale. Thus, the Company may be
allocated lower depreciation and other deductions, and possibly greater amounts
of taxable income in the event of a sale of contributed assets, and such amounts
may be in excess of the economic or book income allocated to it as a result of
such sale. Such an allocation might cause the Company to recognize taxable
income in excess of cash proceeds, which might adversely affect the Company's
ability to comply with the REIT distribution requirements. See "-- Requirements
for Qualification as a REIT -- Annual Distribution Requirements Applicable to
REITs."
OTHER TAX CONSEQUENCES FOR THE COMPANY, ITS SHAREHOLDERS AND THE NONCONTROLLED
SUBSIDIARIES
The Company and its shareholders may be subject to state or local taxation
in various state or local jurisdictions, including those in which it or they
transact business or reside. The state and local tax treatment of the Company
and its shareholders may not conform to the federal income tax consequences
discussed above. Consequently, prospective shareholders should consult their own
tax advisors regarding the effect of state and local tax laws on an investment
in the Company.
A portion of the cash to be used by the Company to fund distributions is
expected to come from the Noncontrolled Subsidiaries through payments of
dividends on the shares of such Corporations held by the Operating Partnership.
The Noncontrolled Subsidiaries pay federal and state income tax at the full
applicable corporate rates. To the extent that the
28
<PAGE> 31
Noncontrolled Subsidiaries are required to pay federal, state or local taxes,
the cash otherwise available for distribution by the Company to shareholders
will be reduced accordingly.
ITEM 2. PROPERTIES
GENERAL
The Company's portfolio (based on revenue and square footage) is the
largest portfolio of office properties of any publicly traded, full-service
office company in the United States. As of December 31, 1997, the Company owned
or had an interest in 258 Office Properties containing approximately 65.3
million rentable square feet of office space and owned 17 Parking Facilities
containing approximately 16,749 parking spaces. The Office Properties are
located in 78 submarkets in 39 markets in 24 states and the District of
Columbia. The Office Properties, by rentable square feet, are located
approximately 50% in central business districts and approximately 50% in
suburban markets. As of December 31, 1997, the Office Properties were, on a
weighted average basis, 94% occupied by a total of 5,676 tenants, with no single
tenant accounting for more than 1.6% of annualized rent (except for the U.S.
General Services Administration, which accounted for 3.6% of annualized rent).
An additional 735,700 square feet (approximately 1.1% of the rentable square
footage of the Office Properties) was leased, with occupancy to commence in
whole or in part during 1998.
All Property data is as of December 31, 1997.
29
<PAGE> 32
OFFICE PROPERTIES BY REGION
<TABLE>
<CAPTION>
PERCENTAGE ANNUALIZED
OF TOTAL NET
OFFICE PERCENTAGE EFFECTIVE ANNUALIZED
PORTFOLIO OF RENT PER RENT PER
NUMBER RENTABLE RENTABLE ANNUALIZED PORTFOLIO NUMBER OCCUPIED OCCUPIED
OF SQUARE SQUARE PERCENTAGE RENT ANNUALIZED OF SQUARE SQUARE
REGION PROPERTIES FEET FEET OCCUPIED ($000S)(1) RENT LEASES FOOT(2) FOOT(1)
- ------ ---------- ---- ---- -------- ---------- ---- ------ ------- -------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Northeast 83 17,707,551 27.1% 95.8% $ 436,121 32.5% 1,395 $14.65 $25.72
Central 31 13,302,501 20.3 91.4 277,477 20.5 1,152 10.80
22.83
Pacific 43 9,703,180 14.9 92.1 210,402 15.7 673 13.50
23.54
West 32 8,794,095 13.5 95.3 154,376 11.5 1,069 10.41 18.41
Southeast 51 8,664,171 13.3 96.5 156,776 11.7 712 11.11 18.75
Southwest 18 7,120,292 10.9 92.2 108,416 8.1 675 8.60 16.51
--- ---------- ---- ---------- ---- ----- ------ ------
Total/Weighted
Average 258 65,291,790 100.0% 94.0% $1,343,568 100.0% 5,676 $11.99 $21.90
=== ========== ===== ========== ===== =====
</TABLE>
(1) Annualized Rent is the monthly contractual rent under existing leases as of
December 31, 1997 multiplied by 12. This amount reflects total rent before
any rent abatements and includes expense reimbursements, which may be
estimates. Total rent abatements for leases in effect as of December 31,
1997 for the 12 months ending December 31, 1998 are approximately $9.5
million.
(2) Annualized Net Effective Rent is calculated for leases in effect as of
December 31, 1997 as follows: Annualized Rent, calculated as described
above, was reduced by the estimated operating expenses per square foot,
based on 1997 actual operating expense for Properties owned as of January
1, 1997 and based on the Company's estimate of annual operating expense for
Properties acquired subsequent to January 1, 1997.
30
<PAGE> 33
OFFICE PROPERTY MARKETS AND SUBMARKETS
OFFICE PROPERTY STATISTICS
<TABLE>
<CAPTION>
PERCENTAGE ANNUALIZED
OF TOTAL NET
OFFICE PERCENTAGE EFFECTIVE ANNUALIZED
PORTFOLIO OF RENT PER RENT PER
NUMBER RENTABLE RENTABLE ANNUALIZED PORTFOLIO NUMBER OCCUPIED OCCUPIED
OFFICE PROPERTIES OF SQUARE SQUARE PERCENTAGE RENT ANNUALIZED OF SQUARE SQUARE
(MARKET, SUBMARKET) PROPERTIES FEET FEET OCCUPIED ($000S)(1) RENT LEASES FOOT(2) FOOT(1)
- ------------------- ---------- ---- ---- -------- ---------- ---- ------ ------- -------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
NORTHEAST REGION
Stamford, CT
Shelton 1 159,848 0.2% 96.2% $ 2,297 0.2% 12 $ 8.57 $14.93
Stamford 7 1,651,856 2.5 98.1 40,859 3.0 118 14.60 25.23
Washington, D.C.
Central Business District 3 722,920 1.1 98.8 21,395 1.6 66 18.35 29.97
East End 1 247,014 0.4 90.8 6,491 0.5 19 15.18 28.92
Alexandria/Old Town 1 68,770 0.1 100.0 1,619 0.1 10 15.14 23.54
Crystal City 2 896,003 1.4 100.0 24,728 1.8 6 20.25 27.60
Fairfax Center 3 585,640 0.9 97.7 9,747 0.7 48 9.30 17.04
Herndon/Dulles 1 124,319 0.2 100.0 3,312 0.2 1 19.94 26.64
Reston 3 726,045 1.1 100.0 19,882 1.5 82 17.57 27.38
Rosslyn/Ballston 2 672,257 1.0 99.9 16,699 1.2 39 15.94 24.88
Tyson's Corner 2 420,674 0.6 99.6 8,724 0.6 17 13.49 20.83
Boston
Downtown-Financial District 13 4,896,223 7.5 92.8 142,685 10.6 383 16.79 31.41
Downtown-Government Center 1 637,002 1.0 93.7 15,089 1.1 82 11.36 25.29
East Cambridge 4 472,647 0.7 99.7 11,753 0.9 9 13.66 24.94
Northwest 15 1,144,813 1.8 93.9 20, 673 1.5 96 10.25 19.23
South 1 165,851 0.3 95.7 3,269 0.2 17 9.53 20.60
West 8 638,229 1.0 98.4 16,022 1.2 86 16.19 25.51
New York City
Midtown 1 562,567 0.9 100.0 16,687 1.2 28 16.50 29.66
Philadelphia
Conshohocken 1 254,355 0.4 99.8 6,229 0.5 43 16.41 24.55
Center City 2 1,506,836 2.3 89.8 27,809 2.1 114 10.05 20.54
King of Prussia/Valley Forge 2 314,076 0.5 98.8 5,822 0.4 25 11.60 18.76
Main Line 3 142,493 0.2 96.4 2,617 0.2 16 13.09 19.05
Plymouth Meeting/Blue Bell 5 293,837 0.5 99.5 5,346 0.4 24 11.78 18.28
</TABLE>
31
<PAGE> 34
<TABLE>
<CAPTION>
PERCENTAGE ANNUALIZED
OF TOTAL NET
OFFICE PERCENTAGE EFFECTIVE ANNUALIZED
PORTFOLIO OF RENT PER RENT PER
NUMBER RENTABLE RENTABLE ANNUALIZED PORTFOLIO NUMBER OCCUPIED OCCUPIED
OFFICE PROPERTIES OF SQUARE SQUARE PERCENTAGE RENT ANNUALIZED OF SQUARE SQUARE
(MARKET, SUBMARKET) PROPERTIES FEET FEET OCCUPIED ($000S)(1) RENT LEASES FOOT(2) FOOT(1)
- ------------------- ---------- ---- ---- -------- ---------- ---- ------ ------- -------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Norfolk
Norfolk 1 403,276 0.6 96.2 6,367 0.5 54 8.55 16.42
-- ---------- ---- ---- -------- ---- ----- ------ -------
NORTHEAST REGION
TOTAL/WEIGHTED AVERAGE 83 17,707,551 27.1% 95.8% $436,121 32.5% 1,395 $14.65 $ 25.72
CENTRAL REGION
Chicago
Downtown -- Central Loop 4 3,231,284 4.9% 90.1% $ 65,004 4.8% 283 $ 8.39 $ 22.33
Downtown -- West Loop 4 3,405,054 5.2 91.5 82,678 6.2 366 11.63 26.54
O'Hare 5 928,272 1.4 94.2 18,364 1.4 74 9.04 21.01
East-West Corridor 7 2,104,383 3.2 89.7 48,612 3.6 176 15.49 25.76
Lake County 5 546,263 0.8 84.6 9,656 0.7 40 11.21 20.90
Indianapolis
Downtown 2 1,057,877 1.6 93.3 18,650 1.4 83 9.77 18.89
Cleveland
Downtown 1 1,242,144 1.9 94.0 18,767 1.4 37 7.32 16.07
Columbus
Downtown 1 407,472 0.6 92.6 8,911 0.7 30 15.12 23.60
Suburban 2 379,752 0.6 98.1 6,835 0.5 63 11.02 18.34
CENTRAL REGION
TOTAL/WEIGHTED AVERAGE 31 13,302,501 20.3% 91.4% $277,477 20.5% 1,152 $10.80 $ 22.83
PACIFIC REGION
Los Angeles
Downtown 2 1,896,243 2.9% 87.2% $ 38,048 2.8% 69 $11.72 $ 23.00
Pasadena 2 439,367 0.7 90.9 10,849 0.8 32 15.93 27.18
Westwood 2 1,084,437 1.7 84.1 28,458 2.1 78 16.51 31.19
Orange County
Central Orange 2 657,512 1.0 97.6 11,467 0.9 76 10.40 17.88
Irvine/Airport 2 586,544 0.9 95.7 11,851 0.9 72 11.99 21.11
San Diego
University Town Center 6 823,418 1.3 95.8 18,637 1.4 107 15.33 23.62
San Francisco
Downtown 5 2,914,093 4.5 94.0 70,164 5.2 209 13.86 25.63
</TABLE>
32
<PAGE> 35
<TABLE>
<CAPTION>
PERCENTAGE ANNUALIZED
OF TOTAL NET
OFFICE PERCENTAGE EFFECTIVE ANNUALIZED
PORTFOLIO OF RENT PER RENT PER
NUMBER RENTABLE RENTABLE ANNUALIZED PORTFOLIO NUMBER OCCUPIED OCCUPIED
OFFICE PROPERTIES OF SQUARE SQUARE PERCENTAGE RENT ANNUALIZED OF SQUARE SQUARE
(MARKET, SUBMARKET) PROPERTIES FEET FEET OCCUPIED ($000S)(1) RENT LEASES FOOT(2) FOOT(1)
- ------------------- ---------- ---- ---- -------- ---------- ---- ------ ------- -------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
San Jose
Mountain View 12 726,508 1.1 100.0 13,509 1.0 12 15.52 18.59
Santa Clara 7 400,058 0.6 84.6 4,200 0.3 15 7.15 12.40
Sunnyvale 3 175,000 0.3 100.0 3,219 0.2 3 16.24 18.40
-- ------- --- ------ --- --
PACIFIC REGION
TOTAL/WEIGHTED AVERAGE 43 9,703,180 14.9% 92.1% $210,402 15.7% 673 $13.50 $23.54
WEST REGION
Anchorage
Midtown 2 190,599 0.3% 100.0% $ 3,505 0.3% 39 9.73 18.39
Phoenix
Central Corridor 2 605,295 0.9 98.8 7,431 0.6 13 11.60 12.43
Minneapolis
Downtown 1 589,432 0.9 97.1 15,065 1.1 29 9.92 26.32
Denver
Southeast 3 671,659 1.0 92.5 11,231 0.8 53 9.46 18.09
St. Louis
Mid County 1 339,163 0.5 100.0 7,559 0.6 33 12.63 22.29
Albuquerque
Downtown 1 230,022 0.4 93.6 3,324 0.2 32 7.20 15.44
Oklahoma City
Northwest 3 261,324 0.4 87.0 2,059 0.2 104 3.94 9.06
Portland
Downtown 1 368,018 0.6 95.7 6,028 0.4 48 9.79 17.12
Dallas
LBJ/Quorum Plaza 3 1,133,436 1.7 95.5 18,746 1.4 120 9.12 17.32
Central 1 283,707 0.4 87.1 4,159 0.3 41 7.95 16.82
North Central Expressway 1 379,556 0.6 91.0 4,895 0.4 70 6.21 14.17
Preston Center 4 721,351 1.1 91.5 13,062 1.0 142 11.89 19.79
Ft. Worth
W/SW Fort Worth 2 239,095 0.4 94.3 2,705 0.2 63 5.72 11.99
Seattle
Bellevue 2 755,570 1.2 95.9 15,041 1.1 99 12.54 20.76
Central Business District 5 2,025,868 3.1 97.9 39,565 2.9 183 12.61 19.95
========= === ====== === ===
WEST REGION
TOTAL/WEIGHTED AVERAGE 32 8,794,095 13.5% 95.3% $154,376 11.5% 1,069 $10.41 $18.41
</TABLE>
33
<PAGE> 36
<TABLE>
<CAPTION>
PERCENTAGE ANNUALIZED
OF TOTAL NET
OFFICE PERCENTAGE EFFECTIVE ANNUALIZED
PORTFOLIO OF RENT PER RENT PER
NUMBER RENTABLE RENTABLE ANNUALIZED PORTFOLIO NUMBER OCCUPIED OCCUPIED
OFFICE PROPERTIES OF SQUARE SQUARE PERCENTAGE RENT ANNUALIZED OF SQUARE SQUARE
(MARKET, SUBMARKET) PROPERTIES FEET FEET OCCUPIED ($000S)(1) RENT LEASES FOOT(2) FOOT(1)
- ------------------- ---------- ---- ---- -------- ---------- ---- ------ ------- -------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
SOUTHEAST REGION
Ft. Lauderdale
Downtown 1 225,500 0.3 99.0% $ 6,078 0.5 21 $ 17.50 $ 27.22
Orlando
Central Business District 1 640,385 1.0 94.4 15,120 1.1 46 14.06 25.00
Palm Beach County, FL
West Palm Beach 1 215,104 0.3 90.2 3,811 0.3 36 9.36 19.64
Sarasota
Downtown 1 247,891 0.4 90.5 4,145 0.3 35 9.93 18.48
Tampa
Westshore/Airport 2 470,331 0.7 98.1 8,311 0.6 57 10.19 18.01
Atlanta
Central Perimeter 39 4,268,457 6.5 96.8 74,280 5.5 385 10.74 17.97
Midtown 1 770,840 1.2 97.1 16,803 1.3 24 14.66 22.46
Northwest 2 641,263 1.0 95.1 12,551 0.9 42 13.12 20.57
Charlotte
Uptown 1 581,666 0.9 100.0 6,897 0.5 9 6.50 11.86
Raleigh/Durham
South Durham 1 181,221 0.3 93.4 3,142 0.2 36 10.66 18.56
Nashville
Downtown 1 421,513 0.6 97.9 5,637 0.4 21 6.43 13.66
-- --------- ---- -------- ---- ---
SOUTHEAST REGION
TOTAL/WEIGHTED AVERAGE 51 8,664,171 13.3% 96.5% $156,776 11.7% 712 $ 11.11 $ 18.75
</TABLE>
34
<PAGE> 37
<TABLE>
<CAPTION>
PERCENTAGE ANNUALIZED
OF TOTAL NET
OFFICE PERCENTAGE EFFECTIVE ANNUALIZED
PORTFOLIO OF RENT PER RENT PER
NUMBER RENTABLE RENTABLE ANNUALIZED PORTFOLIO NUMBER OCCUPIED OCCUPIED
OFFICE PROPERTIES OF SQUARE SQUARE PERCENTAGE RENT ANNUALIZED OF SQUARE SQUARE
(MARKET, SUBMARKET) PROPERTIES FEET FEET OCCUPIED ($000S)(1) RENT LEASES FOOT(2) FOOT(1)
- ------------------- ---------- ---- ---- -------- ---------- ---- ------ ------- -------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
SOUTHWEST REGION
New Orleans
Central Business District 2 1,164,871 1.8% 85.8% $ 16,081 1.2% 59 $ 8.38 $ 16.08
Metairie/E. Jefferson 3 1,192,828 1.8 94.8 17,359 1.3 188 9.07 15.36
Austin
Central Business District 3 1,423,948 2.2 93.8 26,064 1.9 122 9.39 19.52
Houston
Galleria/West Loop 1 959,466 1.5 93.6 14,803 1.1 125 8.63 16.49
North/North Belt 2 402,709 0.6 97.2 5,444 0.4 26 6.85 13.91
North Loop/Northwest 3 797,971 1.2 88.8 10,702 0.8 53 7.41 15.10
West 1 574,216 0.9 97.6 10,287 0.8 24 11.13 18.36
San Antonio
Airport 1 194,398 0.3 88.7 2,511 0.2 18 6.59 14.57
Northwest 2 409,885 0.6 89.9 5,166 0.4 60 6.48 14.01
SOUTHWEST REGION
TOTAL/WEIGHTED AVERAGE 18 7,120,292 10.9% 92.2% $ 108,416 8.1% 675 $ 8.60 $ 16.51
-- ---------- ---- ---------- --- ---
PORTFOLIO TOTAL/WEIGHTED
AVERAGE 258 65,291,790 100.0% 94.0% $1,343,568 100.0% 5,676 $ 11.99 $ 21.90
=== ========== ===== ========== ===== =====
</TABLE>
(1) Annualized Rent is the monthly contractual rent under existing leases as of
December 31, 1997 multiplied by 12. This amount reflects total rent before
any rent abatements and includes expense reimbursements, which may be
estimates. Total rent abatements for leases in effect as of December 31,
1997, for the 12 months ending December 31, 1998, are approximately $9.5
million.
(2) Annualized Net Effective Rent is calculated for leases in effect as of
December 31, 1997, as follows: Annualized Rent, calculated as described
above, was reduced by the estimated operating expenses per square foot,
based on 1997 actual operating expenses for Properties owned as of January
1, 1997, and based on the Company's estimate of annual operating expenses
for Properties acquired subsequent to January 1, 1997.
35
<PAGE> 38
The following table sets forth certain information relating to each Office
Property as of December 31, 1997.
<TABLE>
<CAPTION>
PERCENTAGE ANNUALIZED
OF TOTAL NET
OFFICE PERCENTAGE EFFECTIVE ANNUALIZED
PORTFOLIO OF RENT PER RENT PER
NUMBER RENTABLE RENTABLE ANNUALIZED PORTFOLIO NUMBER OCCUPIED OCCUPIED
OF YEAR/BUILT SQUARE SQUARE PERCENTAGE RENT ANNUALIZED OF SQUARE SQUARE
PROPERTY PROPERTIES RENOVATED FEET FEET OCCUPIED ($000S)(1) RENT LEASES FOOT(2) FOOT(1)
- -------- ---------- --------- ---- ---- -------- ---------- ---- ------ ------- -------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
NORTHEAST REGION
Stamford, CT
Shelton
Shelton Point 1 1985/93 159,848 0.2% 96.2% $ 2,297 0.2% 12 $ 8.90 $ 14.93
Stamford
One Stamford Plaza 1 1986/94 212,244 0.3 100.0 5,450 0.4 12 14.99 25.68
Two Stamford Plaza 1 1986/94 253,020 0.4 97.4 6,787 0.5 20 16.44 27.53
Three Stamford Plaza 1 1980/94 241,575 0.4 97.3 5,063 0.4 16 11.64 21.53
Four Stamford Plaza 1 1979/94 260,581 0.4 95.9 5,031 0.4 9 11.01 20.14
177 Broad Street 1 1989 187,573 0.3 95.5 4,343 0.3 16 14.00 24.24
300 Atlantic Street 1 1987/96 272,458 0.4 100.0 7,287 0.5 26 15.49 26.75
Canterbury Green (3) 1 1987 224,405 0.3 100.0 6,899 0.5 19 20.82 30.74
Washington, D.C
Central Business District
1111 19th Street 1 1979/93 252,014 0.4 98.8 7,248 0.5 30 17.99 29.11
1620 L Street 1 1989 156,272 0.2 98.0 4,360 0.3 16 18.26 28.46
One Lafayette Centre 1 1980/93 314,634 0.5 99.1 9,788 0.7 20 19.21 31.39
East End
1333 H Street 1 1982 247,014 0.4 90.8 6,491 0.5 19 16.71 28.92
Alexandria/Old Town
1600 Duke Street 1 1985 68,770 0.1 100.0 1,619 0.1 10 15.14 23.54
Crystal City
Polk and Taylor
Buildings (4)(5) 2 1970 896,003 1.4 100.0 24,728 1.8 6 20.25 27.60
Fairfax Center
Centerpointe I & II 2 1988-90 407,723 0.6 99.8 7,124 0.5 15 9.74 17.50
Fair Oaks Plaza 1 1986 177,917 0.3 92.7 2,623 0.2 33 8.97 15.91
Herndon/Dulles
Northridge I 1 1988 124,319 0.2 100.0 3,312 0.2 1 19.94 26.64
</TABLE>
36
<PAGE> 39
<TABLE>
<CAPTION>
PERCENTAGE ANNUALIZED
OF TOTAL NET
OFFICE PERCENTAGE EFFECTIVE ANNUALIZED
PORTFOLIO OF RENT PER RENT PER
NUMBER RENTABLE RENTABLE ANNUALIZED PORTFOLIO NUMBER OCCUPIED OCCUPIED
OF YEAR/BUILT SQUARE SQUARE PERCENTAGE RENT ANNUALIZED OF SQUARE SQUARE
PROPERTY PROPERTIES RENOVATED FEET FEET OCCUPIED ($000S)(1) RENT LEASES FOOT(2) FOOT(1)
- -------- ---------- --------- ---- ---- -------- ---------- ---- ------ ------- -------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Reston
Reston Town Center 3 1990 726,045 1.1 100.0 19,882 1.5 82 17.57 27.38
Rosslyn/Ballston
1300 North 17th Street 1 1980 379,199 0.6 99.7 9,600 0.7 25 16.83 25.38
1616 N. Fort Myer Drive 1 1974 293,058 0.4 100.0 7,099 0.5 14 14.84 24.22
Tyson's Corner
E. J. Randolph 1 1983 165,116 0.3 98.9 3,570 0.3 15 13.92 21.86
John Marshall I 1 1981 255,558 0.4 100.0 5,153 0.4 2 13.30 20.16
Boston
Downtown - Financial District
150 Federal Street 1 1988 529,730 0.8 100.0 18,158 1.4 22 21.48 34.28
175 Federal Street 1 1977 207,366 0.3 92.2 4,693 0.3 31 12.96 24.54
2 Oliver Street-147 Milk
Street 1 1988 270,302 0.4 92.8 4,637 0.3 48 11.94 18.48
225 Franklin Street 1 1966/96 938,632 1.4 99.4 34,222 2.5 20 21.12 36.68
28 State Street (6) 1 1968/97 570,040 0.9 57.8 11,067 0.8 12 23.68 33.60
75-101 Federal Street (4)(7 2 1988 810,963 1.2 93.9 25,405 1.9 67 19.45 33.35
One Post Office
Square (4)(8) 1 1981 765,780 1.2 98.7 22,599 1.7 67 17.51 29.90
Rowes Wharf (4)(8) 3 1987 344,698 0.5 96.5 11,445 0.9 42 15.36 34.40
Russia Wharf 1 1978-82 312,563 0.5 99.9 5,033 0.4 46 7.67 16.12
South Station (3) 1 1988 146,149 0.2 100.0 5,427 0.4 28 15.73 37.14
Downtown - Government Center
Center Plaza 1 1969 637,002 1.0 93.7 15,089 1.1 82 12.13 25.29
East Cambridge
One Canal Park 1 1987 97,912 0.1 98.6 2,317 0.2 4 11.47 24.01
Riverview I & II 2 1985-86 263,892 0.4 100.0 7,257 0.5 4 15.60 27.50
Ten Canal Park 1 1987 110,843 0.2 100.0 2,179 0.2 1 11.13 19.66
Northwest
Crosby Corporate Center 6 1996 337,292 0.5 97.8 4,683 0.3 6 10.38 14.19
New England Executive Park 9 1970/85 807,521 1.2 92.2 15,990 1.2 90 11.16 21.47
South
Westwood Business Center 1 1985 165,851 0.3 95.7 3,269 0.2 17 9.96 20.60
</TABLE>
37
<PAGE> 40
<TABLE>
<CAPTION>
PERCENTAGE ANNUALIZED
OF TOTAL NET
OFFICE PERCENTAGE EFFECTIVE ANNUALIZED
PORTFOLIO OF RENT PER RENT PER
NUMBER RENTABLE RENTABLE ANNUALIZED PORTFOLIO NUMBER OCCUPIED OCCUPIED
OF YEAR/BUILT SQUARE SQUARE PERCENTAGE RENT ANNUALIZED OF SQUARE SQUARE
PROPERTY PROPERTIES RENOVATED FEET FEET OCCUPIED ($000S)(1) RENT LEASES FOOT(2) FOOT(1)
- -------- ---------- --------- ---- ---- -------- ---------- ---- ------ ------- -------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
West
Wellesley Office Park 8 1963-84 638,229 1.0 98.4 16,022 1.2 86 16.45 25.51
New York City
Midtown
850 Third Avenue 1 1960/96 562,567 0.9 100.0 16,687 1.2 28 16.50 29.66
Philadelphia
Conshohocken
Four Falls Corporate
Center (4) 1 1988 254,355 0.4 99.8 6,229 0.5 43 16.45 24.55
Center City
1601 Market Street 1 1970 681,289 1.0 95.0 13,454 1.0 68 11.98 20.79
1700 Market Street 1 1969 825,547 1.3 85.6 14,355 1.1 46 10.45 20.31
King of Prussia/Valley Forge
Oak Hill Plaza (4) 1 1982 164,360 0.3 100.0 2,959 0.2 4 10.51 18.00
Walnut Hill Plaza (4) 1 1985 149,716 0.2 97.5 2,863 0.2 21 13.13 19.61
Main Line
One Devon Square (4) 1 1984 73,267 0.1 100.0 1,494 0.1 10 14.93 20.40
Two Devon Square (4) 1 1985 63,226 0.1 91.8 904 0.1 5 10.10 15.57
Three Devon Square (4) 1 6,000 0.0 100.0 218 0.0 1 30.90 36.37
Plymouth Meeting/Blue Bell
One Valley Square (4) 1 1982 70,289 0.1 100.0 1,125 0.1 7 10.08 16.00
Two Valley Square (4) 1 1990 70,622 0.1 100.0 1,314 0.1 6 11.60 18.60
Three Valley Square (4) 1 1984 84,605 0.1 98.3 1,577 0.1 6 12.62 18.96
Four and Five Valley
Square(4) 2 1988 68,321 0.1 100.0 1,331 0.1 5 12.93 19.48
Norfolk
Norfolk
Dominion Tower (4) 1 1987 403,276 0.6 96.2 6,367 0.5 54 8.89 16.42
-- ---------- ---- ---- -------- ---- --
NORTHEAST REGION
TOTAL/WEIGHTED AVERAGE 83 17,707,551 27.1% 95.8% $436,121 32.5% 1,395 $ 14.65 $ 25.72
</TABLE>
38
<PAGE> 41
<TABLE>
<CAPTION>
PERCENTAGE ANNUALIZED
OF TOTAL NET
OFFICE PERCENTAGE EFFECTIVE ANNUALIZED
PORTFOLIO OF RENT PER RENT PER
NUMBER RENTABLE RENTABLE ANNUALIZED PORTFOLIO NUMBER OCCUPIED OCCUPIED
OF YEAR/BUILT SQUARE SQUARE PERCENTAGE RENT ANNUALIZED OF SQUARE SQUARE
PROPERTY PROPERTIES RENOVATED FEET FEET OCCUPIED ($000S)(1) RENT LEASES FOOT(2) FOOT(1)
- -------- ---------- --------- ---- ---- -------- ---------- ---- ------ ------- -------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
CENTRAL REGION
Chicago
Downtown-Central Loop
161 N. Clark 1 1992 1,010,520 1.5% 80.1% $19,240 1.4% 56 $10.68 $23.78
200 West Adams 1 1985/96 677,222 1.0 89.6 12,560 0.9 59 9.19 20.70
30 N. LaSalle Street (3) 1 1974/90 925,950 1.4 95.2 19,197 1.4 113 8.04 21.78
One North Franklin 1 1991 617,592 0.9 99.3 14,007 1.0 55 9.49 22.83
Downtown-West Loop
10 & 30 S Wacker 2 1983-87 2,003,288 3.1 95.8 60,880 4.5 125 16.41 31.74
101 N. Wacker 1 1980/1990 575,294 0.9 89.4 9,896 0.7 37 6.54 19.24
Civic Opera House 1 1929/1996 826,472 1.3 82.6 11,903 0.9 204 6.96 17.43
O'Hare
Presidents Plaza 4 1980-82 794,396 1.2 93.2 16,140 1.2 58 9.77 21.81
1700 Higgins 1 1986 133,876 0.2 100.0 2,224 0.2 16 8.65 16.61
East-West Corridor
AT&T Plaza 1 1984 224,847 0.3 98.0 4,922 0.4 25 14.79 22.34
Oakbrook Terrace Tower 1 1988 772,928 1.2 87.9 17,561 1.3 56 17.10 25.85
Westbrook Corporate Center 5 1985/96 1,106,608 1.7 89.3 26,130 1.9 95 17.94 26.45
Lake County
Tri-State International 5 1986 546,263 0.8 84.6 9,656 0.7 40 13.25 20.90
Indianapolis
Downtown
Bank One Center/Tower 2 1990 1,057,877 1.6 93.3 18,650 1.4 83 10.47 18.89
Cleveland
Downtown
BP Tower 1 1985 1,242,144 1.9 94.0 18,767 1.4 37 7.79 16.07
Columbus
Downtown
One Columbus Building 1 1987 407,472 0.6 92.6 8,911 0.7 30 16.32 23.60
Suburban
Community Corporate Center 1 1987 250,169 0.4 99.1 4,900 0.4 43 12.55 19.77
One Crosswoods Center 1 1984 129,583 0.2 96.4 1,935 0.1 20 8.61 15.50
-- ---------- ---- ---- -------- ---- -----
CENTRAL REGION
TOTAL/WEIGHTED AVERAGE 31 13,302,501 20.3% 91.4% $277,477 20.5% 1,152 $10.80 $22.83
</TABLE>
39
<PAGE> 42
<TABLE>
<CAPTION>
PERCENTAGE
OF TOTAL
OFFICE
PORTFOLIO
NUMBER RENTABLE RENTABLE ANNUALIZED
OF YEAR/BUILT SQUARE SQUARE PERCENTAGE RENT
PROPERTY PROPERTIES RENOVATED FEET FEET OCCUPIED ($000S)(1)
- -------- ---------- ---------- --------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C>
PACIFIC REGION
Los Angeles
Downtown
550 S. Hope 1 1991 566,434 0.9% 86.8% $12,064
Two California Plaza (3) 1 1992 1,329,809 2.0 87.4 25,984
Pasadena
Pasadena Towers 2 1990-91 439,367 0.7 90.9 10,849
Westwood
10880 Wilshire Boulevard (3) 1 1970/92 534,007 0.8 85.1% 12,772
10960 Wilshire Boulevard 1 1971/92 550,430 0.8 83.3% 15,686
Orange County
Central Orange
500 Orange Tower (9) 1 1988 290,765 0.4 94.5 5,138
1100 Executive Tower 1 1987 366,747 0.6 100.0 6,330
Irvine/Airport
1920 Main Plaza 1 1988 305,662 0.5 97.1 6,060
2010 Main Plaza 1 1988 280,882 0.4 94.3 5,791
San Diego
University Town Center
The Plaza at La Jolla
Village (4) 5 1987-90 635,419 1.0 99.9 15,233
Smith Barney Tower 1 1987 187,999 0.3 82.2 3,404
San Francisco
Downtown
201 Mission Street 1 1981 483,289 0.7 99.6 9,654
580 California 1 1984 313,012 0.5 100.0 8,242
60 Spear Street Building 1 1967/87 133,782 0.2 100.0 3,265
One Maritime Plaza 1 1967/90 523,929 0.8 84.0 12,718
One Market 1 1976/95 1,460,081 2.2 93.8 36,285
San Jose
Mountain View
Shoreline Technology Park 12 1985/91 726,508 1.1 100.0 13,509
<CAPTION>
ANNUALIZED
NET
PERCENTAGE EFFECTIVE ANNUALIZED
OF RENT PER RENT PER
PORTFOLIO NUMBER OCCUPIED OCCUPIED
ANNUALIZED OF SQUARE SQUARE
PROPERTY RENT LEASES FOOT(2) FOOT(1)
- -------- ---------- ------ ---------- ----------
<S> <C> <C> <C> <C>
PACIFIC REGION
Los Angeles
Downtown
550 S. Hope 0.9% 39 $13.97 $24.55
Two California Plaza (3) 1.9 30 13.21 22.34
Pasadena
Pasadena Towers 0.8 32 17.54 27.18
Westwood
10880 Wilshire Boulevard (3) 1.0 44 16.86 28.12
10960 Wilshire Boulevard 1.2 34 22.36 34.23
Orange County
Central Orange
500 Orange Tower (9) 0.4 50 11.79 18.70
1100 Executive Tower 0.5 26 9.81 17.26
Irvine/Airport
1920 Main Plaza 0.5 40 11.52 20.43
2010 Main Plaza 0.4 32 13.66 21.87
San Diego
University Town Center
The Plaza at La Jolla
Village (4) 1.1 90 16.59 24.00
Smith Barney Tower 0.3 17 13.54 22.02
San Francisco
Downtown
201 Mission Street 0.7 18 9.44 20.05
580 California 0.6 29 16.03 26.33
60 Spear Street Building 0.2 9 13.07 24.41
One Maritime Plaza 0.9 39 18.29 28.91
One Market 2.7 114 15.35 26.49
San Jose
Mountain View
Shoreline Technology Park 1.0 12 15.52 18.59
</TABLE>
40
<PAGE> 43
<TABLE>
<CAPTION>
PERCENTAGE
OF TOTAL
OFFICE
PORTFOLIO
NUMBER RENTABLE RENTABLE ANNUALIZED
OF YEAR/BUILT SQUARE SQUARE PERCENTAGE RENT
PROPERTY PROPERTIES RENOVATED FEET FEET OCCUPIED ($000S)(1)
- -------- ---------- ---------- --------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C>
Santa Clara
Lake Marriott Business Park. 7 1981 400,058 0.6 84.6 4,200
Sunnyvale
Sunnyvale Business Center 3 1990 175,000 0.3 100.0 3,219
--- --------- ---- --------
PACIFIC REGION
TOTAL/WEIGHTED AVERAGE 43 9,703,180 14.9% 92.1% $210,402
WEST REGION
Anchorage
Midtown
Calais Office Center (3) 2 1975 190,599 0.3% 100.0% $ 3,505
Phoenix
Central Corridor
49 East Thomas Road (10) 1 1974/93 18,892 0.0 60.8 93
One Phoenix Plaza (11) 1 1989 586,403 0.9 100.0 7,338
Minneapolis
Downtown
LaSalle Plaza 1 1991 589,432 0.9 97.1 15,065
Denver
Southeast
Denver Corporate
Center II & III 2 1981/93-97 358,357 0.5 100.0 6,331
The Quadrant 1 1985 313,302 0.5 83.8 4,900
St. Louis
Mid County
Interco Corporate Tower 1 1986 339,163 0.5 100.0 7,559
Albuquerque
Downtown
500 Marquette Building 1 1985 230,022 0.4 93.6 3,324
Oklahoma City
Northwest
Atrium Towers 2 1980/95 155,865 0.2 94.2 1,321
5100 Brookline (4) 1 1974 105,459 0.2 76.4 738
<CAPTION>
ANNUALIZED
NET
PERCENTAGE EFFECTIVE ANNUALIZED
OF RENT PER RENT PER
PORTFOLIO NUMBER OCCUPIED OCCUPIED
ANNUALIZED OF SQUARE SQUARE
PROPERTY RENT LEASES FOOT(2) FOOT(1)
- -------- ---------- ------ ---------- ----------
<S> <C> <C> <C> <C>
Santa Clara
Lake Marriott Business Park. 0.3 15 8.44 12.40
Sunnyvale
Sunnyvale Business Center 0.2 3 16.24 18.40
---- ---
PACIFIC REGION
TOTAL/WEIGHTED AVERAGE 15.7% 673 $13.50 $23.54
WEST REGION
Anchorage
Midtown
Calais Office Center (3) 0.3% 39 $ 9.73 $18.39
Phoenix
Central Corridor
49 East Thomas Road (10) 0.0 12 0.91 8.08
One Phoenix Plaza (11) 0.5 1 11.95 12.51
Minneapolis
Downtown
LaSalle Plaza 1.1 29 10.21 26.32
Denver
Southeast
Denver Corporate
Center II & III 0.5 15 10.12 17.67
The Quadrant 0.4 38 10.40 18.66
St. Louis
Mid County
Interco Corporate Tower 0.6 33 12.63 22.29
Albuquerque
Downtown
500 Marquette Building 0.2 32 7.70 15.44
Oklahoma City
Northwest
Atrium Towers 0.1 43 4.91 9.00
5100 Brookline (4) 0.1 61 3.82 9.15
</TABLE>
41
<PAGE> 44
<TABLE>
<CAPTION>
PERCENTAGE
OF TOTAL
OFFICE
PORTFOLIO
NUMBER RENTABLE RENTABLE ANNUALIZED
OF YEAR/BUILT SQUARE SQUARE PERCENTAGE RENT
PROPERTY PROPERTIES RENOVATED FEET FEET OCCUPIED ($000S)(1)
- -------- ---------- ---------- --------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C>
Portland
Downtown
1001 Fifth Avenue 1 1980 368,018 0.6 95.7 6,028
Dallas
LBJ/Quorum Plaza
Four Forest (4) 1 1985 394,324 0.6 96.1 5,906
Lakeside Square 1 1987 392,537 0.6 99.1 7,879
North Central Plaza Three 1 1986/94 346,575 0.5 90.7 4,962
Central
8080 NCX 1 1984/95 283,707 0.4 87.1 4,159
North Central Expressway
9400 NCX 1 1981/95 379,556 0.6 91.0 4,895
Preston Center
Preston Commons 3 1986 418,604 0.6 91.8 8,046
Sterling Plaza 1 1984/94 302,747 0.5 91.1 5,016
Ft. Worth
W/SW Fort Worth
Summitt Office Park 2 1974/93 239,095 0.4 94.3 2,705
Seattle
Bellevue
One Bellevue Center (3) 1 1983 344,715 0.5 91.7 6,407
Rainer Plaza (3) 1 1986 410,855 0.6 99.4 8,634
Central Business District
1111 Third Avenue (3) 1 1980 528,282 0.8 96.7 8,991
First Interstate 1 1983 915,883 1.4 97.9 18,995
Second and Seneca 2 1991/1996 480,272 0.7 99.5 9,522
Nordstrom Medical Tower 1 1986 101,431 0.2 96.1 2,057
-- --------- ----- --------
WEST REGION
TOTAL/WEIGHTED AVERAGE 32 8,794,095 13.5% 95.3% $154,376
<CAPTION>
ANNUALIZED
NET
PERCENTAGE EFFECTIVE ANNUALIZED
OF RENT PER RENT PER
PORTFOLIO NUMBER OCCUPIED OCCUPIED
ANNUALIZED OF SQUARE SQUARE
PROPERTY RENT LEASES FOOT(2) FOOT(1)
- -------- ---------- ------ ---------- ----------
<S> <C> <C> <C> <C>
Portland
Downtown
1001 Fifth Avenue 0.4 48 10.24 17.12
Dallas
LBJ/Quorum Plaza
Four Forest (4) 0.4 57 8.67 15.59
Lakeside Square 0.6 24 11.66 20.26
North Central Plaza Three 0.4 39 8.03 15.79
Central
8080 NCX 0.3 41 9.12 16.82
North Central Expressway
9400 NCX 0.4 70 6.82 14.17
Preston Center
Preston Commons 0.6 68 15.28 20.95
Sterling Plaza 0.4 74 9.82 18.18
Ft. Worth
W/SW Fort Worth
Summitt Office Park 0.2 63 6.06 11.99
Seattle
Bellevue
One Bellevue Center (3) 0.5 38 12.59 20.26
Rainer Plaza (3) 0.6 61 13.46 21.15
Central Business District
1111 Third Avenue 0.7 57 11.05 17.60
First Interstate 1.4 74 14.09 21.19
Second and Seneca 0.7 31 12.51 19.92
Nordstrom Medical Tower 0.2 21 13.19 21.09
----- -----
WEST REGION
TOTAL/WEIGHTED AVERAGE 11.5% 1,069 $10.41 $18.41
</TABLE>
42
<PAGE> 45
<TABLE>
<CAPTION>
PERCENTAGE
OF TOTAL
OFFICE
PORTFOLIO
NUMBER RENTABLE RENTABLE ANNUALIZED
OF YEAR/BUILT SQUARE SQUARE PERCENTAGE RENT
PROPERTY PROPERTIES RENOVATED FEET FEET OCCUPIED ($000S)(1)
- -------- ---------- ---------- -------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C>
SOUTHEAST REGION
Ft. Lauderdale
Downtown
First Union Center 1 1991 225,500 0.3% 99.0% $ 6,078
Orlando
Central Business District
SunTrust Center 1 1988 640,385 1.0 94.4 15,120
Palm Beach County, FL
West Palm Beach
One Clearlake Centre 1 1987 215,104 0.3 90.2 3,811
Sarasota
Downtown
Sarasota City Center 1 1989 247,891 0.4 90.5 4,145
Tampa
Westshore/Airport
Tampa Commons 1 1985 254,808 0.4 99.2 4,779
Westshore Center 1 1984 215,523 0.3 96.8 3,532
Atlanta
Central Perimeter
125 Perimeter Center West 1 1972 223,059 0.3 100.0 997
20-26 Perimeter Center East 4 1973 69,664 0.1 98.4 1,052
219-223 Perimeter Center
Parkway 2 1978/97 255,657 0.4 100.0 4,790
245 Perimeter Center Parkway 1 1981 229,131 0.4 100.0 4,116
28-32 Perimeter Center East 3 1974 105,287 0.2 99.0 1,585
301-303 Perimeter Center
North 2 1982/98 317,116 0.5 100.0 6,388
41-47 Perimeter Center East 2 1974 172,374 0.3 98.3 2,854
50-66 Perimeter Center East 5 1971/98 738,803 1.1 99.1 12,968
70-76 Perimeter Center East 4 1972 60,351 0.1 97.5 969
8-16 Perimeter Center East 5 1970 65,435 0.1 93.9 932
<CAPTION>
ANNUALIZED
NET
PERCENTAGE EFFECTIVE ANNUALIZED
OF RENT PER RENT PER
PORTFOLIO NUMBER OCCUPIED OCCUPIED
ANNUALIZED OF SQUARE SQUARE
PROPERTY RENT LEASES FOOT(2) FOOT(1)
- -------- ---------- ------ ---------- ----------
<S> <C> <C> <C> <C>
SOUTHEAST REGION
Ft. Lauderdale
Downtown
First Union Center 0.5% 21 $17.67 $27.22
Orlando
Central Business District
SunTrust Center 1.1 46 14.89 25.00
Palm Beach County, FL
West Palm Beach
One Clearlake Centre 0.3 36 10.37 19.64
Sarasota
Downtown
Sarasota City Center 0.3 35 10.97 18.48
Tampa
Westshore/Airport
Tampa Commons 0.4 21 11.42 18.90
Westshore Center 0.3 36 9.13 16.93
Atlanta
Central Perimeter
125 Perimeter Center West 0.1 1 (2.26) 4.47
20-26 Perimeter Center East 0.1 23 8.62 15.35
219-223 Perimeter Center
Parkway 0.4 7 12.00 18.73
245 Perimeter Center Parkway 0.3 1 11.23 17.96
28-32 Perimeter Center East 0.1 16 8.47 15.20
301-303 Perimeter Center
North 0.5 5 13.42 20.15
41-47 Perimeter Center East 0.2 34 10.12 16.85
50-66 Perimeter Center East 1.0 20 10.97 17.70
70-76 Perimeter Center East 0.1 15 9.73 16.46
8-16 Perimeter Center East 0.1 18 8.43 15.16
</TABLE>
43
<PAGE> 46
<TABLE>
<CAPTION>
PERCENTAGE
OF TOTAL
OFFICE
PORTFOLIO
NUMBER RENTABLE RENTABLE ANNUALIZED
OF YEAR/BUILT SQUARE SQUARE PERCENTAGE RENT
PROPERTY PROPERTIES RENOVATED FEET FEET OCCUPIED ($000S)(1)
- -------- ---------- ---------- --------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C>
Central Park 2 1986 612,733 0.9 97.5 12,042
Lakeside Office Park 5 1972/97 390,238 0.6 94.0 5,437
Park Place Shopping Center 1 1979 61,830 0.1 98.9 1,264
Perimeter--North/South
Terraces 2 1984/98 966,779 1.5 91.9 18,887
Midtown
Promenade II 1 1990 770,840 1.2 97.1 16,803
Northwest
Paces West 2 1988 641,263 1.0 95.1 12,551
Charlotte
Uptown
Wachovia Center 1 1972/94 581,666 0.9 100.0 6,897
Raleigh/Durham
South Durham
University Tower 1 1987/92 181,221 0.3 93.4 3,142
Nashville
Downtown
Nations Bank Plaza 1 1977/95 421,513 0.6 97.9 5,637
-- --------- ---- --------
SOUTHEAST REGION
TOTAL/WEIGHTED AVERAGE 51 8,664,171 13.3% 96.5% $156,776
SOUTHWEST REGION
New Orleans
Central Business District
LL&E Tower 1 1987 545,157 0.8% 84.4% $ 7,199
Texaco Center 1 1984 619,714 0.9 87.1 8,882
Metairie/E. Jefferson
One Lakeway Center 1 1981/96 289,112 0.4 90.8 3,972
Two Lakeway Center 1 1984/96 440,826 0.7 94.4 6,309
Three Lakeway Center 1 1987/96 462,890 0.7 97.6 7,079
<CAPTION>
ANNUALIZED
NET
PERCENTAGE EFFECTIVE ANNUALIZED
OF RENT PER RENT PER
PORTFOLIO NUMBER OCCUPIED OCCUPIED
ANNUALIZED OF SQUARE SQUARE
PROPERTY RENT LEASES FOOT(2) FOOT(1)
- -------- ---------- ------ --------- ----------
<S> <C> <C> <C> <C>
Central Park 0.9 75 12.97 20.16
Lakeside Office Park 0.4 38 7.20 14.82
Park Place Shopping Center 0.1 18 13.95 20.68
Perimeter--North/South
Terraces 1.4 114 14.53 21.26
Midtown
Promenade II 1.3 24 15.11 22.46
Northwest
Paces West 0.9 42 13.79 20.57
Charlotte
Uptown
Wachovia Center 0.5 9 6.50 11.86
Raleigh/Durham
South Durham
University Tower 0.2 36 11.41 18.56
Nashville
Downtown
Nations Bank Plaza 0.4 21 6.57 13.66
---- ---
SOUTHEAST REGION
TOTAL/WEIGHTED AVERAGE 11.7% 712 $11.11 18.75
SOUTHWEST REGION
New Orleans
Central Business District
LL&E Tower 0.5% 33 $ 9.14 $15.64
Texaco Center 0.7 26 10.30 16.46
Metairie/E. Jefferson
One Lakeway Center 0.3 49 8.75 15.13
Two Lakeway Center 0.5 85 9.67 15.16
Three Lakeway Center 0.5 54 9.96 15.68
</TABLE>
44
<PAGE> 47
<TABLE>
<CAPTION>
PERCENTAGE
OF TOTAL
OFFICE
PORTFOLIO
NUMBER RENTABLE RENTABLE ANNUALIZED
OF YEAR/BUILT SQUARE SQUARE PERCENTAGE RENT
PROPERTY PROPERTIES RENOVATED FEET FEET OCCUPIED ($000S)(1)
- -------- ---------- ---------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C>
Austin
Central Business District
Franklin Plaza 1 1987 517,849 0.8 91.5 9,698
One American Center (3) 1 1984 505,770 0.8 92.8 8,969
San Jacinto Center 1 1987 400,329 0.6 98.0 7,398
Houston
Galleria/West Loop
San Felipe Plaza (4) 1 1984 959,466 1.5 93.6 14,803
North/North Belt
Intercontinental Center 1 1983/91 194,801 0.3 99.4 2,710
Northborough Tower (4) 1 1983/90 207,908 0.3 95.1 2,734
North Loop/Northwest
Brookhollow Central 3 1972-1981 797,971 1.2 88.8 10,702
West
Destec Tower 1 1982 574,216 0.9 97.6 10,287
San Antonio
Airport
Union Square 1 1986 194,398 0.3 88.7 2,511
Northwest
Colonade I 1 1983 168,637 0.3 92.4 2,361
Northwest Center 1 1984/94 241,248 0.4 88.2 2,805
--- ---------- ----- ----------
SOUTHWEST REGION
TOTAL/WEIGHTED AVERAGE 18 7,120,292 10.9 92.2% $ 108,416
--- ---------- ----- ----------
PORTFOLIO TOTAL/WEIGHTED AVERAGE 258 65,291,790 100.0% 94.0% $1,343,568
=== ========== ===== ==========
<CAPTION>
ANNUALIZED
NET
PERCENTAGE EFFECTIVE ANNUALIZED
OF RENT PER RENT PER
PORTFOLIO NUMBER OCCUPIED OCCUPIED
ANNUALIZED OF SQUARE SQUARE
PROPERTY RENT LEASES FOOT(2) FOOT(1)
- -------- ---------- ------ ---------- ----------
<S> <C> <C> <C> <C>
Austin
Central Business District
Franklin Plaza 0.7 39 11.45 20.47
One American Center (3) 0.7 36 9.51 19.11
San Jacinto Center 0.6 47 8.89 18.85
Houston
Galleria/West Loop
San Felipe Plaza (4) 1.1 125 9.22 16.49
North/North Belt
Intercontinental Center 0.2 12 6.81 13.99
Northborough Tower (4) 0.2 14 7.28 13.83
North Loop/Northwest
Brookhollow Central 0.8 53 8.34 15.10
West
Destec Tower 0.8 24 11.41 18.36
San Antonio
Airport
Union Square 0.2 18 7.44 14.57
Northwest
Colonade I 0.2 26 7.80 15.15
Northwest Center 0.2 34 6.76 13.18
----- -----
SOUTHWEST REGION
TOTAL/WEIGHTED AVERAGE 8.1% 675 $ 8.60 $16.51
----- -----
PORTFOLIO TOTAL/WEIGHTED AVERAGE 100.0% 5,676 $11.99 $21.90
===== =====
</TABLE>
45
<PAGE> 48
(1) Annualized Rent is the monthly contractual rent under existing leases as
of December 31, 1997, multiplied by 12. This amount reflects total base
rent before any rent abatements, but includes expense reimbursements,
which may be estimates. Total rent abatements for leases in effect as of
December 31, 1997, for the 12 months ending December 31, 1998, are
approximately $9.5 million.
(2) Annualized Net Effective Rent is calculated for leases in effect as of
December 31, 1997, as follows: Annualized Rent, calculated as described
above, was reduced by the estimated operating expenses per square foot,
based on 1997 actual operating expenses for Properties owned as of
January 1, 1997, and based on the Company's estimate of annual operating
expenses for Properties acquired subsequent to January 1, 1997.
(3) This Office Property is held subject to a ground lease.
(4) This Office Property is held in a partnership with an unaffiliated third
party and, in the case of San Felipe Plaza, an affiliated party.
(5) The Company owns a 10% interest in this Office Property. The Company's
joint venture partner has advised the Company of its exercise of its
buy-sell right under the joint venture documents. Accordingly, the Company
may either sell its interest in the Office Property or acquire the joint
venture partner's interest in the Office Property, in either case based on
an assumed value for the Property of $175.5 million.
(6) This Office Property recently underwent major redevelopment and tenants
commenced occupancy in May 1997.
(7) This Office Property is held in a private real estate investment trust in
which the Company owns 51.6% of the outstanding shares.
(8) As of the date of this Form 10-K, the Company is involved in continuing
discussions with its joint venture partner in One Post Office Square and
Rowes Wharf with respect to the Company's control over property management
of such Office Properties. Such joint venture partner did not consent to
the transfer to the Company of Beacon's joint venture interest in these
Properties which occurred as a result of the Beacon Merger. Although the
Company believes that such consent was not required, unless the Company is
able to reach an agreement with respect to day-to-day management of such
Properties, it is possible that the joint venture partner could challenge
the transfer of these Properties in the Beacon Merger, or seek to trigger
the buy-sell remedy found in the joint venture documents.
(9) This Office Property is held subject to an interest in the improvements at
the Property held by an unaffiliated third party. In addition, the Company
has a mortgage interest in such improvements.
(10) This Office Property was purchased in conjunction with the purchase of One
Phoenix Plaza for the sole purpose of providing additional parking for the
tenants of One Phoenix Plaza.
(11) This Office Property is 100% leased to a single tenant on a triple net
basis, whereby the tenant pays for certain operating expenses directly
rather than reimbursing the Company. The amounts shown above for
annualized rent include the amounts for reimbursement of expenses paid by
the Company but do not make any adjustments for expenses paid directly by
the tenant.
46
<PAGE> 49
PARKING FACILITIES
Information concerning the Parking Facilities as of December 31, 1997
is set forth below.
<TABLE>
<CAPTION>
NUMBER
APPROXIMATE MANAGEMENT OF
NUMBER OF COMPANY PARKING
PROPERTY NAME SPACES CITY OR LESSEE(1) FACILITIES
- ------------- ----------- ---- ------------ ----------
<S> <C> <C> <C> <C>
Boston Harbor Garage 1,380 Boston Standard Parking 1
1602-34 Chancellor Garage 416 Philadelphia Central Parking 1
15th & Sansom St. Garage 313 Philadelphia Central Parking 1
Juniper/Locust St. Garage 541 Philadelphia Central Parking 1
1111 Sansom St. Garage 250 Philadelphia Central Parking 1
1616 Sansom St. Garage 240 Philadelphia Central Parking 1
Adams Wabash Garage 670 Chicago Standard Parking 1
Stanwix Parking Garage 712 Pittsburgh Standard Parking 1
Milwaukee Center(2) 876 Milwaukee Standard Parking 1
Capitol Commons Garage(2)(3) 950 Indianapolis Central Parking 1
601 Tchoupitoulas Garage 759 New Orleans Central Parking 1
North Loop Transportation
Center(3) 1,172 Chicago Standard Parking 1
Theater District Garage(3) 1,006 Chicago Standard Parking 1
Civic Parking(4) 7,464 St. Louis Central Parking 4
------ --
Total 16,749 17
====== ==
</TABLE>
(1) With the exception of Capitol Commons Garage, all of the named Parking
Facilities are operated by the designated third-party service companies
(each, a "Service Company") under a lease agreement whereby the Company
and the Service Company share the gross receipts from the parking
operation or the Company receives a fixed payment from the Service
Company, and the Company bears none of the operational expenses. In the
case of the Capitol Commons Garage, the operating agreement provides for
the Company's receipt of a percentage of net receipts and, therefore,
results in an insignificant amount of nonqualifying gross income for REIT
qualification purposes relative to the total gross income of the Company.
(2) This Parking Facility is held subject to a ground lease.
(3) Each of these Parking Facilities is held in a partnership with an
unaffiliated third party. The Company or a Subsidiary is the managing
general partner of each such partnership.
(4) The Company has a 50% membership interest in a portfolio of four Parking
Facilities serving the St. Louis, Missouri area.
TENANTS
As of December 31, 1997, the Office Properties were leased to 5,676
tenants; no single tenant accounted for more than 1.6% of the Company's
aggregate annualized rent or 1.3% of aggregate occupied square feet (except for
the U.S. General Services Administration, acting on behalf of various agencies
or departments of the U.S. government, which accounted for 3.6% of annualized
rent and 3.1% of occupied square feet).
47
<PAGE> 50
LEASE EXPIRATION BY REGION AS OF DECEMBER 31, 1997
<TABLE>
<CAPTION>
1998 1999 2000 2001 2002 2003
----------- ----------- ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C> <C>
NORTHEAST REGION TOTALS Square Feet(1) 1,468,199 1,403,658 1,797,439 2,535,563 2,849,213 1,104,907
% Square Feet(2) 8.3% 7.9% 10.2% 14.3% 16.1% 6.2%
Annualized Rent(3) 35,968,046 $35,511,991 $46,612,300 $67,724,851 $75,666,379 $26,782,214
Number of Leases 250 196 235 212 195 89
Rent Per Square Foot $ 24.50 $ 25.30 $25.93 $26.71 $ 26.56 $ 24.24
CENTRAL REGION TOTALS Square Feet(1) 956,638 938,971 1,366,749 893,497 1,092,626 1,246,839
% Square Feet(2) 7.2% 7.1% 10.3% 6.7% 8.2% 9.4%
Annualized Rent(3) $22,607,154 $24,445,635 $33,459,470 $19,840,138 $26,200,266 $35,621,560
Number of Leases 196 172 174 150 141 75
Rent Per Square Foot $ 23.63 $ 26.03 $ 24.48 $ 22.21 $ 23.98 $ 28.57
PACIFIC REGION TOTALS Square Feet(1) 523,215 1,123,666 1,311,607 1,657,927 852,121 480,685
% Square Feet(2) 5.4% 11.6% 13.5% 17.1% 8.8% 5.0%
Annualized Rent(3) $13,343,037 $25,799,415 $27,844,671 $35,819,707 $22,067,131 $12,104,920
Number of Leases 121 114 110 111 76 41
Rent Per Square Foot $ 25.50 $ 22.96 $ 21.23 $ 21.61 $ 25.90 $ 25.18
WEST REGION TOTALS Square Feet(1) 950,557 981,408 1,235,372 1,264,733 963,339 1,017,366
% Square Feet(2) 10.8% 11.2% 14.0% 14.4% 11.0% 11.6%
Annualized Rent(3) $17,324,712 $16,900,464 $21,845,638 $24,462,927 $17,936,972 $21,095,964
Number of Leases 312 202 187 151 108 51
Rent Per Square Foot $ 18.23 $ 17.22 $ 17.68 $ 19.34 $ 18.62 $ 20.74
SOUTHEAST REGION TOTALS Square Feet(1) 731,862 1,406,101 1,229,731 1,417,873 823,210 298,491
% Square Feet(2) 8.4% 16.2% 14.2% 16.4% 9.5% 3.4%
Annualized Rent(3) $12,803,930 $23,079,524 $25,386,337 $27,164,526 $15,317,589 $ 6,615,672
Number of Leases 147 149 138 113 103 16
Rent Per Square Foot $ 17.50 $ 16.41 $ 20.64 $ 19.16 $ 18.61 $ 22.16
SOUTHWEST REGION TOTALS Square Feet(1) 824,455 615,933 1,394,002 1,007,272 914,422 425,305
% Square Feet(2) 11.6% 8.7% 19.6% 14.1% 12.8% 6.0%
Annualized Rent(3) $12,983,956 $ 9,630,778 $24,574,823 $16,989,284 $15,971,348 $ 6,733,658
Number of Leases 182 114 129 88 97 32
Rent Per Square Foot $ 15.75 $ 15.64 $ 17.63 $ 16.87 $ 17.47 $ 15.83
<CAPTION>
2008 AND
2004 2005 2006 2007 BEYOND TOTALS
----------- ----------- ----------- ----------- ----------- ------------
<S> <C> <C> <C> <C> <C> <C>
NORTHEAST REGION TOTALS Square Feet(1) 1,158,431 955,209 1,001,195 940,102 1,745,470 16,959,386
% Square Feet(2) 6.5% 5.4% 5.7% 5.3% 9.9% 95.8%
Annualized Rent(3) $27,925,360 $24,869,807 $21,563,734 $22,523,196 $50,972,720 $436,120,599
Number of Leases 63 46 48 28 33 1,395
Rent Per Square Foot $ 24.11 $ 26.04 $ 21.54 $ 23.96 $29.20 $ 25.72
CENTRAL REGION TOTALS Square Feet(1) 948,068 1,056,897 667,908 485,950 2,500,874 12,155,017
% Square Feet(2) 7.1% 7.9% 5.0% 3.7% 18.8% 91.4%
Annualized Rent(3) $20,967,084 $22,027,009 $13,967,501 $ 9,654,575 $48,686,853 $277,477,246
Number of Leases 81 51 44 32 36 1,152
Rent Per Square Foot $ 22.12 $ 20.84 $ 20.91 $ 19.87 $19.47 $ 22.83
PACIFIC REGION TOTALS Square Feet(1) 344,178 719,364 411,700 794,246 717,531 8,936,240
% Square Feet(2) 3.5% 7.4% 4.2% 8.2% 7.4% 92.1%
Annualized Rent(3) $ 8,787,839 $15,423,632 $13,581,995 $24,500,345 $11,129,561 $210,402,252
Number of Leases 21 27 18 15 19 673
Rent Per Square Foot $ 25.53 $ 21.44 $ 32.99 $ 30.85 $15.51 $ 23.54
WEST REGION TOTALS Square Feet(1) 981,178 281,007 309,239 216,330 182,766 8,383,295
% Square Feet(2) 11.2% 3.2% 3.5% 2.5% 2.1% 95.3%
Annualized Rent(3) $14,345,575 $ 5,523,336 $ 6,441,399 $ 6,163,374 $ 2,335,969 $154,376,329
Number of Leases 21 12 9 7 9 1,069
Rent Per Square Foot $ 14.62 $ 19.66 $ 20.83 $ 28.49 $ 12.78 $ 18.41
SOUTHEAST REGION TOTALS Square Feet(1) 347,833 418,831 595,444 23,488 1,070,353 8,363,217
% Square Feet(2) 4.0% 4.8% 6.9% 0.3% 12.4% 96.5%
Annualized Rent(3) $ 5,170,466 $ 5,837,916 $14,169,239 $ 543,826 $20,686,841 $156,775,866
Number of Leases 17 9 8 3 9 712
Rent Per Square Foot $ 14.86 $ 13.94 $ 23.80 $ 23.15 $ 19.33 $ 18.75
SOUTHWEST REGION TOTALS Square Feet(1) 520,933 72,924 446,126 171,843 171,729 6,564,944
% Square Feet(2) 7.3% 1.0% 6.3% 2.4% 2.4% 92.2%
Annualized Rent(3) $ 9,226,058 $ 1,324,953 $ 7,264,419 $ 3,017,761 $ 699,402 $108,416,439
Number of Leases 18 4 7 2 2 675
Rent Per Square Foot $ 17.71 $ 18.17 $ 16.28 $ 17.56 $ 4.07 $ 16.51
</TABLE>
48
<PAGE> 51
LEASE EXPIRATION BY REGION AS OF DECEMBER 31, 1997
<TABLE>
<CAPTION>
1998 1999 2000 2001 2002 2003
------------ ------------ ------------ ------------ ------------ ------------
<S> <C> <C> <C> <C> <C> <C> <C>
PORTFOLIO TOTALS Square Feet(1) 5,454,926 6,469,737 8,334,900 8,776,865 7,494,931 4,573,593
% Square Feet(2) 8.4% 9.9% 12.8% 13.4% 11.5% 7.0%
Annualized Rent(3) $115,030,835 $135,367,809 $179,723,239 $192,001,433 $173,159,684 $108,953,988
Number of Leases 1,208 947 973 825 720 304
Rent Per Square Foot $ 21.09 $ 20.92 $ 21.56 $ 21.88 $ 23.10 $ 23.82
<CAPTION>
2008 AND
2004 2005 2006 2007 BEYOND TOTALS
----------- ----------- ----------- ----------- ------------ --------------
<S> <C> <C> <C> <C> <C> <C> <C>
PORTFOLIO TOTALS Square Feet(1) 4,300,621 3,504,232 3,431,612 2,631,959 6,388,723 61,362,099
% Square Feet(2) 6.6% 5.4% 5.3% 4.0% 9.8% 94.0%
Annualized Rent(3) $86,422,383 $75,006,652 $76,988,287 $66,403,077 $134,511,346 $1,343,568,733
Number of Leases 221 149 134 87 108 5,676
Rent Per Square Foot $ 20.10 $ 21.40 $ 22.44 $ 25.23 $ 21.05 $ 21.90
</TABLE>
(1) Total net rentable square feet represented by expiring leases.
(2) Percentage of total net rentable feet represented by expiring leases.
(3) Annualized Rent is the monthly contractual rent under existing leases as of
December 31, 1997 multiplied by 12. This amount reflects total base rent
before any rent abatements, but includes expense reimbursements. Total rent
abatements for leases in effect as of December 31, 1997 for the 12 months
ending December 31, 1998 are approximately $9.5 million.
49
<PAGE> 52
LEASE EXPIRATIONS -- TOTAL PORTFOLIO
The following table sets forth a summary schedule of the lease
expirations for the Office Properties for leases in place as of December 31,
1997, assuming that none of the tenants exercise renewal options or termination
rights, if any, at or prior to the scheduled expirations:
<TABLE>
<CAPTION>
PERCENTAGE
ANNUALIZED OF
PERCENTAGE RENT OF ANNUALIZED
SQUARE OF TOTAL ANNUALIZED EXPIRING RENT OF
NUMBER OF FOOTAGE OF OCCUPIED RENT OF LEASES EXPIRING
YEAR OF LEASE LEASES EXPIRING SQUARE EXPIRING PER SQUARE LEASES
EXPIRATION EXPIRING LEASES FEET LEASES FOOT (1)
- ------------- --------- ---------- ---------- -------------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C>
1998(2) 1,208 5,454,926 9.0% $ 115,030,835 $21.09 8.6%
1999 947 6,469,737 10.6 135,367,809 20.92 10.1
2000 973 8,334,900 13.7 179,723,239 21.56 13.4
2001 825 8,776,865 14.5 192,001,433 21.88 14.3
2002 720 7,494,931 12.4 173,159,684 23.10 12.9
2003 304 4,573,593 7.5 108,953,988 23.82 8.1
2004 221 4,300,621 7.1 86,422,383 20.10 6.4
2005 149 3,504,232 5.8 75,006,652 21.40 5.6
2006 134 3,431,612 5.7 76,988,287 22.44 5.7
2007 87 2,631,959 4.3 66,403,077 25.23 4.9
2008 43 1,859,287 3.1 45,585,979 24.52 3.4
2009 21 774,932 1.3 19,203,150 24.78 1.4
2010 and beyond 44 3,057,645 5.0 69,722,217 22.80 5.2
----- ---------- ----- -------------- ------
Total/Weighted
Average 5,676 60,665,240 100.0%(3) $1,343,568,733 $21.90 100.0%
===== ========== ===== ============== ====
</TABLE>
(1) Based on currently payable rent.
(2) Represents lease expirations from January 1, 1998 to December 31, 1998 and
month-to-month leases.
(3) Reconciliation of total net rentable square footage is as follows:
PERCENTAGE
SQUARE OF
FOOTAGE TOTAL
---------- ----------
Square footage occupied by tenants 60,665,240 92.9%
Square footage used for management offices
and building use, and remeasurement adjustments 696,859 1.1
---------- -----
Total occupied square footage 61,362,099 94.0%
---------- -----
Square footage vacant 3,929,691 6.0
---------- -----
Total net rentable square footage 65,291,790 100.0%
========== =====
50
<PAGE> 53
LEASE DISTRIBUTIONS
The following table sets forth information relating to the distribution
of the Office Property leases, based on rentable square feet under lease, as of
December 31, 1997:
<TABLE>
<CAPTION>
PERCENTAGE
PERCENTAGE OF
TOTAL OF AGGREGATE ANNUALIZED AGGREGATE
PERCENT OCCUPIED PORTFOLIO RENT PER PORTFOLIO
SQUARE FEET NUMBER OF ALL SQUARE OCCUPIED ANNUALIZED SQUARE ANNUALIZED
UNDER LEASE OF LEASES LEASES FEET SQUARE FEET RENT FOOT RENT
- ----------- --------- ------- ---------- ------------ -------------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C> <C>
2,500 or Less 2,111 37.1% 2,651,327 4.5% $53,306,953 $20.11 4.0%
2,501-5,000 1,241 21.9 4,425,891 7.3 91,348,801 20.64 6.7
5,001-7,500 645 11.4 3,941,275 6.5 81,850,253 20.77 6.1
7,501-10,000 335 5.9 2,901,540 4.8 62,623,563 21.58 4.7
10,001-20,000 687 12.1 9,709,038 16.0 207,045,803 21.33 15.4
20,001-40,000 363 6.4 9,854,438 16.1 220,294,918 22.35 16.4
40,001-60,000 125 2.2 6,024,324 9.9 136,425,729 22.65 10.2
60,001-100,000 90 1.6 6,675,284 11.0 162,617,086 24.36 12.1
100,001 or Greater 79 1.4 14,482,123 23.9 328,055,628 22.65 24.4
----- ----- ---------- ----- -------------- -----
Total/Weighted Average 5,676 100.0% 60,665,240 100.0% $1,343,568,733 $21.90 100.0%
===== ==== ========== ==== ============== ====
</TABLE>
OCCUPANCY
The table below sets forth weighted average occupancy rates, based on
square feet occupied, of the Office Properties owned by the Company at the
indicated dates:
PERCENTAGE OF
AGGREGATE RENTABLE
RENTABLE SQUARE
DATE SQUARE FEET FEET OCCUPIED
- ---- ----------- -------------
December 31, 1992.............................. 9,095,684 73%
December 31, 1993.............................. 13,550,553 80
December 31, 1994.............................. 18,505,591 88
December 31, 1995.............................. 23,097,222 86
December 31, 1996.............................. 29,127,289 90
December 31, 1997.............................. 65,291,790 94
51
<PAGE> 54
ITEM 3. LEGAL PROCEEDINGS
Neither the Company nor any of the Properties is presently subject to
any material litigation nor, to the Company's knowledge, is any litigation
threatened against the Company or any of the Properties, other than routine
actions for negligence and other claims and administrative proceedings arising
in the ordinary course of business, some of which are expected to be covered by
liability insurance and all of which collectively are not expected to have a
material adverse effect on the liquidity, results of operations, or business or
financial condition of the Company.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
The Company held a special meeting on December 19, 1997 to consider and
vote upon a proposal to approve the Beacon Merger, the Merger Agreement and the
other transactions contemplated thereby. Only holders of Common Shares of record
at the close of business on November 14, 1997 were entitled to vote at the
special meeting. The affirmative vote of the holders of a majority of all of the
Common Shares entitled to vote on the matter was required to approve the Beacon
Merger and the Merger Agreement. As of the record date, there were 162,106,228
Common Shares outstanding and entitled to vote. The vote was as follows:
133,478,552 Common Shares in favor, 11,357 Common Shares against or withheld,
and 38,538 abstentions. For a more detailed discussion of the Beacon Merger, see
"Item 1. Business -- Acquisition Activity." See also the Company's Current
Report on Form 8-K dated December 17, 1997.
PART II
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS.
The Company's Common Shares began trading on the New York Stock Exchange
("NYSE") on July 8, 1997, under the symbol EOP. On March 25, 1998, the reported
closing sale price per Common Share on the NYSE was $30.875 and there were
approximately 837 holders of record of Common Shares. The information required
by this item as to market prices of Common Shares and the distributions paid by
the Company is hereby incorporated by reference to the material appearing on the
inside back cover of the 1997 Annual Report to Shareholders, filed as Exhibit
13.1 hereto, under the caption "Common Share Market Prices and Distribution." In
addition, the Company declared a $0.32 distribution per Common Share payable on
April 10, 1998 to shareholders of record on March 31, 1998.
ISSUANCES OF UNREGISTERED SECURITIES. Unless stated otherwise, the
Company received cash consideration in connection with each of the following
issuances of unregistered securities:
In September 1997, the Company purchased two Office Properties and a
Parking Facility from an unaffiliated third party for a purchase price of
approximately $140 million. Of this amount, the Operating Partnership issued, in
a private placement of securities in reliance on an exemption from the
registration requirements of the Securities Act of 1933, as amended (the
"Securities Act"), pursuant to Section 4(2) and Rule 506 of Regulation D
promulgated thereunder, 1,692,546 Units at a price of $29 per Unit for a total
of approximately $49.1 million.
On September 3, 1997, the Company (through the Operating Partnership)
issued $180 million of unsecured notes (the "$180 Million Notes") in a private
placement to an institutional investor, in reliance on an exemption from the
registration requirements of the Securities Act, pursuant to Section 4(2) and
Rule 506 of Regulation D promulgated thereunder, and used the proceeds therefrom
to repay amounts outstanding under the Company's $600 million unsecured
revolving line of credit entered into in July 1997.
52
<PAGE> 55
In October 1997, the Company sold an aggregate of $274 million of
restricted Common Shares in two separate private transactions to institutional
investors in reliance on an exemption from the registration requirements of the
Securities Act, pursuant to Section 4(2) and Rule 506 of Regulation D
promulgated thereunder, and contributed the proceeds to the Operating
Partnership in exchange for 9.7 million Units.
Also in October 1997, the Company purchased four Office Properties from
an unaffiliated third party for a purchase price of $289 million. Of this
amount, the Operating Partnership issued, in a private placement of securities
in reliance on an exemption from the registration requirements of the Securities
Act, pursuant to Section 4(2) and Rule 506 of Regulation D promulgated
thereunder, 2,900,000 Units at a price of $24.50 per Unit for a total of
approximately $71.1 million.
Also in October 1997, the Company purchased interests in nine Office
Properties from an unaffiliated third party for a purchase price of
approximately $127.5 million. Of this amount, the Operating Partnership issued,
in a private placement of securities in reliance on an exemption from the
registration requirements of the Securities Act, pursuant to Section 4(2) and
Rule 506 of Regulation D promulgated thereunder, 499,977 Units at a price of
$28.775 per Unit for a total of approximately $14.4 million.
Also in October 1997, the Company purchased an Office Property from an
unaffiliated third party for a purchase price of approximately $81.7 million. Of
this amount, the Operating Partnership issued, in a private placement of
securities in reliance on an exemption from the registration requirements of the
Securities Act, pursuant to Section 4(2) and Rule 506 of Regulation D
promulgated thereunder, 741,159 Units at a price of $32.975 per Unit for a total
of approximately $24.4 million.
In November 1997, the Company purchased two Office Properties from an
unaffiliated third party for a purchase price of $17.2 million. Of this amount,
the Operating Partnership issued, in a private placement of securities in
reliance on an exemption from the registration requirements of the Securities
Act, pursuant to Section 4(2) and Rule 506 of Regulation D promulgated
thereunder, 124,348 Units at a price of $28.775 per Unit for a total of
approximately $3.6 million.
In December 1997, the Company purchased ten Office Properties in the
Wright Runstad Acquisition for a purchase price of $640 million. Of this amount,
the Operating Partnership issued, in a private placement of securities in
reliance on an exemption from the registration requirements of the Securities
Act, pursuant to Section 4(2) and Rule 506 of Regulation D promulgated
thereunder, 2,615,700 Units at a price of $29.11 per Unit for a total of
approximately $76.1 million and the Company issued, also in a private placement
of securities in reliance on an exemption from the registration requirements of
the Securities Act, pursuant to Section 4(2) and Rule 506 of Regulation D
promulgated thereunder, 3,435,688 Common Shares at a price of $29.11 per Common
Share for a total of approximately $100 million. The sellers also received five
year warrants (valued at approximately $15 million) to purchase an additional
5,000,000 Common Shares at an exercise price of $39.375 per share. In addition,
the Company, through a Noncontrolled Subsidiary, acquired a non-controlling
interest in the management company of the seller for approximately $20 million.
Of this amount, the Operating Partnership issued, in a private placement of
securities in reliance on an exemption from the registration requirements of the
Securities Act, pursuant to Section 4(2) and Rule 506 of Regulation D
promulgated thereunder, 137,427 Units at a price of $29.11 per Unit for a total
of approximately $4.0 million.
On February 12, 1998, the Company, in two private placements to
institutional investors in reliance on an exemption from the registration
requirements of the Securities Act, pursuant to Section 4(2) and Rule 506 of
Regulation D promulgated thereunder, sold $1.25 billion of unsecured notes in
four series, ranging in maturities from 5 to 20 years, and $250 million of
unsecured 6.376% Mandatory Par Put Remarketed Securities(SM) due 2012
(which are subject to mandatory tender on February 15, 2002).
On February 13, 1998, the Company (through the Operating Partnership),
in a private placement to institutional investors in reliance on an exemption
from the registration requirements of the Securities Act, pursuant to Rule 144A
promulgated thereunder, sold 6,000,000 5.25% Preferred Income Equity Redeemable
Shares for gross aggregate consideration of $300,000,000. The proceeds of this
offering were contributed to the Operating Partnership in exchange for 6,000,000
5.25% Series B Cumulative Redeemable Units of Limited Partnership Interest.
53
<PAGE> 56
ITEM 6. SELECTED FINANCIAL DATA
The information required by this item is hereby incorporated by
reference to the material appearing in the 1997 Annual Report to Shareholders
under the caption "Equity Office Property Trust Selected Financial Data."
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
The information required by this item is hereby incorporated by
reference to the material appearing in the 1997 Annual Report to Shareholders
under the caption "Equity Office Property Trust Management's Discussion and
Analysis of Financial Condition and Results of Operations."
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
Not applicable.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
The financial statements of the Company and report of independent
auditors required to be included in this item are set forth in Item 14 of this
report and are hereby incorporated by reference to the Consolidated and Combined
Financial Statements of Equity Office Properties Trust and Equity Office
Predecessors appearing in the 1997 Annual Report to Shareholders.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
None.
PART III
ITEM 10. TRUSTEES AND EXECUTIVE OFFICERS OF THE REGISTRANT
The information required by this item is hereby incorporated by
reference to the material appearing in the Company's proxy statement for the
annual shareholders' meeting to be held in 1998 (the "Proxy Statement") under
the captions "Management" and "Compliance with Section 16(a) of the Exchange
Act."
ITEM 11. EXECUTIVE COMPENSATION
The information required by this item is hereby incorporated by
reference to the material appearing in the Proxy Statement under the captions
"Management -- Compensation of the Board of Trustees; Payment in Common Shares,"
"Executive Compensation," "Compensation Committee Report on Executive
Compensation" and "Performance Graph."
54
<PAGE> 57
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The information required by this item is hereby incorporated by
reference to the material appearing in the Proxy Statement under the captions
"Security Ownership of Management" and "Security Ownership of Principal
Shareholders."
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
The information required by this item is hereby incorporated by
reference to the material appearing in the Proxy Statement under the caption
"Certain Relationships and Related Transactions."
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS OF FORM 8-K
(a)(1) and (2) Financial Statements and Schedules:
FINANCIAL STATEMENTS
Report of Independent Auditors
Consolidated and Combined Balance Sheets of Equity Office Properties
Trust and Equity Office Predecessors as of December 31, 1997 and
1996
Consolidated Statement of Operations of Equity Office Properties
Trust for the period from July 11, 1997 to December 31, 1997, and
the Combined Statements of Operations of Equity Office
Predecessors for the period from January 1, 1997 to July 10, 1997
and the years ended December 31, 1996 and 1995
Consolidated Statement of Cash Flows of Equity Office Properties
Trust for the period from July 11, 1997 to December 31, 1997, and
the Combined Statements of Cash Flows of Equity Office
Predecessors for the period from January 1, 1997 to July 10,
1997 and the years ended December 31, 1996 and 1995
Consolidated Statement of Shareholders' Equity of Equity Office
Properties Trust for the period from July 11, 1997 to
December 31, 1997 and the Combined Statements of Owners' Equity
of Equity Office Predecessors for the period from January 1, 1997
to July 10, 1997 and the years ended December 31, 1996 and 1995
Notes to Consolidated and Combined Financial Statements
SCHEDULES
Schedule III -- Real Estate and Accumulated Depreciation
All other schedules for which provision is made in the applicable
accounting regulations of the Securities and Exchange Commission
are not required under the related instruction or are
inapplicable, and therefore have been omitted.
(a)(3) Exhibits:
EXHIBIT NO. DESCRIPTION
----------- -----------
3.1* Amended and Restated Declaration of Trust of the
Company, as amended
3.2 Articles Supplementary of the Company, dated
December 15, 1997 and filed with the Maryland State
Department of Assessments and Taxation on December 17,
1997
3.3 Articles Supplementary of the Company, dated
February 18, 1998 and filed with the Maryland State
Department of Assessments and Taxation on February 19,
1998
55
<PAGE> 58
3.4 Bylaws of the Company (Incorporated herein by reference
to Exhibit 3.2 to the Registration Statement of the
Company and the Operating Partnership on Form S-4
(Commission File No. 333-40401))
4.1 Indenture, dated as of September 2, 1997, between the
Operating Partnership and State Street Bank and Trust
Company
4.2 First Supplemental Indenture, dated as of February 9,
1998, between the Operating Partnership and State
Street Bank and Trust Company
4.3 $200,000,000 6.375% Note due 2003. A $100,000,000 6.375%
Note due 2003, identical in all material respects
other than principal amount to the Note filed as
Exhibit 4.3, has not been filed.
4.4 $200,000,000 6.625% Note due 2005. Another $200,000,000
6.625% Note due 2005, identical in all material
respects to the Note filed as Exhibit 4.4, has not
been filed.
4.5 $200,000,000 6.750% Note due 2008. A $100,000,000 6.750%
Note due 2008, identical in all material respects
other than principal amount to the Note filed as
Exhibit 4.5, has not been filed.
4.6 $200,000,000 7.250% Note due 2018. A $50,000,000 7.250%
Note due 2018, identical in all material respects
other than principal amount to the Note filed as
Exhibit 4.6, has not been filed.
4.7 $200,000,000 6.376% MandatOry Par Put Remarketed
Securities(SM) due 2012. A $50,000,000 6.376%
MandatOry Par Put Remarketed Securities(SM) due
2012, identical in all material respects to the note
filed as Exhibit 4.7, has not been filed.
4.8 $30,000,000 7.24% Senior Note due 2004
4.9 $50,000,000 7.36% Senior Note due 2005
4.10 $50,000,000 7.44% Senior Note due 2006
4.11 $50,000,000 7.41% Senior Note due 2007
4.12 Registration Rights Agreement, dated as of February 12,
1998, among the Operating Partnership, and (i) in the
case of the 6.375% Notes due 2003, the 6.625% Notes
due 2005 and the 7.250% Notes due 2018, Merrill Lynch,
Pierce, Fenner & Smith Incorporated ("Merrill Lynch"),
Lehman Brothers Inc. ("Lehman"), J.P. Morgan
Securities Inc. ("J.P. Morgan"), Salomon Brothers Inc
("Salomon") and UBS Securities LLC, (ii) in the case
of the 6.750% Notes due 2008, Merrill Lynch, Lehman,
J.P. Morgan and BancAmerica Robertson Stephens and
(iii) in the case of the 6.376% MandatOry Par Put
Remarketed Securities(SM) due February 15, 2012,
Merrill Lynch
4.13 Registration Rights Agreement, dated as of February 13,
1998, between the Company and Lehman
10.1 Agreement of Limited Partnership of the Operating
Partnership, as amended
10.2 Registration Rights Agreement, dated as of July 11,
1997, among the Company and the persons named therein
10.3 Noncompetition Agreement between the Company and Samuel
Zell
10.4 Contribution Agreement, dated as of April 30, 1997,
among the Operating Partnership and the persons named
therein
10.5 Merger Agreement, dated as of April 30, 1997, among
the Company and the persons named therein
56
<PAGE> 59
10.6 Each member of the Company's Board of Trustees and each
Executive Officer of the Company has entered into an
Indemnification Agreement with the Company. These
Indemnification Agreements are identical in all
material respects. The schedule below sets forth the
terms of each Indemnification Agreement not filed
which differ from the copy of the example
Indemnification Agreement (between the Company and
Samuel Zell, dated as of October 9, 1996), which is
filed as Exhibit 10.6 hereto:
NAME DATED AS OF
---- -----------
Timothy H. Callahan 10/9/96
Richard D. Kincaid 3/14/97
Sheli Z. Rosenberg 3/12/97
Thomas E. Dobrowski 7/11/97
James D. Harper, Jr. 7/11/97
Peter Linneman 7/11/97
Jerry M. Reinsdorf 7/11/97
William W. Goodyear 7/11/97
David K. McKown 7/11/97
H. Jon Runstad 12/18/97
Edwin N. Sidman 12/24/97
Michael A. Steele 10/9/96
Stanley M. Stevens 10/9/96
Jeffrey L. Johnson 3/14/97
10.8 Agreement and Plan of Merger, dated September 15, 1997,
as amended, among the Company, the Operating
Partnership, Beacon and Beacon Partnership
(incorporated herein by reference to Exhibit 2.1 to
the Company's Current Report on Form 8-K dated
September 15, 1997)
13.1 1997 Annual Report to Shareholders
21.1* List of Subsidiaries of the Company
23.1 Consent of Ernst & Young LLP
24.1 Power of Attorney (included in signature page)
27.1 Financial Data Schedule
------------------
* Incorporated herein by reference to the same-numbered exhibit to the
Company's Registration Statement on Form S-11 (Commission File
No. 333-26629).
(b) Reports on Form 8-K:
- Dated October 1, 1997 including Item 2 (Acquisition or Disposition of
Assets), Item 5 (Other Events) and Item 7 (Financial Statements and
Exhibits). Item 7 included the following financial statements and
reports:
- Pro forma condensed combined financial statements of the Company
as of and for the six months ended June 30, 1997 and for the year
ended December 31, 1996.
- Combined Statements of Revenue and Certain Expenses of the
Columbus America Properties for the year ended December 31, 1996
(audited) and the period from January 1, 1997 through July 31,
1997 (unaudited) and a Report of Independent Auditors dated
September 3, 1997.
- Combined Statements of Revenue and Certain Expenses of the
Prudential Properties for the year ended December 31, 1996
(audited) and the period from January 1, 1997 through August 31,
1997 (unaudited) and a Report of Independent Auditors dated
September 3, 1997.
57
<PAGE> 60
- Statements of Revenue and Certain Expenses of 550 South Hope
Street for the year ended March 31, 1997 (audited) and the period
from April 1, 1997 through July 31, 1997 (unaudited) and a Report
of Independent Auditors dated September 24, 1997.
- Combined Statements of Revenue and Certain Expenses of the Acorn
Properties for the year ended December 31, 1996 (audited) and the
period from January 1, 1997 through July 31, 1997 (unaudited) and
a Report of Independent Auditors dated September 9, 1997.
- Combined Statements of Revenue and Certain Expenses of 10 & 30
South Wacker Drive for the year ended December 31, 1996 (audited)
and the period from January 1, 1997 through July 31, 1997
(unaudited) and a Report of Independent Auditors dated September
5, 1997.
- Dated December 17, 1997 including Item 2 (Acquisition or Disposition
of Assets), Item 5 (Other Events) and Item 7 (Financial Statements and
Exhibits). Item 7 included the following financial statements and
reports:
- Pro forma condensed combined financial statements of the Company
as of and for the nine months ended September 30, 1997 and for
the year ended December 31, 1996.
- Statements of Revenue and Certain Expenses of One Lafayette
Centre for the year ended December 31, 1996 (audited) and the
period from January 1, 1997 through July 31, 1997 (unaudited) and
a Report of Independent Auditors dated September 5, 1997.
- Combined Statements of Revenue and Certain Expenses of the Acorn
Properties for the year ended December 31, 1996 (audited) and the
period from January 1, 1997 through July 31, 1997 (unaudited) and
a Report of Independent Auditors dated September 9, 1997.
- Combined Statements of Revenue and Certain Expenses of the PPM
Properties for the year ended December 31, 1996 (audited) and the
period from January 1, 1997 through August 31, 1997 (unaudited)
and a Report of Independent Auditors dated January 22, 1997.
- Combined Statements of Revenue and Certain Expenses of the Wright
Runstad Properties for the year ended September 30, 1996
(audited) and the period from October 1, 1996 through August 31,
1997 (unaudited) and a Report of Independent Auditors dated
September 26, 1997.
(c) Exhibits:
See Item 14(a)(3) above.
(d) Financial Statement Schedules:
None.
58
<PAGE> 61
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, as amended, the Registrant has duly caused this report to
be signed on its behalf by the undersigned, thereunto duly authorized, in
Chicago, Illinois, as of the 31st day of March, 1998.
Equity Office Properties Trust
By: /s/ Timothy H. Callahan
---------------------------------------
Timothy H. Callahan
President and Chief Executive Officer
Pursuant to the requirements of the Securities Exchange Act of 1934,
this report has been signed below by the following persons on behalf of the
registrant in the capacities indicated as of the 31st day of March, 1998.
Each person whose signature appears below hereby constitutes and
appoints Samuel Zell and Timothy H. Callahan, and each of them, his
attorney-in-fact and agent, with full power of substitution and resubstitution
for him in any and all capacities, to sign any or all amendments to this annual
report on Form 10-K for the fiscal year ended December 31, 1997, and to file the
same, with exhibits thereto and other documents in connection therewith, with
the Securities and Exchange Commission, granting unto such attorney-in-fact and
agent full power and authority to do and perform each and every act and thing
requisite and necessary in connection with such matters and hereby ratifying and
confirming all that such attorney-in-fact and agent or his substitutes may do or
cause to be done by virtue hereof.
SIGNATURE TITLE
--------- -----
/s/ Timothy H. Callahan President, Chief Executive Officer and
- ---------------------------- Trustee (principal executive officer)
Timothy H. Callahan
/s/ Richard D. Kincaid Chief Financial Officer
- ---------------------------- (principal financial officer and
Richard D. Kincaid principal accounting officer)
/s/ Samuel Zell Chairman of the Board of Trustees
- ----------------------------
Samuel Zell
/s/ Sheli Z. Rosenberg Trustee
- ----------------------------
Sheli Z. Rosenberg
59
<PAGE> 62
SIGNATURE TITLE
--------- -----
/s/ Thomas E. Dobrowski Trustee
- ----------------------------
Thomas E. Dobrowski
/s/ James D. Harper, Jr. Trustee
- ----------------------------
James D. Harper, Jr.
/s/ Peter Linneman Trustee
- ----------------------------
Peter Linneman
/s/ Jerry M. Reinsdorf Trustee
- ----------------------------
Jerry M. Reinsdorf
/s/ William M. Goodyear Trustee
- ----------------------------
William M. Goodyear
/s/ David K. McKown Trustee
- ----------------------------
David K. McKown
Trustee
- ----------------------------
H. Jon Runstad
/s/ Edwin N. Sidman Trustee
- ----------------------------
Edwin N. Sidman
60
<PAGE> 63
EXHIBIT INDEX
EXHIBIT NO. DESCRIPTION PAGE NO.
- ----------- ----------- --------
3.1* Amended and Restated Declaration of Trust of the
Company, as amended
3.2 Articles Supplementary of the Company, dated
December 15, 1997 and filed with the Maryland State
Department of Assessments and Taxation on
December 17, 1997
3.3 Articles Supplementary of the Company, dated
February 18, 1998 and filed with the Maryland State
Department of Assessments and Taxation on
February 19, 1998
3.4 Bylaws of the Company (Incorporated herein by reference
to Exhibit 3.2 to the Registration Statement of the
Company and the Operating Partnership on Form S-4
(Commission File No. 333-40401))
4.1 Indenture, dated as of September 2, 1997, between the
Operating Partnership and State Street Bank and Trust
Company
4.2 First Supplemental Indenture, dated as of February 9,
1998, between the Operating Partnership and State
Street Bank and Trust Company
4.3 $200,000,000 6.375% Note due 2003. A $100,000,000
6.375% Note due 2003, identical in all material
respects other than principal amount to the Note
filed as Exhibit 4.3, has not been filed.
4.4 $200,000,000 6.625% Note due 2005. Another $200,000,000
6.625% Note due 2005, identical in all material
respects to the Note filed as Exhibit 4.4, has not
been filed.
4.5 $200,000,000 6.750% Note due 2008. A $100,000,000
6.750% Note due 2008, identical in all material
respects other than principal amount to the Note
filed as Exhibit 4.5, has not been filed.
4.6 $200,000,000 7.250% Note due 2018. A $50,000,000 7.250%
Note due 2018, identical in all material respects
other than principal amount to the Note filed as
Exhibit 4.6, has not been filed.
4.7 $200,000,000 6.376% MandatOry Par Put Remarketed
Securities(SM) due 2012. A $50,000,000 6.376% MandatOry
Par Put Remarketed Securities(SM) due 2012, identical
in all material respects to the note filed as Exhibit
4.7, has not been filed.
4.8 $30,000,000 7.24% Senior Note due 2004
4.9 $50,000,000 7.36% Senior Note due 2005
4.10 $50,000,000 7.44% Senior Note due 2006
4.11 $50,000,000 7.41% Senior Note due 2007
4.12 Registration Rights Agreement, dated as of February 12,
1998, among the Operating Partnership, and (i) in the
case of the 6.375% Notes due 2003, the 6.625% Notes
due 2005 and the 7.250% Notes due 2018, Merrill
Lynch, Pierce, Fenner & Smith Incorporated ("Merrill
Lynch"), Lehman Brothers Inc. ("Lehman"), J.P. Morgan
Securities Inc. ("J.P. Morgan"), Salomon Brothers Inc
("Salomon") and UBS Securities LLC, (ii) in the case
of the 6.750% Notes due 2008, Merrill Lynch, Lehman,
J.P. Morgan and BancAmerica Robertson Stephens and
(iii) in the case of the 6.376% MandatOry Par Put
Remarketed Securities(SM) due February 15, 2012,
Merrill Lynch
4.13 Registration Rights Agreement, dated as of February 13,
1998, between the Company and Lehman
10.1 Agreement of Limited Partnership of the Operating
Partnership, as amended
10.2 Registration Rights Agreement, dated as of July 11,
1997, among the Company and the persons named therein
10.3 Noncompetition Agreement between the Company and
Samuel Zell
10.4 Contribution Agreement, dated as of April 30, 1997,
among the Operating Partnership and the persons named
therein
61
<PAGE> 64
10.5 Merger Agreement, dated as of April 30, 1997, among the
Company and the persons named therein
10.6 Each member of the Company's Board of Trustees and each
Executive Officer of the Company has entered into an
Indemnification Agreement with the Company. These
Indemnification Agreements are identical in all
material respects. The schedule below sets forth the
terms of each Indemnification Agreement not filed
which differ from the copy of the example
Indemnification Agreement (between the Company and
Samuel Zell, dated as of October 9, 1996), which is
filed as Exhibit 10.6 hereto:
NAME DATED AS OF
---- -----------
Timothy H. Callahan 10/9/96
Richard D. Kincaid 3/14/97
Sheli Z. Rosenberg 3/12/97
Thomas E. Dobrowski 7/11/97
James D. Harper, Jr. 7/11/97
Peter Linneman 7/11/97
Jerry M. Reinsdorf 7/11/97
William W. Goodyear 7/11/97
David K. McKown 7/11/97
H. Jon Runstad 12/18/97
Edwin N. Sidman 12/24/97
Michael A. Steele 10/9/96
Stanley M. Stevens 10/9/96
Jeffrey L. Johnson 3/14/97
10.7 Agreement and Plan of Merger, dated September 15, 1997,
as amended, among the Company, the Operating
Partnership, Beacon and Beacon Partnership
(Incorporated herein by reference to Exhibit 2.1 to
the Company's Current Report on Form 8-K dated
September 15, 1997)
13.1 1997 Annual Report to Shareholders
21.1* List of Subsidiaries of the Company
23.1 Consent of Ernst & Young LLP
24.1 Power of Attorney (included in signature page)
27.1 Financial Data Schedule
- -----------------------
* Incorporated herein by reference to the same-numbered exhibit to the
Company's Registration Statement on Form S-11 (Commission File
No. 333-26629).
62
<PAGE> 65
Schedule III - Real Estate and Accumulated Depreciation as of December 31, 1997
<TABLE>
<CAPTION>
Costs
Initial Cost to Capitalized Subsequent
Company To Acquisition
---------------------------------------------------------------------------------------------------------------------------------
December 31, 1997 Buildings and Buildings and
Description Location Encumbrances Land Improvements Land Improvements
---------------------------------------------------------------------------------------------------------------------------------
Office Properties:
<S> <C> <C> <C> <C> <C> <C>
1 60 Spear Street Building (3) San Francisco, CA $ 0 $ 2,125,200 $ 19,126,500 $0 $ 0
2 San Felipe Plaza (3) Houston, TX 53,087,500 13,471,300 117,984,100 0 2,131,400
3 Summit Office Park (3) Ft. Worth, TX 0 1,421,000 12,789,700 0 311,400
4 5100 Brookline (3) Oklahoma City, OK 0 570,700 4,236,500 0 120,100
5 Tampa Commons (3) Tampa, FL 0 2,783,900 25,054,600 0 19,200
6 Intercontinental Center (3) Houston, TX 0 1,750,700 14,406,300 0 43,500
7 First Union Center (3) Ft. Lauderdale, FL 0 3,954,000 35,585,900 0 74,400
8 Four Forest (3) Dallas, TX 0 4,767,900 42,911,400 0 590,100
9 Dominion Tower (3) Norfolk, VA 0 4,643,700 41,091,200 0 238,800
10 Northborough Tower (3) Houston, TX 0 1,704,000 12,185,800 0 292,300
11 500 Marquette Building (3) Albuquerque, NM 0 2,219,900 19,978,500 0 370,200
12 Atrium Towers (3) Oklahoma City, OK 0 749,000 6,741,600 0 374,300
13 One Clearlake Centre (3) W. Palm Beach, FL 0 4,585,700 18,771,300 0 562,000
14 Community Corporate Center (3) Columbus, OH 16,719,900 3,018,900 27,169,800 0 200,900
15 Sarasota City Center (3) Sarasota, FL 0 2,239,600 20,156,700 0 72,500
16 Denver Corporate Center
II and III (3) Denver, CO 0 6,059,400 36,534,300 0 603,300
17 University Tower (3) Durham, NC 0 2,085,100 18,766,200 0 146,800
18 Shelton Pointe (3) Shelton, CT 0 1,513,900 13,625,200 0 245,700
19 San Jacinto Center (3) Austin, TX 0 5,074,500 45,670,600 0 877,900
20 1111 19th Street (3) Washington D.C. 0 5,024,000 45,216,000 0 154,700
21 Bank One Center/Tower (3) Indianapolis, IN 0 14,608,200 131,473,600 0 1,206,700
22 North Central Plaza Three (3) Dallas, TX 0 3,632,100 32,689,300 0 273,700
23 The Quadrant (3) Englewood, CO 0 4,357,200 39,215,300 0 634,100
24 Canterbury Green (3)(4)Stamford, CT 19,034,200 0 41,987,100 0 370,500
25 Three Stamford Plaza (3) Stamford, CT 16,562,800 3,956,600 35,609,700 0 163,100
26 Union Square (3) San Antonio, TX 0 2,368,500 14,236,000 0 289,100
27 One North Franklin (3) Chicago, IL 0 9,830,500 88,474,400 0 378,800
28 1620 L Street (3) Washington, DC 0 2,708,200 24,374,100 0 662,500
29 One & Two Stamford Plaza (3) Stamford, CT 0 8,267,700 74,409,300 0 796,400
30 300 Atlantic Street (3) Stamford, CT 0 4,632,300 41,690,900 0 522,000
31 Sterling Plaza (3) Dallas, TX 0 3,810,600 34,295,500 0 367,800
32 1700 Higgins (3) Des Plaines, IL 3,379,700 (5) 1,323,100 11,907,900 0 29,400
33 Franklin Plaza (3) Austin, TX 34,087,800 (5) 6,502,400 58,521,300 0 1,269,800
34 Northwest Center (3) San Antonio, TX 6,465,100 (5) 1,947,900 17,531,900 0 132,600
35 One Columbus Building (3) Columbus, OH 29,386,100 (5) 4,956,300 44,606,300 0 316,200
36 One Crosswoods Center (3) Columbus, OH 3,449,200 (5) 1,058,900 9,529,700 0 188,100
37 One Lakeway (3) Metairie, LA 9,697,600 (5) 2,803,900 25,235,400 0 327,000
38 Three Lakeway (3) Metairie, LA 17,018,700 (5) 4,695,000 43,517,200 0 1,097,300
39 Two Lakeway (3) Metairie, LA 14,692,600 (5) 4,643,500 41,791,800 0 523,700
40 Westshore Center (3) Tampa, FL 7,052,600 (5) 1,978,800 17,808,700 0 150,300
41 NationsBank Plaza (3) Nashville, TN 0 3,049,200 27,443,100 0 229,900
42 The Plaza at La Jolla Village (3) San Diego, CA 57,943,100 11,839,400 98,247,900 0 351,200
43 Interco Corporate Tower (3) Clayton, MO 22,038,100 4,688,400 42,195,200 0 338,100
44 9400 NCX (3) Dallas, TX 0 3,570,000 32,129,700 0 1,895,200
45 Four Stamford Plaza (3) Stamford, CT 15,825,200 4,470,900 40,237,900 0 94,300
46 1920 Main Street Plaza (3) Irvine, CA 0 5,480,700 47,525,800 0 690,100
47 Paces West (3) Atlanta, GA 0 12,833,700 75,024,500 0 1,425,000
48 One Market (3) San Francisco, CA 151,265,200 34,814,400 313,329,700 0 18,864,800
49 2010 Main Street Plaza (3) Irvine, CA 0 5,197,100 46,773,700 0 259,700
</TABLE>
<TABLE>
<CAPTION>
Gross Amount Carried
at Close of
Period 12/31/97
---------------------------------------------------------------------------------------------------------------------------
Buildings and Accumulated Date Date Depreciable
Description Land Improvements Total (1) Depreciation Constructed Acquired Lives (2)
---------------------------------------------------------------------------------------------------------------------------
Office Properties:
<S> <C> <C> <C> <C> <C> <C> <C>
1 60 Spear Street Building $ 2,125,200 $ 19,126,500 $ 21,251,700 $ (218,700) 1967 9/29/87 40
2 San Felipe Plaza 13,471,300 120,115,500 133,586,800 (1,487,800) 1984 9/29/87 40
3 Summit Office Park 1,421,000 13,101,100 14,522,100 (163,300) 1974 3/01/89 40
4 5100 Brookline 570,700 4,356,600 4,927,300 (53,100) 1974 3/01/89 40
5 Tampa Commons 2,783,900 25,073,800 27,857,700 (286,400) 1985 4/25/89 40
6 Intercontinental Center 1,750,700 14,449,800 16,200,500 (165,500) 1983 6/28/89 40
7 First Union Center 3,954,000 35,660,300 39,614,300 (407,900) 1991 6/28/89 40
8 Four Forest 4,767,900 43,501,500 48,269,400 (523,900) 1985 6/29/89 40
9 Dominion Tower 4,643,700 41,330,000 45,973,700 (482,100) 1987 7/25/89 40
10 Northborough Tower 1,704,000 12,478,100 14,182,100 (149,600) 1983 8/03/89 40
11 500 Marquette Building 2,219,900 20,348,700 22,568,600 (255,000) 1985 8/15/89 40
12 Atrium Towers 749,000 7,115,900 7,864,900 (94,600) 1980 12/15/89 40
13 One Clearlake Centre 4,585,700 19,333,300 23,919,000 (239,900) 1987 12/29/89 40
14 Community Corporate Center 3,018,900 27,370,700 30,389,600 (327,100) 1987 6/14/90 40
15 Sarasota City Center 2,239,600 20,229,200 22,468,800 (236,800) 1989 9/28/90 40
16 Denver Corporate Center
II and III 6,059,400 37,137,600 43,197,000 (427,200) 1981-82 12/20/90 40
17 University Tower 2,085,100 18,913,000 20,998,100 (226,100) 1987 10/16/91 40
18 Shelton Pointe 1,513,900 13,870,900 15,384,800 (160,300) 1985 11/26/91 40
19 San Jacinto Center 5,074,500 46,548,500 51,623,000 (555,400) 1987 12/13/91 40
20 1111 19th Street, N.W. 5,024,000 45,370,700 50,394,700 (527,900) 1979 12/18/91 40
21 Bank One Center Tower 14,608,200 132,680,300 147,288,500 (1,543,200) 1990 3/24/92 40
22 North Central Plaza Three 3,632,100 32,963,000 36,595,100 (472,100) 1986 4/21/92 40
23 The Quadrant 4,357,200 39,849,400 44,206,600 (464,200) 1985 12/01/92 40
24 Canterbury Green 0 42,357,600 42,357,600 (482,800) 1987 12/15/92 40
25 Three Stamford Plaza 3,956,600 35,772,800 39,729,400 (419,800) 1980 12/15/92 40
26 Union Square 2,368,500 14,525,100 16,893,600 (179,100) 1986 12/23/92 40
27 One North Franklin 9,830,500 88,853,200 98,683,700 (1,026,800) 1991 12/31/92 40
28 1620 L Street 2,708,200 25,036,600 27,744,800 (329,400) 1989 2/05/93 40
29 One & Two Stamford Plaza 8,267,700 75,205,700 83,473,400 (899,100) 1986 3/30/93 40
30 300 Atlantic Street 4,632,300 42,212,900 46,845,200 (501,200) 1987 3/30/93 40
31 Sterling Plaza 3,810,600 34,663,300 38,473,900 (409,100) 1984 6/25/93 40
32 1700 Higgins 1,323,100 11,937,300 13,260,400 (138,900) 1986 11/12/93 40
33 Franklin Plaza 6,502,400 59,791,100 66,293,500 (741,000) 1987 11/12/93 40
34 Northwest Center 1,947,900 17,664,500 19,612,400 (206,300) 1984 11/12/93 40
35 One Columbus Building 4,956,300 44,922,500 49,878,800 (515,000) 1987 11/12/93 40
36 One Crosswoods Center 1,058,900 9,717,800 10,776,700 (119,100) 1984 11/12/93 40
37 One Lakeway 2,803,900 25,562,400 28,366,300 (305,400) 1981 11/12/93 40
38 Three Lakeway 4,695,000 44,614,500 49,309,500 (557,500) 1987 11/12/93 40
39 Two Lakeway 4,643,500 42,315,500 46,959,000 (505,200) 1984 11/12/93 40
40 Westshore Center 1,978,800 17,959,000 19,937,800 (217,200) 1984 11/12/93 40
41 NationsBank Plaza 3,049,200 27,673,000 30,722,200 (317,800) 1977 12/01/93 40
42 The Plaza at La Jolla Village 11,839,400 98,599,100 110,438,500 (1,134,200) 1987-1990 3/10/94 40
43 Interco Corporate Tower 4,688,400 42,533,300 47,221,700 (486,200) 1986 5/27/94 40
44 9400 NCX 3,570,000 34,024,900 37,594,900 (454,700) 1981 6/24/94 40
45 Four Stamford Plaza 4,470,900 40,332,200 44,803,100 (460,400) 1979 8/31/94 40
46 1920 Main Plaza 5,480,700 48,215,900 53,696,600 (654,600) 1988 9/29/94 40
47 One and Two Paces West 12,833,700 76,449,500 89,283,200 (948,800) 1987 10/31/94 40
48 One Market 34,814,400 332,194,500 367,008,900 (4,391,600) 1976 11/22/94 40
49 2010 Main Plaza 5,197,100 47,033,400 52,230,500 (559,400) 1988 12/13/94 40
</TABLE>
<PAGE> 66
<TABLE>
<CAPTION>
Costs
Initial Cost to Capitalized Subsequent
Company To Acquisition
---------------------------------------------------------------------------------------------------------------------------
December 31, 1997 Buildings and Buildings and
Description Location Encumbrances Land Improvements Land Improvements
---------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
50 1100 Executive Tower (3) Orange, CA 0 10,112,000 41,600,900 0 377,500
51 28 State Street (3)(6)Boston, MA 0 9,512,600 85,613,100 0 27,919,400
52 850 Third Avenue (3) New York, NY 0 9,605,900 86,453,200 0 2,243,100
53 161 North Clark (3) Chicago, IL 111,883,100 15,881,700 142,936,100 0 11,149,300
54 Wachovia Center (3) Charlotte, NC 26,307,200 5,061,000 45,548,900 0 481,600
55 Central Park (3) Atlanta, GA 55,033,500 9,162,600 82,463,100 0 556,000
56 One American Center (3) Austin, TX 0 0 70,811,500 0 552,200
57 Pasadena Towers (3) Pasadena, CA 47,474,100 7,087,500 63,787,500 0 1,383,200
58 580 California (3) San Francisco, CA 29,884,400 7,489,000 67,401,300 0 1,741,600
59 1601 Market Street (3) Philadelphia, PA 0 5,780,800 52,027,500 0 760,500
60 Promenade II (3) Atlanta, GA 95,906,900 14,850,000 133,650,200 0 3,482,500
61 Two California Plaza (3) Los Angeles, CA 0 0 156,197,000 0 14,041,300
62 BP Tower (3) Cleveland, OH 84,587,300 16,450,700 148,056,200 0 312,300
63 Sun Trust Center (3) Orlando, FL 0 11,023,600 99,212,300 0 1,065,600
64 Reston Town Center (3) Reston, VA 91,361,300 23,425,200 154,576,300 0 428,000
65 49 East Thomas Road (3) Phoenix, AZ 0 65,300 587,800 0 0
66 Colonnade I (3) San Antonio, TX 0 1,413,700 12,722,800 0 360,900
67 One Phoenix Plaza (3) Phoenix, AZ 0 6,191,900 55,726,900 0 0
68 177 Broad Street (3)(7)Stamford, CT 0 3,941,200 35,470,900 0 375,200
69 Preston Commons (3) Dallas, TX 0 5,737,200 51,589,100 0 956,100
70 Oakbrook Terrace Tower (3) Oakbrook Terrace, IL 0 11,950,100 107,550,900 0 392,200
71 One Maritime Plaza (3) San Francisco, CA 0 11,532,700 103,793,800 0 1,682,200
72 Smith Barney Tower (3) San Diego, CA 0 2,657,700 23,919,400 0 1,179,100
73 201 Mission Street (3) San Francisco, CA 0 8,870,800 79,836,600 0 258,000
74 30 N. LaSalle Street (3) Chicago, IL 0 12,489,000 112,400,700 0 569,600
75 LL&E Tower New Orleans, LA 37,500,000 (8) 6,185,800 55,672,200 0 127,300
76 Texaco Center New Orleans, LA 42,500,000 (8) 6,686,300 60,177,000 0 393,000
77 Prudential Portfolio (g) Various 0 28,456,300 256,106,600 0 5,343,900
78 550 South Hope Street Los Angeles, CA 0 10,017,500 90,157,600 0 0
79 10 & 30 South Wacker Chicago, IL 0 48,502,500 436,522,400 0 54,100
80 Four Falls Corporate Center Conshohocken, PA 0 4,929,500 44,365,700 0 132,000
81 Four and Five Valley Square Plymouth Meeting, PA 0 864,500 7,781,200 0 15,000
82 Oak Hill Plaza King of Prussia, PA 0 2,205,200 19,847,100 0 2,800
83 One Devon Square Wayne, PA 0 1,023,500 9,211,000 0 1,200
84 Three Devon Square Wayne, PA 0 411,400 3,702,800 0 0
85 Two Devon Square Wayne, PA 0 658,500 5,926,800 0 104,700
86 Two Valley Square Plymouth Meeting, PA 0 878,000 7,901,400 0 1,200
87 Walnut Hill Plaza King of Prussia, PA 14,713,700 2,046,300 18,416,800 0 2,600
88 re Washington, D.C. 0 8,257,000 74,312,800 0 1,400
89 Plymouth Meeting, PA 0 717,600 6,457,600 0 1,200
90 Plymouth Meeting, PA 0 1,012,400 9,111,600 0 1,400
91 1600 Duke Street Alexandria, VA 0 1,105,300 9,948,500 0 0
92 Fair Oaks Plaza Fairfax, VA 0 2,411,600 21,704,200 0 0
93 Lakeside Square Dallas, TX 0 8,261,000 47,349,300 0 587,900
94 LaSalle Plaza Minneapolis, MN 0 9,679,000 87,111,400 0 32,300
95 1001 Fifth Avenue Portland, OR 20,691,500 (10) 5,381,200 48,615,200 0 700
96 1111 Third Avenue Seattle, WA 30,830,400 (10) 9,895,500 89,530,100 0 305,700
97 Calais Office Center Anchorage, AL 8,587,000 (10) 0 16,625,800 0 444,300
98 First Interstate Seattle, WA 83,800,700 (10) 21,352,000 193,449,600 0 20,400
99 Nordstrom Medical Tower Seattle, WA 10,035,400 (10) 1,762,500 16,016,400 0 300
100 One Bellevue Center Bellevue, WA 23,691,800 (10) 0 56,199,700 0 392,900
101 Rainer Plaza Bellevue, WA 29,795,800 (10) 0 79,896,000 0 3,200
102 Second and Seneca Seattle, WA 40,865,800 (10) 10,917,900 98,885,800 0 111,800
103 101 N. Wacker Chicago, IL 0 10,067,600 90,608,800 0 0
104 10880 Wilshire Boulevard Los Angeles, CA 0 0 149,841,200 0 0
105 10960 Wilshire Boulevard Los Angeles, CA 0 16,841,300 151,573,900 0 0
106 1300 N. 17th Street Rosslyn, VA 0 9,810,600 88,295,900 0 0
</TABLE>
<TABLE>
<CAPTION>
Gross Amount Carried
at Close of
Period 12/31/97
- ------------------------------------------------------------------------------------------------------------------------------------
Buildings and Accumulated Date Date Depreciable
Land Improvements Total (1) Depreciation Constructed Acquired Lives (2)
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
50 1100 Executive Tower 10,112,000 41,978,400 52,090,400 (503,200) 1987 12/15/94 40
51 28 State Street 9,512,600 113,532,500 123,045,100 (387,300) 1968 1/23/95 40
52 850 Third Avenue 9,605,900 88,696,300 98,302,200 (1,075,900) 1960 3/20/95 40
53 161 North Clark 15,881,700 154,085,400 169,967,100 (1,864,800) 1992 7/26/95 40
54 Wachovia Center 5,061,000 46,030,500 51,091,500 (524,900) 1972 9/01/95 40
55 Central Park Office Park 9,162,600 83,019,100 92,181,700 (975,500) 1986 10/17/95 40
56 One American Center 0 71,363,700 71,363,700 (815,200) 1984 11/01/95 40
57 Pasadena Towers 7,087,500 65,170,700 72,258,200 (768,000) 1990-1991 12/14/95 40
58 580 California 7,489,000 69,142,900 76,631,900 (888,700) 1984 12/21/95 40
59 1601 Market Street 5,780,800 52,788,000 58,568,800 (661,700) 1970 1/18/96 40
60 Promenade II 14,850,000 137,132,700 151,982,700 (1,632,200) 1990 6/14/96 40
61 Two California Plaza 0 170,238,300 170,238,300 (2,954,000) 1992 8/23/96 40
62 BP Tower 16,450,700 148,368,500 164,819,200 (1,702,200) 1985 9/04/96 40
63 Sun Trust Center 11,023,600 100,277,900 111,301,500 (1,172,300) 1988 9/18/96 40
64 Reston Town Center 23,425,200 155,004,300 178,429,500 (1,779,500) 1990 10/22/96 40
65 49 East Thomas Road 65,300 587,800 653,100 (6,600) 1974 12/04/96 40
66 Colonnade I 1,413,700 13,083,700 14,497,400 (170,200) 1983 12/04/96 40
67 One Phoenix Plaza 6,191,900 55,726,900 61,918,800 (636,400) 1989 12/04/96 40
68 177 Broad Street 3,941,200 35,846,100 39,787,300 (413,900) 1989 1/29/97 40
69 Preston Commons 5,737,200 52,545,200 58,282,400 (631,400) 1986 3/21/97 40
70 Oakbrook Terrace Tower 11,950,100 107,943,100 119,893,200 (1,237,600) 1988 4/16/97 40
71 One Maritime Plaza 11,532,700 105,476,000 117,008,700 (1,209,000) 1967 4/21/97 40
72 Smith Barney Tower 2,657,700 25,098,500 27,756,200 (379,000) 1987 4/28/97 40
73 201 Mission Street 8,870,800 80,094,600 88,965,400 (915,000) 1981 4/30/97 40
74 30 N. LaSalle Street 12,489,000 112,970,300 125,459,300 (1,293,600) 1974 6/13/97 40
75 LL&E Tower 6,185,800 55,799,500 61,985,300 (411,300) 1987 9/3/97 40
76 Texaco Center 6,686,300 60,570,000 67,256,300 (454,100) 1984 9/3/97 40
77 Prudential Portfolio (9) 28,456,300 261,450,500 289,906,800 (1,443,400) Various 10/1/97 40
78 550 South Hope Street 10,017,500 90,157,600 100,175,100 (469,400) 1991 10/6/97 40
79 10 & 30 South Wacker Drive 48,502,500 436,576,500 485,079,000 (2,277,300) 1983 10/7/97 40
80 Four Falls Corporate Center 4,929,500 44,497,700 49,427,200 (238,900) 1988 10/7/97 40
81 Four and Five Valley Square 864,500 7,796,200 8,660,700 (40,500) 1988 10/7/97 40
82 Oak Hill Plaza 2,205,200 19,849,900 22,055,100 (103,300) 1982 10/7/97 40
83 One Devon Square 1,023,500 9,212,200 10,235,700 (47,900) 1984 10/7/97 40
84 Three Devon Square 411,400 3,702,800 4,114,200 (19,300) 1985 10/7/97 40
85 Two Devon Square 658,500 6,031,500 6,690,000 (34,500) 1985 10/7/97 40
86 Two Valley Square 878,000 7,902,600 8,780,600 (41,100) 1990 10/7/97 40
87 Walnut Hill Plaza 2,046,300 18,419,400 20,465,700 (95,900) 1985 10/7/97 40
88 8,257,000 74,314,200 82,571,200 (386,900) 1980 10/17/97 40
89 One Valley Square 717,600 6,458,800 7,176,400 (20,200) 1982 11/21/97 40
90 Three Valley Square 1,012,400 9,113,000 10,125,400 (28,500) 1984 11/21/97 40
91 1600 Duke Street 1,105,300 9,948,500 11,053,800 (31,000) 1985 11/24/97 40
92 Fair Oaks Plaza 2,411,600 21,704,200 24,115,800 (67,700) 1986 11/24/97 40
93 Lakeside Square 8,261,000 47,937,200 56,198,200 (149,800) 1987 11/24/97 40
94 LaSalle Office Plaza 9,679,000 87,143,700 96,822,700 (275,200) 1991 11/25/97 40
95 1001 Fifth Avenue 5,381,200 48,615,900 53,997,100 (49,900) 1980 12/17/97 40
96 1111 Third Avenue 9,895,500 89,835,800 99,731,300 (103,700) 1980 12/17/97 40
97 Calais Office Center 0 17,070,100 17,070,100 (18,900) 1975 12/17/97 40
98 First Interstate Center 21,352,000 193,470,000 214,822,000 (198,600) 1983 12/17/97 40
99 Nordstrom Medical Tower 1,762,500 16,016,700 17,779,200 (16,300) 1986 12/17/97 40
100 One Bellevue Center 0 56,592,600 56,592,600 (60,900) 1983 12/17/97 40
101 Rainer Plaza 0 79,899,200 79,899,200 (82,100) 1986 12/17/97 40
102 Second and Seneca 10,917,900 98,997,600 109,915,500 (101,600) 1991 12/17/97 40
103 101 N. Wacker 10,067,600 90,608,800 100,676,400 (94,400) 1980 12/19/97 40
104 10880 Wilshire Boulevard 0 149,841,200 149,841,200 (156,100) 1970 12/19/97 40
105 10960 Wilshire Boulevard 16,841,300 151,573,900 168,415,200 (157,900) 1971 12/19/97 40
106 1300 N. 17th Street 9,810,600 88,295,900 98,106,500 (92,000) 1980 12/19/97 40
</TABLE>
<PAGE> 67
Schedule III - Real Estate and Accumulated Depreciation as of
December 31, 1997
<TABLE>
<CAPTION>
Costs
Initial Cost to Capitalized Subsequent
Company To Acquisition
--------------------------------------------------------------------------------------------------------------------------
December 31, 1997 Buildings and Buildings and
Description Location Encumbrances Land Improvements Land Improvements
---------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
107 1333 H Street Washington D.C. 0 6,715,400 60,438,200 0 0
108 150 California (11) San Francisco, CA 0 12,566,800 0 0 0
109 150 Federal Street Boston, MA 56,270,200 14,131,300 127,182,200 0 0
110 1616 N. Fort Myer Drive Rosslyn, VA 0 6,960,700 62,646,400 0 0
111 175 Federal Street Boston, MA 12,729,300 4,893,900 44,045,200 0 0
112 175 Wyman Street (11) Walthan, MA 0 24,000,000 0 0 0
113 2 Oliver Street-147 Milk
Street Boston, MA 0 5,017,400 45,157,000 0 0
114 200 West Adams Chicago, IL 0 11,723,300 105,509,500 0 0
115 225 Franklin Street Boston, MA 0 34,607,900 311,470,600 0 0
116 AT&T Plaza Oak Brook, IL 0 4,834,200 43,507,900 0 0
117 Center Plaza Boston, MA 59,898,000 18,942,300 170,480,400 0 0
118 Center Pointe III (11) Fairfax, VA 0 9,600,000 0 0 0
119 Centerpointe I and II Fairfax, VA 30,146,000 8,837,800 79,540,200 0 0
120 Civic Opera House Chicago, IL 31,785,400 12,771,400 114,941,900 0 0
121 Crosby Corporate Center Bedford, MA 0 5,957,800 53,620,400 0 0
122 Crosby Corporate Center II (11) Bedford, MA 0 9,384,600 0 0 22,447,300
123 EJ Randolph McLean, VA 16,057,000 3,936,500 35,429,100 0 0
124 EJ Randolph II (11) McLean, Va 0 3,324,000 0 0 0
125 John Marshall I and II McLean, VA 21,182,900 5,216,400 46,947,600 0 0
126 John Marshall III (11) McLean, VA 0 8,700,000 0 0 0
127 Lake Marriot Business Park Santa Clara, CA 0 6,952,100 62,568,900 0 0
128 Lakeside Office Park Atlanta, GA 0 4,792,500 43,132,300 0 0
129 Media Center (11) Burbank, CA 0 20,000,000 0 0 0
130 New England Executive Park Burlington, MA 0 13,106,000 117,953,900 0 0
131 Northridge I Herndon, VA 14,558,000 3,224,900 29,024,400 0 0
132 One Canal Park Cambridge, MA 0 2,006,000 18,054,000 0 0
133 Perimeter Atlanta, GA 217,871,000 68,306,100 429,131,900 0 0
134 Presidents Plaza Chicago, IL 0 13,435,500 120,919,200 0 0
135 Riverside Center (11) Newton, MA 0 30,000,000 0 0 0
136 Riverview I and II Cambridge, MA 0 5,937,600 53,438,100 0 0
137 Russia Wharf Boston, MA 0 5,918,200 53,263,400 0 0
138 Shoreline Technology Park Mountain View, CA 0 30,194,800 178,471,200 0 0
139 South Station Boston, MA 0 0 31,073,800 0 0
140 Sunnyvale Business Center Sunnyvale, CA 0 4,890,000 44,010,000 0 0
141 Ten Canal Park Cambridge, MA 0 2,383,100 21,447,900 0 0
142 Tri-State International Lincolnshire, IL 0 10,925,300 98,327,300 0 0
143 Wellesley Office Park Wellesley, MA 55,256,000 16,492,700 148,434,200 0 0
144 Westbrook Corporate Center Westchester, IL 111,497,800 24,896,800 224,071,100 0 0
145 Westwood Business Center Wellesley, MA 0 2,719,600 24,476,300 0 0
-------------- -------------- -------------- ---- ------------
Subtotal Office Properties $1,990,406,900 $1,162,720,800 $9,493,786,000 $0 $144,072,900
-------------- -------------- -------------- ---- ------------
</TABLE>
Parking Facilities:
<TABLE>
<S> <C> <C> <C> <C> <C> <C>
1 North Loop Transportation
Center (3) Chicago, IL $32,864,000(12) $3,784,600 $34,061,500 $0 $450,000
2 Theatre District Garage (3) Chicago, IL 0 3,372,300 30,350,700 0 56,800
3 Capitol Commons Garage (5) Indianapolis, IN 4,400,700 0 14,449,700 0 9,100
4 Boston Harbor Garage (3) Boston, MA 35,345,500 6,087,000 54,783,300 0 277,700
5 Milwaukee Center (3) Milwaukee, WI 0 0 7,798,500 0 219,900
6 1111 Sansom Street Garage (3) Philadelphia, PA 0 1,476,500 0 0 6,800
7 15th & Sansom Streets Garage (3) Philadelphia, PA 0 726,400 6,537,600 0 11,300
8 1602-34 Chancellor Garage (3) Philadelphia, PA 0 735,900 6,622,700 0 9,200
9 1616 Sansom Street Garage (3) Philadelphia, PA 0 432,900 3,896,200 0 0
10 Juniper/Locust Streets Garage (3) Philadelphia, PA 0 574,400 5,169,900 0 11,000
11 Adams-Wabash Garage Chicago, IL 0 2,525,000 22,725,300 0 76,200
12 601 Tchoupitoulas Garage New Orleans, LO 0(8) 1,180,000 10,619,800 0 0
13 Stanwix Garage Pittsburgh, PA 0 1,794,900 16,154,700 0 0
</TABLE>
<TABLE>
<CAPTION>
Gross Amount Carried
at Close of
Period 12/31/97
-------------------------------------------------------------------------------------------
Buildings and Accumulated Date Date Depreciable
Land Improvements Total (1) Depreciation Constructed Acquired Lives (2)
-------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
107 1333 H Street 6,715,400 60,438,200 67,153,600 (63,000) 1982 12/19/97 40
108 150 California 12,566,800 0 12,566,800 0 12/19/97
109 150 Federal Street 14,131,300 127,182,200 141,313,500 (132,500) 1988 12/19/97 40
110 1616 N. Fort Myer Drive 6,960,700 62,646,400 69,607,100 (65,300) 1974 12/19/97 40
111 175 Federal Street 4,893,900 44,045,200 48,939,100 (45,900) 1977 12/19/97 40
112 175 Wyman Street 24,000,000 0 24,000,000 0 12/19/97
113 2 Oliver Street-147 Milk Street 5,017,400 45,157,000 50,174,400 (47,000) 1988 12/19/97 40
114 200 West Adams 11,723,300 105,509,500 117,232,800 (109,900) 1985 12/19/97 40
115 225 Franklin Street 34,607,900 311,470,600 346,078,500 (324,500) 1966 12/19/97 40
116 AT&T Plaza 4,834,200 43,507,900 48,342,100 (45,300) 1984 12/19/97 40
117 Center Plaza 18,942,300 170,480,400 189,422,700 (177,600) 1969 12/19/97 40
118 Center Pointe III 9,600,000 0 9,600,000 0 12/19/97
119 Centerpointe I and II 8,837,800 79,540,200 88,378,000 (82,900) 1998/1990 12/19/97 40
120 Civic Opera House 12,771,400 114,941,900 127,713,300 (119,700) 1929 12/19/97 40
121 Crosby Corporate Center 5,957,800 53,620,400 59,578,200 (55,900) 1996 12/19/97 40
122 Crosby Corporate Center II 9,384,600 22,447,300 31,831,900 0 12/19/97
123 EJ Randolph Building 3,936,500 35,429,100 39,365,600 (36,900) 1983 12/19/97 40
124 EJ Randolph II 3,324,000 0 3,324,000 0 12/19/97
125 John Marshall I and II 5,216,400 46,947,600 52,164,000 (48,900) 1981 12/19/97 40
126 John Marshall III 8,700,000 0 8,700,000 0 12/19/97
127 Lake Marriot Business Park 6,952,100 62,568,900 69,521,000 (65,200) 1981 12/19/97 40
128 Lakeside Office Park 4,792,500 43,132,300 47,924,800 (44,900) 1972 12/19/97 40
129 Media Center Development 20,000,000 0 20,000,000 0 12/19/97
130 New England Executive Park 13,106,000 117,953,900 131,059,900 (122,900) 1970 12/19/97 40
131 Northridge I 3,224,900 29,024,400 32,249,300 (30,200) 1988 12/19/97 40
132 One Canal Park 2,006,000 18,054,000 20,060,000 (18,800) 1987 12/19/97 40
133 Perimeter 68,306,100 429,131,900 497,438,000 (822,800) 1972/1998 12/19/97 40
134 Presidents Plaza 13,435,500 120,919,200 134,354,700 (126,000) 1980 12/19/97 40
135 Riverside Center 30,000,000 0 30,000,000 0 12/19/97
136 Riverview I and II 5,937,600 53,438,100 59,375,700 (55,700) 1985 12/19/97 40
137 Russia Wharf 5,918,200 53,263,400 59,181,600 (55,500) 1978 12/19/97 40
138 Shoreline Technology Park 30,194,800 178,471,200 208,666,000 (185,900) 1985 12/19/97 40
139 South Station 0 31,073,800 31,073,800 (32,400) 1988 12/19/97 40
140 Sunnyvale Business Center 4,890,000 44,010,000 48,900,000 (45,800) 1990 12/19/97 40
141 Ten Canal Park 2,383,100 21,447,900 23,831,000 (22,300) 1987 12/19/97 40
142 Tri-State International 10,925,300 98,327,300 109,252,600 (102,400) 1986 12/19/97 40
143 Wellesley Office Park 16,492,700 148,434,200 164,926,900 (154,600) 1963 12/19/97 40
144 Westbrook Corporate Center 24,896,800 224,071,100 248,967,900 (233,400) 1985 12/19/97 40
145 Westwood Business Center 2,719,600 24,476,300 27,195,900 (25,500) 1985 12/19/97 40
-------------- --------------- --------------- ------------
Subtotal Office Properties $1,162,720,800 $ 9,637,858,900 $10,800,579,700 $(62,295,000)
-------------- --------------- --------------- ------------
</TABLE>
Parking Facilities:
<TABLE>
<S> <C> <C> <C> <C> <C> <C> <C>
1 North Loop Transportation
Center $3,784,600 $34,511,500 $38,296,100 $(396,500) 1985 6/9/95 40
2 Theatre District Self Park 3,372,300 30,407,500 33,779,800 (348,200) 1987 6/9/95 40
3 Capitol Commons Garage 0 14,458,800 14,458,800 (165,200) 1987 6/29/95 40
4 Boston Harbor Garage 6,087,000 55,061,000 61,148,000 (635,000) 1972 12/10/96 40
5 Milwaukee Center Parking Garage 0 8,018,400 8,018,400 (98,700) 1988 12/18/96 40
6 1111 Sansom Street 1,476,500 6,800 1,483,300 0 N/A 12/27/96 N/A
7 15th & Sansom Streets 726,400 6,548,900 7,275,300 (73,400) 1950/1954 12/27/96 40
8 1616 Chancellor Street 735,900 6,631,900 7,367,800 (73,800) 1945/1955 12/27/96 40
9 1616 Sansom Street 432,900 3,896,200 4,329,100 (43,200) 1950 12/27/96 40
10 Juniper/Locust Streets 574,400 5,180,900 5,755,300 (58,300) 1949/1952 12/27/96 40
11 Adams-Wabash Parking Facility 2,525,000 22,801,500 25,326,500 (212,900) 1990 8/11/97 40
12 601 Tchoupitoulas 1,180,000 10,619,800 11,799,800 (77,200) 1982 9/3/97 40
13 Stanwix Parking Facility 1,794,900 16,154,700 17,949,600 (50,400) 1969 11/25/97 40
</TABLE>
<PAGE> 68
<TABLE>
<CAPTION>
Initial Cost to Costs Capitalized Subsequent
Company To Acquisition
---------------------------------------------------------------------------------------------------------------------------
December 31, 1997 Buildings and Buildings and
Description Location Encumbrances Land Improvements Land Improvements
---------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
-------------- -------------- -------------- ------------- ------------
Subtotal Parking Facilities 72,610,200 22,689,900 213,169,900 0 1,128,000
-------------- -------------- -------------- ------------- ------------
Management Company (12) 0 0 0 0 3,446,600
-------------- -------------- -------------- ------------- ------------
Investment in Real Estate $2,063,017,100 $1,185,410,700 $9,706,955,900 $ - $148,647,500
============== ============== ============== ============= ============
</TABLE>
<TABLE>
<CAPTION>
at Close of
Period 12/31/97
- ------------------------------------------------------------------------------------------------------------------------------------
Buildings and Accumulated Date Date Depreciable
Description Land Improvements Total (1) Depreciation Constructed Acquired Lives(2)
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
-------------- -------------- --------------- ------------
Subtotal Parking Facilities 22,689,900 214,297,900 236,987,800 (2,232,800)
-------------- -------------- --------------- ------------
Management Company 0 3,446,600 3,446,600 (167,300)
-------------- -------------- --------------- ------------
Investment in Real Estate $1,185,410,700 $9,855,603,100 $11,041,014,100 $(64,695,100)
============== ============== =============== ============
</TABLE>
(1) The aggregate cost for Federal Income Tax purposes as of December 31, 1997
was approximately $7.5 billion.
(2) The life to compute depreciation on building is 40 years. The life to
compute depreciation on building improvements is 4-40 years.
(3) The acquisition of the Properties, or the interest therein, by the Company
from Equity Office Predecessors in connection with the Consolidation, was
accounted for using the purchase method in accordance with Accounting Principles
Board Opinion No. 11. Accordingly, the assets were recorded by the Company at
their fair values.
(4) This Property contains 106 residential units.
(5) These loans are subject to cross default and collateralization provisions.
(6) This building underwent a major renovation to re-tenant the entire Property.
The building is currently in a lease-up period and is expected to be fully
occupied in 1998. During the renovation period, operating costs, real estate
taxes, and interest incurred will be capitalized. As of December 31, 1997,
approximately $23.5 million of operating costs and interest have been
capitalized.
(7) This Propery contains 161 residential units.
(8) These loans are subject to cross default and collateralization provisions.
(9) The Prudential Portfolio consists of six Office Buildings located
in Philadelphia, PA; Dallas, TX; and Houston, TX. These Office Buildings were
constructed between 1969 and 1984.
(10)These loans are subject to cross default and collateralization provisions.
(11)These properties are in various development stages. During the development
period all operating costs, including real estate taxes together with interest
incurred during the developement stages will be capitalized.
(12)The encumbrance on the North Loop Transportation Center is also secured by a
first lien on the Theatre District Garage.
(13)This asset consists of furniture, fixtures, and equipment owned by the
Management Business.
<PAGE> 69
(14) Summary of activity of investment in real estate and accumulated
depreciation is as follows:
The changes in investment in real estate for the period from July 11, 1997
to December 31, 1997, the period from period from January 1, 1997 to July 10,
1997, and for the years ended December 31, 1996 and 1995 are as follows:
<TABLE>
<CAPTION>
For the period For the period
July 11, 1997 to January 1, 1997 December 31, December 31,
December 31, 1997 to July 10, 1997 1996 1995
----------------- ---------------- --------------- ----------------
<S> <C> <C> <C> <C>
Balance, beginning of period 0 3,549,707,600 $2,571,851,300 $ 1,931,002,400
Acquisitions 10,941,428,100 531,968,000 860,995,000 583,485,200
Improvements 99,586,000 59,511,100 129,485,300 76,985,400
Properties disposed of 0 (67,193,400) (9,633,600) 0
Write down for value impairment 0 0 0 (17,512,000)
Write-off of fully depreciated
assets which are no longer
in service 0 0 (2,990,400) (2,109,700)
--------------- -------------- -------------- ---------------
Balance, end of period $11,041,014,100 $4,073,933,200 $3,549,707,600 $ 2,571,851,300
=============== ============== ============== ===============
</TABLE>
The changes in accumulated depreciation for the period from July 11, 1997
to December 31, 1997, the period from period from January 1, 1997 to July 10,
1997, and for the years ended December 31, 1996 and 1995 are as follows:
<TABLE>
<CAPTION>
For the period For the period
July 11, 1997 to January 1, 1997 December 31, December 31,
December 31, 1997 to July 10, 1997 1996 1995
----------------- ---------------- --------------- ----------------
<S> <C> <C> <C> <C>
Balance, beginning of period $ 0 $(257,893,300) $(178,448,600) $(115,842,500)
Depreciation (64,695,100) (57,379,300) (82,905,300) (64,715,800)
Properties disposed of 0 8,517,200 470,200 0
Write-off of fully depreciated
assets which are no longer
in service 0 0 2,990,400 2,109,700
-------------- ------------- ------------- -------------
Balance, end of period $ (64,695,100) $(306,755,400) $(257,893,300) $(178,448,600)
============== ============= ============= =============
</TABLE>
<PAGE> 1
EXHIBIT 3.2
EQUITY OFFICE PROPERTIES TRUST
ARTICLES SUPPLEMENTARY
ESTABLISHING AND FIXING THE RIGHTS AND
PREFERENCES OF A SERIES OF PREFERRED SHARES
Equity Office Properties Trust, a Maryland real estate investment trust
(the "Trust"), certifies to the State Department of Assessments and Taxation of
Maryland that:
FIRST: Under a power contained in Article VI of the Trust's Articles of
Amendment and Restatement of Declaration of Trust (the "Declaration of Trust")
the Board of Trustees (the "Board"), by resolution duly adopted on November 13,
1997, classified and designated 8,000,000 Preferred Shares (as defined in the
Declaration of Trust) as 8.98% Series A Cumulative Redeemable Preferred Shares,
with the preferences, conversion and other rights, voting powers, restrictions,
limitations as to distributions, qualifications and terms and conditions of
redemption of shares as follows:
(1) Designation and Number. A series of Preferred Shares, designated the
"8.98% Series A Cumulative Redeemable Preferred Shares" (the "Series A
Preferred Shares"), is hereby established. The number of Series A Preferred
Shares shall be 8,000,000.
(2) Rank. The Series A Preferred Shares will, with respect to distribution
rights and rights upon liquidation, dissolution or winding up of the Trust,
rank (a) senior to all classes or series of Common Shares (as defined in the
Declaration of Trust), and to all equity securities ranking junior to such
Series A Preferred Shares; (b) on a parity with all equity securities issued by
the Trust the terms of which specifically provide that such equity securities
rank on a parity with the Series A Preferred Shares; and (c) junior to all
equity securities issued by the Trust the terms of which specifically provide
that such equity securities rank senior to the Series A Preferred Shares. The
term "equity securities" shall not include convertible debt securities.
(3) Distributions.
(a) Holders of Series A Preferred Shares shall be entitled to receive,
when and as authorized by the Board, out of funds legally available for the
payment of distributions, cumulative preferential cash distributions at the
rate of 8.98% of the $25.00 liquidation preference per annum (equivalent to a
fixed annual amount of $2.245 per share). Such distributions shall be
cumulative from the last date on which any distributions were paid with respect
to the shares of 8.98% Series A Cumulative Redeemable Preferred Stock of Beacon
Properties Corporation ("Beacon") for which the Series A Preferred Shares were
exchanged in connection with the merger of Beacon with and into the Trust and
shall be payable quarterly in arrears on or before
<PAGE> 2
March 15, June 15, September 15 and December 15 of each year or, if not a
business day, the next succeeding business day (each a "Distribution Payment
Date"). Any distribution payable on the Series A Preferred Shares for any
partial distribution period will be computed on the basis of a 360-day year
consisting of twelve 30-day months. Distributions will be payable to holders
of record as they appear in the share records of the Trust at the close of
business on the applicable record date, which shall be the first day of the
calendar month in which the applicable Distribution Payment Date falls on or
such other date designated by the Board for the payment of distributions that
is not more than 30 nor less than 10 days prior to such Distribution Payment
Date (each a "Distribution Record Date").
(b) No distributions on Series A Preferred Shares shall be authorized by
the Board or paid or set apart for payment by the Trust at such time as the
terms and provisions of any agreement of the Trust, including any agreement
relating to its indebtedness, prohibits such authorization, payment or setting
apart for payment or provides that such authorization, payment or setting apart
for payment would constitute a breach thereof, or a default thereunder, or if
such authorization or payment shall be restricted or prohibited by law.
(c) Notwithstanding the foregoing, dividends on the Series A Preferred
Shares will accrue whether or not the terms and provisions set forth in Section
3(b) hereof at any time prohibit the current payment of distributions, whether
or not the Trust has earnings, whether or not there are funds legally available
for the payment of such distributions and whether or not such distributions are
authorized. Accrued but unpaid distributions on the Series A Preferred Shares
will accumulate as of the Distribution Payment Date on which they first become
payable.
(d) When distributions are not paid in full (or a sum sufficient for such
full payment is not so set apart) upon the Series A Preferred Shares and any
other series of Preferred Shares ranking on a parity as to distributions with
the Series A Preferred Shares, all distributions authorized upon the Series A
Preferred Shares and any other series of Preferred Shares ranking on a parity
as to distributions with the Series A Preferred Shares shall be authorized pro
rata so that the amount of distributions authorized per share of Series A
Preferred Shares and such other series of Preferred Shares shall in all cases
bear to each other the same ratio that accrued distributions per share on the
Series A Preferred Shares and such other series of Preferred Shares (which
shall not include any accrual in respect of unpaid distributions for prior
distribution periods if such Preferred Shares do not have a cumulative
distribution) bear to each other. No interest, or sum of money in lieu of
interest, shall be payable in respect of any distribution payment or payments
on Series A Preferred Shares which may be in arrears.
(e) Except as provided in the immediately preceding paragraph, unless full
cumulative distributions on the Series A Preferred Shares have been or
contemporaneously are authorized and paid or authorized and a sum sufficient
for the payment thereof is set apart for payment for all past distribution
periods and the then current distribution period, no distributions (other than
in Common Shares or other
2
<PAGE> 3
shares of the Trust ranking junior to the Series A Preferred Shares as to
distributions and upon liquidation) shall be authorized or paid or set aside
for payment nor shall any other distribution be authorized or made upon the
Common Shares, or any other shares of the Trust ranking junior to or on a
parity with the Series A Preferred Shares as to distributions or upon
liquidation, nor shall any Common Shares, or any other shares of the Trust
ranking junior to or on a parity with the Series A Preferred Shares as to
distributions or upon liquidation be redeemed, purchased or otherwise acquired
for any consideration (or any moneys be paid to or made available for a sinking
fund for the redemption of any such shares) by the Trust (except by conversion
into or exchange for other shares of the Trust ranking junior to the Series A
Preferred Shares as to distributions and upon liquidation).
(f) Holders of the Series A Preferred Shares shall not be entitled to any
distribution, whether payable in cash, property or shares in excess of full
cumulative distributions on the Series A Preferred Shares as described above.
Any distribution payment made on the Series A Preferred Shares shall first be
credited against the earliest accrued but unpaid distribution due with respect
to such shares which remains payable.
(4) Liquidation Preference.
(a) Upon any voluntary or involuntary liquidation, dissolution or winding
up of the affairs of the Trust, the holders of Series A Preferred Shares then
outstanding are entitled to be paid out of the assets of the Trust legally
available for distribution to its shareholders a liquidation preference of
$25.00 per share, plus an amount equal to any accrued and unpaid distributions
to the date of payment, before any distribution of assets is made to holders of
Common Shares or any other class or series of shares of the Trust that ranks
junior to the Series A Preferred Shares as to liquidation rights.
(b) In the event that, upon any such voluntary or involuntary liquidation,
dissolution or winding up, the available assets of the Trust are insufficient
to pay the amount of the liquidating distributions on all outstanding shares of
Series A Preferred Shares and the corresponding amounts payable on all shares
of the Trust of other classes or series ranking on a parity with the Series A
Preferred Shares in the distribution of assets, then the holders of the Series
A Preferred Shares and all other such classes or series of shares shall share
ratably in any such distribution of assets in proportion to the full
liquidating distributions to which they would otherwise be respectively
entitled.
(c) Written notice of any such liquidation, dissolution or winding up of
the Trust, stating the payment date or dates when, and the place or places
where, the amounts distributable in such circumstances shall be payable, shall
be given by first class mail, postage pre-paid, not less than 30 nor more than
60 days prior to the payment date stated therein, to each record holder of the
Series A Preferred Shares at the respective addresses of such holders as the
same shall appear on the share transfer records of the Trust.
3
<PAGE> 4
(d) After payment of the full amount of the liquidating distributions to
which they are entitled, the holders of Series A Preferred Shares will have no
right or claim to any of the remaining assets of the Trust.
(e) The consolidation or merger of the Trust with or into any other
corporation, trust or entity or of any other corporation, trust or other entity
with or into the Trust or the sale, lease or conveyance of all or substantially
all of, the property or business of the Trust, shall not be deemed to
constitute a liquidation, dissolution or winding up of the Trust.
(5) Redemption.
(a) Right of Optional Redemption. The Series A Preferred Shares are not
redeemable prior to June 15, 2002. However, in order to ensure that the Trust
remains a qualified real estate investment trust ("REIT") for federal income
tax purposes, the Series A Preferred Shares will be subject to the provisions
of Article VII of the Declaration of Trust pursuant to which Series A Preferred
Shares owned by a shareholder in excess of the Ownership Limit, (as defined in
Article VII of the Declaration of Trust) will automatically be transferred to a
Charitable Trust (as defined in Article VII of the Declaration of Trust) and
the Trust will have the right to purchase such shares, as provided in Article
VII of the Declaration of Trust. On and after June 15, 2002, the Trust, at its
option and upon not less than 30 nor more than 60 days' written notice, may
redeem the Series A Preferred Shares, in whole or in part, at any time or from
time to time, for cash at a redemption price of $25.00 per share, plus all
accrued and unpaid distributions thereon to the date fixed for redemption,
without interest. If less than all of the outstanding Series A Preferred
Shares are to be redeemed, the Series A Preferred Shares to be redeemed shall
be selected pro rata (as nearly as may be practicable without creating
fractional shares) or by any other equitable method determined by the Trust.
(b) Limitations on Redemption.
(i) The redemption price of the Series A Preferred Shares (other than the
portion thereof consisting of accrued and unpaid distributions) is payable
solely out of the sale proceeds of other shares of the Trust, which may include
other series of Preferred Shares, and from no other source. For purposes of
the preceding sentence, "shares" means any equity securities (including Common
Shares and Preferred Shares), shares, interest, participation or other
ownership interests (however designated) and any rights (other than debt
securities convertible into or exchangeable for equity securities) or options
to purchase any of the foregoing.
(ii) Unless full cumulative distributions on all Series A Preferred Shares
shall have been or contemporaneously are authorized and paid or authorized and
a sum sufficient for the payment thereof set apart for payment for all past
distribution periods and the then current distribution period, no Series A
Preferred Shares shall be redeemed unless all outstanding Series A Preferred
Shares are simultaneously redeemed, and the Trust shall not purchase or
otherwise acquire
4
<PAGE> 5
directly or indirectly any Series A Preferred Shares (except by and upon
liquidation); provided, however, that the foregoing shall not prevent the
purchase by the Trust of Series A Preferred Shares pursuant to Article VII of
the Declaration of Trust or otherwise in order to ensure that the Trust remains
qualified as a REIT for Federal income tax purposes or the purchase or
acquisition of Series A Preferred Shares pursuant to a purchase or exchange
offer made on the same terms to holders of all outstanding Series A Preferred
Shares.
(c) Rights to Distributions on Shares Called for Redemption. Immediately
prior to any redemption of Series A Preferred Shares, the Trust shall pay, in
cash, any accumulated and unpaid distributions through the redemption date,
unless a redemption date falls after a Distribution Record Date and prior to
the corresponding Distribution Payment Date, in which case each holder of
Series A Preferred Shares at the close of business on such Distribution Record
Date shall be entitled to the distribution payable on such shares on the
corresponding Distribution Payment Date notwithstanding the redemption of such
shares before Distribution Payment Date. Except as provided above, the Trust
will make no payment or allowance for unpaid distributions, whether or not in
arrears, on Series A Preferred Shares for which a notice of redemption has been
given.
(d) Procedures for Redemption.
(i) Notice of redemption will be (a) given by publication in a newspaper
of general circulation in the City of New York, such publication to be made
once a week for two successive weeks commencing not less than 30 nor more than
60 days prior to the redemption date. A similar notice will be mailed by the
Trust, postage prepaid, no less than 30 nor more than 60 days prior to the
redemption date, addressed to the respective holders of record of the Series A
Preferred Shares to be redeemed at their respective addresses as they appear on
the share transfer records of the Trust. No failure to give such notice or any
defect thereto or in the mailing thereof shall affect the validity of the
proceedings for the redemption of any Series A Preferred Shares except as to
the holder to whom notice was defective or not given.
(ii) In addition to any information required by law or by the applicable
rules of any exchange upon which the Series A Preferred Shares may be listed or
admitted to trading, such notice shall state: (A) the redemption date; (B) the
redemption price; (C) the number of Series A Preferred Shares to be redeemed;
(D) the place or places where the Series A Preferred Shares are to be
surrendered for payment of the redemption price; (E) that distributions on the
shares to be redeemed will cease to accrue on such redemption date. If less
than all of the Series A Preferred Shares held by any holder are to be
redeemed, the notice mailed to such holder shall also specify the number of
Series A Preferred Shares held by such holder to be redeemed.
(iii) If notice of redemption of any Series A Preferred Shares has been
given and if the funds necessary for such redemption have been set aside by the
Trust in trust for the benefit of the holders of any Series A Preferred Shares
so called for redemption, then from and after the redemption date distributions
will cease to accrue
5
<PAGE> 6
on such Series A Preferred Shares, such Series A Preferred Shares shall no
longer be deemed outstanding and all rights of the holders of such shares will
terminate, except the right to receive the redemption price. Holders of Series
A Preferred Shares to be redeemed shall surrender such Series A Preferred
Shares at the place designated in such notice and, upon surrender in accordance
with said notice of the certificates for the Series A Preferred Shares so
redeemed (properly endorsed or assigned for transfer, if the Trust shall so
require and the notice shall so state), such Series A Preferred Shares shall be
redeemed by the Trust at the redemption price plus any accrued and unpaid
distributions payable upon such redemption. In case less than all the Series A
Preferred Shares represented by any such certificates are redeemed, a new
certificate or certificates shall be issued representing the unredeemed Series
A Preferred Shares without cost to the holder thereof.
(e) Status of Redeemed Shares. Any Series A Preferred Shares that shall
at any time have been redeemed shall, after such redemption, have the status of
authorized but unissued Preferred Shares, without designation as to series
until such shares are once more designated as part of a particular series by
the Board.
(6) Voting Rights.
(a) Holders of the Series A Preferred Shares will not have any voting
rights, except as set forth below.
(b) Whenever distributions on any Series A Preferred Shares shall be in
arrears for six or more quarterly periods (a "Preferred Distribution Default"),
the holders of such Series A Preferred Shares (voting separately as a class
with all other series of Preferred Shares ranking on a parity with the Series A
Preferred Shares as to distributions or on liquidation ("Parity Preferred
Shares") upon which like voting rights have been conferred and are exercisable)
will be entitled to vote for the election of a total of two additional trustees
of the Trust (the "Preferred Share Trustees") at a special meeting called by
the holders of record of at least 20% of the outstanding Series A Preferred
Shares or the holders of shares of any other series of Parity Preferred Shares
so in arrears (unless such request is received less than 90 days before the
date fixed for the next annual or special meeting of shareholders) or at the
next annual meeting of shareholders, and at each subsequent annual meeting
until all distributions accumulated on such shares of Series A Preferred Shares
for the past dividend periods and the distribution for the then current
distribution period shall have been fully paid or authorized and a sum
sufficient for the payment thereof set aside for payment in full.
(c) If and when all accumulated distributions and the distribution for the
current distribution period on the Series A Preferred Shares shall have been
paid in full or set aside for payment in full, the holders of Series A
Preferred Shares shall be divested of the voting rights set forth in Section
6(b) hereof (subject to revesting in the event of each and every Preferred
Distribution Default) and, if all accumulated distributions and the
distribution for the current distribution period have been paid in full or set
aside for payment in full on all other series of Parity Preferred Shares upon
6
<PAGE> 7
which like voting rights have been conferred and are exercisable, the term of
office of each Preferred Share Trustee so elected shall terminate. Any
Preferred Share Trustee may be removed at any time with or without cause by the
vote of, and shall not be removed otherwise than by the vote of, the holders of
record of a majority of the outstanding Series A Preferred Shares when they
have the voting rights set forth in Section 6(b) (voting separately as a class
with all other series of Parity Preferred Shares upon which like voting rights
have been conferred and are exercisable) So long as a Preferred Distribution
Default shall continue, any vacancy in the office of a Preferred Share Trustee
may be filled by written consent of the Preferred Share Trustee remaining in
office, or if none remains in office, by a vote of the holders of record of a
majority of the outstanding Series A Preferred Shares when they have the voting
rights set forth in Section 6(b) (voting separately as a class with all other
series of Parity Preferred Shares upon which like voting rights have been
conferred and are exercisable). The Preferred Share Trustees shall each be
entitled to one vote per director on any matter.
(d) So long as any Series A Preferred Shares remain outstanding, the Trust
shall not, without the affirmative vote of the holders of at least two thirds
of the Series A Preferred Shares outstanding at the time, (i) authorize or
create, or increase the authorized or issued amount of, any class or series of
shares ranking prior to the Series A Preferred Shares with respect to payment
of distributions or the distribution of assets upon liquidation, dissolution or
winding up or reclassify any authorized shares of the Trust into any such
shares, or create, authorize or issue any obligations or security convertible
into or evidencing the right to purchase any such shares or (ii) amend, alter
or repeal the provisions of the Declaration of Trust, whether by merger,
consolidation or otherwise, so as to materially and adversely affect any right,
preferences, privileges or voting power of the Series A Preferred Shares or the
holders thereof; provided, however, that with respect to the occurrence of any
event set forth in (ii) above, so long as the Series A Preferred Shares remain
outstanding with the terms thereof materially unchanged, the occurrence of any
such event shall not be deemed to materially and adversely affect such rights,
preferences, privileges or voting powers of the holders of the Series A
Preferred Shares and provided further that any increase in the amount of the
authorized Preferred Shares or the creation or issuance of any other series of
Preferred Shares, or any increase in the amount of authorized shares of each
series, in each case ranking on a parity with or junior to the Series A
Preferred Shares with respect to payment of distributions or the distribution
of assets upon liquidation, dissolution or winding up, shall not be deemed to
materially and adversely affect such rights, preferences, privileges or voting
powers.
(e) The foregoing voting provisions will not apply if, at or prior to the
time when the act with respect to which such vote would otherwise be required
shall be effected, all outstanding Series A Preferred Shares shall have been
redeemed or called for redemption upon proper notice and sufficient funds shall
have been deposited in trust to effect such redemption.
7
<PAGE> 8
(7) Conversion. The Series A Preferred Shares are not convertible into or
exchangeable for any other property or securities of the Trust.
(8) Application of Article VII. The Series A Preferred Shares are subject to
the provisions of Article VII of the Declaration of Trust.
SECOND: The Series A Preferred Shares have been classified and designated
by the Board under the authority contained in the Declaration of Trust.
THIRD: These Articles Supplementary have been approved by the Board in
the manner and by the vote required by law.
FOURTH: These Articles Supplementary shall be effective at the time the
State Department of Assessments and Taxation of Maryland accepts these Articles
Supplementary for record.
FIFTH: The undersigned President of the Trust acknowledges these Articles
Supplementary to be the act of the Trust and, as to all matters or facts
required to be verified under oath, the undersigned President acknowledges that
to the best of his knowledge, information and belief, these matters and facts
are true in all material respects and that this statement is made under the
penalties for perjury.
IN WITNESS WHEREOF, the Trust has caused these Articles Supplementary to
be executed under seal in its name and on its behalf by its President and
attested to by its Secretary on this 15th day of December, 1997.
EQUITY OFFICE PROPERTIES TRUST
By: /S/ TIMOTHY H. CALLAHAN
-------------------------------------
Timothy H. Callahan
President and Chief Executive Officer
[SEAL]
ATTEST:
/S/ STANLEY M. STEVENS
- --------------------------------
Stanley M. Stevens, Secretary
8
<PAGE> 1
EXHIBIT 3.3
EQUITY OFFICE PROPERTIES TRUST
ARTICLES SUPPLEMENTARY
ESTABLISHING AND FIXING THE RIGHTS AND
PREFERENCES OF A SERIES OF PREFERRED SHARES
Equity Office Properties Trust, a Maryland real estate investment trust
(the "Trust"), certifies to the State Department of Assessments and Taxation of
Maryland that:
FIRST: Under a power contained in Article VI of the Trust's Articles of
Amendment and Restatement of Declaration of Trust (the "Declaration of Trust")
the Board of Trustees (the "Board"), by resolutions duly adopted on February
13, 1998, classified and designated 7,000,000 Preferred Shares (as defined in
the Declaration of Trust) as 5.25% Series B Convertible, Cumulative Preferred
Shares, with the preferences, conversion and other rights, voting powers,
restrictions, limitations as to distributions, qualifications and terms and
conditions of redemption of shares as follows:
(1) Designation and Number. A series of Preferred Shares, designated the
"5.25% Series B Convertible, Cumulative Preferred Shares" (the "Series B
Preferred Shares"), is hereby established. The par value of the Series B
Preferred Shares is $.01 per share, which is not a change in the par value of
the Preferred Shares as set forth in the Declaration of Trust. The number of
Series B Preferred Shares shall be 7,000,000.
(2) Rank. The Series B Preferred Shares shall, with respect to distribution
rights and rights upon voluntary or involuntary liquidation, dissolution or
winding up of the Trust, rank (a) senior to all classes or series of Common
Shares (as defined in the Declaration of Trust) and to all equity securities
the terms of which provide that such equity securities shall rank junior to
such Series B Preferred Shares; (b) on a parity with all equity securities
issued by the Trust, including the Series A Cumulative Redeemable Preferred
Shares classified and designated pursuant to resolutions duly adopted by the
Board on November 13, 1997, other than those referred to in clauses (a) and
(c); and (c) junior to all equity securities issued by the Trust which rank
senior to the Series B Preferred Shares in accordance with Section 6(d). The
term "equity securities" shall not include convertible debt securities.
(3) Distributions.
(a) Holders of Series B Preferred Shares shall be entitled to receive,
when and as authorized by the Board, out of funds legally available for the
payment of distributions, cumulative preferential cash distributions at the
rate of 5.25% of the $50.00 liquidation preference per annum (equivalent to a
fixed annual amount of $2.625 per share). Distributions (which term as used
herein shall include liquidated
<PAGE> 2
damages, if any, payable pursuant to Section 3(f) hereof), shall be payable
quarterly in equal amounts in arrears on the fifteenth day of each February,
May, August and November or, if not a business day, the next succeeding
business day, beginning May 15, 1998 (each, a "Distribution Payment Date").
Any distribution (including the initial distribution) payable on the Series B
Preferred Shares for any partial distribution period shall be prorated and
computed on the basis of a 360-day year consisting of twelve 30-day months.
Distributions shall be payable to holders of record as they appear in the share
records of the Trust at the close of business on the applicable record date,
which shall be the first day of the calendar month in which the applicable
Distribution Payment Date falls or such other date designated by the Board for
the payment of distributions that is not more than 30 nor less than 10 days
prior to such Distribution Payment Date (each, a "Distribution Record Date").
(b) No distribution on the Series B Preferred Shares shall be authorized
by the Board or paid or set apart for payment by the Trust at such time as the
terms and provisions of any agreement of the Trust, including any agreement
relating to its indebtedness, prohibits such authorization, payment or setting
apart for payment or provides that such authorization, payment or setting apart
for payment would constitute a breach thereof, or a default thereunder, or if
such authorization or payment shall be restricted or prohibited by law. No
interest, or sum of money in lieu of interest, shall be payable in respect of
any distribution payment or payments on the Series B Preferred Shares which may
be in arrears.
Notwithstanding the foregoing, distributions on the Series B Preferred
Shares shall accumulate whether or not any of the foregoing restrictions exist,
whether or not there are funds legally available for the payment thereof and
whether or not such distributions are authorized. Accumulated but unpaid
distributions on the Series B Preferred Shares shall not bear interest and
holders of the Series B Preferred Shares shall not be entitled to any
distributions in excess of full cumulative distributions. Any distribution
payment made on the Series B Preferred Shares shall first be credited against
the earliest accumulated but unpaid distribution due with respect to such
shares which remains payable.
(c) Except as provided in subsection 3(d) herein, if any Series B
Preferred Shares are outstanding, no distributions (other than in Common Shares
or other equity securities of the Trust ranking junior to the Series B
Preferred Shares as to distributions and upon liquidation, dissolution or
winding up of the Trust) shall be declared or paid or set apart for payment nor
shall any other distribution be declared or made on any equity securities of
the Trust ranking, as to distributions or upon liquidation, dissolution or
winding up of the Trust, on a parity with or junior to the Series B Preferred
Shares for any period unless full cumulative distributions have been or
contemporaneously are declared and paid or declared and a sum sufficient for
the payment thereof set apart for such payment on the Series B Preferred Shares
for all past distribution periods and the then current distribution period, nor
shall any Common Shares, or any other equity securities of the Trust ranking
junior to or on a parity with the Series B Preferred Shares as to distributions
or upon liquidation,
2
<PAGE> 3
dissolution or winding up of the Trust, be redeemed, purchased or otherwise
acquired for any consideration (or any monies be paid to or made available for
a sinking fund for the redemption of any such equity securities) by the Trust
(except by conversion into or exchange for other equity securities of the Trust
ranking junior to the Series B Preferred Shares as to distributions and upon
liquidation, dissolution or winding up of the Trust).
(d) When distributions are not paid in full (or a sum sufficient for such
full payment is not so set apart) upon the Series B Preferred Shares and any
other equity securities ranking on a parity as to distributions with the Series
B Preferred Shares, all distributions declared upon the Series B Preferred
Shares and any other equity securities ranking on a parity as to distributions
with the Series B Preferred Shares shall be declared pro rata so that the
amount of distributions declared per share of Series B Preferred Shares and
such other equity securities shall in all cases bear to each other the same
ratio that accumulated distributions per share on the Series B Preferred Shares
and such other equity securities (which shall not include any accumulation in
respect of unpaid distributions for prior distribution periods if such equity
securities do not have a cumulative distribution) bear to each other.
(e) Holders of Series B Preferred Shares shall not be entitled to any
distribution, whether payable in cash, property or shares, in excess of full
cumulative distributions on the Series B Preferred Shares as described above.
Accumulated but unpaid distributions on the Series B Preferred Shares will
accumulate as of the Distribution Payment Date on which they first become
payable.
(f) If the Trust fails to file a registration statement within the period
of time required by the Registration Rights Agreement dated February 18, 1998
between the Trust and Lehman Brothers Inc. (the "Registration Rights
Agreement"), or the required registration statement does not become effective
within the period of time required by the Registration Rights Agreement, or the
Trust fails to maintain the effectiveness of the registration statement as
required by the Registration Rights Agreement, or the Series B Preferred Shares
are not approved for listing by the New York Stock Exchange within the period
of time required by the Registration Rights Agreement, liquidated damages shall
accumulate on the $50.00 liquidation preference of the Series B Preferred
Shares at a rate of 0.25% per annum (equivalent to a fixed annual amount of
$0.125 per share) with respect to the first quarter immediately following such
event and at a rate of 0.50% per annum (equivalent to a fixed annual amount of
$0.25 per share) with respect to the second quarter and all subsequent quarters
following such event.
(4) Liquidation Preference.
(a) In the event of any voluntary or involuntary liquidation, dissolution
or winding up of the Trust, the holders of the Series B Preferred Shares shall
be entitled to receive out of the assets of the Trust available for
distribution to shareholders remaining after payment or provisions for payment
of all debts and other liabilities of
3
<PAGE> 4
the Trust a liquidation preference of $50.00 per share, plus an amount equal to
any accumulated and unpaid distributions to the date of payment, before any
distribution of assets is made to holders of Common Shares or any other equity
securities that rank junior to the Series B Preferred Shares as to liquidation
rights.
(b) If upon any such voluntary or involuntary liquidation, dissolution or
winding up of the Trust, the assets of the Trust are insufficient to make such
full payment to holders of the Series B Preferred Shares and the corresponding
amounts payable on all shares of other classes or series of equity securities
of the Trust ranking on a parity with the Series B Preferred Shares as to
liquidation rights, then the holders of the Series B Preferred Shares and all
other such classes or series of equity securities shall share ratably in any
such distribution of assets in proportion to the full liquidating distributions
to which they would otherwise be respectively entitled.
(c) Written notice of any such liquidation, dissolution or winding up of
the Trust, stating the payment date or dates when, and the place or places
where, the amounts distributable in such circumstances shall be payable, shall
be given by first class mail, postage pre-paid, not less than 30 nor more than
60 days prior to the payment date stated therein, to each record holder of the
Series B Preferred Shares at the respective addresses of such holders as the
same shall appear on the share transfer records of the Trust.
(d) After payment of the full amount of the liquidating distributions to
which they are entitled, the holders of Series B Preferred Shares shall have no
right or claim to any of the remaining assets of the Trust.
(e) None of a consolidation or merger of the Trust with or into another
entity, a merger of another entity with or into the Trust, a statutory share
exchange by the Trust or a sale, lease or conveyance of all or substantially
all of the Trust's property or business shall be considered a liquidation,
dissolution or winding up of the Trust.
(5) Redemption.
(a) Cash Redemption Right. The Series B Preferred Shares are not
redeemable prior to February 15, 2003. To ensure that the Trust remains a
qualified real estate investment trust ("REIT") for federal income tax
purposes, however, the Series B Preferred Shares shall be subject to the
provisions of Article VII of the Declaration of Trust pursuant to which Series
B Preferred Shares owned by a shareholder in excess of the Ownership Limit (as
defined in Article VII of the Declaration of Trust, and as modified by
subparagraph 9 hereof) shall automatically be transferred to a Charitable Trust
(as defined in Article VII of the Declaration of Trust) and the Trust shall
have the right to purchase such shares, as provided in Article VII of the
Declaration of Trust. On and after February 15, 2003, the Trust, at its
option, upon giving notice as provided below, may redeem the Series B Preferred
Shares, in whole or from time to time in part, at the following redemption
prices per Series B Preferred Share if redeemed during the twelve-month period
beginning February 15 of the year indicated below, plus, in each case, all
distributions accumulated and unpaid on such
4
<PAGE> 5
Series B Preferred Share to the date of such redemption (the "Cash Redemption
Right"):
<TABLE>
<CAPTION>
Redemption Price Per
Year Series B Preferred Share
- ---- ------------------------
<S> <C>
2003.................. $51.1667
2004.................. $50.8750
2005.................. $50.5833
2006.................. $50.2917
2007 and thereafter... $50.0000
</TABLE>
(b) Share Redemption Right. In addition to the Cash Redemption Right set
forth in (a) above, on and after February 15, 2003, the Series B Preferred
Shares shall be redeemable by the Trust, in whole or in part, at the option of
the Trust, for such number of Common Shares as equals the liquidation
preference of the Series B Preferred Shares to be redeemed divided by the
Conversion Price (defined in subsection 7(a) herein) as of the opening of
business on the date set for such redemption (equivalent initially to a
conversion rate of 1.40056 Common Shares per Series B Preferred Share (the
"Share Redemption Right")). The Trust may exercise the Share Redemption Right
only if for 20 Trading Days (as defined in Section 9 herein) within any period
of 30 consecutive Trading Days, including the last day of such period, the
closing price of the Common Shares on the New York Stock Exchange exceeds
$41.055 per share, subject to adjustment, under the circumstances described in
Section 7 herein, with respect to the Conversion Price. To exercise the Share
Redemption Right, the Trust shall issue a press release announcing the
redemption prior to the opening of business on the second trading day after the
conditions described in the preceding sentences have, from time to time, been
met (the "Press Release"), but shall not issue a Press Release prior to
December 15, 2002. The Press Release shall announce the redemption and set
forth the number of Series B Preferred Shares that the Trust intends to redeem.
The redemption date (which may not be before February 15, 2003) shall be
selected by the Trust, shall be specified in the notice of redemption and shall
be not less than 30 days or more than 60 days after the date on which the Trust
issues the Press Release. Any date fixed for redemption pursuant to this
Section 5 is referred to herein as a "Redemption Date."
(c) Limitations on Redemption.
(i) The Trust may exercise the Cash Redemption Right provided that the
redemption price (other than the portion thereof consisting of accumulated and
unpaid distributions) is payable solely out of the sale proceeds of other
equity securities of the Trust, and from no other source. For purposes of the
preceding sentence, "equity
5
<PAGE> 6
securities" means any equity securities (including Common Shares and Preferred
Shares (as defined in the Declaration of Trust)), shares, interest,
participation or other ownership interests (however designated) and any rights
(other than debt securities convertible into or exchangeable for equity
securities) or options to purchase any of the foregoing.
(ii) If fewer than all of the outstanding Series B Preferred Shares are to
be redeemed or exchanged pursuant to the Cash Redemption Right or the Share
Redemption Right, the shares to be redeemed shall be determined pro rata or by
lot or in such other manner as prescribed by the Board. If such redemption is
to be by lot and, as a result of such redemption, any holder of Series B
Preferred Shares would become a holder of a number of Series B Preferred Shares
in excess of the Ownership Limit (as defined in Section 8 herein) because such
holder's Series B Preferred Shares were not redeemed, or were only redeemed in
part, then, except as otherwise provided in the Declaration of Trust, the Trust
will redeem the requisite number of Series B Preferred Shares of such holder
such that he will not hold in excess of the Ownership Limit subsequent to such
redemption.
(iii) Notwithstanding anything to the contrary contained herein, unless
full cumulative distributions on all Series B Preferred Shares shall have been
or contemporaneously are declared and paid or declared and a sum sufficient for
the payment thereof set apart for payment for all past distribution periods and
the current distribution period, no Series B Preferred Shares shall be redeemed
unless all outstanding Series B Preferred Shares are simultaneously redeemed or
exchanged; provided, however, that the foregoing shall not prevent the purchase
or acquisition of Series B Preferred Shares pursuant to a purchase or exchange
offer made on the same terms to holders of all outstanding Series B Preferred
Shares. In addition, unless full cumulative distributions on all outstanding
Series B Preferred Shares have been or contemporaneously are declared and paid
or declared and a sum sufficient for the payment thereof set apart for payment
for all past distributions periods and the then current distribution period,
the Trust shall not purchase or otherwise acquire directly or indirectly any
Series B Preferred Shares or any equity securities of the Trust ranking junior
to or on a parity with the Series B Preferred Shares as to distributions or
upon liquidation, dissolution or winding up of the Trust (except by conversion
into or exchange for equity securities of the Trust ranking junior to the
Series B Preferred Shares as to distributions and upon liquidation, dissolution
or winding up of the Trust).
(iv) The foregoing provisions of subsections 5(c)(i)-(iii) shall not
prevent the purchase by the Trust of Series B Preferred Shares pursuant to
Article VII of the Declaration of Trust or otherwise in order to ensure that
the Trust remains qualified as a REIT for federal income tax purposes.
(v) Immediately prior to any redemption of Series B Preferred Shares, the
Trust shall pay, in cash, any accumulated and unpaid distributions through the
Redemption Date, unless a Redemption Date falls after a Distribution Record
Date and on or prior to the corresponding Distribution Payment Date, in which
case each holder
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<PAGE> 7
of Series B Preferred Shares at the close of business on such Distribution
Record Date shall be entitled to the distribution payable on such shares on the
corresponding Distribution Payment Date notwithstanding the redemption of such
shares on or prior to such Distribution Payment Date. Except as provided
above, the Trust will make no payment or allowance for unpaid distributions,
whether or not in arrears, on Series B Preferred Shares for which a notice of
redemption has been given.
(d) Mandatory Redemption. The Trust shall redeem for cash all outstanding
Series B Preferred Shares on February 15, 2008 at a price of $50.00 per Series
B Preferred Share, plus accumulated and unpaid distributions to the redemption
date.
(e) Procedures for Redemption.
(i) Notice of redemption pursuant to the Cash Redemption Right shall be
(a) given by publication in a newspaper of general circulation in the City of
New York, such publication to be made once a week for two successive weeks
commencing not less than 30 nor more than 60 days prior to the Redemption Date;
and (b) mailed, not less than 30 nor more than 60 days prior to the Redemption
Date, to each holder of record of Series B Preferred Shares to be redeemed,
notifying such holder of the Trust's election to redeem such shares. Notice of
redemption pursuant to the Share Redemption Right shall be given not more than
four business days after the date on which the Trust issues the Press Release
to each holder of record of the Series B Preferred Shares to be redeemed. Such
notice shall be provided by mail at such holder's address as the same appears
on the share records of the Trust, or by publication in a newspaper of general
circulation in the City of New York. If the Trust elects to provide such
notice by publication, it shall also promptly mail notice of such redemption to
the holders of the Series B Preferred Shares to be redeemed. No failure to
give such notice or any defect thereto or in the mailing thereof shall affect
the validity of the proceedings for the redemption of any Series B Preferred
Shares except as to the holder to whom notice was defective or not given.
(ii) In addition to any information required by law or by the applicable
rules of any exchange upon which the Series B Preferred Shares may be listed or
admitted to trading, such notice shall state: (i) the Redemption Date, (ii)
with respect to the Cash Redemption Right, the cash redemption price per Series
B Preferred Share and, with respect to the Share Redemption Right, the number
of Common Shares to be issued with respect to each Series B Preferred Share,
(iii) the number of shares to be redeemed (and, if fewer than all the Series B
Preferred Shares are to be redeemed from such holder, the number of shares to
be redeemed from such holder), (iv) the place or places where certificates for
such Series B Preferred Shares are to be surrendered for payment of the
redemption price in cash, with respect to the Cash Redemption Right, and in
certificates representing Common Shares with respect to the Share Redemption
Right, (v) that distributions on the shares to be redeemed will cease to
accumulate on such Redemption Date and (vi) the date upon which the holder's
conversion rights, if any, as to such shares shall terminate.
7
<PAGE> 8
(iii) On or after the Redemption Date, each holder of Series B Preferred
Shares to be redeemed shall present and surrender the certificates representing
his Series B Preferred Shares to the Trust at the place designated in the
notice of redemption and thereupon the redemption price (in cash or Common
Shares, as applicable) of such shares shall be paid to or on the order of the
person whose name appears on such certificate representing Series B Preferred
Shares as the owner thereof and each surrendered certificate shall be canceled.
If fewer than all the shares represented by any such certificate representing
Series B Preferred Shares are to be redeemed, a new certificate shall be issued
representing the unredeemed shares.
(iv) From and after the Redemption Date (unless the Trust defaults in
payment of the redemption price), all distributions on the Series B Preferred
Shares designated for redemption in such notice shall cease to accumulate and
all rights of the holders thereof, except the right to receive the redemption
price thereof (including all accumulated and unpaid distributions up to the
Redemption Date), shall cease and terminate and such shares shall not
thereafter be transferred (except with the consent of the Trust) on the Trust's
books, and such shares shall not be deemed to be outstanding for any purpose
whatsoever. At its election, the Trust, prior to a Redemption Date, may
irrevocably deposit the redemption price (including accumulated and unpaid
distributions) of the Series B Preferred Shares so called for redemption in
trust for the holders thereof with a bank or trust company, in which case the
redemption notice to holders of the Series B Preferred Shares to be redeemed
shall (i) state the date of such deposit, (ii) specify the office of such bank
or trust company as the place of payment of the redemption price and (iii)
require such holders to surrender the certificates representing such shares at
such place on or about the date fixed in such redemption notice (which may not
be later than the Redemption Date) against payment of the redemption price
(including all accumulated and unpaid distributions to the Redemption Date).
At the close of business on a Redemption Date relating to the Trust's Share
Redemption Right, each holder of Series B Preferred Shares to be so redeemed
(unless the Trust defaults in the delivery of the Common Shares payable on such
Redemption Date) shall be deemed to be the record holder of the number of
Common Shares into which such Series B Preferred Shares is to be so redeemed,
regardless of whether such holder has surrendered the certificates representing
the Series B Preferred Shares. Any monies or Common Shares so deposited which
remain unclaimed by the holders of the Series B Preferred Shares at the end of
two years after the Redemption Date shall be returned by such bank or trust
company to the Trust.
(f) Status of Redeemed Shares. Any Series B Preferred Shares that shall
at any time have been redeemed shall, after such redemption, have the status of
authorized but unissued Preferred Shares, without designation as to series
until such shares are once more designated as part of a particular series by
the Board.
(g) No Fractional Shares. No fractional shares or scrip representing
fractions of Common Shares shall be issued upon redemption of a Series B
Preferred Share pursuant to the Trust's Share Redemption Right. Instead of any
fractional interest in a Common Share that would otherwise be deliverable upon
the redemption
8
<PAGE> 9
of a share of Series B Preferred Shares, the Trust shall pay to the holder of
such Series B Preferred Share an amount in cash in respect of such fractional
interest (computed to the nearest cent) based upon the Current Market Price of
Common Shares on the Trading Day immediately preceding the Redemption Date. If
more than one Series B Preferred Share shall be surrendered for redemption at
one time by the same holder, the number of full Common Shares issuable upon
redemption thereof shall be computed on the basis of the aggregate number of
Series B Preferred Shares so surrendered.
(h) Common Shares Issuable Upon Redemption. The Trust covenants that any
Common Shares issued upon redemption of the Series B Preferred Shares shall be
validly issued, fully paid and non-assessable.
(6) Voting Rights.
(a) Holders of the Series B Preferred Shares shall not have any voting
rights, except as provided by law and as described below.
(b) Whenever distributions on any Series B Preferred Shares shall be in
arrears for six or more quarterly periods (a "Preferred Distribution Default"),
the holders of such Series B Preferred Shares (voting separately as a class
with all other equity securities ranking on a parity with the Series B
Preferred Shares as to distributions and upon voluntary or involuntary
liquidation, dissolution or winding up of the Trust upon which like voting
rights have been conferred and are exercisable ("Parity Preferred Shares")
shall be entitled to vote for the election of a total of two additional
trustees of the Trust (the "Preferred Share Trustees") who shall each be
elected for one-year terms. Such election shall be held at a special meeting
called by the holders of record of at least 20% of the outstanding Series B
Preferred Shares or the holders of shares of any other series of Parity
Preferred Shares so in arrears (unless such request is received less than 90
days before the date fixed for the next annual or special meeting of
shareholders) or, if the request for a special meeting is received by the Trust
less than 90 days before the date fixed for the next annual or special meeting
of the shareholders, at the next annual or special meeting of shareholders, and
at each subsequent annual meeting until all distributions accumulated on the
Series B Preferred Shares for the past distribution periods and the
distribution for the then current distribution period shall have been fully
paid or authorized and a sum sufficient for the payment thereof set aside for
payment in full.
(c) If and when all accumulated distributions and the distribution for the
current distribution period on the Series B Preferred Shares shall have been
paid in full or set aside for payment in full, the holders of Series B
Preferred Shares shall be divested of the voting rights set forth in Section
6(b) herein (subject to revesting in the event of each and every Preferred
Distribution Default) and, if all accumulated distributions and the
distribution for the current distribution period have been paid in full or set
aside for payment in full on all other series of Parity Preferred Shares upon
which like voting rights have been conferred and are exercisable, the term of
office of each Preferred Share Trustee so elected shall terminate. So long as
a Preferred Distribution Default shall continue, any vacancy in the office of a
Preferred Share
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<PAGE> 10
Trustee may be filled by written consent of the Preferred Share Trustee
remaining in office, or if there is no such remaining trustee, by vote of
holders of a majority of the outstanding Series B Preferred Shares and any
other such other series of Parity Preferred Shares voting as a single class.
Any Preferred Share Trustee may be removed at any time with or without cause by
the vote of, and shall not be removed otherwise than by the vote of, the
holders of record of a majority of the outstanding Series B Preferred Shares
when they have the voting rights set forth in Section 6(b) (voting separately
as a class with all other series of Parity Preferred Shares upon which like
voting rights have been conferred and are exercisable). The Preferred Share
Trustees shall each be entitled to one vote per trustee on any matter.
(d) So long as any Series B Preferred Shares remain outstanding, the Trust
shall not, without the affirmative vote or consent of the holders of at least
two-thirds of Series B Preferred Shares outstanding at the time, given in
person or by proxy, either in writing or at a meeting (such series voting
separately as a class), (i) authorize or create, or increase the authorized or
issued amount of, any class or series of shares of beneficial interest ranking
prior to Series B Preferred Shares with respect to the payment of distributions
or the distribution of assets upon voluntary or involuntary liquidation,
dissolution or winding up of the Trust or reclassify any authorized shares of
beneficial interest of the Trust into such shares, or create, authorize or
issue any obligation or security convertible or exchangeable into or evidencing
the right to purchase any such shares; or (ii) amend, alter or repeal the
provisions of the Declaration of Trust or these Articles Supplementary, whether
by merger or consolidation (an "Event") or otherwise, so as to materially and
adversely affect any right, preference, privilege or voting power of such
Series B Preferred Shares or the holders thereof; provided, however, with
respect to the occurrence of any of the Events set forth in (ii) above, so long
as Series B Preferred Shares remain outstanding with the terms thereof
materially unchanged, taking into account that, upon the occurrence of an
Event, the Trust may not be the surviving entity and such surviving entity may
thereafter be the issuer of the Series B Preferred Shares, the occurrence of
any such Event shall not be deemed to materially adversely affect such rights,
preferences, privileges or voting powers of holders of Series B Preferred
Shares; and provided further that (x) any increase in the amount of the
authorized Preferred Shares or the creation or issuance of any other series of
Preferred Shares, or (y) any increase in the amount of authorized Series B
Preferred Shares or any other series of Preferred Shares, in each case ranking
on a parity with or junior to the Series B Preferred Shares with respect to
payment of distributions and the distribution of assets upon voluntary or
involuntary liquidation, dissolution or winding up of the Trust, shall not be
deemed to materially and adversely affect such rights, preferences, privilege
or voting powers.
(e) The foregoing voting provisions shall not apply if, at or prior to the
time when the act with respect to which such vote would otherwise be required
shall be effected, all outstanding Series B Preferred Shares shall have been
converted, redeemed or called for redemption upon proper notice and sufficient
funds or Common Shares, as applicable, shall have been deposited in trust to
effect such redemption.
10
<PAGE> 11
(7) Conversion.
(a) Subject to the restrictions on transfer and ownership referenced in
Article VII of the Declaration of Trust, any number of whole (but not
fractional) Series B Preferred Shares shall be convertible at any time, at the
option of the holders thereof, into fully paid and non-assessable Common Shares
at a conversion price of $35.70 per Common Share (equivalent to a conversion
rate of 1.40056 Common Shares for each Series B Preferred Share), subject to
adjustment as described in Section 7(f) herein (the "Conversion Price"),
provided, however, that the right to convert Series B Preferred Shares called
for redemption pursuant to Section 5 shall terminate at the close of business
on the Redemption Date, unless the Trust shall default in making payment of the
redemption price.
(b) To exercise the conversion right, the holder of each Series B
Preferred Share to be converted shall surrender the certificate representing
such share, duly endorsed or assigned to the Trust or in blank, at the
principal office of the Transfer Agent accompanied by written notice to the
Trust that the holder thereof elects to convert such Series B Preferred Share.
Unless the shares issuable on conversion are to be issued in the same name as
the name in which such Series B Preferred Share is registered, in which case
the Trust shall bear the related taxes, each share surrendered for conversion
shall be accompanied by instruments of transfer, in form satisfactory to the
Trust, duly executed by the holder or such holder's duly authorized attorney
and an amount sufficient to pay any transfer or similar tax (or evidence
reasonably satisfactory to the Trust demonstrating that such taxes have been
paid).
(c) Each conversion shall be deemed to have been effected immediately
prior to the close of business on the date on which the certificates for Series
B Preferred Shares shall have been surrendered and such notice (and if
applicable, payment of an amount equal to the distribution payable on such
shares) received by the Trust as aforesaid, and the person or persons in whose
name or names any certificate or certificates for Common Shares shall be
issuable upon such conversion shall be deemed to have become the holder or
holders of record of the shares represented thereby at such time on such date,
and such conversion shall be at the Conversion Price in effect at such time and
on such date unless the share transfer books of the Trust shall be closed on
that date, in which event such person or persons shall be deemed to have become
such holder or holders of record at the close of business on the next
succeeding day on which such share transfer books are open, but such conversion
shall be at the Conversion Price in effect on the date on which such shares
have been surrendered and such notice received by the Trust.
(d) Holders of Series B Preferred Shares at the close of business on a
Distribution Record Date shall be entitled to receive the distribution payable
on such shares on the corresponding Distribution Payment Date notwithstanding
the conversion of such shares following such Distribution Record Date and prior
to such Distribution Payment Date. However, certificates representing Series B
Preferred Shares surrendered for conversion during the period between the close
of business on
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<PAGE> 12
any Distribution Record Date and ending with the opening of business on the
corresponding Distribution Payment Date (except shares converted after the
issuance of a notice of redemption with respect to a Redemption Date during
such period or coinciding with such Distribution Payment Date) shall be
accompanied by payment of an amount equal to the distribution payable on such
shares on such Distribution Payment Date. A holder of Series B Preferred
Shares on a Distribution Record Date who (or whose transferee) tenders any such
shares for conversion into Common Shares on such Distribution Payment Date
shall receive the distribution payable by the Trust on such Series B Preferred
Shares on such date, and the converting holder need not include payment of the
amount of such distribution upon surrender of certificates representing such
Series B Preferred Shares for conversion. Except as provided above, the Trust
shall make no payment or allowance for unpaid distributions, whether or not in
arrears, on converted shares or for distribution on the Common Shares that are
issued upon such conversion.
As promptly as practicable after the surrender of certificates for Series
B Preferred Shares as aforesaid, the Trust shall issue and shall deliver at
such office to such holder, or on his written order, a certificate or
certificates for the number of full Common Shares issuable upon the conversion
of such shares in accordance with the provisions of this Section 7, and any
fractional interest in respect of a Common Share arising upon such conversion
shall be settled as provided in subsection (e) of this Section 7.
(e) No fractional shares of scrip representing fractions of Common Shares
shall be issued upon conversion of the Series B Preferred Shares. Instead of
any fractional interest in a Common Share that would otherwise be deliverable
upon the conversion of a share of Series B Preferred Shares, the Trust shall
pay to the holder of such share an amount in cash in respect of such fractional
interest based upon the Current Market Price of Common Shares on the Trading
Day immediately preceding the date of conversion. If more than one Series B
Preferred Share, as the case may be, shall be surrendered for conversion at one
time by the same holder, the number of full Common Shares issuable upon
conversion thereof shall be computed on the basis of the aggregate number of
Series B Preferred Shares so surrendered.
(f) Conversion Price Adjustments.
The Conversion Price shall be adjusted from time to
time as follows:
(i) If the Trust shall after the date on which the
Series B Preferred Shares are first issued (the "Issue Date")
(A) pay or make a distribution to holders of its equity
securities in Common Shares, (B) subdivide its outstanding
Common Shares into a greater number of shares, (C) combine its
outstanding Common Shares into a smaller number of shares or
(D) issue any shares
12
<PAGE> 13
of beneficial interest by reclassification of its Common
Shares, the Conversion Price in effect at the opening of
business on the day following the date fixed for the
determination of shareholders entitled to receive such
distribution or at the opening of business on the day
following the day on which such subdivision, combination or
reclassification becomes effective, as the case may be, shall
be adjusted so that the holder of any Series B Preferred
Shares thereafter surrendered for conversion shall be
entitled to receive the number of Common Shares that such
holder would have owned or have been entitled to receive
after the happening of any of the events described above had
such Series B Preferred Shares been converted immediately
prior to the record date in the case of a distribution or the
effective date in the case of a subdivision, combination or
reclassification. An adjustment made pursuant to this
subsection (i) shall become effective immediately after the
opening of business on the day next following the record date
(except as provided in subsection (j) below) in the case of a
distribution and shall become effective immediately after the
opening of business on the day next following the effective
date in the case of a subdivision, combination or
reclassification.
(ii) If the Trust shall issue after the Issue Date
rights, options or warrants to all holders of Common Shares
entitling them to subscribe for or purchase Common Shares (or
securities convertible into or exchangeable for Common Shares)
at a price per share less than the Fair Market Value per
Common Share on the record date for the determination of
shareholders entitled to receive such rights, options or
warrants, then the Conversion Price in effect at the opening
of business on the day next following such record date shall
be adjusted to equal the price determined by multiplying (I)
the Conversion Price in effect immediately prior to the
opening of business on the day following the date fixed for
such determination by (II) a fraction, the numerator of which
shall be the sum of (A) the number of Common Shares
outstanding on the close of business on the date fixed for
such determination and (B) the number of shares that the
aggregate proceeds to the Trust from the exercise of such
rights, options or warrants for Common Shares would purchase
at such Fair Market Value, and the denominator of which shall
be the sum of (A) the number of Common Shares outstanding on
the close of business on the date fixed for such determination
and (B) the number of additional Common Shares offered for
subscription or purchase pursuant to such rights, options or
warrants. Such adjustment shall become effective immediately
13
<PAGE> 14
after the opening of business on the day next following such
record date (except as provided in subsection (j) below). In
determining whether any rights, options or warrants entitle
the holders of Common Shares to subscribe for or purchase
Common Shares at less than the Fair Market Value, there shall
be taken into account any consideration received by the Trust
upon issuance and upon exercise of such rights, options or
warrants, the value of such consideration, if other than
cash, to be determined by the Trust's Chief Executive Officer
or the Board of Trustees.
(iii) If the Trust shall distribute to all holders of
its Common Shares any equity securities of the Trust (other
than Common Shares) or evidence of its indebtedness or assets
(excluding cash distributions paid out of the total equity
applicable to Common Shares, including revaluation equity,
less the amount of stated capital attributable to Common
Shares, determined on the basis of the most recent annual
consolidated cost basis and current value basis and quarterly
consolidated balance sheets of the Trust and its consolidated
subsidiaries available at the time of the declaration of the
distribution) or rights, options or warrants to subscribe for
or purchase any of its securities (excluding those rights,
options and warrants issued to all holders of Common Shares
entitling them to subscribe for or purchase Common Shares,
which rights, options and warrants are referred to in and
treated under subsection (ii) above) (any of the foregoing
being hereinafter in this subsection (iii) called the
"Securities"), then in each case the Conversion Price shall be
adjusted so that it shall equal the price determined by
multiplying (I) the Conversion Price in effect immediately
prior to the close of business on the date fixed for the
determination of shareholders entitled to receive such
distribution by (II) a fraction, the numerator of which shall
be the Fair Market Value per Common Share on the record date
mentioned below less the then fair market value (as determined
by the Chief Executive Officer or the Board of Trustees, whose
determination shall be conclusive) of the portion of the
shares of beneficial interest or assets or evidences of
indebtedness so distributed or of such rights, options or
warrants applicable to one Common Share, and the denominator
of which shall be the Fair Market Value per Common Share on
the record date mentioned below. Such adjustment shall become
effective immediately at the opening of business on the
business day next following (except as provided in subsection
(j) below) the record date for the determination of
shareholders entitled to receive such distribution. For the
14
<PAGE> 15
purposes of this subsection (iii), the distribution of a
Security, which is distributed not only to the holders of the
Common Shares on the date fixed for the determination of
shareholders entitled to such distribution of such Security,
but also is distributed with each Common Share delivered to a
person converting a Series B Preferred Share after such
determination date, shall not require an adjustment of the
Conversion Price pursuant to this subsection (iii); provided
that on the date, if any, on which a person converting a
Series B Preferred Share would no longer be entitled to
receive such Security with a Common Share (other than as a
result of the termination of all such Securities), a
distribution of such Securities shall be deemed to have
occurred, and the Conversion Price shall be adjusted as
provided in this subsection (iii) (and such day shall be
deemed to be "the date fixed for the determination of the
shareholders entitled to receive such distribution" and "the
record date" within the meaning of the two preceding
sentences).
(iv) If (I) the Trust shall make cash distributions to
all holders of its Common Shares (excluding any cash portion
of distributions referred to in subsection (iii) above) which,
when combined with (A) all such all-cash distributions made
within the preceding 12 months in respect of which no
adjustment has been made, plus (B) the amount by which any
cash and the fair market value, as of the relevant expiration
date, of other consideration payable in respect of any tender
offers by the Company for Common Shares expired within the
preceding 12 months in respect of which no adjustment has been
made exceeds the Current Market Price of the Common Shares
acquired in such tender offers, exceeds 15% of the Company's
market capitalization (being the product of the then Current
Market Price of the Common Shares times the number of Common
Shares then outstanding) on the record date for such
distribution (the amount by which such cash distributions,
when combined with (A) plus (B) above, exceeds such 15% of
such market capitalization being referred to herein as the
"Excess Cash Amount"), or (II) a tender offer made by the
Trust or any subsidiary for all or any portion of the Common
Shares shall expire and such tender offer shall require
payment to shareholders of aggregate consideration having a
fair market value which, when combined with (C) the aggregate
of the amount by which the cash plus the fair market value, as
of the expiration of such tender offer, of other consideration
payable in respect of any other tender offer by the Company or
any subsidiary for all or any portion of the Common Shares
expiring within 12 months preceding the expiration of such
tender offer
15
<PAGE> 16
and in respect of which no adjustment pursuant to this
subsection (f)(iv) has been made exceeds the Current Market
Price of the Common Shares acquired in such tender offer,
plus (D) the aggregate amount of any distributions to all
holders of Common Shares made exclusively in cash within the
12 months preceding the expiration of such tender offer and
in respect of which no adjustment pursuant to clause (I)
above has been made, exceeds 15% of the product of the
Current Market Price per share of the Common Shares as of the
last time tenders could have been made pursuant to such
tender offer times the number of Common Shares outstanding
(including tendered shares) (the amount by which such
aggregate consideration, when combined with (C) plus (D)
above, exceeds such 15% of such product being referred to
herein as the "Excess Tender Amount"), then in each case the
Conversion Price shall be adjusted so that it shall equal the
price determined by multiplying (Y) the Conversion Price in
effect immediately prior to the close of business on the date
fixed for the determination of shareholders entitled to
receive such distribution by (Z) a fraction, the numerator of
which shall be the Fair Market Value per Common Share on the
record date mentioned below less the Excess Cash Amount, if
any, and the Excess Tender Amount, if any, and the
denominator of which shall be the Fair Market Value per
Common Share on the record date mentioned below. Such
adjustment shall become effective immediately at the opening
of business on the business day next following (except as
provided in subsection (j) below) the record date for the
determination of shareholders entitled to receive such
distribution, or the expiration date of such tender offer, as
the case may be.
(v) No adjustment in the Conversion Price shall be
required unless such adjustment would require a cumulative
increase or decrease of at least 1% in such price; provided,
however, that any adjustments that by reason of this
subsection (v) are not required to be made shall be carried
forward and taken into account in any subsequent adjustment
until made; and provided, further, that any adjustment shall
be required and made in accordance with the provisions of this
Section 7 (other than this subsection (v)) not later than such
time as may be required in order to preserve the tax-free
nature of a distribution to the holders of Common Shares.
Notwithstanding any other provisions of this Section 7, the
Trust shall not be required to make any adjustment of the
Conversion Price for the issuance of any Common Shares
pursuant to any plan providing
16
<PAGE> 17
for the reinvestment of distributions or interest payable on
securities of the Trust and the investment of additional
optional amounts in Common Shares under such plan. All
calculations under this Section 7 shall be made to the
nearest cent with ($.005 being rounded upward) or to the
nearest one-tenth of a share (with .05 of a share being
rounded upward), as the case may be. Anything in this
subsection (f) to the contrary notwithstanding, the Trust
shall be entitled, to the extent permitted by law, to make
such reductions in the Conversion Price, in addition to those
required by this subsection (f), as it in its discretion
shall determine to be advisable in order that any share
distributions, subdivision of shares, reclassification or
combination of shares, distribution of rights, options or
warrants to purchase shares or securities, or a distribution
of other assets (other than cash distributions) hereafter
made by the Trust to its shareholders shall not be taxable.
(g) If the Trust shall be a party to any transaction (including,
without limitation, a merger, consolidation, statutory share
exchange, self tender offer for all or substantially all of the
Common Shares, sale of all or substantially all of the Trust's
assets or recapitalization of the Common Shares and excluding any
transaction as to which subsection (f)(i) of this Section 7 applied)
(each of the foregoing being referred to herein as a "Transaction"),
in each case as a result of which Common Shares shall be converted
into the right to receive shares, stock, securities or other
property (including cash or any combination thereof), each Series B
Preferred Share which is not converted into the right to receive
shares, stock, securities or other property in connection with such
Transaction shall thereafter be convertible into the kind and amount
of shares, stock, securities and other property (including cash or
any combination thereof) receivable upon the consummation of such
Transaction by a holder of that number of Common Shares into which
one Series B Preferred Share was convertible immediately prior to
such Transaction, assuming such holder of Common Shares (i) is not a
Person with which the Trust consolidated or into which the Trust
merged or which merged into the Trust or to which such sale or
transfer was made, as the case may be (a "Constituent Person"), or
an affiliate of a Constituent Person and (ii) failed to exercise his
rights of the election, if any, as to the kind or amount of shares,
stock, securities and other property (including cash) receivable
upon such Transaction (each a "Non-Electing Share") (provided that
if the kind and amount of shares, stock, securities and other
property (including cash) receivable upon such Transaction is not
the same for each Non-Electing Share, the kind and amount receivable
by each Non-Electing Share shall be deemed to be the kind and amount
receivable per share by a plurality
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<PAGE> 18
of the Non-Electing Shares). The Trust shall not be a party to any
Transaction unless the terms of such Transaction are consistent
with the provisions of this subsection (g), and it shall not
consent or agree to the occurrence of any Transaction until the
Trust has entered into an agreement with the successor or
purchasing entity, as the case may be, for the benefit of the
holders of the Series B Preferred Shares that will contain
provisions enabling the holders of the Series B Preferred Shares
that remain outstanding after such Transaction to convert into the
consideration received by holders of Common Shares at the
Conversion Price in effect immediately prior to such Transaction.
The provisions of this subsection (g) shall similarly apply to
successive Transactions.
(h) If:
(i) the Trust shall declare a distribution on the
Common Shares (other than in cash out of the total equity
applicable to Common Shares, including revaluation equity,
less the amount of stated capital attributable to Common
Shares, determined on the basis of the most recent annual
consolidated cost basis and current value basis and quarterly
consolidated balance sheets of the Trust and its consolidated
subsidiaries available at the time of the declaration of the
distribution) or there shall be a reclassification,
subdivision or combination of Common Shares; or
(ii) the Trust shall authorize the granting to the
holders of the Common Shares of rights, options or warrants to
subscribe for or purchase any shares of any class or any other
rights, options or warrants; or
(iii) the Trust shall authorize the payment of any
Excess Cash Amount or Excess Tender Amount; or
(iv) there shall be any reclassifications of the
Common Shares (other than an event to which subsection (f)(i)
of this Section 7 applied) or any consolidation or merger to
which the Trust is a party and for which approval of any
shareholders of the Trust is required, or a statutory share
exchange involving the conversion or exchange of Common Shares
into securities or other property, or a self tender offer by
the Trust for all or substantially all of its outstanding
Common Shares, or the sale or transfer of all or substantially
all of the assets of the Trust as an entity and for which
approval of any stockholder of the Trust is required; or
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<PAGE> 19
(v) there shall occur the voluntary or involuntary
liquidation, dissolution or winding up of the Trust,
then the Trust shall cause to be filed with the Transfer Agent and
shall cause to be mailed to the holders of the Series B Preferred
Shares at their addresses as shown on the share records of the
Trust, as promptly as possible, but at least 15 days prior to the
applicable date hereinafter specified, a notice stating (A) the
date on which a record is to be taken for the purpose of such
distribution or rights, options or warrants, or, if a record is not
to be taken, the date as of which the holders of Common Shares of
record to be entitled to such distribution or rights, options or
warrants are to be determined or (B) the date on which such
reclassification, subdivision, combination, consolidation, merger,
statutory share exchange, sale, transfer, liquidation, dissolution
or winding up is expected to become effective, and the date as of
which it is expected that holders of Common Shares of record shall
be entitled to exchange their Common Shares for securities or other
property, if any, deliverable upon such reclassification,
subdivision, combination, consolidation, merger, statutory share
exchange, sale, transfer, liquidation, dissolution or winding up.
Failure to give or receive such notice or any defect therein shall
not affect the legality or validity of the proceedings described in
this Section 7.
(i) Whenever the Conversion Price is adjusted as herein provided,
the Trust shall promptly file with the Transfer Agent an officer's
certificate setting forth the Conversion Price after such adjustment
and setting forth a brief statement of the facts requiring such
adjustment, which certificate shall be conclusive evidence of the
correctness of such adjustment absent manifest error. Promptly
after delivery of such certificate, the Trust shall prepare a notice
of such adjustment of the Conversion Price setting forth the
adjusted Conversion Price and the effective date such adjustment
becomes effective and shall mail such notice of such adjustment of
the Conversion Price to the holder of each Series B Preferred Share
at such holder's last address as shown on the share records of the
Trust.
(j) In any case in which subsection (f) of this Section 7
provides that an adjustment shall become effective on the date next
following the record date for an event, the Trust may defer until
the occurrence of such event (A) issuing to the holder of any Series
B Preferred Shares converted after such record date and before the
occurrence of such event the additional Common Shares issuable upon
such conversion by reason of the adjustment required by such event
over and above the Common Shares issuable upon such conversion
before giving effect to
19
<PAGE> 20
such adjustment and (B) fractionalizing any Series B Preferred
Share and/or paying to such holder any amount of cash in lieu of
any fraction pursuant to subsection (e) of this Section 7.
(k) There shall be no adjustment of the Conversion Price in case
of the issuance of any shares of beneficial interest of the Trust in
a reorganization, acquisition or other similar transaction except as
specifically set forth in this Section 7. If any action or
transaction would require adjustment of the Conversion Price
pursuant to more than one subsection of this Section 7, only one
adjustment shall be made, and such adjustment shall be the amount of
adjustment that has the highest absolute value.
(l) If the Trust shall take any action affecting the Common
Shares, other than action described in this Section 7, that in the
opinion of the Board of Trustees would materially adversely affect
the conversion rights of the holders of the Series B Preferred
Shares, the Conversion Price for the Series B Preferred Shares may
be adjusted, to the extent permitted by law, in such manner, if any,
and at such time, as the Board of Trustees, in its sole discretion,
may determine to be equitable in the circumstances.
(m) The Trust covenants that it will at all times reserve and
keep available, free from preemptive rights, out of the aggregate of
its authorized but unissued Common Shares, for the purpose of
effecting conversion of the Series B Preferred Shares, the full
number of Common Shares deliverable upon the conversion of all
outstanding Series B Preferred Shares not theretofore converted.
For purposes of this subsection (m), the number of Common Shares
that shall be deliverable upon the conversion of all outstanding
Series B Preferred Shares shall be computed as if at the time of
computation all such outstanding shares were held by a single
holder.
The Trust covenants that any Common Shares issued upon conversion
of the Series B Preferred Shares shall be validly issued, fully
paid and non-assessable. Before taking any action that would cause
an adjustment reducing the Conversion Price below the then-par
value of the Common Shares deliverable upon conversion of the
Series B Preferred Shares, the Trust will take any action that, in
the opinion of its counsel, may be necessary in order that the
Trust may validly and legally issue fully paid and non-assessable
Common Shares at such adjusted Conversion Price.
Prior to the delivery of any securities that the Trust shall be
obligated to deliver upon conversion of the Series B Preferred
Shares, the Trust
20
<PAGE> 21
shall endeavor to comply with all federal and state laws and
regulations thereunder requiring the registration of such
securities with, or any approval of or consent to the delivery
thereof by any governmental authority.
(n) The Trust will pay any and all documentary stamp or similar
issue or transfer taxes payable in respect of the issue or delivery
of Common Shares or other securities or property on conversion or
redemption of the Series B Preferred Shares pursuant hereto;
provided, however, that the Trust shall not be required to pay any
tax that may be payable in respect of any transfer involved in the
issue or delivery of Common Shares or other securities or property
in a name other than that of title holder of the Series B Preferred
Shares to be converted or redeemed, and no such issue or delivery
shall be made unless and until the person requesting such issue or
delivery has paid to the Trust the amount of any such tax or
established, to the reasonable satisfaction of the Trust, that such
tax has been paid.
(8) Ownership Limitations. The Series B Preferred Shares are subject to the
restrictions on transferability and ownership provisions described in Article
VII of the Declaration of Trust. The ownership limit as described in Article
VII of the Declaration of Trust (the "Ownership Limit"), with respect to the
Series B Preferred Shares shall mean the greater of (1) 9.9% of the Series B
Preferred Shares (in value or number, whichever is more restrictive) or (ii)
such number of Series B Preferred Shares such that five persons who are
considered individuals pursuant to Section 542 of the Internal Revenue Code of
1986, as amended (the "Code"), as modified by Section 856(h)(3) of the Code
(taking into account all Excepted Holders (as defined in the Declaration of
Trust)), could not Beneficially Own (as defined in the Declaration of Trust),
in the aggregate, more than 49.5% of the value of the outstanding shares of
beneficial interest of the Trust.
(9) Definitions.
"Current Market Price" of publicly traded Common Shares or any other class
of shares of beneficial interest or other security of the Trust or any other
issuer for any day shall mean the last reported sales price, regular way, on
such day, or, if no sale takes place on such day, the average of the reported
closing bid and asked prices on such day, regular way, in either case as
reported on the New York Stock Exchange ("NYSE") or, if such security is not
listed or admitted for trading on the NYSE, on the principal national
securities exchange on which such security is listed or admitted for trading
or, if not listed or admitted for trading on any national securities exchange,
on the NASDAQ National Market or, if such security is not quoted on such NASDAQ
National Market, the average of the closing bid and asked prices on such day in
the over-the-counter market as reported by NASDAQ or, if bid and asked prices
for such security on such day shall not have been reported through NASDAQ, the
average of the bid and asked prices on such day as furnished by any NYSE member
firm regularly
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<PAGE> 22
making a market in such security selected for such purpose by the Chief
Executive Officer of the Trust or the Board of Trustees.
"Fair Market Value" shall mean the average of the daily Current Market
Prices per Common Share during the five consecutive Trading Days selected by
the Trust commencing not more than 20 Trading Days before, and ending not later
than, the earlier of the day in question and the day before the "ex" date with
respect to the issuance or distribution requiring such computation. The term "
'ex' date," when used with respect to any issuance or distribution, means the
first day on which the Common Shares trade regular way, without the right to
receive such issuance or distribution, on the exchange or in the market, as the
case may be, used to determine that day's Current Market Price.
"Trading Day" shall mean any day on which the securities in question are
traded on the NYSE or, if such securities are not listed or admitted for
trading on the NYSE, on the principal national securities exchange on which
such securities are listed or admitted or, if not listed or admitted for
trading on any national securities exchange, on the NASDAQ National Market or,
if such securities are not quoted on such NASDAQ National Market, in the
applicable securities market in which the securities are traded.
"Transfer Agent" means Bank of Boston EquiServe LLP, an affiliate of First
National Bank of Boston, or such other agent or agents of the Trust as may be
designated by the Board of Trustees or its designee as the transfer agent for
the Series B Preferred Shares.
SECOND: The Series B Preferred Shares have been classified and designated
by the Board under the authority contained in the Declaration of Trust.
THIRD: These Articles Supplementary have been approved by the Board in
the manner and by the vote required by law.
FOURTH: These Articles Supplementary shall be effective at the time the
State Department of Assessments and Taxation of Maryland accepts these Articles
Supplementary for record.
FIFTH: The undersigned President of the Trust acknowledges these Articles
Supplementary to be the act of the Trust and, as to all matters or facts
required to be verified under oath, the undersigned President acknowledges that
to the best of his knowledge, information and belief, these matters and facts
are true in all material respects and that this statement is made under the
penalties for perjury.
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<PAGE> 23
IN WITNESS WHEREOF, the Trust has caused these Articles Supplementary to
be executed under seal in its name and on its behalf by its President and
attested to by its Secretary on this 18th day of February, 1998.
EQUITY OFFICE PROPERTIES TRUST
By: /s/ TIMOTHY H. CALLAHAN
-------------------------------------
Timothy H. Callahan
President and Chief Executive Officer
[SEAL]
ATTEST:
/s/ STANLEY M. STEVENS
- ---------------------------------------
Stanley M. Stevens, Secretary
<PAGE> 1
EXHIBIT 4.1
EXECUTION COPY
================================================================================
EOP OPERATING LIMITED PARTNERSHIP
Issuer
and
STATE STREET BANK AND TRUST COMPANY
Trustee
_______________________________
INDENTURE
Dated as of September 2, 1997
_________________________
SENIOR DEBT SECURITIES
================================================================================
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
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RECITALS OF THE ISSUER........................................... 1
ARTICLE ONE
DEFINITIONS AND OTHER PROVISIONS OF GENERAL APPLICATION
SECTION 101. DEFINITIONS 1
Acquired Indebtedness................................. 1
Act................................................... 2
Additional Amounts.................................... 2
Affiliate............................................. 2
Annual Debt Service Charge............................ 2
Authenticating Agent.................................. 2
Authorized Newspaper.................................. 2
Bankruptcy Law........................................ 2
Bearer Security....................................... 2
Board of Trustees..................................... 2
Board Resolution...................................... 2
Business Day.......................................... 2
CEDEL................................................. 3
Commission............................................ 3
Common Depositary..................................... 3
Consolidated Income Available for Debt Service........ 3
Consolidated Interest Expense......................... 3
Consolidated Net Income............................... 3
Conversion Event...................................... 3
Corporate Trust Office................................ 3
corporation........................................... 3
Coupon................................................ 4
Custodian............................................. 4
Debt.................................................. 4
Defaulted Interest.................................... 4
Dollar................................................ 4
DTC................................................... 4
ECU................................................... 4
Euroclear............................................. 4
European Community.................................... 4
European Monetary System.............................. 4
European Union........................................ 4
Event of Default...................................... 5
Exchange Act.......................................... 5
Exchange Date......................................... 5
Foreign Currency...................................... 5
GAAP.................................................. 5
General Partner....................................... 5
Government Obligations................................ 5
Holder................................................ 5
Indenture............................................. 5
Indexed Security...................................... 5
Interest.............................................. 5
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Interest Payment Date................................. 6
Issuer................................................ 6
Issuer Request........................................ 6
Judgment Currency..................................... 6
Legal Holiday......................................... 6
Make-Whole Amount..................................... 6
Maturity.............................................. 6
Officers' Certificate................................. 6
Opinion of Counsel.................................... 6
Original Issue Discount Security...................... 6
Outstanding........................................... 7
Paying Agent.......................................... 8
Person................................................ 8
Place of Payment...................................... 8
Predecessor Security.................................. 8
Recourse Indebtedness................................. 8
Redemption Date....................................... 8
Redemption Price...................................... 8
Registered Security................................... 8
Regular Record Date................................... 8
Reinvestment Rate..................................... 8
Repayment Date........................................ 9
Repayment Price....................................... 9
Responsible Officer................................... 9
Secured Debt.......................................... 9
Security.............................................. 9
Security Register..................................... 9
Significant Subsidiary................................ 9
Special Record Date................................... 9
Stated Maturity....................................... 9
Statistical Release................................... 10
Subsidiary............................................ 10
Total Assets.......................................... 10
Total Unencumbered Assets............................. 10
Trust Indenture Act or TIA............................ 10
Trustee............................................... 10
Undepreciated Real Estate Assets...................... 10
United States......................................... 10
United States Person.................................. 10
Unsecured Debt........................................ 11
Yield to Maturity..................................... 11
SECTION 102. COMPLIANCE CERTIFICATES AND OPINIONS............... 11
SECTION 103. FORM OF DOCUMENTS DELIVERED TO TRUSTEE............. 11
SECTION 104. ACTS OF HOLDERS.................................... 12
SECTION 105. NOTICES, ETC., TO TRUSTEE AND ISSUER............... 13
SECTION 106. NOTICE TO HOLDERS; WAIVER.......................... 13
SECTION 107. EFFECT OF HEADINGS AND TABLE OF CONTENTS........... 14
SECTION 108. SUCCESSORS AND ASSIGNS............................. 14
SECTION 109. SEVERABILITY CLAUSE................................ 14
SECTION 110. BENEFITS OF INDENTURE.............................. 14
SECTION 111. GOVERNING LAW...................................... 14
SECTION 112. LEGAL HOLIDAYS..................................... 14
SECTION 113. QUALIFICATION UNDER TRUST INDENTURE ACT............ 15
SECTION 114. COUNTERPARTS....................................... 15
</TABLE>
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SECTION 115. JUDGMENT CURRENCY.................................. 15
SECTION 116. NONRECOURSE........................................ 15
ARTICLE TWO
SECURITIES FORMS
SECTION 201. FORMS OF SECURITIES................................ 16
SECTION 202. FORM OF TRUSTEE'S CERTIFICATE OF AUTHENTICATION.... 16
SECTION 203. SECURITIES ISSUABLE IN GLOBAL FORM................. 16
ARTICLE THREE
THE SECURITIES
SECTION 301. AMOUNT UNLIMITED; ISSUABLE IN SERIES............... 17
SECTION 302. CURRENCY, DENOMINATIONS............................ 21
SECTION 303. EXECUTION, AUTHENTICATION, DELIVERY AND DATING..... 21
SECTION 304. TEMPORARY SECURITIES............................... 23
SECTION 305. REGISTRATION, REGISTRATION OF TRANSFER AND EXCHANGE 25
SECTION 306. MUTILATED, DESTROYED, LOST AND STOLEN SECURITIES... 28
SECTION 307. PAYMENT OF INTEREST; INTEREST RIGHTS RESERVED...... 29
SECTION 308. PERSONS DEEMED OWNERS.............................. 30
SECTION 309. CANCELLATION....................................... 31
SECTION 310. COMPUTATION OF INTEREST............................ 31
ARTICLE FOUR
SATISFACTION AND DISCHARGE
SECTION 401. SATISFACTION AND DISCHARGE OF INDENTURE............ 32
SECTION 402. APPLICATION OF TRUST FUNDS......................... 33
ARTICLE FIVE
REMEDIES
SECTION 501 EVENTS OF DEFAULT.................................. 33
SECTION 502. ACCELERATION OF MATURITY; RESCISSION AND ANNULMENT. 35
SECTION 503. COLLECTION OF INDEBTEDNESS AND SUITS FOR
ENFORCEMENT BY TRUSTEE............................. 35
SECTION 504. TRUSTEE MAY FILE PROOFS OF CLAIM................... 36
SECTION 505. TRUSTEE MAY ENFORCE CLAIMS WITHOUT POSSESSION OF
SECURITIES OR COUPONS.............................. 37
SECTION 506. APPLICATION OF MONEY COLLECTED..................... 37
SECTION 507. LIMITATION ON SUITS................................ 37
SECTION 508. UNCONDITIONAL RIGHT OF HOLDERS TO RECEIVE
PRINCIPAL, PREMIUM OR MAKE-WHOLE AMOUNT, IF ANY,
INTEREST AND ADDITIONAL AMOUNTS.................... 38
SECTION 509. RESTORATION OF RIGHTS AND REMEDIES................. 38
SECTION 510. RIGHTS AND REMEDIES CUMULATIVE..................... 38
SECTION 511. DELAY OR OMISSION NOT WAIVER....................... 39
SECTION 512. CONTROL BY HOLDERS OF SECURITIES................... 39
SECTION 513. WAIVER OF PAST DEFAULTS............................ 39
SECTION 514. WAIVER OF USURY, STAY OR EXTENSION LAWS............ 39
SECTION 515. UNDERTAKING FOR COSTS.............................. 40
</TABLE>
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ARTICLE SIX
THE TRUSTEE
SECTION 601. NOTICE OF DEFAULTS................................. 40
SECTION 602. CERTAIN RIGHTS OF TRUSTEE.......................... 40
SECTION 603. NOT RESPONSIBLE FOR RECITALS OR ISSUANCE OF
SECURITIES......................................... 42
SECTION 604. MAY HOLD SECURITIES................................ 42
SECTION 605. MONEY HELD IN TRUST................................ 42
SECTION 606. COMPENSATION AND REIMBURSEMENT..................... 42
SECTION 607. CORPORATE TRUSTEE REQUIRED ELIGIBILITY; CONFLICTING
INTERESTS.......................................... 43
SECTION 608. RESIGNATION AND REMOVAL; APPOINTMENT OF SUCCESSOR.. 43
SECTION 609. ACCEPTANCE OF APPOINTMENT BY SUCCESSOR............. 45
SECTION 610. MERGER, CONVERSION, CONSOLIDATION OR SUCCESSION TO
BUSINESS........................................... 45
SECTION 611. APPOINTMENT OF AUTHENTICATING AGENT................ 46
ARTICLE SEVEN
HOLDERS' LIST AND REPORTS BY TRUSTEE AND ISSUER
SECTION 701. DISCLOSURE OF NAMES AND ADDRESSES OF HOLDERS....... 47
SECTION 702. REPORTS BY TRUSTEE................................. 48
SECTION 703. REPORTS BY ISSUER.................................. 48
SECTION 704. ISSUER TO FURNISH TRUSTEE NAMES AND ADDRESSES OF
HOLDERS............................................ 48
ARTICLE EIGHT
CONSOLIDATION, MERGER, SALE, LEASE OR CONVEYANCE
SECTION 801. CONSOLIDATIONS AND MERGERS OF ISSUER AND SALES,
LEASES AND CONVEYANCE PERMITTED SUBJECT TO CERTAIN
CONDITIONS......................................... 49
SECTION 802. RIGHTS AND DUTIES OF SUCCESSOR CORPORATION......... 49
SECTION 803. OFFICERS' CERTIFICATE AND OPINION OF COUNSEL....... 50
ARTICLE NINE
SUPPLEMENTAL INDENTURES
SECTION 901. SUPPLEMENTAL INDENTURES WITHOUT CONSENT OF HOLDERS. 50
SECTION 902. SUPPLEMENTAL INDENTURES WITH CONSENT OF HOLDERS.... 51
SECTION 903. EXECUTION OF SUPPLEMENTAL INDENTURES............... 52
SECTION 904. EFFECT OF SUPPLEMENTAL INDENTURES.................. 52
SECTION 905. CONFORMITY WITH TRUST INDENTURE ACT................ 52
SECTION 906. REFERENCE IN SECURITIES TO SUPPLEMENTAL INDENTURES. 52
SECTION 907. NOTICE OF SUPPLEMENTAL INDENTURES.................. 52
ARTICLE TEN
COVENANTS
SECTION 1001. PAYMENT OF PRINCIPAL, PREMIUM OR MAKE-WHOLE
AMOUNT, IF ANY, INTEREST AND ADDITIONAL AMOUNTS... 53
SECTION 1002. MAINTENANCE OF OFFICE OR AGENCY................... 53
SECTION 1003. MONEY FOR SECURITIES PAYMENTS TO BE HELD IN TRUST. 54
SECTION 1004. LIMITATIONS ON INCURRENCE OF DEBT................. 56
</TABLE>
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SECTION 1005. [INTENTIONALLY OMITTED]........................... 57
SECTION 1006. EXISTENCE......................................... 57
SECTION 1007. MAINTENANCE OF PROPERTIES......................... 57
SECTION 1008. INSURANCE......................................... 57
SECTION 1009. PAYMENT OF TAXES AND OTHER CLAIMS................. 57
SECTION 1010. PROVISION OF FINANCIAL INFORMATION................ 57
SECTION 1011. STATEMENT AS TO COMPLIANCE........................ 58
SECTION 1012. ADDITIONAL AMOUNTS................................ 58
SECTION 1013. WAIVER OF CERTAIN COVENANTS....................... 59
ARTICLE ELEVEN
REDEMPTION OF SECURITIES
SECTION 1101. APPLICABILITY OF ARTICLE.......................... 59
SECTION 1102. ELECTION TO REDEEM; NOTICE TO TRUSTEE............. 59
SECTION 1103. SELECTION BY TRUSTEE OF SECURITIES TO BE REDEEMED. 59
SECTION 1104. NOTICE OF REDEMPTION.............................. 60
SECTION 1105. DEPOSIT OF REDEMPTION PRICE....................... 61
SECTION 1106. SECURITIES PAYABLE ON REDEMPTION DATE............. 61
SECTION 1107. SECURITIES REDEEMED IN PART....................... 62
ARTICLE TWELVE
SINKING FUNDS
SECTION 1201. APPLICABILITY OF ARTICLE.......................... 62
SECTION 1202. SATISFACTION OF SINKING FUND PAYMENT WITH
SECURITIES........................................ 62
SECTION 1203. REDEMPTION OF SECURITIES FOR SINKING FUND......... 63
ARTICLE THIRTEEN
REPAYMENT AT THE OPTION OF HOLDERS
SECTION 1301. APPLICABILITY OF ARTICLE.......................... 63
SECTION 1302. REPAYMENT OF SECURITIES........................... 63
SECTION 1303. EXERCISE OF OPTION................................ 63
SECTION 1304. WHEN SECURITIES PRESENTED FOR
REPAYMENT BECOME DUE AND PAYABLE.................. 64
SECTION 1305. SECURITIES REPAID IN PART......................... 65
ARTICLE FOURTEEN
DEFEASANCE AND COVENANT DEFEASANCE
SECTION 1401. APPLICABILITY OF ARTICLE; ISSUER'S OPTION TO
EFFECT DEFEASANCE OR COVENANT DEFEASANCE.......... 65
SECTION 1402. DEFEASANCE AND DISCHARGE.......................... 65
SECTION 1403. COVENANT DEFEASANCE............................... 66
SECTION 1404. CONDITIONS TO DEFEASANCE OR COVENANT DEFEASANCE... 66
SECTION 1405. DEPOSITED MONEY AND GOVERNMENT OBLIGATIONS TO BE
HELD IN TRUST; OTHER MISCELLANEOUS PROVISIONS..... 67
ARTICLE FIFTEEN
MEETINGS OF HOLDERS OF SECURITIES
SECTION 1501. PURPOSES FOR WHICH MEETINGS MAY BE CALLED......... 68
SECTION 1502. CALL, NOTICE AND PLACE OF MEETINGS................ 68
</TABLE>
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SECTION 1503. PERSONS ENTITLED TO VOTE AT MEETINGS.............. 69
SECTION 1504. QUORUM; ACTION.................................... 69
SECTION 1505. DETERMINATION OF VOTING RIGHTS; CONDUCT AND
ADJOURNMENT OF MEETINGS........................... 70
SECTION 1506. COUNTING VOTES AND RECORDING ACTION OF MEETINGS... 70
SECTION 1507. EVIDENCE OF ACTION TAKEN BY HOLDERS............... 71
SECTION 1508. PROOF OF EXECUTION OF INSTRUMENTS................. 71
ARTICLE SIXTEEN
SECURITIES IN FOREIGN CURRENCIES
SECTION 1601. APPLICABILITY OF ARTICLE.......................... 71
</TABLE>
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EOP OPERATING LIMITED PARTNERSHIP
Reconciliation and Tie between Trust Indenture Act of 1939 (the "TIA" or
"Trust Indenture Act") and the Indenture, dated as of September 2, 1997
<TABLE>
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Trust Indenture Act Section Indenture Section
Sec. 310(a)(1) ............... 607
(a)(2) ............... 607
(b) .................. 607, 608
Sec. 312(a) .................. 704
Sec. 312(c) .................. 701
Sec. 313(a) .................. 702
(c)................... 702
Sec. 314(a) .................. 703
(a)(4) ............... 1011
(c)(1) ............... 102
(c)(2) ............... 102
(e) .................. 102
Sec. 315(b) .................. 601
Sec. 316(a) (last sentence)... 101 ("Outstanding")
(a)(1)(A) ............ 502, 512
(a)(1)(B) ............ 513
(b) .................. 508
Sec. 317(a)(1) ............... 503
(a)(2) ............... 504
Sec. 318(a) .................. 113
(c) .................. 113
</TABLE>
NOTE: This reconciliation and tie shall not, for any purpose, be deemed to be
a part of the Indenture.
Attention should also be directed to Section 318(c) of the Trust Indenture
Act, which provides that the provisions of Sections 310 to and including 317 of
the Trust Indenture Act are a part of and govern every qualified indenture,
whether or not physically contained therein.
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<PAGE> 9
INDENTURE (this "Indenture"), dated as of September 2, 1997, between EOP
OPERATING LIMITED PARTNERSHIP, a Delaware limited partnership (the "Issuer"),
having its principal offices at Two North Riverside Plaza, 22nd Floor, Chicago,
Illinois 60606 and STATE STREET BANK AND TRUST COMPANY, a Massachusetts trust
company, as Trustee hereunder (the "Trustee"), having its Corporate Trust
Office at Two International Place, Financial Services, Corporate Trust
Department, Boston, Massachusetts 02110.
RECITALS OF THE ISSUER
The Issuer deems it necessary to issue from time to time for its lawful
purposes senior debt securities (hereinafter called the "Securities")
evidencing its unsecured and unsubordinated indebtedness, and has duly
authorized the execution and delivery of this Indenture to provide for the
issuance from time to time of the Securities, unlimited as to principal amount,
to bear interest at the rates or formulas, to mature at such times and to have
such other provisions as shall be fixed as hereinafter provided.
Upon making the appropriate filings with the Securities and Exchange
Commission, this Indenture will be subject to the provisions of the Trust
Indenture Act of 1939, as amended, and the rules and regulations of the
Securities and Exchange Commission promulgated thereunder that are deemed to be
incorporated into this Indenture and shall, to the extent applicable, be
governed by such provisions.
All things necessary to make this Indenture a valid agreement of the
Issuer, in accordance with its terms, have been done.
NOW, THEREFORE, THIS INDENTURE WITNESSETH:
For and in consideration of the premises and the purchase of the
Securities by the holders thereof, it is mutually covenanted and agreed, for
the equal and proportionate benefit of all Holders of the Securities, as
follows:
ARTICLE ONE
DEFINITIONS AND OTHER PROVISIONS OF GENERAL APPLICATION
SECTION 101. DEFINITIONS. For all purposes of this Indenture, except as
otherwise expressly provided or unless the context otherwise requires:
(1) the terms defined in this Article have the meanings assigned to
them in this Article, and include the plural as well as the singular;
(2) all other terms used herein which are defined in the TIA,
either directly or by reference therein, have the meanings assigned
to them therein;
(3) all accounting terms not otherwise defined herein have the
meanings assigned to them in accordance with GAAP;
(4) the words "herein," "hereof," "hereto" and "hereunder" and
other words of similar import refer to this Indenture as a whole and
not to any particular Article, Section or other subdivision; and
(5) the word "or" is always used inclusively.
"ACQUIRED INDEBTEDNESS" means Debt of a Person (i) existing at the time
the Person becomes a Subsidiary or (ii) assumed in connection with the
acquisition of assets from the Person, in each case, other than Debt incurred
in connection with, or in contemplation of, the Person becoming a Subsidiary or
that acquisition. Acquired Indebtedness shall be deemed to be incurred on
<PAGE> 10
the date of the related acquisition of assets from any Person or the date the
acquired Person becomes a Subsidiary.
"ACT," when used with respect to any Holder, has the meaning specified in
Section 104.
"ADDITIONAL AMOUNTS" means any additional amounts which are required by a
Security or by or pursuant to a Board Resolution, under circumstances specified
therein, to be paid by the Issuer in respect of certain taxes, assessments or
other governmental charges imposed on certain Holders and which are owing to
such Holders.
"AFFILIATE" of any specified Person means any other Person directly or
indirectly controlling or controlled by or under direct or indirect common
control with such specified Person. For the purposes of this definition,
"control" when used with respect to any specified Person means the power to
direct the management and policies of such Person, directly or indirectly,
whether through the ownership of voting securities, by contract or otherwise;
and the terms "controlling" and "controlled" have meanings correlative to the
foregoing.
"ANNUAL DEBT SERVICE CHARGE," as of any date means the amount which is
expensed in any 12-month period for Consolidated Interest Expense of the Issuer
and its Subsidiaries.
"AUTHENTICATING AGENT" means any Person authorized by the Trustee
pursuant to Section 611 to act on behalf of the Trustee to authenticate
Securities of one or more series.
"AUTHORIZED NEWSPAPER" means a newspaper, printed in the English language
or in an official language of the place of publication, customarily published
on each day that is a Business Day in the place of publication, whether or not
published on days that are Legal Holidays in the place of publication, and of
general circulation in each place in connection with which the term is used or
in the financial community of each such place. Whenever successive
publications are required to be made in Authorized Newspapers, the successive
publications may be made in the same or in different Authorized Newspapers in
the same city meeting the foregoing requirements and in each case on any day
that is a Business Day in the place of publication.
"BANKRUPTCY LAW" has the meaning specified in Section 501.
"BEARER SECURITY" means any Security established pursuant to Section 201
which is payable to bearer.
"BOARD OF TRUSTEES" means the board of trustees of the General Partner or
any committee of that board duly authorized to act thereunder.
"BOARD RESOLUTION" means a copy of one or more resolutions certified by
the Secretary or an Assistant Secretary of the General Partner to have been
duly adopted by the Board of Trustees and to be in full force and effect on the
date of such certification, and delivered to the Trustee.
"BUSINESS DAY" when used with respect to any Place of Payment or any
other location referred to in this Indenture or in the Securities, means,
unless otherwise specified with respect to any Securities pursuant to Section
301, any day, other than a Saturday or Sunday or other day on which banking
institutions in that Place of Payment or particular location are authorized or
required by law, regulation or executive order to close.
"CEDEL" means Central de Livraison de Valeurs Mobilieres, S.A., or its
successor.
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<PAGE> 11
"COMMISSION" means the Securities and Exchange Commission, as from time
to time constituted, created under the Exchange Act, or, if at any time after
execution of this Indenture such Commission is not existing and performing the
duties now assigned to it under the TIA, then the body performing such duties
on such date.
"COMMON DEPOSITARY" has the meaning specified in Section 304(b).
"CONSOLIDATED INCOME AVAILABLE FOR DEBT SERVICE" for any period means
Consolidated Net Income plus amounts which have been deducted in determining
Consolidated Net Income during such period for (i) Consolidated Interest
Expense, (ii) provision for taxes of the Issuer and its Subsidiaries based on
income, (iii) amortization (other than amortization of debt discount) and
depreciation, (iv) provisions for losses from sales or joint ventures, (v)
increases in deferred taxes and other non-cash items, (vi) charges resulting
from a change in accounting principles and (vii) charges for early
extinguishment of debt, and less amounts which have been added in determining
Consolidated Net Income during such period for (a) provisions for gains from
sales or joint ventures and (b) decreases in deferred taxes and other non-cash
items.
"CONSOLIDATED INTEREST EXPENSE" means, for any period, and without
duplication, all interest (including the interest component of rentals on
leases reflected in accordance with GAAP as capitalized leases on the Issuer's
consolidated balance sheet, letter of credit fees, commitment fees and other
like financial charges) and all amortization of debt discount on all Debt
(including, without limitation, payment-in-kind, zero coupon and other
securities) of the Issuer and its Subsidiaries, but excluding legal fees, title
insurance charges and other out-of-pocket fees and expenses incurred in
connection with the issuance of Debt, all determined in accordance with GAAP.
"CONSOLIDATED NET INCOME" for any period means the amount of net income
(or loss) of the Issuer and its Subsidiaries for such period determined on a
consolidated basis in accordance with GAAP.
"CONVERSION EVENT" means the cessation of use of (i) a Foreign Currency
both by the government of the country or the confederation which issued such
currency and for the settlement of transactions by a central bank or other
public institutions of or within the international banking community, (ii) the
ECU both within the European Monetary System and for the settlement of
transactions by public institutions of or within the European Union or (iii)
any currency unit or composite currency other than the ECU for the purposes for
which it was established.
"CORPORATE TRUST OFFICE" means the principal corporate trust office of the
Trustee at which, at any particular time, its corporate trust business shall be
principally administered, which office at the date hereof is located at Two
International Place, Financial Services, Corporate Trust Department, Boston, MA
02110, provided that with respect to presentment of Securities, a "Corporate
Trust Office" is also maintained at the date hereof at the Corporate Trust
Window, Concourse Level, 61 Broadway, New York, New York 10006.
"CORPORATION" includes corporations and limited liability companies,
associations, partnerships, real estate investment trusts, companies and
business trusts.
"COUPON" means any interest coupon appertaining to a Bearer Security.
"CUSTODIAN" has the meaning specified in Section 501.
"DEBT" of any Person means, without duplication, any indebtedness of such
Person, whether or not contingent, in respect of (i) borrowed money evidenced
by bonds, notes, debentures or similar instruments, (ii) indebtedness secured
by any mortgage, pledge, lien, charge, encumbrance or any security interest
existing on property owned by such Person, (iii) the reimbursement obligations,
contingent or otherwise, in connection with any letters of credit actually
issued or amounts representing the balance deferred and unpaid of the purchase
price of any property except any such
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<PAGE> 12
balance that constitutes an accrued expense or trade payable or (iv) any
lease of property by such Person as lessee which is reflected on such Person's
consolidated balance sheet as a capitalized lease in accordance with GAAP; in
the case of items of indebtedness under (i) through (iii) above to the extent
that any such items (other than letters of credit) would appear as a liability
on such Person's consolidated balance sheet in accordance with GAAP, and also
includes, to the extent not otherwise included, any obligation by such Person
to be liable for, or to pay, as obligor, guarantor or otherwise (other than for
purposes of collection in the ordinary course of business), indebtedness of
another Person (other than such Person and its Subsidiaries) (it being
understood that "Debt" shall be deemed to be incurred by the Issuer and its
Subsidiaries on a consolidated basis whenever the Issuer and its Subsidiaries
on a consolidated basis shall create, assume, guarantee or otherwise become
liable in respect thereof; Debt of a Subsidiary of the Issuer existing prior to
the time it became a Subsidiary of the Issuer shall be deemed to be incurred
upon such Subsidiary's becoming a Subsidiary of the Issuer, and Debt of a
Person existing prior to a merger or consolidation of such Person with the
Issuer or any Subsidiary of the Issuer in which such Person is the successor of
the Issuer or such Subsidiary shall be deemed to be incurred upon the
consummation of such merger or consolidation); provided, however, that the term
Debt shall not include any such indebtedness that has been the subject of an
"in substance" defeasance in accordance with GAAP.
"DEFAULTED INTEREST" has the meaning specified in Section 307.
"DOLLAR" or "$" means a dollar or other equivalent unit in such coin or
currency of the United States as at the time shall be legal tender for the
payment of public and private debts.
"DTC" has the meaning specified in Section 304(b).
"ECU" means European Currency Units as defined and revised from time to
time by the Council of the European Community.
"EUROCLEAR" means Morgan Guaranty Trust Company of New York, Brussels
Office, or its successor as operator of the Euroclear System.
"EUROPEAN COMMUNITY" means the European Economic Community.
"EUROPEAN MONETARY SYSTEM" means the European Monetary System established
by the Resolution of December 5, 1978 of the Council of the European Community.
"EUROPEAN UNION" means the European Community, the European Coal and Steel
Community and the European Atomic Energy Community.
"EVENT OF DEFAULT" has the meaning specified in Article Five.
"EXCHANGE ACT" means the Securities Exchange Act of 1934 and any successor
statute thereto, in each case as amended from time to time, and the rules and
regulations of the Commission thereunder.
"EXCHANGE DATE" has the meaning specified in Section 304(b).
"FOREIGN CURRENCY" means any currency, currency unit or composite
currency, including, without limitation, the ECU, issued by the government of
one or more countries other than the United States or by any recognized
confederation or association of such governments.
"GAAP" means generally accepted accounting principles, as in effect from
time to time, as used in the United States applied on a consistent basis;
provided that solely for purposes of any calculation required by the financial
covenants contained herein, "GAAP" shall mean generally accepted accounting
principles as used in the United States on the date hereof, applied on a
consistent basis.
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<PAGE> 13
"GENERAL PARTNER" means Equity Office Properties Trust, a Maryland real
estate investment trust, as managing general partner of the Issuer.
"GOVERNMENT OBLIGATIONS" means securities which are (i) direct obligations
of the United States or the government which issued the Foreign Currency in
which the Securities of a particular series are payable, for the payment of
which its full faith and credit is pledged or (ii) obligations of a Person
controlled or supervised by and acting as an agency or instrumentality of the
United States or such government which issued the foreign currency in which the
Securities of such series are payable, the payment of which is unconditionally
guaranteed as a full faith and credit obligation by the United States or such
other government, which, in either case, are not callable or redeemable at the
option of the Issuer thereof, and shall also include a depositary receipt
issued by a bank or trust company as custodian with respect to any such
Government Obligation or held by such custodian for the account of the holder
of a depositary receipt, provided that (except as required by law) such
custodian is not authorized to make any deduction from the amount payable to
the holder of such depositary receipt from any amount received by the custodian
in respect of the Government Obligation or the specific payment of interest on
or principal of the Government Obligation evidenced by such depositary receipt.
"HOLDER" means, in the case of any Registered Security, the Person in
whose name such Security is registered in the Security Register and, in the
case of any Bearer Security, the bearer thereof and, when used with respect to
any coupon, shall mean the bearer thereof.
"INDENTURE" means this instrument as originally executed or as it may from
time to time be supplemented or amended by one or more indentures supplemental
hereto entered into pursuant to the applicable provisions hereof, and shall
include the terms of a particular series of Securities established as
contemplated by Section 301.
"INDEXED SECURITY" means a Security the terms of which provide that the
principal amount thereof payable at Stated Maturity may be more or less than
the principal face amount thereof at original issuance.
"INTEREST," when used with respect to an Original Issue Discount Security
which by its terms bears interest only after Maturity, shall mean interest
payable after Maturity and, when used with respect to a Security which provides
for the payment of Additional Amounts pursuant to Section 1012, includes such
Additional Amounts.
"INTEREST PAYMENT DATE," when used with respect to any Security, means the
Stated Maturity of an installment of interest on such Security.
"ISSUER" means the Person named as the "Issuer" in the first paragraph of
this Indenture until a successor Person shall have become such pursuant to the
applicable provisions of this Indenture, and thereafter "Issuer" shall mean
such successor Person.
"ISSUER REQUEST" and "ISSUER ORDER" mean, respectively, a written request
or order signed in the name of the Issuer by the General Partner by its
Chairman of the Board of Trustees, its President or a Vice President (whether
or not designated by a number or a word or words added before or after the
title "vice president"), and by its Treasurer, an Assistant Treasurer, its
Secretary or an Assistant Secretary, of the General Partner, and delivered to
the Trustee.
"JUDGMENT CURRENCY" has the meaning specified in Section 115.
"LEGAL HOLIDAY" means a day that is not a Business Day.
"MAKE-WHOLE AMOUNT" means, in connection with any optional redemption or
accelerated payment of any Securities, the excess, if any, of: (i) the
aggregate present value as of the date of such redemption or accelerated
payment of each dollar of principal being redeemed or paid
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<PAGE> 14
and the amount of interest (exclusive of interest accrued to the date of
redemption or accelerated payment) that would have been payable in respect of
each such dollar if such redemption had not been made, determined by
discounting, on a semi-annual basis, such principal and interest at the
Reinvestment Rate (determined on the third Business Day preceding the date
notice of such redemption is given) from the respective dates on which such
principal and interest would have been payable if such redemption or
accelerated payment had not been made, to the date of redemption or accelerated
payment; over (ii) the aggregate principal amount of the Securities being
redeemed or paid.
"MATURITY," when used with respect to any Security, means the date on
which the principal of such Security or an installment of principal becomes due
and payable as therein or herein provided, whether at the Stated Maturity or by
declaration of acceleration, notice of redemption or repurchase, notice of
option to elect repayment or otherwise, and includes the Redemption Date.
"OFFICERS' CERTIFICATE" means a certificate signed by the Chairman of the
Board of Trustees, the President or a Vice President (whether or not designated
by a number or a word or words added before or after the title "vice
president") of the General Partner and by the Treasurer, an Assistant
Treasurer, the Secretary or an Assistant Secretary of the General Partner, and
delivered to the Trustee.
"OPINION OF COUNSEL" means a written opinion of counsel, who may be
counsel for the Issuer or the General Partner or who may be an employee of or
other counsel for the Issuer or the General Partner and who shall be reasonably
satisfactory to the Trustee.
"ORIGINAL ISSUE DISCOUNT SECURITY" means any Security which provides for
an amount less than the principal amount thereof to be due and payable upon a
declaration of acceleration of the Maturity thereof pursuant to Section 502.
"OUTSTANDING," when used with respect to Securities, means, as of the date
of determination, all Securities theretofore authenticated and delivered under
this Indenture, except:
(i) Securities theretofore canceled by the Trustee or
the Security Registrar or delivered to the Trustee or the
Security Registrar for cancellation,
(ii) Securities, or portions thereof, for whose payment
or redemption or repayment at the option of the Holder money in
the necessary amount has been theretofore deposited with the
Trustee or any Paying Agent (other than the Issuer) in trust or
set aside and segregated in trust by the Issuer (if the Issuer
shall act as its own Paying Agent) for the Holders of such
Securities and any coupons appertaining thereto, provided that,
if such Securities are to be redeemed, notice of such
redemption has been duly given pursuant to this Indenture or
provision therefor satisfactory to the Trustee has been made;
(iii) Securities, except to the extent provided in
Sections 1402 and 1403, with respect to which the Issuer has
effected defeasance and/or covenant defeasance as provided in
Article Fourteen; and
(iv) Securities which have been paid pursuant to Section
306 or in exchange for or in lieu of which other Securities
have been authenticated and delivered pursuant to this
Indenture, other than any such Securities in respect of which
there shall have been presented to the Trustee proof
satisfactory to it that such Securities are held by a bona fide
purchaser in whose hands such Securities are valid obligations
of the Issuer;
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provided, however, that in determining whether the Holders of the requisite
principal amount of the Outstanding Securities have given any request, demand,
authorization, direction, notice, consent or waiver hereunder or are present at
a meeting of Holders for quorum purposes, and for the purpose of making the
calculations required by TIA Section 313, (i) the principal amount of an
Original Issue Discount Security that may be counted in making such
determination or calculation and that shall be deemed to be Outstanding for
such purpose shall be equal to the amount of principal thereof that would be
(or shall have been declared to be) due and payable, at the time of such
determination or calculation, upon a declaration of acceleration of the
maturity thereof pursuant to Section 502, (ii) the principal amount of any
Security denominated in a Foreign Currency that may be counted in making such
determination or calculation and that shall be deemed Outstanding for such
purpose shall be equal to the Dollar equivalent, determined pursuant to Section
301 as of the date such Security is originally issued by the Issuer, of the
principal amount (or, in the case of an Original Issue Discount Security, the
Dollar equivalent as of such date of original issuance of the amount determined
as provided in clause (i) above) of such Security, (iii) the principal amount
of any Indexed Security that may be counted in making such determination or
calculation and that shall be deemed Outstanding for such purpose shall be
equal to the principal face amount of such Indexed Security at original
issuance, unless otherwise provided with respect to such Security pursuant to
Section 301, and (iv) Securities owned by the Issuer or any other obligor upon
the Securities or any Affiliate of the Issuer or of such other obligor shall be
disregarded and deemed not to be Outstanding, except that, in determining
whether the Trustee shall be protected in making such determination or
calculation or in relying upon any such request, demand, authorization,
direction, notice, consent or waiver, only Securities which a Responsible
Officer of the Trustee actually knows to be so owned shall be so disregarded.
Securities so owned which have been pledged in good faith may be regarded as
Outstanding if the pledgee establishes to the satisfaction of the Trustee the
pledgee's right so to act with respect to such Securities and that the pledgee
is not the Issuer or any other obligor upon the Securities or any Affiliate of
the Issuer or of such other obligor.
"PAYING AGENT" means any Person authorized by the Issuer to pay the
principal of (and premium and Additional Amounts, if any) or interest on any
Securities or coupons on behalf of the Issuer.
"PERSON" means any individual, corporation, partnership, limited liability
company, joint venture, joint-stock company, trust, unincorporated
organization, real estate investment trust or government or any agency or
political subdivision thereof.
"PLACE OF PAYMENT," when used with respect to any Security, means the
place or places where the principal of (and premium and Additional Amounts, if
any) and interest on such Securities are payable as specified as contemplated
by Sections 301 and 1002.
"PREDECESSOR SECURITY" of any particular Security means every previous
Security evidencing all or a portion of the same debt as that evidenced by such
particular Security; and, for the purposes of this definition, any Security
authenticated and delivered under Section 306 in exchange for or in lieu of a
mutilated, destroyed, lost or stolen Security or a Security to which a
mutilated, destroyed, lost or stolen coupon appertains shall be deemed to
evidence the same debt as the mutilated, destroyed, lost or stolen Security or
the Security to which the mutilated, destroyed, lost or stolen coupon
appertains.
"RECOURSE INDEBTEDNESS" means Debt, other than Secured Debt as to which
Secured Debt the liability of the obligor thereon is limited to its interest in
the collateral securing such Secured Debt, provided that no such Secured Debt
shall constitute Recourse Indebtedness by reason of provisions therein for
imposition of full recourse liability on the obligor for certain wrongful acts,
environmental liabilities, or other customary exclusions from the scope of
so-called "non-recourse" provisions.
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"REDEMPTION DATE," when used with respect to any Security to be redeemed,
in whole or in part, means the date fixed for such redemption by or pursuant to
this Indenture or such Security.
"REDEMPTION PRICE," when used with respect to any Security to be redeemed,
means the price at which it is to be redeemed pursuant to this Indenture or
such Security.
"REGISTERED SECURITY" shall mean any Security which is registered in the
Security Register.
"REGULAR RECORD DATE" for the interest payable on any Interest Payment
Date on any Registered Security of or within any series means the date
specified for that purpose as contemplated by Section 301, whether or not a
Business Day.
"REINVESTMENT RATE" means .25% plus the arithmetic mean of the yields
under the heading "Week Ending" published in the most recent Statistical
Release under the caption "Treasury Constant Maturities" for the maturity
(rounded to the nearest month) corresponding to the remaining life to maturity,
as of the payment date of the principal being redeemed or paid. If no maturity
exactly corresponds to such maturity, yields for the two published maturities
most closely corresponding to such maturity shall be calculated pursuant to the
immediately preceding sentence and the Reinvestment Rate shall be interpolated
or extrapolated from such yields on a straight-line basis, rounding in each of
such relevant periods to the nearest month. For the purposes of calculating
the Reinvestment Rate, the most recent Statistical Release published prior to
the date of determination of the Make-Whole Amount shall be used. If the
format or content of the Statistical Release changes in a manner that precludes
determination of the Treasury yield in the above manner, then the Treasury
yield shall be determined in the manner that most closely approximates the
above manner, as reasonably determined by the Issuer. If the format or content
of the Statistical Release changes in a manner that precludes determination of
the Treasury Yield in the above manner, then the Treasury Yield shall be
determined in the manner that most closely approximates the above manner, as
reasonably determined by the Issuer.
"REPAYMENT DATE" means, when used with respect to any Security to be
repaid at the option of the Holder, the date fixed for such repayment by or
pursuant to this Indenture.
"REPAYMENT PRICE" means, when used with respect to any Security to be
repaid at the option of the Holder, the price at which it is to be repaid by or
pursuant to this Indenture.
"RESPONSIBLE OFFICER," when used with respect to the Trustee, means any
officer in its corporate trust department (or similar group) having direct
responsibility for the administration of the trusts hereunder and also means,
with respect to a particular corporate trust matter, any other officer to whom
such matter is referred because of such officer's knowledge and familiarity
with the particular subject.
"SECURED DEBT" means, without duplication, Debt that is secured by a
mortgage, trust deed, deed of trust, deed to secure Debt, security agreement,
pledge, conditional sale or other title retention agreement, capitalized lease,
or other like agreement granting or conveying security title to or a security
interest in real property or other tangible assets. Secured Debt shall be
deemed to be incurred (i) on the date the Issuer or any Subsidiary creates,
assumes, guarantees or otherwise becomes liable in respect thereof if it is
secured in the manner described in the preceding sentence on such date or (ii)
on the date the Issuer or any Subsidiary first secures such Debt in the manner
described in the preceding sentence if such Debt was not so secured on the date
it was incurred.
"SECURITY" has the meaning stated in the first recital of this Indenture
and, more particularly, means any Security or Securities authenticated and
delivered under this Indenture; provided; however, that, if at any time there
is more than one Person acting as Trustee under this Indenture, "Securities"
with respect to the Indenture as to which such Person is Trustee shall have
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the meaning stated in the first recital of this Indenture and shall more
particularly mean Securities authenticated and delivered under this Indenture,
exclusive, however, of Securities of any series as to which such Person is not
Trustee.
"SECURITY REGISTER" and "SECURITY REGISTRAR" have the respective meanings
specified in Section 305.
"SIGNIFICANT SUBSIDIARY" means any Subsidiary which is a "significant
subsidiary" (as defined in Article I, Rule 1-02 of Regulation S-X, promulgated
under the Securities Act of 1933, as amended) of the Issuer.
"SPECIAL PAYING AGENT" shall have the meaning specified in Section
301(10).
"SPECIAL RECORD DATE" for the payment of any Defaulted Interest on the
Registered Securities of or within any series means a date fixed by the Trustee
pursuant to Section 307.
"STATED MATURITY," when used with respect to any Security or any
installment of principal thereof or interest thereon or any Additional Amounts
with respect thereto, means the date specified in such Security or a coupon
representing such installment of interest as the fixed date on which the
principal of such Security or such installment of principal or interest, or
such Additional Amounts are due and payable.
"STATISTICAL RELEASE" means the statistical release designated "H.15(519)"
or any successor publication which is published weekly by the Federal Reserve
System and which reports yields on actively traded United States government
securities adjusted to constant maturities, or, if such statistical release is
not published at the time of any determination under the Indenture, then such
other reasonably comparable index which shall be designated by the Issuer.
"SUBSIDIARY" means, as to any Person, (i) a corporation, partnership,
limited liability company, trust, real estate investment trust or other entity
a majority of the voting power of the voting equity securities of which are
owned, directly or indirectly, by such Person or by one or more Subsidiaries of
such Person; (ii) a partnership, limited liability company, trust, real estate
investment trust or other entity not treated as a corporation for federal
income tax purposes the majority of the value of the equity interests of which
are owned, directly or indirectly, by such Person or by one or more other
Subsidiaries of such Person; and (iii) one or more corporations which, either
individually or in the aggregate, would be Significant Subsidiaries (as defined
herein, except that the investment, asset and equity thresholds for purposes of
this definition shall be 5%), the majority of the value of the equity interests
of which are owned, directly or indirectly, by such Person or by one or more
Subsidiaries of such Person.
"TOTAL ASSETS" as of any date means the sum of (i) the Undepreciated Real
Estate Assets and (ii) all other assets of the Issuer and its Subsidiaries on a
consolidated basis determined in accordance with GAAP (but excluding
intangibles and accounts receivable).
"TOTAL UNENCUMBERED ASSETS" as of any date means the sum of (i) the
Undepreciated Real Estate Assets not securing any portion of Secured Debt and
(ii) all other assets of the Issuer and its Subsidiaries on a consolidated
basis not securing any portion of Secured Debt determined in accordance with
GAAP (but excluding intangibles and accounts receivable).
"TRUST INDENTURE ACT" or "TIA" means the Trust Indenture Act of 1939, as
amended and as in force at the date as of which this Indenture was executed,
except as provided in Section 905.
"TRUSTEE" means the Person named as the "Trustee" in the first paragraph
of this Indenture until a successor Trustee shall have become such pursuant to
the applicable provisions of this Indenture, and thereafter "Trustee" shall
mean or include each Person who is then a Trustee
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hereunder; provided, however, that if at any time there is more than one
such Person, "Trustee" as used with respect to the Securities of any series
shall mean only the Person which has agreed in writing to act as Trustee
hereunder with respect to Securities of that series, and its successors
hereunder.
"UNDEPRECIATED REAL ESTATE ASSETS" as of any date means the cost (original
cost plus capital improvements) of real estate assets of the Issuer and its
Subsidiaries on such date, before depreciation and amortization, determined on
a consolidated basis in accordance with GAAP.
"UNITED STATES" means, unless otherwise specified with respect to any
Securities pursuant to Section 301, the United States of America (including the
states and the District of Columbia), its territories, its possessions and
other areas subject to its jurisdiction.
"UNITED STATES PERSON" means, unless otherwise specified with respect to
any Securities pursuant to Section 301, an individual who is a citizen or
resident of the United States, a corporation, partnership or other entity
created or organized in or under the laws of the United States or an estate or
trust the income of which is subject to United States federal income taxation
regardless of its source.
"UNSECURED DEBT" means Debt of the Issuer or any Subsidiary that is not
Secured Debt.
"YIELD TO MATURITY" means the yield to maturity, computed at the time of
issuance of a Security (or, if applicable, at the most recent redetermination
of interest on such Security) and as set forth in such Security in accordance
with generally accepted United States bond yield computation principles.
SECTION 102. COMPLIANCE CERTIFICATES AND OPINIONS. Except as otherwise
expressly provided in this Indenture, upon any application or request by the
Issuer to the Trustee to take any action under any provision of this Indenture,
the Issuer shall furnish to the Trustee an Officers' Certificate stating that
all conditions precedent, if any, provided for in this Indenture relating to
the proposed action have been complied with and an Opinion of Counsel stating
that in the opinion of such counsel all such conditions precedent, if any, have
been complied with, except that in the case of any such application or request
as to which the furnishing of such documents is specifically required by any
provision of this Indenture relating to such particular application or request,
no additional certificate or opinion need be furnished.
Every certificate or opinion with respect to compliance with a condition
or covenant provided for in this Indenture (including certificates delivered
pursuant to Section 1011) shall include:
(1) a statement that each individual signing such certificate or
opinion has read such condition or covenant and the definitions
herein relating thereto;
(2) a brief statement as to the nature and scope of the examination
or investigation upon which the statements or opinions contained in
such certificate or opinion are based;
(3) a statement that, in the opinion of each such individual, he
has made such examination or investigation as is necessary to enable
him to express an informed opinion as to whether or not such
condition or covenant has been complied with; and
(4) a statement as to whether, in the opinion of such individual,
such condition or covenant has been complied with.
SECTION 103. FORM OF DOCUMENTS DELIVERED TO TRUSTEE. In any case where
several matters are required to be certified by, or covered by an opinion of,
any specified
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Person, it is not necessary that all such matters be certified by, or
covered by the opinion of, only one such Person, or that they be so certified
or covered by only one document, but one such Person may certify or give an
opinion as to some matters and one or more other such Persons as to other
matters, and any such Person may certify or give an opinion as to such matters
in one or several documents.
Any certificate or opinion of an officer of the General Partner may be
based, insofar as it relates to legal matters, upon an Opinion of Counsel, or a
certificate or representations of or by counsel, unless such officer knows, or
in the exercise of reasonable care should know, that the opinion, certificate
or representations with respect to the matters upon which his certificate or
opinion is based are erroneous. Any such Opinion of Counsel or certificate or
representations may be based, insofar as it relates to factual matters, upon a
certificate or opinion of, or representations by, an officer or officers of the
General Partner stating that the information as to such factual matters is in
the possession of the Issuer, unless such counsel knows that the certificate or
opinion or representations as to such matters are erroneous.
Where any Person is required to make, give or execute two or more
applications, requests, consents, certificates, statements, opinions or other
instruments under this Indenture, they may, but need not, be consolidated and
form one instrument.
SECTION 104. ACTS OF HOLDERS. (a) Any request, demand, authorization,
direction, notice, consent, waiver or other action provided by this Indenture
to be given or taken by Holders may be embodied in and evidenced by one or more
instruments of substantially similar tenor signed by such Holders in person or
by agents duly appointed in writing. If, but only if, Securities of a series
are issuable as Bearer Securities, any request, demand, authorization,
direction, notice, consent, waiver or other action provided by this Indenture
to be given or taken by Holders of Securities of such series may,
alternatively, be embodied in and evidenced by the record of Holders of
Securities of such series voting in favor thereof, either in person or by
proxies duly appointed in writing, at any meeting of Holders of Securities of
such series duly called and held in accordance with the provisions of Article
Fifteen, or a combination of such instruments and any such record. Except as
herein otherwise expressly provided, such action shall become effective when
such instrument or instruments or record or both are delivered to the Trustee
and, where it is hereby expressly required, to the Issuer. Such instrument or
instruments and any such record (and the action embodied therein and evidenced
thereby) are herein sometimes referred to as the "Act" of the Holders signing
such instrument or instruments or so voting at any such meeting. Proof of
execution of any such instrument or of a writing appointing any such agent, or
of the holding by any Person of a Security, shall be sufficient for any purpose
of this Indenture and (subject to Section 315 of the TIA) conclusive in favor
of the Trustee and the Issuer and any agent of the Trustee or the Issuer, if
made in the manner provided in this Section. The record of any meeting of
Holders of Securities shall be proved in the manner provided in Section 1506.
(b) The fact and date of the execution by any Person of any such
instrument or writing may be proved in any reasonable manner which the Trustee
deems sufficient and in accordance with such reasonable rules as the Trustee
may determine; and the Trustee may in any instance require further proof with
respect to any of the matters referred to in this Section.
(c) The ownership, principal amount and serial numbers of Registered
Securities held by any Person, and the date of the commencement and the date of
the termination of holding the same, shall be proved by the Security Register.
(d) The ownership, principal amount and serial numbers of Bearer
Securities held by any Person, and the date of the commencement and the date of
the termination of holding the same may be proved by the production of such
Bearer Securities or by a certificate executed, as, depositary, by any trust
company, bank, banker or other depositary reasonably acceptable to the Issuer,
wherever situated, if such certificate shall be deemed by the Issuer and the
Trustee to be satisfactory, showing that at the date therein mentioned such
Person had on deposit with such depositary, or exhibited to it, the Bearer
Securities therein described; or such facts may be proved by
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the certificate or affidavit of the Person holding such Bearer Securities,
if such certificate or affidavit is deemed by the Trustee to be satisfactory.
The Trustee and the Issuer may assume that such ownership of any Bearer
Security continues until (1) another certificate or affidavit bearing a later
date issued in respect of the same Bearer Security is produced, or (2) such
Bearer Security is produced to the Trustee by some other Person, or (3) such
Bearer Security is surrendered in exchange for a Registered Security, or (4)
such Bearer Security is no longer Outstanding. The ownership, principal amount
and serial numbers of Bearer Securities held by the Person so executing such
instrument in writing and the date of the commencement and the date of the
termination of holding the same may also be proved in any other manner which
the Trustee deems sufficient.
(e) If the Issuer shall solicit from the Holders of any Registered
Securities any request, demand, authorization, direction, notice, consent,
waiver or other Act, the Issuer may, at its option, in or pursuant to a Board
Resolution, fix in advance a record date for the determination of Holders of
Registered Securities entitled to give such request, demand, authorization,
direction, notice, consent, waiver or other Act, but the Issuer shall have no
obligation to do so. If such a record date is fixed, such request, demand,
authorization, direction, notice, consent, waiver or other Act may be given
before or after such record date, but only the Holders of Registered Securities
of record at the close of business on such record date shall be deemed to be
Holders for the purposes of determining whether Holders of the requisite
proportion of Outstanding Securities have authorized or agreed or consented to
such request, demand, authorization, direction, notice, consent, waiver or
other Act, and for that purpose the Outstanding Securities shall be computed as
of such record date, provided that no such authorization, agreement or consent
by the Holders on such record date shall be deemed effective unless it shall
become effective pursuant to the provisions of this Indenture not later than
eleven months after the record date.
(f) Any request, demand, authorization, direction, notice, consent, waiver
or other Act of the Holder of any Security shall bind every future Holder of
the same Security and the Holder of every Security issued upon the registration
of transfer thereof or in exchange therefor or in lieu thereof in respect of
anything done, omitted or suffered to be done by the Trustee, any Security
Registrar, any Paying Agent, any Authenticating Agent or the Issuer in reliance
thereon, whether or not notation of such action is made upon such Security.
SECTION 105. NOTICES, ETC., TO TRUSTEE AND ISSUER. Any request, demand,
authorization, direction, notice, consent, waiver or Act of Holders or other
document provided or permitted by this Indenture to be made upon, given or
furnished to, or filed with
(A) the Trustee by a Holder or by the Issuer shall be sufficient
for every purpose hereunder if made, given, furnished or filed in
writing to or with the Trustee at its Corporate Trust Office, or
(B) the Issuer by the Trustee or by any Holder shall be sufficient
for every purpose hereunder (unless otherwise herein expressly
provided) if in writing and mailed, first class postage prepaid, to
the Issuer addressed to it at the address of its principal office
specified in the first paragraph of this Indenture or at any other
address previously furnished in writing to the Trustee by the Issuer.
SECTION 106. NOTICE TO HOLDERS; WAIVER. Unless otherwise provided in the
Board Resolution authorizing a particular series of Securities in accordance
with Section 301, where this Indenture provides for notice of any event to
Holders of Registered Securities by the Issuer or the Trustee, such notice
shall be sufficiently given (unless otherwise herein expressly provided) if in
writing and mailed, first-class postage prepaid, to each such Holder affected
by such event, at his address as it appears in the Security Register, not later
than the latest date, and not earlier than the earliest date, prescribed for
the giving of such notice. In any case where notice to Holders of Registered
Securities is given by mail, neither the failure to mail such notice, nor any
defect in any notice so mailed, to any particular Holder shall affect the
sufficiency of such notice with
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respect to other Holders of Registered Securities or the sufficiency
of any notice to Holders of Bearer Securities given as provided herein. Any
notice mailed to a Holder in the manner herein prescribed shall be conclusively
deemed to have been received by such Holder, whether or not such Holder
actually receives such notice.
If by reason of the suspension of or irregularities in regular mail
service or by reason of any other cause it shall be impracticable to give such
notice by mail, then such notification to Holders of Registered Securities as
shall be made with the approval of the Trustee shall constitute a sufficient
notification to such Holders for every purpose hereunder.
Except as otherwise expressly provided herein or otherwise specified with
respect to any Securities pursuant to Section 301, where this Indenture
provides for notice to Holders of Bearer Securities of any event, such notice
shall be sufficiently given if published in an Authorized Newspaper in New York
City and in such other city or cities as may be specified in such Securities on
a Business Day, such publication to be not later than the latest date, and not
earlier than the earliest date, prescribed for the giving of such notice. Any
such notice shall be deemed to have been given on the date of such publication
or, if published more than once, on the date of the first such publication.
If by reason of the suspension of publication of any Authorized Newspaper
or Authorized Newspapers or by reason of any other cause it shall be
impracticable to publish any notice to Holders of Bearer Securities as provided
above, then such notification to Holders of Bearer Securities as shall be given
with the approval of the Trustee shall constitute sufficient notice to such
Holders for every purpose hereunder. Neither the failure to give notice by
publication to any particular Holder of Bearer Securities as provided above,
nor any defect in any notice so published, shall affect the sufficiency of such
notice with respect to other Holders of Bearer Securities or the sufficiency of
any notice to Holders of Registered Securities given as provided herein.
Any request, demand, authorization, direction, notice, consent, waiver or
Act required or permitted under this Indenture shall be in the English
language, except that, if the Issuer so elects, any published notice may be in
an official language of the country of publication.
Where this Indenture provides for notice in any manner, such notice may be
waived in writing by the Person entitled to receive such notice, either before
or after the event, and such waiver shall be the equivalent of such notice.
Waivers of notice by Holders shall be filed with the Trustee, but such filing
shall not be a condition precedent to the validity of any action taken in
reliance upon such waiver.
SECTION 107. EFFECT OF HEADINGS AND TABLE OF CONTENTS. The Article and
Section headings herein and the Table of Contents are for convenience only and
shall not affect the construction hereof.
SECTION 108. SUCCESSORS AND ASSIGNS. All covenants and agreements in
this Indenture by the Issuer shall bind its successors and assigns, whether so
expressed or not.
SECTION 109. SEVERABILITY CLAUSE. In case any provision in this
Indenture or in any Security or coupon shall be deemed invalid, illegal or
unenforceable, the validity, legality and enforceability of the remaining
provisions shall not in any way be affected or impaired thereby.
SECTION 110. BENEFITS OF INDENTURE. Nothing in this Indenture or in the
Securities or coupons, express or implied, shall give to any Person, other than
the parties hereto, any Security Registrar, any Paying Agent, any
Authenticating Agent and their successors hereunder and the Holders any benefit
or any legal or equitable right, remedy or claim under this Indenture.
SECTION 111. GOVERNING LAW. This Indenture and the Securities and
coupons shall be governed by and construed in accordance with the laws of the
State of New York.
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SECTION 112. LEGAL HOLIDAYS. In any case where any Interest Payment
Date, Redemption Date, Repayment Date, sinking fund payment date, Stated
Maturity or Maturity of any Security, or the last date on which a Holder has
the right to exchange Securities of a series that are exchangeable, shall be a
Legal Holiday at any Place of Payment, then (notwithstanding any other
provision of this Indenture or any Security or coupon other than a provision in
any Security or coupon that specifically states that such provision shall apply
in lieu hereof), payment of interest or any Additional Amounts or principal
(and premium or Make-Whole Amount, if any) need not be made at such Place of
Payment on such date and such Securities need not be exchanged on such date,
but such payment may be made and such Securities may be exchanged on the next
succeeding Business Day at such Place of Payment with the same force and effect
as if made on the Interest Payment Date, Redemption Date, Repayment Date or
sinking fund payment date, or at the Stated Maturity or Maturity or on such
last day for exchange, provided that no interest shall accrue on the amount so
payable for the period from and after such Interest Payment Date, Redemption
Date, Repayment Date, sinking fund payment date, Stated Maturity or Maturity or
last day for or exchange, as the case may be.
SECTION 113. QUALIFICATION UNDER TRUST INDENTURE ACT. In the event this
Indenture is or becomes qualified under the provisions of the TIA, the
provisions hereof shall be subject to the TIA, all provisions which the TIA
provides as automatically deemed to be included in an indenture to be qualified
thereunder shall be included herein, and, in the event of any conflict between
the provisions hereof and the provisions of the TIA, the provisions of the TIA
shall control.
SECTION 114. COUNTERPARTS. This Indenture may be executed in several
counterparts, each of which shall be an original and all of which shall
constitute but one and the same instrument.
SECTION 115. JUDGMENT CURRENCY. The Issuer agrees, to the fullest extent
that it may effectively do so under applicable law, that (a) if for the purpose
of obtaining judgment in any court it is necessary to convert the sum due in
respect of the principal of, or premium or interest, if any, or Additional
Amounts on the Securities of any series (the "Required Currency") into a
currency in which a judgment will be rendered (the "Judgment Currency"), the
rate of exchange used shall be the rate at which in accordance with normal
banking procedures the Trustee could purchase in The City of New York the
Required Currency with the Judgment Currency on the New York Banking Day
preceding that on which a final unappealable judgment is given and (b) its
obligations under this Indenture to make payments in the Required Currency (i)
shall not be discharged or satisfied by any tender, or any recovery pursuant to
any judgment (whether or not entered in accordance with clause (a)), in any
currency other than the Required Currency, except to the extent that such
tender or recovery shall result in the actual receipt, by the payee, of the
full amount of the Required Currency expressed to be payable in respect of such
payments, (ii) shall be enforceable as an alternative or additional cause of
action for the purpose of recovering in the Required Currency the amount, if
any, by which such actual receipt shall fall short of the full amount of the
Required Currency so expressed to be payable, and (iii) shall not be affected
by judgment being obtained for any other sum due under this Indenture. For
purposes of the foregoing, "New York Banking Day" means any day except a Legal
Holiday in The City of New York.
SECTION 116. NONRECOURSE. Unless otherwise provided in the Board
Resolution authorizing a particular series of Securities in accordance with
Section 301, no recourse under or upon any obligation, covenant or agreement
contained in this Indenture, in any Security or coupon appertaining thereto, or
because of any Debt evidenced thereby (including, without limitation, any
obligation or indebtedness relating to the principal of, or premium or
Make-Whole Amount, if any, interest or any other amounts due, or claimed to be
due, on any Security issued hereunder), or for any claim based thereon or
otherwise in respect thereof, shall be had (i) against the General Partner or
any other partner, or any Person which owns an interest, directly or
indirectly, in any partner, in the Company, or (ii) against any promoter, as
such, or against any past, present or future shareholder, officer, trustee or
partner, as such, of the Company or the General
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Partner or of any successor, either directly or through the Company or the
General Partner or any successor, under any rule of law, statute or
constitutional provision or by the enforcement of any assessment or by any
legal or equitable proceeding or otherwise, all such liability being expressly
waived and released by the acceptance of the Securities by the Holders thereof
and as part of the consideration for the issue of the Securities. Unless
otherwise provided in the Board Resolution authorizing a particular series of
Securities in accordance with Section 301, the Holders of the Securities
hereunder acknowledge by the acceptance of the Securities that their sole
remedies under this Indenture for any Default by the Company in the payment of
the principal of, or any premium or Make-Whole Amount, if any, interest or any
amounts due, or claimed to be due, on any Security, or otherwise, are limited
to claims against the property of the Company as provided in Section 503
hereof.
ARTICLE TWO
SECURITIES FORMS
SECTION 201. FORMS OF SECURITIES. The Registered Securities, if any, of
each series and the Bearer Securities, if any, of each series and related
coupons shall be in substantially the forms as shall be established in one or
more indentures supplemental hereto or approved from time to time by or
pursuant to a Board Resolution in accordance with Section 301, shall have such
appropriate insertions, omissions, substitutions and other variations as are
required or permitted by this Indenture or any indenture supplemental hereto,
and may have such letters, numbers or other marks of identification or
designation and such legends or endorsements placed thereon as the Issuer may
deem appropriate and as are not inconsistent with the provisions of this
Indenture, or as may be required to comply with any law or with any rule or
regulation made pursuant thereto or with any rule or regulation of any stock
exchange on which the Securities may be listed, or to conform to usage.
Unless otherwise specified as contemplated by Section 301, Bearer
Securities shall have interest coupons attached.
The definitive Securities and coupons shall be printed, lithographed or
engraved or produced by any combination of these methods on a steel engraved
border or steel engraved borders or may be produced in any other manner, all as
determined by the officers executing such Securities or coupons, as evidenced
by their execution of such Securities or coupons.
SECTION 202. FORM OF TRUSTEE'S CERTIFICATE OF AUTHENTI-CATION. Subject
to Section 611, the Trustee's certificate of authentication shall be in
substantially the following form:
This is one of the Securities of the series designated therein
referred to in the within-mentioned Indenture.
(TRUSTEE)
as Trustee
By: ______________________________
Authorized Signatory
SECTION 203. SECURITIES ISSUABLE IN GLOBAL FORM. If Securities of or
within a series are issuable in global form, as specified as contemplated by
Section 301, then, notwithstanding clause (9) of Section 301 and the provisions
of Section 302, any such Security shall represent such of the Outstanding
Securities of such series as shall be specified therein and may provide that it
or any number of such Securities shall represent the aggregate amount of
Outstanding Securities of such series from time to time endorsed thereon and
may also provide that the aggregate amount of
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Outstanding Securities of such series represented thereby may from time to time
be increased or decreased to reflect exchanges. Any endorsement of a Security
in global form to reflect the amount, or any increase or decrease in the
amount, of Outstanding Securities represented thereby shall be made in such
manner and by such Person or Persons as shall be specified therein or in the
Issuer Order to be delivered pursuant to Section 303 or 304. Subject to the
provisions of Section 303 and, if applicable, Section 304, the Trustee shall
deliver and redeliver any Security in permanent global form in the manner and
upon instructions given by the Person or Persons specified therein or in the
applicable Issuer Order. If an Issuer Order pursuant to Section 303 or 304 has
been, or simultaneously is, delivered, any instructions by the Issuer with
respect to endorsement or delivery or redelivery of a Security in global form
shall be in writing but need not comply with Section 102 and need not be
accompanied by an Opinion of Counsel.
The provisions of the last sentence of Section 303 shall apply to any
Security represented by a Security in global form if such Security was never
issued and sold by the Issuer and the Issuer delivers to the Trustee the
Security in global form together with written instructions (which need not
comply with Section 102 and need not be accompanied by an Opinion of Counsel)
with regard to the reduction in the principal amount of Securities represented
thereby, together with the written statement contemplated by the last sentence
of Section 303.
Notwithstanding the provisions of Section 307, unless otherwise specified
as contemplated by Section 301, payment of principal of, and any premium and
interest on, and any Additional Amounts in respect of, any Security in
temporary or permanent global form shall be made to the Person or Persons
specified therein.
Notwithstanding the provisions of Section 308 and except as provided in
the preceding paragraph, the Issuer, the Trustee and any agent of the Issuer
and the Trustee shall treat as the Holder of such principal amount of
Outstanding Securities represented by a global Security (a) in the case of a
global Security in registered form, the Holder of such global Security in
registered form, or (b) in the case of a global Security in bearer form, the
Person or Persons specified pursuant to Section 301.
ARTICLE THREE
THE SECURITIES
SECTION 301. AMOUNT UNLIMITED; ISSUABLE IN SERIES. The aggregate
principal amount of Securities which may be authenticated and delivered under
this Indenture is unlimited.
The Securities may be issued in one or more series. There shall be
established in one or more Board Resolutions or pursuant to authority granted
by one or more Board Resolutions and, subject to Section 303, set forth, or
determined in the manner provided, in an Officers' Certificate, or established
in one or more indentures supplemental hereto, prior to the issuance of
Securities of any series, any or all of the following, as applicable (each of
which (except for the matters set forth in clauses (1), (2) and (16) below), if
so provided, may be determined from time to time by the Issuer with respect to
unissued Securities of the series when issued from time to time):
(1) the title of the Securities of the series (which shall
distinguish the Securities of such series from all other series of
Securities);
(2) any limit upon the aggregate principal amount of the Securities
of the series that may be authenticated and delivered under this
Indenture (except for Securities authenticated and delivered upon
registration of transfer of, or in exchange for, or in lieu of, other
Securities of the series pursuant to Sections 304, 305, 306, 906,
1107 or 1305);
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(3) the percentage of the principal amount at which the Securities
of the series will be issued and, if other than the principal amount
thereof, the portion of the principal amount thereof payable upon
declaration of acceleration of maturity thereof;
(4) the date or dates, or the method for determining such date or
dates, on which the principal of the Securities of the series shall
be payable;
(5) the rate or rates at which the Securities of the series shall
bear interest, if any, or the method by which such rate or rates
shall be determined, the date or dates from which such interest shall
accrue or the method by which such date or dates shall be determined,
the Interest Payment Dates on which such interest will be payable and
the Regular Record Date, if any, for the interest payable on any
Registered Security on any Interest Payment Date, or the method by
which such date shall be determined, and the basis upon which
interest shall be calculated if other than that of a 360-day year of
twelve 30-day months;
(6) the place or places, if any, other than the Corporate Trust
Office of the Trustee, where (i) the principal of (and premium or
Make-Whole Amount, if any), interest, if any, on, and Additional
Amounts, if any, payable in respect of, the Securities of the series
shall be payable, (ii) any Registered Securities of the series may be
surrendered for registration of transfer or exchange and (iii)
notices or demands to or upon the Issuer in respect of the Securities
of the series and this Indenture may be served;
(7) the period or periods within which, the price or prices at
which, the currency or currencies, currency unit or units or
composite currency or currencies in which, and other terms and
conditions upon which the Securities of the series may be redeemed,
as a whole or in part, at the option of the Issuer, if the Issuer is
to have such an option;
(8) the obligation, if any, of the Issuer to redeem, repay or
purchase the Securities of the series pursuant to any sinking fund or
analogous provision or at the option of a Holder thereof, and the
period or periods within which or the date or dates on which, the
price or prices at which, the currency or currencies, currency unit
or units or composite currency or currencies in which, and other
terms and conditions upon which the Securities of the series shall be
redeemed, repaid or purchased, as a whole or in part, pursuant to
such obligation;
(9) if other than denominations of $1,000 and any integral multiple
thereof, the denominations in which any Registered Securities of the
series shall be issuable and, if other than denominations of $5,000
and any integral multiple thereof, the denomination or denominations
in which any Bearer Securities of the series shall be issuable;
(10) if other than the Trustee, the identity of each Security
Registrar and/or Paying Agent and/or offshore Paying Agent (a
"Special Paying Agent") required to act as paying agent and/or
exchange agent for a series of Securities outside of the United
States;
(11) if other than the principal amount thereof, the portion of the
principal amount of the Securities of the series that shall be
payable upon declaration of acceleration of the Maturity thereof
pursuant to Section 502 or the method by which such portion shall be
determined;
(12) if other than Dollars, the Foreign Currency or Currencies in
which payment of the principal of (and premium or Make-Whole Amount,
if any) or interest or Additional
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Amounts, if any, on the Securities of the series shall be payable or
in which the Securities of the series shall be denominated;
(13) whether the amount of payments of principal of (and premium or
Make-Whole Amount, if any) or interest, if any, on the Securities of
the series may be determined with reference to an index, formula or
other method (which index, formula or method may be based, without
limitation, on one or more currencies, currency units, composite
currencies, commodities, equity indices or other indices), and the
manner in which such amounts shall be determined;
(14) whether the principal of (and premium or Make-Whole Amount, if
any) or interest or Additional Amounts, if any, on the Securities of
the series are to be payable, at the election of the Issuer or a
Holder thereof, in a currency or currencies, currency unit or units
or composite currency or currencies other than that in which such
Securities are denominated or stated to be payable, the period or
periods within which, and the terms and conditions upon which, such
election may be made, and the time and manner of, and identity of the
exchange rate agent with responsibility for, determining the exchange
rate between the currency or currencies, currency unit or units or
composite currency or currencies in which such Securities are
denominated or stated to be payable and the currency or currencies,
currency unit or units or composite currency or currencies in which
such Securities are to be so payable;
(15) provisions, if any, granting special rights to the Holders of
the Securities of the series upon the occurrence of such events as
may be specified;
(16) any deletions from, modifications of or additions to the Events
of Default or covenants of the Issuer with respect to the Securities
of the series, whether or not such Events of Default or covenants are
consistent with the Events of Default or covenants set forth herein;
(17) whether the Securities of the series will be in certificated or
book-entry form and, if certificated, whether Securities of the
series are to be issuable as Registered Securities, Bearer Securities
(with or without coupons) or both, any restrictions applicable to the
offer, sale or delivery of Bearer Securities and the terms upon which
Bearer Securities of the series may be exchanged for Registered
Securities of the series and vice versa (if permitted by applicable
laws and regulations), whether any Securities of the series are to be
issuable initially in temporary global form and whether any
Securities of the series are to be issuable in permanent global form
with or without coupons and, if so, whether beneficial owners of
interests in any such permanent global Security may exchange such
interests for Securities of such series and of like tenor of any
authorized form and denomination and the circumstances under which
any such exchanges may occur, if other than in the manner provided in
Section 305, and, if Registered Securities of the series are to be
issuable as a global Security, the identity of the depositary for
such series;
(18) the date as of which any Bearer Securities of the series and
any temporary global Security representing Outstanding Securities of
the series shall be dated if other than the date of original issuance
of the first Security of the series to be issued;
(19) the Person to whom any interest on any Registered Security of
the series shall be payable, if other than the Person in whose name
that Security (or one or more Predecessor Securities) is registered
at the close of business on the Regular Record Date for such
interest, the manner in which, or the Person to whom, any interest on
any Bearer Security of the series shall be payable, if otherwise than
upon presentation and surrender of the coupons appertaining thereto
as they severally mature, and the extent to which, or the manner in
which, any interest payable on a
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<PAGE> 27
temporary global Security on an Interest Payment Date will be paid
if other than in the manner provided in Section 304;
(20) the applicability, if any, of Sections 1402 and/or 1403 to the
Securities of the series and any provisions in modification of, in
addition to or in lieu of, any of the provisions of Article Fourteen;
(21) if the Securities of such series are to be issuable in
definitive form (whether upon original issue or upon exchange of a
temporary Security of such series) only upon receipt of certain
certificates or other documents or satisfaction of other conditions,
then the form and/or terms of such certificates, documents or
conditions;
(22) whether and under what circumstances the Issuer will pay
Additional Amounts on the Securities of the series to any Holder who
is not a United States Person (including any modification to the
definition of such term) in respect of any tax, assessment or
governmental charge and, if so, whether the Issuer will have the
option to redeem such Securities rather than pay such Additional
Amounts (and the terms of any such option);
(23) with respect to any Securities that provide for optional
redemption or prepayment upon the occurrence of certain events (such
as a change of control of the Issuer), (i) the possible effects of
such provisions on the market price of the Issuer's or the General
Partner's securities or in deterring certain mergers, tender offers
or other takeover attempts, and the intention of the Issuer to comply
with the requirements of Rule 14e-1 under the Exchange Act and any
other applicable securities laws in connection with such provisions;
(ii) whether the occurrence of the specified events may give rise to
cross-defaults on other indebtedness such that payment on such
Securities may be effectively subordinated; and (iii) the existence
of any limitations on the Issuer's financial or legal ability to
repurchase such Securities upon the occurrence of such an event
(including, if true, the lack of assurance that such a repurchase can
be effected) and the impact, if any, under the Indenture of such a
failure, including whether and under what circumstances such a
failure may constitute an Event of Default;
(24) with respect to any Securities that may be issued in a private
offering, the restrictions on transfer and legends relating to such
Securities of the series and whether Securities of the series are
entitled to registration or exchange rights;
(25) if other than the Trustee named in the first paragraph of this
Indenture, the identity of the Person to act as Trustee for such
series; provided that any such Person shall in writing agree to act
as Trustee with respect to said series of Securities subject to the
provisions hereof and of any other agreement affecting said series;
and
(26) any other terms of the series (which terms shall not be
inconsistent with the provisions of this Indenture).
All Securities of any one series and the coupons, if any, appertaining to
any Bearer Securities of the series shall be substantially identical except, in
the case of Registered Securities, as to denomination and except as may
otherwise be provided in or pursuant to the Board Resolution establishing the
series (subject to Section 303 and the second paragraph of this Section 301)
and set forth in an Officers' Certificate or in any indenture supplemental
hereto. All Securities of any one series need not be issued at the same time
and, unless otherwise provided, a series may be reopened, without the consent
of the Holders, for issuances of additional Securities of such series.
If any of the terms of the Securities of any series are established by
action taken pursuant to one or more Board Resolutions, a copy of an
appropriate record of such action(s) shall be
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certified by the Secretary or an Assistant Secretary of the General Partner and
delivered to the Trustee at or prior to the delivery of the Officers'
Certificate setting forth the terms of the Securities of such series.
SECTION 302. CURRENCY, DENOMINATIONS. Unless otherwise provided as
contemplated by Section 301, the principal of, any premium and interest on and
any Additional Amounts with respect to the Securities shall be payable in
Dollars. Unless otherwise provided as contemplated by Section 301, Registered
Securities denominated in Dollars (other than Registered Securities issued in
global form, which may be of any denomination) shall be issuable in
denominations of $1,000 and any integral multiple thereof, and the Bearer
Securities denominated in Dollars (other than Bearer Securities issued in
global form, which may be of any denomination) shall be issuable in
denominations of $5,000 and any integral multiple thereof. Securities not
denominated in Dollars shall be issuable in such denominations as are
established with respect to such Securities in or pursuant to this Indenture.
SECTION 303. EXECUTION, AUTHENTICATION, DELIVERY AND DATING. The
Securities and any coupons appertaining thereto shall be executed on behalf of
the Issuer by the General Partner by its Chairman of the Board, its President
or one of its Vice Presidents (whether or not designated by a number or word or
words added before or after the title "vice president") and attested by its
Secretary or one of its Assistant Secretaries. The signature of any of these
officers on the Securities and coupons may be manual or facsimile signatures of
the present or any future such authorized officer and may be imprinted or
otherwise reproduced on the Securities.
Securities or coupons bearing the manual or facsimile signatures of
individuals who were at any time the proper officers of the General Partner
shall bind the Issuer, notwithstanding that such individuals or any of them
have ceased to hold such offices prior to the authentication and delivery of
such Securities or did not hold such offices at the date of such Securities or
coupons.
At any time and from time to time after the execution and delivery of this
Indenture, the Issuer may deliver the Securities of any series, together with
any coupon appertaining thereto, executed by the Issuer to the Trustee for
authentication, together with an Issuer Order for the authentication and
delivery of such Securities, and the Trustee in accordance with the Issuer
Order shall authenticate and deliver such Securities; provided, however, that,
in connection with its original issuance, no Bearer Security shall be mailed or
otherwise delivered to any location in the United States; and provided further
that, unless otherwise specified with respect to any series of Securities
pursuant to Section 301, a Bearer Security may be delivered in connection with
its original issuance only if the Person entitled to receive such Bearer
Security shall have furnished a certificate to Euroclear or CEDEL, as the case
may be, in the form set forth in Exhibit A-1 to this Indenture or such other
certificate as may be specified with respect to any series of Securities
pursuant to Section 301, dated no earlier than 15 days prior to the earlier of
the date on which such Bearer Security is delivered and the date on which any
temporary Security first becomes exchangeable for such Bearer Security in
accordance with the terms of such temporary Security and this Indenture. If
any Security shall be represented by a permanent global Bearer Security, then,
for purposes of this Section and Section 304, the notation of a beneficial
owner's interest therein upon original issuance of such Security or upon
exchange of a portion of a temporary global Security shall be deemed to be
delivery in connection with its original issuance of such beneficial owner's
interest in such permanent global Security. Except as permitted by Section
306, the Trustee shall not authenticate and deliver any Bearer Security unless
all appurtenant coupons for interest then matured have been detached and
canceled.
If all the Securities of any series are not to be issued at one time and
if the Board Resolution or supplemental indenture establishing such series
shall so permit, such Issuer Order may set forth procedures acceptable to the
Trustee for the issuance of such Securities and determining the terms of
particular Securities of such series, such as interest rate or formula,
maturity date, date of issuance and date from which interest shall accrue. In
authenticating such Securities, and accepting the additional responsibilities
under this Indenture in relation to such
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Securities, the Trustee shall be entitled to receive, and (subject to TIA
Section 315(a) through 315(d)) shall be fully protected in relying upon:
(a) an Opinion of Counsel stating that:
(1) the terms and the form or forms of such Securities and any
coupons have been established in conformity with the provisions
of this Indenture; and
(2) such Securities, together with any coupons appertaining thereto,
when completed by appropriate insertions and executed and
delivered by the Issuer to the Trustee for authentication in
accordance with this Indenture, authenticated and delivered by
the Trustee in accordance with this Indenture and issued by the
Issuer in the manner and subject to any conditions specified in
such Opinion of Counsel, will constitute legal, valid and binding
obligations of the Issuer, enforceable in accordance with their
terms, subject to applicable bankruptcy, insolvency,
reorganization and other similar laws of general applicability
relating to or affecting the enforcement of creditors' rights
generally and to general equitable principles and will entitle
the Holders thereof to the benefits of this Indenture; and
(b) an Officers' Certificate stating that all conditions precedent
provided for in this Indenture relating to the issuance of the
Securities have been complied with and that, to the best of the
knowledge of the signers of such certificate, no Event of Default with
respect to any of the Securities shall have occurred and be
continuing.
If such form or terms have been so established, the Trustee shall not be
required to authenticate such Securities if the issue of such Securities
pursuant to this Indenture will affect the Trustee's own rights, duties,
obligations or immunities under the Securities and this Indenture or otherwise
in a manner which is not reasonably acceptable to the Trustee.
Notwithstanding the provisions of Section 301 and of the preceding
paragraph, if all the Securities of any series are not to be issued at one
time, it shall not be necessary to deliver an Officers' Certificate otherwise
required pursuant to Section 301 or an Issuer Order, or an Opinion of Counsel
or an Officers' Certificate otherwise required pursuant to the preceding
paragraph at the time of issuance of each Security of such series, but such
order, opinion and certificates, with appropriate modifications to cover such
future issuances, shall be delivered at or before the time of issuance of the
first Security of such series.
Each Registered Security shall be dated the date of its authentication and
each Bearer Security shall be dated as of the date specified as contemplated by
Section 301.
No Security or coupon shall be entitled to any benefit under this
Indenture or be valid or obligatory for any purpose unless there appears on
such Security or Security to which such coupon appertains a certificate of
authentication substantially in the form provided for herein duly executed by
the Trustee by manual signature of an authorized signatory, and such
certificate upon any Security shall be conclusive evidence, and the only
evidence, that such Security has been duly authenticated and delivered
hereunder and is entitled to the benefits of this Indenture. Notwithstanding
the foregoing, if any Security shall have been authenticated and delivered
hereunder but never issued and sold by the Issuer, and the Issuer shall deliver
such Security to the Trustee for cancellation as provided in Section 309
together with a written statement (which need not comply with Section 102 and
need not be accompanied by an Opinion of Counsel) stating that
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such Security has never been issued and sold by the Issuer, for all purposes of
this Indenture such Security shall be deemed never to have been authenticated
and delivered hereunder and shall never be entitled to the benefits of this
Indenture.
SECTION 304. TEMPORARY SECURITIES. (a) Pending the preparation of
definitive Securities of any series, the Issuer may execute, and upon Issuer
Order the Trustee shall authenticate and deliver, temporary Securities which
are printed, lithographed, typewritten, mimeographed or otherwise produced, in
any authorized denomination, substantially of the tenor of the definitive
Securities in lieu of which they are issued, in registered form, or, if
authorized, in bearer form with one or more coupons or without coupons, and
with such appropriate insertions, omissions, substitutions and other variations
as the officers executing such Securities may determine, as conclusively
evidenced by their execution of such Securities. Such temporary Securities may
be in global form.
Except in the case of temporary Securities in global form (which shall be
exchanged in accordance with Section 304(b) or as otherwise provided in or
pursuant to a Board Resolution), if temporary Securities of any series are
issued, the Issuer will cause definitive Securities of that series to be
prepared without unreasonable delay. After the preparation of definitive
Securities of such series, the temporary Securities of such series shall be
exchangeable for definitive Securities of such series upon surrender of the
temporary Securities of such series at the office or agency of the Issuer in a
Place of Payment for that series, without charge to the Holder. Upon surrender
for cancellation of any one or more temporary Securities of any series
(accompanied by any nonmatured coupons appertaining thereto), the Issuer shall
execute and the Trustee shall authenticate and deliver in exchange therefor a
like principal amount of definitive Securities of the same series of authorized
denominations; provided, however, that no definitive Bearer Security shall be
delivered in exchange for a temporary Registered Security, and provided further
that a definitive Bearer Security shall be delivered in exchange for a
temporary Bearer Security only in compliance with the conditions set forth in
this Indenture. Until so exchanged, the temporary Securities of any series
shall in all respects be entitled to the same benefits under this Indenture as
definitive Securities of such series.
(b) Unless otherwise provided in or pursuant to a Board Resolution, this
Section 304(b) shall govern the exchange of temporary Securities issued in
global form other than through the facilities of The Depositary Trust Company
("DTC"). If any such temporary Security is issued in global form, then such
temporary global Security shall, unless otherwise provided therein, be
delivered to the London office of a depositary or common depositary (the
"Common Depositary"), for the benefit of Euroclear and CEDEL, for credit to the
respective accounts of the beneficial owners of such Securities (or to such
other accounts as they may direct).
Without unnecessary delay, but in any event not later than the date
specified in, or determined pursuant to the terms of, any such temporary global
Security (the "Exchange Date"), the Issuer shall deliver to the Trustee
definitive Securities, in aggregate principal amount equal to the principal
amount of such temporary global Security, executed by the Issuer. On or after
the Exchange Date, such temporary global Security shall be surrendered by the
Common Depositary to the Trustee, as the Issuer's agent for such purpose, to be
exchanged, in whole or from time to time in part, for definitive Securities
without charge, and the Trustee shall authenticate and deliver, in exchange for
each portion of such temporary global Security, an equal aggregate principal
amount of definitive Securities of the same series of authorized denominations
and of like tenor as the portion of such temporary global Security to be
exchanged. The definitive Securities to be delivered in exchange for any such
temporary global Security shall be in bearer form, registered form, permanent
global bearer form or permanent global registered form, or any combination
thereof, as specified as contemplated by Section 301, and, if any combination
thereof is so specified, as requested by the beneficial owner thereof;
provided, however, that, unless otherwise specified in such temporary global
Security, upon such presentation by the Common Depositary, such temporary
global Security is accompanied by a certificate dated the Exchange Date or a
subsequent date and signed by Euroclear as to the portion of such temporary
global Security held for its account then to be exchanged and a certificate
dated the Exchange Date or a subsequent date and signed by CEDEL as
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to the portion of such temporary global Security held for its account then
to be exchanged, each in the form set forth in Exhibit A-2 to this Indenture or
in such other form as may be established pursuant to Section 301; and provided
further that definitive Bearer Securities shall be delivered in exchange for a
portion of a temporary global Security only in compliance with the requirements
of Section 303.
Unless otherwise specified in such temporary global Security, the interest
of a beneficial owner of Securities of a series in a temporary global Security
shall be exchanged for definitive Securities of the same series and of like
tenor following the Exchange Date when the account holder instructs Euroclear
or CEDEL, as the case may be, to request such exchange on his behalf and
delivers to Euroclear or CEDEL, as the case may be, a certificate in the form
set forth in Exhibit A-1 to this Indenture (or in such other form as may be
established pursuant to Section 301), dated no earlier than 15 days prior to
the Exchange Date, copies of which certificate shall be available from the
offices of Euroclear and CEDEL, the Trustee, any Authenticating Agent appointed
for such series of Securities and each Paying Agent. Unless otherwise
specified in such temporary global Security, any such exchange shall be made
free of charge to the beneficial owners of such temporary global Security,
except that a Person receiving definitive Securities must bear the cost of
insurance, postage, transportation and the like unless such Person takes
delivery of such definitive Securities in person at the offices of Euroclear or
CEDEL. Definitive Securities in bearer form to be delivered in exchange for
any portion of a temporary global Security shall be delivered only outside the
United States.
Until exchanged in full as hereinabove provided, the temporary Securities
of any series shall in all respects be entitled to the same benefits under this
Indenture as definitive Securities of the same series and of like tenor
authenticated and delivered hereunder, except that, unless otherwise specified
as contemplated by Section 301, interest payable on a temporary global Security
on an Interest Payment Date for Securities of such series occurring prior to
the applicable Exchange Date shall be payable to Euroclear and CEDEL on such
Interest Payment Date upon delivery by Euroclear and CEDEL to the Trustee of a
certificate or certificates in the form set forth in Exhibit A-2 to this
Indenture (or in such other forms as may be established pursuant to Section
301), for credit without further interest on or after such Interest Payment
Date to the respective accounts of Persons who are the beneficial owners of
such temporary global Security on such Interest Payment Date and who have each
delivered to Euroclear or CEDEL, as the case may be, a certificate dated no
earlier than 15 days prior to the Interest Payment Date occurring prior to such
Exchange Date in the form set forth as Exhibit A-1 to this Indenture (or in
such other forms as may be established pursuant to Section 301).
Notwithstanding anything to the contrary herein contained, the certifications
made pursuant to this paragraph shall satisfy the certification requirements of
the preceding two paragraphs of this Section 304(b) and of the third paragraph
of Section 303 of this Indenture and the interests of the Persons who are the
beneficial owners of the temporary global Security with respect to which such
certification was made will be exchanged for definitive Securities of the same
series and of like tenor on the Exchange Date or the date of certification if
such date occurs after the Exchange Date, without further act or deed by such
beneficial owners. Except as otherwise provided in this paragraph, no payments
of principal or interest owing with respect to a beneficial interest in a
temporary global Security will be made unless and until such interest in such
temporary global Security shall have been exchanged for an interest in a
definitive Security. Any interest so received by Euroclear and CEDEL and not
paid as herein provided shall be returned to the Trustee prior to the
expiration of two years after such Interest Payment Date in order to be repaid
to the Issuer.
(c) Unless otherwise provided in or pursuant to a Board Resolution, this
Section 304(c) shall govern the exchange of temporary Securities issued in
global form through the facilities of DTC. If any such temporary Security is
issued in global form, then such temporary global security shall, unless
otherwise provided therein, be delivered to DTC for credit to the respective
accounts of the beneficial owners of such Securities (or to such other accounts
as they may direct).
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Without unnecessary delay, but in any event not later than the Exchange
Date, the Issuer shall deliver to the Trustee definitive Securities, in
aggregate principal amount equal to the principal amount of such temporary
global Security, executed by the Issuer. On or after the Exchange Date, such
temporary global Security shall be surrendered by DTC to the Trustee, as the
Issuer's agent for such purpose, to be exchanged, in whole or from time to time
in part, for definitive Securities without charge, and the Trustee shall
authenticate and deliver, in exchange for each portion of such temporary global
Security, an equal aggregate principal amount of definitive Securities of the
same series of authorized denominations and of like tenor as the portion of
such temporary global Security to be exchanged. The definitive Securities to
be delivered in exchange for any such temporary global Security shall be in
registered form or permanent global registered form, or any combination
thereof, as specified as contemplated by Section 301, and, if any combination
thereof is so specified, as requested by the beneficial owner thereof.
Unless otherwise specified in such temporary global Security, the interest
of a beneficial owner of Securities of a series in a temporary global Security
shall be exchanged for definitive Securities of the same series and of like
tenor following the Exchange Date when the account holder instructs DTC to
request such exchange on his behalf. Unless otherwise specified in such
temporary global Security, any such exchange shall be made free of charge to
the beneficial owners of such temporary global Security, except that a Person
receiving definitive Securities must bear the cost of insurance, postage,
transportation and the like unless such Person takes delivery of such
definitive Securities in person.
Until exchanged in full as hereinabove provided, the temporary Securities
of any series shall in all respects be entitled to the same benefits under this
Indenture as definitive Securities of the same series and of like tenor
authenticated and delivered hereunder, except that, unless otherwise specified
as contemplated by Section 301, interest payable on a temporary global Security
on an Interest Payment Date for Securities for such series occurring prior to
the applicable Exchange Date shall be payable to DTC on such Interest Payment
Date, for credit without further interest on or after such Interest Payment
Date to the respective accounts of Persons who are the beneficial owners of
such temporary global Security on such Interest Payment Date.
SECTION 305. REGISTRATION, REGISTRATION OF TRANSFER AND EXCHANGE. The
Issuer shall cause to be kept at the Corporate Trust Office of the Trustee or
in any office or agency of the Issuer in a Place of Payment a register for each
series of Securities (the registers maintained in such office or in any such
office or agency of the Issuer in a Place of Payment being herein sometimes
referred to collectively as the "Security Register") in which, subject to such
reasonable regulations as it may prescribe, the Issuer shall provide for the
registration of Registered Securities and of transfers of Registered
Securities. The Security Register shall be in written form or any other form
capable of being converted into written form within a reasonable time. The
Trustee, at its Corporate Trust Office, is hereby appointed "Security
Registrar" for the purpose of registering Registered Securities and transfers
of Registered Securities on such Security Register as herein provided. The
Issuer shall have the right to remove and replace from time to time the
Security Registrar for any series of Securities; provided that no such removal
or replacement shall be effective until a successor Security Registrar with
respect to such series of Securities shall have been appointed by the Issuer
and shall have accepted such appointment by the Issuer. In the event that the
Trustee shall cease to be Security Registrar, it shall have the right to
examine the Security Register at all reasonable times.
Subject to the provisions of this Section 305, upon surrender for
registration of transfer of any Registered Security of any series at any office
or agency of the Issuer in a Place of Payment for that series, the Issuer shall
execute, and the Trustee shall authenticate and deliver, in the name of the
designated transferee or transferees, one or more new Registered Securities of
the same series, of any authorized denominations and of a like aggregate
principal amount, bearing a number not contemporaneously outstanding, and
containing identical terms and provisions. Whenever any such Registered
Securities are so surrendered for exchange, the Issuer shall execute,
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and the Trustee shall authenticate and deliver, the Registered Securities which
the Holder making the exchange is entitled to receive.
Unless otherwise specified with respect to any series of Securities as
contemplated by Section 301, Bearer Securities may not be issued in exchange
for Registered Securities. If (but only if) permitted by the applicable Board
Resolution and (subject to Section 303) set forth in the applicable Officers'
Certificate, or in any indenture supplemental hereto, delivered as contemplated
by Section 301, at the option of the Holder, Bearer Securities of any series
may be exchanged for Registered Securities of the same series of any authorized
denominations and of a like aggregate principal amount and tenor, upon
surrender of the Bearer Securities to be exchanged at any such office or
agency, with all unmatured coupons and all matured coupons in default thereto
appertaining. If the Holder of a Bearer Security is unable to produce any such
unmatured coupon or coupons or matured coupon or coupons in default, any such
permitted exchange may be effected if the Bearer Securities are accompanied by
payment in funds acceptable to the Issuer in an amount equal to the face amount
of such missing coupon or coupons, or the surrender of such missing coupon or
coupons may be waived by the Issuer and the Trustee if there is furnished to
them such security or indemnity as they may require to save each of them and
any Paying Agent harmless. If thereafter the Holder of such Security shall
surrender to any Paying Agent any such missing coupon in respect of which such
a payment shall have been made, such Holder shall be entitled to receive the
amount of such payment; provided, however, that, except as otherwise provided
in Section 1002, interest represented by coupons shall be payable only upon
presentation and surrender of those coupons at an office or agency located
outside the United States. Notwithstanding the foregoing, in case a Bearer
Security of any series is surrendered at any such office or agency in a
permitted exchange for a Registered Security of the same series and like tenor
after the close of business at such office or agency on (i) any Regular Record
Date and before the opening of business at such office or agency on the
relevant Interest Payment Date, or (ii) any Special Record Date and before the
opening of business at such office or agency on the related proposed date for
payment of Defaulted Interest, such Bearer Security shall be surrendered
without the coupon relating to such Interest Payment Date or proposed date for
payment, as the case may be, and interest or Defaulted Interest, as the case
may be, will not be payable on such Interest Payment Date or proposed date for
payment, as the case may be, in respect of the Registered Security issued in
exchange for such Bearer Security, but will be payable only to the Holder of
such coupon when due in accordance with the provisions of this Indenture.
Whenever any Securities are so surrendered for exchange, the Issuer shall
execute, and the Trustee shall authenticate and deliver, the Securities which
the Holder making the exchange is entitled to receive.
If provided as contemplated by Section 301, at the option of the Holder,
Registered Securities of such series may be exchanged for Bearer Securities
upon such terms and conditions as may be provided in or pursuant to this
Indenture with respect to such series. Whenever any Securities are so
surrendered for exchange, the Issuer shall execute, and the Trustee shall
authenticate and deliver, the Securities which the Holder making the exchange
is entitled to receive.
Notwithstanding the foregoing, except as otherwise specified as
contemplated by Section 301, any permanent global Security shall be
exchangeable only as provided in this paragraph. If the depositary for any
permanent global Security is DTC, then unless the terms of such global Security
expressly permit such global Security to be exchanged in whole or in part for
definitive Securities, a global Security may be transferred, in whole but not
in part, only to a nominee of DTC, or by a nominee of DTC to DTC, or to a
successor to DTC for such global Security elected or approved by the Issuer or
to a nominee of such successor to DTC. If at any time DTC notifies the Issuer
that it is unwilling or unable to continue as depositary for the applicable
global Security or Securities or if at any time DTC ceases to be a clearing
agency registered under the Exchange Act if so required by applicable law or
regulation, the Issuer shall appoint a successor depositary with respect to
such global Security or Securities. If (x) a successor depositary for such
global Security or Securities is not appointed by the Issuer within 90 days
after the Issuer receives such notice or becomes aware of such unwillingness,
inability or ineligibility, (y) an Event of Default has occurred and is
continuing and the beneficial owners representing a majority in principal
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amount of the applicable series of Securities represented by such global
Security or Securities advise DTC to cease acting as depositary for such global
Security or Securities or (z) the Issuer, in its sole discretion, determines at
any time that all Outstanding Securities (but not less than all) of any series
issued or issuable in the form of one or more global Securities shall no longer
be represented by such global Security or Securities, then the Issuer shall
execute, and the Trustee shall authenticate and deliver definitive Securities
of like series, rank, tenor and terms in definitive form in an aggregate
principal amount equal to the principal amount of such global Security or
Securities. If any beneficial owner of an interest in a permanent global
Security is otherwise entitled to exchange such interest for Securities of such
series and of like tenor and principal amount of another authorized form and
denomination, as specified as contemplated by Section 301 and provided that any
applicable notice provided in the permanent global Security shall have been
given, then without unnecessary delay but in any event not later than the
earliest day on which such interest may be so exchanged, the Issuer shall
execute, and the Trustee shall authenticate and deliver definitive Securities
in aggregate principal amount equal to the principal amount of such beneficial
owner's interest in such permanent global Security. On or after the earliest
date on which such interests may be so exchanged, such permanent global
Security shall be surrendered for exchange by DTC or such other depositary as
shall be specified in the Issuer Order with respect thereto to the Trustee, as
the Issuer's agent for such purpose, provided, however, that no such exchanges
may occur during a period beginning at the opening of business 15 days before
any selection of Securities to be redeemed and ending on the relevant
Redemption Date if the Security for which exchange is requested may be among
those selected for redemption; and provided further that no Bearer Security
delivered in exchange for a portion of a permanent global Security shall be
mailed or otherwise delivered to any location in the United States. If a
Registered Security is issued in exchange for any portion of a permanent global
Security after the close of business at the office or agency where such
exchange occurs on (i) any Regular Record Date and before the opening of
business at such office or agency on the relevant Interest Payment Date, or
(ii) any Special Record Date and the opening of business at such office or
agency on the related proposed date for payment of Defaulted Interest, interest
or Defaulted Interest, as the case may be, will not be payable on such Interest
Payment Date or proposed date for payment, as the case may be, in respect of
such Registered Security, but will be payable on such Interest Payment Date or
proposed date for payment, as the case may be, only to the Person to whom
interest in respect of such portion of such permanent global Security is
payable in accordance with the provisions of this Indenture.
All Securities issued upon any registration of transfer or exchange of
Securities shall be the valid obligations of the Issuer, evidencing the same
debt, and entitled to the same benefits under this Indenture, as the Securities
surrendered upon such registration of transfer or exchange.
Every Registered Security presented or surrendered for registration of
transfer or for exchange or redemption shall (if so required by the Issuer or
the Security Registrar) be duly endorsed, or be accompanied by a written
instrument of transfer in form satisfactory to the Issuer and the Security
Registrar, duly executed by the Holder thereof or his attorney duly authorized
in writing.
No service charge shall be made for any registration of transfer or
exchange of Securities, but the Issuer may require payment of a sum sufficient
to cover any tax or other governmental charge that may be imposed in connection
with any registration of transfer or exchange of Securities, other than
exchanges pursuant to Sections 304, 906, 1107 or 1305 not involving any
transfer.
Except as otherwise provided in or pursuant to this Indenture, the Issuer
or the Trustee, as applicable, shall not be required (i) to issue, register the
transfer of or exchange any Security if such Security may be among those
selected for redemption during a period beginning at the opening of business 15
days before selection of the Securities to be redeemed under Section 1103 and
ending at the close of business on (A) if such Securities are issuable only as
Registered Securities, the day of the mailing of the relevant notice of
redemption and (B) if such Securities are issuable as Bearer Securities, the
day of the first publication of the relevant notice of redemption or,
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if such Securities are also issuable as Registered Securities and there is no
publication, the mailing of the relevant notice of redemption, or (ii) to
register the transfer of or exchange any Registered Security so selected for
redemption in whole or in part, except, in the case of any Registered Security
to be redeemed in part, the portion thereof not to be redeemed, or (iii) to
exchange any Bearer Security so selected for redemption except that such a
Bearer Security may be exchanged for a Registered Security of that series and
like tenor, provided that such Registered Security shall be simultaneously
surrendered for redemption, or (iv) to issue, register the transfer of or
exchange any Security which has been surrendered for repayment at the option of
the Holder, except the portion, if any, of such Security not to be so repaid.
SECTION 306. MUTILATED, DESTROYED, LOST AND STOLEN SECURITIES. If any
mutilated Security or a Security with a mutilated coupon appertaining to it is
surrendered to the Trustee or the Issuer, together with, in proper cases, such
security or indemnity as may be required by the Issuer or the Trustee to save
each of them or any agent of either of them harmless, the Issuer shall execute
and the Trustee shall authenticate and deliver in exchange therefor a new
Security of the same series and principal amount, containing identical terms
and provisions and bearing a number not contemporaneously outstanding, with
coupons corresponding to the coupons, if any, appertaining to the surrendered
Security.
If there shall be delivered to the Issuer and to the Trustee (i) evidence
to their satisfaction of the destruction, loss or theft of any Security or
coupon, and (ii) such security or indemnity as may be required by them to save
each of them and any agent of either of them harmless, then, in the absence of
notice to the Issuer or the Trustee that such Security or coupon has been
acquired by a bona fide purchaser, the Issuer shall execute and upon its
request the Trustee shall authenticate and deliver, in lieu of any such
destroyed, lost or stolen Security or in exchange for the Security to which a
destroyed, lost or stolen coupon appertains (with all appurtenant coupons not
destroyed, lost or stolen), a new Security of the same series and principal
amount, containing identical terms and provisions and bearing a number not
contemporaneously outstanding, with coupons corresponding to the coupons, if
any, appertaining to such destroyed, lost or stolen Security or to the Security
to which such destroyed, lost or stolen coupon appertains.
Notwithstanding the provisions of the previous two paragraphs, in case any
such mutilated, destroyed, lost or stolen Security or coupon has become or is
about to become due and payable, the Issuer in its discretion may, instead of
issuing a new Security, with coupons corresponding to the coupons, if any,
appertaining to such destroyed, lost or stolen Security or to the Security to
which such destroyed, lost or stolen coupon appertains, pay such Security or
coupon, provided, however, that payment of principal of (and premium or
Make-Whole Amount, if any), and interest on and any Additional Amounts with
respect to, Bearer Securities shall, except as otherwise provided in Section
1002, be payable only at an office or agency located outside the United States
and, unless otherwise specified as contemplated by Section 301, any interest in
Bearer Securities shall be payable only upon presentation and surrender of the
coupons appertaining thereto.
Upon the issuance of any new Security under this Section, the Issuer may
require the payment of a sum sufficient to cover any tax or other governmental
charge that may be imposed in relation thereto and any other expenses
(including the fees and expenses of the Trustee) connected therewith.
Every new Security of any series with its coupons, if any, issued pursuant
to this Section in lieu of any destroyed, lost or stolen Security, or in
exchange for a Security to which a destroyed, lost or stolen coupon appertains,
shall constitute an original additional contractual obligation of the Issuer,
whether or not the destroyed, lost or stolen Security and its coupons, if any,
or the destroyed, lost or stolen coupon shall be at any time enforceable by
anyone, and shall be entitled to all the benefits of this Indenture equally and
proportionately with any and all other Securities of that series and their
coupons, if any, duly issued thereunder.
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The provisions of this Section, as amended or supplemented, are exclusive
and shall preclude (to the extent lawful) all other rights and remedies with
respect to the replacement or payment of mutilated, destroyed, lost or stolen
Securities or coupons.
SECTION 307. PAYMENT OF INTEREST; INTEREST RIGHTS RESERVED. Except as
otherwise specified with respect to a series of Securities in accordance with
the provisions of Section 301, interest on and Additional Amounts with respect
to any Registered Security that is payable, and is punctually paid or duly
provided for, on any Interest Payment Date shall be paid to the Person in whose
name that Security (or one or more Predecessor Securities) is registered at the
close of business on the Regular Record Date for such interest at the office or
agency of the Issuer maintained for such purpose pursuant to Section 1002;
provided, however, that each installment of interest on any Registered Security
may at the Issuer's option be paid by (i) mailing a check for such interest,
payable to or upon the written order of the Person entitled thereto pursuant to
Section 308, to the address of such Person as it appears on the Security
Register or (ii) transfer to an account maintained by the payee located inside
the United States.
Unless otherwise provided as contemplated by Section 301 with respect to
the Securities of any series, payment of interest may be made, in the case of a
Bearer Security, by transfer to an account maintained by the payee with a bank
located outside the United States.
Unless otherwise provided as contemplated by Section 301, every permanent
global Security will provide that interest, if any, payable on any Interest
Payment Date will be paid to DTC, Euroclear and/or CEDEL, as the case may be,
with respect to that portion of such permanent global Security held for its
account by Cede & Co. or the Common Depositary, as the case may be, for the
purpose of permitting such party to credit the interest received by it in
respect of such permanent global Security to the accounts of the beneficial
owners thereof.
In case a Bearer Security of any series is surrendered in exchange for a
Registered Security of such series after the close of business (at an office or
agency in a Place of Payment for such series) on any Regular Record Date and
before the opening of business (at such office or agency) on the next
succeeding Interest Payment Date, such Bearer Security shall be surrendered
without the coupon relating to such Interest Payment Date and interest will not
be payable on such Interest Payment Date in respect of the Registered Security
issued in exchange for such Bearer Security, but will be payable only to the
Holder of such coupon when due in accordance with the provisions of this
Indenture.
Except as otherwise specified with respect to a series of Securities in
accordance with the provisions of Section 301, any interest on any Registered
Security of any series that is payable, but is not punctually paid or duly
provided for, on any Interest Payment Date (herein called "Defaulted Interest")
shall forthwith cease to be payable to the registered Holder thereof on the
relevant Regular Record Date by virtue of having been such Holder, and such
Defaulted Interest may be paid by the Issuer, at its election in each case, as
provided in clause (A) or (B) below:
(A) The Issuer may elect to make payment of any Defaulted
Interest to the Persons in whose names the Registered Securities of
such series (or their respective Predecessor Securities) are
registered at the close of business on a Special Record Date for the
payment of such Defaulted Interest, which shall be fixed in the
following manner. The Issuer shall notify the Trustee in writing of
the amount of Defaulted Interest proposed to be paid on each
Registered Security of such series and the date of the proposed
payment (which shall not be less than 20 days after such notice is
received by the Trustee), and at the same time the Issuer shall
deposit with the Trustee an amount of money in the currency or
currencies, currency unit or units or composite currency or
currencies in which the Securities of such series are payable
(except as otherwise specified pursuant to Section 301 for the
Securities of such series) equal to the aggregate amount proposed to
be paid in respect of such Defaulted Interest or shall make
arrangements satisfactory to the Trustee for such
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deposit on or prior to the date of the proposed payment, such money
when deposited to be held in trust for the benefit of the Persons
entitled to such Defaulted Interest as provided in this clause.
Thereupon the Trustee shall fix a Special Record Date for the
payment of such Defaulted Interest which shall be not more than 15
days and not less than 10 days prior to the date of the proposed
payment and not less than 10 days after the receipt by the Trustee
of the notice of the proposed payment. The Trustee shall promptly
notify the Issuer of such Special Record Date and, in the name and
at the expense of the Issuer, shall cause notice of the proposed
payment of such Defaulted Interest and the Special Record Date
therefor to be mailed, first class postage prepaid, to each Holder
of Registered Securities of such series at his address as it appears
in the Security Register not less than 10 days prior to such Special
Record Date. The Trustee may, in its discretion, in the name and at
the expense of the Issuer, cause a similar notice to be published at
least once in an Authorized Newspaper in each Place of Payment, but
such publications shall not be a condition precedent to the
establishment of such Special Record Date. Notice of the proposed
payment of such Defaulted Interest and the Special Record Date
therefore having been mailed as aforesaid, such Defaulted Interest
shall be paid to the Persons in whose names the Registered
Securities of such series (or their respective Predecessor
Securities) are registered at the close of business on such Special
Record Date and shall no longer be payable pursuant to the following
clause (B). In case a Bearer Security of any series is surrendered
at the office or agency in a Place of Payment for such series in
exchange for a Registered Security of such series after the close of
business at such office or agency on any Special Record Date and
before the opening of business at such office or agency on the
related proposed date for payment of Defaulted Interest, such Bearer
Security shall be surrendered without the coupon relating to such
proposed date of payment and Defaulted Interest will not be payable
on such proposed date of payment in respect of the Registered
Security issued in exchange for such Bearer Security, but will be
payable only to the Holder of such coupon when due in accordance
with the provisions of this Indenture.
(B) The Issuer may make payment of any Defaulted Interest on
the Registered Securities of any series in any other lawful manner
not inconsistent with the requirements of any securities exchange on
which such Securities may be listed, and upon such notice as may be
required by such exchange, if, after notice given by the Issuer to
the Trustee of the proposed payment pursuant to this clause, such
manner of payment shall be deemed practicable by the Trustee.
Subject to the foregoing provisions of this Section and Section 305, each
Security delivered under this Indenture upon registration of transfer of or in
exchange for or in lieu of any other Security shall carry the rights to
interest accrued and unpaid, and to accrue, which were carried by such other
Security.
SECTION 308. PERSONS DEEMED OWNERS. Prior to due presentment of a
Registered Security for registration of transfer, the Issuer, the Trustee and
any agent of the Issuer or the Trustee may treat the Person in whose name such
Registered Security is registered as the owner of such Security for the purpose
of receiving payment of principal of (and premium or Make-Whole Amount, if
any), and (subject to Sections 305 and 307) interest on and any Additional
Amounts with respect to such Registered Security and for all other purposes
whatsoever, whether or not such Registered Security be overdue, and neither the
Issuer, the Trustee nor any agent of the Issuer or the Trustee shall be
affected by notice to the contrary.
Title to any Bearer Security and any coupons appertaining thereto shall
pass by delivery. The Issuer, the Trustee and any agent of the Issuer or the
Trustee may treat the Holder of any Bearer Security and the Holder of any
coupon as the absolute owner of such Security or coupon for the purpose of
receiving any payment with respect to payment thereof or on account thereof and
for all other purposes whatsoever, whether or not any payment with respect to
such Security or
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coupon be overdue, and neither the Issuer, the Trustee nor any agent of the
Issuer or the Trustee shall be affected by notice to the contrary.
No Holder of any beneficial interest in any global Security held on its
behalf by a depositary shall have any rights under this Indenture with respect
to such global Security, and such depositary may be treated by the Issuer, the
Trustee, and any agent of the Issuer or the Trustee as the owner of such global
Security for all purposes whatsoever. None of the Issuer, the Trustee, any
Paying Agent or the Security Registrar will have any responsibility or
liability for any aspect of the records relating to or payments made on account
of beneficial ownership interests of a Security in global form or for
maintaining, supervising or reviewing any records relating to such beneficial
ownership interests.
Notwithstanding the foregoing, with respect to any global Security,
nothing herein shall prevent the Issuer, the Trustee, or any agent of the
Issuer or the Trustee, from giving effect to any written certification, proxy
or other authorization furnished by any depositary, as a Holder, with respect
to such global Security or impair, as between such depositary and owners of
beneficial interests in such global Security, the operation of customary
practices governing the exercise of the rights of such depositary (or its
nominee) as Holder of such global Security.
SECTION 309. CANCELLATION. All Securities and coupons surrendered for
payment, redemption, repayment at the option of the Holder, registration of
transfer or exchange or for credit against any sinking fund payment shall, if
surrendered to any Person other than the Trustee, be delivered to the Trustee,
and any such Securities and coupons and Securities and coupons surrendered
directly to the Trustee for any such purpose shall be promptly canceled by it;
provided, however, where the Place of Payment is located outside of the United
States, the Paying Agent at such Place of Payment may cancel the Securities
surrendered to it for such purposes prior to delivering the Securities to the
Trustee. The Issuer may at any time deliver to the Trustee for cancellation
any Securities previously authenticated and delivered hereunder which the
Issuer may have acquired in any manner whatsoever, and may deliver to the
Trustee (or to any other Person for delivery to the Trustee) for cancellation
any Securities previously authenticated hereunder which the Issuer has not
issued and sold, and all Securities so delivered shall be promptly canceled by
the Trustee. If the Issuer shall so acquire any of the Securities, however,
such acquisition shall not operate as a redemption or satisfaction of the
indebtedness represented by such Securities unless and until the same are
surrendered to the Trustee for cancellation. No Securities shall be
authenticated in lieu of or in exchange for any Securities canceled as provided
in this Section, except as expressly permitted by this Indenture. Canceled
Securities and coupons held by the Trustee shall be destroyed by the Trustee
and the Trustee shall deliver a certificate of such destruction to the Issuer,
unless by an Issuer Order the Issuer directs their return to it.
SECTION 310. COMPUTATION OF INTEREST. Except as otherwise specified as
contemplated by Section 301 with respect to Securities of any series, interest
on the Securities shall be computed on the basis of a 360-day year consisting
of twelve 30-day months.
ARTICLE FOUR
SATISFACTION AND DISCHARGE
SECTION 401. SATISFACTION AND DISCHARGE OF INDENTURE. This Indenture
shall upon Issuer Request cease to be of further effect with respect to any
series of Securities specified in such Issuer Request (except as to any
surviving rights of registration of transfer or exchange of Securities of such
series herein expressly provided for and any right to receive Additional
Amounts, as provided in Section 1012), and the Trustee, upon receipt of an
Issuer Order, and at the expense of the Issuer, shall execute proper
instruments acknowledging satisfaction and discharge of this Indenture as to
such series when
(a) either
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(1) all Securities of such series theretofore
authenticated and delivered and all coupons, if any,
appertaining thereto (other than (i) coupons appertaining to
Bearer Securities surrendered in exchange for Registered
Securities and maturing after such exchange, whose surrender is
not required or has been waived as provided in Section 305,
(ii) Securities and coupons of such series which have been
destroyed, lost or stolen and which have been replaced or paid
as provided in Section 306, (iii) coupons appertaining to
Securities called for redemption and maturing after the
relevant Redemption Date, whose surrender has been waived as
provided in Section 1106, and (iv) Securities and coupons of
such series for whose payment money has theretofore been
deposited in trust or segregated and held in trust by the
Issuer and thereafter repaid to the Issuer or discharged from
such Trust, as provided in Section 1003) have been delivered to
the Trustee for cancellation; or
(2) all Securities of such series and, in the case of
(A) or (B) below, any coupons appertaining thereto not
theretofore delivered to the Trustee for cancellation
(A) have become due and payable, or
(B) will become due and payable at their
Stated Maturity within one year, or
(C) if redeemable at the option of the
Issuer, are to be called for redemption within one year
under arrangements satisfactory to the Trustee for the
giving of notice of redemption by the Trustee in the
name, and at the expense, of the Issuer,
and the Issuer, in the case of (A), (B) or (C) above, has
irrevocably deposited or caused to be deposited with the
Trustee as trust funds in trust for such purpose an amount in
the currency or currencies, currency unit or units or
composite currency or currencies in which the Securities of
such series are payable, sufficient to pay and discharge the
entire indebtedness on such Securities and such coupons not
theretofore delivered to the Trustee for cancellation, for
principal (and premium or Make-Whole Amount, if any) and
interest, and any Additional Amounts with respect thereto, to
the date of such deposit (in the case of Securities which have
become due and payable) or to the Stated Maturity or
Redemption Date, as the case may be,
(b) the Issuer has paid or caused to be paid all other sums payable
hereunder by the Issuer; and
(c) the Issuer has delivered to the Trustee an Officers'
Certificate and an Opinion of Counsel, each stating that all
conditions precedent herein provided for relating to the satisfaction
and discharge of this Indenture as to such series have been complied
with.
Notwithstanding the satisfaction and discharge of this Indenture, the
obligations of the Issuer to the Trustee and any predecessor Trustee under
Section 606, the obligations of the Issuer to any Authenticating Agent under
Section 611 and, if money shall have been deposited with and held by the
Trustee pursuant to subclause (B) of clause (1) of this Section, the
obligations of the Trustee under Section 402 and the last paragraph of Section
1003 shall survive.
SECTION 402. APPLICATION OF TRUST FUNDS. Subject to the provisions of
the last paragraph of Section 1003, all money and Government Obligations
deposited with the Trustee pursuant to Section 401 or Article 14 shall be held
in trust and applied by it, in accordance with the provisions of the
Securities, the coupons and this Indenture, to the payment, either directly
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or through any Paying Agent (including the Issuer acting as its own Paying
Agent) as the Trustee may determine, to the Persons entitled thereto, of the
principal (and premium or Make-Whole Amount, if any), and any interest and
Additional Amounts for whose payment such money has or Government Obligations
have been deposited with or received by the Trustee, but such money and
Government Obligations need not be segregated from other funds except to the
extent required by law.
ARTICLE FIVE
REMEDIES
SECTION 501. EVENTS OF DEFAULT. "Event of Default," wherever used herein
with respect to any particular series of Securities, means any one of the
following events (whatever the reason for such Event of Default and whether or
not it shall be voluntary or involuntary or be effected by operation of law or
pursuant to any judgment, decree or order of any court or any order, rule or
regulation of any administrative or governmental body) unless such event is
specifically deleted or modified in or pursuant to the supplemental indenture,
Board Resolution or Officers' Certificate establishing the terms of such series
pursuant to this Indenture:
(a) default in the payment of any interest upon or any Additional
Amounts payable in respect of any Security of that series or of any
coupon appertaining thereto, when such interest or Additional Amounts
or coupon becomes due and payable, and continuance of such default
for a period of 30 days; or
(b) default in the payment of the principal of (or premium or
Make-Whole Amount, if any, on) any Security of that series when it
becomes due and payable at its Maturity; or
(c) default in the deposit of any sinking fund payment, when and as
due by the terms of any Security of that series; or
(d) default in the performance, or breach, of any covenant or
warranty of the Issuer in this Indenture with respect to any Security
of that series (other than a covenant or warranty a default in the
performance or the breach of which is elsewhere in this Section
specifically dealt with), and continuance of such default or breach
for a period of 60 days after there has been given, by registered or
certified mail, to the Issuer by the Trustee or to the Issuer and the
Trustee by the Holders of at least 25% in principal amount of the
Outstanding Securities of that series, a written notice specifying
such default or breach and requiring it to be remedied and stating
that such notice is a "Notice of Default" hereunder; or
(e) a default under any evidence of Recourse Indebtedness of the
Issuer, or under any mortgage, indenture or other instrument of the
Issuer (including a default with respect to Securities of any series
other than that series) under which there may be issued or by which
there may be secured any Recourse Indebtedness of the Issuer (or by
any Subsidiary, the repayment of which the Issuer has guaranteed or
for which the Issuer is directly responsible or liable as obligor or
guarantor), whether such Recourse Debt now exists or shall hereafter
be created, which default shall constitute a failure to pay an
aggregate principal amount exceeding $5,000,000 of such indebtedness
when due and payable after the expiration of any applicable grace
period with respect thereto and shall have resulted in such
indebtedness in an aggregate principal amount exceeding $5,000,000
becoming or being declared due and payable prior to the date on which
it would otherwise have become due and payable, without such
indebtedness having been discharged, or such acceleration having been
rescinded or annulled, within a period of 10 days after there shall
have been given, by registered or certified mail, to the Issuer by
the Trustee or to the
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Issuer and the Trustee by the Holders of at least 25% in principal
amount of the Outstanding Securities of that series of a written
notice specifying such default and requiring the Issuer to cause
such indebtedness to be discharged or cause such acceleration to be
rescinded or annulled and stating that such notice is a "Notice of
Default" hereunder; or
(f) the Issuer or any Significant Subsidiary pursuant to or within
the meaning of any Bankruptcy Law:
(1) commences a voluntary case;
(2) consents to the entry of an order for relief
against it in an involuntary case;
(3) consents to the appointment of a Custodian of it or
for all or substantially all of its property; or
(4) makes a general assignment for the benefit of its
creditors; or
(g) a court of competent jurisdiction enters an order or decree
under any Bankruptcy Law that:
(1) is for relief against the Issuer or any Significant
Subsidiary in an involuntary case,
(2) appoints a Custodian of the Issuer or any
Significant Subsidiary or for all or substantially all of
either of its property, or
(3) orders the liquidation of the Issuer or any
Significant Subsidiary,
and the order or decree remains unstayed and in effect for 90 days;
or
(h) any other Event of Default provided in or pursuant to this
Indenture with respect to Securities of that series.
As used in this Section 501, the term "Bankruptcy Law" means title 11, U.S.
Code or any similar Federal or state law for the relief of debtors and the term
"Custodian" means any receiver, trustee, assignee, liquidator or other similar
official under any Bankruptcy Law.
SECTION 502. ACCELERATION OF MATURITY; RESCISSION AND ANNULMENT. If an
Event of Default with respect to Securities of any series at the time
Outstanding occurs and is continuing, then and in every such case the Trustee
or the Holders of not less than 25% in principal amount of the Outstanding
Securities of that series may declare the principal (or, if any Securities are
Original Issue Discount Securities or Indexed Securities, such portion of the
principal as may be specified in the terms thereof) of all the Securities of
that series to be due and payable immediately, by a notice in writing to the
Issuer (and to the Trustee if given by the Holders), and upon any such
declaration such principal or such lesser amount shall become immediately due
and payable.
At any time after such a declaration of acceleration with respect to
Securities of any series has been made and before a judgment or decree for
payment of the money due has been obtained by the Trustee as hereinafter in
this Article provided, the Holders of not less than a majority in principal
amount of the Outstanding Securities of that series, by written notice to the
Issuer and the Trustee, may rescind and annul such declaration and its
consequences if:
(a) the Issuer has paid or deposited with the Trustee a sum
sufficient to pay in the currency or currency unit or composite
currency in which the Securities of such series
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are payable (except as otherwise specified pursuant to Section 301
for the Securities of such series):
(1) all overdue installments of interest on and any
Additional Amounts payable in respect of all Outstanding
Securities of that series and any related coupons,
(2) the principal of (and premium or Make-Whole Amount,
if any, on) any Outstanding Securities of that series which
have become due otherwise than by such declaration of
acceleration and interest thereon and any Additional Amounts
with respect thereto at the rate or rates borne by or provided
for in such Securities,
(3) to the extent that payment of such interest or
Additional Amounts is lawful, interest upon overdue
installments of interest and any Additional Amounts at the rate
or rates borne by or provided for in such Securities, and
(4) all sums paid or advanced by the Trustee hereunder
and the reasonable compensation, expenses, disbursements and
advances of the Trustee, its agents and counsel; and
(b) all Events of Default with respect to Securities of that
series, other than the nonpayment of the principal of (or premium or
Make-Whole Amount, if any) or interest on, and any Additional Amounts
with respect to Securities of that series which have become due
solely by such declaration of acceleration, have been cured or waived
as provided in Section 513.
No such rescission shall affect any subsequent default or impair any right
consequent thereon.
SECTION 503. COLLECTION OF INDEBTEDNESS AND SUITS FOR ENFORCEMENT BY
TRUSTEE. The Issuer covenants that if:
(a) default is made in the payment of any installment of interest
or Additional Amounts, if any, on any Security of any series and any
related coupon when such interest or Additional Amount becomes due
and payable and such default continues for a period of 30 days, or
(b) default is made in the payment of the principal of (or premium
or Make-Whole Amount, if any, on) any Security of any series at its
Maturity,
then the Issuer will, upon demand of the Trustee, pay to the Trustee, for the
benefit of the Holders of such Securities of such series and coupons, the whole
amount then due and payable on such Securities and coupons for principal (and
premium or Make-Whole Amount, if any) and interest and Additional Amounts, with
interest upon any overdue principal (and premium or Make-Whole Amount, if any)
and, to the extent that payment of such interest shall be legally enforceable,
upon any overdue installments of interest or Additional Amounts, if any, at the
rate or rates borne by or provided for in such Securities, and, in addition
thereto, such further amount as shall be sufficient to cover the costs and
expenses of collection, including the reasonable compensation, expenses,
disbursements and advances of the Trustee, its agents and counsel.
If the Issuer fails to pay such amounts forthwith upon such
demand, the Trustee, in its own name and as trustee of an express
trust, may institute a judicial proceeding for the collection of the
sums so due and unpaid, and may prosecute such proceeding to judgment
or final decree, and may enforce the same against the Issuer or any
other obligor upon such Securities and any related coupons and collect
the monies adjudged or decreed to be payable in the manner provided by
law out
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of the property of the Issuer or any other obligor upon such Securities and any
related coupons wherever situated.
If an Event of Default with respect to Securities of any series occurs and
is continuing, the Trustee may in its discretion proceed to protect and enforce
its rights and the rights of the Holders of Securities of such series and any
related coupons by such appropriate judicial proceedings as the Trustee shall
deem most effectual to protect and enforce any such rights, whether for the
specific enforcement of any covenant or agreement in this Indenture or in aid
of the exercise of any power granted herein or therein, or to enforce any other
proper remedy.
SECTION 504. TRUSTEE MAY FILE PROOFS OF CLAIM. In case of the pendency
of any receivership, insolvency, liquidation, bankruptcy, reorganization,
arrangement, adjustment, composition or other judicial proceeding relative to
the Issuer or any other obligor upon the Securities or the property of the
Issuer or of such other obligor or their creditors, the Trustee (irrespective
of whether the principal of the Securities of any series shall then be due and
payable as therein expressed or by declaration or otherwise and irrespective of
whether the Trustee shall have made any demand on the Issuer for the payment of
overdue principal, premium or Make-Whole Amount, if any, or interest or
Additional Amounts) shall be entitled and empowered, by intervention in such
proceeding or otherwise:
(a) to file and prove a claim for the whole amount, or
such lesser amount as may be provided for in the Securities of
such series, of principal (and premium or Make-Whole Amount, if
any) and interest and Additional Amounts, if any, owing and
unpaid in respect of the Securities and any related coupons, to
file such other claims of the Trustee (including any claim for
the reasonable compensation, expenses, disbursements and
advances of the Trustee, its agents and counsel) and of the
Holders allowed in such judicial proceeding, and to take any
other action with respect to such claims, including
participating as a member of any official committee of
creditors appointed in the matters as it deems necessary or
advisable, and
(b) to collect and receive any monies or other property
payable or deliverable on any such claims and to distribute the
same;
and any custodian, receiver, assignee, trustee, liquidator, sequestrator (or
other similar official) in any such judicial proceeding is hereby authorized by
each Holder of the Securities of such series and coupons to make such payments
to the Trustee, and the Trustee is hereby constituted and appointed,
irrevocably, the attorney-in-fact for each of the Holders of the Securities of
such series to collect and receive such monies or other property and to deduct
therefrom any amount due to it for the reasonable compensation, expenses,
disbursements and advances of the Trustee and any predecessor Trustee, their
agents and counsel, and any other amounts due the Trustee or any predecessor
Trustee, under Section 606, and in the event that the Trustee shall consent to
the making of such payments directly to the Holders, to pay to the Trustee any
amount due to it for the reasonable compensation, expenses, disbursements and
advances of the Trustee and any predecessor Trustee, their agents and counsel,
and any other amounts due the Trustee or any predecessor Trustee under Section
606.
Nothing herein contained shall be deemed to authorize the Trustee to
authorize or consent to or accept or adopt on behalf of any Holder of a
Security or coupon any plan of reorganization, arrangement, adjustment or
composition affecting the Securities or coupons or the rights of any Holder
thereof, or to authorize the Trustee to vote in respect of the claim of any
Holder of a Security or coupon in any such proceeding.
SECTION 505. TRUSTEE MAY ENFORCE CLAIMS WITHOUT POSSESSION OF SECURITIES
OR COUPONS. All rights of action and claims under this Indenture or any of the
Securities or coupons may be prosecuted and enforced by the Trustee without the
possession of
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any of the Securities or coupons or the production thereof in any proceeding
relating thereto, and any such proceeding instituted by the Trustee shall be
brought in its own name as trustee of an express trust, and any recovery of
judgment shall, after provision for the payment of the reasonable compensation,
expenses, disbursements and advances of the Trustee, its agents and counsel, be
for the ratable benefit of the Holders of the Securities and coupons in respect
of which such judgment has been recovered.
SECTION 506. APPLICATION OF MONEY COLLECTED. Any money collected by the
Trustee pursuant to this Article shall be applied in the following order, at
the date or dates fixed by the Trustee and, in case of the distribution of such
money on account of principal (or premium or Make-Whole Amount, if any) or
interest and any Additional Amounts, upon presentation of the Securities or
coupons, or both, as the case may be, and the notation thereon of the payment
if only partially paid and upon surrender thereof if fully paid:
FIRST: To the payment of all amounts due the Trustee and any
predecessor Trustee under Section 606;
SECOND: To the payment of the amounts then due and unpaid upon the
Securities and coupons for principal (and premium or Make-Whole Amount, if
any) and interest and any Additional Amounts payable, in respect of which
or for the benefit of which such money has been collected, ratably,
without preference or priority of any kind, according to the aggregate
amounts due and payable on such Securities and coupons for principal (and
premium or Make-Whole Amount, if any), interest and Additional Amounts,
respectively; and
THIRD: The balance, if any, to the Issuer.
SECTION 507. LIMITATION ON SUITS. No Holder of any Security of any
series or any related coupon shall have any right to institute any proceeding,
judicial or otherwise, with respect to this Indenture, or for the appointment
of a receiver or trustee, or for any other remedy hereunder, unless:
(a) such Holder has previously given written notice to the Trustee
of a continuing Event of Default with respect to the Securities of
that series;
(b) the Holders of not less than 25% in principal amount of the
Outstanding Securities of that series shall have made written request
to the Trustee to institute proceedings in respect of such Event of
Default in its own name as Trustee hereunder;
(c) such Holder or Holders have offered to the Trustee indemnity
reasonably satisfactory to the Trustee against the costs, expenses
and liabilities to be incurred in compliance with such request;
(d) the Trustee for 60 days after its receipt of such notice,
request and offer of indemnity has failed to institute any such
proceeding; and
(e) no direction inconsistent with such written request has been
given to the Trustee during such 60-day period by the Holders of a
majority in principal amount of the Outstanding Securities of that
series;
it being understood and intended that no one or more of such Holders shall have
any right in any manner whatever by virtue of, or by availing of, any provision
of this Indenture or any Security to affect, disturb or prejudice the rights of
any other of such Holders, or to obtain or to seek to obtain priority or
preference over any other of such Holders or to enforce any right under this
Indenture, except in the manner herein provided and for the equal and ratable
benefit of all such Holders.
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SECTION 508. UNCONDITIONAL RIGHT OF HOLDERS TO RECEIVE PRINCIPAL, PREMIUM
OR MAKE-WHOLE AMOUNT, IF ANY, INTEREST AND ADDITIONAL AMOUNTS. Notwithstanding
any other provision in this Indenture, the Holder of any Security or coupon
shall have the right which is absolute and unconditional to receive payment of
the principal of (and premium or Make-Whole Amount, if any) and (subject to
Sections 305 and 307) interest on, and any Additional Amounts in respect of,
such Security or payment of such coupon on the respective Stated Maturity or
Maturities specified in such Security or coupon (or, in the case of redemption,
on the Redemption Date or, in the case of repayment, on the Repayment Date) and
to institute suit for the enforcement of any such payment and such rights shall
not be impaired without the consent of such Holder.
SECTION 509. RESTORATION OF RIGHTS AND REMEDIES. If the Trustee or any
Holder of a Security or coupon has instituted any proceeding to enforce any
right or remedy under this Indenture and such proceeding has been discontinued
or abandoned for any reason, or has been determined adversely to the Trustee or
to such Holder, then and in every such case, the Issuer, the Trustee and the
Holders of Securities and coupons shall, subject to any determination in such
proceeding, be restored severally and respectively to their former positions
hereunder and thereafter all rights and remedies of the Trustee and the Holders
shall continue as though no such proceeding had been instituted.
SECTION 510. RIGHTS AND REMEDIES CUMULATIVE. Except as otherwise
provided with respect to the replacement or payment of mutilated, destroyed,
lost or stolen Securities or coupons in the last paragraph of Section 306, no
right or remedy herein conferred upon or reserved to the Trustee or to each
Holder of Securities or coupons is intended to be exclusive of any other right
or remedy, and every right and remedy shall, to the extent permitted by law, be
cumulative and in addition to every other right and remedy given hereunder or
now or hereafter existing at law or in equity or otherwise. The assertion or
employment of any right or remedy hereunder, or otherwise, shall not prevent
the concurrent assertion or employment of any other appropriate right or
remedy.
SECTION 511. DELAY OR OMISSION NOT WAIVER. No delay or omission of the
Trustee or of any Holder of any Security or coupon to exercise any right or
remedy accruing upon any Event of Default shall impair any such right or remedy
or constitute a waiver of any such Event of Default or an acquiescence therein.
Every right and remedy given by this Article or by law to the Trustee or to
any Holder may be exercised from time to time, and as often as may be deemed
expedient, by the Trustee or by such Holder of Securities or coupons, as the
case may be.
SECTION 512. CONTROL BY HOLDERS OF SECURITIES. The Holders of not less
than a majority in principal amount of the Outstanding Securities of any series
shall have the right to direct the time, method and place of conducting any
proceeding for any remedy available to the Trustee or exercising any trust or
power conferred on the Trustee with respect to the Securities of such series
and any related coupons, provided that
(a) such direction shall not be in conflict with any rule of law or
with this Indenture or with the Securities of any series,
(b) the Trustee may take any other action deemed proper by the
Trustee which is not inconsistent with such direction, and
(c) the Trustee need not take any action which might involve it in
personal liability or be unduly prejudicial to the Holders of
Securities of such series not joining therein.
SECTION 513. WAIVER OF PAST DEFAULTS. The Holders of not less than a
majority in principal amount of the Outstanding Securities of any series may on
behalf of the Holders of all the Securities of such series and any related
coupons waive any past default hereunder with respect to such series and its
consequences, except a default
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(a) in the payment of the principal of (or premium or Make-Whole Amount,
if any) or interest on or Additional Amounts payable in respect of any
Security of such series or any related coupons, or
(b) in respect of a covenant or provision hereof which under Article Nine
cannot be modified or amended without the consent of the Holder of
each Outstanding Security of such series affected.
Upon any such waiver, such default shall cease to exist, and any Event of
Default arising therefrom shall be deemed to have been cured, for every purpose
of this Indenture; but no such waiver shall extend to any subsequent or other
default or Event of Default or impair any right consequent thereon.
SECTION 514. WAIVER OF USURY, STAY OR EXTENSION LAWS. The Issuer
covenants (to the extent that it may lawfully do so) that it will not at any
time insist upon, or plead, or in any manner whatsoever claim or take the
benefit or advantage of, any usury, stay or extension law wherever enacted, now
or at any time hereafter in force, which may affect the covenants or the
performance of this Indenture; and the Issuer (to the extent that it may
lawfully do so) hereby expressly waives all benefit or advantage of any such
law, and covenants that it will not hinder, delay or impede the execution of
any power herein granted to the Trustee, but will suffer and permit the
execution of every such power as though no such law had been enacted.
SECTION 515. UNDERTAKING FOR COSTS. All parties to this Indenture agree,
and each Holder of any Security by his acceptance thereof shall be deemed to
have agreed, that any court may in its discretion require, in any suit for the
enforcement of any right or remedy under this Indenture, or in any suit against
the Trustee for any action taken or omitted by it as Trustee, the filing by any
party litigant in such suit of any undertaking to pay the costs of such suit,
and that such court may in its discretion assess reasonable costs, including
reasonable attorneys' fees, against any party litigant in such suit having due
regard to the merits and good faith of the claims or defenses made by such
party litigant; but the provisions of this Section shall not apply to any suit
instituted by the Trustee, to any suit instituted by any Holder, or group of
Holders, holding in the aggregate more than 25% in principal amount of the
Outstanding Securities, or to any suit instituted by any Holder for the
enforcement of the payment of the principal of (or premium or Make-Whole
Amount, if any) or interest or Additional Amounts, if any on any Security on or
after the respective Stated Maturities expressed in such Security (or, in the
case of redemption, on or after the Redemption Date or, in the case of
repayment, on or after the Repayment Date).
ARTICLE SIX
THE TRUSTEE
SECTION 601. NOTICE OF DEFAULTS. Within 90 days after the occurrence of
any default hereunder with respect to the Securities of any series for which it
is acting as Trustee, the Trustee shall transmit in the manner and to the
extent provided in TIA Section 313(c), notice of such default hereunder known
to the Trustee, unless such default shall have been cured or waived; provided,
however, that, except in the case of a default in the payment of the principal
of (or premium or Make-Whole Amount, if any) or interest on or any Additional
Amounts with respect to any Security of such series, or in the payment of any
sinking fund installment with respect to the Securities of such series, the
Trustee shall be protected in withholding such notice if and so long as
Responsible Officers of the Trustee in good faith determine that the
withholding of such notice is in the best interests of the Holders of the
Securities and coupons of such series; and provided further that in the case of
any default or breach of the character specified in Section 501(d) with respect
to the Securities and coupons of such series, no such notice to Holders shall
be given until at least 60 days after the occurrence thereof. For the purpose
of this Section, the term "default" means any event which is, or after notice
or lapse of time or both would become, an Event of Default with respect to the
Securities of such series.
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SECTION 602. CERTAIN RIGHTS OF TRUSTEE.
(a) after the occurrence of an Event of Default hereunder and for
so long as such Event of Default is continuing, with respect to the
series of Securities for which it is acting, the Trustee shall
exercise such of the rights and powers vested in it by the Indenture
and use of the same degree of care and skill in their exercise as a
prudent person would exercise or use under the circumstances in the
conduct of such Person's own affairs;
(b) nothing herein shall relieve the Trustee from liability for its
own negligent action, its own negligent failure to act or its own
willful misconduct, except that the Trustee shall not be liable
except for the performance of such duties as are specifically set
forth herein;
(c) if different Trustees have been appointed with respect to
different series of Securities, no Trustee shall be responsible for
the actions or omissions of any other Trustee nor have any liability
to the Holders of any series of Securities for which it is not
acting;
(d) the Trustee may rely and shall be protected in acting or
refraining from acting upon any resolution, certificate, statement,
instrument, opinion, report, notice, request, direction, consent,
order, bond, debenture, note, coupon or other paper or document
believed by it to be genuine and to have been signed or presented by
the proper party or parties, and the Trustee may conclusively rely,
as to the truth of the statements and correctness of the opinions
expressed therein, in the absence of bad faith on the part of the
Trustee; provided, however, that the Trustee shall examine such
papers or documents furnished to it pursuant to this Indenture to
determine whether or not such papers or documents conform to the
requirements of the Indenture;
(e) any request or direction of the Issuer mentioned herein shall
be sufficiently evidenced by an Issuer Request or Issuer Order (other
than delivery of any Security, together with any coupons appertaining
thereto, to the Trustee for authentication and delivery pursuant to
Section 303 which shall be sufficiently evidenced as provided
therein) and any resolution of the Board of Trustees may be
sufficiently evidenced by a Board Resolution;
(f) whenever in the administration of this Indenture the Trustee
shall deem it desirable that a matter be proved or established prior
to taking, suffering or omitting any action hereunder, the Trustee
(unless other evidence be herein specifically prescribed) may, in the
absence of bad faith on its part, rely upon an Officers' Certificate;
(g) the Trustee may consult with counsel and the written advice of
such counsel or any Opinion of Counsel shall be full and complete
authorization and protection in respect of any action taken, suffered
or omitted by it hereunder in good faith and in reliance thereon;
(h) the Trustee shall be under no obligation to exercise any of
the rights or powers vested in it by this Indenture at the request or
direction of any of the Holders of Securities of any series or any
related coupons pursuant to this Indenture, unless such Holders shall
have offered to the Trustee security or indemnity reasonably
satisfactory to the Trustee against the costs, expenses and
liabilities which might be incurred by it in compliance with such
request or direction;
(i) the Trustee shall not be bound to make any investigation into
the facts or matters stated in any resolution, certificate,
statement, instrument, opinion, report, notice,
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request, direction, consent, order, bond, debenture, note, coupon or
other paper or document, but the Trustee, in its discretion, may
make such further inquiry or investigation into such facts or
matters as it may see fit, and, if the Trustee shall determine to
make such further inquiry or investigation, it shall be entitled to
examine the books, records and premises of the Issuer, personally or
by agent or attorney following reasonable notice to the Issuer;
(j) the Trustee may execute any of the trusts or powers hereunder
or perform any duties hereunder either directly or by or through
agents or counsel and the Trustee shall not be responsible for any
misconduct or negligence on the part of any agent or counsel
appointed with due care by it hereunder;
(k) the Trustee shall not be charged with knowledge of any Event of
Default described in Section 501(d), (e), (f) or (g) hereof unless a
Responsible Officer of the Trustee shall have actual knowledge of
such Event of Default; and
(l) in the event the Issuer shall appoint a Special Paying Agent in
connection with a series of Securities, the Issuer and the Trustee
shall enter into a special paying agent agreement (a "Special Paying
Agent Agreement") with such Person on terms as may be mutually agreed
by the Issuer, the Trustee and such Special Paying Agent.
Notwithstanding any other provision contained herein, such Special
Paying Agent so appointed shall be a third party beneficiary of this
Agreement, and all of the benefits and protections of the Trustee
provided for herein (including, but not limited to all of the
provisions for the benefit of the Trustee contained in this Article
Six) shall also apply to the Special Paying Agent, in addition to,
and not as a substitute for, such other benefits and protections as
may be provided for in the related Special Paying Agent Agreement.
The Trustee shall not be required to expend or risk its own funds or
otherwise incur any financial liability in the performance of any of its duties
hereunder, or in the exercise of any of its rights or powers, if it shall have
reasonable grounds for believing that repayment of such funds or adequate
indemnity against such risk or liability is not reasonably assured to it.
Except during the continuance of an Event of Default, the Trustee
undertakes to perform only such duties as are specifically set forth in this
Indenture, and no implied covenants or obligations shall be read into this
Indenture against the Trustee.
SECTION 603. NOT RESPONSIBLE FOR RECITALS OR ISSUANCE OF SECURITIES. The
recitals contained herein and in the Securities, except the Trustee's
certificate of authentication, and in any coupons shall be taken as the
statements of the Issuer, and neither the Trustee nor any Authenticating Agent
assumes any responsibility for their correctness. The Trustee makes no
representations as to the validity or sufficiency of this Indenture or of the
Securities or coupons, except that the Trustee represents that it is duly
authorized to execute and deliver this Indenture, authenticate the Securities
and perform its obligations hereunder and that the statements made by it in a
Statement of Eligibility and Qualification on Form T-1 supplied to the Issuer
are true and correct, subject to the qualifications set forth therein. Neither
the Trustee nor any Authenticating Agent shall be accountable for the use or
application by the Issuer of Securities or the proceeds thereof.
SECTION 604. MAY HOLD SECURITIES. The Trustee, any Paying Agent,
Security Registrar, Authenticating Agent or any other agent of the Trustee or
the Issuer, in its individual or any other capacity, may become the owner or
pledgee of Securities and coupons and, subject to TIA Sections 310(b) and 311
of the TIA, may otherwise deal with the Issuer with the same rights it would
have if it were not Trustee, Paying Agent, Security Registrar, Authenticating
Agent or such other agent.
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SECTION 605. MONEY HELD IN TRUST. Except as provided in Section 402 and
Section 1003, money held by the Trustee in trust hereunder need not be
segregated from other funds except to the extent required by law. The Trustee
shall be under no liability for interest on any money received by it hereunder
except as otherwise agreed with the Issuer.
SECTION 606. COMPENSATION AND REIMBURSEMENT. The Issuer agrees:
(a) to pay to the Trustee from time to time reasonable compensation
for all services rendered by the Trustee hereunder (which
compensation shall not be limited by any provision of law in regard
to the compensation of a trustee of an express trust);
(b) except as otherwise expressly provided herein, to reimburse
each of the Trustee and any predecessor Trustee upon its request for
all reasonable expenses, disbursements and advances incurred or made
by the Trustee in accordance with any provision of this Indenture
(including the reasonable compensation and the expenses and
disbursements of its agents and counsel), except any such expense,
disbursement or advance as may be attributable to its negligence or
bad faith; and
(c) to indemnify each of the Trustee and any predecessor Trustee
for, and to hold it harmless against, any loss, liability or expense
incurred without negligence or bad faith on its own part, arising out
of or in connection with the acceptance or administration of the
trust or trusts hereunder, including the costs and expenses of
defending itself against any claim or liability in connection with
the exercise or performance of any of its powers or duties hereunder.
When the Trustee incurs expenses or renders services in connection with an
Event of Default specified in Section 501(f) or Section 501(g), the expenses
(including the reasonable charges and expenses of its counsel) and the
compensation for the services are intended to constitute expenses of
administration under any applicable Federal or state bankruptcy, insolvency or
other similar law.
As security for the performance of the obligations of the Issuer under
this Section, the Trustee shall have a lien prior to the Securities upon all
property and funds held or collected by the Trustee as such, except funds held
in trust for the payment of principal of (or premium or Make-Whole Amount, if
any) or interest or any Additional Amounts on particular Securities or any
related coupons.
The provisions of this Section shall survive the termination of this
Indenture.
SECTION 607. CORPORATE TRUSTEE REQUIRED ELIGIBILITY; CONFLICTING
INTERESTS. There shall at all times be a Trustee hereunder which shall be
eligible to act as Trustee under TIA Section 310(a)(1) and shall have a
combined capital and surplus of at least $50,000,000. If such corporation
publishes reports of condition at least annually, pursuant to law or the
requirements of Federal, state, territorial or District of Columbia supervising
or examining authority, then for the purposes of this Section, the combined
capital and surplus of such corporation shall be deemed to be its combined
capital and surplus as set forth in its most recent report of condition so
published. If at any time the Trustee shall cease to be eligible in accordance
with the provisions of this Section, it shall resign immediately in the manner
and with the effect hereinafter specified in this Article.
SECTION 608. RESIGNATION AND REMOVAL; APPOINTMENT OF SUCCESSOR.
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(a) No resignation or removal of the Trustee and no appointment of a
successor Trustee pursuant to this Article shall become effective until the
acceptance of appointment by the successor Trustee in accordance with the
applicable requirements of Section 609. Notwithstanding anything to the
contrary contained herein, Section 310(b) of the TIA is hereby incorporated
herein by reference and deemed a part hereof.
(b) The Trustee may resign at any time with respect to the Securities of
one or more series by giving written notice thereof to the Issuer. If any
instrument of acceptance by a successor Trustee shall not have been delivered
to the Trustee within 30 days after the giving of such notice of resignation,
the resigning Trustee may petition any court of competent jurisdiction for the
appointment of a successor Trustee with respect to such series.
(c) The Trustee may be removed at any time with respect to the Securities
of any series by Act of the Holders of a majority in principal amount of the
Outstanding Securities of such series delivered to the Trustee and to the
Issuer.
(d) If at any time:
(1) the Trustee shall fail to comply with the provisions of TIA
Section 310(b) after written request therefor by the Issuer or by
any Holder of a Security who has been a bona fide Holder of a
Security for at least six months, or
(2) the Trustee shall cease to be eligible under Section 607 and
shall fail to resign after written request therefor by the Issuer
or by any Holder of a Security who has been a bona fide Holder of
a Security for at least six months, or
(3) the Trustee shall become incapable of acting or shall be adjudged
a bankrupt or insolvent, or a receiver of the Trustee or of its
property shall be appointed or any public officer shall take
charge or control of the Trustee or of its property or affairs
for the purpose of rehabilitation, conservation or liquidation,
then, in any such case, (A) the Issuer by or pursuant to a Board Resolution may
remove the Trustee and appoint a successor Trustee with respect to all
Securities, or (B) subject to TIA Section 315(e), any Holder of a Security who
has been a bona fide Holder of a Security for at least six months may, on
behalf of himself and all others similarly situated, petition any court of
competent jurisdiction for the removal of the Trustee with respect to all
Securities of such series and the appointment of a successor Trustee or
Trustees.
(e) If the Trustee shall resign, be removed or become incapable of acting,
or if a vacancy shall occur in the office of Trustee for any cause with respect
to the Securities of one or more series, the Issuer, by or pursuant to a Board
Resolution, shall promptly appoint a successor Trustee or Trustees with respect
to the Securities of that or those series (it being understood that any such
successor Trustee may be appointed with respect to the Securities of one or
more or all of such series and that at any time there shall be only one Trustee
with respect to the Securities of any particular series) and shall comply with
the applicable requirements of Section 609. If, within one year after such
resignation, removal or incapability, or the occurrence of such vacancy, a
successor Trustee with respect to the Securities of any series shall be
appointed by Act of the Holders of a majority in principal amount of the
Outstanding Securities of such series delivered to the Issuer and the retiring
Trustee, the successor Trustee so appointed shall, forthwith upon its
acceptance of such appointment in accordance with the applicable requirements
of Section 609, become the successor Trustee with respect to the Securities of
such series and to that extent supersede the successor Trustee appointed by the
Issuer. If no successor Trustee with respect to the Securities of any series
shall have been so appointed by the Issuer or the Holders of Securities and
accepted appointment in the manner
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provided in Section 609, any Holder of a Security who has been a bona fide
Holder of a Security of such series for at least six months may, on behalf of
himself and all others similarly situated, petition any court of competent
jurisdiction for the appointment of a successor Trustee with respect to
Securities of such series.
(f) The Issuer shall give notice of each resignation and each removal of
the Trustee with respect to the Securities of any series and each appointment
of a successor Trustee with respect to the Securities of any series in the
manner provided for notices to the Holders of Securities in Section 106. Each
notice shall include the name of the successor Trustee with respect to the
Securities of such series and the address of its Corporate Trust Office.
SECTION 609. ACCEPTANCE OF APPOINTMENT BY SUCCESSOR.
(a) In case of the appointment hereunder of a successor Trustee with
respect to all Securities, every such successor Trustee shall execute,
acknowledge and deliver to the Issuer and to the retiring Trustee, an
instrument accepting such appointment, and thereupon the resignation or removal
of the retiring Trustee shall become effective and such successor Trustee,
without any further act, deed or conveyance, shall become vested with all the
rights, powers, trusts and duties of the retiring Trustee; but, on request of
the Issuer or the successor Trustee, such retiring Trustee shall, upon, payment
of its charges, execute and deliver an instrument transferring to such
successor Trustee all the rights, powers and trusts of the retiring Trustee,
and shall duly assign, transfer and deliver to such successor Trustee all
property and money held by such retiring Trustee hereunder, subject
nevertheless to its claim, if any, provided for in Section 606.
(b) In case of the appointment hereunder of a successor Trustee with
respect to the Securities of one or more (but not all) series, the Issuer, the
retiring Trustee and each successor Trustee with respect to the Securities of
one or more series shall execute and deliver an indenture supplemental hereto,
pursuant to Article Nine hereof, wherein each successor Trustee shall accept
such appointment and which (1) shall contain such provisions as shall be
necessary or desirable to transfer and confirm to, and to vest in, each
successor Trustee all the rights, powers, trusts and duties of the retiring
Trustee with respect to the Securities of that or those series to which the
appointment of such successor Trustee relates, (2) if the retiring Trustee is
not retiring with respect to all Securities, shall contain such provisions as
shall be deemed necessary or desirable to confirm that all the rights, powers,
trusts and duties of the retiring Trustee with respect to the Securities of
that or those series as to which the retiring Trustee is not retiring shall
continue to be vested in the retiring Trustee, and (3) shall add to or change
any of the provisions of this Indenture as shall be necessary to provide for or
facilitate the administration of the trusts hereunder by more than one Trustee,
it being understood that nothing herein or in such supplemental indenture shall
constitute such Trustee's co-trustees of the same trust and that each such
Trustee shall be trustee of a trust or trusts hereunder separate and apart from
any trust or trusts hereunder administered by any other such Trustee; and upon
the execution and delivery of such supplemental indenture the resignation or
removal of the retiring Trustee shall become effective to the extent provided
therein and each such successor Trustee, without any further act, deed or
conveyance, shall become vested with all the rights, powers, trusts and duties
of the retiring Trustee with respect to the Securities of that or those series
to which the appointment of such successor Trustee relates; but, on request of
the Issuer or any successor Trustee, such retiring Trustee shall duly assign,
transfer and deliver to such successor Trustee all property and money held by
such retiring Trustee hereunder with respect to the Securities of that or those
series to which the appointment of such successor Trustee relates.
(c) Upon request of any such successor Trustee, the Issuer shall execute
any and all instruments for more fully and certainly vesting in and confirming
to such successor Trustee all such rights, powers and trusts referred to in
paragraph (a) or (b) of this Section, as the case may be.
(d) No successor Trustee shall accept its appointment unless at the time
of such acceptance such successor Trustee shall be qualified and eligible under
this Article.
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SECTION 610. MERGER, CONVERSION, CONSOLIDATION OR SUCCESSION TO BUSINESS.
Any corporation into which the Trustee may be merged or converted or with
which it may be consolidated, or any corporation resulting from any merger,
conversion or consolidation to which the Trustee shall be a party, or any
corporation succeeding to all or substantially all of the corporate trust
business of the Trustee, shall be the successor of the Trustee hereunder,
provided such corporation shall be otherwise qualified and eligible under this
Article, without the execution or filing of any paper or any further act on the
part of any of the parties hereto. In case any Securities or coupons shall
have been authenticated, but not delivered, by the Trustee then in office, any
successor by merger, conversion or consolidation to such authenticating Trustee
may adopt such authentication and deliver the Securities or coupons so
authenticated with the same effect as if such successor Trustee had itself
authenticated such Securities or coupons. In case any Securities or coupons
shall not have been authenticated by such predecessor Trustee, any such
successor Trustee may authenticate and deliver such Securities or coupons, in
either its own name or that of its predecessor Trustee, with the full force and
effect which this Indenture provides for the certificate of authentication of
the Trustee.
SECTION 611. APPOINTMENT OF AUTHENTICATING AGENT. At any time when any
of the Securities remain Outstanding, the Trustee may appoint an Authenticating
Agent or Agents with respect to one or more series of Securities which shall be
authorized to act on behalf of the Trustee to authenticate Securities of such
series or pursuant to Section 306 issued upon original issue, exchange,
registration of transfer or partial redemption or repayment thereof, and
Securities so authenticated shall be entitled to the benefits of this Indenture
and shall be valid and obligatory for all purposes as if authenticated by the
Trustee hereunder. Any such appointment shall be evidenced by an instrument in
writing signed by a Responsible Officer of the Trustee, a copy of which
instrument shall be promptly furnished to the Issuer. Wherever reference is
made in this Indenture to the authentication and delivery of Securities by the
Trustee or the Trustee's certification of authentication, such reference shall
be deemed to include authentication and delivery on behalf of the Trustee by an
Authenticating Agent and a certificate of authentication executed on behalf of
the Trustee by an Authenticating Agent.
Each Authenticating Agent shall be acceptable to the Issuer and shall at
all times be a bank or trust company or corporation organized and doing
business and in good standing under the laws of the United States of America or
of any State or the District of Columbia, authorized under such laws to act as
Authenticating Agent, having a combined capital and surplus of not less than
$50,000,000 and subject to supervision or examination by Federal or State
authorities. If such Authenticating Agent publishes reports of condition at
least annually, pursuant to law or the requirements of the aforesaid
supervising or examining authority, then for the purposes of this Section, the
combined capital and surplus of such Authenticating Agent shall be deemed to be
its combined capital and surplus as set forth in its most recent report of
condition so published. In case at any time an Authenticating Agent shall
cease to be eligible in accordance with the provisions of this Section, such
Authenticating Agent shall resign immediately in the manner and with the effect
specified in this Section.
Any corporation into which an Authenticating Agent may be merged or
converted or with which it may be consolidated, or any corporation resulting
from any merger, conversion or consolidation to which such Authenticating Agent
shall be a party, or any corporation succeeding to the corporate agency or
corporate trust business of an Authenticating Agent, shall continue to be an
Authenticating Agent, provided such corporation shall be otherwise eligible
under this Section without the execution or filing of any paper or further act
on the part of the Trustee or the Authenticating Agent.
An Authenticating Agent for any series of Securities may at any time
resign by giving written notice of resignation to the Trustee for such series
and to the Issuer. The Trustee for any series of Securities may at any time
terminate the agency of an Authenticating Agent by giving written notice of
termination to such Authenticating Agent and to the Issuer. Upon receiving
such a notice of resignation or upon such a termination, or in case at any time
such Authenticating Agent
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shall cease to be eligible in accordance with the provisions of this Section,
the Trustee for such series may appoint a successor Authenticating Agent which
shall be acceptable to the Issuer and shall give notice of such appointment to
all Holders of Securities of the series with respect to which such
Authenticating Agent will serve in the manner set forth in Section 106. Any
successor Authenticating Agent upon acceptance of its appointment hereunder
shall become vested with all the rights, powers and duties of its predecessor
hereunder, with like effect as if originally named as an Authenticating Agent
herein. No successor Authenticating Agent shall be appointed unless eligible
under the provisions of this Section.
The Issuer agrees to pay to each Authenticating Agent from time to time
reasonable compensation including reimbursement of its reasonable expenses for
its services under this Section.
If an appointment with respect to one or more series is made pursuant to
this Section, the Securities of such series may have endorsed thereon, in
addition to or in lieu of the Trustee's certificate of authentication, an
alternate certificate of authentication substantially in the following form:
This is one of the Securities of the series designated therein referred to
in the within-mentioned Indenture.
(TRUSTEE)
as Trustee
By:
------------------------
as Authenticating Agent
By:
------------------------
Authorized Signatory
If all of the Securities of any series may not be originally issued at one
time, and if the Trustee does not have an office capable of authenticating
Securities upon original issuance located in a Place of Payment where the
Issuer wishes to have Securities of such series authenticated upon original
issuance, the Trustee, if so requested in writing (which writing need not be
accompanied by or contained in an Officers' Certificate by the Issuer), shall
appoint in accordance with this Section an Authenticating Agent having an
office in a Place of Payment designated by the Issuer with respect to such
series of Securities.
ARTICLE SEVEN
HOLDERS' LIST AND REPORTS BY TRUSTEE AND ISSUER
SECTION 701. DISCLOSURE OF NAMES AND ADDRESSES OF HOLDERS. Every Holder
of Securities or coupons, by receiving and holding the same, agrees with the
Issuer and the Trustee that neither the Issuer nor the Trustee nor an
Authenticating Agent nor any Paying Agent nor any Security Registrar shall be
held accountable by reason of the disclosure of any information as to the names
and addresses of the Holders of Securities in accordance with TIA Section
312(c), regardless of the source from which such information was derived, and
that the Trustee shall not be held accountable by reason of mailing any
material pursuant to a request made under TIA Section 312(b).
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SECTION 702. REPORTS BY TRUSTEE.
(a) Within 60 days after December 31 of each year commencing with the
first December 31 following the first issuance of Securities pursuant to
Section 301, if required by Section 313(a) of the TIA, the Trustee shall
transmit, pursuant to Section 313(c) of the TIA, a brief report dated as of
such December 31 with respect to any of the events specified in said Section
313(a) which may have occurred since the later of the immediately preceding
December 31 and the date of this Indenture.
(b) The Trustee shall transmit the reports required by Section 313(a) of
the TIA at the times specified therein.
(c) Reports pursuant to this Section shall be transmitted in the manner
and to the Persons required by Sections 313(c) and 313(d) of the TIA.
SECTION 703. REPORTS BY ISSUER. The Issuer will, pursuant to TIA Section
314(a):
(a) file with the Trustee, within 15 days after the Issuer is required to
file the same with the Commission, copies of the annual reports and of the
information, documents and other reports (or copies of such portions of
any of the foregoing as the Commission may from time to time by rules and
regulations prescribe) which the Issuer may be required to file with the
Commission pursuant to Section 13 or Section 15(d) of the Exchange Act;
or, if the Issuer is not required to file information, documents or
reports pursuant to either of said Sections, then it shall file with the
Trustee and the Commission, in accordance with rules and regulations
prescribed from time to time by the Commission, such of the supplementary
and periodic information, documents and reports which may be required
pursuant to Section 13 of the Exchange Act in respect of a security listed
and registered on a national securities exchange as may be prescribed from
time to time in such rules and regulations;
(b) file with the Trustee and the Commission, in accordance with rules and
regulations prescribed from time to time by the Commission, such
additional information, documents and reports with respect to compliance
by the Issuer with the conditions and covenants of this Indenture as may
be required from time to time by such rules and regulations; and
(c) transmit by mail to the Holders of Securities, within 30 days after
the filing thereof with the Trustee, in the manner and to the extent
provided in TIA Section 313(c), such summaries of any information,
documents and reports required to be filed by the Issuer pursuant to
Section 1010 and paragraphs (a) and (b) of this Section as may be required
by rules and regulations prescribed from time to time by the Commission.
SECTION 704. ISSUER TO FURNISH TRUSTEE NAMES AND ADDRESSES OF HOLDERS.
In accordance with TIA Section 312(a), the Issuer will furnish or cause to be
furnished to the Trustee:
(a) semiannually, not later than 15 days after the Regular Record Date for
interest of each series of Securities, a list, in such form as the Trustee may
reasonably require, of the names and addresses of the Holders of Registered
Securities of such series as of such Regular Record Date, or if there is no
Regular Record Date for interest for such series of Securities, semiannually,
upon such dates as are set forth in the Board Resolution or indenture
supplemental hereto authorizing such series, and
(b) at such other times as the Trustee may request in writing, within 30
days after the receipt by the Issuer of any such request, a list of similar
form and content as of a date not more than 15 days prior to the time such list
is furnished,
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provided however, that, so long as the Trustee is the Security Registrar, no
such list shall be required to be furnished.
ARTICLE EIGHT
CONSOLIDATION, MERGER, SALE, LEASE OR CONVEYANCE
SECTION 801. CONSOLIDATIONS AND MERGERS OF ISSUER AND SALES, LEASES AND
CONVEYANCE PERMITTED SUBJECT TO CERTAIN CONDITIONS. The Issuer may consolidate
with, or sell, lease or convey all or substantially all of its assets to, or
merge with or into, any other Person, provided that (a) the Issuer shall be the
continuing corporation, or the successor Person or its transferees or assignees
of such assets (if other than the Issuer) formed by or resulting from any such
consolidation or merger or which shall have received the transfer of such
assets by lease (subject to the continuing obligations of Issuer set forth in
Section 802) or otherwise, either directly or indirectly, shall expressly
assume the payment of the principal of (and premium or Make-Whole Amount, if
any) and interest on all the Securities, and the due and punctual performance
and observance of all of the covenants and conditions in this Indenture; (b)
the successor Person formed by or resulting from any such consolidation or
merger or which shall have received the transfer of assets pursuant to this
Section 801 shall be a United States Person; and (c) immediately after giving
effect to such transaction and treating any Debt which becomes an obligation of
the Issuer or any Subsidiary as a result thereof as having been incurred by the
Issuer or such Subsidiary at the time of such transaction, no Event of Default,
and no event which, after notice or the lapse of time, or both, would become
such an Event of Default, shall have occurred and be continuing.
SECTION 802. RIGHTS AND DUTIES OF SUCCESSOR CORPORATION. In case of any
such consolidation, merger, sale, lease or conveyance and upon any such
assumption by the successor corporation, such successor corporation shall
succeed to and be substituted for the Issuer with the same effect as if it had
been named herein as the party of the first part, and the predecessor
corporation, except in the event of a lease, shall be relieved of any further
obligation under this Indenture and the Securities. Such successor corporation
thereupon may cause to be signed, and may issue either in its own name or in
the name of the Issuer, any or all of the Securities issuable hereunder which
theretofore shall not have been signed by the Issuer and delivered to the
Trustee; and, upon the order of such successor corporation, instead of the
Issuer, and subject to all the terms, conditions and limitations in this
Indenture prescribed, the Trustee shall authenticate and shall deliver any
Securities which previously shall have been signed and delivered by the
officers of the Issuer to the Trustee for authentication, and any Securities
which such successor corporation thereafter shall cause to be signed and
delivered to the Trustee for that purpose. All the Securities so issued shall
in all respects have the same legal rank and benefit under this Indenture as
the Securities theretofore or thereafter issued in accordance with the terms of
this Indenture as though all of such Securities had been issued at the date of
the execution hereof.
In case of any such consolidation, merger, sale, lease or conveyance, such
changes in phraseology and form (but not in substance) may be made in the
Securities thereafter to be issued as may be appropriate.
SECTION 803. OFFICERS' CERTIFICATE AND OPINION OF COUNSEL. Any
consolidation, merger, sale, lease or conveyance permitted under Section 801 is
also subject to the condition that the Trustee receive an Officers' Certificate
and an Opinion of Counsel to the effect that any such consolidation, merger,
sale, lease or conveyance, and the assumption by any successor corporation,
complies with the provisions of this Article and that all conditions precedent
herein provided for relating to such transaction have been complied with.
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ARTICLE NINE
SUPPLEMENTAL INDENTURES
SECTION 901. SUPPLEMENTAL INDENTURES WITHOUT CONSENT OF HOLDERS. Without
the consent of any Holders of Securities or coupons, the Issuer, when
authorized by or pursuant to a Board Resolution, and the Trustee, at any time
and from time to time, may enter into one or more indentures supplemental
hereto, in form satisfactory to the Trustee, for any of the following purposes:
(a) to evidence the succession of another Person to the Issuer or the
addition of another Person and the assumption by any such successor or
additional Person of the covenants of the Issuer herein and in the
Securities; or
(b) to add to the covenants of the Issuer for the benefit of the
Holders of all or any series of Securities (and if such covenants are to
be for the benefit of less than all series of securities, stating that
such covenants are expressly being included solely for the benefit of such
series) or to surrender any right or power herein conferred upon the
Issuer; or
(c) to add any additional Events of Default for the benefit of the
Holders of all or any series of Securities (and if such Events of Default
are to be for the benefit of less than all series of Securities, stating
that such Events of Default are expressly being included solely for the
benefit of such series); provided, however, that in respect of any such
additional Events of Default such supplemental indenture may provide for a
particular period of grace after default (which period may be shorter or
longer than that allowed in the case of other defaults) or may provide for
an immediate enforcement upon such default or may limit the remedies
available to the Trustee upon such default or may limit the right of the
Holders of a majority in aggregate principal amount of that or those
series of Securities to which such additional Events of Default apply to
waive such default; or
(d) to add to or change any of the provisions of this Indenture to
provide that Bearer Securities may be registrable as to principal, to
change or eliminate any restrictions on the payment of principal of or any
premium or interest on or any Additional Amounts with respect to Bearer
Securities, to permit Bearer Securities to be issued in exchange for
Registered Securities, to permit Bearer Securities to be issued in
exchange for Bearer Securities of other authorized denominations or to
permit or facilitate the issuance of Securities in uncertificated form,
provided that any such action shall not adversely affect the interests of
the Holders of Securities of any series or any related coupons in any
material respect; or
(e) to change or eliminate any of the provisions of this Indenture,
provided that any such change or elimination shall become effective only
when there is no Security Outstanding of any series created prior to the
execution of such supplemental indenture which is entitled to the benefit
of such provision; or
(f) to secure the Securities; or
(g) to establish the form or terms of Securities of any series and
any related coupons as permitted by Sections 201 and 301; or
(h) to evidence and provide for the acceptance of appointment
hereunder by a successor Trustee with respect to the Securities of one or
more series and to add to or change any of the provisions of this
Indenture as shall be necessary to provide for or facilitate the
administration of the trusts hereunder by more than one Trustee; or
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(i) to cure any ambiguity, to correct or supplement any provision
herein which may be defective or inconsistent with any other provision
herein, or to make any other provisions with respect to matters or
questions arising under this Indenture which shall not be inconsistent
with the provisions of this Indenture, provided such provisions shall not
adversely affect the interests of the Holders of Securities of any series
or any related coupons in any material respect; or
(j) to supplement any of the provisions of this Indenture to such
extent as shall be necessary to permit or facilitate the defeasance and
discharge of any series of Securities pursuant to Sections 401, 1402 and
1403, provided that any such action shall not adversely affect the
interests of the Holders of Securities of such series and any related
coupons or any other series of Securities in any material respect;
provided that only the Trustee appointed with respect to any series of
Securities shall be required to enter into a supplemental indenture
affecting such series.
SECTION 902. SUPPLEMENTAL INDENTURES WITH CONSENT OF HOLDERS. With the
consent of the Holders of not less than a majority in principal amount of all
Outstanding Securities affected by such supplemental indenture, by Act of said
Holders delivered to the Issuer and the Trustee, the Issuer, when authorized by
or pursuant to a Board Resolution, and the Trustee may enter into an indenture
or indentures supplemental hereto for the purpose of adding any provisions to
or changing in any manner or eliminating any of the provisions of this
Indenture or of modifying in any manner the rights of the Holders of Securities
and any related coupons under this Indenture; provided, however, that no such
supplemental indenture shall, without the consent of the Holder of each
Outstanding Security affected thereby:
(a) change the Stated Maturity of the principal of (or premium or
Make-Whole Amount, if any, on) or any installment of principal of or
interest on or any Additional Amounts with respect to, any Security, or
reduce the principal amount thereof or the rate or amount of interest
thereon or any Additional Amounts payable in respect thereof, or any
premium payable upon the redemption thereof, or change any obligation of
the Issuer to pay Additional Amounts pursuant to Section 1012 (except as
contemplated by Section 801(a) and permitted by Section 901(a), or reduce
the amount of the principal of an Original Issue Discount Security that
would be due and payable upon a declaration of acceleration of the
Maturity thereof pursuant to Section 502 or the amount thereof provable in
bankruptcy pursuant to Section 504, or adversely affect any right of
repayment at the option of the Holder of any Security, or change any Place
of Payment where, or the currency or currencies, currency unit or units
or composite currency or currencies in which the principal of, any premium
or interest on, or any Additional Amounts with respect to any Security is
payable, or impair the right to institute suit for the enforcement of any
such payment on or after the Stated Maturity thereof (or, in the case of
redemption or repayment at the option of the Holder, on or after the
Redemption Date or the Repayment Date, as the case may be), or
(b) reduce the percentage in principal amount of the Outstanding
Securities of any series, the consent of whose Holders is required for any
such supplemental indenture, or the consent of whose Holders is required
for any waiver with respect to such series (or compliance with certain
provisions of this Indenture or certain defaults hereunder and their
consequences) provided for in this Indenture, or reduce the requirements
of Section 1504 for quorum or voting, or
(c) modify any of the provisions of this Section, Section 513 or
Section 1013, except to increase the required percentage to effect such
action or to provide that certain other provisions of this Indenture
cannot be modified or waived without the consent of the Holder of each
Outstanding Security affected thereby.
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It shall not be necessary for any Act of Holders under this Section to
approve the particular form of any proposed supplemental indenture, but it
shall be sufficient if such Act shall approve the substance thereof.
A supplemental indenture which changes or eliminates any covenant or other
provision of this Indenture which has expressly been included solely for the
benefit of one or more particular series of Securities, or which modifies the
rights of the Holders of Securities of such series with respect to such
covenant or other provision, shall be deemed not to affect the rights under
this Indenture of the Holders of Securities of any other series.
SECTION 903. EXECUTION OF SUPPLEMENTAL INDENTURES. As a condition to
executing, or accepting the additional trusts created by, any supplemental
indenture permitted by this Article or the modification thereby of the trusts
created by this Indenture, the Trustee shall be entitled to receive, and
(subject to Section 602(d)) shall be fully protected in relying upon, an
Opinion of Counsel stating that the execution of such supplemental indenture is
authorized or permitted by this Indenture. The Trustee may, but shall not be
obligated to, enter into any such supplemental indenture which affects the
Trustee's own rights, duties or immunities under this Indenture or otherwise.
SECTION 904. EFFECT OF SUPPLEMENTAL INDENTURES. Upon the execution of
any supplemental indenture under this Article, this Indenture shall be modified
in accordance therewith, and such supplemental indenture shall form a part of
this Indenture for all purposes; and every Holder of Securities theretofore or
thereafter authenticated and delivered hereunder and of any coupon appertaining
thereto shall be bound thereby.
SECTION 905. CONFORMITY WITH TRUST INDENTURE ACT. Every supplemental
indenture executed pursuant to this Article following the qualification of the
Indenture under the provisions of the TIA shall conform to the requirements of
the TIA as then in effect.
SECTION 906. REFERENCE IN SECURITIES TO SUPPLEMENTAL INDENTURES.
Securities of any series authenticated and delivered after the execution of any
supplemental indenture pursuant to this Article may, and shall, if required by
the Trustee, bear a notation in form approved by the Trustee as to any matter
provided for in such supplemental indenture. If the Issuer shall so determine,
new Securities of any series so modified as to conform, in the opinion of the
Trustee and the Issuer, to any such supplemental indenture may be prepared and
executed by the Issuer and authenticated and delivered by the Trustee in
exchange for Outstanding Securities of such series.
SECTION 907. NOTICE OF SUPPLEMENTAL INDENTURES. Promptly after the
execution by the Issuer and the Trustee of any supplemental indenture pursuant
to the provisions of Section 902, the Issuer shall give notice thereof to the
Holders of each Outstanding Security affected, in the manner provided for in
Section 106, setting forth in general terms the substance of such supplemental
indenture.
ARTICLE TEN
COVENANTS
SECTION 1001. PAYMENT OF PRINCIPAL, PREMIUM OR MAKE-WHOLE AMOUNT, IF ANY,
INTEREST AND ADDITIONAL AMOUNTS. The Issuer covenants and agrees for the
benefit of the Holders of each series of Securities that it will duly and
punctually pay the principal of (and premium or Make-Whole Amount, if any) and
interest on and any Additional Amounts payable in respect of the Securities of
that series in accordance with the terms of such series of Securities, any
coupons appertaining thereto and this Indenture. Unless otherwise specified as
contemplated by Section 301 with respect to any series of Securities, any
interest due on and any Additional Amounts payable in respect of any Bearer
Securities on or before Maturity, other
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than Additional Amounts, if any, payable as provided in Section 1012 in respect
of principal of (or premium or Make-Whole Amount, if any, on) such a Security,
shall be payable only upon presentation and surrender of the several coupons
for such interest installments as are evidenced thereby as they severally
mature. Unless otherwise specified with respect to Securities of any series
pursuant to Section 301, at the option of the Issuer, all payments of principal
may be paid by check to the registered Holder of the Registered Security or
other person entitled thereto against surrender of such Security.
SECTION 1002. MAINTENANCE OF OFFICE OR AGENCY. If Securities of a series
are issuable only as Registered Securities, the Issuer shall maintain in each
Place of Payment for any series of Securities an office or agency where
Securities of that series may be presented or surrendered for payment, where
Securities of that series may be surrendered for registration of transfer or
exchange and where notices and demands to or upon the Issuer in respect of the
Securities of that series and this Indenture may be served. If Securities of a
series are issuable as Bearer Securities, the Issuer will maintain: (A) in the
Borough of Manhattan, New York City, an office or agency where any Securities
of that series may be presented or surrendered for payment, where any
Securities of that series may be surrendered for registration of transfer,
where Securities of that series may be surrendered for exchange, where notices
and demands to or upon the Issuer in respect of the Securities of that series
and this Indenture may be served and where Bearer Securities of that series and
related coupons may be presented or surrendered for payment in the
circumstances described in the following paragraph (and not otherwise); (B)
subject to any laws or regulations applicable thereto in a Place of Payment for
that series which is located outside the United States, an office or agency
where Securities of that series and related coupons may be presented and
surrendered for payment (including payment of any Additional Amounts payable on
Securities of that series pursuant to Section 1012), provided, however, that if
the Securities of that series are listed on the Luxembourg Stock Exchange or
any other stock exchange located outside the United States and such stock
exchange shall so require, the Issuer will maintain a Paying Agent for the
Securities of that series in Luxembourg or any other required city located
outside the United States, as the case may be, so long as the Securities of
that series are listed on such exchange and (C) subject to any laws or
regulations applicable thereto, in a Place of Payment for that series located
outside the United States an office or agency where any Registered Securities
of that series may be surrendered for registration of transfer, where
Securities of that series may be surrendered for exchange and where notices and
demands to or upon the Issuer in respect of the Securities of that series and
this Indenture may be served. The Issuer will give prompt written notice to
the Trustee of the location, and any change in the location, of each such
office or agency. If at any time the Issuer shall fail to maintain any such
required office or agency or shall fail to furnish the Trustee with the address
thereof, such presentations, surrenders, notices and demands may be made or
served at the Corporate Trust Office of the Trustee, except that Bearer
Securities of that series and the related coupons may be presented and
surrendered for payment (including payment of any Additional Amounts payable on
Bearer Securities of that series pursuant to Section 1012) at the offices
specified in the Security in Europe, and the Issuer hereby appoints the same as
its agent to receive such respective presentations, surrenders, notices and
demands, and the Issuer hereby appoints the Trustee its agent to receive all
such presentations, surrenders, notices and demands.
Unless otherwise specified with respect to any Securities pursuant to
Section 301, no payment of principal, premium or interest on or Additional
Amounts in respect of Bearer Securities shall be made at any office or agency
of the Issuer in the United States or by check mailed to any address in the
United States or by transfer to an account maintained with a bank located in
the United States; provided, however, that, if amounts owing with respect to
any Bearer Securities of a series are payable in Dollars, payment of principal
of and any premium and interest on any Bearer Security (including any
Additional Amounts payable on Securities of such series pursuant to Section
1012) shall be made at the office of the designated agent of the Issuer's
Paying Agent if (but only if) payment in Dollars of the full amount of such
principal, premium, interest or Additional Amounts, as the case may be, at all
offices or agencies outside the United States maintained for the purpose by the
Issuer in accordance with this Indenture, is illegal or effectively precluded
by exchange controls or other similar restrictions.
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The Issuer may from time to time designate one or more other offices or
agencies where the Securities of one or more series may be presented or
surrendered for any or all of such purposes, and may from time to time rescind
such designations, provided, however, that no such designations or rescission
shall in any manner relieve the Issuer of its obligation to maintain an office
or agency in accordance with the requirements set forth above for Securities of
any series for such purposes. The Issuer will give prompt written notice to
the Trustee of any such designation or rescission and of any change in the
location of any such other office or agency. Unless otherwise specified with
respect to any Securities pursuant to Section 301 with respect to a series of
Securities, the Issuer hereby designates as a Place of Payment for each series
of Securities the office or agency of the Issuer in the Borough of Manhattan,
New York City, and initially appoints the Trustee at its Corporate Trust Office
as Paying Agent in such city and as its agent to receive all such
presentations, surrenders, notices and demands.
Unless otherwise specified with respect to any Securities pursuant to
Section 301, if and so long as the Securities of any series (i) are denominated
in a Foreign Currency or (ii) may be payable in a Foreign Currency, or so long
as it is required under any other provision of the Indenture, then the Issuer
will maintain with respect to each such series of Securities, or as so
required, at least one exchange rate agent.
SECTION 1003. MONEY FOR SECURITIES PAYMENTS TO BE HELD IN TRUST. If the
Issuer shall at any time act as its own Paying Agent with respect to any series
of any Securities and any related coupons, it will, on or before each due date
of the principal of (and premium or Make-Whole Amount, if any), or interest on
or Additional Amounts in respect of, any of the Securities of that series,
segregate and hold in trust for the benefit of the Persons entitled thereto a
sum in the currency or currencies, currency unit or units or composite currency
or currencies in which the Securities of such series are payable (except as
otherwise specified pursuant to Section 301 for the Securities of such series)
sufficient to pay the principal (and premium or Make-Whole Amount, if any) or
interest or Additional Amounts so becoming due until such sums shall be paid to
such Persons or otherwise disposed of as herein provided, and will promptly
notify the Trustee of its action or failure so to act.
Whenever the Issuer shall have one or more Paying Agents for any series of
Securities and any related coupons, it will, before each due date of the
principal of (and premium or Make-Whole Amount, if any), or interest on or
Additional Amounts in respect of, any Securities of that series, deposit with a
Paying Agent a sum (in the currency or currencies, currency unit or units or
composite currency or currencies described in the preceding paragraph)
sufficient to pay the principal (and premium or Make-Whole Amount, if any) or
interest or Additional Amounts, so becoming due, such sum to be held in trust
for the benefit of the Persons entitled to such principal, premium or interest
or Additional Amounts and (unless such Paying Agent is the Trustee) the Issuer
will promptly notify the Trustee of its action or failure so to act.
The Issuer will cause each Paying Agent other than the Trustee to execute
and deliver to the Trustee an instrument in which such Paying Agent shall agree
with the Trustee, subject to the provisions of this Section, that such Paying
Agent will:
(1) hold all sums held by it for the payment of principal of (and
premium or Make-Whole Amount, if any) or interest on Securities or
Additional Amounts in trust for the benefit of the Persons entitled
thereto until such sums shall be paid to such Persons or otherwise
disposed of as herein provided;
(2) give the Trustee notice of any default by the Issuer (or any
other obligor upon the Securities) in the making of any such payment
of principal (and premium or Make-Whole Amount, if any) or interest
or Additional Amounts; and
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(3) at any time during the continuance of any such default upon the
written request of the Trustee, forthwith pay to the Trustee all
sums so held in trust by such Paying Agent.
The Issuer may at any time, for the purpose of obtaining the satisfaction
and discharge of this Indenture or for any other purpose, pay, or by Issuer
Order direct any Paying Agent to pay, to the Trustee all sums held in trust by
the Issuer or such Paying Agent, such sums to be held by the Trustee upon the
same trusts as those upon which such sums were held by the Issuer or such
Paying Agent; and, upon such payment by any Paying Agent to the Trustee, such
Paying Agent shall be released from all further liability with respect to such
sums.
Except as otherwise provided in the Securities of any series, any money
deposited with the Trustee or any Paying Agent, or then held by the Issuer, in
trust for the payment of the principal of (and premium or Make-Whole Amount, if
any) or interest on, or any Additional Amounts in respect of, any Security of
any series or any related coupon and remaining unclaimed for two years after
such principal (and premium or Make-Whole Amount, if any), interest or
Additional Amounts have become due and payable shall be paid to the Issuer upon
Issuer Request or (if then held by the Issuer) shall be discharged from such
trust; and the Holder of such Security shall thereafter, as an unsecured
general creditor, look only to the Issuer for payment of such principal of (and
premium or Make-Whole Amount, if any) or interest on, or any Additional Amounts
in respect of, any Security, without interest thereon, and all liability of the
Trustee or such Paying Agent with respect to such trust money, and all
liability of the Issuer as trustee thereof, shall thereupon cease, provided,
however, that the Trustee or such Paying Agent, before being required to make
any such repayment, may at the expense of the Issuer cause to be published
once, in an Authorized Newspaper, notice that such money remains unclaimed and
that, after a date specified therein, which shall not be less than 30 days from
the date of such publication, any unclaimed balance of such money then
remaining will be repaid to the Issuer.
SECTION 1004. LIMITATIONS ON INCURRENCE OF DEBT.
(a) The Issuer will not, and will not permit any Subsidiary to, incur
any Debt other than intercompany Debt (representing Debt to which the only
parties are the Issuer, the General Partner and any of their Subsidiaries,
but only so long as such Debt is held solely by any of the Issuer, the
General Partner and any Subsidiary) that is subordinate in right of
payment to the Securities, if, immediately after giving effect to the
incurrence of such additional Debt, the aggregate principal amount of all
outstanding Debt of the Issuer and its Subsidiaries on a consolidated
basis determined in accordance with GAAP is greater than 60% of the sum of
(i) Total Assets as of the end of the fiscal quarter covered in the
Issuer's Annual Report on Form 10-K or Quarterly Report on Form 10-Q, as
the case may be, most recently filed with the Commission (or, if such
filing is not permitted under the Exchange Act, with the Trustee) prior to
the incurrence of such additional Debt and (ii) the increase or decrease
in Total Assets from the end of such quarter including, without
limitation, any increase in Total Assets resulting from the incurrence of
such additional Debt (such increase or decrease together with the Issuer's
Total Assets is referred to as the "Adjusted Total Assets"); and
(b) The Issuer will not, and will not permit any Subsidiary to, incur
any Secured Debt of the Issuer or any Subsidiary if, immediately after
giving effect to the incurrence of such additional Secured Debt, the
aggregate principal amount of all outstanding Secured Debt of the Issuer
and its Subsidiaries on a consolidated basis is greater than 40% of the
Adjusted Total Assets; and
(c) The Issuer will not, and will not permit any Subsidiary to, incur
any Debt other than intercompany Debt that is subordinate in right of
payment to the Securities, if the ratio of the Consolidated Income
Available for Debt Service to the Annual Debt Service Charge for the
period consisting of the four consecutive fiscal quarters most recently
ended
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prior to the date on which such additional Debt is to be incurred shall
have been less than 1.5 to 1 on a pro forma basis after giving effect to
the incurrence of such Debt and to the application of the proceeds
therefrom, and calculated on the assumption that (i) such Debt and any
other Debt incurred by the Issuer or its Subsidiaries since the first day
of such four-quarter period which was outstanding at the end of such
period, had been incurred at the beginning of such period and continued to
be outstanding throughout such period, and the application of the proceeds
of such Debt, including to refinance other Debt, had occurred at the
beginning of such period, (ii) the repayment or retirement of any other
Debt by the Issuer or its Subsidiaries since the first day of such
four-quarter period had been repaid or retired at the beginning of such
period (except that, in determining the amount of Debt so repaid or
retired, the amount of Debt under any revolving credit facility shall be
computed based upon the average daily balance of such Debt during such
period), (iii) in the case of Acquired Indebtedness or Debt incurred in
connection with any acquisition since the first day of the four-quarter
period, the related acquisition had occurred as of the first day of the
period with the appropriate adjustments with respect to the acquisition
being included in the pro forma calculation, and (iv) in the case of any
increase or decrease in Total Assets, or any other acquisition or
disposition by the Issuer or any Subsidiary of any asset or group of
assets, since the first day of such four-quarter period, including,
without limitation, by merger, stock purchase or sale, or asset purchase
or sale, such increase, decrease, or other acquisition or disposition or
any related repayment of Debt had occurred as of the first day of such
period with the appropriate adjustments to revenues, expenses and Debt
levels with respect to such increase, decrease or other acquisition or
disposition being included in such pro forma calculation; and
(d) Issuer will at all times maintain Total Unencumbered Assets of
not less than 150% of the aggregate outstanding principal amount of all
outstanding Unsecured Debt of the Issuer and its Subsidiaries on a
consolidated basis.
SECTION 1005. [INTENTIONALLY OMITTED].
SECTION 1006. EXISTENCE. Subject to Article Eight, the Issuer will do or
cause to be done all things necessary to preserve and keep in full force and
effect its existence, rights and franchises, provided, however, that the Issuer
shall not be required to preserve any right or, franchise if the Board of
Trustees shall determine that the preservation thereof is no longer desirable
in the conduct of the business of the Issuer and that the loss thereof is not
disadvantageous in any material respect to the Holders.
SECTION 1007. MAINTENANCE OF PROPERTIES. The Issuer will cause all of
its material properties used or useful in the conduct of its business or the
business of any Subsidiary to be maintained and kept in good condition, repair
and working order and supplied with all necessary equipment and will cause to
be made all necessary repairs, renewals, replacements, betterments and
improvements thereof, all as in the reasonable judgment of the Issuer may be
necessary so that the business carried on in connection therewith may be
properly and advantageously conducted at all times; provided, however, that the
Company and its Subsidiaries shall not be prevented from discontinuing the
operation and maintenance of any of such properties if such discontinuance is,
in the judgment of the Company, desirable in the conduct of its business and
not disadvantageous in any material respect to the Holders.
SECTION 1008. INSURANCE. The Issuer will, and will cause each of its
Subsidiaries to, maintain insurance coverage by financially sound and reputable
insurance companies in such forms and amounts and against such risks as are
customary for companies of established reputation engaged in the same or a
similar business and owning and operating similar properties.
SECTION 1009. PAYMENT OF TAXES AND OTHER CLAIMS. The Issuer will pay or
discharge or cause to be paid or discharged, before the same shall become
delinquent, (i) all
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material taxes, assessments and governmental charges levied or imposed upon it
or any Subsidiary or upon the income, profits or property of the Issuer or any
Subsidiary, and (ii) all material lawful claims for labor, materials and
supplies which, if unpaid, might by law become a lien upon the property of the
Issuer or any Subsidiary; provided, however, that the Issuer shall not be
required to pay or discharge or cause to be paid or discharged any such tax,
assessment, charge or claim whose amount, applicability or validity is being
contested in good faith by appropriate proceedings so long as appropriate
reserves are established therefor in accordance with GAAP.
SECTION 1010. PROVISION OF FINANCIAL INFORMATION. Whether or not the
Issuer is subject to Section 13 or 15(d) of the Exchange Act, and for so long
as any Securities are outstanding, the Issuer will, to the extent permitted
under the Exchange Act, file with the Commission the annual reports, quarterly
reports and other documents which the Issuer would have been required to file
with the Commission pursuant to such Section 13 or 15(d) (the "Financial
Statements") if the Issuer were so subject, such documents to be filed with the
Commission on or prior to the respective dates (the "Required Filing Dates") by
which the Issuer would have been required so to file such documents if the
Issuer were so subject.
The Issuer will also in any event (x) within 15 days of each Required
Filing Date (i) transmit by mail to all Holders, as their names and addresses
appear in the Security Register, without cost to such Holders, copies of the
annual reports and quarterly reports which the Issuer would have been required
to file with the Commission pursuant to Section 13 or 15(d) of the Exchange Act
if the Issuer were subject to such Sections, and (ii) file with the Trustee
copies of the annual reports, quarterly reports and other documents which the
Issuer would have been required to file with the Commission pursuant to
Section 13 or 15(d) of the Exchange Act if the Issuer were subject to such
Sections, and (y) if filing such documents by the Issuer with the Commission
is not made under the Exchange Act, promptly upon written request and payment
of the reasonable cost of duplication and delivery, supply copies of such
documents to any prospective Holder.
SECTION 1011. STATEMENT AS TO COMPLIANCE. The Issuer shall deliver to
the Trustee, within 120 days after the end of each fiscal year, a written
statement (which need not be contained in or accompanied by an Officers'
Certificate) signed by the principal executive officer, the principal financial
officer or the principal accounting officer of the General Partner acting in
its capacity as the sole general partner of the Issuer, stating that:
(a) a review of the activities of the Issuer during such year and of its
performance under this Indenture has been made under his or her supervision,
and
(b) to the best of his or her knowledge, based on such review, (i) the
Issuer has complied with all the conditions and covenants imposed on it under
this Indenture throughout such year, or, if there has been a default in the
fulfillment of any such condition or covenant, specifying each such default
known to him or her and the nature and status thereof, and (ii) no event has
occurred and is continuing which is, or after notice or lapse of time or both
would become, an Event of Default, or, if such an event has occurred and is
continuing, specifying each such event known to him and the nature and status
thereof.
SECTION 1012. ADDITIONAL AMOUNTS. If any Securities of a series provide
for the payment of Additional Amounts, the Issuer will pay to the Holder of any
Security of such series or any coupon appertaining thereto Additional Amounts
as may be specified as contemplated by Section 301. Whenever in this Indenture
there is mentioned, in any context except in the case of Section 502(a), the
payment of the principal of or any premium or interest on, or in respect of,
any Security of any series or payment of any related coupon or the net proceeds
received on the sale or exchange of any Security of any series, such mention
shall be deemed to include mention of the payment of Additional Amounts
provided by the terms of such series established pursuant to Section 301 to the
extent that, in such context, Additional Amounts are, were or would be payable
in respect thereof pursuant to such terms and express mention of the payment of
Additional Amounts
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(if applicable) in any provisions hereof shall not be construed as excluding
Additional Amounts in those provisions hereof where such express mention is not
made.
Except as otherwise specified as contemplated by Section 301, if the
Securities of a series provide for the payment of Additional Amounts, at least
10 days prior to the first Interest Payment Date with respect to that series of
Securities (or if the Securities of that series will not bear interest prior to
Maturity, the first day on which a payment of principal and any premium is
made), and at least 10 days prior to each date of payment of principal and any
premium or interest if there has been any change with respect to the matters
set forth in the below-mentioned Officers' Certificate, the Issuer shall
furnish to the Trustee and the Paying Agent, if other than the Trustee, an
Officers' Certificate instructing the Trustee and such Paying Agent or Paying
Agents whether such payment of principal of and any premium or interest on the
Securities of that series shall be made to Holders of Securities of that series
or any related coupons who are not United States persons without withholding
for or on account of any tax, assessment or other governmental charge described
in the Securities of the series. If any such withholding shall be required,
then such Officers' Certificate shall specify by country the amount, if any,
required to be withheld on such payments to such Holders of Securities of that
series or related coupons and the Issuer will pay to the Trustee or such Paying
Agent the Additional Amounts required by the terms of such Securities. If the
Trustee or any Paying Agent, as the case may be, shall not so receive the
above-mentioned certificate, then the Trustee or such Paying Agent shall be
entitled (i) to assume that no such withholding or deduction is required with
respect to any payment of principal or interest with respect to any Securities
of a series or related coupons until it shall have received a certificate
advising otherwise and (ii) to make all payments of principal and interest with
respect to the Securities of a series or related coupons without withholding or
deductions until otherwise advised. The Issuer covenants to indemnify the
Trustee and any Paying Agent for, and to hold them harmless against, any loss,
liability or expense reasonably incurred without negligence or bad faith on
their part arising out of or in connection with actions taken or omitted by any
of them or in reliance on any Officers' Certificate furnished pursuant to this
Section or in reliance on the Issuer's not furnishing such an Officers'
Certificate.
SECTION 1013. WAIVER OF CERTAIN COVENANTS. The Issuer may omit in any
particular instance to comply with any term, provision or condition set forth
in Sections 1004 to 1011, inclusive, if before or after the time for such
compliance the Holders of at least a majority in principal amount of all
Outstanding Securities of each series affected by such omission, by Act of such
Holders, either waive such compliance in such instance or generally waive
compliance with such covenant or condition, but no such waiver shall extend to
or affect such covenant or condition except to the extent so expressly waived,
and, until such waiver shall become effective, the obligations of the Issuer
and the duties of the Trustee in respect of any such term, provision or
condition shall remain in full force and effect.
ARTICLE ELEVEN
REDEMPTION OF SECURITIES
SECTION 1101. APPLICABILITY OF ARTICLE. Securities of any series which
are redeemable before their Stated Maturity shall be redeemable in accordance
with their terms and (except as otherwise specified as contemplated by Section
301 for Securities of any series) in accordance with this Article.
SECTION 1102. ELECTION TO REDEEM; NOTICE TO TRUSTEE. Except as otherwise
specified as contemplated by Section 301 for Securities of any series, the
election of the Issuer to redeem any Securities shall be evidenced by or
pursuant to a Board Resolution. In case of any redemption at the election of
the Issuer of less than all of the Securities of any series, the Issuer shall,
at least 45 days prior to the giving of notice of redemption in Section 1104
(unless a shorter notice shall be satisfactory to the Trustee), notify the
Trustee of such Redemption Date and of the principal amount of Securities of
such series to be redeemed. In the case of any redemption of
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Securities prior to the expiration of any restriction on such redemption
provided in the terms of such Securities or elsewhere in this Indenture, the
Issuer shall furnish the Trustee with an Officers' Certificate evidencing
compliance with such restriction.
SECTION 1103. SELECTION BY TRUSTEE OF SECURITIES TO BE REDEEMED. If less
than all the Securities of any series issued on the same day with the same
terms are to be redeemed, the particular Securities to be redeemed shall be
selected not more than 60 days prior to the Redemption Date by the Trustee,
from the Outstanding Securities of such series issued on such date with the
same terms not previously called for redemption, by such method as the Trustee
shall deem fair and appropriate and which may provide for the selection for
redemption of portions (equal to the minimum authorized denomination for
Securities of that series or any integral multiple thereof) of the principal
amount of Securities of such series of a denomination larger than the minimum
authorized denomination for Securities of that series.
The Trustee shall promptly notify the Issuer and the Security Registrar
(if other than itself) in writing of the Securities selected for redemption
and, in the case of any Securities selected for partial redemption, the
principal amount thereof to be redeemed.
For all purposes of this Indenture, unless the context otherwise requires,
all provisions relating to the redemption of Securities shall relate, in the
case of any Security redeemed or to be redeemed only in part, to the portion of
the principal amount of such Security which has been or is to be redeemed.
SECTION 1104. NOTICE OF REDEMPTION. Notice of redemption shall be given
in the manner provided in Section 106, not less than 30 days nor more than 60
days prior to the Redemption Date, unless a shorter period is specified by the
terms of such series established pursuant to Section 301, to each Holder of
Securities to be redeemed. Failure to give such notice in the manner herein
provided to the Holder of any Security designated for redemption as a whole or
in part, or any defect in the notice to any such Holder, shall not affect the
validity of the proceedings for the redemption of any other such Security or
portion thereof. Any notice that is mailed to the Holders of Registered
Securities in the manner herein provided shall be conclusively presumed to have
been duly given, whether or not the Holder; receives the notice.
All notices of redemption shall state:
(a) the Redemption Date;
(b) the Redemption Price, accrued interest to the
Redemption Date payable as provided in Section 1106, if any,
and Additional Amounts, if any,
(c) if less than all Outstanding Securities of any
series are to be redeemed, the identification (and, in the case
of partial redemption, the principal amount) of the particular
Security or Securities to be redeemed,
(d) in case any Security is to be redeemed in part
only, the notice which relates to such Security shall state
that on and after the Redemption Date, upon surrender of such
Security, the holder will receive, without a charge, a new
Security or Securities of authorized denominations for the
principal amount thereof remaining unredeemed,
(e) that on the Redemption Date the Redemption Price
and accrued interest to the Redemption Date payable as provided
in Section 1106, if any, will become due and payable upon each
such Security, or the portion thereof, to be redeemed and, if
applicable, that interest thereon shall cease to accrue on and
after said date,
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(f) the Place or Places of Payment where such
Securities, together in the case of Bearer Securities with all
coupons appertaining thereto, if any, maturing after the
Redemption Date, are to be surrendered for payment of the
Redemption Price and accrued interest, if any,
(g) that the redemption is for a sinking fund, if
such is the case,
(h) that, unless otherwise specified in such notice,
Bearer Securities of any series, if any, surrendered for
redemption must be accompanied by all coupons maturing
subsequent to the date fixed for redemption or the amount of
any such missing coupon or coupons will be deducted from the
Redemption Price, unless security or indemnity satisfactory to
the Issuer, the Trustee for such series and any Paying Agent
is furnished,
(i) if Bearer Securities of any series are to be
redeemed and any Registered Securities of such series are not
to be redeemed, and if such Bearer Securities may be exchanged
for Registered Securities not subject to redemption on this
Redemption Date pursuant to Section 305 or otherwise, the last
date, as determined by the Issuer, on which such exchanges may
be made,
(j) the CUSIP number or the Euroclear or CEDEL
reference numbers of such Security, if any, and
(k) if applicable, that a Holder of Securities who
desires to convert Securities for redemption must satisfy the
requirements for conversion contained in such Securities, the
then existing conversion price or rate, and the date and time
when the option to convert shall expire.
A notice of redemption published as contemplated by Section 106 need not
identify particular Registered Securities to be redeemed.
Notice of redemption of Securities to be redeemed shall be given by the
Issuer or, at the Issuer's request, by the Trustee in the name and at the
expense of the Issuer.
SECTION 1105. DEPOSIT OF REDEMPTION PRICE. At least one Business Day
prior to any Redemption Date, the Issuer shall deposit with the Trustee or with
a Paying Agent (or, if the Issuer is acting as its own Paying Agent, which it
may not do in the case of a sinking fund payment under Article Twelve,
segregate and hold in trust as provided in Section 1003) an amount of money in
the currency or currencies, currency unit or units or composite currency or
currencies in which the Securities of such series are payable (except as
otherwise specified pursuant to Section 301 for the Securities of such series)
sufficient to pay on the Redemption Date the Redemption Price of, and (except
if the Redemption Date shall be an Interest Payment Date) accrued interest on
and Additional Amounts with respect thereto, all the Securities or portions
thereof which are to be redeemed on that date.
SECTION 1106. SECURITIES PAYABLE ON REDEMPTION DATE. Notice of
redemption having been given as aforesaid, the Securities so to be redeemed
shall, on the Redemption Date, become due and payable at the Redemption Price
therein specified in the currency or currencies, currency unit or units or
composite currency or currencies in which the Securities of such series are
payable (except as otherwise specified pursuant to Section 301 for the
Securities of such series) (together with accrued interest, if any, to the
Redemption Date), and from and after such date (unless the Issuer shall default
in the payment of the Redemption Price and accrued interest) such Securities
shall, if the same were interest-bearing, cease to bear interest and the
coupons for such interest appertaining to any Bearer Securities so to be
redeemed, except to the extent provided below, shall be void. Upon surrender
of any such Security for redemption; in accordance with said notice, together
with all coupons, if any, appertaining thereto maturing after the Redemption
Date,
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such Security shall be paid by the Issuer at the Redemption Price, together
with accrued interest and Additional Amounts, if any, to the Redemption Date;
provided, however, that installments of interest on Bearer Securities whose
Stated Maturity is on or prior to the Redemption Date shall be payable only at
an office or agency located outside the United States (except as otherwise
provided in Section 1002) and, unless otherwise specified as contemplated by
Section 301, only upon presentation and surrender of coupons for such interest;
and provided further that, except as otherwise provided, installments of
interest on Registered Securities whose Stated Maturity is on or prior to the
Redemption Date shall be payable to the Holders of such Securities, or one or
more Predecessor Securities, registered as such at the close of business on the
relevant Record Dates according to their terms and the provisions of Section
307.
If any Bearer Security surrendered for redemption shall not be accompanied
by all appurtenant coupons maturing after the Redemption Date, such Security
may be paid after deducting from the Redemption Price an amount equal to the
face amount of all such missing coupons, or the surrender of such missing
coupon or coupons may be waived by the Issuer and the Trustee if there be
furnished to them such security or indemnity as they may require to save each
of them and any Paying Agent harmless. If thereafter the Holder of such
Security shall surrender to the Trustee or any Paying Agent any such missing
coupon in respect of which a deduction shall have been made from the Redemption
Price, such Holder shall be entitled to receive the amount so deducted;
provided, however, that interest represented by coupons shall be payable only
upon presentation and surrender of those coupons at an office or agency located
outside the United States (except as otherwise provided in Section 1002).
If any Security called for redemption shall not be so paid upon surrender
thereof for redemption, the principal (and premium or Make-Whole Amount, if
any) shall, until paid, bear interest from the Redemption Date at the rate
borne by the Security.
SECTION 1107. SECURITIES REDEEMED IN PART. Any Registered Security which
is to be redeemed only in part (pursuant to the provisions of this Article)
shall be surrendered at a Place of Payment therefor (with, if the Issuer or the
Trustee so requires, due endorsement by, or a written instrument of transfer in
form satisfactory to the Issuer and the Trustee duly executed by, the Holder
thereof or his attorney duly authorized in writing) and the Issuer shall
execute and the Trustee shall authenticate and deliver to the Holder of such
Security without service charge a new Registered Security or Securities of the
same series, of any authorized denomination as requested by such Holder in
aggregate principal amount equal to and in exchange for the unredeemed portion
of the principal of the Security so surrendered. If a Security in global form
is so surrendered, the Issuer shall execute, and the Trustee shall authenticate
and deliver to the depositary for such Security in global form as shall be
specified in the Issuer Order with respect thereto to the Trustee, without
service charge, a new Security in global form in a denomination equal to and in
exchange for the unredeemed portion of the principal of the Security in global
form so surrendered.
ARTICLE TWELVE
SINKING FUNDS
SECTION 1201. APPLICABILITY OF ARTICLE. The provisions of this Article
shall be applicable to any sinking fund for the retirement of Securities of a
series except as otherwise specified as contemplated by Section 301 for
Securities of such series.
The minimum amount of any sinking fund payment provided for by the terms
of Securities of any series is herein referred to as a "mandatory sinking fund
payment," and any payment in excess of such minimum amount provided for by the
terms of such Securities of any series is herein referred to as an "optional
sinking fund payment." If provided for by the terms of any Securities of any
series, the cash amount of any mandatory sinking fund payment may be subject to
reduction as provided in Section 1202. Each sinking fund payment shall be
applied to the redemption of Securities of any series as provided for by the
terms of Securities of such series.
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SECTION 1202. SATISFACTION OF SINKING FUND PAYMENT WITH SECURITIES. The
Issuer may, in satisfaction of all or any part of any mandatory sinking fund
payment with respect to the Securities of a series, (1) deliver Outstanding
Securities of such series (other than any Securities previously called for
redemption) together in the case of any Bearer Securities of such series with
all unmatured coupons appertaining thereto and (2) apply as a credit Securities
of such series which have been redeemed either at the election of the Issuer
pursuant to the terms of such Securities or through the application of
permitted optional sinking fund payments pursuant to the terms of such
Securities, or which have otherwise been acquired by the Issuer; provided that
such Securities so delivered or applied as a credit have not been previously so
credited. Such Securities shall be received and credited for such purpose by
the Trustee at the applicable Redemption Price specified in such Securities for
redemption through operation of the sinking fund and the amount of such
mandatory sinking fund payment shall be reduced accordingly.
SECTION 1203. REDEMPTION OF SECURITIES FOR SINKING FUND. Not less than
60 days prior to each sinking fund payment date for Securities of any series,
the Issuer will deliver to the Trustee an Officers' Certificate specifying the
amount of the next ensuing mandatory sinking fund payment for that series
pursuant to the terms of that series, the portion thereof, if any, which is to
be satisfied by payment of cash in the currency or currencies, currency unit or
units or composite currency or currencies in which the Securities of such
series are payable (except as otherwise specified pursuant to Section 301 for
the Securities of such series) and the portion thereof, if any, which is to be
satisfied by delivering and crediting Securities of that series pursuant to
Section 1202, and the optional amount, if any, to be added in cash to the next
ensuing mandatory sinking fund payment, and will also deliver to the Trustee
any Securities to be so delivered and credited. If such Officers' Certificate
shall specify an optional amount to be added in cash to the next ensuing
mandatory sinking fund payment, the Issuer shall thereupon be obligated to pay
the amount therein specified. Not less than 30 days before each such sinking
fund payment date the Trustee shall select the Securities to be redeemed upon
such sinking fund payment date in the manner specified in Section 1103 and
cause notice of the redemption thereof to be given in the name of and at the
expense of the Issuer in the manner provided in Section 1104. Such notice
having been duly given, the redemption of such Securities shall be made upon
the terms and in the manner stated in Sections 1106 and 1107.
ARTICLE THIRTEEN
REPAYMENT AT THE OPTION OF HOLDERS
SECTION 1301. APPLICABILITY OF ARTICLE. Repayment of Securities of any
series before their Stated Maturity at the option of Holders thereof shall be
made in accordance with the terms of such Securities, if any, and (except as
otherwise specified by the terms of such series established pursuant to Section
301) in accordance with this Article.
SECTION 1302. REPAYMENT OF SECURITIES. Securities of any series subject
to repayment in whole or in part at the option of the Holders thereof will,
unless otherwise provided in the terms of such Securities, be repaid at a price
equal to the principal amount thereof, together with interest, if any, thereon
accrued to the Repayment Date specified in or pursuant to the terms of such
Securities. The Issuer covenants that at least one Business Day prior to the
Repayment Date it will deposit with the Trustee or with a Paying Agent (or, if
the Issuer is acting as its own Paying Agent, segregate and hold in trust as
provided in Section 1003) an amount of money in currency or currencies,
currency unit or units or composite currency or currencies in which the
Securities of such series are payable (except as otherwise specified pursuant
to Section 301 for the Securities of such series) sufficient to pay the
principal (or, if so provided by the terms of the Securities of any series, a
percentage of the principal) of, and (except if the Repayment Date shall be an
Interest Payment Date) accrued interest on, all the Securities or portions
thereof, as the case may be, to be repaid on such date.
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SECTION 1303. EXERCISE OF OPTION. Securities of any series subject to
repayment at the option of the Holders thereof will contain an "Option to
Elect Repayment" form on the reverse of such Securities. In order for any
Security to be repaid at the option of the Holder, the Trustee must receive at
the Place of Payment therefor specified in the terms of such Security (or at
such other place or places of which the Issuer shall from time to time notify
the Holders of such Securities) not earlier than 60 days nor later than 30 days
prior to the Repayment Date (1) the Security so providing for such repayment
together with the "Option to Elect Repayment" form on the reverse thereof duly
completed by the Holder (or by the Holder's attorney duly authorized in
writing) or (2) a telegram, telex, facsimile transmission or a letter from a
member of a national securities exchange, or the National Association of
Securities Dealers, Inc., or a commercial bank or trust company in the United
States setting forth the name of the Holder of the Security, the principal
amount of the Security, the principal amount of the Security to be repaid, the
CUSIP number, if any, or a description of the tenor and terms of the Security,
a statement that the option to elect repayment is being exercised thereby and a
guarantee that the Security to be repaid, together with the duly completed form
entitled "Option to Elect Repayment" on the reverse of the Security will be
received by the Trustee not later than the fifth Business Day after the date of
such telegram, telex, facsimile transmission or letter; provided, however, that
such telegram, telex, facsimile transmission or letter shall only be effective
if such Security and form duly completed are received by the Trustee by such
fifth Business Day. If less than the entire principal amount of such Security
is to be repaid in accordance with the terms of such Security, the principal
amount of such Security to be repaid, in increments of the minimum
denominations for Securities of such series, and the denomination or
denominations of the Security or Securities to be issued to the Holder for the
portion of the principal amount of such Security surrendered that is not to be
repaid, must be specified. The principal amount of any Security providing for
repayment at the option of the Holder thereof may not be repaid in part if,
following such repayment, the unpaid principal amount of such Security would be
less than the minimum authorized denomination of Securities of the series of
which such Security to be repaid is a part. Except as otherwise may be
provided by the terms of any Security providing for repayment at the option of
the Holder thereof, exercise of the repayment option by the Holder shall be
irrevocable unless waived by the Issuer.
SECTION 1304. WHEN SECURITIES PRESENTED FOR REPAYMENT BECOME DUE AND
PAYABLE. If Securities of any series providing for repayment at the option of
the Holders thereof shall have been surrendered as provided in this Article and
as provided by or pursuant to the terms of such Securities, such Securities or
the portions thereof, as the case may be, to be repaid shall become due and
payable and shall be paid by the Issuer on the Repayment Date therein
specified, and on and after such Repayment Date (unless the Issuer shall
default in the payment of such Securities on such Repayment Date) such
Securities shall, if the same were interest-bearing, cease to bear interest and
the coupons for such interest appertaining to any Bearer Securities so to be
repaid, except to the extent provided below, shall be void. Upon surrender of
any such Security for repayment in accordance with such provisions, together
with all coupons, if any, appertaining thereto maturing after the Repayment
Date, the principal amount of such Security so to be repaid shall be paid by
the Issuer, together with accrued interest, if any, to the Repayment Date;
provided, however, that coupons whose Stated Maturity is on or prior to the
Repayment Date shall be payable only at an office or agency located outside the
United States (except as otherwise provided in Section 1002) and, unless
otherwise specified pursuant to Section 301, only upon presentation and
surrender of such coupons; and provided further that, in the case of Registered
Securities, installments of interest, if any, whose Stated Maturity is on or
prior to the Repayment Date shall be payable (but without interest thereon,
unless the Issuer shall default in the payment thereof) to the Holders of such
Securities, or one or more Predecessor Securities, registered as such at the
close of business on the relevant Record Dates according to their terms and the
provisions of Section 307.
If any Bearer Security surrendered for repayment shall not be accompanied
by all appurtenant coupons maturing after the Repayment Date, such Security may
be paid after deducting from the amount payable therefor as provided in Section
1302 an amount equal to the face amount of all such missing coupons, or the
surrender of such missing coupon or coupons may be waived by the
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Issuer and the Trustee if there be furnished to them such security or indemnity
as they may require to save each of them and any Paying Agent harmless. If
thereafter the Holder of such Security shall surrender to the Trustee or any
Paying Agent any such missing coupon in respect of which a deduction shall have
been made as provided in the preceding sentence, such Holder shall be entitled
to receive the amount so deducted; provided, however, that interest represented
by coupons shall be payable only at an office or agency located outside the
United States (except as otherwise provided in Section 1002) and, unless
otherwise specified as contemplated by Section 301, only upon presentation and
surrender of those coupons.
If the principal amount of any Security surrendered for repayment shall
not be so repaid upon surrender thereof, such principal amount (together with
interest, if any, thereon, accrued to such Repayment Date) shall, until paid,
bear interest from the Repayment Date at the rate of, interest or Yield to
Maturity (in the case of Original Issue Discount Securities) set forth in such
Security.
SECTION 1305. SECURITIES REPAID IN PART. Upon surrender of any
Registered Security which is to be repaid in part only, the Issuer shall
execute and the Trustee shall authenticate and deliver to the Holder of such
Security, without service charge and at the expense of the Issuer, a new
Registered Security or Securities of the same series, of any authorized
denomination specified by the Holder, in an aggregate principal amount equal to
and in exchange for the portion of the principal of such Security so
surrendered which is not to be repaid.
ARTICLE FOURTEEN
DEFEASANCE AND COVENANT DEFEASANCE
SECTION 1401. APPLICABILITY OF ARTICLE; ISSUER'S OPTION TO EFFECT
DEFEASANCE OR COVENANT DEFEASANCE. If, pursuant to Section 301, provision is
made for either or both of (a) defeasance of the Securities of or within a
series under Section 1402 or (b) covenant defeasance of the Securities of or
within a series under Section 1403, then the provisions of such Section or
Sections, as the case may be, together with the other provisions of this
Article (with such modifications thereto as may be specified pursuant to
Section 301 with respect to any Securities), shall be applicable to such
Securities and any coupons appertaining thereto, and the Issuer may at its
option by Board Resolution, at any time, with respect to such Securities and
any coupons appertaining thereto, elect to have Section 1402 (if applicable) or
Section 1403 (if applicable) be applied to such Outstanding Securities and any
coupons appertaining thereto upon compliance with the conditions set forth
below in this Article.
SECTION 1402. DEFEASANCE AND DISCHARGE. Upon the Issuer's exercise of
the above option applicable to this Section with respect to any Securities of
or within a series, the Issuer shall be deemed to have been discharged from its
obligations with respect to such Outstanding Securities and any coupons
appertaining thereto on the date the conditions set forth in Section 1404 are
satisfied (hereinafter, "defeasance"). For this purpose, such defeasance means
that the Issuer shall be deemed to have paid and discharged the entire
indebtedness represented by such Outstanding Securities and any coupons
appertaining thereto, which shall thereafter be deemed to be "Outstanding" only
for the purposes of Section 1405 and the other Sections of this Indenture
referred to in clauses (A) and (B) below, and to have satisfied all of its
other obligations under such Securities and any coupons appertaining thereto
and this Indenture insofar as such Securities and any coupons appertaining
thereto are concerned (and the Trustee, at the expense of the Issuer, shall
execute proper instruments acknowledging the same), except for the following
which shall survive until otherwise terminated or discharged hereunder: (A) the
rights of Holders of such Outstanding Securities and any coupons appertaining
thereto receive, solely from the trust fund described in Section 1404 and as
more fully set forth in such Section, payments in respect of the principal of
(and premium or Make-Whole Amount, if any) and interest and Additional Amounts,
if any, on such Securities and any coupons appertaining thereto when such
payments are due and any right of such Holder to exchange such Securities for
other Securities, (B) the Issuer's obligations with respect to
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such Securities under Sections 305, 306, 1002 and 1003 and with respect to the
payment of Additional Amounts, if any, on such Securities as contemplated by
Section 1012 (but only to the extent that the Additional Amounts payable with
respect to such Securities exceed the amount deposited in respect of such
Additional Amounts pursuant to Section 1404 below), (C) the rights, powers,
trusts, duties and immunities of the Trustee hereunder and (D) this Article.
Subject to compliance with this Article Fourteen, the Issuer may exercise its
option under this Section notwithstanding the prior exercise of its option
under Section 1403 with respect to such Securities and any coupons appertaining
thereto.
SECTION 1403. COVENANT DEFEASANCE. Upon the Issuer's exercise of the
above option applicable to this Section with respect to any Securities of or
within a series, the Issuer shall be released from its obligations under
Sections 1004 to 1011, inclusive, and, if specified pursuant to Section 301,
its obligations under any other covenant, with respect to such Outstanding
Securities and any coupons appertaining thereto on and after the date the
conditions set forth in Section 1404 are satisfied (hereinafter, "covenant
defeasance"), and such Securities and any coupons appertaining thereto shall
thereafter be deemed to be not "Outstanding" for the purposes of any direction,
waiver, consent or declaration or Act of Holders (and the consequences of any
thereof) in connection with any such covenant, but shall continue to be deemed
"Outstanding" for all other purposes hereunder. For this purpose, such
covenant defeasance means that, with respect to such Outstanding Securities and
any coupons appertaining thereto, the Issuer may omit to comply with and shall
have no liability in respect of any term, condition or limitation set forth in
any such Section or such other covenant, whether directly or indirectly, by
reason of any reference elsewhere herein to any such Section or such other
covenant or by reason of reference in any such Section or such other covenant
to any other provision herein or in any other document and such omission to
comply shall not constitute a default or an Event of Default under Section
501(d) or 501(h) or otherwise, as the case may be, but, except as specified
above, the remainder of this Indenture and such Securities and any coupons
appertaining thereto shall be unaffected thereby.
SECTION 1404. CONDITIONS TO DEFEASANCE OR COVENANT DEFEASANCE. The
following shall be the conditions to application of Section 1402 or Section
1403 to any Outstanding Securities of or within a series and any coupons
appertaining thereto:
(a) The Issuer shall irrevocably have deposited or caused to be deposited
with the Trustee (or another trustee satisfying the requirements of Section 607
who shall agree to comply with the provisions of this Article Fourteen
applicable to it) as trust funds in trust for the purpose of making the
following payments, specifically pledged as security for, and dedicated solely
to, the benefit of the Holders of such Securities and any coupons appertaining
thereto, (1) an amount in such currency, currencies or currency unit in which
such Securities and any coupons appertaining thereto are then specified as
payable at Stated Maturity, or (2) Government Obligations applicable to such
Securities and coupons appertaining thereto (determined on the basis of the
currency, currencies or currency unit in which such Securities and coupons
appertaining thereto are then specified as payable at Stated Maturity) which
through the scheduled payment of principal and interest in respect thereof in
accordance with their terms will provide, not later than one day before the due
date of any payment of principal of (and premium or Make-Whole Amount, if any)
and interest, if any, on such Securities and any coupons appertaining thereto,
money in an amount, or (3) a combination thereof, any case, in an amount,
sufficient, without consideration of any reinvestment of such principal and
interest, in the opinion of a nationally recognized firm of independent public
accountants expressed in a written certification thereof delivered to the
Trustee, to pay and discharge, and which shall be applied by the Trustee (or
other qualifying trustee) to pay and discharge, (i) the principal of (and
premium or Make-Whole Amount, if any) and interest, if any, on such Outstanding
Securities and any coupons appertaining thereto on the Stated Maturity of such
principal or installment of principal or interest and (ii) any mandatory
sinking fund payments or analogous payments applicable to such Outstanding
Securities and any coupons appertaining thereto on the day on which such
payments are due and payable in accordance with the terms of this Indenture and
of such Securities and any coupons appertaining thereto.
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(b) Such defeasance or covenant defeasance shall not result in a breach or
violation of, or constitute a default under, this Indenture or any other
material agreement or instrument to which the Issuer is a party or by which it
is bound.
(c) No Event of Default or event which with notice or lapse of time or
both would become an Event of Default with respect to such Securities and any
coupons appertaining thereto shall have occurred and be continuing on the date
of such deposit and, with respect to defeasance only, at any time during the
period ending on the 91st day after the date of such deposit (it being
understood that this condition shall not be deemed satisfied until the
expiration of such period).
(d) In the case of an election under Section 1402, the Issuer shall have
delivered to the Trustee an Opinion of Counsel stating that (i) the Issuer has
received from, or there has been published by, the Internal Revenue Service a
ruling, or (ii) since the date of execution of this Indenture, there has been a
change in the applicable Federal income tax law, in either case to the effect
that, and based thereon such opinion shall confirm that, the Holders of such
Outstanding Securities and any coupons appertaining thereto will not recognize
income, gain or loss for Federal income tax purposes as a result of such
defeasance and will not be subject to Federal income tax on the same amounts,
in the same manner and at the same times as would have been the case if such
defeasance had not occurred.
(e) In the case of an election under Section 1403, the Issuer shall have
delivered to the Trustee an Opinion of Counsel to the effect that the Holders
of such Outstanding Securities and any coupons appertaining thereto will not
recognize income, gain or loss for Federal income tax purposes as a result of
such covenant defeasance and will be subject to Federal income tax on the same
amounts, in the same manner and at the same times as would have been the case
if such covenant defeasance had not occurred.
(f) The Issuer shall have delivered to the Trustee an Officers'
Certificate and an Opinion of Counsel, each stating that all conditions
precedent to the defeasance under Section 1402 or the covenant defeasance under
Section 1403 (as the case may be) have been complied with.
(g) Notwithstanding any other provisions of this Section, such defeasance
or covenant defeasance shall be effected in compliance with any additional or
substitute terms, conditions or limitations which may be imposed on the Issuer
in connection therewith pursuant to Section 301.
SECTION 1405. DEPOSITED MONEY AND GOVERNMENT OBLIGATIONS TO BE HELD IN
TRUST; OTHER MISCELLANEOUS PROVISIONS. Subject to the provisions of the last
paragraph of Section 1003, all money and Government Obligations (or other
property as may be provided pursuant to Section 301) (including the proceeds
thereof) deposited with the Trustee (or other qualifying trustee, collectively
for purposes of this Section 1405, the "Trustee") pursuant to Section 1404 in
respect of any Outstanding Securities of any series and any coupons
appertaining thereto shall be held in trust and applied by the Trustee, in
accordance with the provisions of such Securities and any coupons appertaining
thereto and this Indenture, to the payment, either directly or through any
Paying Agent (including the Issuer acting as its own Paying Agent) as the
Trustee may determine, to the Holders of such Securities and any coupons
appertaining thereto of all sums due and to become due thereon in respect of
principal (and premium or Make-Whole Amount, if any) and interest and
Additional Amounts, if any, but such money need not be segregated from other
funds except to the extent required by law.
Unless otherwise specified with respect to any Security pursuant to
Section 301, in or pursuant to this Indenture or any Security if, after a
deposit referred to in Section 1404(a) has been made, (a) the Holder of a
Security in respect of which such deposit was made is entitled to, and does,
elect pursuant to Section 301 or the terms of such Security to receive payment
in a currency or currency unit other than that in which the deposit pursuant to
Section 1404(a) has been made in respect of such Security, or (b) a Conversion
Event occurs in respect of the Foreign Currency in
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which the deposit pursuant to Section 1404(a) has been made, the indebtedness
represented by such Security and any coupons appertaining thereto shall be
deemed to have been, and will be, fully discharged and satisfied through the
payment of the principal of (and premium or Make-Whole Amount, if any), and
interest, if any, on and Additional Amounts, if any, with respect to such
Security as the same becomes due out of the proceeds yielded by converting
(from time to time as specified below in the case of any such election) the
amount or other property deposited in respect of such Security into the
currency or currency unit in which such Security becomes payable as a result of
such election or Conversion Event based on the applicable market exchange rate
for such currency or currency unit in effect on the second Business Day prior
to each payment date, except, with respect to a Conversion Event, for such
Foreign Currency in effect (as nearly as feasible) at the time of the
Conversion Event.
The Issuer shall pay and indemnify the Trustee against any tax, fee or
other charge imposed on or assessed against the Government Obligations deposit
pursuant to Section 1404 or the principal and interest received in respect
thereof other than any such tax, fee or other charge which by law is for the
account of the Holders of such Outstanding Securities and any coupons
appertaining thereto.
Anything in this Article to the contrary notwithstanding, subject to
Section 606, the Trustee shall deliver or pay to the Issuer from time to time
upon Issuer Request any money or Government Obligations (or other property and
any proceeds therefrom) held by it as provided in Section 1404 which, in the
opinion of a nationally recognized firm of independent public accountants
expressed in a written certification thereof delivered to the Trustee, are in
excess of the amount thereof which would then be required to be deposited to
effect a defeasance or covenant defeasance, as applicable, in accordance with
this Article.
ARTICLE FIFTEEN
MEETINGS OF HOLDERS OF SECURITIES
SECTION 1501. PURPOSES FOR WHICH MEETINGS MAY BE CALLED. A meeting of
Holders of Securities of any series may be called at any time and from time to
time pursuant to this Article to make, give or take any request, demand,
authorization, direction, notice, consent, waiver or other action provided by
this Indenture to be made, given or taken by Holders of Securities of such
series.
SECTION 1502. CALL, NOTICE AND PLACE OF MEETINGS.
(a) The Trustee may at any time call a meeting of Holders of Securities of
any series for any purpose specified in Section 1501, to be held at such time
and at such place in the Borough of Manhattan, New York City, or in London as
the Trustee shall determine. Notice of every meeting of Holders of Securities
of any series, setting forth the time and the place of such meeting and in
general terms the action proposed to be taken at such meeting, shall be given,
in the manner provided in Section 106, not less than 21 nor more than 180 days
prior to the date fixed for the meeting.
(b) In case at any time the Issuer, pursuant to a Board Resolution, or any
Holders of at least 10% in principal amount of the Outstanding Securities of
any series shall have requested the Trustee to call a meeting of the Holders of
Securities of such series for any purpose specified in Section 1501, by written
request setting forth in reasonable detail the action proposed to be taken at
the meeting, and the Trustee shall not have made the first publication of the
notice of such meeting within 21 days after receipt of such request or shall
not thereafter proceed to cause the meeting to be held as provided herein, then
the Issuer or the Holders of Securities of such series in the amount above
specified, as the case may be, may determine the time and the place in the
Borough of Manhattan, New York City, or in London for such meeting and may call
such meeting for such purposes by giving notice thereof as provided in
subsection (a) of this Section.
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<PAGE> 74
SECTION 1503. PERSONS ENTITLED TO VOTE AT MEETINGS. To be entitled to
vote at any meeting of Holders of Securities of any series, a Person shall be
(1) a Holder of one or more Outstanding Securities of such series, or (2) a
Person appointed by an instrument in writing as proxy for a Holder or Holders
of one or more Outstanding Securities of such series by such Holder or Holders.
The only Persons who shall be entitled to be present or to speak at any
meeting of Holders of Securities of any series shall be the Persons entitled to
vote at such meeting and their counsel, any representatives of the Trustee and
its counsel and any representatives of the Issuer and its counsel.
SECTION 1504. QUORUM; ACTION. The Persons entitled to vote a majority in
principal amount of the Outstanding Securities of a series shall constitute a
quorum for a meeting of Holders of Securities of such series; provided,
however, that if any action is to be taken at such meeting with respect to a
consent or waiver which this Indenture expressly provides may be given by the
Holders of not less than a specified percentage in principal amount of the
Outstanding Securities of a series, the Persons entitled to vote such specified
percentage in principal amount of the Outstanding Securities of such series
shall constitute a quorum. In the absence of a quorum within 30 minutes after
the time appointed for any such meeting, the meeting shall, if convened at the
request of Holders of Securities of such series, be dissolved. In any other
case the meeting may be adjourned for a period of not less than 10 days as
determined by the chairman of the meeting prior to the adjournment of such
meeting. In the absence of a quorum at the reconvening of any such adjourned
meeting, such adjourned meeting may be further adjourned for a period of not
less than 10 days as determined by the chairman of the meeting prior to the
adjournment of such adjourned meeting. Notice of the reconvening of any
adjourned meeting shall be given as provided in Section 1502(a), except that
such notice need to be given only once not less than five days prior to the
date on which the meeting is scheduled to be reconvened. Notice of the
reconvening of any adjournment meeting shall state expressly the percentage, as
provided above, of the principal amount of the Outstanding Securities of such
series which shall constitute a quorum.
Except as limited by the proviso to Section 902, any resolution presented
to a meeting or adjourned meeting duly reconvened at which a quorum is present
as aforesaid may be adopted by the affirmative vote of the persons entitled to
vote a majority in aggregate principal amount of the Outstanding Securities
represented at such meeting; provided, however, that, except as limited by the
proviso to Section 902, any resolution with respect to any request, demand,
authorization, direction, notice, consent, waiver or other action which this
Indenture expressly provides may be made, given or taken by the Holders of a
specified percentage, which is less than a majority, in principal amount of the
Outstanding Securities of a series may be adopted at a meeting or an adjourned
meeting duly reconvened and at which a quorum is present as aforesaid by the
affirmative vote of the Holders of such specified percentage in principal
amount of the Outstanding Securities of that series.
Any resolution passed or decision taken at any meeting of Holders of
Securities of any series duly held in accordance with this Section shall be
binding on all the Holders of Securities of such series and the related
coupons, whether or not present or represented at the meeting.
Notwithstanding the foregoing provisions of this Section 1504, if any
action is to be taken at a meeting of Holders of Securities of any series with
respect to any request, demand, authorization, direction, notice, consent,
waiver or other action that this Indenture expressly provides may be made,
given or taken by the Holders of a specified percentage in principal amount of
all Outstanding Securities affected thereby, or of the Holders of such series
and one or more additional series:
(a) there shall be no minimum quorum requirement for
such meeting; and
(b) the principal amount of the Outstanding
Securities of such series that vote in favor of such request,
demand, authorization, direction, notice, consent, waiver or
other action shall be taken into account in determining
whether
- 66 -
<PAGE> 75
such request, demand, authorization, direction, notice,
consent, waiver or other action has been made, given or taken
under this Indenture.
SECTION 1505. DETERMINATION OF VOTING RIGHTS; CONDUCT AND ADJOURNMENT OF
MEETINGS.
(a) Notwithstanding any provisions of this Indenture, the Trustee may make
such reasonable regulations as it may deem advisable for any meeting of Holders
of Securities of a series in regard to proof of the holding of Securities of
such series and of the appointment of proxies and in regard to the appointment
and duties of inspectors of votes, the submission and examination of proxies,
certificates and other evidence of the right to vote, and such other matters
concerning the conduct of the meeting as it shall deem appropriate. Except as
otherwise permitted or required by any such regulations, the holding of
Securities shall be proved in the manner specified in Section 104 and the
appointment of any proxy shall be proved in the manner specified in Section 104
or by having the signature of the Person executing the proxy witnessed or
guaranteed by any trust company, bank or banker authorized by Section 104 to
certify to the holding of Bearer Securities. Such regulations may provide that
written instruments appointing proxies, regular on their face, may be presumed
valid and genuine without the proof specified in Section 104 or other proof.
(b) The Trustee shall, by an instrument in writing appoint a temporary
chairman of the meeting, unless the meeting shall have been canceled by the
Issuer or by Holders of Securities as provided in Section 1502(b), in which
case the Issuer or the Holders of Securities of the series calling the meeting,
as the case may be, shall in like manner appoint a temporary chairman. A
permanent chairman and a permanent secretary of the meeting shall be elected by
vote of the persons entitled to vote a majority in principal amount of the
Outstanding Securities of such series represented at the meeting.
(c) At any meeting each Holder of a Security of such series or proxy shall
be entitled to one vote for each $1,000 principal amount of the Outstanding
Securities of such series held or represented by him; provided, however that no
vote shall be cast or counted at any meeting in respect of any Security
challenged as not Outstanding and ruled by the chairman of the meeting to be
not Outstanding. The chairman of the meeting shall have no right to vote,
except as a Holder of a Security of such series or proxy.
(d) Any meeting of Holders of Securities of any series duly called
pursuant to Section 1502 at which a quorum is present may be adjourned from
time to time by Persons entitled to vote a majority in principal amount of the
Outstanding Securities of such series represented at the meeting, and the
meeting may be held as so adjourned without further notice.
SECTION 1506. COUNTING VOTES AND RECORDING ACTION OF MEETINGS. The vote
upon any resolution submitted to any meeting of Holders of Securities of any
series shall be by written ballots on which shall be subscribed the signatures
of the Holders of Securities of such series or of their representatives by
proxy and the principal amounts and serial numbers of the Outstanding
Securities of such series held or represented by them. The permanent chairman
of the meeting shall appoint two inspectors of votes who shall count all votes
cast at the meeting for or against any resolution and who shall make and file
with the secretary of the meeting their verified written reports in duplicate
of all votes cast at the meeting. A record, at least in duplicate, of the
proceedings of each meeting of Holders of Securities of any Series shall be
prepared by the secretary of the meeting and there shall be attached to said
record the original reports of the inspectors of votes on any vote by ballot
taken thereat and affidavits by one or more persons having knowledge of the
fact, setting forth a copy of the notice of the meeting and showing that said
notice was given as provided in Section 1502 and, if applicable, Section 1504.
Each copy shall be signed and verified by the affidavits of the permanent
chairman and secretary of the meeting and one such copy shall be delivered to
the Issuer and another to the Trustee to be preserved by the Trustee, the
latter to have attached thereto the ballots voted at the meeting. Any record
so signed and verified shall be conclusive evidence of the matters therein
stated.
- 67 -
<PAGE> 76
SECTION 1507. EVIDENCE OF ACTION TAKEN BY HOLDERS. Any request, demand,
authorization, direction, notice consent, waiver or other action provided by
this Indenture to be given or taken by a specified percentage in principal
amount of the Holders of any or all series may be embodied in and evidenced by
one or more instruments of substantially similar tenor signed by such specified
percentage of Holders in person or by agent duly appointed in writing, and,
except as herein otherwise expressly provided, such action shall become
effective when such instrument or instruments are delivered to the Trustee.
Proof and execution of any instrument or of a writing appointing any such agent
shall be sufficient for any purpose of this Indenture and (subject to Article
Six) conclusive in favor of the Trustee and the Issuer, if made in the manner
provided in this Article.
SECTION 1508. PROOF OF EXECUTION OF INSTRUMENTS. Subject to Article Six,
the execution of any instrument by a Holder or his agent or proxy may be proved
in accordance with such reasonable rules and regulations as may be prescribed
by the Trustee or in such manner as shall be satisfactory to the Trustee.
ARTICLE SIXTEEN
SECURITIES IN FOREIGN CURRENCIES
SECTION 1601. APPLICABILITY OF ARTICLE. Whenever this Indenture provides
for (a) any action by, or the determination of any of the rights of Holders of
Securities of any series in which not all of such Securities are denominated in
the same currency, or (b) any distribution to Holders of Securities, in the
absence of any provision to the contrary in the form of Security of any
particular series or pursuant to this Indenture or the Securities, any amount
in respect of any Security denominated in a currency other than Dollars shall
be treated for any such action or distribution as that amount of Dollars that
could be obtained for such amount on such reasonable basis of exchange and as
of the record date with respect to Registered Securities of such series (if
any) for such action, determination of rights for distribution (or, if there
shall be no applicable record date, such other date reasonably proximate to the
date of such action, determination of rights or distribution) as the Issuer may
specify in a written notice to the Trustee or, in the absence of such written
notice, as the Trustee may determine.
* * * * *
- 68 -
<PAGE> 77
IN WITNESS WHEREOF, the parties hereto have caused this Indenture to be
duly executed, and their respective corporate seals to be hereunto affixed and
attested, all as of the day and year first above written.
EOP OPERATING LIMITED PARTNERSHIP
By:
Equity Office Properties Trust
as Managing General Partner
By: /s/ Timothy H. Callahan
------------------------
Name: Timothy H. Callahan
Title: Chief Executive Officer
and Trustee
Attest:
/s/ Stanley M. Stevens
- -------------------------------------
Title: Executive Vice President
Chief Legal Counsel and
Secretary
STATE STREET BANK AND TRUST COMPANY,
as Trustee
By: /s/ Donald E. Smith
------------------------
Name: Donald E. Smith
Title: Vice President
Attest:
/s/ Gerald R. Wheeler
- -------------------------------------
Title: Vice President
- 69 -
<PAGE> 78
STATE OF ILLINOIS )
) ss:
COUNTY OF COOK )
On the 28th day of August, 1997, before me personally came
Timothy H. Callahan, to me known, who, being by me duly sworn, did depose and
say that he is Chief Executive Officer and Trustee of EQUITY OFFICE
PROPERTIES TRUST, the managing general partner of EOP OPERATING LIMITED
PARTNERSHIP, one of the parties described in and which executed the foregoing
instrument, and that he signed his name thereto by authority of the Board of
Directors.
{Notarial Seal}
/s/ Lori Ellen Kravets
-------------------------
Notary Public
COMMISSION EXPIRES:
- 70 -
<PAGE> 79
COMMONWEALTH OF MASSACHUSETTS )
) ss:
COUNTY OF SUFFOLK )
On the 28th day of August, 1997, before me personally came
Donald E. Smith, to me known, who, being by me duly sworn, did depose and say
that he is Vice President of STATE STREET BANK AND TRUST COMPANY, as
Trustee, one of the parties described in and which executed the foregoing
instrument, and that he is authorized to sign his name thereto on behalf of the
Trustee.
{Notarial Seal}
/s/ Stacye M. Junior
---------------------------
Notary Public
COMMISSION EXPIRES:
- 71 -
<PAGE> 80
EXHIBIT A
FORMS OF CERTIFICATION
EXHIBIT A-1
FORM OF CERTIFICATE TO BE GIVEN BY PERSON ENTITLED
TO RECEIVE BEARER SECURITY OR TO OBTAIN INTEREST
PAYABLE PRIOR TO THE EXCHANGE DATE
CERTIFICATE
{Insert title or sufficient description of Securities to be delivered}
This is to certify that, as of the date hereof, and except as set forth
below, the above-captioned Securities held by you for our account (i) are owned
by person(s) that are not citizens or residents of the United States, domestic
partnerships, domestic corporations or any estate or trust the income of which
is subject to United States federal income taxation regardless of its source
("United States person(s)"), (ii) are owned by United States person(s) that are
(a) foreign branches of United States financial institutions (financial
institutions, as defined in United States Treasury Regulations Section
1.165-12(c)(1)(v) are herein referred to a "financial institutions") purchasing
for their own account or for resale, or (b) United States person(s) who
acquired the Securities through foreign branches of United States financial
institutions and who hold the Securities through such United States financial
institutions on the date hereof (and in either case (a) or (b), each such
United States financial institution hereby agrees, on its own behalf or through
its agent, that you may advise Equity Office Properties Trust or its agent that
such financial institution will comply with the requirements of Section
165(j)(3)(A), (B) or (C) of the United States Internal Revenue Code of 1986,
amended, and the regulations thereunder), or (iii) are owned by United States
or foreign financial institution(s) for purposes of resale during the
restricted period (as defined in United States Treasury Regulations Section 1.1
63-5(c)(2)(i)(D)(7)), and, in addition if the owner is a United States or
foreign financial institution described in clause (iii) above (whether or not
also described in clause (i) or (ii)), this is to further certify that such
financial institution has not acquired the Securities for purposes of resale
directly or indirectly to a United States person or to a person within the
United States or its possessions.
As used herein, "United States" means the United States of America
(including the States and the District of Columbia), and its "possessions"
include Puerto Rico, the U.S. Virgin Islands, Guam, American Samoa, Wake
Island and the Northern Mariana Islands.
We undertake to advise your promptly by tested telex on or prior to the
date on which you intend to submit your certification relating to the
above-captioned Securities held by you for our account in accordance with
Operating Procedures if any applicable statement herein is not correct on such
date, and in the absence of any such notification it may be assumed that this
certification applies as of such date.
This certificate excepts and does not relate to U.S. [ ] of such interest
in the above-captioned Securities in respect of which we are not able to
certify and as to which we understand an exchange for an interest in a
Permanent Global Security or an exchange for and delivery of definitive
Securities (or, if relevant, collection of any interest) cannot be made until
we do so certify.
We understand that this certificate may be required in connection with
certain tax legislation in the United States. If administrative or legal
proceedings are commenced or threatened in
A-1
<PAGE> 81
connection with which this certificate is or would be relevant, we irrevocably
authorize you to produce this certificate or a copy thereof to any interested
party in such proceedings.
Dated: _____________________________________, 19__
(To be dated no earlier than the 15th day prior
to (i) the Exchange Date or (ii) the relevant
Interest Payment Date occurring prior to the
Exchange Date, as applicable)
(Name of Person Making Certification)
---------------------------
(Authorized Signatory)
Name:
Title:
A-2
<PAGE> 82
EXHIBIT A-2
FORM OF CERTIFICATE TO BE GIVEN BY EUROCLEAR
AND CEDEL S.A.A IN CONNECTION WITH THE
EXCHANGE OF A PORTION OF A TEMPORARY
GLOBAL SECURITY OR TO OBTAIN INTEREST
PAYABLE PRIOR TO THE EXCHANGE DATE
CERTIFICATE
{Insert title or sufficient description of Securities to be delivered}
This is to certify that, based solely on written certifications that we
have received in writing, by tested telex or by electronic transmission from
each of the persons appearing in our records as persons entitled to a portion
of the principal amount set forth below (our "Member Organizations")
substantially in the form attached hereto, as of the date hereof, {U.S.}
____________________ principal amount of the above-captioned Securities (i) is
owned by person(s) that are not citizens or residents of the United States,
domestic partnerships, domestic corporations or any estate or trust the income
of which is subject to United States Federal income taxation regardless of its
source ("United States person(s)"), (ii) is owned by United States person(s)
that are (a) foreign branches of United States financial institutions
(financial institutions, as defined in the U.S. Treasury Regulations Section
1.165-12(c)(1)(v) are herein referred to as "financial institutions")
purchasing for their own account or for resale, or (b) United States person(s)
who acquired the Securities through foreign branches of United States financial
institutions and who hold the Securities through such United States financial
institutions on the date hereof (and in either case (a) or (b), each such
financial institution has agreed, on its own behalf or through its agent, that
we may advise Equity Office Properties Trust or its agent that such financial
institution will comply with the requirements of Section 165(j)(3)(A), (B) or
(C) of the Internal Revenue Code of 1986, as amended, and the regulations
thereunder), or (iii) is owned by United States or foreign financial
institution(s) for purposes of resale during the restricted period (as defined
in United States Treasury Regulations Section 1.163-5(c)(2)(i)(D)(7)), and, to
the further effect, that financial institutions described in clause (iii) above
(whether or not also described in clause (i) or (ii)) have certified that they
have not acquired the Securities for purposes of resale directly or indirectly
to a United States person or to a person within the United States or its
possessions.
As used herein "United States" means the United States of America
(including the States and the District of Columbia), and its "possessions"
include Puerto Rico, the U.S. Virgin Islands, Guam, American Samoa, Wake
Island and the Northern Mariana Islands.
We further certify that (i) we are not making available herewith for
exchange (or, if relevant, collection of any interest) any portion of the
temporary global Security representing the above-captioned Securities excepted
in the above-referenced certificates of Member Organizations and (ii) as of the
date hereof we have not received any notification from any of our Member
Organizations to the effect that the statements made by such Member
Organizations with respect to any portion of the part submitted herewith for
exchange (or, if relevant, collection of any interest) are no longer true and
cannot be relied upon as of the date hereof.
We understand that this certification is required in connection with
certain tax legislation in the United States. If administrative or legal
proceedings are commenced or threatened in connection with which this
certificate is or would be relevant, we irrevocably authorize you to produce
this certificate or a copy thereof to any interested party in such proceedings.
A-3
<PAGE> 83
Dated: _________________________________ , 19__
(To be dated no earlier than the Exchange
Date or the relevant Interest Payment Date
occurring prior to the Exchange Date, as
applicable)
{Morgan Guaranty Trust Company of New York,
Brussels Office}, as Operator of the
Euroclear System {Cedel}
By: _______________________________
A-4
<PAGE> 1
EXHIBIT 4.2
EXECUTION COPY
===============================================================================
EOP OPERATING LIMITED PARTNERSHIP
Issuer
and
STATE STREET BANK AND TRUST COMPANY
Trustee
_______________________________________
FIRST SUPPLEMENTAL INDENTURE
Dated as of February 9, 1998
_________________________________
SENIOR DEBT SECURITIES
===============================================================================
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
----
<S> <C>
ARTICLE ONE DEFINITIONS AND OTHER PROVISIONS OF GENERAL
APPLICATION ......................................... 1
SECTION 101. DEFINITIONS ...................................... 1
SECTION 102. EFFECT OF HEADINGS AND TABLE OF CONTENTS ......... 1
SECTION 103. SUCCESSORS AND ASSIGNS ........................... 1
SECTION 104. SEPARABILITY CLAUSE .............................. 1
SECTION 105. BENEFITS OF INDENTURE ............................ 2
SECTION 106. GOVERNING LAW .................................... 2
SECTION 107. EFFECTIVENESS .................................... 2
ARTICLE TEN COVENANTS ........................................... 2
SECTION 1004. LIMITATIONS ON INCURRENCE OF DEBT ............... 2
</TABLE>
- i -
<PAGE> 3
FIRST SUPPLEMENTAL INDENTURE, dated as of February 9, 1998, between EOP
OPERATING LIMITED PARTNERSHIP, a Delaware limited partnership (the "Issuer"),
having its principal offices at Two North Riverside Plaza, 22nd Floor, Chicago,
Illinois 60606, and STATE STREET BANK AND TRUST COMPANY, a Massachusetts trust
company, as Trustee hereunder (the "Trustee"), having its Corporate Trust
Office at Two International Place, Financial Services, Corporate Trust
Department, Boston, Massachusetts 02110, under the indenture between the
Issuer and the Trustee (the "Indenture") dated as of September 2, 1997.
RECITALS
The Indenture provides that the Issuer and the Trustee may, at any time
and from time to time, enter into one or more supplemental indentures, in form
satisfactory to the Trustee, for the purpose of supplementing the provisions of
the Indenture to add to the covenants of the Issuer for the benefit of the
Holders of all or any series of Securities.
The Issuer has duly authorized the execution and delivery of this First
Supplemental Indenture, and all things necessary have been done to make this
First Supplemental Indenture a valid agreement of the Issuer, in accordance
with its terms.
NOW, THEREFORE, THIS FIRST SUPPLEMENTAL INDENTURE WITNESSETH:
For and in consideration of the mutual premises and agreements herein
contained, the Issuer and the Trustee mutually covenant and agree, for the
equal and proportionate benefit of all Holders of the Securities, as follows:
ARTICLE ONE
DEFINITIONS AND OTHER PROVISIONS OF GENERAL APPLICATION
SECTION 101. DEFINITIONS. For all purposes of this Indenture, except as
otherwise expressly provided or unless the context otherwise requires:
(1) the terms defined in this Article have the meanings assigned
to them in this Article, and include the plural as well as the
singular;
(2) the words "herein," "hereof," "hereto" and "hereunder" and
other words of similar import refer to the Indenture and this First
Supplemental Indenture as a whole and not to any particular Article,
Section or other subdivision; and
(3) certain capitalized terms are used herein as they are defined
in the Indenture.
SECTION 102. EFFECT OF HEADINGS AND TABLE OF CONTENTS. The Article and
Section headings herein and the Table of Contents are for convenience only and
shall not affect the construction hereof.
SECTION 103. SUCCESSORS AND ASSIGNS. All covenants, stipulations,
promises and agreements in this First Supplemental Indenture by the Issuer
shall bind its successors and assigns, whether so expressed or not.
SECTION 104. SEPARABILITY CLAUSE. In case any provision in this First
Supplemental Indenture or the Securities shall be invalid, illegal or
unenforceable, the validity, legality and enforceability of the remaining
provisions shall not in any way be affected or impaired thereby.
<PAGE> 4
SECTION 105. BENEFITS OF INDENTURE. Except as provided in the next
sentence, nothing in this First Supplemental Indenture or in the Securities,
express or implied, shall give to any Person, other than the parties hereto and
their successors and assigns hereunder and the Holders of Securities, any
benefit or legal or equitable right, remedy or claim under this First
Supplemental Indenture.
SECTION 106. GOVERNING LAW. This First Supplemental Indenture and the
Securities and coupons shall be governed by and construed in accordance with
the laws of the State of New York.
SECTION 107. EFFECTIVENESS. This First Supplemental Indenture shall take
effect on the date hereof and shall amend the provisions of the Indenture with
respect to the Securities.
ARTICLE TEN
COVENANTS
SECTION 1004. LIMITATIONS ON INCURRENCE OF DEBT.
(a) The clause "The Issuer will not, and will not permit any
Subsidiary to, incur any Debt other than intercompany Debt (representing
Debt to which the only parties are the Issuer, the General Partner and
any of their Subsidiaries, but only so long as such Debt is held solely
by any of the Issuer, the General Partner and any Subsidiary) that is
subordinate in right of payment to the Securities," in Section 1004(a) is
amended and restated to read as follows:
"The Issuer will not, and will not permit any
Subsidiary to, incur any Debt other than intercompany Debt
(representing Debt to which the only parties are the Issuer,
the General Partner and any of their Subsidiaries, but only
so long as such Debt is held solely by any of the Issuer,
the General Partner and any Subsidiary and provided that, in
the case of Debt owed to Subsidiaries, such Debt is
subordinate in right of payment to the Securities),"
(b) The clause "The Issuer will not, and will not permit any
Subsidiary to, incur any Debt other than intercompany Debt that is
subordinate in right of payment to the Securities," in Section 1004(c) is
amended and restated to read as follows: .
"The Issuer will not, and will not permit any
Subsidiary to, incur any Debt other than intercompany Debt
(provided that, in the case of Debt owed to Subsidiaries,
such Debt is subordinate in right of payment to the
Securities),"
* * * * *
- 2 -
<PAGE> 5
This First Supplemental Indenture may be executed in any number of
counterparts, each of which so executed shall be deemed to be an original, but
all such counterparts shall together constitute but one and the same
instrument.
IN WITNESS WHEREOF, the parties hereto have caused this First Supplemental
Indenture to be duly executed, and their respective corporate seals to be
hereunto affixed and attested, all as of the day and year first above written.
EOP OPERATING LIMITED PARTNERSHIP
By: Equity Office Properties Trust
as Managing General Partner
By: /S/ TIMOTHY H. CALLAHAN
--------------------------
Name: Timothy H. Callahan
Title: President and CEO
Attest:
/s/ STANLEY M. STEVENS
- ------------------------------------
Title: Secretary and General Counsel
STATE STREET BANK AND TRUST COMPANY,
as Trustee
By: /s/ DONALD E. SMITH
------------------------
Name: Donald E. Smith
Title: Vice President
Attest:
/s/ SUSAN FREEDMAN
- ------------------------------------
Title: Vice President
- 3 -
<PAGE> 6
STATE OF Illinois )
) ss:
COUNTY OF Cook )
On the 17th day of February, 1998, before me personally came Timothy H.
Callahan, to me known, who, being by me duly sworn, did depose and say that he
is President and CEO of EQUITY OFFICE PROPERTIES TRUST, the managing general
partner of EOP OPERATING LIMITED PARTNERSHIP, one of the parties described in
and which executed the foregoing instrument, and that he signed his name thereto
by authority of the Board of Directors.
{Notarial Seal}
/s/ DEBBIE J. WIELKOPOLAN
---------------------------------
Notary Public
COMMISSION EXPIRES: June 13, 2000
- 4 -
<PAGE> 7
COMMONWEALTH OF MASSACHUSETTS )
) ss:
COUNTY OF SUFFOLK )
On the 17th day of February, 1998, before me personally came Donald E.
Smith, to me known, who, being by me duly sworn, did depose and say that he is
Vice President of STATE STREET BANK AND TRUST COMPANY, as Trustee, one of the
parties described in and which executed the foregoing instrument, and that he is
authorized to sign his name thereto on behalf of the Trustee.
{Notarial Seal}
/s/ Stacye M. Junior
--------------------------------
Notary Public
COMMISSION EXPIRES: 9/13/02
- 5 -
<PAGE> 1
EXHIBIT 4.3
EOP OPERATING LIMITED PARTNERSHIP
6.375% NOTES DUE 2003
NO. 001 PRINCIPAL AMOUNT
CUSIP NO. 268766 AA 0 $200,000,000
UNLESS THIS NOTE IS PRESENTED BY AN AUTHORIZED REPRESENTATIVE OF THE
DEPOSITORY TRUST COMPANY, A NEW YORK CORPORATION ("DTC"), TO THE ISSUER OR ITS
AGENT FOR REGISTRATION OF TRANSFER, EXCHANGE OR PAYMENT AND ANY NOTE ISSUED IS
REGISTERED IN THE NAME OF CEDE & CO. OR IN SUCH OTHER NAME AS IS REQUESTED BY
AN AUTHORIZED REPRESENTATIVE OF DTC AND ANY PAYMENT IS MADE TO CEDE & CO., OR
TO SUCH OTHER ENTITY AS IS REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF DTC,
ANY TRANSFER, PLEDGE, OR OTHER USE HEREOF FOR VALUE OR OTHERWISE BY OR TO ANY
PERSON IS WRONGFUL INASMUCH AS THE REGISTERED OWNER HEREOF, CEDE & CO., HAS AN
INTEREST HEREIN.
UNLESS AND UNTIL THIS NOTE IS EXCHANGED IN WHOLE OR IN PART FOR NOTES IN
CERTIFICATED FORM, THIS NOTE MAY NOT BE TRANSFERRED EXCEPT AS A WHOLE BY DTC TO
A NOMINEE THEREOF OR BY A NOMINEE THEREOF TO DTC OR ANOTHER NOMINEE OF DTC OR
BY DTC OR ANY SUCH NOMINEE TO A SUCCESSOR OF DTC OR A NOMINEE OF SUCH
SUCCESSOR.
THIS NOTE HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS
AMENDED (THE "SECURITIES ACT"), OR ANY STATE SECURITIES LAW. NEITHER THIS
NOTE NOR ANY INTERESTS OR PARTICIPATION HEREIN MAY BE REOFFERED, SOLD,
ASSIGNED, TRANSFERRED, PLEDGED, ENCUMBERED OR OTHERWISE DISPOSED OF IN THE
ABSENCE OF SUCH REGISTRATION OR UNLESS SUCH TRANSACTION IS EXEMPT FROM, OR NOT
SUBJECT TO, REGISTRATION. THIS NOTE WILL BE ISSUED AND MAY BE TRANSFERRED ONLY
IN MINIMUM DENOMINATIONS OF $100,000 AND INTEGRAL MULTIPLES OF $1,000 IN EXCESS
THEREOF.
THE HOLDER OF THIS NOTE BY ITS ACCEPTANCE HEREOF AGREES TO OFFER, SELL OR
OTHERWISE TRANSFER THIS NOTE, PRIOR TO THE DATE (THE "RESALE RESTRICTION
TERMINATION DATE") WHICH IS TWO YEARS AFTER THE LATER OF THE ORIGINAL ISSUE
DATE HEREOF AND THE LAST DATE ON WHICH THE ISSUER OR ANY "AFFILIATE" OF THE
ISSUER WAS THE OWNER OF THIS NOTE (OR ANY PREDECESSOR OF SUCH NOTE), ONLY (A)
TO THE ISSUER OR ANY SUBSIDIARY THEREOF, (B) PURSUANT TO A REGISTRATION
STATEMENT WHICH HAS BEEN DECLARED EFFECTIVE UNDER THE SECURITIES ACT, (C) FOR
SO LONG AS THIS NOTE IS ELIGIBLE FOR RESALE PURSUANT TO RULE 144A, TO A PERSON
IT REASONABLY BELIEVES IS A "QUALIFIED INSTITUTIONAL BUYER" AS DEFINED IN RULE
144A UNDER THE SECURITIES ACT THAT PURCHASES FOR ITS OWN ACCOUNT OR FOR THE
ACCOUNT OF A QUALIFIED INSTITUTIONAL BUYER TO WHOM NOTICE IS GIVEN THAT THE
TRANSFER IS BEING MADE IN RELIANCE ON RULE 144A, OR (D) TO AN INSTITUTIONAL
"ACCREDITED INVESTOR" WITHIN THE MEANING OF
<PAGE> 2
SUBPARAGRAPH (A)(1), (2), (3), OR (7) OF RULE 501 UNDER THE SECURITIES ACT THAT
IS ACQUIRING THIS NOTE FOR ITS OWN ACCOUNT OR FOR ACCOUNT OF SUCH AN
INSTITUTIONAL ACCREDITED INVESTOR, OR AS FIDUCIARY FOR THE ACCOUNT OF ONE OR
MORE TRUSTS, EACH OF WHICH IS AN "ACCREDITED INVESTOR" WITHIN THE MEANING OF
SUBPARAGRAPH (A) (7) OF RULE 501 UNDER THE SECURITIES ACT, FOR INVESTMENT
PURPOSES AND NOT WITH A VIEW TO, OR FOR OFFER OR SALE IN CONNECTION WITH, ANY
DISTRIBUTION IN VIOLATION OF THE SECURITIES ACT, IN A TRANSACTION EXEMPT FROM
THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT UPON THE DELIVERY OF AN
OPINION OF COUNSEL, CERTIFICATION AND/OR OTHER INFORMATION SATISIFACTORY TO THE
ISSUER, SUBJECT IN EACH OF THE FOREGOING CASES, TO A CERTIFICATE OF TRANSFER IN
THE FORM APPEARING ON THE OTHER SIDE OF THIS NOTE BEING COMPLETED AND DELIVERED
BY THE TRANSFEROR TO THE ISSUER. THIS LEGEND WILL BE REMOVED UPON THE REQUEST
OF THE HOLDER AFTER THE RESALE RESTRICTION TERMINATION DATE.
THE HOLDER OF THIS NOTE BY ITS ACCEPTANCE HEREOF AGREES TO BE BOUND BY THE
PROVISIONS OF THE REGISTRATION RIGHTS AGREEMENT RELATING TO ALL NOTES OF THIS
SERIES.
EOP Operating Limited Partnership, a Delaware limited partnership (the
"Issuer," which term includes any successor under the Indenture hereinafter
referred to), for value received, hereby promises to pay to Cede & Co. or
registered assigns, the principal sum of TWO HUNDRED MILLION Dollars on
February 15, 2003 (the "Stated Maturity Date"), (or any Redemption Date (as
defined on the reverse hereof) or any earlier date of acceleration of maturity,
(each such date being referred to as the "Maturity Date" with respect to the
principal repayable on such date) and to pay interest thereon from February 18,
1998 (or from the most recent Interest Payment Date (as defined below) to which
interest has been paid or duly provided for), semiannually in arrears on
February 15 and August 15 of each year, commencing on August 15, 1998 (each, an
"Interest Payment Date"), and on the Maturity Date, at a rate of 6.375% per
annum (together with Liquidated Damages, as defined in the Registration Rights
Agreement hereinafter referred to, that the Issuer may be required to pay, as
described on the reverse hereof), until payment of said principal sum has been
made or duly provided for. Interest on this Note will be computed on the basis
of a 360-day year of twelve 30-day months.
The interest so payable and punctually paid or duly provided for on an
Interest Payment Date will, subject to certain exceptions described below, be
paid to the Holder in whose name this Note (or one or more predecessor Notes)
is registered at the close of business on the "Regular Record Date" for such
payment, which will be the date 15 calendar days (regardless of whether such
day is a Business Day (as defined below)) next preceding such Interest Payment
Date. Any interest not so punctually paid or duly provided for on an Interest
Payment Date ("Defaulted Interest") shall forthwith cease to be payable to the
Holder on such Regular Record Date, and shall be paid to the Holder in whose
name this Note (or one or more predecessor Notes) is registered at the close of
business on a special record date (the "Special Record Date") for the payment
of such Defaulted Interest to be fixed by the Trustee hereinafter referred to,
notice whereof shall be given to the Holder of this Note by the Trustee not
less than 10 calendar days prior to such Special Record Date or may be paid at
any time in any other lawful manner, all as more fully provided for in the
Indenture.
2
<PAGE> 3
The principal of and Make-Whole Amount, if any, with respect to this Note
payable on the Maturity Date will be paid against presentation and surrender of
this Note at the office or agency of the Issuer maintained for that purpose in
Boston, Massachusetts with a drop facility maintained in New York, New York.
The Issuer hereby initially designates the Corporate Trust Office of the
Trustee in Boston, Massachusetts as the office to be maintained by it where
Notes may be presented for payment, registration of transfer, or exchange and
where notices or demands to or upon the Issuer in respect of the Notes or the
Indenture may be served.
Interest payable on this Note on any Interest Payment Date and on the
Maturity Date, as the case may be, will be the amount of interest accrued
during the applicable Interest Period (as defined below).
An "Interest Period" is each period from and including the immediately
preceding Interest Payment Date (or from and including February 18, 1998, in
the case of the initial Interest Period) to but excluding the applicable
Interest Payment Date or the Maturity Date, as the case may be. If any
Interest Payment Date or Maturity Date falls on a day that is not a Business
Day, principal, Make Whole Amount, if any, and interest payable on such date
will be paid on the succeeding Business Day with the same force and effect as
if it were paid on the date such payment was due, and no interest will accrue
on the amount so payable for the period from and after such date to such
succeeding Business Day. "Business Day" means any day, other than a Saturday
or a Sunday, on which banking institutions in New York, New York and Boston,
Massachusetts are not required or authorized by law or executive order to
close.
Payments of principal, Make Whole Amount, if any, and interest in respect
of this Note will be made by U.S. dollar check or by wire transfer (such a wire
transfer to be made only to a Holder of an aggregate principal amount of Notes
in excess of $10,000,000, and only if such Holder shall have furnished wire
instructions in writing to the Trustee no later than 15 days prior to the
relevant payment date and acknowledged that a wire transfer fee shall be
payable) of immediately available funds in such coin or currency of the United
States of America as at the time of payment is legal tender for the payment of
public and private debts.
The Holder of this Note is entitled to the benefits of and is subject to
the obligations contained in a Registration Rights Agreement (subject to the
provisions thereof), dated as of February 18, 1998 (the "Registration Rights
Agreement"), between the Issuer and the Initial Purchasers, as defined in the
Registration Rights Agreement. The Issuer shall pay Liquidated Damages to the
Holder of this Note as provided in the Registration Rights Agreement.
Reference is made to the further provisions of this Note set forth on the
reverse hereof. Such further provisions shall for all purposes have the same
effect as though fully set forth at this place. Capitalized terms used herein,
including on the reverse hereof, and not defined herein or on the reverse
hereof shall have the respective meanings given to such terms in the Indenture.
This Note shall not be entitled to the benefits of the Indenture or be
valid or become obligatory for any purpose until the certificate of
authentication hereon shall have been signed by the Trustee.
3
<PAGE> 4
IN WITNESS WHEREOF, the Issuer has caused this Note to be signed manually
or by facsimile by duly authorized officers of the General Partner.
Dated: February 18, 1998 EOP OPERATING LIMITED PARTNERSHIP,
as Issuer
By: EQUITY OFFICE PROPERTIES TRUST, not
individually but as General Partner
By: /s/ Timothy H. Callahan
--------------------------
Timothy H. Callahan
Its:President and Chief Executive
Officer
and By: /s/ Richard D. Kincaid
-------------------------
Richard D. Kincaid
Its:Chief Financial Officer
TRUSTEE'S CERTIFICATE OF AUTHENTICATION
This is one of the Notes of the series designated herein referred to in the
within-mentioned Indenture.
Dated: February 18, 1998 STATE STREET BANK AND TRUST COMPANY
By: /s/ Donald E. Smith
--------------------------
Authorized Officer
4
<PAGE> 5
[REVERSE OF NOTE]
EOP OPERATING LIMITED PARTNERSHIP
6.375% NOTES DUE 2003
This Note is one of a duly authorized issue of senior Notes of the Issuer
(hereinafter called the "Notes") of the series hereinafter specified, all
issued or to be issued under and pursuant to an Indenture dated as of September
2, 1997 (herein called the "Indenture"), duly executed and delivered by the
Issuer to State Street Bank and Trust Company, as Trustee (herein called the
"Trustee," which term includes any successor trustee under the Indenture with
respect to the series of Notes of which this Note is a part), to which
Indenture and all indentures supplemental thereto reference is hereby made for
a description of the rights, limitations of rights, obligations, duties, and
immunities thereunder of the Trustee, the Issuer, and the Holders of the Notes,
and of the terms upon which the Notes are, and are to be, authenticated and
delivered. The Notes may be issued in one or more series, which different
series may be issued in various aggregate principal amounts, may mature at
different times, may bear interest (if any) at different rates, may be subject
to different redemption provisions (if any), and may otherwise vary as provided
in the Indenture. This Note is one of a series designated as the 6.375% Notes
due 2003 of the Issuer (the "Notes"), limited in aggregate principal amount to
$300,000,000 subject to the provisions in the Indenture.
In case an Event of Default with respect to the Notes shall have occurred
and be continuing, the principal hereof and Make Whole Amount (if any) may be
declared, and upon such declaration shall become, due and payable, in the
manner, with the effect, and subject to the conditions provided in the
Indenture.
The Issuer may redeem this Note, at any time in whole or from time to time
in part, at the election of the Issuer, at a redemption price equal to the sum
of (i) the principal amount being redeemed plus accrued interest thereon to the
date fixed for redemption (the "Redemption Date") and (ii) the Make-Whole
Amount with respect hereto (the "Redemption Price"); provided, however, that
interest installments due on an Interest Payment Date which is on or prior to
the Redemption Date will be payable to the Holder hereof (or one or more
predecessor Notes) as of the close of business on the Record Date preceding
such Interest Payment Date. If notice has been given as provided in the
Indenture and funds for the redemption of this Note or any part thereof called
for redemption shall have been made available on the Redemption Date, this Note
or such part thereof will cease to bear interest on the Redemption Date
referred to in such notice and the only right of the Holder will be to receive
payment of the Redemption Price. Notice of any optional redemption of any Notes
will be given to the Holder hereof (in accordance with the provisions of the
Indenture), not more than 60 nor less than 30 days prior to the Redemption
Date. In the event of redemption of this Note in part only, a new Note of like
tenor for the unredeemed portion hereof and otherwise having the same terms and
provisions as this Note shall be issued by the Issuer in the name of the Holder
hereof upon the presentation and surrender hereof.
The Indenture contains provisions for defeasance of (i) the entire
indebtedness of the Notes or (ii) certain covenants and Events of Default with
respect to the Notes, in each case upon compliance with certain conditions set
forth therein, which provisions apply to the Notes.
At any time when the Issuer is not subject to Section 13 or 15(d) of the
United States Securities Exchange Act of 1934, as amended, upon the request of
a Holder of a Registrable Note (as defined in
5
<PAGE> 6
the Registration Rights Agreement) the Issuer will promptly furnish or cause to
be furnished the information specified in Rule 144(d)(4) to such Holder of a
Registrable Note, or to a prospective purchaser of any Note designated by any
such Holder to the extent required to permit compliance by such Holder with
Rule 144A under the Securities Act in connection with the resale of any such
Note.
Whenever in this Note there is a reference, in any context, to the payment
of the principal of, or Make-Whole Amount, if any, or interest on, or in
respect of, the Note, such mention shall be deemed to include mention of the
payment Liquidated Damages payable as described above to the extent that, in
such context, Liquidated Damages are, were or would be payable in respect of
the Note.
The Indenture contains provisions permitting the Issuer and the Trustee,
with the consent of the Holders of not less than a majority of the aggregate
principal amount of the Notes at the time Outstanding of all series to be
affected (voting as one class), evidenced as provided in the Indenture, to
execute supplemental indentures adding any provisions to or changing in any
manner or eliminating any of the provisions of the Indenture or of any
supplemental indenture or modifying in any manner the rights of the Holders of
the Notes of each series; provided, however, that no such supplemental
indenture shall, without the consent of the Holder of each Note at the time
Outstanding so affected, (i) change the final maturity of any Note, or reduce
the principal amount thereof or any premium or Make-Whole Amount thereon, if
any, or reduce the rate or extend the time of payment of any interest thereon,
or impair or affect the rights of any Holder to institute suit for the payment
on any Note, or (ii) reduce the percentage in principal amount of Outstanding
Notes, the Holders of which are required to consent to any such supplemental
indenture, or (iii) reduce the percentage in principal amount of Outstanding
Notes, the Holders of which are required to consent to any waiver of compliance
with certain provisions of the Indenture or any waiver of certain defaults
thereunder. It is also provided in the Indenture that, with respect to certain
defaults or Events of Default regarding the Notes of any series, the Holders of
a majority in aggregate principal amount Outstanding of the Notes of such
series (or, in the case of certain defaults or Events of Default, all series of
Notes) may on behalf of the Holders of all the Notes of such series (or all of
the Notes, as the case may be) waive any such past default or Event of Default
and its consequences, prior to any declaration accelerating the maturity of
such Notes, or, subject to certain conditions, may rescind a declaration of
acceleration and its consequences with respect to such Notes. The preceding
sentence shall not, however, apply to a default in or Event of Default relating
to, the payment of the principal of or premium or Make-Whole Amount, if any, or
interest on any of the Notes or in respect of a covenant or provision contained
in the Indenture that cannot be modified or amended without the consent of the
Holders of each Note at the time Outstanding affected thereby. Any such
consent or waiver by the Holder of this Note (unless revoked as provided in the
Indenture) shall be conclusive and binding upon such Holder and upon all future
Holders and owners of this Note and any Notes that may be issued in exchange or
substitution herefor, irrespective of whether or not any notation thereof is
made upon this Note or such other Notes.
No reference herein to the Indenture and no provision of this Note or of
the Indenture shall alter or impair the obligation of the Issuer, which is
absolute and unconditional, to pay the principal of and any Make-Whole Amount
and interest (including Liquidated Damages) on this Note in the manner, at the
respective times, at the rate and in the coin or currency herein prescribed.
This Note is issuable only in registered form without coupons in
denominations of U.S.$100,000 and integral multiples of $1,000 thereof. Notes
may be exchanged for a like aggregate principal amount of Notes of this series
of other authorized denominations at the office or agency of the
6
<PAGE> 7
Issuer in Boston, Massachusetts, in the manner and subject to the limitations
provided herein and in the Indenture, but without the payment of any service
charge except for any tax or other governmental charge imposed in connection
therewith.
Upon due presentment for registration of transfer of this Note at the
office or agency of the Issuer in Boston, Massachusetts, one or more new Notes
of authorized denominations in an equal aggregate principal amount will be
issued to the transferee in exchange therefor, subject to the limitations
provided in the Indenture, but without the payment of any service charge except
for any tax or other governmental charge imposed in connection therewith.
This Note is not subject to a sinking fund requirement.
No recourse under or upon any obligation, covenant or agreement contained
in the Indenture, or any Note, or because of any indebtedness evidenced hereby
or thereby (including, without limitation, any obligation or indebtedness
relating to the principal of, or premium or Make-Whole Amount or Liquidated
Damages, if any, interest or any other amounts due, or claimed to be due, on
this Note), or for any claim based thereon or otherwise in respect thereof,
shall be had (i) against the General Partner or any other partner, or any
Person which owns an interest, directly or indirectly, in any partner, in the
Issuer, or (ii) against any promoter, as such, or against any past, present or
future shareholder, officer, trustee or partner, as such, of the Issuer or the
General Partner or of any successor, either directly or through the Issuer or
the General Partner or any successor, under any rule of law, statute or
constitutional provision or by the enforcement of any assessment or by any
legal or equitable proceeding or otherwise, all such liability being expressly
waived and released by the acceptance hereof and as part of the consideration
for the issue hereof.
Prior to due presentation of this Note for registration of transfer, the
Issuer, the Trustee, and any authorized agent of the Issuer or the Trustee may
deem and treat the Person in whose name this Note is registered as the absolute
owner of this Note (whether or not this Note shall be overdue and
notwithstanding any notation of ownership or other writing hereon), for the
purpose of receiving payment of, or on account of, the principal hereof and
Make-Whole Amount, if any, and subject to the provisions herein and on the face
hereof, interest hereon, and for all other purposes, and neither the Issuer nor
the Trustee nor any authorized agent of the Issuer or the Trustee shall be
affected by any notice to the contrary, except as required by law.
THE INDENTURE AND THIS NOTE SHALL BE GOVERNED BY AND CONSTRUED IN
ACCORDANCE WITH THE LAW OF THE STATE OF NEW YORK, UNITED STATES OF AMERICA
WITHOUT REGARD TO THE PRINCIPLES OF CONFLICTS OF LAWS.
7
<PAGE> 8
ASSIGNMENT FORM AND CERTIFICATE OF TRANSFER
To assign this Note fill in the form below:
(I) or (we) assign and transfer this Note to
_______________________________________________________________________________
(Insert assignee's social Note or tax identification number, if any)
_______________________________________________________________________________
_______________________________________________________________________________
_______________________________________________________________________________
(Print or type assignee's name, address and zip code)
Your signature: ___________________________________________________________
(Sign exactly as your name appears on the other side
of this Note)
Date: ________________________________________
Signature Guarantee:* __________________________
In connection with any transfer of any of the Notes evidenced by this
certificate occurring prior to the date that is two years (or such shorter
period as may then be applicable under Rule 144(k) of the United States
Securities Act of 1933, as amended (the "Securities Act") (or any successor
provision)) after the later of the date of original issuance of such Notes and
the last date, if any, on which this Note is owned by the Issuer or any
Affiliate of the Issuer, the undersigned confirms that this Note is being
transferred:
CHECK ONE BOX BELOW
(1) [ ] to the Issuer or a Subsidiary thereof; or
(2) [ ] pursuant to and in compliance with Rule 144A under the
Securities Act; or
(3) [ ] pursuant to Rule 144 under the Securities Act; or
(4) [ ] pursuant to an effective registration statement under the
Securities Act; or
(5) [ ] pursuant to another available exemption from the registration
requirements of the Securities Act.
Unless one of the boxes is checked, the Trustee will refuse to register
this Note in the name of any person other than the registered holder thereof;
provided, however, that if box (5) is checked, the Trustee (as instructed by
the Issuer) and the Issuer may require, prior to registering any transfer of
this Note, such certifications, legal opinions or other information as the
Issuer has reasonably requested
*Signature must be guaranteed by a commercial bank, trust company or member
firm or a major stock exchange
8
<PAGE> 9
to confirm that such transfer is being made pursuant to an exemption from, or
in a transaction not subject to, the registration requirements of the
Securities Act.
9
<PAGE> 1
EXHIBIT 4.4
EOP OPERATING LIMITED PARTNERSHIP
6.625% NOTES DUE 2005
NO. 001 PRINCIPAL AMOUNT
CUSIP NO. 268766 AD 4 $200,000,000
UNLESS THIS NOTE IS PRESENTED BY AN AUTHORIZED REPRESENTATIVE OF THE
DEPOSITORY TRUST COMPANY, A NEW YORK CORPORATION ("DTC"), TO THE ISSUER OR ITS
AGENT FOR REGISTRATION OF TRANSFER, EXCHANGE OR PAYMENT AND ANY NOTE ISSUED IS
REGISTERED IN THE NAME OF CEDE & CO. OR IN SUCH OTHER NAME AS IS REQUESTED BY
AN AUTHORIZED REPRESENTATIVE OF DTC AND ANY PAYMENT IS MADE TO CEDE & CO., OR
TO SUCH OTHER ENTITY AS IS REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF DTC,
ANY TRANSFER, PLEDGE, OR OTHER USE HEREOF FOR VALUE OR OTHERWISE BY OR TO ANY
PERSON IS WRONGFUL INASMUCH AS THE REGISTERED OWNER HEREOF, CEDE & CO., HAS AN
INTEREST HEREIN.
UNLESS AND UNTIL THIS NOTE IS EXCHANGED IN WHOLE OR IN PART FOR NOTES IN
CERTIFICATED FORM, THIS NOTE MAY NOT BE TRANSFERRED EXCEPT AS A WHOLE BY DTC TO
A NOMINEE THEREOF OR BY A NOMINEE THEREOF TO DTC OR ANOTHER NOMINEE OF DTC OR
BY DTC OR ANY SUCH NOMINEE TO A SUCCESSOR OF DTC OR A NOMINEE OF SUCH
SUCCESSOR.
THIS NOTE HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS
AMENDED (THE "SECURITIES ACT"), OR ANY STATE SECURITIES LAW. NEITHER THIS NOTE
NOR ANY INTERESTS OR PARTICIPATION HEREIN MAY BE REOFFERED, SOLD, ASSIGNED,
TRANSFERRED, PLEDGED, ENCUMBERED OR OTHERWISE DISPOSED OF IN THE ABSENCE OF
SUCH REGISTRATION OR UNLESS SUCH TRANSACTION IS EXEMPT FROM, OR NOT SUBJECT TO,
REGISTRATION. THIS NOTE WILL BE ISSUED AND MAY BE TRANSFERRED ONLY IN MINIMUM
DENOMINATIONS OF $100,000 AND INTEGRAL MULTIPLES OF $1,000 IN EXCESS THEREOF.
THE HOLDER OF THIS NOTE BY ITS ACCEPTANCE HEREOF AGREES TO OFFER, SELL OR
OTHERWISE TRANSFER THIS NOTE, PRIOR TO THE DATE (THE "RESALE RESTRICTION
TERMINATION DATE") WHICH IS TWO YEARS AFTER THE LATER OF THE ORIGINAL ISSUE
DATE HEREOF AND THE LAST DATE ON WHICH THE ISSUER OR ANY "AFFILIATE" OF THE
ISSUER WAS THE OWNER OF THIS NOTE (OR ANY PREDECESSOR OF SUCH NOTE), ONLY (A)
TO THE ISSUER OR ANY SUBSIDIARY THEREOF, (B) PURSUANT TO A REGISTRATION
STATEMENT WHICH HAS BEEN DECLARED EFFECTIVE UNDER THE SECURITIES ACT, (C) FOR
SO LONG AS THIS NOTE IS ELIGIBLE FOR RESALE PURSUANT TO RULE 144A, TO A PERSON
IT REASONABLY BELIEVES IS A "QUALIFIED INSTITUTIONAL BUYER" AS DEFINED IN RULE
144A UNDER THE SECURITIES ACT THAT PURCHASES FOR ITS OWN ACCOUNT OR FOR THE
ACCOUNT OF A QUALIFIED INSTITUTIONAL BUYER TO WHOM NOTICE IS GIVEN THAT THE
TRANSFER IS BEING MADE IN RELIANCE ON RULE 144A, OR (D) TO AN INSTITUTIONAL
"ACCREDITED INVESTOR" WITHIN THE MEANING OF
<PAGE> 2
SUBPARAGRAPH (a)(1), (2), (3), OR (7) OF RULE 501 UNDER THE SECURITIES ACT THAT
IS ACQUIRING THIS NOTE FOR ITS OWN ACCOUNT OR FOR AN ACCOUNT OF SUCH AN
INSTITUTIONAL ACCREDITED INVESTOR, OR AS FIDUCIARY FOR THE ACCOUNT OF ONE OR
MORE TRUSTS, EACH OF WHICH IS AN "ACCREDITED INVESTOR" WITHIN THE MEANING OF
SUBPARAGRAPH (a) (7) OF RULE 501 UNDER THE SECURITIES ACT, FOR INVESTMENT
PURPOSES AND NOT WITH A VIEW TO, OR FOR OFFER OR SALE IN CONNECTION WITH, ANY
DISTRIBUTION IN VIOLATION OF THE SECURITIES ACT, IN A TRANSACTION EXEMPT FROM
THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT UPON THE DELIVERY OF AN
OPINION OF COUNSEL, CERTIFICATION AND/OR OTHER INFORMATION SATISFACTORY TO THE
ISSUER, SUBJECT IN EACH OF THE FOREGOING CASES, TO A CERTIFICATE OF TRANSFER IN
THE FORM APPEARING ON THE OTHER SIDE OF THIS NOTE BEING COMPLETED AND DELIVERED
BY THE TRANSFEROR TO THE ISSUER. THIS LEGEND WILL BE REMOVED UPON THE REQUEST
OF THE HOLDER AFTER THE RESALE RESTRICTION TERMINATION DATE.
THE HOLDER OF THIS NOTE BY ITS ACCEPTANCE HEREOF AGREES TO BE BOUND BY THE
PROVISIONS OF THE REGISTRATION RIGHTS AGREEMENT RELATING TO ALL NOTES OF THIS
SERIES.
EOP Operating Limited Partnership, a Delaware limited partnership (the
"Issuer," which term includes any successor under the Indenture hereinafter
referred to), for value received, hereby promises to pay to Cede & Co. or
registered assigns, the principal sum of TWO HUNDRED MILLION DOLLARS on
February 15, 2005 (the "Stated Maturity Date"), (or any Redemption Date (as
defined on the reverse hereof) or any earlier date of acceleration of maturity,
(each such date being referred to as the "Maturity Date" with respect to the
principal repayable on such date) and to pay interest thereon from February 18,
1998 (or from the most recent Interest Payment Date (as defined below) to which
interest has been paid or duly provided for), semiannually in arrears on
February 15 and August 15 of each year, commencing on August 15, 1998 (each, an
"Interest Payment Date"), and on the Maturity Date, at a rate of 6.625% per
annum (together with Liquidated Damages, as defined in the Registration Rights
Agreement hereinafter referred to, that the Issuer may be required to pay, as
described on the reverse hereof), until payment of said principal sum has been
made or duly provided for. Interest on this Note will be computed on the basis
of a 360-day year of twelve 30-day months.
The interest so payable and punctually paid or duly provided for on an
Interest Payment Date will, subject to certain exceptions described below, be
paid to the Holder in whose name this Note (or one or more predecessor Notes)
is registered at the close of business on the "Regular Record Date" for such
payment, which will be the date 15 calendar days (regardless of whether such
day is a Business Day (as defined below)) next preceding such Interest Payment
Date. Any interest not so punctually paid or duly provided for on an Interest
Payment Date ("Defaulted Interest") shall forthwith cease to be payable to the
Holder on such Regular Record Date, and shall be paid to the Holder in whose
name this Note (or one or more predecessor Notes) is registered at the close of
business on a special record date (the "Special Record Date") for the payment
of such Defaulted Interest to be fixed by the Trustee hereinafter referred to,
notice whereof shall be given to the Holder of this Note by the Trustee not
less than 10 calendar days prior to such Special Record Date or may be paid at
any time in any other lawful manner, all as more fully provided for in the
Indenture.
2
<PAGE> 3
The principal of and Make-Whole Amount, if any, with respect to this Note
payable on the Maturity Date will be paid against presentation and surrender of
this Note at the office or agency of the Issuer maintained for that purpose in
Boston, Massachusetts with a drop facility maintained in New York, New York.
The Issuer hereby initially designates the Corporate Trust Office of the
Trustee in Boston, Massachusetts as the office to be maintained by it where
Notes may be presented for payment, registration of transfer, or exchange and
where notices or demands to or upon the Issuer in respect of the Notes or the
Indenture may be served.
Interest payable on this Note on any Interest Payment Date and on the
Maturity Date, as the case may be, will be the amount of interest accrued
during the applicable Interest Period (as defined below).
An "Interest Period" is each period from and including the immediately
preceding Interest Payment Date (or from and including February 18, 1998, in
the case of the initial Interest Period) to but excluding the applicable
Interest Payment Date or the Maturity Date, as the case may be. If any
Interest Payment Date or Maturity Date falls on a day that is not a Business
Day, principal, Make Whole Amount, if any, and interest payable on such date
will be paid on the succeeding Business Day with the same force and effect as
if it were paid on the date such payment was due, and no interest will accrue
on the amount so payable for the period from and after such date to such
succeeding Business Day. "Business Day" means any day, other than a Saturday
or a Sunday on which banking institutions in New York, New York and Boston,
Massachusetts are required or authorized by law or executive order to close.
Payments of principal, Make Whole Amount, if any, and interest in respect
of this Note will be made by U.S. dollar check or by wire transfer (such a wire
transfer to be made only to a Holder of an aggregate principal amount of Notes
in excess of $10,000,000, and only if such Holder shall have furnished wire
instructions in writing to the Trustee no later than 15 days prior to the
relevant payment date and acknowledged that a wire transfer fee shall be
payable) of immediately available funds in such coin or currency of the United
States of America as at the time of payment is legal tender for the payment of
public and private debts.
The Holder of this Note is entitled to the benefits of and is subject to
the obligations contained in a Registration Rights Agreement (subject to the
provisions thereof), dated as of February 18, 1998 (the "Registration Rights
Agreement"), between the Issuer and the Initial Purchasers, as defined in the
Registration Rights Agreement. The Issuer shall pay Liquidated Damages to the
Holder of this Note as provided in the Registration Rights Agreement.
Reference is made to the further provisions of this Note set forth on the
reverse hereof. Such further provisions shall for all purposes have the same
effect as though fully set forth at this place. Capitalized terms used herein,
including on the reverse hereof, and not defined herein or on the reverse
hereof shall have the respective meanings given to such terms in the Indenture.
This Note shall not be entitled to the benefits of the Indenture or be
valid or become obligatory for any purpose until the certificate of
authentication hereon shall have been signed by the Trustee.
3
<PAGE> 4
IN WITNESS WHEREOF, the Issuer has caused this Note to be signed manually
or by facsimile by duly authorized officers of the General Partner.
Dated: February 18, 1998 EOP OPERATING LIMITED PARTNERSHIP,
as Issuer
By: EQUITY OFFICE PROPERTIES TRUST, not
individually but as General Partner
By: /s/ Timothy H. Callahan
------------------------------
Timothy H. Callahan
Its: President and Chief
Executive Officer
and By: /s/ Richard D. Kincaid
------------------------------
Richard D. Kincaid
Its: Chief Financial Officer
TRUSTEE'S CERTIFICATE OF AUTHENTICATION
This is one of the Notes of the series designated herein referred to in the
within-mentioned Indenture.
Dated: February 18, 1998 STATE STREET BANK AND TRUST COMPANY
By: /s/ Donald E. Smith
------------------------------
Authorized Officer
4
<PAGE> 5
[REVERSE OF NOTE]
EOP OPERATING LIMITED PARTNERSHIP
6.625% NOTES DUE 2005
This Note is one of a duly authorized issue of senior Notes of the Issuer
(hereinafter called the "Notes") of the series hereinafter specified, all
issued or to be issued under and pursuant to an Indenture dated as of September
2, 1997 (herein called the "Indenture"), duly executed and delivered by the
Issuer to State Street Bank and Trust Company, as Trustee (herein called the
"Trustee," which term includes any successor trustee under the Indenture with
respect to the series of Notes of which this Note is a part), to which
Indenture and all indentures supplemental thereto reference is hereby made for
a description of the rights, limitations of rights, obligations, duties, and
immunities thereunder of the Trustee, the Issuer, and the Holders of the Notes,
and of the terms upon which the Notes are, and are to be, authenticated and
delivered. The Notes may be issued in one or more series, which different
series may be issued in various aggregate principal amounts, may mature at
different times, may bear interest (if any) at different rates, may be subject
to different redemption provisions (if any), and may otherwise vary as provided
in the Indenture. This Note is one of a series designated as the 6.625% Notes
due 2005 of the Issuer (the "Notes"), limited in aggregate principal amount to
$400,000,000 subject to the provisions in the Indenture.
In case an Event of Default with respect to the Notes shall have occurred
and be continuing, the principal hereof and Make Whole Amount (if any) may be
declared, and upon such declaration shall become, due and payable, in the
manner, with the effect, and subject to the conditions provided in the
Indenture.
The Issuer may redeem this Note, at any time in whole or from time to time
in part, at the election of the Issuer, at a redemption price equal to the sum
of (i) the principal amount being redeemed plus accrued interest thereon to the
date fixed for redemption (the "Redemption Date") and (ii) the Make-Whole
Amount with respect hereto (the "Redemption Price"); provided, however, that
interest installments due on an Interest Payment Date which is on or prior to
the Redemption Date will be payable to the Holder hereof (or one or more
predecessor Notes) as of the close of business on the Record Date preceding
such Interest Payment Date. If notice has been given as provided in the
Indenture and funds for the redemption of this Note or any part thereof called
for redemption shall have been made available on the Redemption Date, this Note
or such part thereof will cease to bear interest on the Redemption Date
referred to in such notice and the only right of the Holder will be to receive
payment of the Redemption Price. Notice of any optional redemption of any Notes
will be given to the Holder hereof (in accordance with the provisions of the
Indenture), not more than 60 nor less than 30 days prior to the Redemption
Date. In the event of redemption of this Note in part only, a new Note of like
tenor for the unredeemed portion hereof and otherwise having the same terms and
provisions as this Note shall be issued by the Issuer in the name of the Holder
hereof upon the presentation and surrender hereof.
The Indenture contains provisions for defeasance of (i) the entire
indebtedness of the Notes or (ii) certain covenants and Events of Default with
respect to the Notes, in each case upon compliance with certain conditions set
forth therein, which provisions apply to the Notes.
At any time when the Issuer is not subject to Section 13 or 15(d) of the
United States Securities Exchange Act of 1934, as amended, upon the request of
a Holder of a Registrable Note (as defined in
5
<PAGE> 6
the Registration Rights Agreement) the Issuer will promptly furnish or cause to
be furnished the information specified in Rule 144(d)(4) to such Holder of a
Registrable Note, or to a prospective purchaser of any Note designated by any
such Holder to the extent required to permit compliance by such Holder with
Rule 144A under the Securities Act in connection with the resale of any such
Note.
Whenever in this Note there is a reference, in any context, to the payment
of the principal of, or Make-Whole Amount, if any, or interest on, or in
respect of, the Note, such mention shall be deemed to include mention of the
payment Liquidated Damages payable as described above to the extent that, in
such context, Liquidated Damages are, were or would be payable in respect of
the Note.
The Indenture contains provisions permitting the Issuer and the Trustee,
with the consent of the Holders of not less than a majority of the aggregate
principal amount of the Notes at the time Outstanding of all series to be
affected (voting as one class), evidenced as provided in the Indenture, to
execute supplemental indentures adding any provisions to or changing in any
manner or eliminating any of the provisions of the Indenture or of any
supplemental indenture or modifying in any manner the rights of the Holders of
the Notes of each series; provided, however, that no such supplemental
indenture shall, without the consent of the Holder of each Note at the time
Outstanding so affected, (i) change the final maturity of any Note, or reduce
the principal amount thereof or any premium or Make-Whole Amount thereon, if
any, or reduce the rate or extend the time of payment of any interest thereon,
or impair or affect the rights of any Holder to institute suit for the payment
on any Note, or (ii) reduce the percentage in principal amount of Outstanding
Notes, the Holders of which are required to consent to any such supplemental
indenture, or (iii) reduce the percentage in principal amount of Outstanding
Notes, the Holders of which are required to consent to any waiver of compliance
with certain provisions of the Indenture or any waiver of certain defaults
thereunder. It is also provided in the Indenture that, with respect to certain
defaults or Events of Default regarding the Notes of any series, the Holders of
a majority in aggregate principal amount Outstanding of the Notes of such
series (or, in the case of certain defaults or Events of Default, all series of
Notes) may on behalf of the Holders of all the Notes of such series (or all of
the Notes, as the case may be) waive any such past default or Event of Default
and its consequences, prior to any declaration accelerating the maturity of
such Notes, or, subject to certain conditions, may rescind a declaration of
acceleration and its consequences with respect to such Notes. The preceding
sentence shall not, however, apply to a default in or Event of Default relating
to, the payment of the principal of or premium or Make-Whole Amount, if any, or
interest on any of the Notes or in respect of a covenant or provision contained
in the Indenture that cannot be modified or amended without the consent of the
Holders of each Note at the time Outstanding affected thereby. Any such
consent or waiver by the Holder of this Note (unless revoked as provided in the
Indenture) shall be conclusive and binding upon such Holder and upon all future
Holders and owners of this Note and any Notes that may be issued in exchange or
substitution herefor, irrespective of whether or not any notation thereof is
made upon this Note or such other Notes.
No reference herein to the Indenture and no provision of this Note or of
the Indenture shall alter or impair the obligation of the Issuer, which is
absolute and unconditional, to pay the principal of and any Make-Whole Amount
and interest (including Liquidated Damages) on this Note in the manner, at the
respective times, at the rate and in the coin or currency herein prescribed.
This Note is issuable only in registered form without coupons in
denominations of U.S.$100,000 and integral multiples of $1,000 thereof. Notes
may be exchanged for a like aggregate principal amount of Notes of this series
of other authorized denominations at the office or agency of the
6
<PAGE> 7
Issuer in Boston, Massachusetts, in the manner and subject to the limitations
provided herein and in the Indenture, but without the payment of any service
charge except for any tax or other governmental charge imposed in connection
therewith.
Upon due presentment for registration of transfer of this Note at the
office or agency of the Issuer in Boston, Massachusetts, one or more new Notes
of authorized denominations in an equal aggregate principal amount will be
issued to the transferee in exchange therefor, subject to the limitations
provided in the Indenture, but without the payment of any service charge except
for any tax or other governmental charge imposed in connection therewith.
This Note is not subject to a sinking fund requirement.
No recourse under or upon any obligation, covenant or agreement contained
in the Indenture, or any Note, or because of any indebtedness evidenced hereby
or thereby (including, without limitation, any obligation or indebtedness
relating to the principal of, or premium or Make-Whole Amount or Liquidated
Damages, if any, interest or any other amounts due, or claimed to be due, on
this Note), or for any claim based thereon or otherwise in respect thereof,
shall be had (i) against the General Partner or any other partner, or any
Person which owns an interest, directly or indirectly, in any partner, in the
Issuer, or (ii) against any promoter, as such, or against any past, present or
future shareholder, officer, trustee or partner, as such, of the Issuer or the
General Partner or of any successor, either directly or through the Issuer or
the General Partner or any successor, under any rule of law, statute or
constitutional provision or by the enforcement of any assessment or by any
legal or equitable proceeding or otherwise, all such liability being expressly
waived and released by the acceptance hereof and as part of the consideration
for the issue hereof.
Prior to due presentation of this Note for registration of transfer, the
Issuer, the Trustee, and any authorized agent of the Issuer or the Trustee may
deem and treat the Person in whose name this Note is registered as the absolute
owner of this Note (whether or not this Note shall be overdue and
notwithstanding any notation of ownership or other writing hereon), for the
purpose of receiving payment of, or on account of, the principal hereof and
Make-Whole Amount, if any, and subject to the provisions herein and on the face
hereof, interest hereon, and for all other purposes, and neither the Issuer nor
the Trustee nor any authorized agent of the Issuer or the Trustee shall be
affected by any notice to the contrary, except as required by law.
THE INDENTURE AND THIS NOTE SHALL BE GOVERNED BY AND CONSTRUED IN
ACCORDANCE WITH THE LAW OF THE STATE OF NEW YORK, UNITED STATES OF AMERICA
WITHOUT REGARD TO THE PRINCIPLES OF CONFLICTS OF LAWS.
7
<PAGE> 8
ASSIGNMENT FORM AND CERTIFICATE OF TRANSFER
To assign this Note fill in the form below:
(I) or (we) assign and transfer this Note to
(Insert assignee's social Note or tax identification number, if any)
(Print or type assignee's name, address and zip code)
Your signature:
(Sign exactly as your name appears on the other side of this Note)
Date: ________________________________________
Signature Guarantee:* __________________________
In connection with any transfer of any of the Notes evidenced by this
certificate occurring prior to the date that is two years (or such shorter
period as may then be applicable under Rule 144(k) of the United States
Securities Act of 1933, as amended (the "Securities Act") (or any successor
provision)) after the later of the date of original issuance of such Notes and
the last date, if any, on which this Note is owned by the Issuer or any
Affiliate of the Issuer, the undersigned confirms that this Note is being
transferred:
CHECK ONE BOX BELOW
(1) [ ] to the Issuer or a Subsidiary thereof; or
(2) [ ] pursuant to and in compliance with Rule 144A under the
Securities Act; or
(3) [ ] pursuant to Rule 144 under the Securities Act; or
(4) [ ] pursuant to an effective registration statement under the
Securities Act; or
(5) [ ] pursuant to another available exemption from the registration
requirements of the Securities Act.
Unless one of the boxes is checked, the Trustee will refuse to register
this Note in the name of any person other than the registered holder thereof;
provided, however, that if box (5) is checked, the Trustee (as instructed by
the Issuer) and the Issuer may require, prior to registering any transfer of
this Note, such certifications, legal opinions or other information as the
Issuer has reasonably requested
__________________________
*Signature must be guaranteed by a commercial bank, trust company or member
firm or a major stock exchange
8
<PAGE> 9
to confirm that such transfer is being made pursuant to an exemption from, or
in a transaction not subject to, the registration requirements of the
Securities Act.
9
<PAGE> 1
EXHIBIT 4.5
EOP OPERATING LIMITED PARTNERSHIP
6.750% NOTES DUE 2008
NO. 001 PRINCIPAL AMOUNT
CUSIP NO. 268766 AG 7 $200,000,000
UNLESS THIS NOTE IS PRESENTED BY AN AUTHORIZED REPRESENTATIVE OF THE
DEPOSITORY TRUST COMPANY, A NEW YORK CORPORATION ("DTC"), TO THE ISSUER OR ITS
AGENT FOR REGISTRATION OF TRANSFER, EXCHANGE OR PAYMENT AND ANY NOTE ISSUED IS
REGISTERED IN THE NAME OF CEDE & CO. OR IN SUCH OTHER NAME AS IS REQUESTED BY
AN AUTHORIZED REPRESENTATIVE OF DTC AND ANY PAYMENT IS MADE TO CEDE & CO., OR
TO SUCH OTHER ENTITY AS IS REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF DTC,
ANY TRANSFER, PLEDGE, OR OTHER USE HEREOF FOR VALUE OR OTHERWISE BY OR TO ANY
PERSON IS WRONGFUL INASMUCH AS THE REGISTERED OWNER HEREOF, CEDE & CO., HAS AN
INTEREST HEREIN.
UNLESS AND UNTIL THIS NOTE IS EXCHANGED IN WHOLE OR IN PART FOR NOTES IN
CERTIFICATED FORM, THIS NOTE MAY NOT BE TRANSFERRED EXCEPT AS A WHOLE BY DTC TO
A NOMINEE THEREOF OR BY A NOMINEE THEREOF TO DTC OR ANOTHER NOMINEE OF DTC OR
BY DTC OR ANY SUCH NOMINEE TO A SUCCESSOR OF DTC OR A NOMINEE OF SUCH
SUCCESSOR.
THIS NOTE HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS
AMENDED (THE "SECURITIES ACT"), OR ANY STATE SECURITIES LAW. NEITHER THIS NOTE
NOR ANY INTERESTS OR PARTICIPATION HEREIN MAY BE REOFFERED, SOLD, ASSIGNED,
TRANSFERRED, PLEDGED, ENCUMBERED OR OTHERWISE DISPOSED OF IN THE ABSENCE OF
SUCH REGISTRATION OR UNLESS SUCH TRANSACTION IS EXEMPT FROM, OR NOT SUBJECT TO,
REGISTRATION. THIS NOTE WILL BE ISSUED AND MAY BE TRANSFERRED ONLY IN MINIMUM
DENOMINATIONS OF $100,000 AND INTEGRAL MULTIPLES OF $1,000 IN EXCESS THEREOF.
THE HOLDER OF THIS NOTE BY ITS ACCEPTANCE HEREOF AGREES TO OFFER, SELL OR
OTHERWISE TRANSFER THIS NOTE, PRIOR TO THE DATE (THE "RESALE RESTRICTION
TERMINATION DATE") WHICH IS TWO YEARS AFTER THE LATER OF THE ORIGINAL ISSUE
DATE HEREOF AND THE LAST DATE ON WHICH THE ISSUER OR ANY "AFFILIATE" OF THE
ISSUER WAS THE OWNER OF THIS NOTE (OR ANY PREDECESSOR OF SUCH NOTE), ONLY (A)
TO THE ISSUER OR ANY SUBSIDIARY THEREOF, (B) PURSUANT TO A REGISTRATION
STATEMENT WHICH HAS BEEN DECLARED EFFECTIVE UNDER THE SECURITIES ACT, (C) FOR
SO LONG AS THIS NOTE IS ELIGIBLE FOR RESALE PURSUANT TO RULE 144A, TO A PERSON
IT REASONABLY BELIEVES IS A "QUALIFIED INSTITUTIONAL BUYER" AS DEFINED IN RULE
144A UNDER THE SECURITIES ACT THAT PURCHASES FOR ITS OWN ACCOUNT OR FOR THE
ACCOUNT OF A QUALIFIED INSTITUTIONAL BUYER TO WHOM NOTICE IS GIVEN THAT THE
TRANSFER IS BEING MADE IN RELIANCE ON RULE 144A, OR (D) TO AN INSTITUTIONAL
"ACCREDITED INVESTOR" WITHIN THE MEANING OF
<PAGE> 2
SUBPARAGRAPH (A)(1), (2), (3), OR (7) OF RULE 501 UNDER THE SECURITIES ACT THAT
IS ACQUIRING THIS NOTE FOR ITS OWN ACCOUNT OR FOR AN ACCOUNT OF SUCH AN
INSTITUTIONAL ACCREDITED INVESTOR, OR AS FIDUCIARY FOR THE ACCOUNT OF ONE OR
MORE TRUSTS, EACH OF WHICH IS AN "ACCREDITED INVESTOR" WITHIN THE MEANING OF
SUBPARAGRAPH (A) (7) OF RULE 501 UNDER THE SECURITIES ACT, FOR INVESTMENT
PURPOSES AND NOT WITH A VIEW TO, OR FOR OFFER OR SALE IN CONNECTION WITH, ANY
DISTRIBUTION IN VIOLATION OF THE SECURITIES ACT, IN A TRANSACTION EXEMPT FROM
THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT UPON THE DELIVERY OF AN
OPINION OF COUNSEL, CERTIFICATION AND/OR OTHER INFORMATION SATISFACTORY TO THE
ISSUER, SUBJECT IN EACH OF THE FOREGOING CASES, TO A CERTIFICATE OF TRANSFER IN
THE FORM APPEARING ON THE OTHER SIDE OF THIS NOTE BEING COMPLETED AND DELIVERED
BY THE TRANSFEROR TO THE ISSUER. THIS LEGEND WILL BE REMOVED UPON THE REQUEST
OF THE HOLDER AFTER THE RESALE RESTRICTION TERMINATION DATE.
THE HOLDER OF THIS NOTE BY ITS ACCEPTANCE HEREOF AGREES TO BE BOUND BY THE
PROVISIONS OF THE REGISTRATION RIGHTS AGREEMENT RELATING TO ALL NOTES OF THIS
SERIES.
EOP Operating Limited Partnership, a Delaware limited partnership (the
"Issuer," which term includes any successor under the Indenture hereinafter
referred to), for value received, hereby promises to pay to Cede & Co. or
registered assigns, the principal sum of TWO HUNDRED MILLION Dollars on
February 15, 2008 (the "Stated Maturity Date"), (or any Redemption Date (as
defined on the reverse hereof) or any earlier date of acceleration of maturity,
(each such date being referred to as the "Maturity Date" with respect to the
principal repayable on such date) and to pay interest thereon from February 18,
1998 (or from the most recent Interest Payment Date (as defined below) to which
interest has been paid or duly provided for), semiannually in arrears on
February 15 and August 15 of each year, commencing on August 15, 1998 (each, an
"Interest Payment Date"), and on the Maturity Date, at a rate of 6.750% per
annum (together with Liquidated Damages, as defined in the Registration Rights
Agreement hereinafter referred to, that the Issuer may be required to pay, as
described on the reverse hereof), until payment of said principal sum has been
made or duly provided for. Interest on this Note will be computed on the basis
of a 360-day year of twelve 30-day months.
The interest so payable and punctually paid or duly provided for on an
Interest Payment Date will, subject to certain exceptions described below, be
paid to the Holder in whose name this Note (or one or more predecessor Notes)
is registered at the close of business on the "Regular Record Date" for such
payment, which will be the date 15 calendar days (regardless of whether such
day is a Business Day (as defined below)) next preceding such Interest Payment
Date. Any interest not so punctually paid or duly provided for on an Interest
Payment Date ("Defaulted Interest") shall forthwith cease to be payable to the
Holder on such Regular Record Date, and shall be paid to the Holder in whose
name this Note (or one or more predecessor Notes) is registered at the close of
business on a special record date (the "Special Record Date") for the payment
of such Defaulted Interest to be fixed by the Trustee hereinafter referred to,
notice whereof shall be given to the Holder of this Note by the Trustee not
less than 10 calendar days prior to such Special Record Date or may be paid at
any time in any other lawful manner, all as more fully provided for in the
Indenture.
2
<PAGE> 3
The principal of and Make-Whole Amount, if any, with respect to this Note
payable on the Maturity Date will be paid against presentation and surrender of
this Note at the office or agency of the Issuer maintained for that purpose in
Boston, Massachusetts with a drop facility maintained in New York, New York.
The Issuer hereby initially designates the Corporate Trust Office of the
Trustee in Boston, Massachusetts as the office to be maintained by it where
Notes may be presented for payment, registration of transfer, or exchange and
where notices or demands to or upon the Issuer in respect of the Notes or the
Indenture may be served.
Interest payable on this Note on any Interest Payment Date and on the
Maturity Date, as the case may be, will be the amount of interest accrued
during the applicable Interest Period (as defined below).
An "Interest Period" is each period from and including the immediately
preceding Interest Payment Date (or from and including February 18, 1998, in
the case of the initial Interest Period) to but excluding the applicable
Interest Payment Date or the Maturity Date, as the case may be. If any
Interest Payment Date or Maturity Date falls on a day that is not a Business
Day, principal, Make Whole Amount, if any, and interest payable on such date
will be paid on the succeeding Business Day with the same force and effect as
if it were paid on the date such payment was due, and no interest will accrue
on the amount so payable for the period from and after such date to such
succeeding Business Day. "Business Day" means any day, other than a Saturday
or a Sunday on which banking institutions in New York, New York and Boston,
Massachusetts are required or authorized by law or executive order to close.
Payments of principal, Make Whole Amount, if any, and interest in respect
of this Note will be made by U.S. dollar check or by wire transfer (such a wire
transfer to be made only to a Holder of an aggregate principal amount of Notes
in excess of $10,000,000, and only if such Holder shall have furnished wire
instructions in writing to the Trustee no later than 15 days prior to the
relevant payment date and acknowledged that a wire transfer fee shall be
payable) of immediately available funds in such coin or currency of the United
States of America as at the time of payment is legal tender for the payment of
public and private debts.
The Holder of this Note is entitled to the benefits of and is subject to
the obligations contained in a Registration Rights Agreement (subject to the
provisions thereof), dated as of February 18, 1998 (the "Registration Rights
Agreement"), between the Issuer and the Initial Purchasers, as defined in the
Registration Rights Agreement. The Issuer shall pay Liquidated Damages to the
Holder of this Note as provided in the Registration Rights Agreement.
Reference is made to the further provisions of this Note set forth on the
reverse hereof. Such further provisions shall for all purposes have the same
effect as though fully set forth at this place. Capitalized terms used herein,
including on the reverse hereof, and not defined herein or on the reverse
hereof shall have the respective meanings given to such terms in the Indenture.
This Note shall not be entitled to the benefits of the Indenture or be
valid or become obligatory for any purpose until the certificate of
authentication hereon shall have been signed by the Trustee.
3
<PAGE> 4
IN WITNESS WHEREOF, the Issuer has caused this Note to be signed manually
or by facsimile by duly authorized officers of the General Partner.
Dated: February 18, 1998 EOP OPERATING LIMITED PARTNERSHIP,
as Issuer
By: EQUITY OFFICE PROPERTIES TRUST, not
individually but as General Partner
By: /s/ Timothy H. Callahan
------------------------------
Timothy H. Callahan
Its: President and Chief
Executive Officer
and By: /s/ Richard D. Kincaid
------------------------------
Richard D. Kincaid
Its: Chief Financial Officer
TRUSTEE'S CERTIFICATE OF AUTHENTICATION
This is one of the Notes of the series designated herein referred to in the
within-mentioned Indenture.
Dated: February 18, 1998 STATE STREET BANK AND TRUST COMPANY
By: /s/ Donald E. Smith
------------------------------
Authorized Officer
4
<PAGE> 5
[REVERSE OF NOTE]
EOP OPERATING LIMITED PARTNERSHIP
6.750% NOTES DUE 2008
This Note is one of a duly authorized issue of senior Notes of the Issuer
(hereinafter called the "Notes") of the series hereinafter specified, all
issued or to be issued under and pursuant to an Indenture dated as of September
2, 1997 (herein called the "Indenture"), duly executed and delivered by the
Issuer to State Street Bank and Trust Company, as Trustee (herein called the
"Trustee," which term includes any successor trustee under the Indenture with
respect to the series of Notes of which this Note is a part), to which
Indenture and all indentures supplemental thereto reference is hereby made for
a description of the rights, limitations of rights, obligations, duties, and
immunities thereunder of the Trustee, the Issuer, and the Holders of the Notes,
and of the terms upon which the Notes are, and are to be, authenticated and
delivered. The Notes may be issued in one or more series, which different
series may be issued in various aggregate principal amounts, may mature at
different times, may bear interest (if any) at different rates, may be subject
to different redemption provisions (if any), and may otherwise vary as provided
in the Indenture. This Note is one of a series designated as the 6.750% Notes
due 2008 of the Issuer (the "Notes"), limited in aggregate principal amount to
$300,000,000 subject to the provisions in the Indenture.
In case an Event of Default with respect to the Notes shall have occurred
and be continuing, the principal hereof and Make Whole Amount (if any) may be
declared, and upon such declaration shall become, due and payable, in the
manner, with the effect, and subject to the conditions provided in the
Indenture.
The Issuer may redeem this Note, at any time in whole or from time to time
in part, at the election of the Issuer, at a redemption price equal to the sum
of (i) the principal amount being redeemed plus accrued interest thereon to the
date fixed for redemption (the "Redemption Date") and (ii) the Make-Whole
Amount with respect hereto (the "Redemption Price"); provided, however, that
interest installments due on an Interest Payment Date which is on or prior to
the Redemption Date will be payable to the Holder hereof (or one or more
predecessor Notes) as of the close of business on the Record Date preceding
such Interest Payment Date. If notice has been given as provided in the
Indenture and funds for the redemption of this Note or any part thereof called
for redemption shall have been made available on the Redemption Date, this Note
or such part thereof will cease to bear interest on the Redemption Date
referred to in such notice and the only right of the Holder will be to receive
payment of the Redemption Price. Notice of any optional redemption of any Notes
will be given to the Holder hereof (in accordance with the provisions of the
Indenture), not more than 60 nor less than 30 days prior to the Redemption
Date. In the event of redemption of this Note in part only, a new Note of like
tenor for the unredeemed portion hereof and otherwise having the same terms and
provisions as this Note shall be issued by the Issuer in the name of the Holder
hereof upon the presentation and surrender hereof.
The Indenture contains provisions for defeasance of (i) the entire
indebtedness of the Notes or (ii) certain covenants and Events of Default with
respect to the Notes, in each case upon compliance with certain conditions set
forth therein, which provisions apply to the Notes.
At any time when the Issuer is not subject to Section 13 or 15(d) of the
United States Securities Exchange Act of 1934, as amended, upon the request of
a Holder of a Registrable Note (as defined in
5
<PAGE> 6
the Registration Rights Agreement) the Issuer will promptly furnish or cause to
be furnished the information specified in Rule 144(d)(4) to such Holder of a
Registrable Note, or to a prospective purchaser of any Note designated by any
such Holder to the extent required to permit compliance by such Holder with
Rule 144A under the Securities Act in connection with the resale of any such
Note.
Whenever in this Note there is a reference, in any context, to the payment
of the principal of, or Make-Whole Amount, if any, or interest on, or in
respect of, the Note, such mention shall be deemed to include mention of the
payment Liquidated Damages payable as described above to the extent that, in
such context, Liquidated Damages are, were or would be payable in respect of
the Note.
The Indenture contains provisions permitting the Issuer and the Trustee,
with the consent of the Holders of not less than a majority of the aggregate
principal amount of the Notes at the time Outstanding of all series to be
affected (voting as one class), evidenced as provided in the Indenture, to
execute supplemental indentures adding any provisions to or changing in any
manner or eliminating any of the provisions of the Indenture or of any
supplemental indenture or modifying in any manner the rights of the Holders of
the Notes of each series; provided, however, that no such supplemental
indenture shall, without the consent of the Holder of each Note at the time
Outstanding so affected, (i) change the final maturity of any Note, or reduce
the principal amount thereof or any premium or Make-Whole Amount thereon, if
any, or reduce the rate or extend the time of payment of any interest thereon,
or impair or affect the rights of any Holder to institute suit for the payment
on any Note, or (ii) reduce the percentage in principal amount of Outstanding
Notes, the Holders of which are required to consent to any such supplemental
indenture, or (iii) reduce the percentage in principal amount of Outstanding
Notes, the Holders of which are required to consent to any waiver of compliance
with certain provisions of the Indenture or any waiver of certain defaults
thereunder. It is also provided in the Indenture that, with respect to certain
defaults or Events of Default regarding the Notes of any series, the Holders of
a majority in aggregate principal amount Outstanding of the Notes of such
series (or, in the case of certain defaults or Events of Default, all series of
Notes) may on behalf of the Holders of all the Notes of such series (or all of
the Notes, as the case may be) waive any such past default or Event of Default
and its consequences, prior to any declaration accelerating the maturity of
such Notes, or, subject to certain conditions, may rescind a declaration of
acceleration and its consequences with respect to such Notes. The preceding
sentence shall not, however, apply to a default in or Event of Default relating
to, the payment of the principal of or premium or Make-Whole Amount, if any, or
interest on any of the Notes or in respect of a covenant or provision contained
in the Indenture that cannot be modified or amended without the consent of the
Holders of each Note at the time Outstanding affected thereby. Any such
consent or waiver by the Holder of this Note (unless revoked as provided in the
Indenture) shall be conclusive and binding upon such Holder and upon all future
Holders and owners of this Note and any Notes that may be issued in exchange or
substitution herefor, irrespective of whether or not any notation thereof is
made upon this Note or such other Notes.
No reference herein to the Indenture and no provision of this Note or of
the Indenture shall alter or impair the obligation of the Issuer, which is
absolute and unconditional, to pay the principal of and any Make-Whole Amount
and interest (including Liquidated Damages) on this Note in the manner, at the
respective times, at the rate and in the coin or currency herein prescribed.
This Note is issuable only in registered form without coupons in
denominations of U.S.$100,000 and integral multiples of $1,000 thereof. Notes
may be exchanged for a like aggregate principal amount of Notes of this series
of other authorized denominations at the office or agency of the
6
<PAGE> 7
Issuer in Boston, Massachusetts, in the manner and subject to the limitations
provided herein and in the Indenture, but without the payment of any service
charge except for any tax or other governmental charge imposed in connection
therewith.
Upon due presentment for registration of transfer of this Note at the
office or agency of the Issuer in Boston, Massachusetts, one or more new Notes
of authorized denominations in an equal aggregate principal amount will be
issued to the transferee in exchange therefor, subject to the limitations
provided in the Indenture, but without the payment of any service charge except
for any tax or other governmental charge imposed in connection therewith.
This Note is not subject to a sinking fund requirement.
No recourse under or upon any obligation, covenant or agreement contained
in the Indenture, or any Note, or because of any indebtedness evidenced hereby
or thereby (including, without limitation, any obligation or indebtedness
relating to the principal of, or premium or Make-Whole Amount or Liquidated
Damages, if any, interest or any other amounts due, or claimed to be due, on
this Note), or for any claim based thereon or otherwise in respect thereof,
shall be had (i) against the General Partner or any other partner, or any
Person which owns an interest, directly or indirectly, in any partner, in the
Issuer, or (ii) against any promoter, as such, or against any past, present or
future shareholder, officer, trustee or partner, as such, of the Issuer or the
General Partner or of any successor, either directly or through the Issuer or
the General Partner or any successor, under any rule of law, statute or
constitutional provision or by the enforcement of any assessment or by any
legal or equitable proceeding or otherwise, all such liability being expressly
waived and released by the acceptance hereof and as part of the consideration
for the issue hereof.
Prior to due presentation of this Note for registration of transfer, the
Issuer, the Trustee, and any authorized agent of the Issuer or the Trustee may
deem and treat the Person in whose name this Note is registered as the absolute
owner of this Note (whether or not this Note shall be overdue and
notwithstanding any notation of ownership or other writing hereon), for the
purpose of receiving payment of, or on account of, the principal hereof and
Make-Whole Amount, if any, and subject to the provisions herein and on the face
hereof, interest hereon, and for all other purposes, and neither the Issuer nor
the Trustee nor any authorized agent of the Issuer or the Trustee shall be
affected by any notice to the contrary, except as required by law.
THE INDENTURE AND THIS NOTE SHALL BE GOVERNED BY AND CONSTRUED IN
ACCORDANCE WITH THE LAW OF THE STATE OF NEW YORK, UNITED STATES OF AMERICA
WITHOUT REGARD TO THE PRINCIPLES OF CONFLICTS OF LAWS.
7
<PAGE> 8
ASSIGNMENT FORM AND CERTIFICATE OF TRANSFER
To assign this Note fill in the form below:
(I) or (we) assign and transfer this Note to
_______________________________________________________________________________
(Insert assignee's social Note or tax identification number, if any)
_______________________________________________________________________________
_______________________________________________________________________________
(Print or type assignee's name, address and zip code)
Your signature: __________________________________________________________
(Sign exactly as your name appears on the other side of
this Note)
Date: ________________________________________
Signature Guarantee:* __________________________
In connection with any transfer of any of the Notes evidenced by this
certificate occurring prior to the date that is two years (or such shorter
period as may then be applicable under Rule 144(k) of the United States
Securities Act of 1933, as amended (the "Securities Act") (or any successor
provision)) after the later of the date of original issuance of such Notes and
the last date, if any, on which this Note is owned by the Issuer or any
Affiliate of the Issuer, the undersigned confirms that this Note is being
transferred:
CHECK ONE BOX BELOW
(1) [ ] to the Issuer or a Subsidiary thereof; or
(2) [ ] pursuant to and in compliance with Rule 144A under the
Securities Act; or
(3) [ ] pursuant to Rule 144 under the Securities Act; or
(4) [ ] pursuant to an effective registration statement under the
Securities Act; or
(5) [ ] pursuant to another available exemption from the registration
requirements of the Securities Act.
Unless one of the boxes is checked, the Trustee will refuse to register
this Note in the name of any person other than the registered holder thereof;
provided, however, that if box (5) is checked, the Trustee (as instructed by
the Issuer) and the Issuer may require, prior to registering any transfer of
this Note, such certifications, legal opinions or other information as the
Issuer has reasonably requested
__________________________
*Signature must be guaranteed by a commercial bank, trust company or member
firm or a major stock exchange
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<PAGE> 9
to confirm that such transfer is being made pursuant to an exemption from, or
in a transaction not subject to, the registration requirements of the
Securities Act.
9
<PAGE> 1
EXHIBIT 4.6
EOP OPERATING LIMITED PARTNERSHIP
7.250% NOTES DUE 2018
NO. 001 PRINCIPAL AMOUNT
CUSIP NO. 268766 AK 8 $200,000,000
UNLESS THIS NOTE IS PRESENTED BY AN AUTHORIZED REPRESENTATIVE OF THE
DEPOSITORY TRUST COMPANY, A NEW YORK CORPORATION ("DTC"), TO THE ISSUER OR ITS
AGENT FOR REGISTRATION OF TRANSFER, EXCHANGE OR PAYMENT AND ANY NOTE ISSUED IS
REGISTERED IN THE NAME OF CEDE & CO. OR IN SUCH OTHER NAME AS IS REQUESTED BY
AN AUTHORIZED REPRESENTATIVE OF DTC AND ANY PAYMENT IS MADE TO CEDE & CO., OR
TO SUCH OTHER ENTITY AS IS REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF DTC,
ANY TRANSFER, PLEDGE, OR OTHER USE HEREOF FOR VALUE OR OTHERWISE BY OR TO ANY
PERSON IS WRONGFUL INASMUCH AS THE REGISTERED OWNER HEREOF, CEDE & CO., HAS AN
INTEREST HEREIN.
UNLESS AND UNTIL THIS NOTE IS EXCHANGED IN WHOLE OR IN PART FOR NOTES IN
CERTIFICATED FORM, THIS NOTE MAY NOT BE TRANSFERRED EXCEPT AS A WHOLE BY DTC TO
A NOMINEE THEREOF OR BY A NOMINEE THEREOF TO DTC OR ANOTHER NOMINEE OF DTC OR
BY DTC OR ANY SUCH NOMINEE TO A SUCCESSOR OF DTC OR A NOMINEE OF SUCH
SUCCESSOR.
THIS NOTE HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS
AMENDED (THE "SECURITIES ACT"), OR ANY STATE SECURITIES LAW. NEITHER THIS NOTE
NOR ANY INTERESTS OR PARTICIPATION HEREIN MAY BE REOFFERED, SOLD, ASSIGNED,
TRANSFERRED, PLEDGED, ENCUMBERED OR OTHERWISE DISPOSED OF IN THE ABSENCE OF
SUCH REGISTRATION OR UNLESS SUCH TRANSACTION IS EXEMPT FROM, OR NOT SUBJECT TO,
REGISTRATION. THIS NOTE WILL BE ISSUED AND MAY BE TRANSFERRED ONLY IN MINIMUM
DENOMINATIONS OF $100,000 AND INTEGRAL MULTIPLES OF $1,000 IN EXCESS THEREOF.
THE HOLDER OF THIS NOTE BY ITS ACCEPTANCE HEREOF AGREES TO OFFER, SELL OR
OTHERWISE TRANSFER THIS NOTE, PRIOR TO THE DATE (THE "RESALE RESTRICTION
TERMINATION DATE") WHICH IS TWO YEARS AFTER THE LATER OF THE ORIGINAL ISSUE
DATE HEREOF AND THE LAST DATE ON WHICH THE ISSUER OR ANY "AFFILIATE" OF THE
ISSUER WAS THE OWNER OF THIS NOTE (OR ANY PREDECESSOR OF SUCH NOTE), ONLY (A)
TO THE ISSUER OR ANY SUBSIDIARY THEREOF, (B) PURSUANT TO A REGISTRATION
STATEMENT WHICH HAS BEEN DECLARED EFFECTIVE UNDER THE SECURITIES ACT, (C) FOR
SO LONG AS THIS NOTE IS ELIGIBLE FOR RESALE PURSUANT TO RULE 144A, TO A PERSON
IT REASONABLY BELIEVES IS A "QUALIFIED INSTITUTIONAL BUYER" AS DEFINED IN RULE
144A UNDER THE SECURITIES ACT THAT PURCHASES FOR ITS OWN ACCOUNT OR FOR THE
ACCOUNT OF A QUALIFIED INSTITUTIONAL BUYER TO WHOM NOTICE IS GIVEN THAT THE
TRANSFER IS BEING MADE IN RELIANCE ON RULE 144A, OR (D) TO AN INSTITUTIONAL
"ACCREDITED INVESTOR" WITHIN THE MEANING OF
<PAGE> 2
SUBPARAGRAPH (A)(1), (2), (3), OR (7) OF RULE 501 UNDER THE SECURITIES ACT THAT
IS ACQUIRING THIS NOTE FOR ITS OWN ACCOUNT OR FOR ACCOUNT OF SUCH AN
INSTITUTIONAL ACCREDITED INVESTOR, OR AS FIDUCIARY FOR THE ACCOUNT OF ONE OR
MORE TRUSTS, EACH OF WHICH IS AN "ACCREDITED INVESTOR" WITHIN THE MEANING OF
SUBPARAGRAPH (A) (7) OF RULE 501 UNDER THE SECURITIES ACT, FOR INVESTMENT
PURPOSES AND NOT WITH A VIEW TO, OR FOR OFFER OR SALE IN CONNECTION WITH, ANY
DISTRIBUTION IN VIOLATION OF THE SECURITIES ACT, IN A TRANSACTION EXEMPT FROM
THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT UPON THE DELIVERY OF AN
OPINION OF COUNSEL, CERTIFICATION AND/OR OTHER INFORMATION SATISFACTORY TO THE
ISSUER, SUBJECT IN EACH OF THE FOREGOING CASES, TO A CERTIFICATE OF TRANSFER IN
THE FORM APPEARING ON THE OTHER SIDE OF THIS NOTE BEING COMPLETED AND DELIVERED
BY THE TRANSFEROR TO THE ISSUER. THIS LEGEND WILL BE REMOVED UPON THE REQUEST
OF THE HOLDER AFTER THE RESALE RESTRICTION TERMINATION DATE.
THE HOLDER OF THIS NOTE BY ITS ACCEPTANCE HEREOF AGREES TO BE BOUND BY THE
PROVISIONS OF THE REGISTRATION RIGHTS AGREEMENT RELATING TO ALL NOTES OF THIS
SERIES.
EOP Operating Limited Partnership, a Delaware limited partnership (the
"Issuer," which term includes any successor under the Indenture hereinafter
referred to), for value received, hereby promises to pay to Cede & Co. or
registered assigns, the principal sum of TWO HUNDRED MILLION Dollars on
February 15, 2018 (the "Stated Maturity Date"), (or any Redemption Date (as
defined on the reverse hereof) or any earlier date of acceleration of maturity,
(each such date being referred to as the "Maturity Date" with respect to the
principal repayable on such date) and to pay interest thereon from February 18,
1998 (or from the most recent Interest Payment Date (as defined below) to which
interest has been paid or duly provided for), semiannually in arrears on
February 15 and August 15 of each year, commencing on August 15, 1998 (each, an
"Interest Payment Date"), and on the Maturity Date, at a rate of 7.250% per
annum (together with Liquidated Damages, as defined in the Registration Rights
Agreement hereinafter referred to, that the Issuer may be required to pay, as
described on the reverse hereof), until payment of said principal sum has been
made or duly provided for. Interest on this Note will be computed on the basis
of a 360-day year of twelve 30-day months.
The interest so payable and punctually paid or duly provided for on an
Interest Payment Date will, subject to certain exceptions described below, be
paid to the Holder in whose name this Note (or one or more predecessor Notes)
is registered at the close of business on the "Regular Record Date" for such
payment, which will be the date 15 calendar days (regardless of whether such
day is a Business Day (as defined below)) next preceding such Interest Payment
Date. Any interest not so punctually paid or duly provided for on an Interest
Payment Date ("Defaulted Interest") shall forthwith cease to be payable to the
Holder on such Regular Record Date, and shall be paid to the Holder in whose
name this Note (or one or more predecessor Notes) is registered at the close of
business on a special record date (the "Special Record Date") for the payment
of such Defaulted Interest to be fixed by the Trustee hereinafter referred to,
notice whereof shall be given to the Holder of this Note by the Trustee not
less than 10 calendar days prior to such Special Record Date or may be paid at
any time in any other lawful manner, all as more fully provided for in the
Indenture.
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<PAGE> 3
The principal of and Make-Whole Amount, if any, with respect to this Note
payable on the Maturity Date will be paid against presentation and surrender of
this Note at the office or agency of the Issuer maintained for that purpose in
Boston, Massachusetts with a drop facility maintained in New York, New York.
The Issuer hereby initially designates the Corporate Trust Office of the
Trustee in Boston, Massachusetts as the office to be maintained by it where
Notes may be presented for payment, registration of transfer, or exchange and
where notices or demands to or upon the Issuer in respect of the Notes or the
Indenture may be served.
Interest payable on this Note on any Interest Payment Date and on the
Maturity Date, as the case may be, will be the amount of interest accrued
during the applicable Interest Period (as defined below).
An "Interest Period" is each period from and including the immediately
preceding Interest Payment Date (or from and including February 18, 1998, in
the case of the initial Interest Period) to but excluding the applicable
Interest Payment Date or the Maturity Date, as the case may be. If any
Interest Payment Date or Maturity Date falls on a day that is not a Business
Day, principal, Make Whole Amount, if any, and interest payable on such date
will be paid on the succeeding Business Day with the same force and effect as
if it were paid on the date such payment was due, and no interest will accrue
on the amount so payable for the period from and after such date to such
succeeding Business Day. "Business Day" means any day, other than a Saturday
or a Sunday on which banking institutions in New York, New York and Boston,
Massachusetts are required or authorized by law or executive order to close.
Payments of principal, Make Whole Amount, if any, and interest in respect
of this Note will be made by U.S. dollar check or by wire transfer (such a wire
transfer to be made only to a Holder of an aggregate principal amount of Notes
in excess of $10,000,000, and only if such Holder shall have furnished wire
instructions in writing to the Trustee no later than 15 days prior to the
relevant payment date and acknowledged that a wire transfer fee shall be
payable) of immediately available funds in such coin or currency of the United
States of America as at the time of payment is legal tender for the payment of
public and private debts.
The Holder of this Note is entitled to the benefits of and is subject to
the obligations contained in a Registration Rights Agreement (subject to the
provisions thereof), dated as of February 18, 1998 (the "Registration Rights
Agreement"), between the Issuer and the Initial Purchasers, as defined in the
Registration Rights Agreement. The Issuer shall pay Liquidated Damages to the
Holder of this Note as provided in the Registration Rights Agreement.
Reference is made to the further provisions of this Note set forth on the
reverse hereof. Such further provisions shall for all purposes have the same
effect as though fully set forth at this place. Capitalized terms used herein,
including on the reverse hereof, and not defined herein or on the reverse
hereof shall have the respective meanings given to such terms in the Indenture.
This Note shall not be entitled to the benefits of the Indenture or be
valid or become obligatory for any purpose until the certificate of
authentication hereon shall have been signed by the Trustee.
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<PAGE> 4
IN WITNESS WHEREOF, the Issuer has caused this Note to be signed manually
or by facsimile by duly authorized officers of the General Partner.
Dated: February 18, 1998 EOP OPERATING LIMITED PARTNERSHIP,
as Issuer
By: EQUITY OFFICE PROPERTIES TRUST, not
individually but as General Partner
By: /s/ Timothy H. Callahan
---------------------------------
Timothy H. Callahan
Its: President and Chief
Executive Officer
and By: /s/ Richard D. Kincaid
---------------------------------
Richard D. Kincaid
Its: Chief Financial Officer
TRUSTEE'S CERTIFICATE OF AUTHENTICATION
This is one of the Notes of the series designated herein referred to in the
within-mentioned Indenture.
Dated: February 18, 1998 STATE STREET BANK AND TRUST COMPANY
By: /s/ Donald E. Smith
---------------------------------
Authorized Officer
4
<PAGE> 5
[REVERSE OF NOTE]
EOP OPERATING LIMITED PARTNERSHIP
7.250% NOTES DUE 2018
This Note is one of a duly authorized issue of senior Notes of the Issuer
(hereinafter called the "Notes") of the series hereinafter specified, all
issued or to be issued under and pursuant to an Indenture dated as of September
2, 1997 (herein called the "Indenture"), duly executed and delivered by the
Issuer to State Street Bank and Trust Company, as Trustee (herein called the
"Trustee," which term includes any successor trustee under the Indenture with
respect to the series of Notes of which this Note is a part), to which
Indenture and all indentures supplemental thereto reference is hereby made for
a description of the rights, limitations of rights, obligations, duties, and
immunities thereunder of the Trustee, the Issuer, and the Holders of the Notes,
and of the terms upon which the Notes are, and are to be, authenticated and
delivered. The Notes may be issued in one or more series, which different
series may be issued in various aggregate principal amounts, may mature at
different times, may bear interest (if any) at different rates, may be subject
to different redemption provisions (if any), and may otherwise vary as provided
in the Indenture. This Note is one of a series designated as the 7.250% Notes
due 2018 of the Issuer (the "Notes"), limited in aggregate principal amount to
$250,000,000 subject to the provisions in the Indenture.
In case an Event of Default with respect to the Notes shall have occurred
and be continuing, the principal hereof and Make Whole Amount (if any) may be
declared, and upon such declaration shall become, due and payable, in the
manner, with the effect, and subject to the conditions provided in the
Indenture.
The Issuer may redeem this Note, at any time in whole or from time to time
in part, at the election of the Issuer, at a redemption price equal to the sum
of (i) the principal amount being redeemed plus accrued interest thereon to the
date fixed for redemption (the "Redemption Date") and (ii) the Make-Whole
Amount with respect hereto (the "Redemption Price"); provided, however, that
interest installments due on an Interest Payment Date which is on or prior to
the Redemption Date will be payable to the Holder hereof (or one or more
predecessor Notes) as of the close of business on the Record Date preceding
such Interest Payment Date. If notice has been given as provided in the
Indenture and funds for the redemption of this Note or any part thereof called
for redemption shall have been made available on the Redemption Date, this Note
or such part thereof will cease to bear interest on the Redemption Date
referred to in such notice and the only right of the Holder will be to receive
payment of the Redemption Price. Notice of any optional redemption of any Notes
will be given to the Holder hereof (in accordance with the provisions of the
Indenture), not more than 60 nor less than 30 days prior to the Redemption
Date. In the event of redemption of this Note in part only, a new Note of like
tenor for the unredeemed portion hereof and otherwise having the same terms and
provisions as this Note shall be issued by the Issuer in the name of the Holder
hereof upon the presentation and surrender hereof.
The Indenture contains provisions for defeasance of (i) the entire
indebtedness of the Notes or (ii) certain covenants and Events of Default with
respect to the Notes, in each case upon compliance with certain conditions set
forth therein, which provisions apply to the Notes.
At any time when the Issuer is not subject to Section 13 or 15(d) of the
United States Securities Exchange Act of 1934, as amended, upon the request of
a Holder of a Registrable Note (as defined in
5
<PAGE> 6
the Registration Rights Agreement) the Issuer will promptly furnish or cause to
be furnished the information specified in Rule 144(d)(4) to such Holder of a
Registrable Note, or to a prospective purchaser of any Note designated by any
such Holder to the extent required to permit compliance by such Holder with
Rule 144A under the Securities Act in connection with the resale of any such
Note.
Whenever in this Note there is a reference, in any context, to the payment
of the principal of, or Make-Whole Amount, if any, or interest on, or in
respect of, the Note, such mention shall be deemed to include mention of the
payment Liquidated Damages payable as described above to the extent that, in
such context, Liquidated Damages are, were or would be payable in respect of
the Note.
The Indenture contains provisions permitting the Issuer and the Trustee,
with the consent of the Holders of not less than a majority of the aggregate
principal amount of the Notes at the time Outstanding of all series to be
affected (voting as one class), evidenced as provided in the Indenture, to
execute supplemental indentures adding any provisions to or changing in any
manner or eliminating any of the provisions of the Indenture or of any
supplemental indenture or modifying in any manner the rights of the Holders of
the Notes of each series; provided, however, that no such supplemental
indenture shall, without the consent of the Holder of each Note at the time
Outstanding so affected, (i) change the final maturity of any Note, or reduce
the principal amount thereof or any premium or Make-Whole Amount thereon, if
any, or reduce the rate or extend the time of payment of any interest thereon,
or impair or affect the rights of any Holder to institute suit for the payment
on any Note, or (ii) reduce the percentage in principal amount of Outstanding
Notes, the Holders of which are required to consent to any such supplemental
indenture, or (iii) reduce the percentage in principal amount of Outstanding
Notes, the Holders of which are required to consent to any waiver of compliance
with certain provisions of the Indenture or any waiver of certain defaults
thereunder. It is also provided in the Indenture that, with respect to certain
defaults or Events of Default regarding the Notes of any series, the Holders of
a majority in aggregate principal amount Outstanding of the Notes of such
series (or, in the case of certain defaults or Events of Default, all series of
Notes) may on behalf of the Holders of all the Notes of such series (or all of
the Notes, as the case may be) waive any such past default or Event of Default
and its consequences, prior to any declaration accelerating the maturity of
such Notes, or, subject to certain conditions, may rescind a declaration of
acceleration and its consequences with respect to such Notes. The preceding
sentence shall not, however, apply to a default in or Event of Default relating
to, the payment of the principal of or premium or Make-Whole Amount, if any, or
interest on any of the Notes or in respect of a covenant or provision contained
in the Indenture that cannot be modified or amended without the consent of the
Holders of each Note at the time Outstanding affected thereby. Any such
consent or waiver by the Holder of this Note (unless revoked as provided in the
Indenture) shall be conclusive and binding upon such Holder and upon all future
Holders and owners of this Note and any Notes that may be issued in exchange or
substitution herefor, irrespective of whether or not any notation thereof is
made upon this Note or such other Notes.
No reference herein to the Indenture and no provision of this Note or of
the Indenture shall alter or impair the obligation of the Issuer, which is
absolute and unconditional, to pay the principal of and any Make-Whole Amount
and interest (including Liquidated Damages) on this Note in the manner, at the
respective times, at the rate and in the coin or currency herein prescribed.
This Note is issuable only in registered form without coupons in
denominations of U.S.$100,000 and integral multiples of $1,000 thereof. Notes
may be exchanged for a like aggregate principal amount of Notes of this series
of other authorized denominations at the office or agency of the
6
<PAGE> 7
Issuer in Boston, Massachusetts, in the manner and subject to the limitations
provided herein and in the Indenture, but without the payment of any service
charge except for any tax or other governmental charge imposed in connection
therewith.
Upon due presentment for registration of transfer of this Note at the
office or agency of the Issuer in Boston, Massachusetts, one or more new Notes
of authorized denominations in an equal aggregate principal amount will be
issued to the transferee in exchange therefor, subject to the limitations
provided in the Indenture, but without the payment of any service charge except
for any tax or other governmental charge imposed in connection therewith.
This Note is not subject to a sinking fund requirement.
No recourse under or upon any obligation, covenant or agreement contained
in the Indenture, or any Note, or because of any indebtedness evidenced hereby
or thereby (including, without limitation, any obligation or indebtedness
relating to the principal of, or premium or Make-Whole Amount or Liquidated
Damages, if any, interest or any other amounts due, or claimed to be due, on
this Note), or for any claim based thereon or otherwise in respect thereof,
shall be had (i) against the General Partner or any other partner, or any
Person which owns an interest, directly or indirectly, in any partner, in the
Issuer, or (ii) against any promoter, as such, or against any past, present or
future shareholder, officer, trustee or partner, as such, of the Issuer or the
General Partner or of any successor, either directly or through the Issuer or
the General Partner or any successor, under any rule of law, statute or
constitutional provision or by the enforcement of any assessment or by any
legal or equitable proceeding or otherwise, all such liability being expressly
waived and released by the acceptance hereof and as part of the consideration
for the issue hereof.
Prior to due presentation of this Note for registration of transfer, the
Issuer, the Trustee, and any authorized agent of the Issuer or the Trustee may
deem and treat the Person in whose name this Note is registered as the absolute
owner of this Note (whether or not this Note shall be overdue and
notwithstanding any notation of ownership or other writing hereon), for the
purpose of receiving payment of, or on account of, the principal hereof and
Make-Whole Amount, if any, and subject to the provisions herein and on the face
hereof, interest hereon, and for all other purposes, and neither the Issuer nor
the Trustee nor any authorized agent of the Issuer or the Trustee shall be
affected by any notice to the contrary, except as required by law.
THE INDENTURE AND THIS NOTE SHALL BE GOVERNED BY AND CONSTRUED IN
ACCORDANCE WITH THE LAW OF THE STATE OF NEW YORK, UNITED STATES OF AMERICA
WITHOUT REGARD TO THE PRINCIPALES OF CONFLICTS OF LAWS.
7
<PAGE> 8
ASSIGNMENT FORM AND CERTIFICATE OF TRANSFER
To assign this Note fill in the form below:
(I) or (we) assign and transfer this Note to
_______________________________________________________________________________
(Insert assignee's social Note or tax identification number, if any)
_______________________________________________________________________________
_______________________________________________________________________________
_______________________________________________________________________________
(Print or type assignee's name, address and zip code)
Your signature: __________________________________________________________
(Sign exactly as your name appears on the other side of
this Note)
Date: ________________________________________
Signature Guarantee:* __________________________
In connection with any transfer of any of the Notes evidenced by this
certificate occurring prior to the date that is two years (or such shorter
period as may then be applicable under Rule 144(k) of the United States
Securities Act of 1933, as amended (the "Securities Act") (or any successor
provision)) after the later of the date of original issuance of such Notes and
the last date, if any, on which this Note is owned by the Issuer or any
Affiliate of the Issuer, the undersigned confirms that this Note is being
transferred:
CHECK ONE BOX BELOW
(1) [ ] to the Issuer or a Subsidiary thereof; or
(2) [ ] pursuant to and in compliance with Rule 144A under the
Securities Act; or
(3) [ ] pursuant to Rule 144 under the Securities Act; or
(4) [ ] pursuant to an effective registration statement under the
Securities Act; or
(5) [ ] pursuant to another available exemption from the registration
requirements of the Securities Act.
Unless one of the boxes is checked, the Trustee will refuse to register
this Note in the name of any person other than the registered holder thereof;
provided, however, that if box (5) is checked, the Trustee (as instructed by
the Issuer) and the Issuer may require, prior to registering any transfer of
this Note, such certifications, legal opinions or other information as the
Issuer has reasonably requested
__________________________
*Signature must be guaranteed by a commercial bank, trust company or member
firm or a major stock exchange
8
<PAGE> 9
to confirm that such transfer is being made pursuant to an exemption from, or
in a transaction not subject to, the registration requirements of the
Securities Act.
9
<PAGE> 1
EXHIBIT 4.7
THIS MOPPRS HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS
AMENDED (THE "SECURITIES ACT") OR ANY STATE SECURITIES LAW, NEITHER THIS MOPPRS
NOR ANY INTEREST OR PARTICIPATION HEREIN MAY BE REOFFERED, SOLD, ASSIGNED,
TRANSFERRED, PLEDGED, ENCUMBERED OR OTHERWISE DISPOSED OF IN THE ABSENCE OF SUCH
REGISTRATION OR UNLESS SUCH TRANSACTION IS EXEMPT FROM, OR NOT SUBJECT TO,
REGISTRATION. THIS MOPPRS IS ISSUED AND MAY BE TRANSFERRED ONLY IN MINIMUM
DENOMINATIONS OF $100,000 AND INTEGRAL MULTIPLES OF $1,000 IN EXCESS THEREOF.
THE HOLDER OF THIS MOPPRS BY ITS ACCEPTANCE HEREOF AGREES TO OFFER, SELL OR
OTHERWISE TRANSFER SUCH SECURITY, PRIOR TO THE DATE (THE "RESALE RESTRICTION
TERMINATION DATE") WHICH IS TWO YEARS AFTER THE LATER OF THE ORIGINAL ISSUE DATE
HEREOF AND THE LAST DATE ON WHICH THE COMPANY OR ANY AFFILIATE OF THE COMPANY
WAS THE OWNER OF THIS MOPPRS (OR ANY PREDECESSOR OF THIS MOPPRS), ONLY (A) TO
THE COMPANY OR ANY SUBSIDIARY THEREOF, (B) PURSUANT TO A REGISTRATION STATEMENT
WHICH HAS BEEN DECLARED EFFECTIVE UNDER THE SECURITIES ACT, (C) FOR SO LONG AS
THIS MOPPRS IS ELIGIBLE FOR RESALE PURSUANT TO RULE 144A UNDER THE SECURITIES
ACT ("RULE 144A), TO A PERSON WHOM THE SELLER REASONABLY BELIEVES IS A
"QUALIFIED INSTITUTIONAL BUYER" AS DEFINED IN RULE 144A THAT IS PURCHASING FOR
ITS OWN ACCOUNT OR FOR AN ACCOUNT OF A QUALIFIED INSTITUTIONAL BUYER TO WHOM
NOTICE IS GIVEN THAT THE TRANSFER IS BEING MADE IN RELIANCE ON RULE 144A, OR (D)
TO AN INSTITUTIONAL "ACCREDITED INVESTOR" WITHIN THE MEANING OF SUBPARAGRAPH
(A)(1),(2),(3) OR (7) OF RULE 501 UNDER THE SECURITIES ACT THAT IS ACQUIRING
THIS MOPPRS FOR ITS OWN ACCOUNT OR FOR AN ACCOUNT OF SUCH AN INSTITUTIONAL
ACCREDITED INVESTOR, OR AS FIDUCIARY FOR THE ACCOUNT OF ONE OR MORE TRUSTS, EACH
OF WHICH IS AN "ACCREDITED INVESTOR" WITHIN THE MEANING OF SUBPARAGRAPH
(A)(7)(OF RULE 501 UNDER THE SECURITIES ACT, FOR INVESTMENT PURPOSES AND NOT
WITH A VIEW TO, OR FOR OFFER OR SALE IN CONNECTION WITH, ANY DISTRIBUTION IN
VIOLATION OF THE SECURITIES ACT, IN A TRANSACTION EXEMPT FROM THE REGISTRATION
REQUIREMENTS OF THE SECURITIES ACT UPON THE DELIVERY OF AN OPINION OF COUNSEL,
CERTIFICATION AND/OR OTHER INFORMATION SATISFACTORY TO THE COMPANY, SUBJECT IN
EACH OF THE FOREGOING CASES, TO A CERTIFICATION OF ASSIGNMENT IN THE FORM
APPEARING ON THE OTHER SIDE OF THIS MOPPRS BEING COMPLETED AND DELIVERED BY THE
TRANSFEROR TO THE COMPANY. THIS LEGEND WILL BE REMOVED UPON THE REQUEST OF THE
HOLDER HEREOF AFTER THE RESALE RESTRICTION TERMINATION DATE.
THE HOLDER OF THIS MOPPRS BY ITS ACCEPTANCE HEREOF AGREES TO BE BOUND BY
THE PROVISIONS OF THE REGISTRATION RIGHTS AGREEMENT RELATING TO ALL THE MOPPRS.
UNLESS THIS MOPPRS IS PRESENTED BY AN AUTHORIZED REPRESENTATIVE OF THE
DEPOSITORY TRUST COMPANY ("DTC")(55 WATER STREET, NEW YORK, NEW YORK) TO THE
COMPANY OR ITS AGENT FOR REGISTRATION OF TRANSFER, EXCHANGE OR PAYMENT, AND ANY
SECURITY ISSUED IS REGISTERED IN THE NAME OF CEDE & CO. OR SUCH OTHER NAME AS
REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF DTC AND ANY PAYMENT IS MADE TO CEDE
& CO., ANY TRANSFER, PLEDGE OR OTHER USE
<PAGE> 2
HEREOF FOR VALUE OR OTHERWISE BY OR TO ANY PERSON IS WRONGFUL SINCE THE
REGISTERED OWNER HEREOF, CEDE & CO., HAS AN INTEREST HEREIN.
UNLESS AND UNTIL IT IS EXCHANGED IN WHOLE OR IN PART FOR SECURITIES IN
CERTIFICATED FORM, THIS MOPPRS MAY NOT BE TRANSFERRED EXCEPT AS A WHOLE BY DTC
TO A NOMINEE OF DTC OR BY A NOMINEE OF DTC TO DTC OR ANOTHER NOMINEE OF DTC OR
BY DTC OR ANY SUCH NOMINEE TO A SUCCESSOR DEPOSITARY OR A NOMINEE OF SUCH
SUCCESSOR DEPOSITARY.
No. 001 PRINCIPAL
CUSIP NO.: 268766 AN 2 AMOUNT: $200,000,000
EOP OPERATING LIMITED PARTNERSHIP
6.376% Mandatory Par Put Remarketed Securities(SM) ("MOPPRS(SM)")
due February 15, 2012
ORIGINAL ISSUE DATE: INTEREST RATE STATED MATURITY DATE:
February 18, 1998 TO REMARKETING February 15, 2012
DATE: 6.376%
REMARKETING DATE: INTEREST RATE
February 15, 2002 TO MATURITY: To be determined as
provided herein and
set forth in the
records of the
Trustee
AUTHORIZED DENOMINATION: INTEREST PAYMENT DATE(S):
$100,000 and integral multiples February 15 and August 15
of $1,000 in excess thereof
EOP OPERATING LIMITED PARTNERSHIP, a Delaware limited partnership (the
"Company"), which term includes any successor under the Indenture hereinafter
referred to, for value received, hereby promises to pay Cede & Co., a nominee of
the Depository Trust Company ("DTC"), or its registered assigns, the principal
amount of Two Hundred Million Dollars ($200,000,000), on the Stated Maturity
Dates specified above (or any earlier redemption date or repurchase date) (each
such Stated Maturity Date, redemption date or repurchase date being hereinafter
referred to as the "Maturity Date" with respect to the principal repayable on
such date) and to pay interest thereon (and on any overdue principal, premium
and/or interest to the extent legally enforceable) at the Interest Rate per
annum specified above to February 15, 2002 (the "Remarketing Date"), and
thereafter, subject to the terms and conditions set forth herein, at the
Interest Rate determined by the Remarketing Dealer (as defined below) in
accordance with the procedures set forth below (the "Interest Rate to
Maturity)", until the principal hereof is paid or duly made available for
payment. The Company will pay interest in arrears on each Interest Payment Date,
if any, specified above (each, an "Interest Payment Date"), commencing
_________________
"Mandatory Par Put Remarketed Securities(SM)" and "MOPPRS(SM)" are service marks
owned by Merrill Lynch & Co., Inc.
<PAGE> 3
with the first Interest Payment Date next succeeding the Original Issue Date
specified above, and on the Maturity Date. Interest on this MOPPRS will be
computed on the basis of a 360-day year of twelve 30-day months.
If, pursuant to the Remarketing Agreement, dated as of the date hereof (the
"Remarketing Agreement"), between Merrill Lynch, Pierce, Fenner & Smith
Incorporated, as Remarketing Dealer (the "Remarketing Dealer"), and the Company,
the Remarketing Dealer elects to remarket the MOPPRS, then, except as otherwise
set forth herein, (i) this MOPPRS shall be subject to mandatory tender to the
Remarketing Dealer for remarketing on the Remarketing Date, on the terms and
subject to the conditions set forth herein, and (ii) on and after the
Remarketing Date, this MOPPRS shall bear interest at the Interest Rate to
Maturity determined by the Remarketing Dealer in accordance with the procedures
set forth in Section 3 herein. the Remarketing Dealer's duties set forth herein
shall be performed pursuant to the Remarketing Agreement.
Interest on this MOPPRS will accrue from, and including, the immediately
preceding Interest Payment Date to which interest has been paid or duly provided
for (or from, and including, the Original Issue Date, if no interest has been
paid or duly provided for) to, but excluding, the applicable Interest Payment
Date or the Maturity Date, as the case may be. The interest so payable, and
punctually paid or duly provided for, on any Interest Payment Date will, subject
to certain exceptions described herein, be paid to the person in whose name this
MOPPRS (or one or more predecessor MOPPRS) is registered at the close of
business on the fifteenth calendar day (whether or not a Business Day, as
defined below) immediately preceding such Interest Payment Date (the "Record
Date"). Any such interest not so punctually paid or duly provided for on any
Interest Payment Date other than the Maturity Date ("Defaulted Interest") shall
forthwith cease to be payable to the Holder on any Record Date, and, instead,
shall be paid to the person in whose name this MOPPRS is registered at the close
of business on a special record date (the "Special Record Date") for the payment
of such Defaulted Interest to be fixed by the Trustee hereinafter referred to,
notice whereof shall be given to the Holder of this MOPPRS by the Trustee not
less than 10 calendar days prior to such Special Record Date or may be paid at
any time in any other lawful manner, all as more fully provided for in the
Indenture.
Payment of principal and premium, if any, in respect of this MOPPRS due on
the Maturity Date will be made in immediately available funds upon presentation
and surrender of the MOPPRS at the office or agency maintained by the Company
for that purpose in Boston, Massachusetts with a drop facility maintained in New
York, New York. The Company hereby initially designates the Corporate Trust
Office of the Trustee in Boston, Massachusetts as the office to maintained by it
where MOPPRS may be presented for payment, registration of transfer, or exchange
and where notices or demands to or upon the Company in respect of the MOPPRS or
the Indenture referred to on the reverse hereof may be served. Payment of
interest due on any Interest Payment Date will be made at the aforementioned
office or agency maintained by the company or, at the option of the Company, by
check mailed to the address of the person entitled thereto as such address shall
appear in the Security Register maintained by the Trustee; provided, however,
that a Holder of U.S.$10,000,000 or more in aggregate principal amount of MOPPRS
(whether having identical or different terms and provisions) will be entitled to
receive interest payments on such Interest Payment Date by wire transfer of
immediately available funds if appropriate wire transfer instructions have been
received in writing by the Trustee not less than 15 calendar days prior to such
Interest Payment Date. Any such wire transfer instructions received by the
Trustee shall remain in effect until revoked by such Holder. Notwithstanding the
foregoing or any provision hereof, if this MOPPRS is a global security (as
evidenced by the legend first set forth above and provided in the Indenture),
and is held in book-entry form through the facilities of DTC, payments on this
MOPPRS will
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<PAGE> 4
be made to DTC or its nominee in accordance with the arrangements then in
effect between the Trustee and DTC.
If any Interest Payment Date or Maturity Date falls on a day that is not a
Business Day, the required payment of principal, premium, if any, and/or
interest shall be made on the next succeeding Business Day with the same force
and effect as if it were made on the date such payment was due, and no interest
shall accrue with respect to such payment for the period from and after such
Interest Payment Date or the Maturity Date, as the case may be, to the date of
such payment on the next succeeding Business Day.
As used herein, "Business Day" means any day, other than a Saturday or
Sunday, that is neither a legal holiday nor a day on which banking institutions
are authorized or required by law, regulation or executive order to close in
New York, New York or Boston, Massachusetts.
The Company is obligated to make all payments of principal, premium, if
any, and interest in respect of this MOPPRS in such coin or currency of the
United States of America as at the time of such payment is legal tender for the
payment of public and private debts in the United States of America.
Reference is hereby made to the further provisions of this MOPPRS set
forth on the reverse hereof, which further provisions shall have the same force
and effect as if set forth on the face hereof.
Unless the Certificate of Authentication hereon has been executed by the
Trustee by manual signature, this MOPPRS shall not be entitled to any benefit
under the Indenture or be valid or obligatory for any purpose.
<PAGE> 5
IN WITNESS WHEREOF, EOP OPERATING LIMITED PARTNERSHIP has caused this
MOPPRS to be duly executed by one of its duly authorized officers.
Dated: February 18, 1998 EOP OPERATING LIMITED PARTNERSHIP,
as Issuer
By: EQUITY OFFICE PROPERTIES TRUST,
not individually but as
General Partner
By: /s/ Timothy H. Callahan
----------------------------
Timothy H. Callahan
Its: President and Chief Executive Officer
and By: /s/ Richard D. Kincaid
----------------------------
Richard D. Kincaid
Its: Chief Financial Officer
TRUSTEE'S CERTIFICATE OF AUTHENTICATION
This is one of the Debt Securities of the series designated herein referred
to in the within-mentioned Indenture.
Dated: February 18, 1998 STATE STREET BANK AND TRUST COMPANY,
as Trustee
By: /s/ Donald E. Smith
----------------------------
Authorized Officer
<PAGE> 6
[REVERSE OF CERTIFICATE]
EOP OPERATING LIMITED PARTNERSHIP
6.376% MandatOry Par Put Remarketed SecuritiesSM ("MOPPRSSM")
due February 15, 2012
1. Indenture. (a) This MOPPRS is one of a duly authorized series of Debt
Securities (the "Debt Securities") of the Company issued and to be issued under
an Indenture, dated as of September 2, 1997, as amended or supplemented (the
"Indenture"), between the Company and State Street Bank and Trust Company, as
Trustee (the "Trustee", which term includes any successor trustee under the
Indenture), to which Indenture and all indentures supplemental thereto
reference is hereby made for a statement of the respective rights, limitations
of rights, duties and immunities thereunder of the company, the Trustee and the
Holders of the Debt Securities, and of the terms upon which the Debt Securities
are, and are to be, authenticated and delivered. This security is one of the
series of Debt Securities designated as "6.376% MandatOry par Put Remarketed
SecuritiesSM due February 15, 2012" ("MOPPRSSM"), which MOPPRS are limited to
$250,000,000 aggregate principal amount. All terms used but not defined in this
MOPPRS shall have the meanings assigned to such terms in the Indenture. Except
where the context otherwise requires, all references in this MOPPRS to "this
MOPPRS", "this Security", "herein" or "hereof" or similar terms shall include
the Indenture.
(b) The MOPPRS are issuable only in registered form without coupons in
minimum denominations of U.S.$100,000 and integral multiples of U.S.$1,000 in
excess thereof.
(c) This MOPPRS will not be subject to any sinking fund and will not be
repayable at the option of the Holder hereof prior to the Stated Maturity Date.
2. Mandatory Tender. Provided that on a Business Day not later than five
Business Days prior to the Remarketing Date the Remarketing Dealer notifies the
Company and the Trustee of its election to purchase the MOPPRS on the
Remarketing Date for remarketing (the "Notification Date"), this MOPPRS shall
be subject to mandatory tender to the Remarketing Dealer, and the Remarketing
Dealer shall be obligated to purchase the MOPPRS, for remarketing on the
Remarketing Date, subject in each case to the conditions described herein and
set forth in theRemarketing Agreement. The purchase price for the tendered
MOPPRS shall equal 100% of the principal amount thereof. From and after the
Remarketing Date, the MOPPRS shall bear interest at the Interest Rate to
Maturity determined pursuant to Section 3 hereof. If the Remarketing Dealer
elects to remarket the MOPPRS, the obligation of the Remarketing Dealer to
purchase this MOPPRS on the Remarketing Date is subject to the conditions
specified in Section 8 of the Remarketing Agreement. If for any reason the
Remarketing Dealer does not purchase all tendered MOPPRS on the Remarketing
Date, the Company shall be required to repurchase from the Beneficial owners
thereof, and the Beneficial Owners will be required to sell to the Company, all
the MOPPRS at a price equal to the principal amount thereof plus all accrued
and unpaid interest, if any, on the MOPPRS to the Remarketing Date as provided
in Section 4 hereof.
<PAGE> 7
"Beneficial Owner" shall mean each person who acquires an interest in the
MOPPRS which is reflected on the records of the DTC through its participants.
3. Determination of Interest Rate to Maturity. (a) Subject to the
Remarketing Dealer's election to remarket the MOPPRS as provided in Section 2
hereof and the Remarketing Agreement, the Interest Rate to Maturity shall be
determined by the Remarketing Dealer by 3:30 p.m., New York City time, on and as
of the third Business Day immediately preceding the Remarketing Date (the
"Determination Date") to the nearest one hundred-thousandth (0.00001) of one
percent per annum, and will be equal to the sum of 5.488% (the "Base Rate") plus
the Applicable Spread, which will be based on the Dollar Price of the MOPPRS.
The "Applicable Spread" will be the lowest bid indication, expressed as a
spread (in the form of a percentage or in basis points) above the Base Rate,
obtained by the Remarketing Dealer on the Determination Date from the bids
quoted by five Reference Corporate Dealers for the full aggregate principal
amount of the MOPPRS at the Dollar Price, but assuming (i) an issue date equal
to the Remarketing Date, with settlement on such date without accrued interest,
(ii) a maturity date equal to the Stated Maturity Date of the MOPPRS, and (iii)
a stated annual interest rate, payable semiannually on each Interest Payment
Date, equal to the Base Rate plus the spread bid by the applicable Reference
Corporate Dealer. If fewer than five Reference Corporate Dealers bid as
described above, then the Applicable Spread shall be the lowest of such bid
indications obtained as described above. The Interest Rate to Maturity announced
by the Remarketing Dealer, absent manifest error, shall be binding and
conclusive upon the Beneficial Owners and Holders of the MOPPRS, the Company and
the Trustee.
"Dollar Price" means, with respect to the MOPPRS, the present value, as of
the Remarketing Date, of the Remaining Scheduled Payments discounted to the
Remarketing Date, on a semiannual basis (assuming a 360-day year consisting of
twelve 30-day months), at the Treasury Rate.
"Reference Corporate Dealers" means leading dealers of publicly traded debt
securities of the Company in the City of New York (which may include the
Remarketing Dealer or one of its affiliates) selected by the Remarketing Dealer.
"Treasury Rate" means, with respect to the Remarketing Date, the rate per
annum equal to the semiannual equivalent yield to maturity or interpolated (on a
day count basis) yield to maturity of the Comparable Treasury Issues, assuming a
price for the Comparable Treasury Issues (expressed as a percentage of its
principal amount), equal to the Comparable Treasury Price for the Remarketing
Date.
"Comparable Treasury Issues" means the United States Treasury security or
securities selected by the Remarketing Dealer as having an actual or
interpolated maturity or maturities comparable to the remaining term of the
MOPPRS being purchased.
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<PAGE> 8
"Comparable Treasury Price" means, with respect to the Remarketing Date,
(a) the offer prices for the Comparable Treasury Issues (expressed in each case
as a percentage of its principal amount) on the Determination Date, as set
forth on "Telerate page 500" (or such other page as may replace Telerate Page
500), or (b) if such page (or any successor page) is not displayed or does not
contain such offer prices on the Determination Date, (i) the average of the
Reference Treasury Dealer Quotations for the Remarketing Date, after excluding
the highest and lowest of such Reference Treasury Dealer Quotations, or (ii) if
the Remarketing Dealer obtains fewer than four such Reference Treasury Dealer
Quotations, the average of all such Reference Treasury Dealer Quotations,
"Telerate Page 500" means the display designated as "Telerate page 500" on Dow
Jones markets Limited (or such other page as may replace Telerate page 500 on
such service) or such other service displaying the offer prices specified in
(a) above as may replace Dow Jones markets Limited.
"Reference Treasury Dealer Quotations" means, with respect to each
Reference Treasury Dealer and the Remarketing Date, the offer prices for the
Comparable Treasury issues (expressed in each case as a percentage of its
principal amount) quoted to the Remarketing Dealer by such Reference Treasury
Dealer by 3:30 p.m., New York City time, on the Determination Date.
"Reference Treasury Dealer" means each of Credit Suisse First Boston
Corporation, Lehman Brothers Inc., Merrill Lynch, Pierce, Fenner & Smith
Incorporated, Morgan Stanley & Co. Incorporated and Salomon Brothers Inc. and
their respective successors; provided, however, that if any of the foregoing or
their affiliates shall cease to be a primary U.S. Government securities dealer
in The City of New York (a "Primary Treasury Dealer"), the Remarketing Dealer
shall substitute therefor another Primary Treasury Dealer.
"Remaining Scheduled Payments" means, with respect to the MOPPRS, the
remaining scheduled payments of the principal thereof and interest thereon,
calculated at the Base Rate only, that would be due after the Remarketing Date
to and including the Stated Maturity Date; provided, however, that if the
Remarketing Date is not an Interest Payment Date with respect to the MOPPRS,
the amount of the next succeeding scheduled interest payment thereon,
calculated at the Base Rate only, will be reduced by the amount of interest
accrued thereon, calculated at the Base Rate only, to the Remarketing Date.
(b) Provided that the Remarketing Dealer has previously notified the
Company and the Trustee on the Notification Date of its intention to purchase
all tenders MOPPRS on the Remarketing Date, the Remarketing Dealer will notify
the Company, the Trustee and DTC by telephone, confirmed in writing (which may
include facsimile or other electronic transmission), by 4:00 p.m., New York
City time, on the Determination Date, of the Interest Rate to maturity. All of
the tendered MOPPRS shall be automatically delivered to the account of the
Trustee, by book-entry through DTC pending payment of the purchase price
therefor, on the Remarketing Date.
In the event that the Remarketing Dealer purchases the tendered MOPPRS on
the Remarketing Date, the Remarketing Dealer shall make or cause the Trustee to
make payment (from monies deposited with it by the Remarketing Dealer or the
Company) to
<PAGE> 9
the DTC Participant of each tendering Beneficial Owner of MOPPRS, by book-entry
through DTC by the close of business on the Remarketing Date against delivery
through DTC of such Beneficial Owner's tendered MOPPRS, of 100% of the
principal amount of the tendered MOPPRS that have been purchased for
remarketing by the Remarketing Dealer. If the Remarketing Dealer does not
purchase all of the MOPPRS on the Remarketing Date, it shall be the obligation
of the Company to make or cause to be made such payment for the MOPPRS, as
provided in Section 4 hereof. In any case, the Company shall make or cause the
Trustee to make payment of interest to each Beneficial Owner of MOPPRS due on
the Remarketing Date by book-entry through DTC by the close of business on the
Remarketing Date.
"DTC Participant" shall mean any person that has an account with DTC
through which Beneficial Owner's acquire, directly or indirectly, an interest
in the MOPPRS.
The transactions set forth in this Section shall be executed on the
Remarketing Date through DTC in accordance with the procedures of DTC, and the
accounts of the representative DTC participants will be debited and credited
and the MOPPRS delivered by book entry as necessary to effect the purchases and
sales thereof.
Transactions involving the sale and purchase of MOPPRS remarketed by the
Remarketing Dealer on and after the Remarketing Date shall settle in
immediately available funds through DTC's Same-Day Funds Settlement System.
The tender and settlement procedures set forth above, including provisions
for payment by purchasers of MOPPRS in the remarketing or for payment to
selling Beneficial owners of tendered MOPPRS, may be modified to the extent
required by DTC or to the extent required to facilitate the tender and
remarketing of MOPPRS in certificated form, if the book-entry system is no
longer available for the MOPPRS at the time of the remarketing. In addition,
the Remarketing Dealer may, in accordance with the terms of the Indenture,
modify the tender and settlement procedures set forth above in order to
facilitate the tender and settlement process.
As long as DTC's nominee holds the certificates representing any MOPPRS in
the book-entry system of DTC, no certificates for such MOPPRS will be delivered
by any selling Beneficial Owner to reflect any transfer of such MOPPRS effected
in the remarketing.,
(c) Notwithstanding any provision herein to the contrary, upon the
occurrence of any event as specified in Section 11(b) of the Remarketing
Agreement, the Remarketing Dealer, in its sole discretion at any time between
the Determination Date and 3:30 p.m., New York City time, on the Business Day
immediately preceding the Remarketing Date, may elect to purchase the MOPPRS
for remarketing and determine a new Interest Rate to Maturity in the manner
provided in Section 3(a) hereof, except that for purposes of determining the
new Interest Rate to maturity pursuant to this paragraph, the Determination
Date referred to therein shall be the date of such election and
redetermination. The Remarketing Dealer shall notify the Company, the Trustee
and DTC by telephone, confirmed in writing (which may include facsimile or
other electronic transmission), by 4:00 p.m., New York City time, on the date
of such election, of the
9
<PAGE> 10
new Interest Rate to Maturity applicable to the MOPPRS. Thereupon, such new
Interest Rate to Maturity shall supersede and replace any Interest Rate to
Maturity previously determined by the Remarketing Dealer and, absent manifest
error, shall be binding and conclusive upon the record and Beneficial Owners
and Holders of the MOPPRS or after the Remarketing Date, the Company and the
Trustee.
4. Repurchase. In the event that (i) the Remarketing Dealer for any reason
does not notify the Company of the Interest Rate to Maturity by 4:00 p.m., New
York City time, on the Determination Date, or (ii) prior to the Remarketing
Date, the Remarketing Dealer has resigned and no successor has been appointed on
or before the Determination Date, or (iii) any event or failure of conditions as
set forth in Section 8 and Section 11 of the Remarketing Agreement shall have
occurred at any time after the Remarketing Dealer elects on the Notification
Date to remarket the MOPPRS, or (iv) the Remarketing Dealer for any reason does
not elect to purchase the MOPPRS for remarketing on the Remarketing Date, or (v)
the Remarketing Dealer for any reason does not purchase all tendered MOPPRS on
the Remarketing Date, the Company shall repurchase all the MOPPRS as a whole on
the Remarketing Date at a price equal to 100% of the principal amount of the
MOPPRS plus all accrued and unpaid interest, if any, on the MOPPRS to the
Remarketing Date. In any such case, payment will be made by the Company through
the Trustee to the DTC Participant of each tendering Beneficial Owner of MOPPRS,
by book entry through DTC by the close of business on the Remarketing Date
against delivery through DTC of such Beneficial Owner's tendered MOPPRS.
5. Redemption. If the Remarketing Dealer elects to remarket the MOPPRS on
the Remarketing Date, the MOPPRS shall be subject to redemption at the option of
the Company from the Remarketing Dealer, as a whole but not in part, as set
forth in this Section. The Company shall notify the Remarketing Dealer, and the
Trustee, not later than the Business Day immediately preceding the Determination
Date, if the Company irrevocably elects to exercise its right to redeem the
MOPPRS, in whole but not in part, from the Remarketing Dealer on the Remarketing
Date at the Optional Redemption Price. If the Company so elects, it shall redeem
the MOPPRS by payment to the Remarketing Dealer as provided in the Remarketing
Agreement.
The "Optional Redemption Price" shall be greater of (i) 100% of the
principal amount of the MOPPRS and (ii) the sum of the present values of the
Remaining Scheduled Payments thereon, as determined by the Remarketing Dealer,
discounted to the Remarketing Date on a semiannual basis (assuming a 360-day
year consisting of twelve 30-day months) at the Treasury Rate, plus in either
case accrued and unpaid interest from the Remarketing Date on the principal
amount being redeemed to the date of redemption. If the Company elects of redeem
the MOPPRS, it shall pay such Optional Redemption Price in same-day funds by
wire transfer to an account designated by the Remarketing Dealer on the
Remarketing Date.
6. Effect of Events of Default. If any Event of Default, as defined in the
Indenture, shall occur and be continuing, the principal of this MOPPRS may, and
in certain cases shall, be accelerated in the manner and with the effect
provided in the indenture.
10
<PAGE> 11
7. Defeasance. The Indenture contains provisions for defeasance of (i)
the entire indebtedness of certain Debt Securities or (ii) certain covenants and
Events of Default with respect to the Debt Securities, in each case upon
compliance with certain conditions set forth therein. Except as otherwise
permitted herein and in the Remarketing Agreement, prior to the Remarketing
Date, neither the Company nor any of its subsidiaries or affiliates shall
defease, purchase or otherwise acquire, or enter into any agreement to defease,
purchase or otherwise acquire, any of the MOPPRS prior to the remarketing
thereof by the Remarketing Dealer; provided, however, that the provisions in
Article Fourteen of the Indenture relating to covenant defeasance shall apply to
the MOPPRS at all times.
8. Maintenance in Book-Entry Form. Notwithstanding any provision to the
contrary set forth in the Indenture, the Company (i) shall use its reasonable
best efforts to maintain the MOPPRS in book-entry form with DTC or any successor
thereto and to appoint a successor depositary to the extent necessary to
maintain the MOPPRS in book-entry form, and (ii) waives any discretionary right
it otherwise has under the Indenture to cause the MOPPRS to be issued in
certificated form.
9. Tax treatment. Each Holder and Beneficial Owner of this MOPPRS or
any interest therein prior tot he remarketing on the Remarketing Date, by its
purchase of this MOPPRS or any interest therein, agrees to treat this MOPPRS as
maturing on the Remarketing Date for United States federal income tax purposes.
10. Amendment and Modification. The Indenture permits, with certain
exceptions as therein provided, the amendment thereof and the modification of
the rights and obligations of the Company and the rights of the Holders of the
Debt Securities at any time by the Company and the Trustee with the consent of
the Holders of a majority of the aggregate principal amount of all Debt
Securities at the time outstanding and affected thereby. The Indenture also
contains provisions permitting the Holders of a majority of the aggregate
principal amount of the outstanding Debt Securities of any series, on behalf of
the Holders of all such Debt Securities, to waive compliance by the Company with
certain provisions of the Indenture. Furthermore, provisions in the Indenture
permit the Holders of a majority of the aggregate principal amount of the
outstanding Debt Securities of any series, in certain instances, to waive, on
behalf of all of the Holders of Debt Securities of such series, certain past
defaults under the Indenture and their consequences. Any such consent or waiver
by the Holder of this MOPPRS shall be conclusive and binding upon such Holder
and upon all future Holders of this MOPPRS and other MOPPRS issued upon the
registration of transfer hereof or in exchange heretofore or in lieu hereof,
whether or not notation of such consent or waiver is made upon this MOPPRS.
11. Obligation to Pay Principal, premium, if any, and Interest. No
reference herein to the Indenture and no provision of this MOPPRS or of the
Indenture shall alter and impair the obligation of the Company, which is
absolute and unconditional, to pay principal, premium. if any, and interest in
respect of this MOPPRS at the times, places and rate formula, and in the manner
and coin currency, herein prescribed.
11
<PAGE> 12
12. Transfer and Exchange. As provided in the Indenture and subject to
certain limitations therein and herein set forth, the transfer of this MOPPRS
is registrable in the Security Register of the Company upon surrender of this
MOPPRS for registration of transfer at the office or agency of the Company in
any place where the principal hereof and any premium or interest hereon are
payable, duly endorsed by, or accompanied by a written instrument of transfer
in form satisfactory to the Company and the Security Registrar duly executed
by, the Holder hereof or by his attorney duly authorized in writing, and
thereupon one or more new MOPPRS having the same terms and provisions, of
authorized denominations and for the same aggregate principal amount, will be
issued by the Company to the designated transferee or transferees.
As provided in the Indenture and subject to certain limitations therein
and herein set forth, this MOPPRS is exchangeable for a like aggregate
principal amount of MOPPRS of different authorized denominations but otherwise
having the same terms and provisions, as requested by the Holder hereof
surrendering the same.
No service charge shall be made for any such registration of transfer or
exchange, but the Company may require payment of a sum sufficient to cover any
tax or other governmental charge payable in connection therewith.
Prior to due presentment of this MOPPRS for registration of transfer, the
Company, the Trustee and any agent of the Company or the Trustee may treat the
Holder as the owner hereof for all purposes, whether or not this MOPPRS be
overdue, and neither the Company, the Trustee nor any such agent shall be
affected by notice to the contrary, except as required by law.
13. No Recourse to General Partner. No recourse under or upon any
obligation, covenant or agreement contained in the Indenture, in this MOPPRS or
coupon appertaining thereto, or because of any indebtedness evidenced hereby or
thereby (including, without limitation, any obligation or indebtedness relating
to the principal of, or premium, or Liquidated Damages, if any, interest or any
other amounts due, or claimed to be due, on this MOPPRS), or for any claim
based thereon or otherwise in respect thereof, shall be had (i) against the
General Partner or any other partner, or any person which owns an interest,
directly or indirectly, in any partner, in the Company, or (ii) against any
promoter, as such, or against any past, present or future shareholder, officer,
trustee or partner, as such, of the Company or the General Partner or of any
successor, either directly or through the Company or the General Partner or any
successor, under any rule of law, statute or constitutional provision or by
the enforcement of any assessment or by any legal or equitable proceeding or
otherwise, all such liability being expressly waived and released by the
acceptance hereof and as part of the consideration for the issue hereof.
14. Registration Rights Agreement. The Holder of this MOPPRS is entitled
to the benefits of and is subject to the obligations contained in a
Registration Rights Agreement (the "Registration Rights Agreement") (subject to
the provisions thereof), dated as of February 18, 1998, between the Company and
the Initial Purchasers, as defined in the Registration Rights Agreement. The
Company shall pay Liquidated Damages to the Holder of this MOPPRS as provided
in the Registration Rights Agreement.
15. Liquidated Damages. Whenever in this MOPPRS there is a reference, in
any context, to the payment of the principal of, premium, if any, or interests
on, or in respect of, the MOPPRS, such mention shall be deemed to include
mention of the payment Liquidated Damages payable as described above to the
extent that, in such context, Liquidated Damages are, were or would be payable
in respect of the Note and express mention of the payment of Liquidated Damages
in any provisions of this MOPPRS
12
<PAGE> 13
shall not be construed as excluding Liquidated Damages in those provisions of
this MOPPRS were such express mention is not made.
16. Governing Law. The Indenture and this MOPPRS shall be governed by, and
construed in accordance with, the laws of the State of New York without regard
to conflict of law principles.
<PAGE> 14
ABBREVIATIONS
The following abbreviations, when used in the inscription on the face of this
MOPPRS, shall be construed as though they were written out in full according to
applicable laws or regulations:
TEN COM - as tenants in common
UNIF GIFT MIN ACT - ________ Custodian __________
(Cust) (minor)
under Uniform Gifts to Minors Act
_________________ (State)
TENENT - as tenants by the entireties
JT TEN - as joint tenants with right
of survivorship and not as
tenants in common
Additional abbreviations may also be used though not in the above list.
___________________
ASSIGNMENT
FOR VALUE RECEIVED, the undersigned hereby sells(s), assign(s) and transfer(s)
unto
PLEASE INSERT SOCIAL SECURITY OR
OTHER
IDENTIFYING NUMBER OF ASSIGNEE
_____________________________________
________________________________________________________________________
(Please print or typewrite name and address including postal zip code of
assignee)
_______________________________________ this MOPPRS and all rights thereunder
hereby irrevocably constituting and appointing
_______________________________________ Attorney to transfer this MOPPRS on the
books of the Trustee, with full power of substitution in the premises.
Dated: ____________ _________________________________________
_________________________________________
Notice: The signature(s) on this Assignment
must correspond with the name(s) written upon
the face of this MOPPRS in every particular,
without alteration or enlargement or any
change whatsoever.
<PAGE> 1
EXHIBIT 4.8
SENIOR NOTE
THE SALE, TRANSFER, ASSIGNMENT, PLEDGE OR HYPOTHECATION OF THIS SENIOR NOTE HAS
NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED. THIS SENIOR
NOTE MAY NOT BE SOLD, TRANSFERRED, ASSIGNED, PLEDGED OR HYPOTHECATED UNLESS
SUCH TRANSACTION IS DULY REGISTERED UNDER THE ACT OR UNLESS SUCH TRANSACTION IS
EXEMPT FROM THE REGISTRATION PROVISIONS OF THE SECURITIES ACT. ALSO, THIS
SENIOR NOTE MAY NOT BE SOLD, TRANSFERRED, ASSIGNED, PLEDGED OR HYPOTHECATED
UNLESS SUCH TRANSACTION IS DULY REGISTERED OR IS EXEMPT FROM SUCH REGISTRATION
UNDER APPLICABLE STATE SECURITIES LAWS.
NO. 1 PRINCIPAL AMOUNT
CUSIP NO. 26876#AA0 $30,000,000.00
EOP OPERATING LIMITED PARTNERSHIP
7.24% Senior Note due 2004 (the "Senior Note")
EOP Operating Limited Partnership, a Delaware limited partnership (the
"Issuer," which term includes any successor under the indenture hereinafter
referred to), for value received, hereby promises to pay to Teachers Insurance
and Annuity Association of America or registered assigns, the principal sum of
Thirty Million Dollars on September 1, 2004 (the "Maturity Date"), and to pay
interest thereon (a) from September 3, 1997 (or from the most recent Interest
Payment Date to which interest has been paid or duly provided for),
semiannually on March 1 and September 1, of each year (each, an "Interest
Payment Date"), commencing on March 1, 1998, and on the Maturity Date, at the
rate of 7.24% per annum, and (b) to the extent permitted by law on any overdue
payment (including any overdue prepayment) of principal, any overdue payment of
interest and any overdue payment of any Make-Whole Amount (as defined in the
note purchase agreement hereinafter referred to) payable as aforesaid (or, at
the option of the registered holder hereof, on demand), at a rate per annum
from time to time equal to the Default Rate (as defined in the note purchase
agreement hereinafter referred to), in each case, until payment of said
principal sum has been made or fully provided for.
The interest so payable and punctually paid or duly provided for on any
Interest Payment Date and on the Maturity Date will be paid to the holder in
whose name this Senior Note (or one or more predecessor Senior Notes) is
registered at the close of business on the "Record Date" for such payment,
which will be 15 calendar days (regardless of whether such day is a Business
Day (as defined below)) next preceding such Interest Payment Date or the
<PAGE> 2
Maturity Date, as the case may be. Any interest not so punctually paid or duly
provided for shall forthwith cease to be payable to the registered holder on
such Record Date, and shall be paid to the holder in whose name this Senior
Note (or one or more predecessor Senior Notes) is registered at the close of
business on a subsequent record date for the payment of such defaulted interest
(which shall be not less than five Business Days (as defined below) prior to
the date of the payment of such defaulted interest) established by notice
given by mail by or on behalf of the Issuer to the registered holder of this
Senior Note (or one or more predecessor Senior Notes) not less than 15 days
preceding such subsequent record date. Interest on this Senior Note will be
computed on the basis of a 360-day year comprised of twelve 30-day months.
Except as otherwise agreed to in writing among the initial registered
holder of this Senior Note, the trustee under the indenture hereinafter
referred to and the Issuer, the principal of this Senior Note payable on the
Maturity Date will be paid against presentation and surrender of this Senior
Note at the office or agency of the Issuer maintained for that purpose in The
Borough of Manhattan, The City of New York. The Issuer hereby initially
designates the Corporate Trust Office of the trustee in the Borough of
Manhattan, The City of New York as the office to be maintained by it where
Senior Notes may be presented for payment and the Corporate Trust Office of the
trustee in Boston, Massachusetts as the office to be maintained by it where
Senior Notes may be presented for registration of transfer or exchange and
where notices or demands to or upon the Issuer in respect of the Senior Note or
in the indenture hereinafter referred to may be served.
Interest payable on this Senior Note on any Interest Payment Date and on
the Maturity Date, as the case may be, will be the amount of interest accrued
from and including the immediately preceding Interest Payment Date (or from and
including September 3, 1997 in the case of the initial Interest Payment Date)
to but excluding the applicable Interest Payment Date or the Maturity Date, as
the case may be. If any Interest Payment Date other than the Maturity Date
would otherwise be a day that is not a Business Day (as defined below), such
Interest Payment Date will be postponed to the succeeding Business Day. If the
Maturity Date falls on a day that is not a Business Day, principal and interest
payable on the Maturity Date will be paid on the succeeding Business Day with
the same force and effect as if it were paid on the date such payment was due,
and no interest will accrue on the amount so payable for the period from and
after the Maturity Date. "Business Day" means any day, other than a Saturday
or Sunday or other day on which banking institutions in The City of New York,
New York or Boston, Massachusetts are authorized or required by law, regulation
or executive order to close.
Payments of principal and interest in respect of this Senior Note will be
made by wire transfer of immediately available funds in such coin or currency
of the United States of America as at the time of payment is legal tender for
the payment of public and private debts.
2
<PAGE> 3
Reference is made to the further provisions of this Senior Note set forth
on the reverse hereof. Such further provisions shall for all purposes have the
same effect as though fully set forth at this place.
This Senior Note shall not be entitled to the benefits of the indenture
hereinafter referred to or be valid or become obligatory for any purpose until
the certificate of authentication hereon shall have been signed by the trustee
under such indenture.
IN WITNESS WHEREOF, the Issuer has caused this instrument to be signed
manually or by facsimile by its duly authorized officers.
Dated:September 3, 1997
EOP OPERATING LIMITED PARTNERSHIP,
as Issuer
By: EQUITY OFFICE PROPERTIES
TRUST, its managing general partner
Attest: /s/ Stanley M. Stevens By: /s/ Timothy H. Callahan
------------------------
Name: Timothy H. Callahan
Its: President and Chief Executive Officer
TRUSTEE'S CERTIFICATE OF AUTHENTICATION
This is one of the Securities of the series designated herein referred to in
the within-mentioned indenture.
STATE STREET BANK AND TRUST COMPANY
By: /s/ Donald E. Smith
-------------------
Authorized Officer
3
<PAGE> 4
[REVERSE OF SENIOR NOTE]
EOP OPERATING LIMITED PARTNERSHIP
7.24% Senior Notes due 2004
This Senior Note is one of a duly authorized issue of debentures, notes,
bonds, or other evidences of the Issuer (hereinafter called the "Securities")
of the series hereinafter specified, all issued or to be issued under and
pursuant to (i) an Indenture dated as of September 2, 1997 (herein called the
"Indenture"), duly executed and delivered by the Issuer to State Street Bank
and Trust Company, as Trustee (herein called the "Trustee", which term includes
any successor trustee under the Indenture with respect to the series of
Securities of which this Senior Note is a part), (ii) a Note Purchase Agreement
dated September 2, 1997 (herein called the "Note Purchase Agreement"), duly
executed and delivered by the Issuer to the initial holder of this Senior Note,
and (iii) an Officer's Certificate dated the date hereof (the "Officer's
Certificate"), duly executed by authorized officers of the Issuer, pursuant to
Section 301 of the Indenture, to which Note Purchase Agreement, Officer's
Certificate and Indenture and all Indentures supplemental thereto reference is
hereby made for a description of the rights, limitations of rights,
obligations, duties, and immunities thereunder of the Trustee, the Issuer, and
the holders of the series of Securities of which this Senior Note is a part,
and of the terms upon which this Senior Note is, and is to be, authenticated
and delivered. Securities of the Issuer may be issued under the Indenture in
one or more series, which different series may be issued in various aggregate
principal amounts, may mature at different times, may bear interest (if any) at
different rates, may be subject to different redemption provisions (if any),
and may otherwise vary as provided in the Indenture. This Senior Note is one
of a series of Senior Notes issued pursuant to the Indenture and offered
pursuant to the Note Purchase Agreement and designated as the 7.24%-7.44%
Senior Notes due 2004-2007, Tranches A-D, limited in aggregate principal amount
to $180,000,000.
In case an Event of Default with respect to the Senior Notes shall have
occurred and be continuing, the principal hereof and Make-Whole Amount, if any,
may be declared, and upon such declaration shall become, due and payable, in
the manner, with the effect, and subject to the conditions provided in the
Indenture and the Note Purchase Agreement.
The Issuer may redeem the Senior Notes comprising the series of securities
under the Indenture referred to above (the "Series A Senior Notes"), at any
time in whole or from time to time in part, at the election of the Issuer, at a
redemption price equal to the sum of (i) the principal amount of the Series A
Senior Notes being redeemed plus accrued interest thereon to the Redemption
Date and (ii) the Make-Whole Amount, if any, with respect to such Series A
4
<PAGE> 5
Senior Notes (the "Redemption Price") on the terms specified in the Indenture
and the Note Purchase Agreement. Notice of any optional redemption of any
Series A Senior Notes will be given to holders at their addresses, as shown in
the Security Register, not more than 60 nor less than 30 days prior to the date
fixed for redemption. The notice of redemption will specify, among other
items, the Redemption Price and the principal amount of the Series A Senior
Notes held by such holder to be redeemed.
The Indenture contains provisions permitting the Issuer and the Trustee,
with the consent of the holders of not less than a majority of the aggregate
principal amount of the Securities at the time Outstanding of all series to be
affected (voting as one class), evidenced as provided in the Indenture, to
execute supplemental Indentures adding any provisions to or changing in any
manner or eliminating any of the provisions of the Indenture or of any
supplemental Indenture or modifying in any manner the rights of the holders of
the Securities of such series; provided, however, that no such supplemental
Indenture shall, without the consent of the holder of each Security so
affected, (i) change the final maturity of any Security, or reduce the
principal amount thereof or any premium thereon, or reduce the rate or extend
the time of payment of any interest thereon, or impair or affect the rights of
any holder to institute suit for the payment on any Security, or (ii) reduce
the aforesaid percentage of Securities, the holders of which are required to
consent to any such supplemental Indenture, or (iii) reduce the percentage of
Securities, the Holders of which are required to consent to any waiver of
compliance with certain provisions of the Indenture or any waiver of certain
defaults thereunder. It is also provided in the Indenture that, with respect
to certain defaults or Events of Default regarding the Securities of any
series, the holders of a majority in aggregate principal amount outstanding of
the Securities of such series (or, in the case of certain defaults or Events of
Default, all series of Securities) may on behalf of the holders of all the
Securities of such series (or all of the Securities, as the case may be) waive
any such past default or Event of Default and its consequences, prior to any
declaration accelerating the maturity of such Securities; or, subject to
certain conditions, may rescind a declaration of acceleration and its
consequences with respect to such Securities. Any such consent or waiver by
the holder of this Senior Note (unless revoked as provided in the Indenture)
shall be conclusive and binding upon such holder and upon all future holders
and owners of this Senior Note and any Senior Notes that may be issued in
exchange or substitution herefor, irrespective of whether or not any notation
thereof is made upon this Senior Note or such other Senior Notes.
No reference herein to the Indenture and no provision of this Senior Note
or of the Indenture shall alter or impair the obligation of the Issuer, which
is absolute and unconditional, to pay the principal of and any Make-Whole
Amount and interest on this Senior Note in the manner, at the respective times,
at the rate and in the coin or currency herein prescribed.
This Senior Note is issuable only in registered form without coupons in
denominations of $1,000 and integral multiples thereof. Series A Senior Notes
may be exchanged for a like aggregate principal amount of Series A Senior Notes
of other authorized denominations at the Corporate Trust Office in Boston,
Massachusetts, in the manner and subject to the limitations
5
<PAGE> 6
provided in the Indenture, but without the payment of any service charge except
for any tax or other governmental charge imposed in connection therewith.
Upon due presentment for registration of transfer of this Senior Note at
the Corporate Trust Office in Boston, Massachusetts, a new Senior Note or
Senior Notes of the same series of authorized denominations in an equal
aggregate principal amount will be issued to the transferee in exchange
therefor, subject to the limitations provided in the Indenture, without charge
except for any tax or other governmental charge imposed in connection
therewith.
The Issuer, the Trustee, and any authorized agent of the Issuer or the
Trustee may deem and treat the Person in whose name this Senior Note is
registered as the absolute owner of this Senior Note (whether or not this
Senior Note shall be overdue and notwithstanding any notation of ownership or
other writing hereon) for the purpose of receiving payment of, or on account
of, the principal hereof and Make-Whole Amount, if any, and subject to the
provisions on the face hereof, interest hereon, and for all other purposes, and
neither the Issuer nor the Trustee nor any authorized agent of the Issuer or
the Trustee shall be affected by any notice to the contrary.
The Indenture, the Note Purchase Agreement and this Senior Note shall be
deemed to be a contract under the laws of the State of New York, and for all
purposes shall be construed in accordance with the laws of such state, except
as may otherwise be required by mandatory provisions of law.
Terms used herein that are defined in the Indenture or the Note Purchase
Agreement shall have the respective meanings assigned thereto in the Indenture
or the Note Purchase Agreement, unless otherwise defined herein.
6
<PAGE> 1
EXHIBIT 4.9
SENIOR NOTE
THE SALE, TRANSFER, ASSIGNMENT, PLEDGE OR HYPOTHECATION OF THIS SENIOR NOTE HAS
NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED. THIS SENIOR
NOTE MAY NOT BE SOLD, TRANSFERRED, ASSIGNED, PLEDGED OR HYPOTHECATED UNLESS
SUCH TRANSACTION IS DULY REGISTERED UNDER THE ACT OR UNLESS SUCH TRANSACTION IS
EXEMPT FROM THE REGISTRATION PROVISIONS OF THE SECURITIES ACT. ALSO, THIS
SENIOR NOTE MAY NOT BE SOLD, TRANSFERRED, ASSIGNED, PLEDGED OR HYPOTHECATED
UNLESS SUCH TRANSACTION IS DULY REGISTERED OR IS EXEMPT FROM SUCH REGISTRATION
UNDER APPLICABLE STATE SECURITIES LAWS.
NO. 2 PRINCIPAL AMOUNT
CUSIP NO. 26876#AB8 50,000,000.00
EOP OPERATING LIMITED PARTNERSHIP
7.36% Senior Note due 2005 (the "Senior Note")
EOP Operating Limited Partnership, a Delaware limited partnership (the
"Issuer," which term includes any successor under the indenture hereinafter
referred to), for value received, hereby promises to pay to Teachers Insurance
and Annuity Association of America or registered assigns, the principal sum of
Fifty Million Dollars on September 1, 2005 (the "Maturity Date"), and to pay
interest thereon (a) from September 3, 1997 (or from the most recent Interest
Payment Date to which interest has been paid or duly provided for),
semiannually on March 1 and September 1, of each year (each, an "Interest
Payment Date"), commencing on March 1, 1998, and on the Maturity Date, at the
rate of 7.36% per annum, and (b) to the extent permitted by law on any overdue
payment (including any overdue prepayment) of principal, any overdue payment of
interest and any overdue payment of any Make-Whole Amount (as defined in the
note purchase agreement hereinafter referred to) payable as aforesaid (or, at
the option of the registered holder hereof, on demand), at a rate per annum
from time to time equal to the Default Rate (as defined in the note purchase
agreement hereinafter referred to), in each case, until payment of said
principal sum has been made or fully provided for.
The interest so payable and punctually paid or duly provided for on any
Interest Payment Date and on the Maturity Date will be paid to the holder in
whose name this Senior Note (or one or more predecessor Senior Notes) is
registered at the close of business on the "Record Date" for such payment,
which will be 15 calendar days (regardless of whether such day is a Business
Day (as defined below)) next preceding such Interest Payment Date or the
Maturity Date, as the case may be. Any interest not so punctually paid or duly
provided for
<PAGE> 2
shall forthwith cease to be payable to the registered holder on such Record
Date, and shall be paid to the holder in whose name this Senior Note (or one or
more predecessor Senior Notes) is registered at the close of business on a
subsequent record date for the payment of such defaulted interest (which shall
be not less than five Business Days (as defined below) prior to the date of
the payment of such defaulted interest) established by notice given by mail by
or on behalf of the Issuer to the registered holder of this Senior Note (or one
or more predecessor Senior Notes) not less than 15 days preceding such
subsequent record date. Interest on this Senior Note will be computed on the
basis of a 360-day year comprised of twelve 30-day months.
Except as otherwise agreed to in writing among the initial registered
holder of this Senior Note, the trustee under the indenture hereinafter
referred to and the Issuer, the principal of this Senior Note payable on the
Maturity Date will be paid against presentation and surrender of this Senior
Note at the office or agency of the Issuer maintained for that purpose in The
Borough of Manhattan, The City of New York. The Issuer hereby initially
designates the Corporate Trust Office of the trustee in the Borough of
Manhattan, The City of New York as the office to be maintained by it where
Senior Notes may be presented for payment and the Corporate Trust Office of the
trustee in Boston, Massachusetts as the office to be maintained by it where
Senior Notes may be presented for registration of transfer or exchange and
where notices or demands to or upon the Issuer in respect of the Senior Note or
in the indenture hereinafter referred to may be served.
Interest payable on this Senior Note on any Interest Payment Date and on
the Maturity Date, as the case may be, will be the amount of interest accrued
from and including the immediately preceding Interest Payment Date (or from and
including September 3, 1997 in the case of the initial Interest Payment Date)
to but excluding the applicable Interest Payment Date or the Maturity Date, as
the case may be. If any Interest Payment Date other than the Maturity Date
would otherwise be a day that is not a Business Day (as defined below), such
Interest Payment Date will be postponed to the succeeding Business Day. If the
Maturity Date falls on a day that is not a Business Day, principal and interest
payable on the Maturity Date will be paid on the succeeding Business Day with
the same force and effect as if it were paid on the date such payment was due,
and no interest will accrue on the amount so payable for the period from and
after the Maturity Date. "Business Day" means any day, other than a Saturday
or Sunday or other day on which banking institutions in The City of New York,
New York or Boston, Massachusetts are authorized or required by law, regulation
or executive order to close.
Payments of principal and interest in respect of this Senior Note will be
made by wire transfer of immediately available funds in such coin or currency
of the United States of America as at the time of payment is legal tender for
the payment of public and private debts.
Reference is made to the further provisions of this Senior Note set forth
on the reverse hereof. Such further provisions shall for all purposes have the
same effect as though fully set
2
<PAGE> 3
forth at this place.
This Senior Note shall not be entitled to the benefits of the indenture
hereinafter referred to or be valid or become obligatory for any purpose until
the certificate of authentication hereon shall have been signed by the trustee
under such indenture.
IN WITNESS WHEREOF, the Issuer has caused this instrument to be signed
manually or by facsimile by its duly authorized officers.
Dated: September 3, 1997
EOP OPERATING LIMITED PARTNERSHIP,
as Issuer
By: EQUITY OFFICE PROPERTIES TRUST, its
managing general partner
Attest: /s/ Stanley M. Stevens By: /s/ Timothy H. Callahan
----------------------- ---------------------------------------
Name: Timothy H. Callahan
-------------------------------------
Its: President and Chief Executive Officer
-------------------------------------
TRUSTEE'S CERTIFICATE OF AUTHENTICATION
This is one of the Securities of the series designated herein referred to in
the within-mentioned indenture.
STATE STREET BANK AND TRUST COMPANY
By: /s/ Donald E. Smith
---------------------------------------
Authorized Officer
3
<PAGE> 4
[REVERSE OF SENIOR NOTE]
EOP OPERATING LIMITED PARTNERSHIP
7.36% Senior Notes due 2005
This Senior Note is one of a duly authorized issue of debentures, notes,
bonds, or other evidences of the Issuer (hereinafter called the "Securities")
of the series hereinafter specified, all issued or to be issued under and
pursuant to (i) an Indenture dated as of September 2, 1997 (herein called the
"Indenture"), duly executed and delivered by the Issuer to State Street Bank
and Trust Company, as Trustee (herein called the "Trustee", which term includes
any successor trustee under the Indenture with respect to the series of
Securities of which this Senior Note is a part), (ii) a Note Purchase Agreement
dated September 2, 1997 (herein called the "Note Purchase Agreement"), duly
executed and delivered by the Issuer to the initial holder of this Senior Note,
and (iii) an Officer's Certificate dated the date hereof (the "Officer's
Certificate"), duly executed by authorized officers of the Issuer, pursuant to
Section 301 of the Indenture, to which Note Purchase Agreement, Officer's
Certificate and Indenture and all Indentures supplemental thereto reference is
hereby made for a description of the rights, limitations of rights,
obligations, duties, and immunities thereunder of the Trustee, the Issuer, and
the holders of the series of Securities of which this Senior Note is a part,
and of the terms upon which this Senior Note is, and is to be, authenticated
and delivered. Securities of the Issuer may be issued under the Indenture in
one or more series, which different series may be issued in various aggregate
principal amounts, may mature at different times, may bear interest (if any) at
different rates, may be subject to different redemption provisions (if any),
and may otherwise vary as provided in the Indenture. This Senior Note is one
of a series of Senior Notes issued pursuant to the Indenture and offered
pursuant to the Note Purchase Agreement and designated as the 7.24%-7.44%
Senior Notes due 2004-2007, Tranches A-D, limited in aggregate principal amount
to $180,000,000.
In case an Event of Default with respect to the Senior Notes shall have
occurred and be continuing, the principal hereof and Make-Whole Amount, if any,
may be declared, and upon such declaration shall become, due and payable, in
the manner, with the effect, and subject to the conditions provided in the
Indenture and the Note Purchase Agreement.
The Issuer may redeem the Senior Notes comprising the series of securities
under the Indenture referred to above (the "Series A Senior Notes"), at any
time in whole or from time to time in part, at the election of the Issuer, at a
redemption price equal to the sum of (i) the principal amount of the Series A
Senior Notes being redeemed plus accrued interest thereon to the Redemption
Date and (ii) the Make-Whole Amount, if any, with respect to such Series A
Senior Notes (the "Redemption Price") on the terms specified in the Indenture
and the Note
4
<PAGE> 5
Purchase Agreement. Notice of any optional redemption of any Series A Senior
Notes will be given to holders at their addresses, as shown in the Security
Register, not more than 60 nor less than 30 days prior to the date fixed for
redemption. The notice of redemption will specify, among other items, the
Redemption Price and the principal amount of the Series A Senior Notes held by
such holder to be redeemed.
The Indenture contains provisions permitting the Issuer and the Trustee,
with the consent of the holders of not less than a majority of the aggregate
principal amount of the Securities at the time Outstanding of all series to be
affected (voting as one class), evidenced as provided in the Indenture, to
execute supplemental Indentures adding any provisions to or changing in any
manner or eliminating any of the provisions of the Indenture or of any
supplemental Indenture or modifying in any manner the rights of the holders of
the Securities of such series; provided, however, that no such supplemental
Indenture shall, without the consent of the holder of each Security so
affected, (i) change the final maturity of any Security, or reduce the
principal amount thereof or any premium thereon, or reduce the rate or extend
the time of payment of any interest thereon, or impair or affect the rights of
any holder to institute suit for the payment on any Security, or (ii) reduce
the aforesaid percentage of Securities, the holders of which are required to
consent to any such supplemental Indenture, or (iii) reduce the percentage of
Securities, the Holders of which are required to consent to any waiver of
compliance with certain provisions of the Indenture or any waiver of certain
defaults thereunder. It is also provided in the Indenture that, with respect
to certain defaults or Events of Default regarding the Securities of any
series, the holders of a majority in aggregate principal amount outstanding of
the Securities of such series (or, in the case of certain defaults or Events of
Default, all series of Securities) may on behalf of the holders of all the
Securities of such series (or all of the Securities, as the case may be) waive
any such past default or Event of Default and its consequences, prior to any
declaration accelerating the maturity of such Securities; or, subject to
certain conditions, may rescind a declaration of acceleration and its
consequences with respect to such Securities. Any such consent or waiver by
the holder of this Senior Note (unless revoked as provided in the Indenture)
shall be conclusive and binding upon such holder and upon all future holders
and owners of this Senior Note and any Senior Notes that may be issued in
exchange or substitution herefor, irrespective of whether or not any notation
thereof is made upon this Senior Note or such other Senior Notes.
No reference herein to the Indenture and no provision of this Senior Note
or of the Indenture shall alter or impair the obligation of the Issuer, which
is absolute and unconditional, to pay the principal of and any Make-Whole
Amount and interest on this Senior Note in the manner, at the respective times,
at the rate and in the coin or currency herein prescribed.
This Senior Note is issuable only in registered form without coupons in
denominations of $1,000 and integral multiples thereof. Series A Senior Notes
may be exchanged for a like aggregate principal amount of Series A Senior Notes
of other authorized denominations at the Corporate Trust Office in Boston,
Massachusetts, in the manner and subject to the limitations provided in the
Indenture, but without the payment of any service charge except for any tax or
5
<PAGE> 6
other governmental charge imposed in connection therewith.
Upon due presentment for registration of transfer of this Senior Note at
the Corporate Trust Office in Boston, Massachusetts, a new Senior Note or
Senior Notes of the same series of authorized denominations in an equal
aggregate principal amount will be issued to the transferee in exchange
therefor, subject to the limitations provided in the Indenture, without charge
except for any tax or other governmental charge imposed in connection
therewith.
The Issuer, the Trustee, and any authorized agent of the Issuer or the
Trustee may deem and treat the Person in whose name this Senior Note is
registered as the absolute owner of this Senior Note (whether or not this
Senior Note shall be overdue and notwithstanding any notation of ownership or
other writing hereon) for the purpose of receiving payment of, or on account
of, the principal hereof and Make-Whole Amount, if any, and subject to the
provisions on the face hereof, interest hereon, and for all other purposes, and
neither the Issuer nor the Trustee nor any authorized agent of the Issuer or
the Trustee shall be affected by any notice to the contrary.
The Indenture, the Note Purchase Agreement and this Senior Note shall be
deemed to be a contract under the laws of the State of New York, and for all
purposes shall be construed in accordance with the laws of such state, except
as may otherwise be required by mandatory provisions of law.
Terms used herein that are defined in the Indenture or the Note Purchase
Agreement shall have the respective meanings assigned thereto in the Indenture
or the Note Purchase Agreement, unless otherwise defined herein.
6
<PAGE> 1
EXHIBIT 4.10
SENIOR NOTE
THE SALE, TRANSFER, ASSIGNMENT, PLEDGE OR HYPOTHECATION OF THIS SENIOR
NOTE HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS
AMENDED. THIS SENIOR NOTE MAY NOT BE SOLD, TRANSFERRED, ASSIGNED, PLEDGED OR
HYPOTHECATED UNLESS SUCH TRANSACTION IS DULY REGISTERED UNDER THE ACT OR UNLESS
SUCH TRANSACTION IS EXEMPT FROM THE REGISTRATION PROVISIONS OF THE SECURITIES
ACT. ALSO, THIS SENIOR NOTE MAY NOT BE SOLD, TRANSFERRED, ASSIGNED, PLEDGED OR
HYPOTHECATED UNLESS SUCH TRANSACTION IS DULY REGISTERED OR IS EXEMPT FROM SUCH
REGISTRATION UNDER APPLICABLE STATE SECURITIES LAWS.
NO. 3 PRINCIPAL AMOUNT
CUSIP NO. 26876#AC6 $50,000,000.00
EOP OPERATING LIMITED PARTNERSHIP
7.44% Senior Note due 2006 (the "Senior Note")
EOP Operating Limited Partnership, a Delaware limited partnership (the
"Issuer," which term includes any successor under the indenture hereinafter
referred to), for value received, hereby promises to pay to Teachers Insurance
and Annuity Association of America or registered assigns, the principal sum of
Fifty Million Dollars on September 1, 2006 (the "Maturity Date"), and to pay
interest thereon (a) from September 3, 1997 (or from the most recent Interest
Payment Date to which interest has been paid or duly provided for),
semiannually on March 1 and September 1, of each year (each, an "Interest
Payment Date"), commencing on March 1, 1998, and on the Maturity Date, at the
rate of 7.44% per annum, and (b) to the extent permitted by law on any overdue
payment (including any overdue prepayment) of principal, any overdue payment of
interest and any overdue payment of any Make-Whole Amount (as defined in the
note purchase agreement hereinafter referred to) payable as aforesaid (or, at
the option of the registered holder hereof, on demand), at a rate per annum
from time to time equal to the Default Rate (as defined in the note purchase
agreement hereinafter referred to), in each case, until payment of said
principal sum has been made or fully provided for.
The interest so payable and punctually paid or duly provided for on any
Interest Payment Date and on the Maturity Date will be paid to the holder in
whose name this Senior Note (or one or more predecessor Senior Notes) is
registered at the close of business on the "Record Date" for such payment,
which will be 15 calendar days (regardless of whether such day is a Business
Day (as defined below)) next preceding such Interest Payment Date or the
<PAGE> 2
Maturity Date, as the case may be. Any interest not so punctually paid or duly
provided for shall forthwith cease to be payable to the registered holder on
such Record Date, and shall be paid to the holder in whose name this Senior
Note (or one or more predecessor Senior Notes) is registered at the close of
business on a subsequent record date for the payment of such defaulted interest
(which shall be not less than five Business Days (as defined below) prior to
the date of the payment of such defaulted interest) established by notice
given by mail by or on behalf of the Issuer to the registered holder of this
Senior Note (or one or more predecessor Senior Notes) not less than 15 days
preceding such subsequent record date. Interest on this Senior Note will be
computed on the basis of a 360-day year comprised of twelve 30-day months.
Except as otherwise agreed to in writing among the initial registered
holder of this Senior Note, the trustee under the indenture hereinafter
referred to and the Issuer, the principal of this Senior Note payable on the
Maturity Date will be paid against presentation and surrender of this Senior
Note at the office or agency of the Issuer maintained for that purpose in The
Borough of Manhattan, The City of New York. The Issuer hereby initially
designates the Corporate Trust Office of the trustee in the Borough of
Manhattan, The City of New York as the office to be maintained by it where
Senior Notes may be presented for payment and the Corporate Trust Office of the
trustee in Boston, Massachusetts as the office to be maintained by it where
Senior Notes may be presented for registration of transfer or exchange and
where notices or demands to or upon the Issuer in respect of the Senior Note or
in the indenture hereinafter referred to may be served.
Interest payable on this Senior Note on any Interest Payment Date and on
the Maturity Date, as the case may be, will be the amount of interest accrued
from and including the immediately preceding Interest Payment Date (or from and
including September 3, 1997 in the case of the initial Interest Payment Date)
to but excluding the applicable Interest Payment Date or the Maturity Date, as
the case may be. If any Interest Payment Date other than the Maturity Date
would otherwise be a day that is not a Business Day (as defined below), such
Interest Payment Date will be postponed to the succeeding Business Day. If the
Maturity Date falls on a day that is not a Business Day, principal and interest
payable on the Maturity Date will be paid on the succeeding Business Day with
the same force and effect as if it were paid on the date such payment was due,
and no interest will accrue on the amount so payable for the period from and
after the Maturity Date. "Business Day" means any day, other than a Saturday
or Sunday or other day on which banking institutions in The City of New York,
New York or Boston, Massachusetts are authorized or required by law, regulation
or executive order to close.
Payments of principal and interest in respect of this Senior Note will be
made by wire transfer of immediately available funds in such coin or currency
of the United States of America as at the time of payment is legal tender for
the payment of public and private debts.
2
<PAGE> 3
Reference is made to the further provisions of this Senior Note set forth
on the reverse hereof. Such further provisions shall for all purposes have the
same effect as though fully set forth at this place.
This Senior Note shall not be entitled to the benefits of the indenture
hereinafter referred to or be valid or become obligatory for any purpose until
the certificate of authentication hereon shall have been signed by the trustee
under such indenture.
IN WITNESS WHEREOF, the Issuer has caused this instrument to be signed
manually or by facsimile by its duly authorized officers.
Dated: September 3, 1997
EOP OPERATING LIMITED PARTNERSHIP,
as Issuer
By: EQUITY OFFICE PROPERTIES TRUST, its
managing general partner
Attest: /s/ Stanley M. Stevens By: /s/ Timothy H. Callahan
---------------------- ---------------------------------------
Name: Timothy H. Callahan
-------------------------------------
Its: President and Chief Executive Officer
--------------------------------------
TRUSTEE'S CERTIFICATE OF AUTHENTICATION
This is one of the Securities of the series designated herein referred to in
the within-mentioned indenture.
STATE STREET BANK AND TRUST COMPANY
By: /s/ Donald E. Smith
---------------------------------------
Authorized Officer
3
<PAGE> 4
[REVERSE OF SENIOR NOTE]
EOP OPERATING LIMITED PARTNERSHIP
7.44% Senior Notes due 2006
This Senior Note is one of a duly authorized issue of debentures, notes,
bonds, or other evidences of the Issuer (hereinafter called the "Securities")
of the series hereinafter specified, all issued or to be issued under and
pursuant to (i) an Indenture dated as of September 2, 1997 (herein called the
"Indenture"), duly executed and delivered by the Issuer to State Street Bank
and Trust Company, as Trustee (herein called the "Trustee", which term includes
any successor trustee under the Indenture with respect to the series of
Securities of which this Senior Note is a part), (ii) a Note Purchase Agreement
dated September 2, 1997 (herein called the "Note Purchase Agreement"), duly
executed and delivered by the Issuer to the initial holder of this Senior Note,
and (iii) an Officer's Certificate dated the date hereof (the "Officer's
Certificate"), duly executed by authorized officers of the Issuer, pursuant to
Section 301 of the Indenture, to which Note Purchase Agreement, Officer's
Certificate and Indenture and all Indentures supplemental thereto reference is
hereby made for a description of the rights, limitations of rights,
obligations, duties, and immunities thereunder of the Trustee, the Issuer, and
the holders of the series of Securities of which this Senior Note is a part,
and of the terms upon which this Senior Note is, and is to be, authenticated
and delivered. Securities of the Issuer may be issued under the Indenture in
one or more series, which different series may be issued in various aggregate
principal amounts, may mature at different times, may bear interest (if any) at
different rates, may be subject to different redemption provisions (if any),
and may otherwise vary as provided in the Indenture. This Senior Note is one
of a series of Senior Notes issued pursuant to the Indenture and offered
pursuant to the Note Purchase Agreement and designated as the 7.24%-7.44%
Senior Notes due 2004-2007, Tranches A-D, limited in aggregate principal amount
to $180,000,000.
In case an Event of Default with respect to the Senior Notes shall have
occurred and be continuing, the principal hereof and Make-Whole Amount, if any,
may be declared, and upon such declaration shall become, due and payable, in
the manner, with the effect, and subject to the conditions provided in the
Indenture and the Note Purchase Agreement.
The Issuer may redeem the Senior Notes comprising the series of securities
under the Indenture referred to above (the "Series A Senior Notes"), at any
time in whole or from time to time in part, at the election of the Issuer, at a
redemption price equal to the sum of (i) the principal amount of the Series A
Senior Notes being redeemed plus accrued interest thereon to the Redemption
Date and (ii) the Make-Whole Amount, if any, with respect to such Series A
4
<PAGE> 5
Senior Notes (the "Redemption Price") on the terms specified in the Indenture
and the Note Purchase Agreement. Notice of any optional redemption of any
Series A Senior Notes will be given to holders at their addresses, as shown in
the Security Register, not more than 60 nor less than 30 days prior to the date
fixed for redemption. The notice of redemption will specify, among other
items, the Redemption Price and the principal amount of the Series A Senior
Notes held by such holder to be redeemed.
The Indenture contains provisions permitting the Issuer and the Trustee,
with the consent of the holders of not less than a majority of the aggregate
principal amount of the Securities at the time Outstanding of all series to be
affected (voting as one class), evidenced as provided in the Indenture, to
execute supplemental Indentures adding any provisions to or changing in any
manner or eliminating any of the provisions of the Indenture or of any
supplemental Indenture or modifying in any manner the rights of the holders of
the Securities of such series; provided, however, that no such supplemental
Indenture shall, without the consent of the holder of each Security so
affected, (i) change the final maturity of any Security, or reduce the
principal amount thereof or any premium thereon, or reduce the rate or extend
the time of payment of any interest thereon, or impair or affect the rights of
any holder to institute suit for the payment on any Security, or (ii) reduce
the aforesaid percentage of Securities, the holders of which are required to
consent to any such supplemental Indenture, or (iii) reduce the percentage of
Securities, the Holders of which are required to consent to any waiver of
compliance with certain provisions of the Indenture or any waiver of certain
defaults thereunder. It is also provided in the Indenture that, with respect
to certain defaults or Events of Default regarding the Securities of any
series, the holders of a majority in aggregate principal amount outstanding of
the Securities of such series (or, in the case of certain defaults or Events of
Default, all series of Securities) may on behalf of the holders of all the
Securities of such series (or all of the Securities, as the case may be) waive
any such past default or Event of Default and its consequences, prior to any
declaration accelerating the maturity of such Securities; or, subject to
certain conditions, may rescind a declaration of acceleration and its
consequences with respect to such Securities. Any such consent or waiver by
the holder of this Senior Note (unless revoked as provided in the Indenture)
shall be conclusive and binding upon such holder and upon all future holders
and owners of this Senior Note and any Senior Notes that may be issued in
exchange or substitution herefor, irrespective of whether or not any notation
thereof is made upon this Senior Note or such other Senior Notes.
No reference herein to the Indenture and no provision of this Senior Note
or of the Indenture shall alter or impair the obligation of the Issuer, which
is absolute and unconditional, to pay the principal of and any Make-Whole
Amount and interest on this Senior Note in the manner, at the respective times,
at the rate and in the coin or currency herein prescribed.
This Senior Note is issuable only in registered form without coupons in
denominations of $1,000 and integral multiples thereof. Series A Senior Notes
may be exchanged for a like aggregate principal amount of Series A Senior Notes
of other authorized denominations at the Corporate Trust Office in Boston,
Massachusetts, in the manner and subject to the limitations
5
<PAGE> 6
provided in the Indenture, but without the payment of any service charge except
for any tax or other governmental charge imposed in connection therewith.
Upon due presentment for registration of transfer of this Senior Note at
the Corporate Trust Office in Boston, Massachusetts, a new Senior Note or
Senior Notes of the same series of authorized denominations in an equal
aggregate principal amount will be issued to the transferee in exchange
therefor, subject to the limitations provided in the Indenture, without charge
except for any tax or other governmental charge imposed in connection
therewith.
The Issuer, the Trustee, and any authorized agent of the Issuer or the
Trustee may deem and treat the Person in whose name this Senior Note is
registered as the absolute owner of this Senior Note (whether or not this
Senior Note shall be overdue and notwithstanding any notation of ownership or
other writing hereon) for the purpose of receiving payment of, or on account
of, the principal hereof and Make-Whole Amount, if any, and subject to the
provisions on the face hereof, interest hereon, and for all other purposes, and
neither the Issuer nor the Trustee nor any authorized agent of the Issuer or
the Trustee shall be affected by any notice to the contrary.
The Indenture, the Note Purchase Agreement and this Senior Note shall be
deemed to be a contract under the laws of the State of New York, and for all
purposes shall be construed in accordance with the laws of such state, except
as may otherwise be required by mandatory provisions of law.
Terms used herein that are defined in the Indenture or the Note Purchase
Agreement shall have the respective meanings assigned thereto in the Indenture
or the Note Purchase Agreement, unless otherwise defined herein.
6
<PAGE> 1
EXHIBIT 4.11
SENIOR NOTE
THE SALE, TRANSFER, ASSIGNMENT, PLEDGE OR HYPOTHECATION OF THIS SENIOR NOTE HAS
NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED. THIS SENIOR
NOTE MAY NOT BE SOLD, TRANSFERRED, ASSIGNED, PLEDGED OR HYPOTHECATED UNLESS
SUCH TRANSACTION IS DULY REGISTERED UNDER THE ACT OR UNLESS SUCH TRANSACTION IS
EXEMPT FROM THE REGISTRATION PROVISIONS OF THE SECURITIES ACT. ALSO, THIS
SENIOR NOTE MAY NOT BE SOLD, TRANSFERRED, ASSIGNED, PLEDGED OR HYPOTHECATED
UNLESS SUCH TRANSACTION IS DULY REGISTERED OR IS EXEMPT FROM SUCH REGISTRATION
UNDER APPLICABLE STATE SECURITIES LAWS.
NO. 4 PRINCIPAL AMOUNT
CUSIP NO. 26876#AD4 $50,000,000.00
EOP OPERATING LIMITED PARTNERSHIP
7.41% Senior Note due 2007 (the "Senior Note")
EOP Operating Limited Partnership, a Delaware limited partnership (the
"Issuer," which term includes any successor under the indenture hereinafter
referred to), for value received, hereby promises to pay to Teachers Insurance
and Annuity Association of America or registered assigns, the principal sum of
Fifty Million Dollars on September 1, 2007 (the "Maturity Date"), and to pay
interest thereon (a) from September 3, 1997 (or from the most recent Interest
Payment Date to which interest has been paid or duly provided for),
semiannually on March 1 and September 1, of each year (each, an "Interest
Payment Date"), commencing on March 1, 1998, and on the Maturity Date, at the
rate of 7.41% per annum, and (b) to the extent permitted by law on any overdue
payment (including any overdue prepayment) of principal, any overdue payment of
interest and any overdue payment of any Make-Whole Amount (as defined in the
note purchase agreement hereinafter referred to) payable as aforesaid (or, at
the option of the registered holder hereof, on demand), at a rate per annum
from time to time equal to the Default Rate (as defined in the note purchase
agreement hereinafter referred to), in each case, until payment of said
principal sum has been made or fully provided for.
The interest so payable and punctually paid or duly provided for on any
Interest Payment Date and on the Maturity Date will be paid to the holder in
whose name this Senior Note (or one or more predecessor Senior Notes) is
registered at the close of business on the "Record Date" for such payment,
which will be 15 calendar days (regardless of whether such day is a Business
Day (as defined below)) next preceding such Interest Payment Date or the
Maturity Date, as the case may be. Any interest not so punctually paid or duly
provided for
<PAGE> 2
shall forthwith cease to be payable to the registered holder on such Record
Date, and shall be paid to the holder in whose name this Senior Note (or one or
more predecessor Senior Notes) is registered at the close of business on a
subsequent record date for the payment of such defaulted interest (which shall
be not less than five Business Days (as defined below) prior to the date of
the payment of such defaulted interest) established by notice given by mail by
or on behalf of the Issuer to the registered holder of this Senior Note (or one
or more predecessor Senior Notes) not less than 15 days preceding such
subsequent record date. Interest on this Senior Note will be computed on the
basis of a 360-day year comprised of twelve 30-day months.
Except as otherwise agreed to in writing among the initial registered
holder of this Senior Note, the trustee under the indenture hereinafter
referred to and the Issuer, the principal of this Senior Note payable on the
Maturity Date will be paid against presentation and surrender of this Senior
Note at the office or agency of the Issuer maintained for that purpose in The
Borough of Manhattan, The City of New York. The Issuer hereby initially
designates the Corporate Trust Office of the trustee in the Borough of
Manhattan, The City of New York as the office to be maintained by it where
Senior Notes may be presented for payment and the Corporate Trust Office of the
trustee in Boston, Massachusetts as the office to be maintained by it where
Senior Notes may be presented for registration of transfer or exchange and
where notices or demands to or upon the Issuer in respect of the Senior Note or
in the indenture hereinafter referred to may be served.
Interest payable on this Senior Note on any Interest Payment Date and on
the Maturity Date, as the case may be, will be the amount of interest accrued
from and including the immediately preceding Interest Payment Date (or from and
including September 3, 1997 in the case of the initial Interest Payment Date)
to but excluding the applicable Interest Payment Date or the Maturity Date, as
the case may be. If any Interest Payment Date other than the Maturity Date
would otherwise be a day that is not a Business Day (as defined below), such
Interest Payment Date will be postponed to the succeeding Business Day. If the
Maturity Date falls on a day that is not a Business Day, principal and interest
payable on the Maturity Date will be paid on the succeeding Business Day with
the same force and effect as if it were paid on the date such payment was due,
and no interest will accrue on the amount so payable for the period from and
after the Maturity Date. "Business Day" means any day, other than a Saturday
or Sunday or other day on which banking institutions in The City of New York,
New York or Boston, Massachusetts are authorized or required by law, regulation
or executive order to close.
Payments of principal and interest in respect of this Senior Note will be
made by wire transfer of immediately available funds in such coin or currency
of the United States of America as at the time of payment is legal tender for
the payment of public and private debts.
2
<PAGE> 3
Reference is made to the further provisions of this Senior Note set
forth on the reverse hereof. Such further provisions shall for all purposes
have the same effect as though fully set forth at this place.
This Senior Note shall not be entitled to the benefits of the indenture
hereinafter referred to or be valid or become obligatory for any purpose until
the certificate of authentication hereon shall have been signed by the trustee
under such indenture.
IN WITNESS WHEREOF, the Issuer has caused this instrument to be signed
manually or by facsimile by its duly authorized officers.
Dated: September 3, 1997
EOP OPERATING LIMITED PARTNERSHIP,
as Issuer
By: EQUITY OFFICE PROPERTIES TRUST, its
managing general partner
Attest: /s/ Stanley M. Stevens By: /s/ Timothy H. Callahan
----------------------- ---------------------------------------
Name: Timothy H. Callahan
-------------------------------------
Its: President and Chief Executive Officer
--------------------------------------
TRUSTEE'S CERTIFICATE OF AUTHENTICATION
This is one of the Securities of the series designated herein referred to in
the within-mentioned indenture.
STATE STREET BANK AND TRUST COMPANY
By: /s/ Donald E. Smith
---------------------------------------
Authorized Officer
3
<PAGE> 4
[REVERSE OF SENIOR NOTE]
EOP OPERATING LIMITED PARTNERSHIP
7.41% Senior Notes due 2007
This Senior Note is one of a duly authorized issue of debentures, notes,
bonds, or other evidences of the Issuer (hereinafter called the "Securities")
of the series hereinafter specified, all issued or to be issued under and
pursuant to (i) an Indenture dated as of September 2, 1997 (herein called the
"Indenture"), duly executed and delivered by the Issuer to State Street Bank
and Trust Company, as Trustee (herein called the "Trustee", which term includes
any successor trustee under the Indenture with respect to the series of
Securities of which this Senior Note is a part), (ii) a Note Purchase Agreement
dated September 2, 1997 (herein called the "Note Purchase Agreement"), duly
executed and delivered by the Issuer to the initial holder of this Senior Note,
and (iii) an Officer's Certificate dated the date hereof (the "Officer's
Certificate"), duly executed by authorized officers of the Issuer, pursuant to
Section 301 of the Indenture, to which Note Purchase Agreement, Officer's
Certificate and Indenture and all Indentures supplemental thereto reference is
hereby made for a description of the rights, limitations of rights,
obligations, duties, and immunities thereunder of the Trustee, the Issuer, and
the holders of the series of Securities of which this Senior Note is a part,
and of the terms upon which this Senior Note is, and is to be, authenticated
and delivered. Securities of the Issuer may be issued under the Indenture in
one or more series, which different series may be issued in various aggregate
principal amounts, may mature at different times, may bear interest (if any) at
different rates, may be subject to different redemption provisions (if any),
and may otherwise vary as provided in the Indenture. This Senior Note is one
of a series of Senior Notes issued pursuant to the Indenture and offered
pursuant to the Note Purchase Agreement and designated as the 7.24%-7.44%
Senior Notes due 2004-2007, Tranches A-D, limited in aggregate principal amount
to $180,000,000.
In case an Event of Default with respect to the Senior Notes shall have
occurred and be continuing, the principal hereof and Make-Whole Amount, if any,
may be declared, and upon such declaration shall become, due and payable, in
the manner, with the effect, and subject to the conditions provided in the
Indenture and the Note Purchase Agreement.
The Issuer may redeem the Senior Notes comprising the series of securities
under the Indenture referred to above (the "Series A Senior Notes"), at any
time in whole or from time to time in part, at the election of the Issuer, at a
redemption price equal to the sum of (i) the principal amount of the Series A
Senior Notes being redeemed plus accrued interest thereon to the Redemption
Date and (ii) the Make-Whole Amount, if any, with respect to such Series A
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<PAGE> 5
Senior Notes (the "Redemption Price") on the terms specified in the Indenture
and the Note Purchase Agreement. Notice of any optional redemption of any
Series A Senior Notes will be given to holders at their addresses, as shown in
the Security Register, not more than 60 nor less than 30 days prior to the date
fixed for redemption. The notice of redemption will specify, among other
items, the Redemption Price and the principal amount of the Series A Senior
Notes held by such holder to be redeemed.
The Indenture contains provisions permitting the Issuer and the Trustee,
with the consent of the holders of not less than a majority of the aggregate
principal amount of the Securities at the time Outstanding of all series to be
affected (voting as one class), evidenced as provided in the Indenture, to
execute supplemental Indentures adding any provisions to or changing in any
manner or eliminating any of the provisions of the Indenture or of any
supplemental Indenture or modifying in any manner the rights of the holders of
the Securities of such series; provided, however, that no such supplemental
Indenture shall, without the consent of the holder of each Security so
affected, (i) change the final maturity of any Security, or reduce the
principal amount thereof or any premium thereon, or reduce the rate or extend
the time of payment of any interest thereon, or impair or affect the rights of
any holder to institute suit for the payment on any Security, or (ii) reduce
the aforesaid percentage of Securities, the holders of which are required to
consent to any such supplemental Indenture, or (iii) reduce the percentage of
Securities, the Holders of which are required to consent to any waiver of
compliance with certain provisions of the Indenture or any waiver of certain
defaults thereunder. It is also provided in the Indenture that, with respect
to certain defaults or Events of Default regarding the Securities of any
series, the holders of a majority in aggregate principal amount outstanding of
the Securities of such series (or, in the case of certain defaults or Events of
Default, all series of Securities) may on behalf of the holders of all the
Securities of such series (or all of the Securities, as the case may be) waive
any such past default or Event of Default and its consequences, prior to any
declaration accelerating the maturity of such Securities; or, subject to
certain conditions, may rescind a declaration of acceleration and its
consequences with respect to such Securities. Any such consent or waiver by
the holder of this Senior Note (unless revoked as provided in the Indenture)
shall be conclusive and binding upon such holder and upon all future holders
and owners of this Senior Note and any Senior Notes that may be issued in
exchange or substitution herefor, irrespective of whether or not any notation
thereof is made upon this Senior Note or such other Senior Notes.
No reference herein to the Indenture and no provision of this Senior Note
or of the Indenture shall alter or impair the obligation of the Issuer, which
is absolute and unconditional, to pay the principal of and any Make-Whole
Amount and interest on this Senior Note in the manner, at the respective times,
at the rate and in the coin or currency herein prescribed.
This Senior Note is issuable only in registered form without coupons in
denominations of $1,000 and integral multiples thereof. Series A Senior Notes
may be exchanged for a like aggregate principal amount of Series A Senior Notes
of other authorized denominations at the Corporate Trust Office in Boston,
Massachusetts, in the manner and subject to the limitations
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<PAGE> 6
provided in the Indenture, but without the payment of any service charge except
for any tax or other governmental charge imposed in connection therewith.
Upon due presentment for registration of transfer of this Senior Note at
the Corporate Trust Office in Boston, Massachusetts, a new Senior Note or
Senior Notes of the same series of authorized denominations in an equal
aggregate principal amount will be issued to the transferee in exchange
therefor, subject to the limitations provided in the Indenture, without charge
except for any tax or other governmental charge imposed in connection
therewith.
The Issuer, the Trustee, and any authorized agent of the Issuer or the
Trustee may deem and treat the Person in whose name this Senior Note is
registered as the absolute owner of this Senior Note (whether or not this
Senior Note shall be overdue and notwithstanding any notation of ownership or
other writing hereon) for the purpose of receiving payment of, or on account
of, the principal hereof and Make-Whole Amount, if any, and subject to the
provisions on the face hereof, interest hereon, and for all other purposes, and
neither the Issuer nor the Trustee nor any authorized agent of the Issuer or
the Trustee shall be affected by any notice to the contrary.
The Indenture, the Note Purchase Agreement and this Senior Note shall be
deemed to be a contract under the laws of the State of New York, and for all
purposes shall be construed in accordance with the laws of such state, except
as may otherwise be required by mandatory provisions of law.
Terms used herein that are defined in the Indenture or the Note Purchase
Agreement shall have the respective meanings assigned thereto in the Indenture
or the Note Purchase Agreement, unless otherwise defined herein.
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<PAGE> 1
Exhibit 4.12
REGISTRATION RIGHTS AGREEMENT
THIS REGISTRATION RIGHTS AGREEMENT (the "AGREEMENT") is made
and entered into as of February 12, 1998 between EOP OPERATING LIMITED
PARTNERSHIP, a Delaware limited partnership (the "COMPANY"), and the Initial
Purchasers (as hereinafter defined).
This Agreement is made pursuant to (i) the Purchase Agreement
dated February 12, 1998 (the "NOTES PURCHASE AGREEMENT"), between the Company,
as issuer of the 6.375% Notes due 2003 (the "2003 Notes"), the 6.625% Notes due
2005 (the "2005 Notes"), the 6.750% Notes due 2008 (the "2008 Notes") and the
7.250% Notes due 2018 (the "2018 Notes," and together with the 2003 Notes, the
2005 Notes and the 2008 Notes, the "Callable Securities"), and the Initial
Purchasers, which provides for, among other things, the sale by the Company to
the Initial Purchasers of the aggregate principal amount of Callable Securities
specified therein and (ii) the Purchase Agreement dated February 12, 1998 (the
"MOPPRS PURCHASE AGREEMENT," and together with the Notes Purchase Agreement, the
"PURCHASE AGREEMENTS"), between the Company, as issuer of the 6.376% Mandatory
Par Put Remarketed Securities due February 15, 2012 (the "MOPPRS," and together
with the Callable Securities, the "Notes"), and Merrill Lynch, Pierce, Fenner &
Smith Incorporated, as sole Initial Purchaser, which provides for, among other
things, the sale by the Company to the Initial Purchaser of the aggregate
principal amount of the MOPPRS specified therein. In order to induce the Initial
Purchasers to enter into the Purchase Agreements, the Company has agreed to
provide to the Initial Purchasers and Merrill Lynch and their direct and
indirect transferees the registration rights set forth in this Agreement. The
execution and delivery of this Agreement is a condition to the closings under
the Purchase Agreements.
In consideration of the foregoing, the parties hereto agree as
follows:
<PAGE> 2
1. DEFINITIONS. As used in this Agreement, the following
capitalized defined terms shall have the following meanings:
"ADVICE" shall have the meaning set forth in the last paragraph of
Section 3 hereof.
"AFFILIATE" has the same meaning as given to that term in Rule 405
under the Securities Act or any successor rule thereunder.
"APPLICABLE PERIOD" shall have the meaning set forth in Section 3(u)
hereof.
"BUSINESS DAY" means any day other than a Saturday, a Sunday, or a day
on which banking institutions in New York, New York or Boston, Massachusetts are
authorized or required by law or executive order to remain closed.
"CALLABLE SECURITIES" shall have the meaning set forth in the preamble
to this Agreement.
"CLOSING TIME" shall mean the Closing Time as defined in the Purchase
Agreements.
"COMPANY" shall have the meaning set forth in the preamble to this
Agreement and also includes the Company's successors and permitted assigns.
"DEPOSITARY" shall mean The Depository Trust Company, or any other
depositary appointed by the Company; PROVIDED, HOWEVER, that such depositary
must have an address in the Borough of Manhattan, in The City of New York.
"EFFECTIVENESS PERIOD" shall have the meaning set forth in
Section 2(b) hereof.
"EXCHANGE ACT" shall mean the Securities Exchange Act of 1934, as
amended from time to time.
"EXCHANGE OFFER" shall mean the offer by the Company to the Holders to
exchange all of the Registrable Notes for a like
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<PAGE> 3
amount of Exchange Notes of the same series pursuant to Section 2(a) hereof.
"EXCHANGE OFFER REGISTRATION" shall mean a registration under the
Securities Act effected pursuant to Section 2(a) hereof.
"EXCHANGE OFFER REGISTRATION STATEMENT" shall mean an exchange offer
registration statement on Form S-4 (or, if applicable, on another appropriate
form), and all amendments and supplements to such registration statement, in
each case including the Prospectus contained therein, all exhibits thereto and
all documents incorporated by reference therein.
"EXCHANGE PERIOD" shall have the meaning set forth in Section 2(a)
hereof.
"EXCHANGE NOTES" shall mean the 6.375% Notes due 2003, the 6.625% Notes
due 2005, the 6.750% Notes due 2008 and the 7.250% Notes due 2018 containing
terms identical to the Notes (except that they will not contain terms with
respect to the transfer restrictions under the Securities Act (the "Exchange
Notes") (other than requiring minimum transfers thereof to be in blocks of
$100,000 aggregate principal amount) and will not provide for any Liquidated
Damages thereon).
"HOLDER" shall mean any Initial Purchaser, for so long as it owns any
Registrable Notes, and each of its respective successors, assigns and direct and
indirect transferees who become registered owners of Registrable Notes under the
Indenture.
"INDENTURE" shall mean the Indenture relating to the Notes and the
Exchange Notes, dated as of September 2, 1997, as amended or supplemented to the
date hereof, between the Company, as issuer, and State Street Bank and Trust
Company, as trustee, as the same may be further amended from or supplemented
time to time in accordance with the terms thereof.
"INITIAL PURCHASERS" shall mean: (1) in the case of 2003 Notes, the
2005 Notes and the 2018 Notes, Merrill Lynch, Pierce, Fenner & Smith
Incorporated ("Merrill Lynch"), Lehman Brothers Inc. ("Lehman"), J.P. Morgan
Securities Inc. ("J.P. Morgan"), Salomon Brothers Inc. ("Salomon") and UBS
Securities LLC, (ii) in
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<PAGE> 4
the case of the 2008 Notes, Merrill Lynch, Lehman, J.P. Morgan, Salomon and
BancAmerica Robertson Stephens and (iii) in the case of the MOPPRS, Merrill
Lynch.
"INSPECTORS" shall have the meaning set forth in Section 3(o) hereof.
"ISSUE DATE" shall mean February 18, 1998, the date of delivery of the
Notes from the Company to the Initial Purchasers.
"LIQUIDATED DAMAGES" shall have the meaning set forth in Section 2(e)
hereof.
"MAJORITY HOLDERS" shall mean the Holders of a majority of the
aggregate principal amount of outstanding Notes and Exchange Notes of the same
series.
"MOPPRS" shall have the meaning set forth in the preamble to this
Agreement.
"NOTES" shall have the meaning set forth in the preamble to this
Agreement.
"PARTICIPATING BROKER-DEALER" shall have the meaning set forth in
Section 3(u) hereof.
"PERSON" shall mean an individual, partnership, corporation, trust or
unincorporated organization, limited liability corporation, or a government or
agency or political subdivision thereof.
"PROSPECTUS" shall mean the prospectus included in a Registration
Statement, including any preliminary prospectus, and any such prospectus as
amended or supplemented by any prospectus supplement, including a prospectus
supplement with respect to the terms of the offering of any portion of the
Registrable Notes covered by a Shelf Registration Statement, and by all other
amendments and supplements to a prospectus, including post-effective amendments,
and in each case including all documents incorporated by reference therein.
"PURCHASE AGREEMENTS" shall have the meaning set forth in the preamble
to this Agreement.
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<PAGE> 5
"RECORDS" shall have the meaning set forth in Section 3(o) hereof.
"REGISTRABLE NOTES" shall mean the Notes; PROVIDED, HOWEVER, that Notes
shall cease to be Registrable Notes when the earlier of the following occurs:
(i) a Registration Statement with respect to such Notes for the exchange or
resale thereof shall have been declared effective under the Securities Act and
such Notes shall have been disposed of pursuant to such Registration Statement,
(ii) such Notes shall have been sold to the public pursuant to Rule 144(k) (or
any similar provision then in force, but not Rule 144A) under the Securities Act
or are eligible to be sold without restriction as contemplated by Rule 144(k),
(iii) such Notes shall have ceased to be outstanding or (iv) no Shelf
Registration Event has occurred and the Exchange Offer has concluded in
accordance with the provisions hereof.
"REGISTRATION EXPENSES" shall mean any and all expenses incident to
performance of or compliance by the Company with this Agreement, including
without limitation: (i) all SEC or National Association of Securities Dealers,
Inc. (the "NASD") registration and filing fees, including, if applicable, the
fees and expenses of any "qualified independent underwriter" (and its counsel)
that is required to be retained by any Holder of Registrable Notes in accordance
with the rules and regulations of the NASD, (ii) all fees and expenses incurred
in connection with compliance with state securities or blue sky laws (including
reasonable fees and disbursements of one counsel for all underwriters or Holders
as a group in connection with blue sky qualification of any of the Exchange
Notes or Registrable Notes) and compliance with the rules of the NASD, (iii) all
expenses of any Persons in preparing or assisting in preparing, word processing,
printing and distributing any Registration Statement, any Prospectus and any
amendments or supplements thereto, and in preparing or assisting in preparing,
printing and distributing any underwriting agreements, securities sales
agreements and other documents relating to the performance of and compliance
with this Agreement, (iv) all rating agency fees, (v) the fees and disbursements
of counsel for the Company and of the independent certified public accountants
of the Company, including the expenses of any "cold comfort" letters required by
or incident to the performance of and compliance with this Agreement, (vi) the
reasonable fees and expenses of the Trustee and its counsel and any exchange
agent or custodi-
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<PAGE> 6
an, and (vii) the reasonable fees and expenses of any special experts retained
by the Company in connection with any Registration Statement.
"REGISTRATION STATEMENT" shall mean any registration statement of the
Company which covers any of the Exchange Notes or Registrable Notes pursuant to
the provisions of this Agreement, and all amendments and supplements to any such
Registration Statement, including post-effective amendments, in each case
including the Prospectus contained therein, all exhibits thereto and all
documents incorporated by reference therein.
"RULE 144(k) PERIOD" shall mean the period of two years (or such
shorter period as may hereafter be referred to in Rule 144(k) under the
Securities Act (or similar successor rule)) commencing on the Issue Date.
"SEC" shall mean the Securities and Exchange Commission.
"SECURITIES ACT" shall mean the Securities Act of 1933, as amended from
time to time.
"SHELF REGISTRATION" shall mean a registration effected pursuant to
Section 2(b) hereof.
"SHELF REGISTRATION EVENT" shall have the meaning set forth in Section
2(b) hereof.
"SHELF REGISTRATION EVENT DATE" shall have the meaning set forth in
Section 2(b) hereof.
"SHELF REGISTRATION STATEMENT" shall mean a "shelf" registration
statement of the Company pursuant to the provisions of Section 2(b) hereof which
covers all of the Registrable Notes on an appropriate form under Rule 415 under
the Securities Act, or any similar rule that may be adopted by the SEC, and all
amendments and supplements to such registration statement, including
post-effective amendments, in each case including the Prospectus contained
therein, all exhibits thereto and all documents incorporated by reference
therein.
"TIA" shall have the meaning set forth in Section 3(l) hereof.
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<PAGE> 7
"TRUSTEE" shall mean the trustee under the Indenture.
2. REGISTRATION UNDER THE SECURITIES ACT.
a. EXCHANGE OFFER. Except as set forth in Section 2(b) below,
the Company shall, for the benefit of the Holders, at the Company's cost, use
its reasonable best efforts to (i) cause to be filed with the SEC within 60
calendar days after the Issue Date an Exchange Offer Registration Statement on
an appropriate form under the Securities Act relating to the Exchange Offer,
(ii) cause such Exchange Offer Registration Statement to be declared effective
under the Securities Act by the SEC not later than the date which is 135
calendar days after the Issue Date, (iii) keep such Exchange Offer Registration
Statement effective for not less than 30 calendar days (or longer if required by
applicable law) after the date notice of the Exchange Offer is mailed to the
Holders and (iv) cause the Exchange Offer to be consummated within 180 calendar
days after the Issue Date. Promptly after the effectiveness of the Exchange
Offer Registration Statement, the Company shall commence the Exchange Offer, it
being the objective of such Exchange Offer to enable each Holder eligible and
electing to exchange Registrable Notes for a like principal amount of Exchange
Notes of the same series (provided that such Holder (i) is not an Affiliate of
the Company, (ii) is not a broker-dealer tendering Registrable Notes acquired
directly from the Company, (iii) acquires the Exchange Notes in the ordinary
course of such Holder's business and (iv) has no arrangements or understandings
with any Person to participate in the Exchange Offer for the purpose of
distributing the Exchange Notes) to transfer such Exchange Notes from and after
their receipt without any limitations or restrictions under the Securities Act
and under state securities or blue sky laws (other than requiring minimum
transfers in blocks having an aggregate principal amount, as the case may be, of
$100,000).
In connection with the Exchange Offer, the Company shall:
i. mail to each Holder a copy of the Prospectus forming part of the
Exchange Offer Registration Statement, together with an appropriate letter of
transmittal and related documents;
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<PAGE> 8
ii. keep the Exchange Offer open for acceptance for a period of
not less than 30 days after the date notice thereof is mailed to the Holders (or
longer if required by applicable law) (such period referred to herein as the
"EXCHANGE PERIOD");
iii. utilize the services of the Depositary for the Exchange Offer
with respect to Notes represented by a global certificate;
iv. permit Holders to withdraw tendered Notes at any time prior to
the close of business, New York City time, on the last Business Day of the
Exchange Period, by sending to the institution specified in the notice to
Holders, a telegram, telex, facsimile transmission or letter setting forth the
name of such Holder, the series and amount of Notes delivered for exchange, and
a statement that such Holder is withdrawing his election to have such Notes
exchanged;
v. notify each Holder that any Note not tendered by such Holder
in the Exchange Offer will remain outstanding and continue to accrue interest
but will not retain any rights under this Agreement (except in the case of the
Initial Purchasers and Participating Broker-Dealers as provided herein); and
vi. otherwise comply in all respects with all applicable laws
relating to the Exchange Offer.
As soon as practicable after the close of the Exchange Offer,
the Company shall:
(i) accept for exchange all Notes or portions thereof tendered and
not validly withdrawn pursuant to the Exchange Offer;
(ii) deliver, or cause to be delivered, to the Trustee for
cancellation all Notes or portions thereof so accepted for exchange by the
Company; and
(iii) issue, and cause the Trustee under the Indenture to promptly
authenticate and deliver to each Holder, Exchange Notes of the same series equal
in principal amount to the principal amount of the Notes as are surrendered by
such Holder.
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<PAGE> 9
Interest on each Exchange Note issued pursuant to the Exchange
Offer will accrue from the last date on which interest was paid on the Note
surrendered in exchange therefor or, if no interest has been paid on such Note,
from the Issue Date. To the extent not prohibited by any law or applicable
interpretation of the staff of the SEC, the Company shall use reasonable best
efforts to complete the Exchange Offer as provided above, and shall comply with
the applicable requirements of the Securities Act, the Exchange Act and other
applicable laws in connection with the Exchange Offer. The Exchange Offer shall
not be subject to any conditions other than the conditions referred to in
Section 2(b)(i) and (ii) below and those conditions that are customary in
similar exchange offers. Each Holder of Registrable Notes who wishes to exchange
such Registrable Notes for Exchange Notes in the Exchange Offer will be required
to make certain customary representations in connection therewith, including, in
the case of any Holder of Notes, representations that (i) it is not an Affiliate
of the Company, (ii) it is not a broker-dealer tendering Registrable Notes
acquired directly from the Company, (iii) the Exchange Notes to be received by
it are being acquired in the ordinary course of its business and (iv) at the
time of the Exchange Offer, it has no arrangements or understandings with any
Person to participate in the distribution (within the meaning of the Securities
Act) of the Exchange Notes. The Company shall inform the Initial Purchasers,
after consultation with the Trustee, of the names and addresses of the Holders
to whom the Exchange Offer is made, and the Initial Purchasers shall have the
right to contact such Holders in order to facilitate the tender of Registrable
Notes in the Exchange Offer.
Upon consummation of the Exchange Offer in accordance with
this Section 2(a), the provisions of this Agreement shall continue to apply,
MUTATIS MUTANDIS, solely with respect to Exchange Notes held by Participating
Broker-Dealers, and the Company shall have no further obligation to register the
Registrable Notes held by any Holder pursuant to Section 2(b) of this Agreement.
(b) SHELF REGISTRATION. In the event that (i) the Company
reasonably determines, after conferring with counsel (which may be in-house
counsel), that the Exchange Offer Registration provided in Section 2(a) above is
not available under applicable law and regulations and currently prevailing
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<PAGE> 10
interpretations of the staff of the SEC, (ii) the Exchange Offer is not
consummated within 180 days after the Issue Date or (iii) upon the request of
any Initial Purchaser with respect to any Registrable Notes held by it, if such
Initial Purchaser is not permitted, in the reasonable opinion of Brown & Wood
LLP, pursuant to applicable law or applicable interpretations of the staff of
the SEC, to participate in the Exchange Offer and thereby receive securities
that are freely tradeable without restriction under the Securities Act and
applicable blue sky or state securities laws (any of the events specified in
(i), (ii) or (iii) being a "SHELF REGISTRATION EVENT", and the date of
occurrence thereof, the "SHELF REGISTRATION EVENT DATE"), then in addition to or
in lieu of conducting the Exchange Offer contemplated by Section 2(a), as the
case may be, the Company shall promptly notify the Holders thereof and shall, at
its cost, use its reasonable best efforts to cause to be filed as promptly as
practicable after such Shelf Registration Event Date, as the case may be, and,
in any event, within 60 days after such Shelf Registration Event Date (provided
that in no event shall such filing date be required to be earlier than 75 days
after the Issue Date), a Shelf Registration Statement providing for the sale by
the Holders of all of the Registrable Notes, and shall use its reasonable best
efforts to have such Shelf Registration Statement declared effective by the SEC
as soon as practicable. No Holder of Registrable Notes shall be entitled to
include any of its Registrable Notes in any Shelf Registration pursuant to this
Agreement unless and until such Holder agrees in writing to be bound by all of
the provisions of this Agreement applicable to such Holder and furnishes to the
Company in writing, within 15 days after receipt of a request therefor, such
information as the Company may, after conferring with counsel with regard to
information relating to Holders that would be required by the SEC to be included
in such Shelf Registration Statement or Prospectus included therein, reasonably
request for inclusion in any Shelf Registration Statement or Prospectus included
therein. Each Holder as to which any Shelf Registration is being effected agrees
to furnish to the Company all information with respect to such Holder necessary
to make the information previously furnished to the Company by such Holder not
materially misleading.
The Company agrees to use its reasonable best efforts to keep
the Shelf Registration Statement continuously effective and the Prospectus
usable for resales for the earlier of: (a) the
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<PAGE> 11
Rule 144(k) Period or (b) such time as all of the Securities covered by the
Shelf Registration Statement have been sold pursuant to the Shelf Registration
Statement or cease to be Registrable Notes (the "EFFECTIVENESS PERIOD"). The
Company shall not permit any securities other than (i) the Company's issued and
outstanding securities currently possessing incidental registration rights and
(ii) Registrable Notes, to be included in the Shelf Registration. The Company
will, in the event a Shelf Registration Statement is declared effective, provide
to each Holder a reasonable number of copies of the Prospectus which is a part
of the Shelf Registration Statement, notify each such Holder when the Shelf
Registration has become effective and take any other action required to permit
unrestricted resales of the Registrable Notes. The Company further agrees, if
necessary, to supplement or amend the Shelf Registration Statement, if 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 by any other rules and regulations thereunder for shelf registrations,
and the Company agrees to furnish to the Holders of Registrable Notes copies of
any such supplement or amendment promptly after its being used or filed with the
SEC.
(c) EXPENSES. The Company shall pay all Registration Expenses
in connection with any Registration Statement filed pursuant to Section 2(a)
and/or 2(b) hereof and will reimburse the Initial Purchasers for the reasonable
fees and disbursements of Brown & Wood LLP incurred in connection with the
Exchange Offer. Except as provided herein, each Holder shall pay all expenses of
its counsel, underwriting discounts and commissions and transfer taxes, if any,
relating to the sale or disposition of such Holder's Registrable Notes pursuant
to the Shelf Registration Statement.
(d) EFFECTIVE REGISTRATION STATEMENT. An Exchange Offer
Registration Statement pursuant to Section 2(a) hereof or a Shelf Registration
Statement pursuant to Section 2(b) hereof will not be deemed to have become
effective unless it has been declared effective by the SEC; PROVIDED, HOWEVER,
that if, after it has been declared effective, the offering of Registrable Notes
pursuant to such Exchange Offer Registration Statement or Shelf Registration
Statement is interfered with by any stop order, injunction or other order or
requirement of the SEC or any other
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<PAGE> 12
governmental agency or court, such Exchange Offer Registration Statement or
Shelf Registration Statement will be deemed not to have been effective during
the period of such interference, until the offering of Registrable Notes
pursuant to such Registration Statement may legally resume. The Company will be
deemed not to have used its reasonable best efforts to cause the Exchange Offer
Registration Statement or the Shelf Registration Statement, as the case may be,
to become, or to remain, effective during the requisite period if voluntarily
takes any action that would result in any such Registration Statement not being
declared effective or that would result in the Holders of Registrable Notes
covered thereby not being able to exchange or offer and sell such Registrable
Notes during that period, unless such action is required by applicable law.
(e) LIQUIDATED DAMAGES. In the event that:
(i) the Exchange Offer Registration Statement is
not filed with the SEC on or prior to the 60th day after the Issue Date, then,
commencing on the 61st day after the Issue Date, liquidated damages ("Liquidated
Damages") shall accrue on the principal amount of the Notes at a rate of 0.50%
per annum;
(ii) the Exchange Offer Registration Statement is not
declared effective by the SEC on or prior to the 135th day after the Issue Date,
then, commencing on the 136th day after the Issue Date, Liquidated Damages shall
accrue on the principal amount of the Notes at a rate of 0.50% per annum;
(iii) the Shelf Registration Statement, if required
pursuant to Section 2(b), is not filed with the SEC on or prior to the date
required pursuant to such section, then, commencing on the first day after the
applicable required filing date, Liquidated Damages shall accrue on the
principal amount of the Notes at the rate of 0.50% per annum;
(iv) (A) the Company has not exchanged Exchange Notes
for all Notes, validly tendered in accordance with the terms of the Exchange
Offer on or prior to the 180th day after the Issue Date or (B) if the Shelf
Registration Statement is required to be filed pursuant to Section 2(b) but is
not declared effective by the SEC on or prior to the 180th day after the Issue
Date, then, commencing on the 181st day after the Issue Date,
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<PAGE> 13
Liquidated Damages shall accrue on the principal amount of the Notes at the rate
of 0.50% per annum; or
(v) the Shelf Registration Statement has been
declared effective and such Shelf Registration Statement ceases to be effective
or the Prospectus usable for resales (I) at any time prior to the expiration of
the Effectiveness Period or (II) if related to corporate developments, public
filings or similar events or to correct a material misstatement or omission in
the Prospectus, for more than 60 days (whether or not consecutive) in any
twelve-month period, then Liquidated Damages shall accrue on the principal
amount of Notes at a rate of 0.50% per annum commencing on the day (in the case
of (I) above), or the 61st day after (in the case of (II) above), such Shelf
Registration Statement ceases to be effective or the Prospectus usable for
resales;
PROVIDED, HOWEVER, that the Liquidated Damages rate on the Notes may not exceed
in the aggregate 0.50% per annum; PROVIDED, FURTHER, HOWEVER, that (1) upon the
filing of the Exchange Offer Registration Statement (in the case of clause (i)
above), (2) upon the effectiveness of the Exchange Offer Registration Statement
(in the case of clause (ii) above), (3) upon the filing of the Shelf
Registration Statement (in the case of clause (iii) above), (4) upon the
exchange of Exchange Notes for all Notes validly tendered (in the case of clause
(iv)(A) above) or upon the effectiveness of the Shelf Registration Statement (in
the case of clause (iv) (B) above) or (5) the earlier of (y) such time as the
Shelf Registration Statement which had ceased to remain effective or the
Prospectus usable for resales again becomes effective and usable for resales and
(z) the expiration of the Effectiveness Period (in the case of clause (v)
above), Liquidated Damages on the principal amount of the Notes as a result of
such clause (or the relevant subclause thereof) shall cease to accrue;
PROVIDED, FURTHER, HOWEVER, that if the Exchange Offer Registration Statement is
not declared effective by the SEC on or prior to the 135th day after the Issue
Date and the Company shall request Holders to provide the information required
by the SEC for inclusion in the Shelf Registration Statement, the Notes owned by
Holders who do not provide such information when required pursuant to Section
2(b) will not be entitled to any Liquidated Damages following the 180th after
the Issue Date.
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<PAGE> 14
Any amounts of Liquidated Damages due pursuant to Section 2(e)(i),
(ii), (iii), (iv) or (v) above will be payable in cash on the next succeeding
February 15 or August 15, as the case may be, to Holders on the relevant record
dates for the payment of interest pursuant to the Indenture.
(f) SPECIFIC ENFORCEMENT. Without limiting the remedies
available to the Holders, the Company acknowledges that any failure by the
Company to comply with its obligations under Section 2(a) and Section 2(b)
hereof may result in material irreparable injury to the Holders for which there
is no adequate remedy at law, that it would not be possible to measure damages
for such injuries precisely and that, in the event of any such failure, any
Holder may obtain such relief as may be required to specifically enforce the
Company's obligations under Section 2(a) and Section 2(b) hereof.
3. REGISTRATION PROCEDURES. In connection with the obligations of the
Company with respect to the Registration Statements pursuant to Sections 2(a)
and 2(b) hereof, the Company shall use its reasonable best efforts to:
(a) prepare and file with the SEC a Registration Statement or Registration
Statements as prescribed by Sections 2(a) and 2(b) hereof within the relevant
time period specified in Section 2 hereof on the appropriate form under the
Securities Act, which form shall (i) be selected by the Company, (ii) in the
case of a Shelf Registration, be available for the sale of the Registrable Notes
by the selling Holders thereof and, in the case of an Exchange Offer, be
available for the exchange of Registrable Notes, and (iii) comply as to form in
all material respects with the requirements of the applicable form and include
all financial statements required by the SEC to be filed therewith; the Company
shall use its reasonable best efforts to cause such Registration Statement to
become effective and remain effective (and, in the case of a Shelf Registration
Statement, the Prospectus usable for resales) in accordance with Section 2
hereof; PROVIDED, HOWEVER, that if (1) such filing is pursuant to Section 2(b),
or (2) a Prospectus contained in an Exchange Offer Registration Statement filed
pursuant to Section 2(a) is required to be delivered under the Securities Act by
any Participating Broker-Dealer who seeks
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<PAGE> 15
to sell Exchange Notes, before filing any Registration Statement or Prospectus
or any amendments or supplements thereto, the Company shall furnish to and
afford the Holders of the Registrable Notes and each such Participating
Broker-Dealer, as the case may be, covered by such Registration Statement, their
counsel and the managing underwriters, if any, a reasonable opportunity to
review copies of all such documents (including copies of any documents to be
incorporated by reference therein and all exhibits thereto) proposed to be
filed; and the Company shall not file any Registration Statement or Prospectus
or any amendments or supplements thereto in respect of which the Holders must be
afforded an opportunity to review prior to the filing of such document if the
Majority Holders or such Participating Broker-Dealer, as the case may be, their
counsel or the managing underwriters, if any, shall reasonably object in a
timely manner;
(b) prepare and file with the SEC such amendments and
post-effective amendments to each Registration Statement as may be
necessary to keep such Registration Statement effective for the
Effectiveness Period or the Applicable Period, as the case may be, and
cause each Prospectus to be supplemented, if so determined by the
Company or requested by the SEC, by any required prospectus supplement
and as so supplemented to be filed pursuant to Rule 424 (or any similar
provision then in force) under the Securities Act, and comply with the
provisions of the Securities Act, the Exchange Act and the rules and
regulations promulgated thereunder applicable to it with respect to the
disposition of all securities covered by each Registration Statement
during the Effectiveness Period or the Applicable Period, as the case
may be, in accordance with the intended method or methods of
distribution by the selling Holders thereof described in this Agreement
(including sales by any Participating Broker-Dealer);
(c) in the case of a Shelf Registration, (i) notify each
Holder of Registrable Notes included in the Shelf Registration
Statement, at least three Business Days prior to filing, that a Shelf
Registration Statement with respect to the Registrable Notes is being
filed and advising such Holder that the distribution of Registrable
Notes will be made in accordance with the method selected by the
Majority Holders, (ii) furnish to each Holder of Registrable Notes
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<PAGE> 16
included in the Shelf Registration Statement and to each underwriter of
an underwritten offering of Registrable Notes, if any, without charge,
as many copies of each Prospectus, including each preliminary
prospectus, and any amendment or supplement thereto, and such other
documents as such Holder or underwriter may reasonably request, in
order to facilitate the public sale or other disposition of the
Registrable Notes and (iii) consent to the use of the Prospectus or any
amendment or supplement thereto by each of the selling Holders of
Registrable Notes included in the Shelf Registration Statement in
connection with the offering and sale of the Registrable Notes covered
by the Prospectus or any amendment or supplement thereto;
(d) in the case of a Shelf Registration, register or qualify
the Registrable Notes under all applicable state securities or "blue
sky" laws of such jurisdictions by the time the applicable Registration
Statement is declared effective by the SEC as any Holder of Registrable
Notes covered by a Registration Statement and each underwriter of an
underwritten offering of Registrable Notes shall reasonably request in
writing in advance of such date of effectiveness, and do any and all
other acts and things which may be reasonably necessary or advisable to
enable such Holder and underwriter to consummate the disposition in
each such jurisdiction of such Registrable Notes owned by such Holder;
PROVIDED, HOWEVER, that the Company shall not be required to (i)
qualify as a foreign corporation or as a dealer in securities in any
jurisdiction where it would not otherwise be required to qualify but
for this Section 3(d), (ii) file any general consent to service of
process in any jurisdiction where it would not otherwise be subject to
such service of process or (iii) subject itself to taxation in any such
jurisdiction if it is not then so subject;
(e) (1) in the case of a Shelf Registration or (2) if
Participating Broker-Dealers from whom the Company has received prior
written notice that they will be utilizing the Prospectus contained in
the Exchange Offer Registration Statement as provided in Section 3(u)
hereof, are seeking to sell Exchange Notes and are required to deliver
Prospectuses, promptly notify each Holder of Registrable Notes, or such
Participating Broker-Dealers, as the case may be,
16
<PAGE> 17
their counsel and the managing underwriters, if any, and promptly
confirm such notice in writing (i) when a Registration Statement has
become effective and when any post-effective amendments thereto become
effective, (ii) of any request by the SEC or any state securities
authority for amendments and supplements to a Registration Statement or
Prospectus or for additional information after the Registration
Statement has become effective, (iii) of the issuance by the SEC or any
state securities authority of any stop order suspending the
effectiveness of a Registration Statement or the qualification of the
Registrable Notes or the Exchange Notes to be offered or sold by any
Participating Broker-Dealer in any jurisdiction described in Section
3(d) hereof or the initiation of any proceedings for that purpose, (iv)
in the case of a Shelf Registration, if, between the effective date of
a Registration Statement and the closing of any sale of Registrable
Notes covered thereby, the representations and warranties of the
Company contained in any purchase agreement, securities sales agreement
or other similar agreement cease to be true and correct in all material
respects, (v) of the happening of any event or the failure of any event
to occur or the discovery of any facts, during the Effectiveness
Period, which makes any statement made in such Registration Statement
or the related Prospectus untrue in any material respect or which
causes such Registration Statement or Prospectus to omit to state a
material fact necessary in order to make the statements therein, in the
light of the circumstances under which they were made, not misleading,
as well as any other corporate developments, public filings with the
SEC or similar events causing such Registration Statement not to be
effective or the Prospectus not useable for resales and (vi) of the
reasonable determination of the Company that a post-effective amendment
to the Registration Statement would be appropriate;
(f) obtain the withdrawal of any order suspending the
effectiveness of a Registration Statement at the earliest
possible moment;
(g) in the case of a Shelf Registration, furnish to each
Holder of Registrable Notes included within the coverage of such Shelf
Registration Statement, without
17
<PAGE> 18
charge, at least one conformed copy of each Registration Statement
relating to such Shelf Registration and any post-effective amendment
thereto (without documents incorporated therein by reference or
exhibits thereto, unless requested);
(h) in the case of a Shelf Registration, cooperate with the
selling Holders of Registrable Notes to facilitate the timely
preparation and delivery of certificates representing Registrable Notes
to be sold and not bearing any restrictive legends (other than with
respect to restrictions requiring minimum transfers in blocks having an
aggregate principal amount of $100,000) and in such denominations
(consistent with the provisions of the Indenture) and registered in
such names as the selling Holders or the underwriters may reasonably
request at least two Business Days prior to the closing of any sale of
Registrable Notes pursuant to such Shelf Registration Statement;
(i) in the case of a Shelf Registration or an Exchange Offer
Registration, promptly after the occurrence of any event specified in
Section 3(e)(ii), 3(e)(iii), 3(e)(v) (subject to a 60-day grace period
within any twelve-month period) or 3(e)(vi) hereof, prepare a
supplement or post-effective amendment to such Registration Statement
or the related Prospectus or any document incorporated therein by
reference or file any other required document so that, as thereafter
delivered to the purchasers of the Registrable Notes, such Prospectus
will not include any untrue statement of a material fact or omit to
state a material fact necessary to make the statements therein, in the
light of the circumstances under which they were made, not misleading;
and the Company shall notify each Holder to suspend use of the
Prospectus as promptly as practicable after the occurrence of such an
event, and each Holder hereby agrees to suspend use of the Prospectus
until the Company has amended or supplemented the Prospectus to correct
such misstatement or omission;
(j) in the case of a Shelf Registration, a reasonable time
prior to the filing of any document which is to be incorporated by
reference into a Registration Statement or a Prospectus after the
initial filing of a Registration State-
18
<PAGE> 19
ment, provide a reasonable number of copies of such document to the
Holders and make such of the representatives of the Company as shall be
reasonably requested by the Holders of Registrable Notes or the Initial
Purchasers on behalf of such Holders available for discussion of such
document;
(k) obtain a CUSIP number for each series of Notes, as the
case may be, not later than the effective date of a Registration
Statement, and provide the Trustee with certificates for the Exchange
Notes or the Registrable Notes, as the case may be, in a form eligible
for deposit with the Depositary;
(l) cause the Indenture to be qualified under the Trust
Indenture Act of 1939, as amended (the "TIA"), in connection with the
registration of the Exchange Notes or Registrable Notes, as the case
may be, and effect such changes to such documents as may be required
for them to be so qualified in accordance with the terms of the TIA and
execute, and cause the Trustee to execute, all documents as may be
required to effect such changes, and all other forms and documents
required to be filed with the SEC to enable such documents to be so
qualified in a timely manner;
(m) in the case of a Shelf Registration, enter into such
agreements (including underwriting agreements) as are customary in
underwritten offerings and take all such other appropriate actions in
connection therewith as are reasonably requested by the Holders of at
least 25% in aggregate principal amount of the Registrable Notes in
order to expedite or facilitate the registration or the disposition of
the Registrable Notes;
(n) in the case of a Shelf Registration, whether or not an
underwriting agreement is entered into and whether or not the
registration is an underwritten registration, if requested by (x) an
Initial Purchaser, in the case where such Initial Purchaser holds Notes
acquired by it as part of its initial placement and (y) Holders of at
least 25% in aggregate principal amount of the Registrable Notes
covered thereby: (i) make such representations and warranties to
Holders of such Registrable Notes and the underwriters (if any), with
respect to the business of the Company and the
19
<PAGE> 20
subsidiaries of the Company as then conducted and the Registration
Statement, Prospectus and documents, if any, incorporated or deemed to
be incorporated by reference therein, in each case, as are customarily
made by issuers to underwriters in underwritten offerings, and confirm
the same if and when requested; (ii) obtain opinions of counsel to the
Company and updates thereof (which may be in the form of a reliance
letter) in form and substance reasonably satisfactory to the managing
underwriters (if any) and the Holders of a majority in amount of the
Registrable Notes being sold, addressed to each selling Holder and the
underwriters (if any) covering the matters customarily covered in
opinions requested in underwritten offerings and such other matters as
may be reasonably requested by such underwriters (it being agreed that
the matters to be covered by such opinion may be subject to customary
qualifications and exceptions); (iii) obtain "cold comfort" letters and
updates thereof in form and substance reasonably satisfactory to the
managing underwriters from the independent certified public accountants
of the Company (and, if necessary, any other independent certified
public accountants of any business acquired by the Company for which
financial statements and financial data are, or are required to be,
included in the Registration Statement), addressed to each of the
underwriters, such letters to be in customary form and covering matters
of the type customarily covered in "cold comfort" letters in connection
with underwritten offerings and such other matters as reasonably
requested by such underwriters in accordance with Statement on Auditing
Standards No. 72; and (iv) if an underwriting agreement is entered
into, the same shall contain indemnification provisions and procedures
no less favorable than those set forth in Section 4 hereof (or such
other provisions and procedures acceptable to Holders of a majority in
aggregate principal amount of Registrable Notes covered by such
Registration Statement and the managing underwriters) customary for
such agreements with respect to all parties to be indemnified pursuant
to said Section (including, without limitation, such underwriters and
selling Holders); and in the case of an underwritten registration, the
above requirements shall be satisfied at each closing under the related
underwriting agreement or as and to the extent required thereunder;
20
<PAGE> 21
(o) if (1) a Shelf Registration is filed pursuant to Section
2(b) or (2) a Prospectus contained in an Exchange Offer Registration
Statement filed pursuant to Section 2(a) is required to be delivered
under the Securities Act by any Participating Broker-Dealer who seeks
to sell Exchange Notes during the Applicable Period, make reasonably
available for inspection by any selling Holder or Registrable Notes or
Participating Broker-Dealer, as applicable, who certifies to the
Company that it has a current intention to sell Registrable Notes
pursuant to the Shelf Registration, any underwriter participating in
any such disposition of Registrable Notes, if any, and any attorney,
accountant or other agent retained by any such selling Holder,
Participating Broker-Dealer, as the case may be, or underwriter
(collectively, the "INSPECTORS"), at the offices where normally kept,
during the Company's normal business hours, all financial and other
records, pertinent organizational and operational documents and
properties of the Company and its subsidiaries (collectively, the
"RECORDS") as shall be reasonably necessary to enable them to exercise
any applicable due diligence responsibilities, and cause the officers,
trustees and employees of Equity Office Properties Trust and the
Company and its subsidiaries to supply all relevant information in each
case reasonably requested by any such Inspector in connection with such
Registration Statement; records and information which the Company
determines, in good faith, to be confidential and any Records and
information which it notifies the Inspectors are confidential shall not
be disclosed to any Inspector except where (i) the disclosure of such
Records or information is necessary to avoid or correct a material
misstatement or omission in such Registration Statement, (ii) the
release of such Records or information is ordered pursuant to a
subpoena or other order from a court of competent jurisdiction or is
necessary in connection with any action, suit or proceeding or (iii)
such Records or information previously has been made generally
available to the public; each selling Holder of such Registrable Notes
and each such Participating Broker-Dealer will be required to agree in
writing that Records and information obtained by it as a result of such
inspections shall be deemed confidential and shall not be used by it as
the basis for any market transactions in the securities of the Company
unless and until such is made
21
<PAGE> 22
generally available to the public through no fault of an Inspector or a
selling Holder; and each selling Holder of such Registrable Notes and
each such Participating Broker-Dealer will be required to further agree
in writing that it will, upon learning that disclosure of such Records
or information is sought in a court of competent jurisdiction, or in
connection with any action, suit or proceeding, give notice to the
Company and allow the Company at its expense to undertake appropriate
action to prevent disclosure of the Records and information deemed
confidential;
(p) comply with all applicable rules and regulations of the
SEC so long as any provision of this Agreement shall be applicable and
make generally available to its security-holders earning statements
satisfying the provisions of Section 11(a) of the Securities Act and
Rule 158 thereunder (or any similar rule promulgated under the
Securities Act) no later than 45 days after the end of any 12-month
period (or 90 days after the end of any 12-month period if such period
is a fiscal year) (i) commencing at the end of any fiscal quarter in
which Registrable Notes are sold to underwriters in a firm commitment
or best efforts underwritten offering and (ii) if not sold to
underwriters in such an offering, commencing on the first day of the
first fiscal quarter of the Company after the effective date of a
Registration Statement, which statements shall cover said 12-month
periods, provided that the obligations under this paragraph (p) shall
be satisfied by the timely filing of quarterly and annual reports on
Forms 10-Q and 10-K under the Exchange Act;
(q) upon consummation of an Exchange Offer, if requested by
the Trustee, obtain an opinion of counsel to the Company addressed to
the Trustee for the benefit of all Holders of Registrable Notes
participating in the Exchange Offer, substantially to the effect that
(i) the Company has duly authorized, executed and delivered the
Exchange Notes, and (ii) each of the Exchange Notes constitutes a
legal, valid and binding obligation of the Company, enforceable against
the Company, in accordance with its respective terms (in each case,
with customary exceptions);
22
<PAGE> 23
(r) if an Exchange Offer is to be consummated, upon delivery
of the Registrable Notes by Holders to the Company (or to such other
Person as directed by the Company), in exchange for the Exchange Notes,
the Company shall mark, or cause to be marked, on such Registrable
Notes delivered by such Holders that such Registrable Notes are being
cancelled in exchange for the Exchange Notes; it being understood that
in no event shall such Registrable Notes be marked as paid or otherwise
satisfied;
(s) cooperate with each seller of Registrable Notes covered by
any Registration Statement and each underwriter, if any, participating
in the disposition of such Registrable Notes and their respective
counsel in connection with any filings required to be made with the
NASD;
(t) take all other steps necessary to effect the registration
of the Registrable Notes covered by a Registration Statement
contemplated hereby;
(u) (A) in the case of the Exchange Offer Registration
Statement (i) include in the Exchange Offer Registration Statement a
section entitled "Plan of Distribution," which section shall be
reasonably acceptable to the Initial Purchasers or another
representative of the Participating Broker-Dealers, and which shall
contain a summary statement of the positions taken or policies made by
the staff of the SEC with respect to the potential "underwriter" status
of any broker-dealer that holds Registrable Notes acquired for its own
account as a result of market-making activities or other trading
activities (a "PARTICIPATING BROKER-DEALER") and that will be the
beneficial owner (as defined in Rule 13d-3 under the Exchange Act) of
Exchange Notes to be received by such broker-dealer in the Exchange
Offer, whether such positions or policies have been publicly
disseminated by the staff of the SEC or such positions or policies, in
the reasonable judgment of the Initial Purchasers or such other
representative, represent the prevailing views of the staff of the SEC,
including a statement that any such broker-dealer who receives Exchange
Notes for Registrable Notes pursuant to the Exchange Offer may be
deemed a statutory underwriter and must deliver a prospectus meeting
the requirements of the Securities Act in connection
23
<PAGE> 24
with any resale of such Exchange Notes, (ii) furnish to each
Participating Broker-Dealer who has delivered to the Company the notice
referred to in Section 3(e), without charge, as many copies of each
Prospectus included in the Exchange Offer Registration Statement,
including any preliminary Prospectus, and any amendment or supplement
thereto, as such Participating Broker-Dealer may reasonably request
(the Company hereby consents to the use of the Prospectus forming part
of the Exchange Offer Registration Statement or any amendment or
supplement thereto by any Person subject to the prospectus delivery
requirements of the Securities Act, including all Participating
Broker-Dealers, in connection with the sale or transfer of the Exchange
Notes covered by the Prospectus or any amendment or supplement
thereto), (iii) use its reasonable best efforts to keep the Exchange
Offer Registration Statement effective and to amend and supplement the
Prospectus contained therein in order to permit such Prospectus to be
lawfully delivered by all Persons subject to the prospectus delivery
requirements of the Securities Act for such period of time as such
Persons must comply with such requirements under the Securities Act and
applicable rules and regulations in order to resell the Exchange Notes;
PROVIDED, HOWEVER, that such period shall not be required to exceed 180
days (or such longer period if extended pursuant to the last sentence
of Section 3 hereof) (the "APPLICABLE PERIOD"), and (iv) include in the
transmittal letter or similar documentation to be executed by an
exchange offeree in order to participate in the Exchange Offer (x) the
following provision:
"If the exchange offeree is a broker-dealer holding
Registrable Notes acquired for its own account as a
result of market-making activities or other trading
activities, it will deliver a prospectus meeting the
requirements of the Securities Act in connection with
any resale of Exchange Notes received in respect of
such Registrable Notes pursuant to the Exchange
Offer";
and (y) a statement to the effect that by a broker-dealer making the
acknowledgment described in clause (x) and by delivering a Prospectus
in connection with the exchange of
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<PAGE> 25
Registrable Notes, the broker-dealer will not be deemed to admit that
it is an underwriter within the meaning of the Securities Act; and
(B) in the case of any Exchange Offer Registration Statement,
the Company agrees to deliver to the Initial Purchasers or to another
representative of the Participating Broker-Dealers, if reasonably
requested by an Initial Purchaser or such other representative of
Participating Broker-Dealers, on behalf of the Participating
Broker-Dealers upon consummation of the Exchange Offer (i) an opinion
of counsel in form and substance reasonably satisfactory to such
Initial Purchaser or such other representative of the Participating
Broker-Dealers, covering the matters customarily covered in opinions
requested in connection with Exchange Offer Registration Statements and
such other matters as may be reasonably requested (it being agreed that
the matters to be covered by such opinion may be subject to customary
qualifications and exceptions), (ii) an officers' certificate
containing certifications substantially similar to those set forth in
Section 5(c) of the Purchase Agreements and such additional
certifications as are customarily delivered in a public offering of
debt securities and (iii) upon the effectiveness of the Exchange Offer
Registration Statement, comfort letter(s), in each case, in customary
form if permitted by Statement on Auditing Standards No. 72.
The Company may require each seller of Registrable Notes as to
which any registration is being effected to furnish to the Company such
information regarding such seller as may be required by the staff of the SEC to
be included in a Registration Statement. The Company may exclude from such
registration the Registrable Notes of any seller who unreasonably fails to
furnish such information within a reasonable time after receiving such request.
The Company shall have no obligation to register under the Securities Act the
Registrable Notes of a seller who so fails to furnish such information.
In the case of a Shelf Registration Statement, or if
Participating Broker-Dealers who have notified the Company that they will be
utilizing the Prospectus contained in the Exchange Offer Registration Statement
as provided in this Section 3(u)
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<PAGE> 26
hereof are seeking to sell Exchange Notes and are required to deliver
Prospectuses, each Holder agrees that, upon receipt of any notice from the
Company of the occurrence of any event specified in Section 3(e)(ii), 3(e)(iii),
3(e)(v) or 3(e)(vi) hereof, such Holder will forthwith discontinue disposition
of Registrable Notes pursuant to a Registration Statement until such Holder's
receipt of the copies of the supplemented or amended Prospectus contemplated by
Section 3(i) hereof or until it is advised in writing (the "ADVICE") by the
Company that the use of the applicable Prospectus may be resumed, and, if so
directed by the Company, such Holder will deliver to the Company (at the
Company's expense) all copies in such Holder's possession, other than permanent
file copies then in such Holder's possession, of the Prospectus covering such
Registrable Notes or Exchange Notes, as the case may be, current at the time of
receipt of such notice. If the Company shall give any such notice to suspend the
disposition of Registrable Notes or Exchange Notes, as the case may be, pursuant
to a Registration Statement, the Company shall use its reasonable best efforts
to file and have declared effective (if an amendment) as soon as practicable
after the resolution of the related matters an amendment or supplement to the
Registration Statement and shall extend the period during which such
Registration Statement is required to be maintained effective and the Prospectus
usable for resales pursuant to this Agreement by the number of days in the
period from and including the date of the giving of such notice to and including
the date when the Company shall have made available to the Holders (x) copies of
the supplemented or amended Prospectus necessary to resume such dispositions or
(y) the Advice.
4. INDEMNIFICATION AND CONTRIBUTION. (a) In connection with any
Registration Statement, the Company shall indemnify and hold harmless the
Initial Purchasers, each Holder, each underwriter who participates in an
offering of the Registrable Notes, each Participating Broker-Dealer, each
Person, if any, who controls any of such parties within the meaning of Section
15 of the Securities Act or Section 20 of the Exchange Act and each of their
respective directors, officers, employees and agents, as follows:
(i) against any and all loss, liability, claim, damage and
expense whatsoever, as incurred, arising out of any
26
<PAGE> 27
untrue statement or alleged untrue statement of a material fact
contained in any Registration Statement (or any amendment or supplement
thereto), covering Registrable Notes or Exchange Notes, as applicable,
or the omission or alleged omission therefrom of a material fact
required to be stated therein, in the light of the circumstances under
which they were made, not misleading;
(ii) against any and all loss, liability, claim, damage and
expense whatsoever, as incurred, to the extent of the aggregate amount
paid in settlement of any litigation, or any investigation or
proceeding by any governmental agency or body, commenced or threatened,
or of any claim whatsoever based upon any such untrue statement or
omission, or any such alleged untrue statement or omission; provided
that (subject to Section 4(d) hereof) any such settlement is effected
with the prior written consent of the Company; and
(iii) against any and all expenses whatsoever, as incurred
(including the reasonable fees and disbursements of counsel chosen by
such Holder, such Participating Broker-Dealer, or any underwriter
(except to the extent otherwise expressly provided in Section 4(c)
hereof)), reasonably incurred in investigating, preparing or defending
against any litigation, or any investigation or proceeding by any
governmental agency or body, commenced or threatened, or any claim
whatsoever based upon any such untrue statement or omission, or any
such alleged untrue statement or omission, to the extent that any such
expense is not paid under subparagraph (i) or (ii) of this Section
4(a);
PROVIDED, HOWEVER, that this indemnity does not apply to any loss, liability,
claim, damage or expense to the extent arising out of an untrue statement or
omission or alleged untrue statement or omission made in reliance upon and in
conformity with written information furnished in writing to the Company by the
Initial Purchasers or such Holder, underwriter or Participating Broker-Dealer
for use in a Registration Statement (or any amendment thereto) or any Prospectus
(or any amendment or supplement thereto).
(b) Each of the Initial Purchasers and each Holder,
underwriter or Participating Broken-Dealer agrees, severally and
27
<PAGE> 28
not jointly, to indemnify and hold harmless the Company, Equity Office
Properties Trust and the trustees and officers of Equity Office Properties
Trust, and each Person, if any, who controls the Company within the meaning of
Section 15 of the Securities Act or Section 20 of the Exchange Act against any
and all loss, liability, claim, damage and expense whatsoever described in the
indemnity contained in Section 4(a) hereof, as incurred, but only with respect
to untrue statements or omissions, or alleged untrue statements or omissions,
made in a Registration Statement (or any amendment thereto) or any Prospectus
(or any amendment or supplement thereto) in reliance upon and in conformity with
written information furnished to the Company by such Holder expressly for use in
such Registration Statement (or any amendment thereto), or any such Prospectus
(or any amendment or supplement thereto); PROVIDED, HOWEVER, that in the case of
a Shelf Registration Statement, no such Holder shall be liable for any claims
hereunder in excess of the amount of net proceeds received by such Holder from
the sale of Registrable Notes pursuant to such Shelf Registration Statement.
(c) Each indemnified party shall give notice as promptly as
reasonably practicable to each indemnifying party of any action commenced
against it in respect of which indemnity may be sought hereunder, but failure to
so notify an indemnifying party shall not relieve such indemnifying party from
any liability which it may have under this Section 4 to the extent that it is
not materially prejudiced by such failure as a result thereof, and in any event
shall not relieve it from liability which it may have otherwise on account of
this indemnity agreement. In the case of parties indemnified pursuant to Section
4(a) or (b) above, counsel to the indemnified parties shall be selected by such
parties. An indemnifying party may participate at its own expense in the defense
of such action; provided, however, that counsel to the indemnifying party shall
not (except with the consent of the indemnified party) also be counsel to the
indemnified party. In no event shall the indemnifying parties be liable for the
fees and expenses of more than one counsel (in addition to local counsel),
separate from their own counsel, for all indemnified parties in connection with
any one action or separate but similar or related actions in the same
jurisdiction arising out of the same general allegations or circumstances. No
indemnifying party shall, without the prior written consent of the indemnified
parties, settle or compromise or consent to the entry
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<PAGE> 29
of any judgment with respect to any litigation, or any investigation or
proceeding by any governmental agency or body, commenced or threatened, or any
claim whatsoever in respect of which indemnification or contribution could be
sought under this Section 4 (whether or not the indemnified parties are actual
or potential parties thereto), unless such settlement, compromise or consent (i)
includes an unconditional written release of each indemnified party from all
liability arising out of such litigation, investigation, proceeding or claim and
(ii) does not include a statement as to or an admission of fault, culpability or
a failure to act by or on behalf of any indemnified party.
(d) If at any time an indemnified party shall have validly
requested an indemnifying party to reimburse the indemnified party for fees and
expenses of counsel, such indemnifying party agrees that it shall be liable for
any settlement of the nature contemplated by Section 4(a)(ii) effected without
its written consent if (i) such settlement is entered into more than 45 days
after receipt by such indemnifying party of the aforesaid request, (ii) such
indemnifying party shall have received notice of the terms of such settlement at
least 30 days prior to such settlement being entered into and (iii) such
indemnifying party shall not have reimbursed such indemnified party in
accordance with such request prior to the date of such settlement.
(e) In order to provide for just and equitable contribution in
circumstances under which any of the indemnity provisions set forth in this
Section 4 is for any reason held to be unenforceable by an indemnified party
although applicable in accordance with its terms, the Company and the Holders
shall contribute to the aggregate losses, liabilities, claims, damages and
expenses of the nature contemplated by such indemnity agreement incurred by the
Company and the Holders, as incurred; PROVIDED, HOWEVER, that no Person guilty
of fraudulent misrepresentation (within the meaning of Section 11(f) of the 1933
Act) shall be entitled to contribution from any Person that was not guilty of
such fraudulent misrepresentation. As between the Company and the Holders, such
parties shall contribute to such aggregate losses, liabilities, claims, damages
and expenses of the nature contemplated by such indemnity agreement in such
proportion as shall be appropriate to reflect the relative fault of the Company,
on the one hand, and the Holders, on the other
29
<PAGE> 30
hand, with respect to the statements or omissions which resulted in such loss,
liability, claim, damage or expense, or action in respect thereof, as well as
any other relevant equitable considerations. The relative fault of the Company,
on the one hand, and of the Holders, on the other hand, shall be determined by
reference to, among other things, whether the untrue or alleged untrue statement
of a material fact or the omission or alleged omission to state a material fact
relates to information supplied by the Company, on the one hand, or by or on
behalf of the Holders, on the other, and the parties' relative intent,
knowledge, access to information and opportunity to correct or prevent such
statement or omission. The Company and the Holders of the Registrable Notes
agree that it would not be just and equitable if contribution pursuant to this
Section 4 were to be determined by pro rata allocation or by any other method of
allocation that does not take into account the relevant equitable
considerations. For purposes of this Section 4, each Affiliate of a Holder, and
each director, officer and employee and Person, if any, who controls a Holder or
such Affiliate within the meaning of Section 15 of the Securities Act or Section
20 of the Exchange Act shall have the same rights to contribution as such
Holder, and each trustee and officer of Equity Office Properties Trust and each
Person, if any, who controls the Company within the meaning of Section 15 of the
Securities Act or Section 20 of the Exchange Act shall have the same rights to
contribution as the Company.
5. PARTICIPATION IN AN UNDERWRITTEN REGISTRATION. No Holder
may participate in an underwritten registration hereunder unless such Holder (a)
agrees to sell such Holder's Registrable Notes on the basis provided in the
underwriting arrangement approved by the Persons entitled hereunder to approve
such arrangements and (b) completes and executes all reasonable questionnaires,
powers of attorney, indemnities, underwriting agreements, lock-up letters and
other documents reasonably required under the terms of such underwriting
arrangements.
6. SELECTION OF UNDERWRITERS. The Holders of Registrable Notes
covered by the Shelf Registration Statement who desire to do so may sell the
Securities covered by such Shelf Registration in an underwritten offering,
subject to the provisions of Section 3(m) hereof. In any such underwritten
offering, the underwriter or underwriters and manager or managers that will
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<PAGE> 31
administer the offering will be selected by the Holders of a majority in
aggregate principal amount, as applicable, of the Registrable Notes included in
such offering; PROVIDED, HOWEVER, that such underwriters and managers must be
reasonably satisfactory to the Company.
7. MISCELLANEOUS.
(a) RULE 144 AND RULE 144A. For so long as the Company is
subject to the reporting requirements of Section 13 or 15 of the Exchange Act
and any Registrable Notes remain outstanding, the Company will file the reports
required to be filed by it under the Securities Act and Section 13(a) or 15(d)
of the Exchange Act and the rules and regulations adopted by the SEC thereunder;
PROVIDED, HOWEVER, that if the Company ceases to be so required to file such
reports, it will, upon the request of any Holder of Registrable Notes (a) make
publicly available such information as is necessary to permit sales of its
securities pursuant to Rule 144 under the Securities Act, (b) deliver such
information to a prospective purchaser as is necessary to permit sales of its
securities pursuant to Rule 144A under the Securities Act, and (c) take such
further action that is reasonable in the circumstances, in each case, to the
extent required from time to time to enable such Holder to sell its Registrable
Notes without registration under the Securities Act within the limitation of the
exemptions provided by (i) Rule 144 under the Securities Act, as such rule may
be amended from time to time, (ii) Rule 144A under the Securities Act, as such
rule may be amended from time to time, or (iii) any similar rules or regulations
hereafter adopted by the SEC. Upon the request of any Holder of Registrable
Notes, the Company will deliver to such Holder a written statement as to whether
it has complied with such requirements.
(b) NO INCONSISTENT AGREEMENTS. The Company has not
entered into, nor will the Company on or after the date of this Agreement enter
into, any agreement which is inconsistent with the rights granted to the Holders
of Registrable Notes in this Agreement or otherwise conflicts with the
provisions hereof. The rights granted to the Holders hereunder do not in any way
conflict with and are not inconsistent with the rights granted to the holders of
the Company's other issued and outstanding securities under any such agreements.
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<PAGE> 32
(c) AMENDMENTS AND WAIVERS. The provisions of this Agreement,
including the provisions of this sentence, may not be amended, modified or
supplemented, and waivers or consents to departures from the provisions hereof
may not be given, unless the Company has obtained the written consent of Holders
of a majority in aggregate principal amount of the outstanding Registrable Notes
affected by such amendment, modification, supplement, waiver or departure;
PROVIDED that no amendment, modification or supplement or waiver or consent to
the departure with respect to the provisions of Section 4 hereof shall be
effective as against any Holder of Registrable Notes unless consented to in
writing by such Holder of Registrable Notes. Notwithstanding the foregoing
sentence, (i) this Agreement may be amended, without the consent of any Holder
of Registrable Notes, by written agreement signed by the Company and the Initial
Purchasers, to cure any ambiguity, correct or supplement any provision of this
Agreement that may be inconsistent with any other provision of this Agreement or
to make any other provisions with respect to matters or questions arising under
this Agreement which shall not be inconsistent with other provisions of this
Agreement, (ii) this Agreement may be amended, modified or supplemented, and
waivers and consents to departures from the provisions hereof may be given, by
written agreement signed by the Company and the Initial Purchasers to the extent
that any such amendment, modification, supplement, waiver or consent is, in
their reasonable judgment, necessary or appropriate to comply with applicable
law (including any interpretation of the Staff of the SEC) or any change therein
and (iii) to the extent any provision of this Agreement relates to an Initial
Purchaser, such provision may be amended, modified or supplemented, and waivers
or consents to departures from such provisions may be given, by written
agreement signed by such Initial Purchaser and the Company.
(d) NOTICES. All notices and other communications provided for
or permitted hereunder shall be made in writing by hand-delivery, registered
first-class mail, telex, telecopier, or any courier guaranteeing overnight
delivery (i) if to a Holder, at the most current address given by such Holder to
the Company by means of a notice given in accordance with the provisions of this
Section 7(d), which address initially is, with respect to each Initial
Purchaser, the address set forth in the Purchase Agreements; and (ii) if to the
Company, initially at the
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<PAGE> 33
Company's address set forth in the Purchase Agreements and thereafter at such
other address, notice of which is given in accordance with the provisions of
this Section 7(d).
All such notices and communications shall be deemed to have
been duly given: at the time delivered by hand, if personally delivered; five
Business Days after being deposited in the mail, postage prepaid, if mailed;
when answered back, if telexed; when receipt is acknowledged, if telecopied; and
on the next Business Day, if timely delivered to an air courier guaranteeing
overnight delivery.
Copies of all such notices, demands, or other communications
shall be concurrently delivered by the Person giving the same to the Trustee, at
the address specified in the Indenture.
(e) SUCCESSORS AND ASSIGNS. This Agreement shall inure to the
benefit of and be binding upon the successors, assigns and transferees of the
Initial Purchasers, including, without limitation and without the need for an
express assignment, subsequent Holders; PROVIDED, HOWEVER, that nothing herein
shall be deemed to permit any assignment, transfer or other disposition of
Registrable Notes in violation of the terms of the Purchase Agreements or the
Indenture. If any transferee of any Holder shall acquire Registrable Notes, in
any manner, whether by operation of law or otherwise, such Registrable Notes
shall be held subject to all of the terms of this Agreement, and by taking and
holding such Registrable Notes, such Person shall be conclusively deemed to have
agreed to be bound by and to perform all of the terms and provisions of this
Agreement and such Person shall be entitled to receive the benefits hereof.
(f) THIRD PARTY BENEFICIARIES. Each Holder and any
Participating Broker-Dealer shall be third party beneficiaries of the agreements
made hereunder between the Initial Purchasers and the Company, and the Initial
Purchasers shall have the right to enforce such agreements directly to the
extent it deems such enforcement necessary or advisable to protect its rights or
the rights of Holders hereunder.
(g) COUNTERPARTS. This Agreement may be executed in any number
of counterparts and by the parties hereto in separate counterparts, each of
which when so executed shall be deemed to
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<PAGE> 34
be an original and all of which taken together shall constitute one and the same
agreement.
(h) HEADINGS. The headings in this Agreement are for
convenience of reference only and shall not limit or otherwise affect the
meaning hereof.
(i) GOVERNING LAW. THIS AGREEMENT SHALL BE DEEMED TO HAVE BEEN
MADE IN THE STATE OF NEW YORK. THE VALIDITY AND INTERPRETATION OF THIS
AGREEMENT, AND THE TERMS AND CONDITIONS SET FORTH HEREIN, SHALL BE GOVERNED BY
AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK WITHOUT
GIVING EFFECT TO ANY PROVISIONS RELATING TO CONFLICTS OF LAWS. EACH OF THE
PARTIES HERETO AGREES TO SUBMIT TO THE EXCLUSIVE JURISDICTION OF THE COURTS OF
THE STATE OF NEW YORK IN ANY SUIT, ACTION OR PROCEEDING ARISING OUT OF OR
RELATING TO THIS AGREEMENT OR ANY OF THE MATTERS CONTEMPLATED HEREBY,
IRREVOCABLY WAIVES ANY DEFENSE OF LACK OF PERSONAL JURISDICTION AND IRREVOCABLY
AGREES THAT ALL CLAIMS IN RESPECT OF ANY SUIT, ACTION OR PROCEEDING MAY BE HEARD
AND DETERMINED IN ANY SUCH COURT. EACH OF THE PARTIES HERETO IRREVOCABLY WAIVES,
TO THE FULLEST EXTENT IT MAY EFFECTIVELY DO SO UNDER APPLICABLE LAW, ANY
OBJECTION WHICH IT MAY NOW OR HEREAFTER HAVE TO THE LAYING OF VENUE OF SUCH
SUIT, ACTION OR PROCEEDING BROUGHT IN ANY SUCH COURT AND ANY CLAIM THAT ANY SUCH
SUIT, ACTION OR PROCEEDING BROUGHT IN ANY SUCH COURT HAS BEEN BROUGHT IN AN
INCONVENIENT FORUM.
(j) SEVERABILITY. In the event that any one or more of the
provisions contained herein, or the application thereof in any circumstance, is
held invalid, illegal or unenforceable, the validity, legality and
enforceability of any such provision in every other respect and of the remaining
provisions contained herein shall not be affected or impaired thereby.
(k) SECURITIES HELD BY THE COMPANY OR ITS AFFILIATES. Whenever
the consent or approval of Holders of a specified percentage of Registrable
Notes is required hereunder, Registrable Notes held by the Company or its
Affiliates shall not be counted in determining whether such consent or approval
was given by the Holders of such required percentage.
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<PAGE> 35
IN WITNESS WHEREOF, the parties have executed this Agreement
as of the date first written above.
EOP OPERATING LIMITED PARTNERSHIP
By: Equity Office Properties Trust,
as Managing General Partner
By: /s/ Stanley M. Stevens
------------------------------------
Name: Stanley M. Stevens
Title: Executive Vice President
and Chief Legal Counsel
Confirmed and accepted as of
the date first above
written:
MERRILL LYNCH & CO.
MERRILL LYNCH, PIERCE, FENNER & SMITH
INCORPORATED
LEHMAN BROTHERS INC.
J.P. MORGAN SECURITIES INC.
SALOMON BROTHERS INC
UBS SECURITIES LLC
BANCAMERICA ROBERTSON STEPHENS
By: MERRILL LYNCH, PIERCE, FENNER & SMITH
INCORPORATED
For itself and as Representative of the
several Initial Purchasers
By: John Campo
---------------------------------------
Authorized Signatory
35
<PAGE> 1
EXHIBIT 4.13
REGISTRATION RIGHTS AGREEMENT
THIS REGISTRATION RIGHTS AGREEMENT (the "AGREEMENT") is made
and entered into as of February 13, 1998 between EQUITY OFFICE PROPERTIES TRUST,
a Maryland real estate investment trust (the "COMPANY") and LEHMAN BROTHERS INC.
(the "INITIAL PURCHASER").
This Agreement is made pursuant to the Purchase Agreement,
dated February 13, 1998 (the "PURCHASE AGREEMENT"), between the Company, as
issuer of the 5.25% Preferred Income Equity Redeemable Shares designated by the
Company as the 5.25% Series B Convertible, Cumulative Preferred Shares of
Beneficial Interest, $.01 par value per share, liquidation preference $50.00 per
share (the "Preferred Securities"), and the Initial Purchaser, which provides
for, among other things, the sale by the Company to the Initial Purchaser of the
aggregate liquidation preference of the Preferred Securities. In order to induce
the Initial Purchaser to enter into the Purchase Agreement, the Company has
agreed to provide to the Initial Purchaser and its direct and indirect
transferees the registration rights set forth in this Agreement.
In consideration of the foregoing, the parties hereto agree as
follows:
1. DEFINITIONS. As used in this Agreement, the
following capitalized defined terms shall have the following meanings:
"ADVICE" shall have the meaning set forth in the last paragraph of
Section 3 hereof.
"AFFILIATE" has the same meaning as given to that term in Rule 405
under the Securities Act or any successor rule thereunder.
"BUSINESS DAY" means any day other than a Saturday, a Sunday, or a day
on which banking institutions in New York, New York or Boston, Massachusetts are
authorized or required by law or executive order to remain closed.
<PAGE> 2
"COMMON SHARES" means the common shares of beneficial interest of the
Company, par value $0.01 per share, initially issuable upon conversion or
redemption of the Preferred Securities.
"COMPANY" shall have the meaning set forth in the preamble to this
Agreement and also includes the Company's successors and permitted assigns.
"CLOSING TIME" shall mean the Closing Time as defined in the Purchase
Agreement.
"EFFECTIVENESS PERIOD" shall have the meaning set forth in Section 2(a)
hereof.
"ELIGIBILITY DATE" shall mean the date of the first anniversary of the
Company's initial public offering of its common stock.
"EXCHANGE ACT" shall mean the Securities Exchange Act of 1934, as
amended from time to time.
"HOLDER" shall mean the Initial Purchaser, for so long as it owns any
Registrable Securities, and each of its respective successors, assigns and
direct and indirect transferees who become registered owners of Registrable
Securities.
"INITIAL PURCHASER" shall have the meaning set forth in the preamble to
this Agreement.
"INSPECTORS" shall have the meaning set forth in Section 3(m) hereof.
"ISSUE DATE" shall mean February 19, 1998, the date of original
issuance of the Preferred Securities.
"LIQUIDATED DAMAGES" shall have the meaning set forth in Section 2(d)
hereof.
"MAJORITY HOLDERS" shall mean the Holders of a majority of the
aggregate liquidation preference of outstanding Preferred Securities.
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<PAGE> 3
"OPERATING PARTNERSHIP" shall mean EOP Operating Limited Partnership, a
Delaware limited partnership.
"PERSON" shall mean an individual, partnership, corporation, trust or
unincorporated organization, limited liability corporation, or a government or
agency or political subdivision thereof.
"PROSPECTUS" shall mean the prospectus included in a Shelf Registration
Statement, including any preliminary prospectus, and any such prospectus as
amended or supplemented by any prospectus supplement, including a prospectus
supplement with respect to the terms of the offering of any portion of the
Registrable Securities covered by a Shelf Registration Statement, and by all
other amendments and supplements to a prospectus, including post-effective
amendments, and, in each case, including all documents incorporated by reference
therein.
"PURCHASE AGREEMENT" shall have the meaning set forth in the preamble
to this Agreement.
"RECORDS" shall have the meaning set forth in Section 3(m) hereof.
"REGISTRABLE SECURITIES" shall mean the Securities; PROVIDED, HOWEVER,
that Securities shall cease to be Registrable Securities when the earlier of the
following occurs (i) a Shelf Registration Statement with respect to such
Securities for the resale thereof shall have been declared effective under the
Securities Act and such Securities shall have been disposed of pursuant to such
Shelf Registration Statement, (ii) such Securities shall have been sold to the
public pursuant to Rule 144(k) (or any similar provision then in force, but not
Rule 144A) under the Securities Act or are eligible to be sold without
restriction as contemplated by Rule 144(k) or (iii) such Securities shall have
ceased to be outstanding.
"REGISTRATION EXPENSES" shall mean any and all expenses incident to
performance of or compliance by the Company with this Agreement, including
without limitation: (i) all SEC or National Association of Securities Dealers,
Inc. (the "NASD") registration and filing fees, including, if applicable, the
fees and expenses of any "qualified independent underwriter" (and its counsel)
that is
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<PAGE> 4
required to be retained by any Holder of Registrable Securities in accordance
with the rules and regulations of the NASD, (ii) all fees and expenses incurred
in connection with compliance with state securities or blue sky laws (including
reasonable fees and disbursements of one counsel for all underwriters or Holders
as a group in connection with blue sky qualification of any of the Registrable
Securities) and compliance with the rules of the NASD, (iii) all expenses of any
Persons in preparing or assisting in preparing, word processing, printing and
distributing any Shelf Registration Statement, any Prospectus and any amendments
or supplements thereto, and in preparing or assisting in preparing, printing and
distributing any underwriting agreements, securities sales agreements and other
documents relating to the performance of and compliance with this Agreement,
(iv) all rating agency fees, (v) the fees and disbursements of counsel for the
Company and of the independent certified public accountants of the Company,
including the expenses of any "cold comfort" letters required by or incident to
the performance of and compliance with this Agreement, and (vi) the reasonable
fees and expenses of any special experts retained by the Company in connection
with the Shelf Registration Statement.
"RULE 144(k) PERIOD" shall mean the period of two years (or such
shorter period as may hereafter be referred to in Rule 144(k) under the
Securities Act (or similar successor rule)) commencing on the Issue Date.
"SEC" shall mean the Securities and Exchange Commission.
"SECURITIES" shall mean the Preferred Securities and the common shares.
"SECURITIES ACT" shall mean the Securities Act of 1933, as amended from
time to time.
"SHELF REGISTRATION" shall mean a registration effected pursuant to
Section 2(a) hereof.
"SHELF REGISTRATION STATEMENT" shall mean a "shelf" registration
statement of the Company pursuant to the provisions of Section 2(a) hereof which
covers all of the Registrable Securities on an appropriate form under Rule 415
under the Securities Act, or any similar rule that may be adopted by the SEC,
and all amendments
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<PAGE> 5
and supplements to such registration statement, including post-effective
amendments, in each case including the Prospectus contained therein, all
exhibits thereto and all documents incorporated by reference therein.
2. REGISTRATION UNDER THE SECURITIES ACT.
(a) SHELF REGISTRATION. The Company shall file or cause
to be filed, on or prior to August 10, 1998, a Shelf Registration Statement
providing for the sale by the Holders of all of the Registrable Securities, and
shall use its reasonable best efforts to have such Shelf Registration Statement
declared effective by the SEC as promptly as practicable after filing thereof,
but in any event within 90 days after the Eligibility Date. No Holder of
Registrable Securities shall be entitled to include any of its Registrable
Securities in any Shelf Registration pursuant to this Agreement unless and until
such Holder agrees in writing to be bound by all of the provisions of this
Agreement applicable to such Holder and furnishes to the Company in writing,
within 15 days after receipt of a request therefor, such information as the
Company may, after conferring with counsel with regard to information relating
to Holders that would be required by the SEC to be included in such Shelf
Registration Statement or Prospectus included therein, reasonably request for
inclusion in any Shelf Registration Statement or Prospectus included therein.
Each Holder as to which any Shelf Registration is being effected agrees to
furnish to the Company all information with respect to such Holder necessary to
make the information previously furnished to the Company by such Holder not
materially misleading.
The Company agrees to use its reasonable best efforts to keep
the Shelf Registration Statement continuously effective and the Prospectus
usable for resales for the Rule 144(k) Period (subject to extension pursuant to
the last paragraph of Section 3 hereof), or for such shorter period which will
terminate when all of the Securities covered by the Shelf Registration Statement
have been sold pursuant to the Shelf Registration Statement or cease to be
Registrable Securities (the "EFFECTIVENESS PERIOD"); provided, however, that for
75 days or less (whether or not consecutive) in any twelve-month period, the
Company shall be permitted to suspend sales of Securities if the Shelf
Registration Statement is no longer effective or the Prospectus usable for
resales due to circumstances relating to pending developments, public filings
with
5
<PAGE> 6
the SEC and similar events, or because the Prospectus contains an untrue
statement of a material fact or omits to state a material fact required to be
stated therein or necessary in order to make statements therein not misleading.
The Company shall not permit any securities other than (i) the Company's issued
and outstanding securities currently possessing incidental registration rights
and (ii) Registrable Securities to be included in the Shelf Registration. The
Company will, in the event a Shelf Registration Statement is declared effective,
provide to each Holder a reasonable number of copies of the Prospectus which is
a part of the Shelf Registration Statement, notify each such Holder when the
Shelf Registration Statement has become effective and take such other actions as
are required to permit unrestricted resales of the Registrable Securities. The
Company further agrees to supplement or 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 by any other rules and regulations thereunder for shelf
registrations, and the Company agrees to furnish to the Holders of Registrable
Securities copies of any such supplement or amendment promptly after its being
used or filed with the SEC.
(b) LISTING. The Company shall use its reasonable best efforts
to cause the Securities to be approved for listing on the New York Stock
Exchange as promptly as practicable, but in any event, within 90 days after the
Eligibility Date.
(c) EXPENSES. The Company, as issuer of the Securities, shall
pay all Registration Expenses in connection with any Shelf Registration
Statement filed pursuant to Section 2(a) hereof and will reimburse the Initial
Purchaser for the reasonable fees and disbursements of Brown & Wood LLP, counsel
for the Initial Purchaser, incurred in connection with the private offering of
the Securities, and either Brown & Wood LLP or any other single counsel
designated in writing by the Majority Holders to act as counsel for the Holders
of the Registrable Securities in connection with a Shelf Registration Statement,
which other counsel shall be reasonably satisfactory to the Company. Except as
provided herein, each Holder shall pay all expenses of its counsel, underwriting
discounts and commissions and transfer taxes, if any, relating to the sale or
disposition of such Holder's Registrable Securities pursuant to the Shelf
Registration Statement.
6
<PAGE> 7
(d) EFFECTIVE SHELF REGISTRATION STATEMENT. A Shelf
Registration Statement will not be deemed to have become effective unless it has
been declared effective by the SEC; PROVIDED, HOWEVER, that if, after it has
been declared effective, the offering of Registrable Securities pursuant to such
Shelf Registration Statement is interfered with by any stop order, injunction or
other order or requirement of the SEC or any other governmental agency or court,
such Shelf Registration Statement will be deemed not to have been effective
during the period of such interference, until the offering of Registrable
Securities pursuant to such Shelf Registration Statement may legally resume. The
Company will be deemed not to have used its reasonable best efforts to cause a
Shelf Registration Statement to become, or to remain, effective during the
requisite period if it voluntarily takes any action that would result in any
such Shelf Registration Statement not being declared effective or that would
result in the Holders of Registrable Securities covered thereby not being able
to offer and sell such Registrable Securities during that period, unless such
action is required by applicable law.
(e) LIQUIDATED DAMAGES. In the event that:
(i) a Shelf Registration Statement is not filed
with the SEC on or prior to August 10, 1998, then, with respect to the first
quarter immediately following such date, liquidated damages ("Liquidated
Damages") shall accumulate on the liquidation preference of the Preferred
Securities at a rate of 0.25% per annum, and with respect to the second quarter
thereafter and all subsequent quarters following such date, at a rate equal to
0.50% per annum;
(ii) a Shelf Registration Statement is not
declared effective by the SEC on or prior to the 90th day after the Eligibility
Date, then, with respect to the first quarter immediately following such date,
Liquidated Damages shall accumulate on the liquidation preference of the
Preferred Securities at a rate of 0.25% per annum, and with respect to the
second quarter thereafter and all subsequent quarters following such date, at a
rate equal to 0.50% per annum;
(iii) a Shelf Registration Statement has been
declared effective and such Shelf Registration Statement ceases to be effective
or the Prospectus usable for resales (A) at any time
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<PAGE> 8
prior to the expiration of the Effectiveness Period and (B) if related to
corporate developments, public filings with the SEC or similar events or to
correct a material misstatement or omission in the Prospectus contained in the
Shelf Registration Statement, for more than 75 days (whether or not consecutive)
in any twelve-month period, then, with respect to the first quarter immediately
following the day or 76th day, as the case may be, such Shelf Registration
Statement ceases to be effective or the Prospectus usable for resales,
Liquidated Damages shall accumulate on the liquidation preference of the
Preferred Securities at a rate of 0.25% per annum, and with respect to the
second quarter thereafter and all subsequent quarters following such day, at a
rate equal to 0.50% per annum; or
(iv) if the Securities are not approved for
listing on the New York Stock Exchange on or prior to the 90th day after the
Eligibility Date, then, with respect to the first quarter immediately following
such date, Liquidated Damages shall accumulate on the liquidation preference of
the Preferred Securities at a rate of 0.25% per annum, and with respect to the
second quarter thereafter and all subsequent quarters following such date, at a
rate equal to 0.50% per annum;
PROVIDED, HOWEVER, that the Liquidated Damages rate on the liquidation
preference of the Preferred Securities may not exceed in the aggregate 0.50% per
annum; PROVIDED, FURTHER, HOWEVER, that (1) upon the filing of a Shelf
Registration Statement (in the case of clause (i) above), (2) upon the
effectiveness of a Shelf Registration Statement (in the case of clause (ii)
above), (3) upon such time as the Shelf Registration Statement which had ceased
to remain effective or the Prospectus usable for resales again becomes effective
and usable for resales (in the case of clause (iii) above), or (4) upon such
time as the Securities are approved for listing on the New York Stock Exchange,
Liquidated Damages on the liquidation preference of the Preferred Securities as
a result thereof shall cease to accumulate.
Any amounts of Liquidated Damages due pursuant to Section 2(d)(i),
(ii), (iii) or (iv) above will be payable in cash on the next succeeding
February 15, May 15, August 15 and November 15, as the case may be, to Holders
on the relevant record dates for the payment of dividends.
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<PAGE> 9
(f) SPECIFIC ENFORCEMENT. Without limiting the remedies
available to the Holders, the Company acknowledges that any failure by it to
comply with its obligations under Section 2(a) hereof may result in material
irreparable injury to the Holders for which there is no adequate remedy at law,
that it would not be possible to measure damages for such injuries precisely and
that, in the event of any such failure, any Holder may obtain such relief as may
be required to specifically enforce the Company's obligations under Section 2(a)
hereof.
3. REGISTRATION PROCEDURES. In connection with the obligations of the
Company with respect to the Shelf Registration Statement pursuant to Section
2(a) hereof, the Company shall use its best efforts to:
(a) prepare and file with the SEC a Shelf Registration Statement as
prescribed by Section 2(a) hereof within the relevant time period specified in
Section 2(a) hereof on the appropriate form under the Securities Act, which form
shall (i) be selected by the Company, (ii) be available for the sale of the
Registrable Securities by the selling Holders thereof, and (iii) comply as to
form in all material respects with the requirements of the applicable form and
include all financial statements required by the SEC to be filed therewith; the
Company shall use its reasonable best efforts to cause such Shelf Registration
Statement to become effective and remain effective and the Prospectus usable for
resales in accordance with Section 2 hereof; PROVIDED, HOWEVER, that, before
filing any Shelf Registration Statement or Prospectus or any amendments or
supplements thereto, the Company shall furnish to and afford the Holders of the
Registrable Securities covered by such Shelf Registration Statement, their
counsel and the managing underwriters, if any, a reasonable opportunity to
review copies of all such documents (including copies of any documents to be
incorporated by reference therein and all exhibits thereto) proposed to be
filed; and the Company shall not file any Shelf Registration Statement or
Prospectus or any amendments or supplements thereto in respect of which the
Holders must be afforded an opportunity to review prior to the filing of such
document if the Majority Holders, their counsel or the managing underwriters, if
any, shall reasonably object in a timely manner;
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<PAGE> 10
(b) prepare and file with the SEC such amendments and
post-effective amendments to the Shelf Registration Statement as may be
necessary to keep such Shelf Registration Statement effective for the
Effectiveness Period, subject to the proviso contained in the second
paragraph in Section 2(a), and cause each Prospectus to be
supplemented, if so determined by the Company or requested by the SEC,
by any required prospectus supplement and as so supplemented to be
filed pursuant to Rule 424 (or any similar provision then in force)
under the Securities Act, and comply with the provisions of the
Securities Act, the Exchange Act and the rules and regulations
promulgated thereunder applicable to it with respect to the disposition
of all securities covered by a Shelf Registration Statement during the
Effectiveness Period in accordance with the intended method or methods
of distribution by the selling Holders thereof described in this
Agreement;
(c) (i) notify each Holder of Registrable Securities included
in the Shelf Registration Statement, at least three Business Days prior
to filing, that a Shelf Registration Statement with respect to the
Registrable Securities is being filed and advising such Holder that the
distribution of Registrable Securities will be made in accordance with
the method selected by the Majority Holders, (ii) furnish to each
Holder of Registrable Securities included in the Shelf Registration
Statement and to each underwriter of an underwritten offering of
Registrable Securities, if any, without charge, as many copies of each
Prospectus, including each preliminary prospectus, and any amendment or
supplement thereto, and such other documents as such Holder or
underwriter may reasonably request, in order to facilitate the public
sale or other disposition of the Registrable Securities and (iii)
consent to the use of the Prospectus or any amendment or supplement
thereto by each of the selling Holders of Registrable Securities
included in the Shelf Registration Statement in connection with the
offering and sale of the Registrable Securities covered by the
Prospectus or any amendment or supplement thereto;
(d) register or qualify the Registrable Securities under all
applicable state securities or "blue sky" laws of such jurisdictions by
the time the applicable Shelf Registration Statement is declared
effective by the SEC as any Holder of
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<PAGE> 11
Registrable Securities covered by a Shelf Registration Statement and
each underwriter of an underwritten offering of Registrable Securities
shall reasonably request in writing in advance of such date of
effectiveness, and do any and all other acts and things which may be
reasonably necessary or advisable to enable such Holder and underwriter
to consummate the disposition in each such jurisdiction of such
Registrable Securities owned by such Holder; PROVIDED, HOWEVER, that
the Company shall not be required to (i) qualify as a foreign
corporation or as a dealer in securities in any jurisdiction where it
would not otherwise be required to qualify but for this Section 3(d),
(ii) file any general consent to service of process in any jurisdiction
where it would not otherwise be subject to such service of process or
(iii) subject itself to taxation in any such jurisdiction if it is not
then so subject;
(e) promptly notify each Holder of Registrable Securities,
their counsel and the managing underwriters, if any, and promptly
confirm such notice in writing (i) when a Shelf Registration Statement
has become effective and when any post-effective amendments thereto
become effective, (ii) of any request by the SEC or any state
securities authority for amendments and supplements to a Shelf
Registration Statement or Prospectus or for additional information
after the Shelf Registration Statement has become effective, (iii) of
the issuance by the SEC or any state securities authority of any stop
order suspending the effectiveness of a Shelf Registration Statement or
the qualification of the Registrable Securities in any jurisdiction
described in Section 3(d) hereof or the initiation of any proceedings
for that purpose, (iv) if, between the effective date of a Shelf
Registration Statement and the closing of any sale of Registrable
Securities covered thereby, the representations and warranties of the
Company contained in any purchase agreement, securities sales agreement
or other similar agreement cease to be true and correct in all material
respects, (v) of the happening of any event or the failure of any event
to occur or the discovery of any facts, during the Effectiveness
Period, which makes any statement made in a Shelf Registration
Statement or the related Prospectus untrue in any material respect or
which causes such Shelf Registration Statement or Prospectus to omit to
state a material fact necessary in order to make the state-
11
<PAGE> 12
ments therein, in the light of the circumstances under which they were
made, not misleading, and (vi) of the reasonable determination of the
Company that a post-effective amendment to the Shelf Registration
Statement would be appropriate;
(f) obtain the withdrawal of any order suspending the
effectiveness of the Shelf Registration Statement at the
earliest possible moment;
(g) furnish to each Holder of Registrable Securities included
within the coverage of a Shelf Registration Statement, without charge,
at least one conformed copy of the Shelf Registration Statement
relating to such Shelf Registration and any post-effective amendment
thereto (without documents incorporated therein by reference or
exhibits thereto, unless requested);
(h) cooperate with the selling Holders of Registrable
Securities to facilitate the timely preparation and delivery of
certificates representing Registrable Securities to be sold and not
bearing any restrictive legends and registered in such names as the
selling Holders or the underwriters may reasonably request at least two
Business Days prior to the closing of any sale of Registrable
Securities pursuant to the Shelf Registration Statement;
(i) promptly after the occurrence of any event specified in
Section 3(e)(ii), 3(e)(iii), 3(e)(v) (subject to a 75 day grace period
within any twelve-month period) or 3(e)(vi) hereof, prepare a
supplement or post-effective amendment to the Shelf Registration
Statement or the related Prospectus or any document incorporated
therein by reference or file any other required document so that, as
thereafter delivered to the purchasers of the Registrable Securities,
such Prospectus will not include any untrue statement of a material
fact or omit to state a material fact necessary to make the statements
therein, in the light of the circumstances under which they were made,
not misleading; and the Company shall notify each Holder to suspend use
of the Prospectus as promptly as practicable after the occurrence of
such an event, and each Holder hereby agrees to suspend use of the
Prospectus until the Company has amended or supplemented the Prospectus
to correct such misstatement or omission;
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<PAGE> 13
(j) a reasonable time prior to the filing of any document
which is to be incorporated by reference into a Shelf Registration
Statement or a Prospectus after the initial filing of a Shelf
Registration Statement, provide a reasonable number of copies of such
document to the Holders and make such of the representatives of the
Company as shall be reasonably requested by the Holders of Registrable
Securities or the Initial Purchaser on behalf of such Holders available
for discussion of such document;
(k) enter into such agreements (including underwriting
agreements) as are customary in underwritten offerings and take all
such other appropriate actions in connection therewith as are
reasonably requested by the Holders of at least 25% in aggregate
liquidation preference of the Registrable Securities in order to
expedite or facilitate the registration or the disposition of the
Registrable Securities;
(l) whether or not an underwriting agreement is entered into
and whether or not the registration is an underwritten registration, if
requested by (x) the Initial Purchaser, in the case where the Initial
Purchaser holds Securities acquired by it as part of its initial
placement and (y) Holders of at least 25% in aggregate liquidation
preference of the Registrable Securities covered thereby: (i) make such
representations and warranties to Holders of such Registrable
Securities and the underwriters (if any), with respect to the business
of the Company and its subsidiaries as then conducted and with respect
to the Shelf Registration Statement, Prospectus and documents, if any,
incorporated or deemed to be incorporated by reference therein, in each
case, as are customarily made by issuers to underwriters in
underwritten offerings, and confirm the same if and when requested;
(ii) obtain opinions of counsel to the Company and updates thereof
(which may be in the form of a reliance letter) in form and substance
reasonably satisfactory to the managing underwriters (if any) and the
Holders of a majority in aggregate liquidation preference of the
Registrable Securities being sold, addressed to each selling Holder and
the underwriters (if any) covering the matters customarily covered in
opinions requested in underwritten offerings and such other matters as
may be reasonably requested by such underwriters (it being agreed that
the matters to be covered by such opinion may be
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<PAGE> 14
subject to customary qualifications and exceptions); (iii) obtain "cold
comfort" letters and updates thereof in form and substance reasonably
satisfactory to the managing underwriters from the independent
certified public accountants of the Company (and, if necessary, any
other independent certified public accountants of any business acquired
by the Company for which financial statements and financial data are,
or are required to be, included in the Registration Statement),
addressed to each of the underwriters, such letters to be in customary
form and covering matters of the type customarily covered in "cold
comfort" letters in connection with underwritten offerings and such
other matters as reasonably requested by such underwriters in
accordance with Statement on Auditing Standards No. 72; and (iv) if an
underwriting agreement is entered into, the same shall contain
indemnification provisions and procedures no less favorable than those
set forth in Section 4 hereof (or such other provisions and procedures
acceptable to Holders of a majority in aggregate liquidation preference
of Registrable Securities covered by such Shelf Registration Statement
and the managing underwriters) customary for such agreements with
respect to all parties to be indemnified pursuant to said Section
(including, without limitation, such underwriters and selling Holders);
and in the case of an underwritten registration, the above requirements
shall be satisfied at each closing under the related underwriting
agreement or as and to the extent required thereunder;
(m) make reasonably available for inspection by any selling
Holder of Registrable Securities who certifies to the Company that it
has a current intention to sell Registrable Securities pursuant to the
Shelf Registration, any underwriter participating in any such
disposition of Registrable Securities, if any, and any attorney,
accountant or other agent retained by any such selling Holder or
underwriter (collectively, the "INSPECTORS"), at the offices where
normally kept, during the Company's normal business hours, all
financial and other records, pertinent organizational and operational
documents and properties of the Company and its subsidiaries
(collectively, the "RECORDS") as shall be reasonably necessary to
enable them to exercise any applicable due diligence responsibilities,
and cause the officers, trustees and employees of the Company and its
subsidiaries to supply all
14
<PAGE> 15
relevant information in each case reasonably requested by any such
Inspector in connection with such Shelf Registration Statement; records
and information which the Company, in good faith, to be confidential
and any Records and information which it notifies the Inspectors are
confidential shall not be disclosed to any Inspector except where (i)
the disclosure of such Records or information is necessary to avoid or
correct a material misstatement or omission in such Shelf Registration
Statement, (ii) the release of such Records or information is ordered
pursuant to a subpoena or other order from a court of competent
jurisdiction or is necessary in connection with any action, suit or
proceeding or (iii) such Records or information previously has been
made generally available to the public; each selling Holder of such
Registrable Securities will be required to agree in writing that
Records and information obtained by it as a result of such inspections
shall be deemed confidential and shall not be used by it as the basis
for any market transactions in the securities of the Company unless and
until such is made generally available to the public through no fault
of an Inspector or a selling Holder; and each selling Holder of such
Registrable Securities will be required to further agree in writing
that it will, upon learning that disclosure of such Records or
information is sought in a court of competent jurisdiction, or in
connection with any action, suit or proceeding, give notice to the
Company and allow the Company at its expense to undertake appropriate
action to prevent disclosure of the Records and information deemed
confidential;
(n) comply with all applicable rules and regulations of the
SEC so long as any provision of this Agreement shall be applicable and
make generally available to its securityholders earning statements
satisfying the provisions of Section 11(a) of the Securities Act and
Rule 158 thereunder (or any similar rule promulgated under the
Securities Act) no later than 45 days after the end of any twelve-month
period (or 90 days after the end of any twelve-month period if such
period is a fiscal year) (i) commencing at the end of any fiscal
quarter in which Registrable Securities are sold to underwriters in a
firm commitment or best efforts underwritten offering and (ii) if not
sold to underwriters in such an offering, commencing on the first day
of the first fiscal quarter of the Company after the effective date of
a Shelf Registration
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<PAGE> 16
Statement, which statements shall cover said twelve-month periods,
provided that the obligations under this Section 3(n) shall be
satisfied by the timely filing of quarterly and annual reports on Forms
10-Q and 10-K under the Exchange Act;
(o) cooperate with each seller of Registrable Securities
covered by a Shelf Registration Statement and each underwriter, if any,
participating in the disposition of such Registrable Securities and
their respective counsel in connection with any filings required to be
made with the NASD;
(p) take all other steps necessary to effect the registration
of the Registrable Securities covered by a Shelf Registration Statement
contemplated hereby; and
(q) the Company may require each seller of Registrable
Securities as to which any registration is being effected to furnish to
it such information regarding such seller as may be required by the
staff of the SEC to be included in a Shelf Registration Statement; the
Company may exclude from such registration the Registrable Securities
of any seller who unreasonably fails to furnish such information within
a reasonable time after receiving such request; and the Company shall
have no obligation to register under the Securities Act the Registrable
Securities of a seller who so fails to furnish such information.
Each Holder agrees that, upon receipt of any notice from the
Company of the occurrence of any event specified in Section 3(e)(ii), 3(e)(iii),
3(e)(v) or 3(e)(vi) hereof, such Holder will forthwith discontinue disposition
of Registrable Securities pursuant to a Shelf Registration Statement until such
Holder's receipt of the copies of the supplemented or amended Prospectus
contemplated by Section 3(i) hereof or until it is advised in writing (the
"ADVICE") by the Company that the use of the applicable Prospectus may be
resumed, and, if so directed by the Company, such Holder will deliver to the
Company (at the Company's expense) all copies in such Holder's possession, other
than permanent file copies then in such Holder's possession, of the Prospectus
covering such Registrable Securities current at the time of receipt of such
notice. If the Company shall give any such notice to suspend the disposition of
Registrable Securities pursuant to a Shelf Registration Statement, the Company
shall use
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<PAGE> 17
its reasonable best efforts to file and have declared effective (if an
amendment) as soon as practicable after the resolution of the related matters an
amendment or supplement to the Shelf Registration Statement and related
Prospectus and shall extend the period during which such Shelf Registration
Statement is required to be main-tained effective and the Prospectus usable for
resales pursuant to this Agreement by the number of days in the period from and
including the date of the giving of such notice to and including the date when
the Company shall have made available to the Holders (x) copies of the
supplemented or amended Prospectus necessary to resume such dispositions or (y)
the Advice.
4. INDEMNIFICATION AND CONTRIBUTION. (a) The Company and the Operating
Partnership, jointly and severably, hereby agrees to indemnify and hold harmless
the Initial Purchaser, each Holder, each underwriter who participates in an
offering of the Registrable Securities, each Person, if any, who controls any of
such parties within the meaning of Section 15 of the Securities Act and Section
20 of the Exchange Act and each of their respective directors, officers,
employees and agents, as follows:
(i) against any and all loss, liability, claim, damage and
expense whatsoever, as incurred, arising out of any untrue statement or
alleged untrue statement of a material fact contained in a Shelf
Registration Statement (or any amendment thereto) or the Prospectus (or
any amendment or supplement thereto) or the omission or alleged
omission therefrom of a material fact required to be stated therein, in
the light of the circumstances under which they were made, not
misleading;
(ii) against any and all loss, liability, claim, damage and
expense whatsoever, as incurred, to the extent of the aggregate amount
paid in settlement of any litigation, or any investigation or
proceeding by any governmental agency or body, commenced or threatened,
or of any claim whatsoever based upon any such untrue statement or
omission, or any such alleged untrue statement or omission, provided
that (subject to Section 4(d) hereof) such settlement is effected with
the prior written consent of the Company; and
(iii) against any and all expenses whatsoever, as incurred
(including the reasonable fees and disbursements of counsel
17
<PAGE> 18
chosen by the Initial Purchaser or such Holder), reasonably incurred in
investigating, preparing or defending against any litigation, or any
investigation or proceeding by any governmental agency or body,
commenced or threatened, or any claim whatsoever based upon any such
untrue statement or omission, or any such alleged untrue statement or
omission, to the extent that any such expense is not paid under
subpara-graph (i) or (ii) of this Section 4(a);
PROVIDED, HOWEVER, that this indemnity does not apply to any loss, liability,
claim, damage or expense to the extent arising out of an untrue statement or
omission or alleged untrue statement or omission made in reliance upon and in
conformity with written information furnished in writing to the Company by the
Initial Purchaser or such Holder or underwriter for use in the Shelf
Registration Statement (or any amendment thereto) or any Prospectus (or any
amendment or supplement thereto).
(b) The Initial Purchaser and each Holder or underwriter
agrees, severally and not jointly, to indemnify and hold harmless the Company,
its trustees and officers (including each officer of the Company who signed the
Shelf Registration Statement), and the Operating Partnership and each Person, if
any, who controls the Company within the meaning of Section 15 of the Securities
Act or Section 20 of the Exchange Act against any and all loss, liability,
claim, damage and expense whatsoever described in the indemnity contained in
Section 4(a) hereof, as incurred, but only with respect to untrue statements or
omissions, or alleged untrue statements or omissions, made in the Shelf
Registration Statement (or any amendment thereto) or the Prospectus (or any
amendment or supplement thereto) in reliance upon and in conformity with written
information furnished to the Company by such Holder expressly for use in such
Shelf Registration Statement (or any amendment thereto) or such Prospectus (or
any amendment or supplement thereto); PROVIDED, HOWEVER, that no Holder shall be
liable for any claims hereunder in excess of the amount of net proceeds received
by such Holder from the sale of Registrable Securities.
(c) Each indemnified party shall give notice as promptly as
reasonably practicable to each indemnifying party of any action commenced
against it in respect of which indemnity may be sought hereunder, but failure to
so notify an indemnifying party shall not relieve such indemnifying party from
any liability which it may
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<PAGE> 19
have under this Section 4 to the extent that it is not materially prejudiced by
such failure as a result thereof, and in any event shall not relieve it from
liability which it may have otherwise on account of this indemnity agreement. In
the case of parties indemnified pursuant to Section 4(a) or (b) above, counsel
to the indemnified parties shall be selected by such parties. An indemnifying
party may participate at its own expense in the defense of such action;
provided, however, that counsel to the indemnifying party shall not (except with
the consent of the indemnified party) also be counsel to the indemnified party.
In no event shall the indemnifying parties be liable for the fees and expenses
of more than one counsel (in addition to local counsel), separate from their own
counsel, for all indemnified parties in connection with any one action or
separate but similar or related actions in the same jurisdiction arising out of
the same general allegations or circumstances. No indemnifying party shall,
without the prior written consent of the indemnified parties, settle or
compromise or consent to the entry of any judgment with respect to any
litigation, or any investigation or proceeding by any governmental agency or
body, commenced or threatened, or any claim whatsoever in respect of which
indemnification or contribution could be sought under this Section 4 (whether or
not the indemnified parties are actual or potential parties thereto), unless
such settlement, compromise or consent (i) includes an unconditional written
release of each indemnified party from all liability arising out of such
litigation, investigation, proceeding or claim and (ii) does not include a
statement as to or an admission of fault, culpability or a failure to act by or
on behalf of any indemnified party.
(d) If at any time an indemnified party shall have validly
requested an indemnifying party to reimburse the indemnified party for fees and
expenses of counsel, such indemnifying party agrees that it shall be liable for
any settlement of the nature contemplated by Section 4(a)(ii) effected without
its written consent if (i) such settlement is entered into more than 45 days
after receipt by such indemnifying party of the aforesaid request, (ii) such
indemnifying party shall have received notice of the terms of such settlement at
least 30 days prior to such settlement being entered into and (iii) such
indemnifying party shall not have reimbursed such indemnified party in
accordance with such request prior to the date of such settlement.
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<PAGE> 20
(e) In order to provide for just and equitable contribution in
circumstances in which the indemnity agreement set forth in this Section 4 is
for any reason held to be unenforceable by an indemnified party although
applicable in accordance with its terms, the Company and the Operating
Partnership, on the one hand, and the Holders, on the other hand, shall
contribute to the aggregate losses, liabilities, claims, damages and expenses of
the nature contemplated by such indemnity agreement incurred by the Company, the
Operating Partnership and the Holders, as incurred; PROVIDED, HOWEVER, that no
Person guilty of fraudulent misrepresentation (within the meaning of Section
11(f) of the 1933 Act) shall be entitled to contribution from any Person that
was not guilty of such fraudulent misrepresentation. As between the Company and
the Operating Partnership, on the one hand, and the Holders, on the other hand,
such parties shall contribute to such aggregate losses, liabilities, claims,
damages and expenses of the nature contemplated by such indemnity agreement in
such proportion as shall be appropriate to reflect the relative fault of the
Company and the Operating Partnership, on the one hand, and the Holders, on the
other hand, with respect to the statements or omissions which resulted in such
loss, liability, claim, damage or expense, or action in respect thereof, as well
as any other relevant equitable considerations. The relative fault of the
Company and the Operating Partnership, on the one hand, and of the Holders, on
the other hand, shall be determined by reference to, among other things, whether
the untrue or alleged untrue statement of a material fact or the omission or
alleged omission to state a material fact relates to information supplied by the
Company or the Operating Partnership, on the one hand, or by or on behalf of the
Holders, on the other, and the parties' relative intent, knowledge, access to
information and opportunity to correct or prevent such statement or omission.
The Company, the Operating Partnership and the Holders of the Registrable
Securities agree that it would not be just and equitable if contribution
pursuant to this Section 4 were to be determined by pro rata allocation or by
any other method of allocation that does not take into account the relevant
equitable considerations. For purposes of this Section 4, each Affiliate of a
Holder, and each director, officer and employee and Person, if any, who controls
a Holder or such Affiliate within the meaning of Section 15 of the Securities
Act shall have the same rights to contribution as such Holder, and each trustee
and officer of the Company and each Person, if any, who controls the Company
within the meaning of Section 15 of the Securities Act or Section
20
<PAGE> 21
20 of the Exchange Act shall have the same rights to contribution as the Company
and the Operating Partnership.
5. PARTICIPATION IN AN UNDERWRITTEN REGISTRATION. No
Holder may participate in an underwritten registration hereunder unless such
Holder (a) agrees to sell such Holder's Registrable Securities on the basis
provided in the underwriting arrangement approved by the Persons entitled
hereunder to approve such arrangements and (b) completes and executes all
reasonable questionnaires, powers of attorney, indemnities, underwriting
agreements, lock-up letters and other documents reasonably required under the
terms of such underwriting arrangements.
6. SELECTION OF UNDERWRITERS. The Holders of Registrable
Securities covered by the Shelf Registration Statement who desire to do so may
sell the Securities covered by such Shelf Registration in an underwritten
offering, subject to the provisions of Section 3(l) hereof. In any such
underwritten offering, the underwriter or underwriters and manager or managers
that will administer the offering will be selected by the Holders of a majority
in aggregate liquidation preference of the Registrable Securities included in
such offering; PROVIDED, HOWEVER, that such underwriters and managers must be
reasonably satisfactory to the Company.
7. MISCELLANEOUS.
(a) RULE 144 AND RULE 144A. For so long as the Company is
subject to the reporting requirements of Section 13 or 15 of the Exchange Act
and any Registrable Securities remain outstanding, the Company will file the
reports required to be filed by it under the Securities Act and Section 13(a) or
15(d) of the Exchange Act and the rules and regulations adopted by the SEC
thereunder; PROVIDED, HOWEVER, that if the Company ceases to be so required to
file such reports, it will, upon the request of any Holder of Registrable
Securities (a) make publicly available such information as is necessary to
permit sales of its securities pursuant to Rule 144 under the Securities Act,
(b) deliver such information to a prospective purchaser as is necessary to
permit sales of its securities pursuant to Rule 144A under the Securities Act,
and (c) take such further action that is reasonable in the circumstances, in
each case, to the extent required from time to time to enable such Holder to
sell its Registrable Securities without registration
21
<PAGE> 22
under the Securities Act within the limitation of the exemptions provided by (i)
Rule 144 under the Securities Act, as such rule may be amended from time to
time, (ii) Rule 144A under the Securities Act, as such rule may be amended from
time to time, or (iii) any similar rules or regulations hereafter adopted by the
SEC. Upon the request of any Holder of Registrable Securities, the Company will
deliver to such Holder a written statement as to whether it has complied with
such requirements.
(b) NO INCONSISTENT AGREEMENTS. The Company has not entered
into, and will not enter into, any agreement which is inconsistent with the
rights granted to the Holders of Registrable Securities in this Agreement or
otherwise conflicts with the provisions hereof. The rights granted to the
Holders hereunder do not in any way conflict with and are not inconsistent with
the rights granted to the holders of the Company's other issued and outstanding
securities under any such agreements.
(c) AMENDMENTS AND WAIVERS. The provisions of this Agreement,
including the provisions of this sentence, may not be amended, modified or
supplemented, and waivers or consents to departures from the provisions hereof
may not be given, unless the Company has obtained the written consent of Holders
of a majority in aggregate liquidation preference of the outstanding Registrable
Securities affected by such amendment, modification, supplement, waiver or
departure; PROVIDED that no amendment, modification or supplement or waiver or
consent to the departure with respect to the provisions of Section 4 hereof
shall be effective as against any Holder of Registrable Securities unless
consented to in writing by such Holder of Registrable Securities.
Notwithstanding the foregoing sentence, (i) this Agreement may be amended,
without the consent of any Holder of Registrable Securities, by written
agreement signed by the Company, the Operating Partnership and the Initial
Purchaser, to cure any ambiguity, correct or supplement any provision of this
Agreement that may be inconsistent with any other provision of this Agreement or
to make any other provisions with respect to matters or questions arising under
this Agreement which shall not be inconsistent with other provisions of this
Agreement, (ii) this Agreement may be amended, modified or supplemented, and
waivers and consents to departures from the provisions hereof may be given, by
written agreement signed by the Company, the Operating Partnership and the
Initial Purchaser to the extent that any such amendment, modification,
supplement, waiver or consent is, in their
22
<PAGE> 23
reasonable judgment, necessary or appropriate to comply with applicable law
(including any interpretation of the Staff of the SEC) or any change therein and
(iii) to the extent any provision of this Agreement relates to the Initial
Purchaser, such provision may be amended, modified or supplemented, and waivers
or consents to departures from such provisions may be given, by written
agreement signed by the Initial Purchaser, the Operating Partnership and the
Company.
(d) NOTICES. All notices and other communications provided for
or permitted hereunder shall be made in writing by hand-delivery, registered
first-class mail, telex, telecopier, or any courier guaranteeing overnight
delivery (i) if to a Holder, at the most current address given by such Holder to
the Company by means of a notice given in accordance with the provisions of this
Section 7(d), which address initially is, with respect to the Initial Purchaser,
the address set forth in the Purchase Agreement; and (ii) if to the Company,
initially at the Company's address set forth in the Purchase Agreement and
thereafter at such other address, notice of which is given in accordance with
the provisions of this Section 7(d).
All such notices and communications shall be deemed to have
been duly given: at the time delivered by hand, if personally delivered; five
Business Days after being deposited in the mail, postage prepaid, if mailed;
when answered back, if telexed; when receipt is acknowledged, if telecopied; and
on the next Business Day, if timely delivered to an air courier guaranteeing
overnight delivery.
(e) SUCCESSORS AND ASSIGNS. This Agreement shall inure to the
benefit of and be binding upon the successors, assigns and transferees of the
Initial Purchaser, including, without limitation and without the need for an
express assignment, subsequent Holders; PROVIDED, HOWEVER, that nothing herein
shall be deemed to permit any assignment, transfer or other disposition of
Registrable Securities in violation of the terms of the Purchase Agreement or
amended charter of the Company. If any transferee of any Holder shall acquire
Registrable Securities, in any manner, whether by operation of law or otherwise,
such Registrable Securities shall be held subject to all of the terms of this
Agreement, and by taking and holding such Registrable Securities, such Person
shall be conclusively deemed to have agreed to be bound by and to perform
23
<PAGE> 24
all of the terms and provisions of this Agreement and such Person shall be
entitled to receive the benefits hereof.
(f) THIRD PARTY BENEFICIARIES. Each Holder shall be a third
party beneficiary of the agreements made hereunder among the Company, the
Operating Partnership and the Initial Purchaser, and the Initial Purchaser shall
have the right to enforce such agreements directly to the extent it deems such
enforcement necessary or advisable to protect its rights or the rights of
Holders hereunder.
(g) COUNTERPARTS. This Agreement may be executed in any number
of counterparts and by the parties hereto in separate counterparts, each of
which when so executed shall be deemed to be an original and all of which taken
together shall constitute one and the same agreement.
(h) HEADINGS. The headings in this Agreement are for
convenience of reference only and shall not limit or otherwise affect the
meaning hereof.
(i) GOVERNING LAW. THIS AGREEMENT SHALL BE DEEMED TO HAVE BEEN
MADE IN THE STATE OF NEW YORK. THE VALIDITY AND INTERPRETATION OF THIS
AGREEMENT, AND THE TERMS AND CONDITIONS SET FORTH HEREIN, SHALL BE GOVERNED BY
AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK WITHOUT
GIVING EFFECT TO ANY PROVISIONS RELATING TO CONFLICTS OF LAWS. EACH OF THE
PARTIES HERETO AGREES TO SUBMIT TO THE EXCLUSIVE JURISDICTION OF THE COURTS OF
THE STATE OF NEW YORK IN ANY SUIT, ACTION OR PROCEEDING ARISING OUT OF OR
RELATING TO THIS AGREEMENT OR ANY OF THE MATTERS CONTEMPLATED HEREBY,
IRREVOCABLY WAIVES ANY DEFENSE OF LACK OF PERSONAL JURISDICTION AND IRREVOCABLY
AGREES THAT ALL CLAIMS IN RESPECT OF ANY SUIT, ACTION OR PROCEEDING MAY BE HEARD
AND DETERMINED IN ANY SUCH COURT. EACH OF THE PARTIES HERETO IRREVOCABLY WAIVES,
TO THE FULLEST EXTENT IT MAY EFFECTIVELY DO SO UNDER APPLICABLE LAW, ANY
OBJECTION WHICH IT MAY NOW OR HEREAFTER HAVE TO THE LAYING OF VENUE OF SUCH
SUIT, ACTION OR PROCEEDING BROUGHT IN ANY SUCH COURT AND ANY CLAIM THAT ANY SUCH
SUIT, ACTION OR PROCEEDING BROUGHT IN ANY SUCH COURT HAS BEEN BROUGHT IN AN
INCONVENIENT FORUM.
(j) SEVERABILITY. In the event that any one or more of the
provisions contained herein, or the application thereof in any circumstance, is
held invalid, illegal or unenforceable, the
24
<PAGE> 25
validity, legality and enforceability of any such provision in every other
respect and of the remaining provisions contained herein shall not be affected
or impaired thereby.
(k) SECURITIES HELD BY THE COMPANY OR ITS AFFILIATES. Whenever
the consent or approval of Holders of a specified percentage of Registrable
Securities is required hereunder, Registrable Securities held by the Company or
any Affiliates shall not be counted in determining whether such consent or
approval was given by the Holders of such required percentage.
25
<PAGE> 26
IN WITNESS WHEREOF, the parties have executed this Agreement
as of the date first written above.
Very truly yours,
EQUITY OFFICE PROPERTIES TRUST
By: /s/ Stanley M. Stevens
------------------------------------
Name: Stanley M. Stevens
Title: Executive Vice President and
Chief Legal Counsel
EOP OPERATING LIMITED PARTNERSHIP
By: Equity Office Properties Trust
its Managing General Partner
solely with respect to Section 4
hereof
By: /s/ Stanley M. Stevens
------------------------------------
Name: Stanley M. Stevens
Title: Executive Vice President and
Chief Legal Counsel
CONFIRMED AND ACCEPTED,
as of the date first
above written:
LEHMAN BROTHERS INC.
By: Nicole Kaplan
---------------------------------
Authorized Signatory
<PAGE> 1
EXHIBIT 10.1
-----------------------------------------
AGREEMENT OF LIMITED PARTNERSHIP
OF
EOP OPERATING LIMITED PARTNERSHIP
-----------------------------------------
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
<S> <C>
ARTICLE I DEFINED TERMS..............................................................................1
ARTICLE II ORGANIZATIONAL MATTERS....................................................................13
Section 2.1 Organization.......................................................................13
Section 2.2 Name...............................................................................13
Section 2.3 Registered Office and Agent; Principal Office......................................13
Section 2.4 Term...............................................................................14
ARTICLE III PURPOSE..................................................................................14
Section 3.1 Purpose and Business...............................................................14
Section 3.2 Powers.............................................................................14
ARTICLE IV CAPITAL CONTRIBUTIONS AND ISSUANCES OF PARTNERSHIP INTERESTS..............................14
Section 4.1 Capital Contributions of the Partners..............................................14
Section 4.2 Issuances of Partnership Interests.................................................15
Section 4.3 No Preemptive Rights...............................................................16
Section 4.4 Other Contribution Provisions......................................................16
Section 4.5 No Interest on Capital.............................................................17
ARTICLE V DISTRIBUTIONS..............................................................................17
Section 5.1 Requirement and Characterization of Distributions..................................17
Section 5.2 Amounts Withheld...................................................................20
Section 5.3 Distributions Upon Liquidation.....................................................20
Section 5.4 Revisions to Reflect Issuance of Partnership Interests.............................20
ARTICLE VI ALLOCATIONS...............................................................................20
Section 6.1 Allocations For Capital Account Purposes...........................................20
Section 6.2 Revisions to Allocations to Reflect Issuance of Partnership Interests..............21
ARTICLE VII MANAGEMENT AND OPERATIONS OF BUSINESS....................................................22
Section 7.1 Management.........................................................................22
Section 7.2 Certificate of Limited Partnership.................................................26
Section 7.3 Title to Partnership Assets........................................................26
Section 7.4 Reimbursement of the General Partners..............................................26
Section 7.5 Outside Activities of the General Partners; Relationship of Shares to
Partnership Units; Funding Debt.......................................................28
Section 7.6 Transactions with Affiliates.......................................................29
Section 7.7 Indemnification....................................................................30
Section 7.8 Liability of the General Partners..................................................32
Section 7.9 Other Matters Concerning the General Partners......................................32
Section 7.10 Reliance by Third Parties.........................................................34
Section 7.11 Restrictions on General Partners' Authority.......................................34
Section 7.12 Loans by Third Parties............................................................35
Section 7.13 Actions of the General Partners...................................................35
ARTICLE VIII RIGHTS AND OBLIGATIONS OF LIMITED PARTNERS..............................................36
Section 8.1 Limitation of Liability............................................................36
Section 8.2 Management of Business.............................................................36
Section 8.3 Outside Activities of Limited Partners.............................................36
Section 8.4 Return of Capital..................................................................36
Section 8.5 Rights of Limited Partners Relating to the Partnership.............................37
Section 8.6 Redemption Right...................................................................38
</TABLE>
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<TABLE>
<S> <C>
ARTICLE IX BOOKS, RECORDS, ACCOUNTING AND REPORTS....................................................40
Section 9.1 Records and Accounting.............................................................40
Section 9.2 Fiscal Year........................................................................40
Section 9.3 Reports............................................................................41
ARTICLE X 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...........................................................43
Section 10.5 Withholding.......................................................................43
ARTICLE XI TRANSFERS AND WITHDRAWALS.................................................................44
Section 11.1 Transfer..........................................................................44
Section 11.2 Transfers of Partnership Interests of General Partners............................44
Section 11.3 Limited Partners' Rights to Transfer..............................................45
Section 11.4 Substituted Limited Partners......................................................47
Section 11.5 Assignees.........................................................................47
Section 11.6 General Provisions................................................................48
ARTICLE XII ADMISSION OF PARTNERS....................................................................50
Section 12.1 Admission of a Successor General Partner..........................................50
Section 12.2 Admission of Additional Limited Partners..........................................50
Section 12.3 Amendment of Agreement and Certificate of Limited Partnership.....................51
ARTICLE XIII DISSOLUTION AND LIQUIDATION.............................................................51
Section 13.1 Dissolution.......................................................................51
Section 13.2 Winding Up........................................................................52
Section 13.3 Compliance with Timing Requirements of Regulations................................53
Section 13.4 Deemed Distribution and Recontribution............................................53
Section 13.5 Rights of Limited Partners........................................................53
Section 13.6 Notice of Dissolution.............................................................54
Section 13.7 Cancellation of Certificate of Limited Partnership................................54
Section 13.8 Reasonable Time for Winding Up....................................................54
Section 13.9 Waiver of Partition...............................................................54
Section 13.10 Liability of Liquidator..........................................................54
ARTICLE XIV AMENDMENT OF PARTNERSHIP AGREEMENT; MEETINGS.............................................54
Section 14.1 Amendments........................................................................54
Section 14.2 Meetings of the Partners..........................................................56
ARTICLE XV GENERAL PROVISIONS........................................................................57
Section 15.1 Addresses and Notice..............................................................57
Section 15.2 Titles and Captions...............................................................57
Section 15.3 Pronouns and Plurals..............................................................57
Section 15.4 Further Action....................................................................57
Section 15.5 Binding Effect....................................................................57
Section 15.6 Creditors.........................................................................57
Section 15.7 Waiver............................................................................57
Section 15.8 Counterparts......................................................................58
Section 15.9 Applicable Law....................................................................58
Section 15.10 Invalidity of Provisions.........................................................58
Section 15.11 Power of Attorney................................................................58
Section 15.12 Entire Agreement.................................................................59
</TABLE>
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<TABLE>
<S> <C>
Section 15.13 No Rights as Shareholders........................................................59
Section 15.14 Limitation to Preserve REIT Status...............................................60
</TABLE>
-iii-
<PAGE> 5
EXHIBIT A
PARTNERS AND PARTNERSHIP INTERESTS
EXHIBIT B
CAPITAL ACCOUNT MAINTENANCE
EXHIBIT C
SPECIAL ALLOCATION RULES
EXHIBIT D
NOTICE OF REDEMPTION
EXHIBIT E
VALUE OF CONTRIBUTED PROPERTY
-iv-
<PAGE> 6
AGREEMENT OF LIMITED PARTNERSHIP
OF
EOP OPERATING LIMITED PARTNERSHIP
THIS AGREEMENT OF LIMITED PARTNERSHIP, dated as of July 3,
1997, is entered into by and among Zell/Merrill Lynch Real Estate Opportunity
Partners Limited Partnership II, an Illinois limited partnership, and Equity
Office Properties Trust, a Maryland real estate investment trust, as the General
Partners, and the Persons whose names are set forth on Exhibit A hereto as
Limited Partners, together with any other Persons who become Partners in the
Partnership as provided herein.
NOW, THEREFORE, in consideration of the mutual covenants set
forth herein, and for other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the parties hereto hereby agree to
form the Partnership as a limited partnership under the Delaware Revised Uniform
Limited Partnership Act, as amended from time to time, as follows:
ARTICLE I
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 12.2 hereof and who is
shown as such on the books and records of the Partnership.
"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 Exhibit B.
"Adjustment Date" has the meaning set forth in Section 4.2.B.
<PAGE> 7
"Affiliate" means, with respect to any Person, (i) any Person
directly or indirectly controlling, controlled by or under common control with
such Person, (ii) any Person owning or controlling ten percent (10%) or more of
the outstanding voting interests of such Person, (iii) any Person of which such
Person owns or controls ten percent (10%) or more of the voting interests or
(iv) any officer, director, general partner or trustee of such Person or any
Person referred to in clauses (i), (ii), and (iii) above. 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 "controlling" and "controlled" have meanings correlative to the
foregoing.
"Agreed Value" means (i) in the case of any Contributed
Property contributed to the Partnership as part of or in connection with the
Consolidation, the amount set forth on Exhibit E as the Agreed Value of such
Property; (ii) in the case of any other Contributed Property, the 704(c) Value
of such property as of the time of its contribution to the Partnership, reduced
by any liabilities either assumed by the Partnership upon such contribution or
to which such property is subject when contributed; and (iii) 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.
"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) plus
the amount of any reduction (including, without limitation, a reduction
resulting because the Managing 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):
(i) all interest, principal and other debt payments
made during such period by the Partnership,
(ii) all 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 permitted under this Agreement
and are not otherwise described in clauses (b)(i) or (ii), and
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<PAGE> 8
(iv) the amount of any increase in reserves
established during such period which the Managing 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 Exhibit B 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 Chicago, Illinois are authorized or
required by law to close.
"Capital Account" means the Capital Account maintained for a
Partner pursuant to Exhibit B.
"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.
"Carrying Value" means (i) with respect to a Contributed
Property or Adjusted Property, the 704(c) Value of such property reduced (but
not below zero) by all Depreciation with respect to such Contributed Property or
Adjusted Property, as the case may be, 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 Exhibit B, and to reflect changes, additions (including
capital improvements thereto) or other adjustments to the Carrying Value for
dispositions and acquisitions of Partnership properties, as deemed appropriate
by the Managing General Partner.
"Cash Amount" means an amount of cash equal to the Value on
the Valuation Date of the Shares Amount.
"Certificate" means the Certificate of Limited Partnership
relating to the Partnership filed in the office of the Delaware Secretary of
State, as amended from time to time in accordance with the terms hereof and the
Act.
"Class A" has the meaning set forth in Section 5.1.C.
"Class A Share" has the meaning set forth in Section 5.1.C.
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<PAGE> 9
"Class A Unit" means any Partnership Unit that is not
specifically designated by the Managing General Partner as being of another
specified class of Partnership Units.
"Class B" has the meaning set forth in Section 5.1.C.
"Class B Share" has the meaning set forth in Section 5.1.C.
"Class B Unit" means a Partnership Unit that is specifically
designated by the Managing General Partner as being a Class B Unit.
"Code" means the Internal Revenue Code of 1986, as amended and
in effect from time to time, as interpreted by the applicable regulations
thereunder. 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.
"Consent" means the consent or approval of a proposed action
by a Partner given in accordance with Section 14.2.
"Consent of the Outside Limited Partners" means the Consent of
Limited Partners (excluding for this purpose any Limited Partnership Interests
held by the Managing General Partner, any of the Opportunity Partnerships, any
other Person of which the Managing General Partner owns or controls more than
fifty percent (50%) of the voting interests and any Person directly or
indirectly owning or controlling more than fifty percent (50%) of the
outstanding voting interests of the Managing General Partner) holding Percentage
Interests that are greater than fifty percent (50%) of the aggregate Percentage
Interest of all Limited Partners who are not excluded for the purposes hereof.
"Consolidation" means (i) the transactions whereby the
Partnership will acquire interests in certain office properties owned by the
Opportunity Partnerships and certain asset management and property management
businesses which provide services to those properties and to other office
properties, in exchange for Partnership Units, and (ii) the merger of the ZML
Investors, Inc., ZML Investors II, Inc., Zell/Merrill Lynch Real Estate
Opportunity Partners III Trust and Zell/Merrill Lynch Real Estate Opportunity
Partners IV Trust with and into Equity Office Holdings Trust, all as described
in a Joint Proxy Statement/Offering Memorandum dated March 25, 1997.
"Contributed Property" means each property or other asset
contributed to the Partnership, in such form as may be permitted by the Act, but
excluding cash contributed or deemed contributed to the Partnership. Once the
Carrying Value of a Contributed Property is adjusted pursuant to Exhibit B, such
property shall no longer constitute a Contributed Property for purposes of
Exhibit B, but shall be deemed an Adjusted Property for such purposes.
"Conversion Factor" means 1.0; provided that, if the General
Partner Entity (i) declares or pays a dividend on its outstanding Shares in
Shares or makes a distribution to all holders of its outstanding Shares in
Shares, (ii) subdivides its outstanding Shares or (iii) combines its outstanding
Shares into a smaller number of Shares, the Conversion Factor shall be adjusted
by multiplying the Conversion Factor by a fraction, the numerator of which shall
be the number of Shares issued and outstanding on the record date for such
dividend, distribution, subdivision or combination (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
-4-
<PAGE> 10
combination; and provided further that if an entity shall cease to be the
General Partner Entity (the "Predecessor Entity") and another entity shall
become the General Partner Entity (the "Successor Entity"), the Conversion
Factor shall be adjusted by multiplying the Conversion Factor by a fraction, the
numerator of which is the Value of one Share of the Predecessor Entity,
determined as of the date when the Successor Entity becomes the General Partner
Entity, and the denominator of which is the Value of one Share of the Successor
Entity, determined as of that same date. (For purposes of the second proviso in
the preceding sentence, if any shareholders of the Predecessor Entity will
receive consideration in connection with the transaction in which the Successor
Entity becomes the General Partner Entity, the numerator in the fraction
described above for determining the adjustment to the Conversion Factor (that
is, the Value of one Share of the Predecessor Entity) shall be the sum of the
greatest amount of cash and the fair market value (as determined in good faith
by the Managing General Partner) of any securities and other consideration that
the holder of one Share in the Predecessor Entity could have received in such
transaction (determined without regard to any provisions governing fractional
shares).) Any adjustment to the Conversion Factor shall become effective
immediately after the effective date of the event retroactive to the record
date, if any, for the event giving rise thereto, it being intended that (x)
adjustments to the Conversion Factor are to be made to avoid unintended dilution
or anti-dilution as a result of transactions in which Shares are issued,
redeemed or exchanged without a corresponding issuance, redemption or exchange
of Partnership Units and (y) if a Specified Redemption Date shall fall between
the record date and the effective date of any event of the type described above,
that the Conversion Factor applicable to such redemption shall be adjusted to
take into account such event.
"Convertible Funding Debt" has the meaning set forth in
Section 7.5.F.
"Debt" means, as to any Person, as of any date of
determination, (i) all indebtedness of such Person for borrowed money or for the
deferred purchase price of property or 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 borrowed money 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)
obligations of such Person incurred in connection with entering into a lease
which, in accordance with generally accepted accounting principles, should be
capitalized.
"Declaration of Trust" means the Declaration of Trust of
Equity Office Properties Trust filed in the State of Maryland on October 9 1996,
as amended or restated from time to time.
"Deemed Partnership Interest Value" means, as of any date with
respect to any class of Partnership Interests, the Deemed Value of the
Partnership Interest of such class multiplied by the applicable Partner's
Percentage Interest of such class.
"Deemed Value of the Partnership Interest" means, as of any
date with respect to any class of Partnership Interests, (a) if the common
shares of beneficial interest (or other comparable equity interests) of the
General Partner Entity are Publicly Traded (i) the total number of shares of
beneficial interest (or other comparable equity interest) of the General Partner
Entity corresponding to such class of Partnership Interest (as provided for in
Section 4.2.B) issued and outstanding as of the close of business on such date
(excluding any treasury shares) multiplied by the Value of a share of such
beneficial interest (or other comparable equity interest) on such date divided
by (ii) the Percentage Interest of the Managing General Partner in such class of
Partnership Interests on such date, and (b) otherwise, the aggregate
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<PAGE> 11
Value of such class of Partnership Interests determined as set forth in the
fourth and fifth sentences of the definition of Value.
"Depreciation" means, for each fiscal year, an amount equal to
the federal income tax depreciation, amortization, or other cost recovery
deduction allowable with respect to an asset for such year, 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 Managing General Partner.
"Distribution Period" has the meaning set forth in Section
5.1.C.
"Effective Date" means the date of the closing of the
Consolidation.
"ERISA" means the Employee Retirement Income Security Act of
1974, as amended.
"ERISA Partner" means either any (a) Limited Partner or (b)
holder of shares of beneficial interest in the Managing General Partner that
received such Shares in the mergers of ZML Investors, Inc., ZML Investors II,
Inc., Zell/Merrill Lynch Real Estate Opportunity Partners III Trust, and
Zell/Merrill Lynch Real Estate Opportunity Partners IV Trust into the Managing
General Partner, and which Limited Partner or shareholder is either (i) an
employee benefit plan subject to Title I of ERISA or section 4975 of the Code,
or (ii) a nominee for or a trust established pursuant to such employee benefit
plan, or (iii) which is an entity whose underlying assets include assets of such
employee benefit plan by reason of such plan's investment in such entity.
"ERISA Plan" means an "employee benefit plan" as that term is
defined in 29 U.S.C. ss. 1002(3), and which is not exempt from regulation under
ERISA by virtue of 29 U.S.C. ss. 1003(b).
"Exchange Act" means the Securities Exchange Act of 1934, as
amended.
"Fair Value" shall have the meaning described in Section
7.09E(iv).
"Funding Debt" means the incurrence of any Debt by or on
behalf of the General Partner Entity for the purpose of providing funds to the
Partnership.
"General Partner" means Zell/Merrill Lynch Real Estate
Opportunity Partners Limited Partnership II, or the Managing General Partner or
any of their successors as a general partner of the Partnership, and "General
Partners" means the Zell/Merrill Lynch Real Estate Opportunity Partners Limited
Partnership II, and the Managing General Partner or their successors as general
partners.
"General Partner Entity" means the Managing General Partner;
provided, however, that if (i) the common shares of beneficial interest (or
other comparable equity interests) of the Managing General Partner are at any
time not Publicly Traded and (ii) the common shares of beneficial interest (or
other comparable equity interests) of an entity that owns, directly or
indirectly, fifty percent (50%) or more of the common shares of beneficial
interest (or other comparable equity interests) of the Managing General Partner
are Publicly Traded, the term "General Partner Entity" shall refer to such
entity whose
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<PAGE> 12
common shares of beneficial interest (or other comparable equity securities) are
Publicly Traded. If both requirements set forth in clauses (i) and (ii) above
are not satisfied, then the term "General Partner Entity" shall mean the
Managing General Partner.
"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 Partnership Units.
"IRS" means the Internal Revenue Service, which administers
the internal revenue laws of the United States.
"Immediate Family" means, with respect to any natural Person,
such natural Person's spouse, parents, descendants, nephews, nieces, brothers,
and sisters.
"Incapacity" or "Incapacitated" means, (i) as to any
individual Partner, death, total physical disability or entry by a court of
competent jurisdiction adjudicating such Partner incompetent to manage his or
her Person or 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 or limited liability
company which is a Partner, the dissolution and commencement of winding up of
the partnership or limited liability company, (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 (a) the Partner
commences a voluntary proceeding seeking liquidation, reorganization or other
relief under any bankruptcy, insolvency or other similar law now or hereafter in
effect, (b) the Partner is adjudged as bankrupt or insolvent, or a final and
nonappealable order for relief under any bankruptcy, insolvency or similar law
now or hereafter in effect has been entered against the Partner, (c) the Partner
executes and delivers a general assignment for the benefit of the Partner's
creditors, (d) the Partner files an answer or other pleading admitting or
failing to contest the material allegations of a petition filed against the
Partner in any proceeding of the nature described in clause (b) above, (e) the
Partner seeks, consents to or acquiesces in the appointment of a trustee,
receiver or liquidator for the Partner or for all or any substantial part of the
Partner's properties, (f) any proceeding seeking liquidation, reorganization or
other relief under any bankruptcy, insolvency or other similar law now or
hereafter in effect has not been dismissed within one hundred twenty (120) days
after the commencement thereof, (g) the appointment without the Partner's
consent or acquiescence of a trustee, receiver of liquidator has not been
vacated or stayed within ninety (90) days of such appointment or (h) an
appointment referred to in clause (g) is not vacated within ninety (90) days
after the expiration of any such stay.
"Indemnitee" means (i) any Person made a party to a proceeding
by reason of its status as (A) a General Partner, (B) a Limited Partner, or (C)
a trustee, director or officer of the Partnership, or any General Partner and
(ii) such other Persons (including Affiliates of any General Partner, a Limited
Partner or the Partnership) as the Managing General Partner may designate from
time to time (whether before or after the event giving rise to potential
liability), in its sole and absolute discretion.
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"Limited Partner" means any Person named as a Limited Partner
in Exhibit A, as such Exhibit may be amended from time to time, 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.
"Liquidating Event" has the meaning set forth in Section 13.1.
"Liquidator" has the meaning set forth in Section 13.2.A.
"Managing General Partner" means Equity Office Properties
Trust, a Maryland real estate investment trust, or its successors, as managing
general partner of the Partnership.
"Managing General Partner Payment" has the meaning set forth
in Section 15.14 hereof.
"Net Income" means, for any taxable period, the excess, if
any, of the Partnership's items of income and gain for such taxable period over
the Partnership's items of loss and deduction for such taxable period. The items
included in the calculation of Net Income shall be determined in accordance with
Exhibit B. If an item of income, gain, loss or deduction that has been included
in the initial computation of Net Income is subjected to the special allocation
rules in Exhibit C, Net Income or the resulting Net Loss, whichever the case may
be, shall be recomputed without regard to such item.
"Net Loss" means, for any taxable period, the excess, if any,
of the Partnership's items of loss and deduction for such taxable period over
the Partnership's items of income and gain for such taxable period. The items
included in the calculation of Net Loss shall be determined in accordance with
Exhibit B. If an item of income, gain, loss or deduction that has been included
in the initial computation of Net Loss is subjected to the special allocation
rules in Exhibit C, Net Loss or the resulting Net Income, whichever the case may
be, shall be recomputed without regard to such item.
"New Securities" means (i) any rights, options, warrants or
convertible or exchangeable securities having the right to subscribe for or
purchase shares of beneficial interest (or other comparable equity interest) of
the Managing General Partner, excluding grants under any Share Option Plan, or
(ii) any Debt issued by the Managing General Partner that provides any of the
rights described in clause (i).
"Nonrecourse Built-in Gain" means, with respect to any
Contributed Properties or Adjusted Properties that are subject to a mortgage or
negative pledge securing a Nonrecourse Liability, the amount of any taxable gain
that would be allocated to the Partners pursuant to Section 2.B of Exhibit C if
such properties were disposed of in a taxable transaction in full satisfaction
of such liabilities and for no other consideration.
"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).
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"Nonrecourse Liability" has the meaning set forth in
Regulations Section 1.752-1(a)(2).
"Notice of Redemption" means a Notice of Redemption
substantially in the form of Exhibit D.
"Opportunity Partnerships" means, Zell/Merrill Lynch Real
Estate Opportunity Partners Limited Partnership, Zell/Merrill Lynch Real Estate
Opportunity Partners Limited Partnership II, Zell/Merrill Lynch Real Estate
Opportunity Partners Limited Partnership III, and Zell/Merrill Lynch Real Estate
Opportunity Partners Limited Partnership IV.
"Partner" means a General Partner or a Limited Partner, and
"Partners" means the General Partners 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 upon the terms and conditions set forth in this Agreement, or any successor
to such limited partnership.
"Partnership Interest" means a Limited Partnership Interest or
a General Partnership Interest 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.
"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 Managing General Partner either (i) 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 the General Partner Entity for a distribution to its
shareholders of some or all of its portion of such distribution, or (ii) if
applicable, for determining the Partners entitled to vote on or consent to any
proposed action for which the consent or approval of the Partners is sought
pursuant to Section 14.2 hereof.
"Partnership Unit" means a fractional, undivided share of the
Partnership Interests of all Partners issued pursuant to Sections 4.1 and 4.2,
and includes Class A Units, Class B Units and any other classes or series of
Partnership Units established after the date hereof. The number of Partnership
Units
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outstanding and the Percentage Interests in the Partnership represented by such
Partnership Units are set forth in Exhibit A, as such Exhibit may be amended
from time to time.
"Partnership Year" means the fiscal year of the Partnership,
which shall be the calendar year.
"Percentage Interest" means, as to a Partner holding a class
of Partnership Interests, its interest in such class, determined by dividing the
Partnership Units of such class owned by such Partner by the total number of
Partnership Units of such class then outstanding as specified in Exhibit A, as
such exhibit may be amended from time to time, multiplied by the aggregate
Percentage Interest allocable to such class of Partnership Interests. If the
Partnership shall at any time have outstanding more than one class of
Partnership Interests, the Percentage Interest attributable to each class of
Partnership Interests shall be determined as set forth in Section 4.2.B.
"Person" means a natural person, partnership (whether general
or limited), trust, estate, association, corporation, limited liability company,
unincorporated organization, custodian, nominee or any other individual or
entity in its own or any representative capacity.
"Predecessor Entity" has the meaning set forth in the
definition of "Conversion Factor" herein.
"Publicly Traded" means listed or admitted to trading on the
New York Stock Exchange, the American Stock Exchange or another national
securities exchange or designated for quotation on the NASDAQ National Market,
or any successor to any of the foregoing.
"Qualified REIT Subsidiary" means any Subsidiary of the
Managing General Partner that is a "qualified REIT subsidiary" within the
meaning of Section 856(i) of the Code.
"Qualified Transferee" means an "Accredited Investor" as
defined in Rule 501 promulgated under the Securities Act.
"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.
"Redeeming Partner" has the meaning set forth in Section
8.6.A.
"Redemption Amount" means either the Cash Amount or the Shares
Amount, as determined by the Managing General Partner, in its sole and absolute
discretion; provided that if the Shares are not Publicly Traded at the time a
Redeeming Partner exercises its Redemption Right, the Redemption Amount shall be
paid only in the form of the Cash Amount unless the Redeeming Partner, in its
sole and absolute discretion, consents to payment of the Redemption Amount in
the form of the Shares Amount. A Redeeming Partner shall have no right, without
the Managing General Partner's consent, in its sole and absolute discretion, to
receive the Redemption Amount in the form of the Shares Amount.
"Redemption Right" has the meaning set forth in Section 8.6.A.
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"Regulation" or "Regulations" means the Income Tax 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.
"REIT Requirements" has the meaning set forth in Section
5.1.A.
"Residual Gain" or "Residual Loss" means any item of gain or
loss, as the case may be, of the Partnership recognized for federal income tax
purposes resulting from a sale, exchange or other disposition of Contributed
Property or Adjusted Property, to the extent such item of gain or loss is not
allocated pursuant to Section 2.B.1(a) or 2.B.2(a) of Exhibit C to eliminate
Book-Tax Disparities.
"Safe Harbor" has the meaning set forth in Section 11.6.F.
"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 at the time of contribution as determined by the
General Partners using such reasonable method of valuation as they may adopt;
provided, however, subject to Exhibit B, the General Partners shall, in their
sole and absolute discretion, use such method as they deem reasonable and
appropriate to allocate the aggregate of the 704(c) Value of Contributed
Properties in a single or integrated transaction among each separate property on
a basis proportional to its fair market values. The 704(c) Values of the
Contributed Properties contributed to the Partnership as part of or in
connection with the Consolidation are set forth on Exhibit E.
"Share" means a share of beneficial interest (or other
comparable equity interest) of the General Partner Entity. Shares may be issued
in one or more classes or series in accordance with the terms of the Declaration
of Trust (or, if the Managing General Partner is not the General Partner Entity,
the organizational documents of the General Partner Entity). If there is more
than one class or series of Shares, the term "Shares" shall, as the context
requires, be deemed to refer to the class or series of Shares that correspond to
the class or series of Partnership Interests for which the reference to Shares
is made. When used with reference to Class A Units, the term "Shares" refers to
common shares of beneficial interest (or other comparable equity interest) of
the General Partner Entity.
"Shares Amount" means a number of Shares equal to the product
of the number of Partnership Units offered for redemption by a Redeeming Partner
times the Conversion Factor; provided that, if the General Partner Entity issues
to all holders of Shares rights, options, warrants or convertible or
exchangeable securities entitling such holders to subscribe for or purchase
Shares or any other securities or property (collectively, the "rights"), then
the Shares Amount shall also include such rights that a holder of that number of
Shares would be entitled to receive.
"Share Option Plan" means any equity incentive plan of the
Managing General Partner, the Partnership and/or any Affiliate of the
Partnership.
"Specified Redemption Date" means the tenth Business Day after
receipt by the Managing General Partner of a Notice of Redemption; provided
that, if the Shares are not Publicly Traded, the Specified Redemption Date means
the thirtieth Business Day after receipt by the Managing General Partner of a
Notice of Redemption.
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"Subsidiary" means, with respect to any Person, any
corporation, limited liability company, trust, partnership or joint venture, 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.
"Successor Entity" has the meaning set forth in the definition
of "Conversion Factor" herein.
"Terminating Capital Transaction" means any sale or other
disposition of all or substantially all of the assets of the Partnership for
cash or a related series of transactions that, taken together, result in the
sale or other disposition of all or substantially all of the assets of the
Partnership for cash.
"Termination Transaction" has the meaning set forth in Section
11.2.B.
"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 Exhibit B) as of such
date, over (ii) the Carrying Value of such property (prior to any adjustment to
be made pursuant to Exhibit B) 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
Exhibit B) as of such date, over (ii) the fair market value of such property (as
determined under Exhibit B) as of such date.
"Valuation Date" means the date of receipt by the Managing
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 any outstanding Shares of the
General Partner Entity that are Publicly Traded, the average of the daily market
price for the ten consecutive trading days immediately preceding the date with
respect to which value must be determined. The market price for each such
trading day shall be 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. If the outstanding Shares of the General Partner Entity are Publicly
Traded and the Shares Amount includes rights that a holder of Shares would be
entitled to receive, then the Value of such rights shall be determined by the
Managing General Partner acting in good faith on the basis of such quotations
and other information as it considers, in its reasonable judgment, appropriate.
If the Shares of the General Partner Entity are not Publicly Traded, the Value
of the Shares Amount per Partnership Unit offered for redemption (which will be
the Cash Amount per Partnership Unit offered for redemption payable pursuant to
Section 8.6.A) means the amount that a holder of one Partnership Unit would
receive if each of the assets of the Partnership were to be sold for its fair
market value on the Specified Redemption Date, the Partnership were to pay all
of its outstanding liabilities, and the remaining proceeds were to be
distributed to the Partners in accordance with the terms of this Agreement. Such
Value shall be determined by the Managing General Partner, acting in good faith
and based upon a commercially reasonable estimate of the amount that would be
realized by the Partnership if each asset of the Partnership (and each asset of
each partnership, limited liability company, trust, joint venture or other
entity in which the Partnership owns a direct or indirect
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interest) were sold to an unrelated purchaser in an arms' length transaction
where neither the purchaser nor the seller were under economic compulsion to
enter into the transaction (without regard to any discount in value as a result
of the Partnership's minority interest in any property or any illiquidity of the
Partnership's interest in any property). In connection with determining the
Deemed Value of the Partnership Interest for purposes of determining the number
of additional Partnership Units issuable upon a Capital Contribution funded by
an underwritten public offering or an arm's length private placement of shares
of beneficial interest (or other comparable equity interest) of the Managing
General Partner, the Value of such shares shall be the public offering or arm's
length private placement price per share of such class of beneficial interest
(or other comparable equity interest) sold.
ARTICLE II
ORGANIZATIONAL MATTERS
SECTION 2.1 ORGANIZATION
The Partnership is a limited partnership organized 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. The Partnership Interest of each
Partner shall be personal property for all purposes.
SECTION 2.2 NAME
The name of the Partnership is EOP Operating Limited
Partnership. The Partnership's business may be conducted under any other name or
names deemed advisable by the General Partners, including the name of any of the
General Partners or any Affiliate thereof. The words "Limited Partnership,"
"L.P.," "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 Partners in their sole and
absolute discretion may change the name of the Partnership at any time and from
time to time and shall notify the Limited Partners of such change in the next
regular communication to the Limited Partners.
SECTION 2.3 REGISTERED OFFICE AND AGENT; PRINCIPAL OFFICE
The address of the registered office of the Partnership in the
State of Delaware shall be located at Corporation Trust Center, 1209 Orange
Street, 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 shall be Corporation Trust Company. The principal office of
the Partnership shall be Two North Riverside Plaza, Suite 2200, Chicago,
Illinois 60606, or such other place as the General Partners 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 Delaware as
the General Partners deem advisable.
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SECTION 2.4 TERM
The term of the Partnership shall commence on November 1,
1996, and shall continue until December 31, 2095, unless it is dissolved sooner
pursuant to the provisions of Article XIII or as otherwise provided by law.
ARTICLE III
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; provided, however, that such
business shall be limited to and conducted in such a manner as to permit the
General Partner Entity at all times to be classified as a REIT, unless the
General Partner Entity ceases to qualify or is not qualified as a REIT for any
reason or reasons not related to the business conducted by the Partnership, (ii)
to enter into any corporation, partnership, joint venture, trust, limited
liability company or other similar arrangement to engage in any of the foregoing
or the ownership of interests in any entity engaged, directly or indirectly, in
any of the foregoing and (iii) to do anything necessary or incidental to the
foregoing. In connection with the foregoing, the Partners acknowledge that the
status of the General Partner Entity as a REIT inures to the benefit of all the
Partners and not solely to the General Partner Entity or its Affiliates.
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, including, without
limitation, full power and authority, directly or through its ownership interest
in other entities, to enter into, perform and carry out contracts of any kind,
borrow money and issue evidences of indebtedness, whether or not secured by
mortgage, deed of trust, pledge or other lien, acquire, own, manage, improve and
develop real property, and lease, sell, transfer and dispose of real property;
provided, however, that the Partnership shall not take, or refrain from taking,
any action which, in the judgment of the Managing General Partner, in its sole
and absolute discretion, (i) could adversely affect the ability of the General
Partner Entity to continue to qualify as a REIT, (ii) could subject the General
Partner Entity 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 any General Partner or its securities, unless
such action (or inaction) shall have been specifically consented to by the
General Partner in writing.
ARTICLE IV
CAPITAL CONTRIBUTIONS AND ISSUANCES
OF PARTNERSHIP INTERESTS
SECTION 4.1 CAPITAL CONTRIBUTIONS OF THE PARTNERS
At the time of the execution of this Agreement, the Partners
shall make or shall have made the Capital Contributions as set forth in Exhibit
A. The Partners shall own Partnership Units in the
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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 Managing General Partner to the
extent necessary to reflect accurately redemptions, Capital Contributions, the
issuance of additional Partnership Units or similar events having an effect on a
Partner's Percentage Interest. To the extent the Partnership is acquiring any
property by the merger of any other Person into the Partnership, Persons who
receive Partnership Interests in exchange for their interests in the Person
merging into the Partnership shall become Partners and shall be deemed to have
made Capital Contributions as provided in the applicable merger agreement and as
set forth in Exhibit A. A number of Partnership Units held by each of the
General Partners equal to one percent (1%) of all outstanding Partnership Units
(as of the closing date of the Consolidation) shall be deemed to be the General
Partner Partnership Units and shall be the General Partnership Interest of such
General Partner. All other Partnership Units held by the General Partners shall
be deemed to be Limited Partnership Interests and shall be held by the General
Partners in their capacity as Limited Partners in the Partnership. Except as
provided in Sections 7.5 and 10.5 hereof, the Partners shall have no obligation
to make any additional Capital Contributions or provide any additional funding
to the Partnership (whether in the form of loans, repayments of loans or
otherwise). No Partner shall have any obligation to restore any deficit that may
exist in its Capital Account, either upon a liquidation of the Partnership or
otherwise.
SECTION 4.2 ISSUANCES OF PARTNERSHIP INTERESTS
A. General. The Managing General Partner is hereby authorized
to cause the Partnership from time to time to issue to Partners (including the
Managing General Partner and its Affiliates) or other Persons (including,
without limitation, in connection with the contribution of property to the
Partnership) Partnership Units or other Partnership Interests in one or more
classes, or in one or more series of any of such classes, with such
designations, preferences and relative, participating, optional or other special
rights, powers and duties, including rights, powers and duties senior to Limited
Partnership Interests, all as shall be determined, subject to applicable
Delaware law, by the Managing General Partner in its sole and absolute
discretion, 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 that, no such Partnership Units or
other Partnership Interests shall be issued to the Managing General Partner
unless either (a) the Partnership Interests are issued in connection with the
grant, award or issuance of Shares or other equity interests in the Managing
General Partner having designations, preferences and other rights such that the
economic interests attributable to such Shares or other equity interests are
substantially similar to the designations, preferences and other rights (except
voting rights) of the Partnership Interests issued to the Managing General
Partner in accordance with this Section 4.2.A or (b) the additional Partnership
Interests are issued to all Partners holding Partnership Interests in the same
class in proportion to their respective Percentage Interests in such class. If
the Partnership issues Partnership Interests pursuant to this Section 4.2.A, the
Managing General Partner shall make such revisions to this Agreement (including
but not limited to the revisions described in Section 5.4, Section 6.2 and
Section 8.6) as it deems necessary to reflect the issuance of such Partnership
Interests.
B. Percentage Interest Adjustments in the Case of Capital
Contributions for Partnership Units. Upon the acceptance of additional Capital
Contributions in exchange for Partnership Units and if the Partnership shall
have outstanding more than one class of Partnership Interests, the Percentage
Interest related thereto shall be equal to a fraction, the numerator of which is
equal to the
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amount of cash, if any, plus the Agreed Value of Contributed Property, if any,
contributed with respect to such additional Partnership Units and the
denominator of which is equal to the sum of (i) the Deemed Value of the
Partnership Interests for all outstanding classes (computed as of the Business
Day immediately preceding the date on which the additional Capital Contributions
are made (an "Adjustment Date")) plus (ii) the aggregate amount of additional
Capital Contributions contributed to the Partnership on such Adjustment Date in
respect of such additional Partnership Units. The Percentage Interest of each
other Partner holding Partnership Interests not making a full pro rata Capital
Contribution shall be adjusted to a fraction the numerator of which is equal to
the sum of (i) the Deemed Partnership Interest Value of such Limited Partner
(computed as of the Business Day immediately preceding the Adjustment Date) plus
(ii) the amount of additional Capital Contributions (such amount being equal to
the amount of cash, if any, plus the Agreed Value of Contributed Property, if
any, so contributed), if any, made by such Partner to the Partnership in respect
of such Partnership Interest as of such Adjustment Date and the denominator of
which is equal to the sum of (i) the Deemed Value of the Partnership Interests
of all outstanding classes (computed as of the Business Day immediately
preceding such Adjustment Date) plus (ii) the aggregate amount of the additional
Capital Contributions contributed to the Partnership on such Adjustment Date in
respect of such additional Partnership Interests. For purposes of calculating a
Partner's Percentage Interest pursuant to this Section 4.2.B, cash Capital
Contributions by a General Partner will be deemed to equal the cash contributed
by such General Partner plus (a) in the case of cash contributions funded by an
offering of any equity interests in or other securities of the Managing General
Partner, the offering costs attributable to the cash contributed to the
Partnership, and (b) in the case of Partnership Units issued pursuant to Section
7.5.E, an amount equal to the difference between the Value of the Shares sold
pursuant to any Share Option Plan and the net proceeds of such sale.
C. Classes of Partnership Units. From and after the Effective
Date, subject to Section 4.2.A above, the Partnership shall have two classes of
Partnership Units entitled "Class A Units" and "Class B Units." Either Class A
Units or Class B Units, at the election of the Managing General Partner, in its
sole and absolute discretion, may be issued to newly admitted Partners in
exchange for the contribution by such Partners of cash, real estate partnership
interests, stock, notes or other assets or consideration; provided, that all
Partnership Units issued to Partners in connection with the Consolidation shall
be Class A Units; and, provided further, that any Partnership Unit that is not
specifically designated by the General Partner as being of a particular class
shall be deemed to be a Class A Unit. Each Class B Unit shall be converted
automatically into a Class A Unit on the day immediately following the
Partnership Record Date for the Distribution Period (as defined in Section
5.1.C) in which such Class B Unit was issued, without the requirement for any
action by either the Partnership or the Partner holding the Class B Unit.
SECTION 4.3 NO PREEMPTIVE RIGHTS
Except to the extent expressly granted by the Partnership
pursuant to another agreement, 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 Units or
other Partnership Interests.
SECTION 4.4 OTHER CONTRIBUTION PROVISIONS
If any Partner is admitted to the Partnership and is given a
Capital Account in exchange for services rendered to the Partnership, such
transaction shall be treated by the Partnership and the
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affected Partner as if the Partnership had compensated such Partner in cash, and
the Partner had contributed such cash to the capital of the Partnership.
SECTION 4.5 NO INTEREST ON CAPITAL
No Partner shall be entitled to interest on its Capital
Contributions or its Capital Account.
ARTICLE V
DISTRIBUTIONS
SECTION 5.1 REQUIREMENT AND CHARACTERIZATION OF DISTRIBUTIONS
A. General. The General Partners shall distribute at least
quarterly an amount equal to one hundred percent (100%) of Available Cash
generated by the Partnership during such quarter or shorter period to the
Partners who are Partners on the Partnership Record Date with respect to such
quarter or shorter period as provided in Sections 5.1.B, 5.1.C and 5.1.D.
Notwithstanding anything to the contrary contained herein, in no event may a
Partner receive a distribution of Available Cash with respect to a Partnership
Unit for a quarter or shorter period if such Partner is entitled to receive a
distribution with respect to a Share for which such Partnership Unit has been
redeemed or exchanged. Unless otherwise expressly provided for herein or in an
agreement at the time a new class of Partnership Interests is created in
accordance with Article IV hereof, no Partnership Interest shall be entitled to
a distribution in preference to any other Partnership Interest. The General
Partners shall make such reasonable efforts, as determined by them in their sole
and absolute discretion and consistent with the qualification of the General
Partner Entity as a REIT, to distribute Available Cash (a) to Limited Partners
so as to preclude any such distribution or portion thereof from being treated as
part of a sale of property of the Partnership by a Limited Partner under Section
707 of the Code or the Regulations thereunder; provided that, the General
Partners and the Partnership shall not have liability to a Limited Partner under
any circumstances as a result of any distribution to a Limited Partner being so
treated, and (b) to the General Partners in an amount sufficient to enable the
General Partner Entity to pay shareholder dividends that will (1) satisfy the
requirements for qualification as a REIT under the Code and the Regulations (the
"REIT Requirements") of, and (2) avoid any federal income or excise tax
liability for, the General Partner Entity.
B. Method. (i) Each holder of Partnership Interests that is
entitled to any preference in distribution shall be entitled to a distribution
in accordance with the rights of any such class of Partnership Interests (and,
within such class, pro rata in proportion to the respective Percentage Interests
on such Partnership Record Date); and
(ii) To the extent there is Available Cash remaining after the
payment of any preference in distribution in accordance with the foregoing
clause (i), with respect to Partnership Interests that are not entitled to any
preference in distribution, pro rata to each such class in accordance with the
terms of such class (and, within each such class, pro rata in proportion to the
respective Percentage Interests on such Partnership Record Date).
C. Distributions When Class B Units Are Outstanding. If for
any quarter or shorter period with respect to which a distribution is to be made
(a "Distribution Period") Class B Units are outstanding on the Partnership
Record Date for such Distribution Period, the General Partners shall
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allocate the Available Cash with respect to such Distribution Period available
for distribution with respect to the Class A Units and Class B Units
collectively between the Partners who are holders of Class A Units ("Class A")
and the Partners who are holders of Class B Units ("Class B") as follows:
(1) Class A shall receive that
portion of the Available Cash (the "Class A Share")
determined by multiplying the amount of Available
Cash by the following fraction:
A x Y
--------------------------
(A x Y)+(B x X)
(2) Class B shall receive that
portion of the Available Cash (the "Class B Share")
determined by multiplying the amount of Available
Cash by the following fraction:
B x X
--------------------------
(A x Y)+(B x X)
(3) For purposes of the foregoing
formulas, (i) "A" equals the number of Class A Units
outstanding on the Partnership Record Date for such
Distribution Period; (ii) "B" equals the number of
Class B Units outstanding on the Partnership Record
Date for such Distribution Period; (iii) "Y" equals
the number of days in the Distribution Period; and
(iv) "X" equals the number of days in the
Distribution Period for which the Class B Units were
issued and outstanding.
The Class A Share shall be distributed among Partners holding
Class A Units on the Partnership Record Date for the Distribution Period in
accordance with the number of Class A Units held by each Partner on such
Partnership Record Date; provided that, in no event may a Partner receive a
distribution of Available Cash with respect to a Class A Unit if a Partner is
entitled to receive a distribution out of such Available Cash with respect to a
Share for which such Class A Unit has been redeemed or exchanged. The Class B
Shares shall be distributed among the Partners holding Class B Units on the
Partnership Record Date for the Distribution Period in accordance with the
number of Class B Units held by each Partner on such Partnership Record Date. In
no event shall any Class B Units
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be entitled to receive any distribution of Available Cash for any Distribution
Period ending prior to the date on which such Class B Units are issued.
D. Distributions When Class B Units Have Been Issued on
Different Dates. If Class B Units which have been issued on different dates are
outstanding on the Partnership Record Date for any Distribution Period, then the
Class B Units issued on each particular date shall be treated as a separate
series of Partnership Units for purposes of making the allocation of Available
Cash for such Distribution Period among the holders of Partnership Units (and
the formula for making such allocation, and the definitions of variables used
therein, shall be modified accordingly). Thus, for example, if two series of
Class B Units are outstanding on the Partnership Record Date for any
Distribution Period, the allocation formula for each series, "Series B(1)" and
"Series B(2)" would be as follows:
(1) Series B(1) shall receive that
portion of the Available Cash determined by
multiplying the amount of Available Cash by the
following fraction:
B(1) x X(1)
--------------------------------------
(A x Y)+(B(1) x X(1))+(B(2) x X(2))
(2) Series B(2) shall receive that
portion of the Available Cash determined by
multiplying the amount of Available Cash by the
following fraction:
B(2) x X(2)
--------------------------------------
(A x Y)+(B(1) x X(1))+(B(2) x X(2))
(3) For purposes of the foregoing
formulas the definitions set forth in Section 5.1.C.3
remain the same except that (i) "B(1)" equals the
number of Partnership Units in Series B(1)
outstanding on the Partnership Record Date for such
Distribution Period; (ii) "B(2)" equals the number of
Partnership Units in Series B(2) outstanding on the
Partnership Record Date for such Distribution Period;
(iii) "X(1)" equals the number of days in the
Distribution Period for which the Partnership Units
in Series B(1) were issued and outstanding; and (iv)
"X(2)" equals the number of days in
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the Distribution Period for which the Partnership
Units in Series B(2) were issued and outstanding.
E. Minimum Distributions if Shares Not Publicly Traded. In
addition (and without regard to the amount of Available Cash), if the Shares of
the General Partner Entity are not Publicly Traded, the Managing General Partner
shall make cash distributions with respect to the Class A Units at least
annually for each taxable year of the Partnership beginning prior to the
fifteenth (15th) anniversary of the Effective Date in an aggregate amount with
respect to each such taxable year at least equal to 95% of the Partnership's
taxable income for such year allocable to the Class A Units, with such
distributions to be made not later than 60 days after the end of such year.
SECTION 5.2 AMOUNTS WITHHELD
All amounts withheld pursuant to the Code or any provisions of
any state or local tax law and Section 10.5 with respect to any allocation,
payment or distribution to the General Partners, the Limited Partners or
Assignees shall be treated as amounts distributed to the General Partners,
Limited Partners or Assignees pursuant to Section 5.1 for all purposes under
this Agreement.
SECTION 5.3 DISTRIBUTIONS UPON LIQUIDATION
Proceeds from a Terminating Capital Transaction shall be
distributed to the Partners in accordance with Section 13.2.
SECTION 5.4 REVISIONS TO REFLECT ISSUANCE OF PARTNERSHIP INTERESTS
If the Partnership issues Partnership Interests to the General
Partners or any Additional Limited Partner pursuant to Article IV hereof, the
Managing General Partner shall make such revisions to this Article V and Exhibit
A as it deems necessary to reflect the issuance of such additional Partnership
Interests without the requirements for any other consents or approvals.
ARTICLE VI
ALLOCATIONS
SECTION 6.1 ALLOCATIONS FOR CAPITAL ACCOUNT PURPOSES
For purposes of maintaining the Capital Accounts and in
determining the rights of the Partners among themselves, the Partnership's items
of income, gain, loss and deduction (computed in accordance with Exhibit B)
shall be allocated among the Partners in each taxable year (or portion thereof)
as provided herein below.
A. Net Income. After giving effect to the special allocations
set forth in Section 1 of Exhibit C, Net Income shall be allocated (i) first, to
the General Partners to the extent that Net Losses previously allocated to the
General Partners pursuant to the last sentence of Section 6.1.B exceed Net
Income previously allocated to the General Partners pursuant to this clause (i)
of Section 6.1.A, (ii) second, to the holders of any Partnership Interests that
are entitled to any preference in distribution in accordance with the rights of
any such class of Partnership Interests until each such Partnership Interest has
been allocated, on a cumulative basis pursuant to this clause (ii), Net Income
equal to the amount of
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distributions received which are attributable to the preference of such class of
Partnership Interests (and, within such class, pro rata in proportion to the
respective Percentage Interests as of the last day of the period for which such
allocation is being made) and (iii) third, with respect to Partnership Interests
that are not entitled to any preference in the allocation of Net Income, pro
rata to each such class in accordance with the terms of such class (and, within
such class, pro rata in proportion to the respective Percentage Interests as of
the last day of the period for which such allocation is being made).
B. Net Losses. After giving effect to the special allocations
set forth in Section 1 of Exhibit C, Net Losses shall be allocated (i) first, to
the holders of any Partnership Interests that are entitled to any preference in
distribution in accordance with the rights of any such class of Partnership
Interests to the extent that any prior allocations of Net Income to such class
of Partnership Interests pursuant to Section 6.1.A(ii) exceed, on a cumulative
basis, distributions with respect to such Partnership Interests pursuant to
clause (i) of Section 5.1.B (and, within such class, pro rata in proportion to
the respective Percentage Interests as of the last day of the period for which
such allocation is being made) and (ii) second, with respect to classes of
Partnership Interests that are not entitled to any preference in distribution,
pro rata to each such class in accordance with the terms of such class (and,
within such class, pro rata in proportion to the respective Percentage Interests
as of the last day of the period for which such allocation is being made);
provided that 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 (or increase any
existing Adjusted Capital Account Deficit) at the end of such taxable year (or
portion thereof). All Net Losses in excess of the limitations set forth in this
Section 6.1.B shall be allocated to the General Partners.
C. Allocation of Nonrecourse Debt. For purposes of Regulation
Section 1.752-3(a), the Partners agree that Nonrecourse Liabilities of the
Partnership in excess of the sum of (i) the amount of Partnership Minimum Gain
and (ii) the total amount of Nonrecourse Built-in Gain shall be allocated among
the Partners in accordance with their respective Percentage Interests.
D. Recapture Income. 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 Exhibit C, 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 REVISIONS TO ALLOCATIONS TO REFLECT ISSUANCE OF
PARTNERSHIP INTERESTS
If the Partnership issues Partnership Interests to the General
Partners or any Additional Limited Partner pursuant to Article IV hereof, the
Managing General Partner shall make such revisions to this Article VI and
Exhibit A as it deems necessary to reflect the terms of the issuance of such
Partnership Interests, including making preferential allocations to classes of
Partnership Interests that are entitled thereto. Such revisions shall not
require the consent or approval of any other Partner.
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ARTICLE VII
MANAGEMENT AND OPERATIONS OF BUSINESS
SECTION 7.1 MANAGEMENT
A. Powers of General Partners. Except as otherwise expressly
provided in this Agreement, all management powers over the business and affairs
of the Partnership are and shall be exclusively vested in the General Partners,
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.
The General Partners 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
Partners under any other provision of this Agreement, the Managing General
Partner, subject to Section 7.11, 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 and to effectuate
the purposes set forth in Section 3.1, including, without limitation:
(1) the making of any expenditures, the lending
or borrowing of money (including, without
limitation, making prepayments on loans and
borrowing money to permit the Partnership to
make distributions to its Partners in such
amounts as are required under Section 5.1.E
or will permit the General Partner Entity
(so long as the General Partner Entity
qualifies as 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 the
General Partner Entity 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) and the incurring of any obligations
the General Partner Entity deems necessary
for the conduct of the activities of the
Partnership;
(2) 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;
(3) the acquisition, disposition, mortgage,
pledge, encumbrance, hypothecation or
exchange of any or all of the assets of the
Partnership (including the exercise or grant
of any conversion, option, privilege or
subscription right or other right available
in connection with any assets at any time
held by the Partnership) or the merger or
other combination of the Partnership with or
into another entity on such terms as the
Managing General Partner deems proper;
(4) 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 Partners, the
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Partnership or any of the Partnership's
Subsidiaries, the lending of funds to other
Persons (including, without limitation, the
Managing General Partner, its Subsidiaries
and the Partnership's Subsidiaries) and the
repayment of obligations of the Partnership
and its Subsidiaries and any other Person in
which the Partnership has an equity
investment and the making of capital
contributions to its Subsidiaries;
(5) the management, operation, leasing,
landscaping, repair, alteration, demolition
or improvement of any real property or
improvements owned by the Partnership or any
Subsidiary of the Partnership or any Person
in which the Partnership has made a direct
or indirect equity investment;
(6) the negotiation, execution, and performance
of any contracts, conveyances or other
instruments that the Managing General
Partner considers useful or necessary to the
conduct of the Partnership's operations or
the implementation of the Managing General
Partner's powers under this Agreement,
including contracting with contractors,
developers, consultants, accountants, legal
counsel, other professional advisors and
other agents and the payment of their
expenses and compensation out of the
Partnership's assets;
(7) the mortgage, pledge, encumbrance or
hypothecation of any assets of the
Partnership, and 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 or the operations of the General
Partners or the Partnership, the lending of
funds to other Persons (including, without
limitation, any Subsidiaries of the
Partnership) and the repayment of
obligations of the Partnership, any of its
Subsidiaries and any other Person in which
it has an equity investment;
(8) the distribution of Partnership cash or
other Partnership assets in accordance with
this Agreement;
(9) the holding, managing, investing and
reinvesting of cash and other assets of the
Partnership;
(10) the collection and receipt of revenues and
income of the Partnership;
(11) the selection, designation of powers,
authority and duties and the dismal of
employees of the Partnership (including,
without limitation, employees having titles
such as "president," "vice president,"
"secretary" and "treasurer") and agents,
outside attorneys, accountants, consultants
and contractors of the Partnership and the
determination of their compensation and
other terms of employment or hiring;
(12) the maintenance of such insurance for the
benefit of the Partnership and the Partners
as it deems necessary or appropriate;
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<PAGE> 29
(13) the formation of, or acquisition of an
interest (including non-voting interests in
entities controlled by Affiliates of the
Partnership or third parties) in, and the
contribution of property to, any further
limited or general partnerships, joint
ventures, limited liability companies or
other relationships that it deems desirable
(including, without limitation, the
acquisition of interests in, and the
contributions of funds or property to, or
making of loans to, its Subsidiaries and any
other Person in which it has an equity
investment from time to time, or the
incurrence of indebtedness on behalf of such
Persons or the guarantee of the obligations
of such Persons); provided that, as long as
the Managing General Partner has determined
to continue to qualify as a REIT, the
Partnership may not engage in any such
formation, acquisition or contribution that
would cause the Managing General Partner to
fail to qualify as a REIT;
(14) the control of any matters affecting the
rights and obligations of the Partnership,
including the settlement, compromise,
submission to arbitration or any other form
of dispute resolution or abandonment of any
claim, cause of action, liability, debt or
damages due or owing to or from the
Partnership, the commencement or defense of
suits, legal proceedings, administrative
proceedings, arbitrations or other forms of
dispute resolution, the representation of
the Partnership in all suits or legal
proceedings, administrative proceedings,
arbitrations or other forms of dispute
resolution, the incurring of legal expense
and the indemnification of any Person
against liabilities and contingencies to the
extent permitted by law;
(15) the determination of the fair market value
of any Partnership property distributed in
kind, using such reasonable method of
valuation as the Managing General Partner
may adopt;
(16) the exercise, directly or indirectly,
through any attorney-in-fact acting under a
general or limited power of attorney, of any
right, including the right to vote,
appurtenant to any assets or investment held
by the Partnership;
(17) the exercise of any of the powers of the
General Partners enumerated in this
Agreement on behalf of or in connection with
any Subsidiary of the Partnership or any
other Person in which the Partnership has a
direct or indirect interest, individually or
jointly with any such Subsidiary or other
Person;
(18) the exercise of any of the powers of the
General Partners enumerated in this
Agreement on behalf of any Person in which
the Partnership does not have any interest
pursuant to contractual or other
arrangements with such Person;
(19) the making, executing and delivering of any
and all deeds, leases, notes, deeds to
secure debt, mortgages, deeds of trust,
security agreements,
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conveyances, contracts, guarantees,
warranties, indemnities, waivers, releases
or other legal instruments or agreements in
writing necessary or appropriate in the
judgment of the Managing General Partner for
the accomplishment of any of the powers of
the General Partners enumerated in this
Agreement; and
(20) the distribution of cash to acquire
Partnership Units held by a Limited Partner
in connection with a Limited Partner's
exercise of its Redemption Right under
Section 8.6; and
(21) the amendment and restatement of Exhibit A
to reflect accurately at all times the
Capital Contributions and Percentage
Interests of the Partners as the same are
adjusted from time to time to the extent
necessary to reflect redemptions, Capital
Contributions, the issuance of Partnership
Units, the admission of any Additional
Limited Partner or any Substituted Limited
Partner or otherwise, which amendment and
restatement, notwithstanding anything in
this Agreement to the contrary, shall not be
deemed an amendment of this Agreement, as
long as the matter or event being reflected
in Exhibit A otherwise is authorized by this
Agreement.
B. No Approval by Limited Partners. Except as provided in
Section 7.11, each of the Limited Partners and the other General Partners agrees
that the Managing 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, the Act or any applicable law, rule or
regulation, to the full extent permitted under the Act or other applicable law.
The execution, delivery or performance by the Managing General Partner or the
Partnership of any agreement authorized or permitted under this Agreement shall
not constitute a breach by the Managing General Partner of any duty that the
Managing 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. Insurance. At all times from and after the date hereof, the
Managing General Partner may cause the Partnership to obtain and maintain (i)
casualty, liability and other insurance on the properties of the Partnership and
(ii) liability insurance for the Indemnitees hereunder and (iii) such other
insurance as the Managing General Partner, in its sole and absolute discretion,
determines to be necessary.
D. Working Capital and Other Reserves. At all times from and
after the date hereof, the Managing General Partner may cause the Partnership to
establish and maintain working capital reserves in such amounts as the Managing
General Partner, in its sole and absolute discretion, deems appropriate and
reasonable from time to time, including upon liquidation of the Partnership
under Section 13.
E. No Obligations to Consider Tax Consequences of Limited
Partners. In exercising their authority under this Agreement, the General
Partners may, but shall be under no obligation to, take into account the tax
consequences to any Partner (including the General Partners) of any action taken
(or not taken) by any of them. The General Partners and the Partnership shall
not have liability to a Limited Partner for monetary damages or otherwise for
losses sustained, liabilities incurred
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or benefits not derived by such Limited Partner in connection with such
decisions, provided that the General Partners have acted in good faith and
pursuant to their authority under this Agreement.
SECTION 7.2 CERTIFICATE OF LIMITED PARTNERSHIP
The General Partners have previously filed the Certificate
with the Secretary of State of Delaware. To the extent that such action is
determined by the General Partners to be reasonable and necessary or
appropriate, the General Partners 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 state, the
District of Columbia or other jurisdiction in which the Partnership may elect to
do business or own property. Subject to the terms of Section 8.5.A(4), the
General Partners 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 Managing 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 state, the District of
Columbia or other jurisdiction in which the Partnership may elect to do business
or own property.
SECTION 7.3 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 Partners, 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, any General Partner or one or more nominees, as the Managing
General Partner may determine, including Affiliates of the General Partners. The
General Partners hereby declare and warrant that any Partnership assets for
which legal title is held in the name of any General Partner or any nominee or
Affiliate of the General Partners shall be held by that General Partner for the
use and benefit of the Partnership in accordance with the provisions of this
Agreement. 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 7.4 REIMBURSEMENT OF THE GENERAL PARTNERS
A. No Compensation. Except as provided in this Section 7.4 and
elsewhere in this Agreement (including the provisions of Articles V and VI
regarding distributions, payments and allocations to which it may be entitled),
the General Partners shall not be compensated for their services as general
partners of the Partnership.
B. Responsibility for Partnership Expenses. The Partnership
shall be responsible for and shall pay all expenses relating to the
Partnership's organization, the ownership of its assets and its operations. The
Managing General Partner shall be reimbursed on a monthly basis, or such other
basis as the Managing General Partner may determine in its sole and absolute
discretion, for all expenses it incurs relating to the ownership and operation
of, or for the benefit of, the Partnership (including, without limitation,
expenses related to the operations of the General Partners and to the management
and administration of any Subsidiaries of the Managing General Partner or the
Partnership or Affiliates of the Partnership, such as auditing expenses and
filing fees); provided that, the amount of any such
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<PAGE> 32
reimbursement shall be reduced by (i) any interest earned by the Managing
General Partner with respect to bank accounts or other instruments or accounts
held by it on behalf of the Partnership as permitted in Section 7.5.A (which
interest is considered to belong to the Partnership and shall be paid over to
the Partnership to the extent not applied to reimburse the Managing General
Partner for expenses hereunder); and (ii) any amount derived by the Managing
General Partner from any investments permitted in Section 7.5.A. The Managing
General Partner shall determine in good faith the amount of expenses incurred by
it related to the ownership and operation of, or for the benefit of, the
Partnership. If certain expenses are incurred for the benefit of the Partnership
and other entities (including the Managing General Partner), such expenses will
be allocated to the Partnership and such other entities in such a manner as the
Managing General Partner in its sole and absolute discretion deems fair and
reasonable. Such reimbursements shall be in addition to any reimbursement to the
Managing General Partner pursuant to Section 10.3.C and as a result of
indemnification pursuant to Section 7.7. All payments and reimbursements
hereunder shall be characterized for federal income tax purposes as expenses of
the Partnership incurred on its behalf, and not as expenses of the Managing
General Partner.
C. Partnership Interest Issuance Expenses. The Managing
General Partner shall also be reimbursed for all expenses it incurs relating to
any issuance of Partnership Interests, Shares, Debt of the Partnership or the
Managing General Partner or rights, options, warrants or convertible or
exchangeable securities pursuant to Article IV (including, without limitation,
all costs, expenses, damages and other payments resulting from or arising in
connection with litigation related to any of the foregoing), all of which
expenses are considered by the Partners to constitute expenses of, and for the
benefit of, the Partnership.
D. Purchases of Shares by the Managing General Partner. If the
Managing General Partner exercises its rights under the Declaration of Trust to
purchase Shares or otherwise elects to purchase from its shareholders Shares in
connection with a share repurchase or similar program or for the purpose of
delivering such Shares to satisfy an obligation under any dividend reinvestment
or equity purchase program adopted by the Managing General Partner, any employee
equity purchase plan adopted by the Managing General Partner or any similar
obligation or arrangement undertaken by the Managing General Partner in the
future, the purchase price paid by the Managing General Partner for those Shares
and any other expenses incurred by the Managing General Partner in connection
with such purchase shall be considered expenses of the Partnership and shall be
reimbursable to the Managing General Partner, subject to the conditions that:
(i) if those Shares subsequently are to be sold by the Managing General Partner,
the Managing General Partner shall pay to the Partnership any proceeds received
by the Managing General Partner for those Shares (provided that a transfer of
Shares for Partnership Units pursuant to Section 8.6 would not be considered a
sale for such purposes); and (ii) if such Shares are not retransferred by the
Managing General Partner within thirty (30) days after the purchase thereof, the
Managing General Partner shall cause the Partnership to cancel a number of
Partnership Units (rounded to the nearest whole Partnership Unit) held by the
Managing General Partner equal to the product attained by multiplying the number
of those Shares by a fraction, the numerator of which is one and the denominator
of which is the Conversion Factor.
E. Reimbursement not a Distribution. If and to the extent any
reimbursement made pursuant to this Section 7.4 is determined for federal income
tax purposes not to constitute a payment of expenses of the Partnership, the
amount so determined shall constitute a guaranteed payment with respect to
capital within the meaning of Section 707(c) of the Code, shall be treated
consistently therewith by the Partnership and all Partners and shall not be
treated as a distribution for purposes of computing the Partners' Capital
Accounts.
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<PAGE> 33
SECTION 7.5 OUTSIDE ACTIVITIES OF THE GENERAL PARTNERS; RELATIONSHIP
OF SHARES TO PARTNERSHIP UNITS; FUNDING DEBT
A. General. Without the Consent of the Outside Limited
Partners, the General Partners shall not, directly or indirectly, enter into or
conduct any business other than in connection with the ownership, acquisition
and disposition of Partnership Interests as a General Partner or Limited Partner
and the management of the business of the Partnership and such activities as are
incidental thereto. Without the Consent of the Outside Limited Partners, the
assets of the Managing General Partner shall be limited to Partnership Interests
and permitted debt obligations of the Partnership (as contemplated by Section
7.5.F), so that Shares and Partnership Units are completely fungible except as
otherwise specifically provided herein; provided, that the Managing General
Partner shall be permitted to hold such bank accounts or similar instruments or
accounts in its name as it deems necessary to carry out its responsibilities and
purposes as contemplated under this Agreement and its organizational documents
(provided that accounts held on behalf of the Partnership to permit the Managing
General Partner to carry out its responsibilities under this Agreement shall be
considered to belong to the Partnership and the interest earned thereon shall,
subject to Section 7.4.B, be applied for the benefit of the Partnership); and,
provided further, that the General Partners shall be permitted to acquire,
directly or through a Qualified REIT Subsidiary or limited liability company, up
to a one percent (1%) interest in any partnership or limited liability company
at least ninety-nine percent (99%) of the equity of which is owned, directly or
indirectly, by the Partnership. The Managing General Partner and any of its
Affiliates may acquire Limited Partnership Interests and shall be entitled to
exercise all rights of a Limited Partner relating to such Limited Partnership
Interests.
B. Repurchase of Shares. If the Managing General Partner
exercises its rights under the Declaration of Trust to purchase Shares or
otherwise elects to purchase from its shareholders Shares in connection with a
share repurchase or similar program or for the purpose of delivering such shares
to satisfy an obligation under any dividend reinvestment or share purchase
program adopted by the Managing General Partner, any employee share purchase
plan adopted by the Managing General Partner or any similar obligation or
arrangement undertaken by the Managing General Partner in the future, then the
Managing General Partner shall cause the Partnership to purchase from the
Managing General Partner that number of Partnership Units of the appropriate
class equal to the product obtained by multiplying the number of Shares
purchased by the Managing General Partner times a fraction, the numerator of
which is one and the denominator of which is the Conversion Factor, on the same
terms and for the same aggregate price that the Managing General Partner
purchased such Shares.
C. Forfeiture of Shares. If the Partnership or the Managing
General Partner acquires Shares as a result of the forfeiture of such Shares
under a restricted or similar share plan, then the Managing General Partner
shall cause the Partnership to cancel that number of Partnership Units equal to
the number of Shares so acquired, and, if the Partnership acquired such Shares,
it shall transfer such Shares to the Managing General Partner for cancellation.
D. Issuances of Shares. After the Effective Date, the Managing
General Partner shall not grant, award, or issue any additional Shares (other
than Shares issued pursuant to Section 8.6 hereof, pursuant to a dividend or
distribution (including any share split) of Shares to all of its shareholders,
or in connection with any acquisition permitted by Section 7.5.A hereof of up to
a one percent (1%) interest in any partnership or limited liability company at
least ninety-nine percent (99%) of the equity of which is owned, directly or
indirectly, by the Partnership), other equity securities of the Managing General
Partner, New Securities or Convertible Funding Debt unless (i) the Managing
General Partner shall cause, pursuant to Section 4.2.A hereof, the Partnership
to issue to the Managing General Partner Partnership Interests or rights,
options, warrants or convertible or exchangeable securities of the
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Partnership having designations, preferences and other rights, all such that the
economic interests are substantially the same as those of such additional
Shares, other equity securities, New Securities or Convertible Funding Debt, as
the case may be, and (ii) the Managing General Partner transfers to the
Partnership, as an additional Capital Contribution, the proceeds from the grant,
award, or issuance of such additional Shares, other equity securities, New
Securities or Convertible Funding Debt, as the case may be, or from the exercise
of rights contained in such additional Shares, other equity securities, New
Securities or Convertible Funding Debt, as the case may be. Without limiting the
foregoing, the Managing General Partner is expressly authorized to issue
additional Shares, other equity securities, New Securities or Convertible
Funding Debt, as the case may be, for less than fair market value, and the
Managing General Partner is expressly authorized, pursuant to Section 4.2.A
hereof, to cause the Partnership to issue to the Managing General Partner
corresponding Partnership Interests, as long as (a) the Managing General Partner
concludes in good faith that such issuance is in the interests of the Managing
General Partner and the Partnership (for example, and not by way of limitation,
the issuance of Shares and corresponding Partnership Units pursuant to a share
purchase plan providing for purchases of Shares, either by employees or
shareholders, at a discount from fair market value or pursuant to employee share
options that have an exercise price that is less than the fair market value of
the Shares, either at the time of issuance or at the time of exercise) and (b)
the Managing General Partner transfers all proceeds from any such issuance or
exercise to the Partnership as an additional Capital Contribution.
E. Share Option Plan. If at any time or from time to time, the
Managing General Partner sells Shares pursuant to any Share Option Plan, the
Managing General Partner shall transfer the net proceeds of the sale of such
Shares to the Partnership as an additional Capital Contribution in exchange for
an amount of additional Partnership Units equal to the number of Shares so sold
divided by the Conversion Factor.
F. Funding Debt. The Managing General Partner may incur a
Funding Debt, including, without limitation, a Funding Debt that is convertible
into Shares or otherwise constitutes a class of New Securities ("Convertible
Funding Debt"), subject to the condition that the Managing General Partner lend
to the Partnership the net proceeds of such Funding Debt; provided, that
Convertible Funding Debt shall be issued pursuant to Section 7.5.D above; and,
provided further, that the Managing General Partner shall not be obligated to
lend the net proceeds of any Funding Debt to the Partnership in a manner that
would be inconsistent with the Managing General Partner's ability to remain
qualified as a REIT. If the Managing General Partner enters into any Funding
Debt, the loan to the Partnership shall be on comparable terms and conditions,
including interest rate, repayment schedule and costs and expenses, as are
applicable with respect to or incurred in connection with such Funding Debt.
SECTION 7.6 TRANSACTIONS WITH AFFILIATES
A. Transactions with Certain Affiliates. Except as expressly
permitted by this Agreement, the Partnership shall not, directly or indirectly,
sell, transfer or convey any property to, or purchase any property from, or
borrow funds from, or lend funds to, any Partner or any Affiliate of the
Partnership that is not also a Subsidiary of the Partnership, except pursuant to
transactions that are on terms that are fair and reasonable and no less
favorable to the Partnership than would be obtained from an unaffiliated third
party.
B. Conflict Avoidance. The General Partners are 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 General Partners on such terms as the
General Partners, in their sole and absolute discretion, believe are advisable.
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C. Benefit Plans Sponsored by the Partnership. The Managing
General Partner in its sole and absolute discretion and without the approval of
the Limited Partners, may propose and adopt on behalf of the Partnership
employee benefit plans funded by the Partnership for the benefit of employees of
the Managing General Partner, the Partnership, Subsidiaries of the Partnership
or any Affiliate of any of them.
SECTION 7.7 INDEMNIFICATION
A. General. The Partnership shall indemnify each Indemnitee to
the fullest extent provided by the Act from and against any and all losses,
claims, damages, liabilities, joint or several, expenses (including, without
limitation, attorneys fees and other legal fees and expenses), judgments, fines,
settlements and other amounts arising from or in connection with any and all
claims, demands, actions, suits or proceedings, civil, criminal, administrative
or investigative, incurred by the Indemnitee and relating to the Partnership or
the General Partners or the operation of, or the ownership of property by, any
of them as set forth in this Agreement in which any such Indemnitee may be
involved, or is threatened to be involved, as a party or otherwise, unless it is
established by a final determination of a court of competent jurisdiction that:
(i) the act or omission of the Indemnitee was material to the matter giving rise
to the proceeding and either was committed in bad faith or was the result of
active and deliberate dishonesty, (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. Without limitation, the foregoing indemnity shall
extend to any liability of any Indemnitee, pursuant to a loan guarantee,
contractual obligation for any indebtedness or other obligation or otherwise,
for any indebtedness of the Partnership or any Subsidiary of the Partnership
(including, without limitation, any indebtedness which the Partnership or any
Subsidiary of the Partnership has assumed or taken subject to), and the Managing
General Partner is hereby authorized and empowered, on behalf of the
Partnership, to enter into one or more indemnity agreements consistent with the
provisions of this Section 7.7 in favor of any Indemnitee having or potentially
having liability for any such indebtedness. 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 with respect to the subject
matter of such proceeding. Any indemnification pursuant to this Section 7.7
shall be made only out of the assets of the Partnership, and any insurance
proceeds from the liability policy covering the General Partners and any
Indemnitee, and neither a General Partner nor any Limited Partner shall have any
obligation to contribute to the capital of the Partnership or otherwise provide
funds to enable the Partnership to fund its obligations under this Section 7.7.
B. Advancement of Expenses. Reasonable expenses expected to be
incurred by an Indemnitee shall be paid or reimbursed by the Partnership in
advance of the final disposition of any and all claims, demands, actions, suits
or proceedings, civil, criminal, administrative or investigative made or
threatened against an Indemnitee 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.A 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.
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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 unless otherwise provided in
a written agreement pursuant to which such Indemnitee is indemnified.
D. Insurance. The Partnership may purchase and maintain
insurance on behalf of the Indemnitees and such other Persons as the Managing
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. Benefit Plan Fiduciary. For purposes of this Section 7.7,
(i) excise taxes assessed on an Indemnitee, of for which the Indemnitee is
otherwise found liable, with respect to an ERISA Plan pursuant to applicable law
shall constitute fines within the meaning of this Section 7.7 and (iii) actions
taken or omitted by the Indemnitee with respect to an ERISA Plan in the
performance of its duties for a purpose reasonably believed by it to be in the
interest of the participants and beneficiaries of such ERISA Plan shall be
deemed to be for a purpose which is not opposed to the best interests of the
Partnership.
F. No Personal Liability for Limited Partners. In no event may
an Indemnitee subject any of the Partners to personal liability by reason of the
indemnification provisions set forth in this Agreement.
G. 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.
H. Benefit. The provisions of this Section 7.7 are for the
benefit of the Indemnitees, their employees, officers, directors, trustees,
heirs, successors, assigns and administrators and shall not be deemed to create
any rights for the benefit of any other Persons. Any amendment, modification or
repeal of this Section 7.7, or any provision hereof, shall be prospective only
and shall not in any way affect the limitation on the Partnership's liability to
any Indemnitee under this Section 7.7 as in effect immediately prior to such
amendment, modification or repeal with respect to claims arising from or related
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.
I. Indemnification Payments Not Distributions. If and to the
extent any payments to the General Partners pursuant to this Section 7.7
constitute gross income to the General Partners (as opposed to the repayment of
advances made on behalf of the Partnership), such amounts shall constitute
guaranteed payments within the meaning of Section 707(c) of the Code, shall be
treated consistently therewith by the Partnership and all Partners, and shall
not be treated as distributions for purposes of computing the Partners' Capital
Accounts.
J. Exception to Indemnification. Notwithstanding anything to
the contrary in this Agreement, a General Partner shall not be entitled to
indemnification hereunder for any loss, claim, damage, liability or expense for
which such General Partner is obligated to indemnify the Partnership under any
other agreement between such General Partner and the Partnership.
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SECTION 7.8 LIABILITY OF THE GENERAL PARTNERS
A. General. Notwithstanding anything to the contrary set forth
in this Agreement, no General Partner shall be liable for monetary damages to
the Partnership, any Partners or any Assignees for losses sustained, liabilities
incurred or benefits not derived as a result of errors in judgment or mistakes
of fact or law or of any act or omission unless that General Partner acted in
bad faith and the act or omission was material to the matter giving rise to the
loss, liability or benefit not derived.
B. No Obligation to Consider Separate Interests of Limited
Partners or Shareholders. The Limited Partners expressly acknowledge that the
General Partners are acting on behalf of the Partnership, that the General
Partners are under no obligation to consider the separate interests of the
Limited Partners (including, without limitation, the tax consequences to Limited
Partners or Assignees) in deciding whether to cause the Partnership to take (or
decline to take) any actions, and that the General Partners 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 Partners have acted in good faith.
C. Actions of Agents. Subject to their obligations and duties
as General Partners set forth in Section 7.1.A, the General Partners may
exercise any of the powers granted to them by this Agreement and perform any of
the duties imposed upon them hereunder either directly or by or through their
agents. The General Partners shall not be responsible for any misconduct or
negligence on the part of any such agent appointed by a General Partner in good
faith.
D. Effect of Amendment. Notwithstanding any other provision
contained herein, 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 a 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 PARTNERS
A. Reliance on Documents. A 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 in good faith
to be genuine and to have been signed or presented by the proper party or
parties.
B. Reliance on Advisors. The General Partners may consult with
legal counsel, accountants, appraisers, management consultants, investment
bankers and other consultants and advisers selected by them, and any act taken
or omitted to be taken in reliance upon the opinion of such Persons as to
matters which the General Partners reasonably believe 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 Agents. The General Partners shall have the
right, in respect of any of their powers or obligations hereunder, to act
through any of their duly authorized officers and a duly appointed attorney or
attorneys-in-fact. Each such attorney shall, to the extent provided by the
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General Partners 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 Partners hereunder.
D. Actions to Maintain REIT Status or Avoid Taxation of the
General Partner Entity. Notwithstanding any other provisions of this Agreement
or the Act, any action of the General Partners on behalf of the Partnership or
any decision of a 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 the General
Partner Entity to continue to qualify as a REIT or (ii) to allow the General
Partner Entity to avoid incurring any liability for taxes under Section 857 or
4981 of the Code, is expressly authorized under this Agreement and is deemed
approved by all of the Limited Partners.
E. Actions to Maintain REOC Status. If and so long as the
Partnership Interests of "benefit plan investors" are "significant" (as such
term or terms succeeding thereto with the same objective are used in 29 C.F.R.
Section 2510.3-101(f) (such regulation or successor regulation being known as
the "Plan Assets Regulation")), or if necessary so that the underlying assets of
the Managing General Partner will not be "plan assets " (as such term is defined
in the Plan Assets Regulations) of any ERISA Partner, then the Managing General
Partner shall conduct the affairs of the Partnership in such manner so that the
Partnership shall qualify as a "real estate operating company" ("REOC"), as that
term is used in the Plan Assets Regulations, and so that the assets of the
Partnership will not be plan assets of any ERISA Partner.
(i) If the Managing General Partner, pursuant to this
Section 7.09.E, intends to conduct the affairs of the Partnership as a REOC, the
Managing General Partner shall deliver to each ERISA Partner an opinion of
counsel reasonably acceptable to each ERISA Partner and upon which such ERISA
Partner may rely with respect to the Partnership's REOC status as of the
"initial valuation date" and, if requested in writing by an ERISA Partner, as of
each "annual valuation period" (as those terms, or terms succeeding thereto with
the same objective, are defined in the Plan Assets Regulation). Such opinion of
counsel shall state, (A) as to the opinion respecting the "initial valuation
date," that the Partnership shall qualify as a REOC for the period beginning on
such "initial valuation date" and ending on the last day of the first "annual
valuation period," and (B) as to each annual opinion respecting each "annual
valuation period," that the Partnership shall qualify as a REOC for the 12-month
period following the last day of such "annual valuation period." Such opinion of
counsel may rely upon, among other things, a certificate of the Managing General
Partner as to the exercise of management rights with respect to one or more
investments (other than short-term investments pending long-term commitment or
distribution to investors) during the appropriate period, and as to a
description of such investments, and also shall state whether the Partnership
has included in a certification to the opinion a statement to the effect that on
such "initial valuation date" or during such "annual valuation period" at least
50 percent of Partnership assets (other than short-term investments pending
long-term commitment or distribution to investors), valued at cost, were
invested in real estate investments as described in the Plan Assets Regulation.
(ii) If the opinion described in this subsection is
not provided in the affirmative, or if any ERISA Partner shall obtain and
deliver to the Managing General Partner an opinion of counsel to such ERISA
Partner (which opinion shall be reasonably satisfactory to the Managing General
Partner) that there is a reasonable probability that the Partnership was not or
will not be a REOC for a period in which either (i) participation by benefit
plan investors in the Partnership is significant or (ii) REOC status is
necessary so that the underlying assets of the Managing General Partner will not
be
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plan assets and the Managing General Partner does not obtain an opinion to the
contrary reasonably acceptable to each such ERISA Partner within fifteen (15)
days of its receipt of the opinion delivered by the ERISA Partner (it being
understood that the existence or reaffirmation of the opinion delivered by the
ERISA Partner to the Managing General Partner shall not constitute the sole
basis of any ERISA Partner's determination that the opinion delivered within
fifteen days by the Managing General Partner is not reasonably satisfactory),
then the Managing General Partner is hereby authorized and empowered to take
such actions as it deems necessary and appropriate to mitigate, prevent, or cure
such adverse consequences as might result to an ERISA Partner from the
underlying assets of the Partnership being assets of an ERISA Partner or the
underlying assets of the Managing General Partner being assets of any ERISA
Partner.
SECTION 7.10 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
Managing General Partner has full power and authority, without consent or
approval of any other Partner or Person, to encumber, sell or otherwise use in
any manner any and all assets of the Partnership, to enter into any contracts on
behalf of the Partnership and to take any and all actions on behalf of the
Partnership, and such Person shall be entitled to deal with the Managing General
Partner as if the Managing General Partner 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 Managing General Partner in
connection with any such dealing. In no event shall any Person dealing with the
Managing 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 Managing General Partner or
its representatives. Each and every certificate, document or other instrument
executed on behalf of the Partnership by the Managing 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.
SECTION 7.11 RESTRICTIONS ON GENERAL PARTNERS' AUTHORITY
A. Consent Required. The General Partners may not take any
action in contravention of an express prohibition or limitation of this
Agreement without the written Consent of (i) all Partners adversely affected or
(ii) such lower percentage of the Limited Partnership Interests as may be
specifically provided for under a provision of this Agreement or the Act.
B. Sale of All Assets of the Partnership. Except as provided
in Article XIII, the General Partners may not, directly or indirectly, cause the
Partnership to sell, exchange, transfer or otherwise dispose of all or
substantially all of the Partnership's assets in a single transaction or a
series of related transactions (including by way of merger (including a
triangular merger), consolidation or other combination with any other Persons)
(i) if such merger, sale or other transaction is in connection with a
Termination Transaction permitted under Section 11.2.B hereof, without the
Consent of the Partners holding at least a majority of the then outstanding
Partnership Units (including any Partnership Units held by the General
Partners), or (ii) otherwise, without the Consent of the Outside Limited
Partners.
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C. Communications Act Investor. Unless otherwise approved in
writing by each affected Communications Act Investor (hereinafter defined), the
General Partners may not, directly or indirectly, cause the Partnership to
invest in any Property or otherwise take any action that (i) would result in the
Communications Act Investor being placed in a position whereby it would have or
be deemed to have the right to act for any third party in selecting or dealing
with any interexchange carrier (which, for purposes hereof, shall include
satellite telecommunication service) in providing long distance service between
local access and transport areas which originates in any State within the region
in which the affected Communications Act Investor (or the operating company
affiliate thereof) provides wireline telephone local exchange service, (but in
no event shall the foregoing be deemed to prohibit the Partnership from
contracting with a third party to perform such functions on a discretionary
basis as part of its property management duties where such activity is a
necessary adjunct to an investment and such activities, in the aggregate, are
not significant in relation to the Partnership's business activities taken as a
whole), or (ii) would cause a significant percentage of the Partnership's gross
income from any Property to be attributable to either the provision or resale of
long distance service between local access and transport areas which originates
in any State within the region in which the affected Communications Act Investor
(or the operating company affiliate thereof) provides wireline telephone local
exchange service, or the manufacture of telecommunications, customer premises or
related equipment. In addition, the Partnership will not engage in any
telecommunications activities other than those that may be ancillary to the
ownership or operation of its investments or make an investment in a cable
television system that would violate the cable-telephone cross-ownership
restriction in the Communications Act of 1934, as amended, with regard to the
local exchange service area of a Communications Act Investor (or the operating
company affiliate thereof). Notwithstanding the foregoing, the Partnership is
not precluded from engaging in any telecommunications business or cable business
unless such business is found to place the Communications Act Investor in
violation of law. The Managing General Partner shall have a period of 120 days
following a finding by a court or regulatory body that such a violation exists
to use its reasonable best efforts to prevent or eliminate such violation,
including, but not limited to, correction of the condition giving rise to the
violation, amendment to this Agreement or sale of the relevant property or the
interest of the Communications Act Investor therein. A "Communications Act
Investor" is a Partner or shareholder of the Managing General Partner that has
notified the Managing General Partner that it is subject to the Communications
Act of 1934, as amended.
SECTION 7.12 LOANS BY THIRD PARTIES
The Partnership may incur Debt, or enter into similar credit,
guarantee, financing or refinancing arrangements for any purpose (including,
without limitation, in connection with any acquisition of property) with any
Person that is not a General Partner upon such terms as the Managing General
Partner determines appropriate; provided that, the Partnership shall not incur
any Debt that is recourse to a General Partner, except to the extent otherwise
agreed to by such General Partner in its sole discretion.
SECTION 7.13 ACTIONS OF THE GENERAL PARTNERS
Any act (including, without limitation, execution of any
document), determination or judgment required by this Agreement to be performed
or made by the General Partners (as opposed to by the Managing General Partner
acting alone), may be performed or made by the Managing General Partner,
provided it has obtained the consent of a majority in number of all of the
General Partners (including the Managing General Partner).
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ARTICLE VIII
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 this Agreement, including Section
10.5, or under the Act.
SECTION 8.2 MANAGEMENT OF BUSINESS
No Limited Partner or Assignee (other than the General
Partners, any of their Affiliates or any officer, director, employee, partner,
agent or trustee of a 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 a General Partner, any of its Affiliates or any officer,
director, employee, partner, agent or trustee of a 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 Section 7.5 hereof, and subject to any agreements
entered into pursuant to Section 7.6.C hereof and to any other agreements
entered into by a Limited Partner or its Affiliates with the Partnership or a
Subsidiary, any Limited Partner (other than a General Partner) and any officer,
director, employee, agent, trustee, Affiliate or shareholder of any 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 or indirect competition with the
Partnership. Neither the Partnership nor any Partners shall have any rights by
virtue of this Agreement in any business ventures of any Limited Partner or
Assignee. None of the Limited Partners (other than the General 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 (other than the Managing General Partner to the extent expressly
provided herein), and such Person shall have no obligation pursuant to this
Agreement to offer any interest in any such business ventures to the
Partnership, any Limited Partner or any such other Person, even if such
opportunity is of a character which, if presented to the Partnership, any
Limited Partner or such other Person, could be taken by such Person.
SECTION 8.4 RETURN OF CAPITAL
Except pursuant to the right of redemption set forth in
Section 8.6, no Limited Partner shall be entitled to the withdrawal or return of
its Capital Contribution, except to the extent of distributions made pursuant to
this Agreement or upon termination of the Partnership as provided herein. No
Limited Partner or Assignee shall have priority over any other Limited Partner
or Assignee either as to the return of Capital Contributions (except as
permitted by Section 4.2.A) or, except to the extent provided by Exhibit C or as
permitted by Sections 4.2.A, 5.1.B(i), 6.1.A(ii) and 6.1.B(i), or otherwise
expressly provided in this Agreement, as to profits, losses, distributions or
credits.
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SECTION 8.5 RIGHTS OF LIMITED PARTNERS RELATING TO THE PARTNERSHIP
A. General. In addition to other rights provided by this
Agreement or by the Act, and except as limited by Section 8.5.D, each Limited
Partner shall have the right, for a purpose reasonably related to such Limited
Partner's interest as a limited partner in the Partnership, upon written demand
with a statement of the purpose of such demand and at such Limited Partner's own
expense:
(1) to obtain a copy of the most recent annual
and quarterly reports filed with the
Securities and Exchange Commission by the
General Partner Entity pursuant to the
Exchange Act;
(2) to obtain a copy of the Partnership's
federal, state and local income tax returns
for each Partnership Year;
(3) to obtain a current list of the name and
last known business, residence or mailing
address of each Partner;
(4) to obtain a copy of this Agreement and the
Certificate and all amendments thereto,
together with executed copies of all powers
of attorney pursuant to which this
Agreement, the Certificate and all
amendments thereto have been executed; and
(5) to obtain 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. Notice of Conversion Factor. The Partnership shall notify
each Limited Partner upon request of the then current Conversion Factor and any
changes that have been made thereto.
C. Notice of Extraordinary Transaction of the General Partner
Entity. The General Partner Entity shall not make any extraordinary
distributions of cash or property to its shareholders or effect a merger
(including, without limitation, a triangular merger), a sale of all or
substantially all of its assets or any other similar extraordinary transaction
without notifying the Limited Partners of its intention to make such
distribution or effect such merger, sale or other extraordinary transaction at
least twenty (20) Business Days prior to the record date to determine
shareholders eligible to receive such distribution or to vote upon the approval
of such merger, sale or other extraordinary transaction (or, if no such record
date is applicable, at least twenty (20) business days before consummation of
such merger, sale or other extraordinary transaction). This provision for such
notice shall not be deemed (i) to permit any transaction that otherwise is
prohibited by this Agreement or requires a Consent of the Partners or (ii) to
require a Consent of the Limited Partners to a transaction that does not
otherwise require Consent under this Agreement. Each Limited Partner agrees, as
a condition to the receipt of the notice pursuant hereto, to keep confidential
the information set forth therein until such time as the General Partner Entity
has made public disclosure thereof and to use such information during such
period of confidentiality solely for purposes of determining whether to exercise
the Redemption Right; provided, however, that a Limited Partner may disclose
such information to its attorney, accountant and/or financial advisor for
purposes of obtaining advice with respect to such exercise so long as such
attorney, accountant and/or financial advisor agrees to receive and hold such
information subject to this confidentiality requirement.
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D. Confidentiality. Notwithstanding any other provision of
this Section 8.5, the General Partners may keep confidential from the Limited
Partners, for such period of time as the General Partners determine in their
sole and absolute discretion to be reasonable, any information that (i) the
General Partners reasonably believe to be in the nature of trade secrets or
other information the disclosure of which the General Partners in good faith
believe is not in the best interests of the Partnership or could damage the
Partnership or its business or (ii) the Partnership is required by law or by
agreements with unaffiliated third parties to keep confidential.
SECTION 8.6 REDEMPTION RIGHT
A. General. (i) Subject to Section 8.6.C, at any time on or
after the first anniversary date of the issuance of a Partnership Unit to a
Limited Partner pursuant to Article IV hereof (which one-year period shall
commence upon the issuance of such Partnership Unit regardless of whether such
Partnership Unit is designated upon issuance as a Class A Unit, a Class B Unit
or otherwise and shall include the period of time from the date such Partnership
Unit is issued to such Limited Partner as other than a Class A Unit until the
date such Partnership Unit is converted automatically to a Class A Unit pursuant
to Section 4.2.C hereof), or on or after such date prior to the expiration of
such one-year period as the Managing General Partner, in its sole and absolute
discretion, designates with respect to any or all Class A Units then
outstanding, the holder of a Partnership Unit (if other than the Managing
General Partner or the General Partner Entity or any Subsidiary of either the
Managing General Partner or the General Partner Entity) shall have the right
(the "Redemption Right") to require the Partnership to redeem such Partnership
Unit, with such redemption to occur on the Specified Redemption Date and at a
redemption price equal to and in the form of the Cash Amount to be paid by the
Partnership; provided, however, that solely with respect to Partnership Units
issued to the Opportunity Partnerships in the Consolidation and ultimately
distributed by the Opportunity Partnerships to their respective limited
partners, the Redemption Right only shall be exercisable commencing on or after
the second anniversary date of the issuance of such Partnership Units. Any such
Redemption Right shall be exercised pursuant to a Notice of Redemption delivered
to the Partnership (with a copy to the Managing General Partner) by the Limited
Partner who is exercising the Redemption Right (the "Redeeming Partner"). A
Limited Partner may exercise the Redemption Right from time to time, without
limitation as to frequency, with respect to part or all of the Units that it
owns, as selected by the Limited Partner, provided that a Limited Partner may
not exercise the Redemption Right for less than one thousand (1,000) Partnership
Units unless such Redeeming Partner then holds less than one thousand (1,000)
Partnership Units, in which event the Redeeming Partner must exercise the
Redemption Right for all of the Partnership Units held by such Redeeming
Partner.
(ii) The Redeeming Partner shall have no right with
respect to any Partnership Units so redeemed to receive any distributions paid
after the Specified Redemption Date with respect to such Partnership Units.
(iii) The Assignee of any Limited Partner may
exercise the rights of such Limited Partner pursuant to this Section 8.6, and
such Limited Partner shall be deemed to have assigned such rights to such
Assignee and shall be bound by the exercise of such rights by such Limited
Partner's Assignee. In connection with any exercise of such rights by such
Assignee on behalf of such Limited Partner, the Cash Amount shall be paid by the
Partnership directly to such Assignee and not to such Limited Partner.
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(iv) If the Managing General Partner provides notice
to the Limited Partners, pursuant to Section 8.5.C hereof, the Redemption Right
shall be exercisable, without regard to whether the Partnership Units have been
outstanding for any specified period, during the period commencing on the date
on which the Managing General Partner provides such notice and ending on the
record date to determine shareholders eligible to receive such distribution or
to vote upon the approval of such merger, sale or other extraordinary
transaction (or, if no such record date is applicable, at least twenty (20)
business days before the consummation of such merger, sale or other
extraordinary transaction). If this subparagraph (iv) applies, the Specified
Redemption Date is the date on which the Partnership and the Managing General
Partner receive notice of exercise of the Redemption Right, rather than ten (10)
Business Days after receipt of the notice of redemption.
B. Managing General Partner Assumption of Right. (i) If a
Limited Partner has delivered a Notice of Redemption, the Managing General
Partner may, in its sole and absolute discretion (subject to the limitations on
ownership and transfer of Shares set forth in the Declaration of Trust), elect
to assume directly and satisfy a Redemption Right by paying to the Redeeming
Partner either the Cash Amount or the Shares Amount, as the Managing General
Partner determines in its sole and absolute discretion (provided that payment of
the Redemption Amount in the form of Shares shall be in Shares registered for
resale under Section 12 of the Exchange Act and listed for trading on the
exchange or national market on which the Shares are Publicly Traded, and
provided further that, if the Shares are not Publicly Traded at the time a
Redeeming Partner exercises its Redemption Right, the Redemption Amount shall be
paid only in the form of the Cash Amount unless the Redeeming Partner, in its
sole and absolute discretion, consents to payment of the Redemption Amount in
the form of the Shares Amount), on the Specified Redemption Date, whereupon the
Managing General Partner shall acquire the Partnership Units offered for
redemption by the Redeeming Partner and shall be treated for all purposes of
this Agreement as the owner of such Partnership Units. Unless the Managing
General Partner, in its sole and absolute discretion, shall exercise its right
to assume directly and satisfy the Redemption Right, the Managing General
Partner shall not have any obligation to the Redeeming Partner or to the
Partnership with respect to the Redeeming Partner's exercise of the Redemption
Right. If the Managing General Partner shall exercise its right to satisfy the
Redemption Right in the manner described in the first sentence of this Section
8.6B and shall fully perform its obligations in connection therewith, the
Partnership shall have no right or 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 and the Managing
General Partner shall, for federal income tax purposes, treat the transaction
between the General Partner and the Redeeming Partner as a sale of the Redeeming
Partner's Partnership Units to the Managing General Partner. Nothing contained
in this Section 8.6.B shall imply any right of the Managing General Partner to
require any Limited Partner to exercise the Redemption Right afforded to such
Limited Partner pursuant to Section 8.6.A.
(ii) If the Managing General Partner determines to
pay the Redeeming Partner the Redemption Amount in the form of Shares, the total
number of Shares to be paid to the Redeeming Partner in exchange for the
Redeeming Partner's Partnership Units shall be the applicable Shares Amount. If
this amount is not a whole number of Shares, the Redeeming Partner shall be paid
(i) that number of Shares which equals the nearest whole number less than such
amount plus (ii) an amount of cash which the Managing General Partner
determines, in its reasonable discretion, to represent the fair value of the
remaining fractional Share which would otherwise be payable to the Redeeming
Partner.
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(iii) Each Redeeming Partner agrees to execute such
documents as the Managing General Partner may reasonably require in connection
with the issuance of Shares upon exercise of the Redemption Right.
C. Exceptions to Exercise of Redemption Right. Notwithstanding
the provisions of Sections 8.6.A and 8.6.B, a Partner shall not be entitled to
exercise the Redemption Right pursuant to Section 8.6.A if (but only as long as)
the delivery of Shares to such Partner on the Specified Redemption Date (i)
would be prohibited under the Declaration of Trust or (ii) would be prohibited
under applicable federal or state securities laws or regulations (in each case
regardless of whether the Managing General Partner would in fact assume and
satisfy the Redemption Right).
D. No Liens on Partnership Units Delivered for Redemption.
Each Limited Partner covenants and agrees with the Managing General Partner that
all Partnership Units delivered for redemption shall be delivered to the
Partnership or the Managing General Partner, as the case may be, free and clear
of all liens, and, notwithstanding anything contained herein to the contrary,
neither the Managing General Partner nor the Partnership shall be under any
obligation to acquire Partnership Units which are or may be subject to any
liens. Each Limited Partner further agrees that, if any state or local property
transfer tax is payable as a result of the transfer of its Partnership Units to
the Partnership or the Managing General Partner, such Limited Partner shall
assume and pay such transfer tax.
E. Additional Partnership Interests. If the Partnership issues
Partnership Interests to any Additional Limited Partner pursuant to Article IV,
the Managing General Partner shall make such revisions to this Section 8.6 as it
determines are necessary to reflect the issuance of such Partnership Interests
(including setting forth any restrictions on the exercise of the Redemption
Right with respect to such Partnership Interests).
ARTICLE IX
BOOKS, RECORDS, ACCOUNTING AND REPORTS
SECTION 9.1 RECORDS AND ACCOUNTING
The Managing 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 Section 9.3. 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, punch cards, 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 and tax reporting purposes, on an accrual basis in
accordance with generally accepted accounting principles.
SECTION 9.2 FISCAL YEAR
The fiscal year of the Partnership shall be the calendar year.
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SECTION 9.3 REPORTS
A. Annual Reports. As soon as practicable, but in no event
later than the date on which the General Partner Entity mails its annual report
to its shareholders, the General Partner Entity shall cause to be mailed to each
Limited Partner an annual report, as of the close of the most recently ended
Partnership Year, containing financial statements of the Partnership, or of the
General Partner Entity if such statements are prepared solely on a consolidated
basis with the Partnership, 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 Entity.
B. Quarterly Reports. If and to the extent that the General
Partner Entity mails quarterly reports to its shareholders, as soon as
practicable, but in no event later than the date on such reports are mailed, the
General Partner Entity shall cause to be mailed to each Limited Partner a report
containing unaudited financial statements, as of the last day of such calendar
quarter, of the Partnership, or of the General Partner Entity if such statements
are prepared solely on a consolidated basis with the Partnership, and such other
information as may be required by applicable law or regulation, or as the
Managing General Partner determines to be appropriate.
ARTICLE X
TAX MATTERS
SECTION 10.1 PREPARATION OF TAX RETURNS
The General Partners 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 ninety (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 Partners
shall, in their sole and absolute discretion, determine whether to make any
available election pursuant to the Code; provided, however, that the General
Partners shall make the election under Section 754 of the Code in accordance
with applicable regulations thereunder. The General Partners 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 Partners' determination
in their sole and absolute discretion that such revocation is in the best
interests of the Partners.
SECTION 10.3 TAX MATTERS PARTNER
A. General. The Managing General Partner shall be the "tax
matters partner" of the Partnership for federal income tax purposes. Pursuant to
Section 6223(c)(3) 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, tax payer
identification number and profit interest of each of the Limited Partners and
any Assignees; provided, however, that such information is provided to the
Partnership by the Limited Partners.
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B. Powers. The tax matters partner is authorized, but not
required:
(1) 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 (i) 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 (ii)
who is a "notice partner" (as defined in
Section 6231(a)(8) of the Code) or a member
of a "notice group" (as defined in Section
6223(b)(2) of the Code);
(2) if 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 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 filing of a complaint for refund with
the United States Claims Court or the
District Court of the United States for the
district in which the Partnership's
principal place of business is located;
(3) to intervene in any action brought by any
other Partner for judicial review of a final
adjustment;
(4) 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 or complaint) for judicial review
with respect to such request;
(5) 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
(6) 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
Managing General Partner set forth in Section 7.7 shall be fully applicable to
the tax matters partner in its capacity as such.
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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 and expenses) shall be borne by the Partnership. Nothing herein
shall be construed to restrict the Partnership from engaging an accounting firm
and/or law firm to assist the tax matters partner in discharging its 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 sixty (60) month
period as provided in Section 709 of the Code.
SECTION 10.5 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 Managing 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, 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. 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 fifteen (15) days
after notice from the Managing 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 Managing 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. Each Limited Partner hereby unconditionally
and irrevocably grants to the Partnership a security interest in such Limited
Partner's Partnership Interest to secure such Limited Partner's obligation to
pay to the Partnership any amounts required to be paid pursuant to this Section
10.5. If a Limited Partner fails to pay any amounts owed to the Partnership
pursuant to this Section 10.5 when due, the Managing General Partner may, in its
sole and absolute discretion, elect to make the payment to the Partnership on
behalf of such defaulting Limited Partner, and in such event shall be deemed to
have loaned such amount to such defaulting Limited Partner and shall succeed to
all rights and remedies of the Partnership as against such defaulting Limited
Partner (including, without limitation, the right to receive distributions). Any
amounts payable by a Limited Partner hereunder shall bear interest at the base
rate on corporate loans at large United States money center commercial banks, as
published from time to time in the Wall Street Journal, plus four (4) percentage
points (but not higher than the maximum lawful rate under the laws of the State
of Illinois) from the date such amount is due (i.e., fifteen (15) days after
demand) until such amount is paid in full. Each Limited Partner shall take such
actions as the Partnership or the Managing General Partner shall request to
perfect or enforce the security interest created hereunder.
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ARTICLE XI
TRANSFERS AND WITHDRAWALS
SECTION 11.1 TRANSFER
A. Definition. The term "transfer," when used in this Article
XI with respect to a Partnership Interest or a Partnership Unit, shall be deemed
to refer to a transaction by which a General Partner purports to assign all or
any part of its General Partnership Interest to another Person or by which a
Limited Partner purports to assign all or any part of 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 XI does not include
any redemption or repurchase of Partnership Units by the Partnership from a
Partner or acquisition of Partnership Units from a Limited Partner by the
Managing General Partner pursuant to Section 8.6 or otherwise. No part of the
interest of a Limited Partner shall be subject to the claims of any creditor,
any spouse for alimony or support, or to legal process, and may not be
voluntarily or involuntarily alienated or encumbered except as may be
specifically provided for in this Agreement.
B. General. No Partnership Interest shall be transferred, in
whole or in part, except in accordance with the terms and conditions set forth
in this Article XI. Any transfer or purported transfer of a Partnership Interest
not made in accordance with this Article XI shall be null and void.
SECTION 11.2 TRANSFERS OF PARTNERSHIP INTERESTS OF GENERAL PARTNERS
A. Except for transfers of Partnership Units to the
Partnership as provided in Section 7.5 or Section 8.6, the Managing General
Partner may not transfer any of its Partnership Interest (including both its
General Partnership Interest and its Limited Partnership Interest) except in
connection with a transaction described in Section 11.2.B or as otherwise
expressly permitted under this Agreement, nor shall the Managing General Partner
withdraw as a General Partner except in connection with a transaction described
in Section 11.2.B. A General Partner, other than the Managing General Partner,
may not transfer any of its Partnership Interests or withdraw as a General
Partner except (i) in connection with a transaction described in Section 11.2.B,
(ii) as set forth in Section 11.2.C, (iii) as set forth in Section 7.9.E. or
(iv) with the consent of the Managing General Partner, in its sole and absolute
discretion.
B. The Managing General Partner shall not engage in any merger
(including a triangular merger), consolidation or other combination with or into
another person, sale of all or substantially all of its assets or any
reclassification, recapitalization or change of outstanding Shares (other than a
change in par value, or from par value to no par value, or as a result of a
subdivision or combination as described in the definition of "Conversion
Factor") ("Termination Transaction"), unless the Termination Transaction has
been approved by the Consent of the Partners holding at least a majority of the
then outstanding Partnership Units (including any Partnership Units held by the
General Partners) and in connection with which all Limited Partners either will
receive, or will have the right to elect to receive, for each Partnership Unit
an amount of cash, securities, or other property equal to the product of the
Conversion Factor multiplied by the greatest amount of cash, securities or other
property paid to a holder of Shares corresponding to such Partnership Unit in
consideration of one such Share at any time during the period from and after the
date on which the Termination Transaction is consummated; provided that, if, in
connection with the Termination Transaction, a purchase, tender or exchange
offer shall have been made to and accepted by the holders of more than fifty
percent (50%) of the outstanding
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Shares, each holder of Partnership Units shall receive, or shall have the right
to elect to receive without any right of Consent set forth above in this
subsection B, the greatest amount of cash, securities, or other property which
such holder would have received had it exercised the Redemption Right and
received Shares in exchange for its Partnership Units immediately prior to the
expiration of such purchase, tender or exchange offer and had thereupon accepted
such purchase, tender or exchange offer.
C. In accordance with its Plan of Dissolution and Liquidation
to be entered into on July 11, 1997 (the "Plan of Liquidation"), each of the
General Partners, other than the Managing General Partner, shall dissolve and
liquidate on the second anniversary date of the consummation of the
Consolidation. On such date, (i) each liquidating General Partner shall be
deemed to have withdrawn as a general partner from the Partnership and (ii) the
General Partnership Interest of such General Partner shall be converted into a
Limited Partnership Interest and distributed to such General Partner's partners
in accordance with the Plan of Liquidation.
SECTION 11.3 LIMITED PARTNERS' RIGHTS TO TRANSFER
A. General. Subject to the provisions of Sections 11.3.C,
11.3.D, 11.3.E, 11.4 and 11.6, a Limited Partner (other than a General Partner)
may transfer with or without the consent of the General Partners, all or any
portion of its Partnership Interest, or any of such Limited Partner's rights as
a Limited Partner, provided that prior written notice of such proposed transfer
is delivered to the Managing General Partner. Notwithstanding the foregoing, any
Limited Partner may, at any time, without the consent of the General Partners,
(i) transfer all or any portion of its Partnership Interest to any General
Partner, (ii) transfer all or any portion of its Partnership Interest to an
Affiliate, another original Limited Partner or to an Immediate Family member,
subject to the provisions of Section 11.6, (iii) transfer all or any portion of
its Partnership Interest to a trust for the benefit of a charitable beneficiary
or to a charitable foundation, subject to the provisions of Section 11.6, and
(iv) subject to the provisions of Section 11.6, pledge (a "Pledge") all or any
portion of its Partnership Interest to a lending institution, which is not an
Affiliate of such Limited Partner, as collateral or security for a bona fide
loan or other extension of credit, and transfer such pledged Partnership
Interest to such lending institution in connection with the exercise of remedies
under such loan or extension or credit. Each Limited Partner or Assignee
(resulting from a transfer made pursuant to clauses (i) -(iv) of the proviso of
the preceding sentence) shall have the right to transfer all or any portion of
its Partnership Interest, subject to the provisions of Section 11.6 and the
satisfaction of each of the following conditions (in addition to the right of
each such Limited Partner or Assignee to continue to make any such transfer
permitted by clauses (i) - (iv) of such proviso without satisfying either of the
following conditions):
(a) GENERAL PARTNER RIGHT OF FIRST REFUSAL. The
transferring Partner shall give written notice of the
proposed transfer to the General Partner, which
notice shall state (i) the identity of the proposed
transferee, and (ii) the amount and type of
consideration proposed to be received for the
transferred Partnership Units. The General Partner
shall have ten (10) days upon which to give the
transferring Partner notice of its election to
acquire the Partnership Units on the proposed terms.
If it so elects, it shall purchase the Partnership
Units on such terms within ten (10) days after giving
notice of such election. If it does not so elect, the
transferring Partner may transfer such Partnership
Units to a third party, on economic terms no more
favorable to the
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transferee than the proposed terms, subject to the
other condition of this Section 11.3.
(b) QUALIFIED TRANSFEREE. Any transfer of a Partnership
Interest shall be made only to Qualified Transferees.
It is a condition to any transfer otherwise permitted
hereunder (excluding Pledges of a Partnership Interest, but including any
transfer of the pledged Partnership Interest, whether to the secured party or
otherwise, pursuant to the secured party's exercise of its remedies under such
Pledge or the related loan or extension of credit) that the transferee assumes
by operation of law or express agreement all of the obligations of the
transferor Limited Partner under this Agreement with respect to such transferred
Partnership Interest and no such transfer (other than pursuant to a statutory
merger or consolidation wherein all obligations and liabilities of the
transferor Partner are assumed by a successor corporation by operation of law)
shall relieve the transferor Partner of its obligations under this Agreement
without the approval of the General Partner, in its reasonable discretion.
Notwithstanding the foregoing, any transferee of any transferred Partnership
Interest shall be subject to any and all ownership limitations contained in the
Declaration of Trust. Any transferee, whether or not admitted as a Substituted
Limited Partner, shall take subject to the obligations of the transferor
hereunder. Unless admitted as a Substitute Limited Partner, no transferee,
whether by a voluntary transfer, by operation of law or otherwise, shall have
rights hereunder, other than the rights of an Assignee as provided in Section
11.5.
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 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 Managing
General Partner may prohibit any transfer of Partnership Units by a Limited
Partner unless it receives a written opinion of legal counsel (which opinion and
counsel shall be reasonably satisfactory to the Partnership) to such Limited
Partner that such transfer would not require filing of a registration statement
under the Securities Act or would not otherwise violate any federal, or state
securities laws or regulations applicable to the Partnership or the Partnership
Unit or, at the option of the Partnership, an opinion of legal counsel to the
Partnership to the same effect.
D. No Transfers Affecting Tax Status of Partnership. No
transfer of Partnership Units by a Limited Partner (including a redemption or
exchange pursuant to Section 8.6) may be made to any Person if (i) in the
opinion of legal counsel for the Partnership, it would result in the Partnership
being treated as an association taxable as a corporation for federal income tax
purposes or would result in a termination of the Partnership for federal income
tax purposes (except as a result of the redemption or exchange for Shares of all
Partnership Units held by all Limited Partners other than the General Partners
or the General Partner Entity or any Subsidiary of either the Managing General
Partner or the General Partner Entity or pursuant to a transaction expressly
permitted under Section 7.11.B or Section 11.2), (ii) in the opinion of legal
counsel for the Partnership, it would adversely affect the ability of the
General Partner Entity to continue to qualify as a REIT or would subject the
General Partner Entity to any additional taxes under Section 857 or Section 4981
of the Code or (iii) such transfer is effectuated
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through an "established securities market" or a "secondary market (or the
substantial equivalent thereof)" within the meaning of Section 7704 of the Code.
E. No Transfers to Holders of Nonrecourse Liabilities. No
Pledge or 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 Nonrecourse Liability unless (i) the Managing General Partner is
provided notice thereof and (ii) the lender enters into an arrangement with the
Partnership and the Managing General Partner to exchange or 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 Partners. No Limited Partner shall have
the right to substitute a transferee as a Limited Partner in its place. The
Managing General Partner shall, however, 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 Managing General Partner in its sole and absolute discretion.
The Managing 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. The Managing General
Partner hereby grants its consent to the admission as a Substituted Limited
Partner to any bona fide financial institution that loans money or otherwise
extends credit to a holder of Units and thereafter becomes the owner of such
Units pursuant to the exercise by such financial institution of its rights under
a Pledge of such Units granted in connection with such loan or extension of
credit.
B. Rights of Substituted Limited Partner. A transferee who has
been admitted as a Substituted Limited Partner in accordance with this Article
XI shall have all the rights and powers and be subject to all the restrictions
and liabilities of a Limited Partner under this Agreement. The admission of any
transferee as a Substituted Limited Partner shall be conditioned upon the
transferee executing and delivering to the Partnership an acceptance of all the
terms and conditions of this Agreement (including, without limitation, the
provisions of Section 15.11) and such other documents or instruments as may be
required to effect the admission.
C. Amendment of Exhibit A. Upon the admission of a Substituted
Limited Partner, the Managing General Partner shall amend Exhibit A to reflect
the name, address, Capital Account, number of Partnership Units, and Percentage
Interest of such Substituted Limited Partner and to eliminate or adjust, if
necessary, the name, address, Capital Account and Percentage Interest and
interest of the predecessor of such Substituted Limited Partner.
SECTION 11.5 ASSIGNEES
If the Managing General Partner, in its sole and absolute
discretion, does not consent to the admission of any permitted transferee under
Section 11.3 as a Substituted Limited Partner, as described in Section 11.4,
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 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
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such transferee, and shall have the rights granted to the Limited Partners under
Section 8.6, 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 other Partnership Units held by Limited Partners are
voted). If 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 XI 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
XI or pursuant to redemption of all of its Partnership Units under Section 8.6.
B. Termination of Status as Limited Partner. Any Limited
Partner who shall transfer all of its Partnership Units in a transfer permitted
pursuant to this Article XI or pursuant to redemption of all of its Partnership
Units under Section 8.6 shall cease to be a Limited Partner.
C. Timing of Transfers. Transfers pursuant to this Article XI
may only be made upon three business days prior notice, unless the Managing
General Partner otherwise agrees.
D. Allocations. If any Partnership Interest is transferred
during any quarterly segment of the Partnership's fiscal year in compliance with
the provisions of this Article XI or redeemed or transferred 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 (unless the Managing
General Partner, in its sole and absolute discretion, elects to adopt a daily,
weekly, or a monthly proration period, in which event Net Income, Net Losses,
each item thereof and all other items attributable to such interest for such
fiscal year shall be prorated based upon the applicable method selected by the
Managing General Partner). 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 attributable to any
Partnership Unit with respect to which the Partnership Record Date is before the
date of such transfer, assignment or redemption shall be made to the transferor
Partner or the Redeeming Partner, as the case may be, and, in the case of a
transfer or assignment other than a redemption, all distributions of Available
Cash thereafter attributable to such Partnership Unit shall be made to the
transferee Partner.
E. Additional Restrictions. In addition to any other
restrictions on transfer herein contained, including without limitation the
provisions of this Article XI, in no event may any transfer or assignment of a
Partnership Interest by any Partner (including pursuant to Section 8.6) be made
without the express consent of the Managing General Partner, in its sole and
absolute discretion, (i) to any person or entity who lacks the legal right,
power or capacity to own a Partnership Interest; (ii) in violation of applicable
law; (iii) of any component portion of a Partnership Interest, such as the
Capital Account, or rights to distributions, separate and apart from all other
components of a Partnership Interest; (iv) if in
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the opinion of legal counsel to the Partnership such transfer would cause a
termination of the Partnership for federal or state income tax purposes (except
as a result of the redemption or exchange for Shares of all Partnership Units
held by all Limited Partners or pursuant to a transaction expressly permitted
under Section 7.11.B or Section 11.2); (v) if in the opinion of counsel to the
Partnership, such transfer would cause the Partnership to cease to be classified
as a partnership for federal income tax purposes (except as a result of the
redemption or exchange for Shares of all Partnership Units held by all Limited
Partners or pursuant to a transaction expressly permitted under Section 7.11.B
or Section 11.2); (vi) if such transfer would cause the Partnership Interests of
"benefit plan investors" to become "significant," as those terms are used in
Section 7.9.E., or would cause the Partnership to become, with respect to any
employee benefit plan subject to Title I of ERISA, a "party-in-interest" (as
defined in Section 3(14) of ERISA) or a "disqualified person" (as defined in
Section 4975(c) of the Code); (vii) if such transfer would, in the opinion of
counsel to the Partnership, cause any portion of the assets of the Partnership
to constitute assets of any employee benefit plan pursuant to Department of
Labor Regulations Section 2510.1-101; (viii) if such transfer requires the
registration of such Partnership Interest pursuant to any applicable federal or
state securities laws; (ix) if such transfer is effectuated through an
"established securities market" or a "secondary market" (or the substantial
equivalent thereof) within the meaning of Section 7704 of the Code or such
transfer causes the Partnership to become a "publicly traded partnership," as
such term is defined in Section 469(k)(2) or Section 7704(b) of the Code
(provided that this clause (ix) shall not be the basis for limiting or
restricting in any manner the exercise of the Redemption Right under Section 8.6
unless, and only to the extent that, outside tax counsel provides to the
Managing General Partner an opinion to the effect that, in the absence of such
limitation or restriction, there is a significant risk that the Partnership will
be treated as a "publicly traded partnership" and, by reason thereof, taxable as
a corporation); (x) if such transfer subjects the Partnership to regulation
under the Investment Company Act of 1940, the Investment Advisors Act of 1940 or
ERISA, each as amended; (xi) such transfer could adversely affect the ability of
the General Partner Entity to remain qualified as a REIT; or (xii) if in the
opinion of legal counsel for the transferring Partner (which opinion and counsel
shall be reasonably satisfactory to the Partnership) or legal counsel for the
Partnership, such transfer would adversely affect the ability of the General
Partner Entity to continue to qualify as a REIT or subject the General Partner
Entity to any additional taxes under Section 857 or Section 4981 of the Code.
F. Avoidance of "Publicly Traded Partnership" Status. The
Managing General Partner shall monitor the transfers of interests in the
Partnership to determine (i) if such interests are being traded on an
"established securities market" or a "secondary market (or the substantial
equivalent thereof)" within the meaning of Section 7704 of the Code and (ii)
whether additional transfers of interests would result in the Partnership being
unable to qualify for at least one of the "safe harbors" set forth in
Regulations Section 1.7704-1 (or such other guidance subsequently published by
the IRS setting forth safe harbors under which interests will not be treated as
"readily tradable on a secondary market (or the substantial equivalent thereof)"
within the meaning of Section 7704 of the Code) (the "Safe Harbors"). The
Managing General Partner shall take all steps reasonably necessary or
appropriate to prevent any trading of interests or any recognition by the
Partnership of transfers made on such markets and, except as otherwise provided
herein, to insure that at least one of the Safe Harbors is met; provided,
however, that the foregoing shall not authorize the Managing General Partner to
limit or restrict in any manner the right of any holder of a Partnership Unit to
exercise the Redemption Right in accordance with the terms of Section 8.6
unless, and only to the extent that, outside tax counsel provides to the
Managing General Partner an opinion to the effect that, in the absence of such
limitation or restriction, there is a significant risk that the Partnership will
be treated as a "publicly traded partnership" and, by reason thereof, taxable as
a corporation.
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ARTICLE XII
ADMISSION OF PARTNERS
SECTION 12.1 ADMISSION OF A SUCCESSOR GENERAL PARTNER
A successor to all of a General Partner's General Partnership
Interest pursuant to Section 11.2 who is proposed to be admitted as a successor
General Partner shall be admitted to the Partnership as a General Partner,
effective upon such transfer. Any such transferee shall carry on the business of
the Partnership without dissolution. In each case, the admission shall be
subject to such 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. No Person shall be admitted as an Additional
Limited Partner without the consent of the Managing General Partner, which
consent shall be given or withheld in the Managing General Partner's sole and
absolute discretion. A Person who makes a Capital Contribution to the
Partnership in accordance with this Agreement, including without limitation,
under Section 4.1.C, or who exercises an option to receive Partnership Units
shall be admitted to the Partnership as an Additional Limited Partner only with
the consent of the Managing General Partner and only upon furnishing to the
Managing General Partner (i) evidence of acceptance in form satisfactory to the
Managing General Partner of all of the terms and conditions of this Agreement,
including, without limitation, the power of attorney granted in Section 15.11
and (ii) such other documents or instruments as may be required in the
discretion of the Managing General Partner to effect such Person's admission as
an Additional Limited Partner. 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 Managing General Partner to such admission.
B. Allocations to Additional Limited Partners. If any
Additional Limited Partner is admitted to the Partnership on any day other than
the first day of a Partnership Year, then Net Income, Net Losses, each item
thereof and all other items allocable among Partners and Assignees for such
Partnership Year shall be allocated among such Additional Limited Partner and
all other Partners and Assignees by taking into account their varying interests
during the Partnership Year in accordance with Section 706(d) of the Code, using
the interim closing of the books method (unless the Managing General Partner, in
its sole and absolute discretion, elects to adopt a daily, weekly or monthly
proration method, in which event Net Income, Net Losses, and each item thereof
would be prorated based upon the applicable period selected by the Managing
General Partner). Solely for purposes of making such allocations, each of such
items for the calendar month in which an admission of any Additional Limited
Partner occurs shall be allocated among all the Partners and Assignees including
such Additional Limited Partner. All distributions of Available Cash with
respect to which the Partnership Record Date is before the date of such
admission shall be made solely to Partners and Assignees other than the
Additional Limited Partner, and all distributions of Available Cash thereafter
shall be made to all the Partners and Assignees including such Additional
Limited Partner.
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SECTION 12.3 AMENDMENT OF AGREEMENT AND CERTIFICATE OF LIMITED
PARTNERSHIP
For the admission to the Partnership of any Partner, the
Managing General Partner shall 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 Section 15.11 hereof.
ARTICLE XIII
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 a General Partner, the remaining General Partners and any
successor General Partner shall continue the business of the Partnership. The
Partnership shall dissolve, and its affairs shall be wound up, upon the first to
occur of any of the following ("Liquidating Events") :
(i) the expiration of its term as provided in Section
2.4 hereof;
(ii) an event of withdrawal of a General Partner, as
defined in the Act (other than an event of bankruptcy), unless (1) there is at
least one other General Partner, in which case the remaining General Partners
shall continue the business of the Partnership, or (2) within ninety (90) days
after the withdrawal a "majority in interest" (as defined below) of the
remaining Partners Consent 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;
(iii) through December 31, 2046, an election to
dissolve the Partnership made by the Managing General Partner with the consent
of Limited Partners who hold ninety percent (90%) of the outstanding Units held
by Limited Partners (including Units held by the General Partners);
(iv) an election to dissolve the Partnership made by
the Managing General Partner, in its sole and absolute discretion after December
31, 2046;
(v) entry of a decree of judicial dissolution of the
Partnership pursuant to the provisions of the Act;
(vi) the sale of all or substantially all of the
assets and properties of the Partnership for cash or for marketable securities;
or
(vii) a final and non-appealable judgment is entered
by a court of competent jurisdiction ruling that the remaining General
Partner(s) is bankrupt or insolvent, or a final and non-appealable order for
relief is entered by a court with appropriate jurisdiction against the remaining
General Partner(s), in each case under any federal or state bankruptcy or
insolvency laws as now or hereafter in effect, unless prior to or at the time of
the entry of such order or judgment a "majority in interest" (as defined below)
of the remaining Partners Consent in writing to continue the business of the
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Partnership and to the appointment, effective as of a date prior to the date of
such order or judgment, of a substitute General Partner.
As used herein, a "majority in interest" shall refer to
Partners (excluding the General Partners) who hold more than fifty percent (50%)
of the outstanding Percentage Interests not held by the General Partners.
SECTION 13.2 WINDING UP
A. General. Upon the occurrence of a Liquidating Event, 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 Partners (or, if 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 shall be
liquidated as promptly as is consistent with obtaining the fair value thereof,
and the proceeds therefrom (which may, to the extent determined by the General
Partners, include equity or other securities of the General Partners or any
other entity) shall be applied and distributed in the following order:
(1) First, to the payment and discharge of all
of the Partnership's debts and liabilities
to creditors other than the Partners;
(2) Second, to the payment and discharge of all
of the Partnership's debts and liabilities
to the General Partners;
(3) Third, to the payment and discharge of all
of the Partnership's debts and liabilities
to the Limited Partners; and
(4) The balance, if any, to the Partners in
accordance with their Capital Accounts,
after giving effect to all contributions,
distributions, and allocations for all
periods.
The General Partners shall not receive any additional
compensation for any services performed pursuant to this Article XIII.
B. Deferred Liquidation. Notwithstanding the provisions of
Section 13.2.A which require liquidation of the assets of the Partnership, but
subject to the order of priorities set forth therein, 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) or distribute to the Partners, in lieu of cash, as
tenants in common and in accordance with the provisions of Section 13.2.A,
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
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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.
SECTION 13.3 COMPLIANCE WITH TIMING REQUIREMENTS OF REGULATIONS
Subject to Section 13.4, if the Partnership is "liquidated"
within the meaning of Regulations Section 1.704-1(b)(2)(ii)(g), distributions
shall be made under this Article XIII to the General Partners and Limited
Partners who have positive Capital Accounts in compliance with Regulations
Section 1.704-1(b)(2)(ii)(b)(2). If any Partner has a deficit balance in its
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 discretion of the Managing
General Partner, a pro rata portion of the distributions that would otherwise be
made to the General Partners and Limited Partners pursuant to this Article XIII
may be: (A) distributed to a trust established for the benefit of the General
Partners 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
Partners arising out of or in connection with the Partnership (in which case the
assets of any such trust shall be distributed to the General Partners and
Limited Partners from time to time, in the reasonable discretion of the Managing
General Partner, in the same proportions as the amount distributed to such trust
by the Partnership would otherwise have been distributed to the General Partners
and Limited Partners pursuant to this Agreement); or (B) 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 Partners and Limited Partners as soon as practicable.
SECTION 13.4 DEEMED DISTRIBUTION AND RECONTRIBUTION
Notwithstanding any other provision of this Article XIII, if
the Partnership is deemed liquidated within the meaning of Regulations Section
1.704-1(b)(2)(ii)(g) but no Liquidating Event 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,
for federal income tax purposes and for purposes of maintaining Capital Accounts
pursuant to Exhibit B, the Partnership shall be deemed to have distributed its
assets in kind to the General Partners and Limited Partners, who shall be deemed
to have assumed and taken such assets subject to all Partnership liabilities,
all in accordance with their respective Capital Accounts. Immediately
thereafter, the General Partners and Limited Partners shall be deemed to have
recontributed the Partnership assets in kind to the Partnership, which shall be
deemed to have assumed and taken such assets subject to all such liabilities.
SECTION 13.5 RIGHTS OF LIMITED PARTNERS
Except as otherwise provided in this Agreement, each Limited
Partner shall look solely to the assets of the Partnership for the return of its
Capital Contributions and shall have no right or power to demand or receive
property other than cash from the Partnership. Except as otherwise expressly
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provided in this Agreement, no Limited Partner shall have priority over any
other Limited Partner as to the return of its Capital Contributions,
distributions, or allocations.
SECTION 13.6 NOTICE OF DISSOLUTION
If a Liquidating Event occurs or an event occurs that would,
but for provisions of an election or objection by one or more Partners pursuant
to Section 13.1, result in a dissolution of the Partnership, the Managing
General Partner shall, within thirty (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 discretion of the
Managing General Partner).
SECTION 13.7 CANCELLATION OF CERTIFICATE OF LIMITED PARTNERSHIP
Upon the completion of the liquidation of the Partnership cash
and property as provided in Section 13.2, 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 13.8 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, to minimize any losses otherwise attendant upon such
winding-up, and the provisions of this Agreement shall remain in effect among
the Partners during the period of liquidation.
SECTION 13.9 WAIVER OF PARTITION
Each Partner hereby waives any right to partition of the
Partnership property.
SECTION 13.10 LIABILITY OF LIQUIDATOR
The Liquidator shall be indemnified and held harmless by the
Partnership in the same manner and to the same degree as an Indemnitee may be
indemnified pursuant to Section 7.7.
ARTICLE XIV
AMENDMENT OF PARTNERSHIP AGREEMENT; MEETINGS
SECTION 14.1 AMENDMENTS
A. General. Amendments to this Agreement may be proposed by a
General Partner or by any Limited Partners holding twenty-five percent (25%) or
more of the Partnership Interests. Following such proposal (except an amendment
pursuant to Section 14.1.B), the Managing General Partner shall submit any
proposed amendment to the Limited Partners. The Managing 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. For purposes of obtaining a written vote, the Managing General
Partner may require a response within a reasonable specified time, but not less
than fifteen (15) days, and failure to respond in such time period shall
constitute a vote which
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is consistent with the Managing General Partner's recommendation with respect to
the proposal. Except as provided in Section 14.1.B, 14.1.C or 14.1.D, a proposed
amendment shall be adopted and be effective as an amendment hereto if it is
approved by the General Partners and it receives the Consent of Partners holding
a majority of the Percentage Interests of the Limited Partners (including
Limited Partnership Interests held by the General Partners).
B. Amendments Not Requiring Limited Partner Approval.
Notwithstanding Section 14.1.A or 14.1.C, the Managing 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:
(1) to add to the obligations of the General
Partners or surrender any right or power
granted to the General Partners or any
Affiliate of a General Partner for the
benefit of the Limited Partners;
(2) to reflect the admission, substitution,
termination, or withdrawal of Partners in
accordance with this Agreement (which may be
effected through the replacement of Exhibit
A with an amended Exhibit A);
(3) to set forth the designations, rights,
powers, duties, and preferences of the
holders of any additional Partnership
Interests issued pursuant to Article IV;
(4) to reflect a change that 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 of this Agreement, 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
(5) to satisfy any requirements, conditions, or
guidelines contained in any order,
directive, opinion, ruling or regulation of
a federal, state or local agency or
contained in federal, state or local law.
The Managing General Partner shall notify the Limited Partners
when any action under this Section 14.1.B is taken in the next regular
communication to the Limited Partners.
C. Amendments Requiring Limited Partner Approval (Excluding
General Partners). Notwithstanding Section 14.1.A, without the Consent of the
Outside Limited Partners, the General Partners shall not amend Section 4.2.A,
Section 5.1.E, Section 7.1.A (second sentence only), Section 7.5, Section 7.6,
Section 7.8, Section 7.11.B, Section 11.2, Section 13.1 (other than Section
13.1(iii) which can be amended only with a Consent of 90% of the Partnership
Units (including Partnership Units held by the General Partners), the last
sentence of Section 11.4 (provided that no such amendment shall in any event
adversely affect the rights of any lender who made a loan or who extended credit
and received in connection therewith a Pledge of Units prior to the date such
amendment is adopted unless, and only to the extent such lender consents
thereto, this Section 14.1.C or Section 14.2.
D. Other Amendments Requiring Certain Limited Partner
Approval. Notwithstanding anything in this Section 14.1 to the contrary, this
Agreement shall not be amended with
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respect to any Partner adversely affected without the Consent of such Partner,
or any Assignee who is a bona fide financial institution that loans money or
otherwise extends credit to a holder of Units, 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) amend Section 7.11.A, (iv) amend Article V or Article VI (except
as permitted pursuant to Sections 4.2, 5.1.E, 5.4, 6.2 and 14.1.B(3)), (v) amend
Section 8.6 or any defined terms set forth in Article I that relate to the
Redemption Right (except as permitted in Section 8.6.E), or (vi) amend Sections
11.3 or 11.5, or any additional restrictions to Section 11.6.E, or amend
Sections 14.1.B(4) or 14.1.D. This Section 14.1.D does not require unanimous
consent of all Partners adversely affected unless the amendment is to be
effective against all Partners adversely affected.
SECTION 14.2 MEETINGS OF THE PARTNERS
A. General. Meetings of the Partners may be called by the
Managing General Partner and shall be called upon the receipt by the Managing
General Partner of a written request by Limited Partners holding twenty-five
percent (25%) or more of the Partnership Interests. The call shall state the
nature of the business to be transacted. Notice of any such meeting shall be
given to all Partners not less than seven (7) days nor more than thirty (30)
days prior to the date of such meeting. Partners may vote in person or by proxy
at such meeting. Whenever the vote or Consent of Partners is permitted or
required under this Agreement, such vote or Consent may be given at a meeting of
Partners or may be given in accordance with the procedure prescribed in Section
14.1.A. Except as otherwise expressly provided in this Agreement, the Consent of
holders of a majority of the Percentage Interests held by Limited Partners
(including Limited Partnership Interests held by the General Partners) shall
control.
B. Actions Without a Meeting. Any action required or permitted
to be taken at a meeting of the 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 Partners (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 Partners (or such other percentage as is
expressly required by this Agreement). Such consent shall be filed with the
Managing 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
its attorney-in-fact. No proxy shall be valid after the expiration of eleven
(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,
such revocation to be effective upon the Partnership's receipt of written notice
thereof.
D. Conduct of Meeting. Each meeting of Partners shall be
conducted by the Managing General Partner or such other Person as the Managing
General Partner may appoint pursuant to such rules for the conduct of the
meeting as the Managing General Partner or such other Person deem appropriate.
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<PAGE> 62
ARTICLE XV
GENERAL PROVISIONS
SECTION 15.1 ADDRESSES AND NOTICE
Any notice, demand, request or report required or permitted to
be given or made to a Partner or Assignee under this Agreement shall be in
writing and shall be deemed given or made when delivered in person or when sent
by first class United States mail or by other means of written communication to
the Partner or Assignee at the address set forth in Exhibit A or such other
address as the Partners shall notify the Managing General Partner in writing.
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"
"Sections" and "Exhibits" are to Articles, Sections and Exhibits 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 15.6 CREDITORS
Other than as expressly set forth herein with regard to any
Indemnitee, none of the provisions of this Agreement shall be for the benefit
of, or shall be enforceable by, any creditor of the Partnership.
SECTION 15.7 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.
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<PAGE> 63
SECTION 15.8 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. Each party shall become bound by this Agreement immediately
upon affixing its signature hereto.
SECTION 15.9 APPLICABLE LAW
This Agreement shall be construed and enforced in accordance
with and governed by the laws of the State of Delaware, without regard to the
principles of conflicts of law.
SECTION 15.10 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.
SECTION 15.11 POWER OF ATTORNEY
A. General. Each Limited Partner and each Assignee who accepts
Partnership Units (or any rights, benefits or privileges associated therewith)
is deemed to irrevocably constitute and appoint the Managing 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, as its
true and lawful agent and attorney-in-fact, with full power and authority in its
name, place and stead to:
(1) execute, swear to, acknowledge, deliver,
file and record in the appropriate public
offices (a) all certificates, documents and
other instruments (including, without
limitation, this Agreement and the
Certificate and all amendments or
restatements thereof) that the Managing
General Partner or any 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, (b) all instruments that
the Managing General Partner or any
Liquidator deem appropriate or necessary to
reflect any amendment, change, modification
or restatement of this Agreement in
accordance with its terms, (c) all
conveyances and other instruments or
documents that the Managing General Partner
or any Liquidator 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, (d) all instruments relating
to the admission, withdrawal, removal or
substitution of any Partner pursuant to, or
other events described in, Article XI, XII
or XIII hereof or the Capital Contribution
of any Partner and (e) all certificates,
documents and other
-58-
<PAGE> 64
instruments relating to the determination of
the rights, preferences and privileges of
Partnership Interests; and
(2) execute, swear to, acknowledge and file all
ballots, consents, approvals, waivers,
certificates and other instruments
appropriate or necessary, in the sole and
absolute discretion of the Managing General
Partner or any Liquidator, to make,
evidence, give, 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,
in the sole discretion of the Managing
General Partner or any Liquidator, to
effectuate the terms or intent of this
Agreement.
Nothing contained in this Section 15.11 shall be construed as
authorizing the Managing General Partner or any Liquidator to amend this
Agreement except in accordance with Article XIV hereof or as may be otherwise
expressly provided for in this Agreement.
B. Irrevocable Nature. 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 Managing General Partner or 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 Managing General Partner or any Liquidator, 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 Managing General Partner or any
Liquidator, taken in good faith under such power of attorney. Each Limited
Partner or Assignee shall execute and deliver to the Managing General Partner or
the Liquidator, within fifteen (15) days after receipt of the Managing General
Partner's or Liquidator's request therefor, such further designation, powers of
attorney and other instruments as the Managing General Partner or the
Liquidator, as the case may be, deems necessary to effectuate this Agreement and
the purposes of the Partnership.
SECTION 15.12 ENTIRE AGREEMENT
This Agreement contains the entire understanding and agreement
among the Partners with respect to the subject matter hereof and supersedes any
prior written oral understandings or agreements among them with respect thereto.
SECTION 15.13 NO RIGHTS AS SHAREHOLDERS
Nothing contained in this Agreement shall be construed as
conferring upon the holders of the Partnership Units any rights whatsoever as
partners or shareholders of any of the General Partners, including, without
limitation, any right to receive dividends or other distributions made to
shareholders of the Managing General Partner or partners of the other General
Partners or to vote or to consent or receive notice as (i) shareholders in
respect to any meeting of shareholders for the election of trustees of
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<PAGE> 65
the Managing General Partner or partners of the other General Partners or any
other matter or (ii) partners in respect to any meeting of partners of the other
General Partners or any other matter.
SECTION 15.14 LIMITATION TO PRESERVE REIT STATUS
To the extent that any amount paid or credited to the General
Partners or any of their officers, directors, trustees, employees or agents
pursuant to Section 7.4 or Section 7.7 would constitute gross income to the
Managing General Partner for purposes of Section 856(c)(2) or 856(c)(3) of the
Code (a "Managing General Partner Payment") then, notwithstanding any other
provision of this Agreement, the amount of such Managing General Partner Payment
for any fiscal year shall not exceed the lesser of:
(i) an amount equal to the excess, if any, of (a)
4.20% of the Managing General Partner's total gross income (but not including
the amount of any Managing General Partner Payments) for the fiscal year which
is described in subsections (A) though (H) of Section 856(c)(2) of the Code over
(b) the amount of gross income (within the meaning of Section 856(c)(2) of the
Code) derived by the Managing General Partner from sources other than those
described in subsections (A) through (H) of Section 856(c)(2) of the Code (but
not including the amount of any Managing General Partner Payments); or
(ii) an amount equal to the excess, if any of (a) 25%
of the Managing General Partner's total gross income (but not including the
amount of any Managing General Partner Payments) for the fiscal year which is
described in subsections (A) through (I) of Section 856(c)(3) of the Code over
(b) the amount of gross income (within the meaning of Section 856(c)(3) of the
Code) derived by the Managing General Partner from sources other than those
described in subsections (A) through (I) of Section 856(c)(3) of the Code (but
not including the amount of any Managing General Partner Payments); provided,
however, that Managing General Partner Payments in excess of the amounts set
forth in subparagraphs (i) and (ii) above may be made if the Managing General
Partner, as a condition precedent, obtains an opinion of tax counsel that the
receipt of such excess amounts would not adversely affect the Managing General
Partner's ability to qualify as a REIT. To the extent Managing General Partner
Payments may not be made in a year due to the foregoing limitations, such
Managing General Partner Payments shall carry over and be treated as arising in
the following year, provided, however, that such amounts shall not carry over
for more than five years, and if not paid within such five year period, shall
expire; provided further, that (i) as Managing General Partner Payments are
made, such payments shall be applied first to carry over amounts outstanding, if
any, and (ii) with respect to carry over amounts for more than one Partnership
Year, such payments shall be applied to the earliest Partnership Year first.
-60-
<PAGE> 66
IN WITNESS WHEREOF, the parties hereto have executed this
Agreement as of the date first written above.
GENERAL PARTNERS:
EQUITY OFFICE PROPERTIES TRUST
By: /s/ Timothy H. Callahan
-------------------------------------
Name: Timothy H. Callahan
Title: President and Chief Executive Officer
ZELL/MERRILL LYNCH REAL ESTATE OPPORTUNITY
PARTNERS LIMITED PARTNERSHIP II
By: Equity Office Properties Trust, its
managing general partner
By: /s/ Timothy H. Callahan
--------------------------------
Name: Timothy H. Callahan
Title: President and Chief Executive
Officer
LIMITED PARTNERS:
By: Equity Office Properties Trust, as
Attorney-in-Fact for the Limited Partners
By: /s/ Timothy H. Callahan
--------------------------------
Name: Timothy H. Callahan
Title: President and Chief Executive
Officer
For purposes of Section 8.6 hereof:
EQUITY OFFICE PROPERTIES TRUST
By: /s/ Timothy H. Callahan
--------------------------------
Name: Timothy H. Callahan
Title: President and Chief Executive
Officer
-61-
<PAGE> 67
PARTNERSHIP INTEREST TRANSFER
FOR VALUE RECEIVED, and as part of a prorata distribution to its
members of "Partnership Units", EQUITY OFFICE HOLDINGS, L.L.C. ("Assignor") does
hereby assign, transfer and deliver unto ALPHABET PARTNERS ("Assignee") all
right, title and interest of Assignor in and to 1,155,346 Partnership Units (and
Assignor's Limited Partnership Interest related thereto) in that certain limited
partnership (the "Partnership") known as EOP Operating Limited Partnership, and
Assignor hereby authorizes the substitution of Assignee as a limited partner in
the Partnership with respect thereto. As used herein, the terms "Partnership
Units" and "Limited Partnership Interest" each has the meaning ascribed to it in
the Agreement of Limited Partnership for the Partnership (the "Partnership
Agreement").
Assignor hereby represents and warrants that it owns title to said
1,155,346 Partnership Units in the Partnership (and the Limited Partnership
Interest related thereto) free and clear of any liens or encumbrances.
IN WITNESS THEREOF, Assignor has executed this Assignment to be
effective as of August 1, 1997.
ASSIGNOR:
EQUITY OFFICE HOLDINGS, L.L.C.
By: /s/ Sheli Z. Rosenberg
-----------------------------------
Name: Sheli Z. Rosenberg
Title: Vice President
ACCEPTANCE
In consideration of the foregoing Assignment, the undersigned hereby
accepts the aforesaid 1,155,346 Partnership Units (and the Limited Partnership
Interest related thereto) and hereby assumes and agrees to perform and be bound
by all of the terms, covenants and conditions of the Partnership Agreement
relating thereto.
ASSIGNEE:
By: ALPHABET PARTNERS, an Illinois general
partnership
By: SZA Trust, an Illinois trust
SZG Trust, an Illinois trust
SZI Trust, an Illinois trust
By: /s/ Arthur A. Greenberg
----------------------------------
Arthur A. Greenberg, Trustee
<PAGE> 68
PARTNERSHIP INTEREST TRANSFER
FOR VALUE RECEIVED, ALPHABET PARTNERS ("Assignor") does hereby assign,
transfer and deliver unto SAMSTOCK/ALPHA, L.L.C. ("Assignee"), as a contribution
of capital thereto, all right, title and interest of Assignor in and to
1,155,346 Partnership Units (and Assignor's Limited Partnership Interest related
thereto) in that certain limited partnership (the "Partnership") known as EOP
Operating Limited Partnership, and Assignor hereby authorizes the substitution
of Assignee as a limited partner in the Partnership with respect thereto. As
used herein, the terms "Partnership Units" and "Limited Partnership Interest"
each has the meaning ascribed to it in the Agreement of Limited Partnership for
the Partnership (the "Partnership Agreement").
Assignor hereby represents and warrants that it owns title to said
1,155,346 Partnership Units in the Partnership (and the Limited Partnership
Interest related thereto) free and clear of any liens or encumbrances.
IN WITNESS THEREOF, Assignor has executed this Assignment to be
effective as of August 1, 1997.
ASSIGNOR:
By: ALPHABET PARTNERS, an Illinois general
partnership
By: SZA Trust, an Illinois trust
SZG Trust, an Illinois trust
SZI Trust, an Illinois trust
By: /s/ Arthur A. Greenberg
----------------------------
Arthur A. Greenberg, Trustee
ACCEPTANCE
In consideration of the foregoing Assignment, the undersigned hereby
accepts the aforesaid 1,155,346 Partnership Units (and the Limited Partnership
Interest related thereto) and hereby assumes and agrees to perform and be bound
by all of the terms, covenants and conditions of the Partnership Agreement
relating thereto.
ASSIGNEE:
SAMSTOCK/ALPHA, L.L.C.
By: /s/ Donald J. Liebentritt
------------------------------------
Name: Donald J. Liebentritt
Title: Vice President
<PAGE> 69
PARTNERSHIP INTEREST TRANSFER
FOR VALUE RECEIVED, and as part of a prorata distribution to its
members of "Partnership Units", EQUITY OFFICE HOLDINGS, L.L.C. ("Assignor") does
hereby assign, transfer and deliver unto ZFT PARTNERSHIP ("Assignee") all right,
title and interest of Assignor in and to 1,155,346 Partnership Units (and
Assignor's Limited Partnership Interest related thereto) in that certain limited
partnership (the "Partnership") known as EOP Operating Limited Partnership, and
Assignor hereby authorizes the substitution of Assignee as a limited partner in
the Partnership with respect thereto. As used herein, the terms "Partnership
Units" and "Limited Partnership Interest" each has the meaning ascribed to it in
the Agreement of Limited Partnership for the Partnership (the "Partnership
Agreement").
Assignor hereby represents and warrants that it owns title to said
1,155,346 Partnership Units in the Partnership (and the Limited Partnership
Interest related thereto) free and clear of any liens or encumbrances.
IN WITNESS THEREOF, Assignor has executed this Assignment to be
effective as of August 1, 1997.
ASSIGNOR:
EQUITY OFFICE HOLDINGS, L.L.C.
By: /s/ Sheli Z. Rosenberg
------------------------------------
Name: Sheli Z. Rosenberg
Title: Vice President
ACCEPTANCE
In consideration of the foregoing Assignment, the undersigned hereby
accepts the aforesaid 1,155,346 Partnership Units (and the Limited Partnership
Interest related thereto) and hereby assumes and agrees to perform and be bound
by all of the terms, covenants and conditions of the Partnership Agreement
relating thereto.
ASSIGNEE:
ZFT PARTNERSHIP, an Illinois general partnership
By: Joann Zell Trust, an Illinois trust
Joann's Child's A Trust, an Illinois trust
Joann's Child Trust, an Illinois trust
By: /s/ Sheli Z. Rosenberg
-------------------------------------
Sheli Z. Rosenberg, Trustee
<PAGE> 70
PARTNERSHIP INTEREST TRANSFER
FOR VALUE RECEIVED, ZFT PARTNERSHIP ("Assignor") does hereby assign,
transfer and deliver unto SAMSTOCK/ZFT, L.L.C. ("Assignee"), and as a
contribution of capital thereto, all right, title and interest of Assignor in
and to 1,155,346 Partnership Units (and Assignor's Limited Partnership Interest
related thereto) in that certain limited partnership (the "Partnership") known
as EOP Operating Limited Partnership, and Assignor hereby authorizes the
substitution of Assignee as a limited partner in the Partnership with respect
thereto. As used herein, the terms "Partnership Units" and "Limited Partnership
Interest" each has the meaning ascribed to it in the Agreement of Limited
Partnership for the Partnership (the "Partnership Agreement").
Assignor hereby represents and warrants that it owns title to said
1,155,346 Partnership Units in the Partnership (and the Limited Partnership
Interest related thereto) free and clear of any liens or encumbrances.
IN WITNESS THEREOF, Assignor has executed this Assignment to be
effective as of August 1, 1997.
ASSIGNOR:
By: ZFT PARTNERSHIP, an Illinois general
partnership
By: Joann Zell Trust, an Illinois trust
Joann's Child's A Trust, an Illinois trust
Joann's Child Trust, an Illinois trust
By: /s/ Sheli Z. Rosenberg
------------------------------------
Sheli Z. Rosenberg, Trustee
ACCEPTANCE
In consideration of the foregoing Assignment, the undersigned hereby
accepts the aforesaid 1,155,346 Partnership Units (and the Limited Partnership
Interest related thereto) and hereby assumes and agrees to perform and be bound
by all of the terms, covenants and conditions of the Partnership Agreement
relating thereto.
ASSIGNEE:
SAMSTOCK/ZFT, L.L.C.
By: /s/ Donald J. Liebentritt
------------------------------------
Name: Donald J. Liebentritt
Title: Vice President
<PAGE> 71
PARTNERSHIP INTEREST TRANSFER
FOR VALUE RECEIVED, and as part of a prorata distribution to its
members of "Partnership Units", EQUITY OFFICE HOLDINGS, L.L.C. ("Assignor") does
hereby assign, transfer and deliver unto ANDA PARTNERSHIP ("Assignee") all
right, title and interest of Assignor in and to 2,310,692 Partnership Units (and
Assignor's Limited Partnership Interest related thereto) in that certain limited
partnership (the "Partnership") known as EOP Operating Limited Partnership, and
Assignor hereby authorizes the substitution of Assignee as a limited partner in
the Partnership with respect thereto. As used herein, the terms "Partnership
Units" and "Limited Partnership Interest" each has the meaning ascribed to it in
the Agreement of Limited Partnership for the Partnership (the "Partnership
Agreement").
Assignor hereby represents and warrants that it owns title to said
2,310,692 Partnership Units in the Partnership (and the Limited Partnership
Interest related thereto) free and clear of any liens or encumbrances.
IN WITNESS THEREOF, Assignor has executed this Assignment to be
effective as of August 1, 1997.
ASSIGNOR:
EQUITY OFFICE HOLDINGS, L.L.C.
By: /s/ Sheli Z. Rosenberg
-------------------------------------
Name: Sheli Z. Rosenberg
Title: Vice President
ACCEPTANCE
In consideration of the foregoing Assignment, the undersigned hereby
accepts the aforesaid 2,310,692 Partnership Units (and the Limited Partnership
Interest related thereto) and hereby assumes and agrees to perform and be bound
by all of the terms, covenants and conditions of the Partnership Agreement
relating thereto.
ASSIGNEE:
By: ANDA PARTNERSHIP
By: Ann Only Trust, an Illinois trust
By: /s/ Mark Slezak
-----------------------------
Mark Slezak, Trustee
By: Ann/Jessee Trust, an Illinois trust
By: /s/ Mark Slezak
-----------------------------
Mark Slezak, Trustee
<PAGE> 72
ACKNOWLEDGEMENT
The undersigned being the managing general partner of EOP Operating
Limited Partnership (the "Partnership"), for and on behalf of the Partnership,
hereby acknowledges the following transfers of interests in the Partnership:
<TABLE>
<CAPTION>
ASSIGNOR ASSIGNEE PARTNERSHIP UNITS
-------- -------- -----------------
<S> <C> <C>
Equity Office Holdings, L.L.C. Alphabet Partners 1,155,346
Equity Office Holdings, L.L.C. ZFT Partnership 1,155,346
Equity Office Holdings, L.L.C. Anda Partnership 2,310,692
Alphabet Partners Samstock/Alpha, L.L.C. 1,155,346
ZFT Partnership Samstock/ZFT, L.L.C. 1,155,346
</TABLE>
The undersigned further acknowledges that, as a result of the foregoing
transfers, each of the following has been substituted as a limited partner in
the Partnership in lieu of Equity Office Holdings, L.L.C. as to the interest
indicated:
Anda Partnership 2,310,692 Partnership Units
Samstock/Alpha, L.L.C. 1,155,346 Partnership Units
Samstock/ZFT, L.L.C. 1,155,346 Partnership Units
EQUITY OFFICE PROPERTIES TRUST, as
managing general partner of EOP Operating
Limited Partnership
Dated as of August 1, 1997
By: /s/ Stanley M. Stevens
-----------------------------------
Name: Stanley M. Stevens
Title: Executive Vice President
<PAGE> 73
PARTNERSHIP INTEREST TRANSFER
FOR VALUE RECEIVED, EQUITY GROUP INVESTMENTS, INC. ("Assignor") does
hereby assign, transfer and deliver unto EGI HOLDINGS, INC. ("Assignee"), its
wholly owned subsidiary and as a contribution of capital thereto, all right,
title and interest of Assignor in and to 1,868,719 Partnership Units (and
Assignor's Limited Partnership Interest related thereto) in that certain limited
partnership (the "Partnership") known as EOP Operating Limited Partnership, and
Assignor hereby authorizes the substitution of Assignee as a limited partner in
the Partnership with respect thereto. As used herein, the terms "Partnership
Units" and "Limited Partnership Interest" each has the meaning ascribed to it in
the Agreement of Limited Partnership for the Partnership (the "Partnership
Agreement").
Assignor hereby represents and warrants that it owns title to said
1,868,719 Partnership Units in the Partnership (and the Limited Partnership
Interest related thereto) free and clear of any liens or encumbrances.
IN WITNESS THEREOF, Assignor has executed this Assignment to be
effective as of August 1, 1997.
ASSIGNOR:
EQUITY GROUP INVESTMENTS, INC.
By: /s/ Donald J. Liebentritt
----------------------------------
Name: Donald J. Liebentitt
Title: Executive Vice President
ACCEPTANCE
In consideration of the foregoing Assignment, the undersigned hereby
accepts the aforesaid 1,868,719 Partnership Units (and the Limited Partnership
Interest related thereto) and hereby assumes and agrees to perform and be bound
by all of the terms, covenants and conditions of the Partnership Agreement
relating thereto.
ASSIGNEE:
EGI HOLDINGS, INC.
By: /s/ Donald J. Liebentritt
----------------------------------
Name: Donald J. Liebentitt
Title: Executive Vice President
<PAGE> 74
ACKNOWLEDGEMENT
The undersigned being the managing general partner of EOP Operating
Limited Partnership (the "Partnership"), for and on behalf of the Partnership,
hereby acknowledges a transfer of interest in the Partnership from Equity Group
Investments, Inc., as assignor to EGI Holdings, Inc. as assignee of 1,868,719
Partnership Units.
The undersigned further acknowledges that, as a result of the foregoing
transfer, EGI Holdings, Inc. has been substituted as a limited partner in the
Partnership in lieu of Equity Group Investments, Inc. as to the interest
indicated above.
EQUITY OFFICE PROPERTIES TRUST, as
managing general partner of EOP Operating
Limited Partnership
Dated as of August 1, 1997
By: /s/ Stanley M. Stevens
-------------------------------
Name: Stanley M. Stevens
Title: Executive Vice President
<PAGE> 75
PARTNERSHIP INTEREST TRANSFER
FOR VALUE RECEIVED, EQUITY GROUP INVESTMENTS, INC. ("Assignor") does
hereby assign, transfer and deliver unto EGIL Investments, Inc. ("Assignee"),
its wholly owned subsidiary and as a contribution of capital thereto, all right,
title and interest of Assignor in and to 1,868,719 Partnership Units (and
Assignor's Limited Partnership Interest related thereto) in that certain limited
partnership (the "Partnership") known as EOP Operating Limited Partnership, and
Assignor hereby authorizes the substitution of Assignee as a limited partner in
the Partnership with respect thereto. As used herein, the terms "Partnership
Units" and "Limited Partnership Interest" each has the meaning ascribed to it in
the Agreement of Limited Partnership for the Partnership (the "Partnership
Agreement").
Assignor hereby represents and warrants that it owns title to said
1,868,719 Partnership Units in the Partnership (and the Limited Partnership
Interest related thereto) free and clear of any liens or encumbrances.
IN WITNESS THEREOF, Assignor has executed this Assignment to be
effective as of August 1, 1997.
ASSIGNOR:
EQUITY GROUP INVESTMENTS, INC.
By: /s/ Donald J. Liebentritt
----------------------------------
Name: Donald J. Liebentritt
Title: Executive Vice President
ACCEPTANCE
In consideration of the foregoing Assignment, the undersigned hereby
accepts the aforesaid 1,868,719 Partnership Units (and the Limited Partnership
Interest related thereto) and hereby assumes and agrees to perform and be bound
by all of the terms, covenants and conditions of the Partnership Agreement
relating thereto.
ASSIGNEE:
EGIL INVESTMENTS, INC.
By: /s/ Mark Slezak
---------------------------------
Name: Mark Slezak
Title: Vice President and Treasurer
<PAGE> 76
ACKNOWLEDGEMENT
The undersigned being the managing general partner of EOP Operating
Limited Partnership (the "Partnership"), for and on behalf of the Partnership,
hereby acknowledges a transfer of interest in the Partnership from Equity Group
Investments, Inc., as assignor to EGIL Investments, Inc. as assignee of
1,868,719 Partnership Units.
The undersigned further acknowledges that, as a result of the foregoing
transfer, EGIL Investments, Inc. has been substituted as a limited partner in
the Partnership in lieu of Equity Group Investments, Inc. as to the interest
indicated above.
EQUITY OFFICE PROPERTIES TRUST, as
managing general partner of EOP Operating
Limited Partnership
Dated as of August 1, 1997
By: /s/ Stanley M. Stevens
-------------------------------
Name: Stanley M. Stevens
Title: Executive Vice President
<PAGE> 77
500 Marquette - Step 2, No. 10
ASSIGNMENT AND ASSUMPTION AGREEMENT
Assignment and Assumption Agreement, dated July 11, 1997,
between Zell/Merrill Lynch Real Estate Opportunity Partners Limited Partnership,
an Illinois limited partnership ("ZML OP"), and EOP Operating Limited
Partnership, a Delaware limited partnership ("EOP OP").
WHEREAS, pursuant to a Contribution Agreement, dated as of May
30, 1997 among ZML OP, EOP OP and various other parties (the "Contribution
Agreement"), ZML OP has agreed to contribute certain property interests of ZML
OP (the "Property Interests") to EOP OP; and
WHEREAS, pursuant to the Contribution Agreement, in exchange
for such contribution, EOP OP has agreed to (a) issue certain partnership
interests in EOP OP ("OP Units") to ZML OP and (b) assume certain liabilities of
ZML OP.
NOW, THEREFORE, in consideration of the foregoing and for
other good and valuable consideration (receipt of which is hereby acknowledged),
the parties hereto, intending to be legally bound hereby, agree as follows:
1. Pursuant to and in accordance with the Contribution
Agreement, ZML OP hereby sells, conveys, assigns, transfers and delivers over
unto EOP OP, its successors and assigns, all of the right, title and interest of
ZML OP in each of the Property Interests described on Exhibit A attached hereto.
2. Pursuant to and in accordance with the Contribution
Agreement, EOP OP hereby sells, conveys, assigns, transfers and delivers over
unto ZML OP, its successors and assigns, 21,072,687 OP Units, which OP Units are
hereby accepted by ZML OP.
3. Pursuant to and in accordance with the Contribution
Agreement, EOP OP hereby assumes (a) all of the right, title and interest of ZML
OP in each of the Property Interests and (b) all liabilities and obligations,
secured or unsecured, whether absolute, accrued, contingent or otherwise,
whether known or unknown and whether or not due, arising from, relating to or
otherwise in respect of each of the Property Interests, whether arising prior
to, as of or following the execution of this Agreement.
4. ZML OP and EOP OP, from time to time, shall execute,
acknowledge, deliver and perform, or cause to be executed, acknowledged,
delivered and performed, all such further acts, assignments, transfers,
conveyances, powers of attorney and assurances as may be necessary or proper to
carry out the provisions and intent of the Contribution Agreement and this
Agreement.
5. This Agreement shall be governed by the internal laws of
the State of Illinois, without regard to the choice of laws provisions thereof.
<PAGE> 78
IN WITNESS WHEREOF, the parties have executed this Agreement
as of the date first above written.
ZELL/MERRILL LYNCH REAL ESTATE OPPORTUNITY
PARTNERS LIMITED PARTNERSHIP, an Illinois
limited partnership
By: ZML Partners Limited Partnership, an
Illinois limited partnership, its
general partner
By: ZM Investors Limited Partnership,
an Illinois limited partnership,
its general partner
By: ZM, Inc., an Illinois corporation,
its general partner
By: /s/ Stanley M. Stevens
-------------------------
Name: Stanley M. Stevens
Title: Vice President
EOP OPERATING LIMITED PARTNERSHIP, a Delaware
limited partnership
By: Equity Office Properties Trust, its general
partner
By: /s/ Stanley M. Stevens
------------------------------------
Name: Stanley M. Stevens
Title: Executive Vice President
<PAGE> 79
28 State - Step 3, No. 17
ASSIGNMENT AND ASSUMPTION AGREEMENT
Assignment and Assumption Agreement, dated July 11, 1997,
between Zell/Merrill Lynch Real Estate Opportunity Partners Limited Partnership
II, an Illinois limited partnership ("ZML OP II"), and EOP Operating Limited
Partnership, a Delaware limited partnership ("EOP OP").
WHEREAS, pursuant to a Contribution Agreement, dated as of May
30, 1997 among ZML OP II, EOP OP and various other parties (the "Contribution
Agreement"), ZML OP II has agreed to contribute certain property interests of
ZML OP II (the "Property Interests") to EOP OP; and
WHEREAS, pursuant to the Contribution Agreement, in exchange
for such contribution, EOP OP has agreed to (a) issue certain partnership
interests in EOP OP ("OP Units") to ZML OP II and (b) assume certain liabilities
of ZML OP II.
NOW, THEREFORE, in consideration of the foregoing and for
other good and valuable consideration (receipt of which is hereby acknowledged),
the parties hereto, intending to be legally bound hereby, agree as follows:
1. Pursuant to and in accordance with the Contribution
Agreement, ZML OP II hereby sells, conveys, assigns, transfers and delivers over
unto EOP OP, its successors and assigns, all of the right, title and interest of
ZML OP II in each of the Property Interests described on Exhibit A attached
hereto.
2. Pursuant to and in accordance with the Contribution
Agreement, EOP OP hereby sells, conveys, assigns, transfers and delivers over
unto ZML OP II, its successors and assigns, 23,279,014 OP Units, which OP Units
are hereby accepted by ZML OP II.
3. Pursuant to and in accordance with the Contribution
Agreement, EOP OP hereby assumes (a) all of the right, title and interest of ZML
OP II in each of the Property Interests and (b) all liabilities and obligations,
secured or unsecured, whether absolute, accrued, contingent or otherwise,
whether known or unknown and whether or not due, arising from, relating to or
otherwise in respect of each of the Property Interests, whether arising prior
to, as of or following the execution of this Agreement.
4. ZML OP II and EOP OP, from time to time, shall execute,
acknowledge, deliver and perform, or cause to be executed, acknowledged,
delivered and performed, all such further acts, assignments, transfers,
conveyances, powers of attorney and assurances as may be necessary or proper to
carry out the provisions and intent of the Contribution Agreement and this
Agreement.
5. This Agreement shall be governed by the internal laws of
the State of Illinois, without regard to the choice of laws provisions thereof.
<PAGE> 80
IN WITNESS WHEREOF, the parties have executed this Agreement
as of the date first above written.
ZELL/MERRILL LYNCH REAL ESTATE OPPORTUNITY PARTNERS
LIMITED PARTNERSHIP II, an Illinois limited partnership
By: ZML Partners Limited Partnership II, an Illinois
limited partnership, its general partner
By: ZM Investors Limited Partnership II, an
Illinois limited partnership, its
general partner
By: Zell/Merrill II, Inc., an Illinois
corporation, its general partner
By: /s/ Stanley M. Stevens
------------------------------
Name: Stanley M. Stevens
Title: Vice President
EOP OPERATING LIMITED PARTNERSHIP, a Delaware limited
partnership
By: Equity Office Properties Trust, its general partner
By: /s/ Stanley M. Stevens
----------------------------------------
Name: Stanley M. Stevens
Title: Executive Vice President
<PAGE> 81
850 Third - Step 3, No. 17
ASSIGNMENT AND ASSUMPTION AGREEMENT
Assignment and Assumption Agreement, dated July 11, 1997,
between Zell/Merrill Lynch Real Estate Opportunity Partners Limited Partnership
III, an Illinois limited partnership ("ZML OP III"), and EOP Operating Limited
Partnership, a Delaware limited partnership ("EOP OP").
WHEREAS, pursuant to a Contribution Agreement, dated as of May
30, 1997 among ZML OP III, EOP OP and various other parties (the "Contribution
Agreement"), ZML OP III has agreed to contribute certain property interests of
ZML OP III (the "Property Interests") to EOP OP; and
WHEREAS, pursuant to the Contribution Agreement, in exchange
for such contribution, EOP OP has agreed to (a) issue certain partnership
interests in EOP OP ("OP Units") to ZML OP III and (b) assume certain
liabilities of ZML OP III.
NOW, THEREFORE, in consideration of the foregoing and for
other good and valuable consideration (receipt of which is hereby acknowledged),
the parties hereto, intending to be legally bound hereby, agree as follows:
1. Pursuant to and in accordance with the Contribution
Agreement, ZML OP III hereby sells, conveys, assigns, transfers and delivers
over unto EOP OP, its successors and assigns, all of the right, title and
interest of ZML OP III in each of the Property Interests described on Exhibit A
attached hereto.
2. Pursuant to and in accordance with the Contribution
Agreement, EOP OP hereby sells, conveys, assigns, transfers and delivers over
unto ZML OP III, its successors and assigns, 49,228,311 OP Units, which OP Units
are hereby accepted by ZML OP III.
3. Pursuant to and in accordance with the Contribution
Agreement, EOP OP hereby assumes (a) all of the right, title and interest of ZML
OP III in each of the Property Interests and (b) all liabilities and
obligations, secured or unsecured, whether absolute, accrued, contingent or
otherwise, whether known or unknown and whether or not due, arising from,
relating to or otherwise in respect of each of the Property Interests, whether
arising prior to, as of or following the execution of this Agreement.
4. ZML OP III and EOP OP, from time to time, shall execute,
acknowledge, deliver and perform, or cause to be executed, acknowledged,
delivered and performed, all such further acts, assignments, transfers,
conveyances, powers of attorney and assurances as may be necessary or proper to
carry out the provisions and intent of the Contribution Agreement and this
Agreement.
5. This Agreement shall be governed by the internal laws of
the State of Illinois, without regard to the choice of laws provisions thereof.
<PAGE> 82
IN WITNESS WHEREOF, the parties have executed this Agreement
as of the date first above written.
ZELL/MERRILL LYNCH REAL ESTATE OPPORTUNITY
PARTNERS LIMITED PARTNERSHIP III, an
Illinois limited partnership
By: ZML Partners Limited Partnership III,
an Illinois limited partnership, its
general partner
By: ZM Investors Limited Partnership
III, an Illinois limited
partnership, its general partner
By: Zell/Merrill III, Inc., an
Illinois corporation, its
general partner
By: /s/ Stanley M. Stevens
-----------------------
Name: Stanley M. Stevens
Title: Vice President
EOP OPERATING LIMITED PARTNERSHIP, a Delaware
limited partnership
By: Equity Office Properties Trust, its
general partner
By: /s/ Stanley M. Stevens
-------------------------------
Name: Stanley M. Stevens
Title: Executive Vice President
<PAGE> 83
British - Step 3, No. 10
ASSIGNMENT AND ASSUMPTION AGREEMENT
Assignment and Assumption Agreement, dated July 11, 1997,
between Zell/Merrill Lynch Real Estate Opportunity Partners Limited Partnership
IV, an Illinois limited partnership ("ZML OP IV"), and EOP Operating Limited
Partnership, a Delaware limited partnership ("EOP OP").
WHEREAS, pursuant to a Contribution Agreement, dated as of May
30, 1997 among ZML OP IV, EOP OP and various other parties (the "Contribution
Agreement"), ZML OP IV has agreed to contribute certain property interests of
ZML OP IV (the "Property Interests") to EOP OP; and
WHEREAS, pursuant to the Contribution Agreement, in exchange
for such contribution, EOP OP has agreed to (a) issue certain partnership
interests in EOP OP ("OP Units") to ZML OP IV and (b) assume certain liabilities
of ZML OP IV.
NOW, THEREFORE, in consideration of the foregoing and for
other good and valuable consideration (receipt of which is hereby acknowledged),
the parties hereto, intending to be legally bound hereby, agree as follows:
1. Pursuant to and in accordance with the Contribution
Agreement, ZML OP IV hereby sells, conveys, assigns, transfers and delivers over
unto EOP OP, its successors and assigns, all of the right, title and interest of
ZML OP IV in each of the Property Interests described on Exhibit A attached
hereto.
2. Pursuant to and in accordance with the Contribution
Agreement, EOP OP hereby sells, conveys, assigns, transfers and delivers over
unto ZML OP IV, its successors and assigns, 31,186,903 OP Units, which OP Units
are hereby accepted by ZML OP IV.
3. Pursuant to and in accordance with the Contribution
Agreement, EOP OP hereby assumes (a) all of the right, title and interest of ZML
OP IV in each of the Property Interests and (b) all liabilities and obligations,
secured or unsecured, whether absolute, accrued, contingent or otherwise,
whether known or unknown and whether or not due, arising from, relating to or
otherwise in respect of each of the Property Interests, whether arising prior
to, as of or following the execution of this Agreement.
4. ZML OP IV and EOP OP, from time to time, shall execute,
acknowledge, deliver and perform, or cause to be executed, acknowledged,
delivered and performed, all such further acts, assignments, transfers,
conveyances, powers of attorney and assurances as may be necessary or proper to
carry out the provisions and intent of the Contribution Agreement and this
Agreement.
5. This Agreement shall be governed by the internal laws of
the State of Illinois, without regard to the choice of laws provisions thereof.
<PAGE> 84
IN WITNESS WHEREOF, the parties have executed this Agreement
as of the date first above written.
ZELL/MERRILL LYNCH REAL ESTATE OPPORTUNITY
PARTNERS LIMITED PARTNERSHIP IV, an Illinois
limited partnership
By: ZML Partners Limited Partnership IV, an
Illinois limited partnership, its general
partner
By: ZM Investors Limited Partnership IV, an
Illinois limited partnership, its
general partner
By: Zell/Merrill IV, Inc., an Illinois
corporation, its general partner
By: /s/ Stanley M. Stevens
------------------------
Name: Stanley M. Stevens
Title: Vice President
EOP OPERATING LIMITED PARTNERSHIP, a Delaware
limited partnership
By: Equity Office Properties Trust, its general
partner
By: /s/ Stanley M. Stevens
----------------------------------
Name: Stanley M. Stevens
Title: Executive Vice President
<PAGE> 85
FIRST AMENDMENT TO
AGREEMENT OF LIMITED PARTNERSHIP
OF
EOP OPERATING LIMITED PARTNERSHIP
THIS AMENDMENT TO AGREEMENT OF LIMITED PARTNERSHIP OF EOP
OPERATING LIMITED PARTNERSHIP (this "AMENDMENT"), dated September 2, 1997, is
entered into by EQUITY OFFICE PROPERTIES TRUST, a Maryland real estate
investment trust, as managing general partner (the "GENERAL PARTNER") of EOP
Operating Limited Partnership, a Delaware limited partnership (the
"PARTNERSHIP"), for itself and on behalf of the limited partners of the
Partnership.
WHEREAS, on the date hereof, Columbus America Properties,
L.L.C. ("CAP") is receiving 1,690,000 Class A Units, subject to adjustment as
provided in the Contribution Agreement, of limited partnership interest ("OP
UNITS") in the Partnership in exchange for the office properties known as Texaco
Center, LL&E Tower and 601 Tchoupitoulas Garage (collectively, the "CAP
Properties") pursuant to a closing under, and as more particularly described in,
that certain Agreement for Contribution of Real Estate and Related Property
dated as of August 1, 1997 by and between the Partnership, the General Partner,
CAP and certain members of CAP (the "CONTRIBUTION AGREEMENT");
WHEREAS, pursuant to the authority granted to the General
Partner under the Agreement of Limited Partnership of the Partnership dated as
of July 3, 1997 (the "PARTNERSHIP AGREEMENT"), the General Partner desires to
amend the Partnership Agreement to admit CAP as a result of the foregoing
transactions, and to amend and restate Exhibit A to reflect the admission of CAP
as an Additional Limited Partner and the holder of the OP Units; and
WHEREAS, CAP desires to become a party to the Partnership
Agreement and to be bound by all of the terms, conditions and other provisions
of this Amendment and the Partnership Agreement.
NOW, THEREFORE, in consideration of the premises and for other
good and valuable consideration, the receipt and sufficiency of which hereby are
acknowledged, the General Partner hereby amends the Partnership Agreement as
follows:
1. CAP hereby agrees to become a party to the Partnership
Agreement and to be bound by all of the terms, conditions and other provisions
of the Partnership Agreement.
<PAGE> 86
2. Exhibit A hereby is amended by replacing such Exhibit A
with Exhibit "A" attached to this Amendment, and CAP hereby is admitted as an
Additional Limited Partner in accordance with Section 12.2 of the Partnership
Agreement holding the OP Units. In the event the post-closing adjustments called
for under the Contribution Agreement result in adjustments to the number of OP
Units CAP is entitled to, the parties hereto agree to further amend the
Partnership Agreement to reflect such adjustment.
3. Notwithstanding any provision in the Partnership Agreement
to the contrary and in addition to (and not in lieu thereof) any and all rights
of CAP under the Partnership Agreement:
(i) The holder of the OP Units shall have the right
at any time and from time to time, to exchange all or any number of such OP
Units at the request of such holder for common shares of beneficial interest,
par value $0.01 per share of General Partner ("COMMON SHARES") in the form
required in Section 8.6B(i) of the Partnership Agreement; and
(ii) CAP shall have the right, exercisable upon
written notice to Partnership at any time and from time to time before the
earlier to occur of (a) September [2], 1998, or (b) the date that CAP shall have
either transferred or converted all of its OP Units into Common Shares, to
require Partnership to acquire all, or any portion or portions, of CAP's OP
Units at $29.00 per OP Unit. The price for such OP Units shall be paid by
Partnership, in immediately available funds not less than five (5) days after
receipt of such notice from CAP. The OP Units shall be conveyed to CAP free and
clear of all liens and encumbrances, other than those liens and encumbrances, if
any, in favor of General Partner or Partnership. At the closing of the
acquisition of the OP Units, the parties shall execute instruments of assignment
and conveyance in the form attached hereto as Exhibit "B" and an amendment to
the Partnership Agreement evidencing the assignment of the OP Units to the
Partnership and the withdrawal of CAP as a Limited Partner of the Partnership
(the "UNIT ACQUISITION DOCUMENTS").
4. Notwithstanding any other provision of this Amendment or
the Partnership Agreement to the contrary, upon liquidation of the Partnership,
CAP shall be required to contribute to the Partnership the deficit balance in
its Capital Account computed in accordance with Section 1.752-2(b)(1) and (2) of
the Regulations, provided, however, that such contribution obligation shall not
exceed $84,350,000 (the "Deficit Obligation"). CAP specifically waives any right
of contribution or subrogation with respect to such Deficit Obligation and
neither the General partners nor any other Partner or other Person shall be
required to reimburse CAP for such contribution. Irrespective of the balance in
the Capital Account of CAP, CAP agrees to indemnify the Partnership and the
General Partners to the extent that the recourse obligations of the Partnership
exceed the assets of the Partnership available to satisfy such recourse
obligations. This
-2-
<PAGE> 87
indemnity obligation is intended to protect and hold the Partnership and the
General Partners harmless for such recourse obligations without regard to
obligations imposed on the General Partners under applicable state law or other
contract provisions. This indemnity obligation shall be limited to $84,350,000
(the "Indemnity Obligation"). CAP hereby specifically waives any right of
contribution from or subrogation against the General Partner or any other
Partner and neither the Partnership nor any other Partner shall be required to
contribute to or otherwise reimburse CAP with respect to such indemnity. Upon
payment of such indemnity, CAP's Capital Account shall be credited with such
payment only to the extent of any deficit in such Capital Account. Amounts paid
to the Partnership pursuant to the Deficit Obligation or the Indemnity
Obligation shall be used to satisfy the recourse obligations of the Partnership.
CAP's Deficit Obligation and Indemnity Obligation shall not in
the aggregate exceed $84,350,000 (subject to reduction as herein provided). In
addition, the Deficit Obligation and the Indemnity Obligation shall be forever
reduced to $6,350,000 immediately upon the first placing, after acquisition of
the Properties by the Partnership, of a non-recourse third party mortgage on the
Properties securing a third party non-recourse loan to the Partnership in an
amount not less than $78,000,000.
Unless the transferee, in its sole discretion, specifically
agrees to the Deficit Obligation or the Indemnity Obligation, upon the sale,
redemption, conversion or other disposition of the OP Units, the Deficit
Obligation and the Indemnity Obligation of CAP under this provision shall
terminate. Nothing in this paragraph 4 of the Amendment shall in any way effect
the sale, exchange or conversion rights of CAP under the Partnership Agreement
or this Amendment.
All capitalized terms used in this Amendment and not otherwise
defined shall have the meanings assigned in the Partnership Agreement. Except as
modified herein, all terms and conditions of the Partnership Agreement shall
remain in full force and effect, which terms and conditions the General Partner
hereby ratifies and affirms.
-3-
<PAGE> 88
IN WITNESS WHEREOF, the undersigned has executed this
Amendment as of the date first set forth above.
EQUITY OFFICE PROPERTIES TRUST, a
Maryland real estate investment
trust, as General Partner of EOP
Operating Limited Partnership and on
behalf of existing Limited Partners
By: /s/ SYBIL J. ELLIS
------------------------------------
Name: Sybil J. Ellis
----------------------------------
Title: SVP - Acquisitions
---------------------------------
COLUMBUS AMERICA PROPERTIES, L.L.C.,
a Louisiana limited liability company
By: Columbus Southeast Properties, Inc.,
manager
By: /s/ Joseph C. Canizaro
------------------------------
Joseph C. Canizaro, President
-4-
<PAGE> 89
ADDENDUM DATED AS OF OCTOBER 1, 1997
TO EOP OPERATING LIMITED PARTNERSHIP
AGREEMENT OF LIMITED PARTNERSHIP
This Addendum to EOP Operating Limited Partnership Agreement of Limited
Partnership dated as of October 1, 1997 (the "Addendum"), which Addendum is
incorporated into that certain EOP Operating Limited Partnership Agreement of
Limited Partnership dated as of July 3, 1997 (the "Partnership Agreement"), is
executed and delivered by each of the undersigned. As of the date hereof, the
undersigned designated as an Additional Limited Partner is admitted as a Limited
Partner of the Partnership, and by said undersigned's execution and delivery
hereof, said undersigned agrees to be bound by the terms and provisions of the
Partnership Agreement. The number of Units issued as of the date hereof to the
undersigned designated as an Additional Limited Partner is shown opposite such
Additional Limited Partner's signature below. All terms used herein and not
otherwise defined shall have the meanings given them in the Partnership
Agreement.
GENERAL PARTNER
EQUITY OFFICE PROPERTIES TRUST,
a Maryland real estate investment trust
By: /s/ David H. Naus
----------------------------------
Name: David H. Naus
Title: Senior Vice President
ADDITIONAL LIMITED PARTNERS:
2,900,000 Units PRUDENTIAL INSURANCE COMPANY OF AMERICA, a
New Jersey corporation
By: /s/ Robert W. Gadsden
----------------------------------
Name: Robert W. Gadsden
Title: Vice President
Tax ID#: 22-121-1670
<PAGE> 90
FURTHER ADDENDUM DATED AS OF OCTOBER 6, 1997
TO EOP OPERATING LIMITED PARTNERSHIP
AGREEMENT OF LIMITED PARTNERSHIP
This Further Addendum to EOP Operating Limited Partnership Agreement of
Limited Partnership dated as of October 6, 1997 (the "Addendum"), which Addendum
is incorporated into that certain EOP Operating Limited Partnership Agreement of
Limited Partnership dated as of July 3, 1997 (the "Partnership Agreement"), is
executed and delivered by the undersigned. Each of the undersigned designated as
an Existing Limited Partner has previously been admitted as a Limited Partner of
the Partnership. Such Existing Limited Partner has transferred, assigned and
conveyed a portion of their Class B Units to the undersigned person designated
as an Additional Limited Partner. As of the date hereof, the undersigned
designated as an Additional Limited Partner is admitted as a Limited Partner of
the Partnership, and by said undersigned's execution and delivery hereof, said
undersigned agrees to be bound by the terms and provisions of the Partnership
Agreement. After giving effect to the assignment contemplated hereby, as of the
date hereof, the number of Class B Units held by each of the undersigned
Existing Limited Partner and the Additional Limited Partner shall be the amount
shown opposite each of their respective signatures. All terms used herein and
not otherwise defined shall have the meanings given them in the Partnership
Agreement.
GENERAL PARTNER:
EQUITY OFFICE PROPERTIES TRUST,
a Maryland real estate investment trust
By: /s/ Stanley M. Stevens
-------------------------------
Name: Stanley M. Stevens
Title: Executive Vice President &
Chief Legal Counsel
EXISTING LIMITED PARTNER:
THE PRUDENTIAL INSURANCE COMPANY OF
AMERICA, a New Jersey corporation
621,429 Class B Units retained
by Existing Limited Partner By: /s/ Robert W. Gadsden
-------------------------------
Name: Robert W. Gadsden
Title: Vice President
Tax ID#: 22-121-1670
ADDITIONAL LIMITED PARTNER:
STRATEGIC VALUE INVESTORS, LLC, a Delaware
limited liability company
2,278,571 Class B Units
transferred from Existing By: /s/ Gary H. Picone
Limited Partner --------------------------------
Name: Gary H. Picone
Title: Vice President
<PAGE> 91
SECOND ADDENDUM DATED AS OF OCTOBER 7, 1997
TO EOP OPERATING LIMITED PARTNERSHIP
AGREEMENT OF LIMITED PARTNERSHIP
This Second Addendum to EOP Operating Limited Partnership Agreement of
Limited Partnership dated as of October 7, 1997 (the "Addendum"), which Addendum
is incorporated into that certain EOP Operating Limited Partnership Agreement of
Limited Partnership dated as of July 3, 1997 (the "Partnership Agreement"), is
executed and delivered by each of the undersigned. As of the date hereof, each
of the undersigned designated as an Additional Limited Partner is admitted as a
Limited Partner of the Partnership, and by said undersigned's execution and
delivery hereof, said undersigned agrees to be bound by the terms and provisions
of the Partnership Agreement. The number of Units issued as of the date hereof
to each of the undersigned designated as an Additional Limited Partner is shown
opposite such Additional Limited Partner's signature below. All terms used
herein and not otherwise defined shall have the meanings given them in the
Partnership Agreement.
This Second Addendum may be executed in two (2) or more counterparts,
each of which shall be deemed an original but all of which collectively shall
constitute one and the same document.
GENERAL PARTNER
EQUITY OFFICE PROPERTIES TRUST,
a Maryland real estate investment trust
By: /s/ Matthew Gworek
----------------------------------
Name: Matthew Gworek
Title: Vice President - Acquisitions
ADDITIONAL LIMITED PARTNERS:
239,306 Units /s/ David A. Gardner
-------------------------------------------
DAVID A. GARDNER
SS ####-##-####
239,295 Units /s/ Donald J. Resnick
-------------------------------------------
DONALD J. RESNICK
SS ####-##-####
21,376 Units /s/ Mark D. Quigley
-------------------------------------------
MARK D. QUIGLEY
SS ####-##-####
<PAGE> 92
SECOND AMENDMENT TO
AGREEMENT OF LIMITED PARTNERSHIP
OF
EOP OPERATING LIMITED PARTNERSHIP
THIS SECOND AMENDMENT TO AGREEMENT OF LIMITED PARTNERSHIP OF
EOP OPERATING LIMITED PARTNERSHIP (this "AMENDMENT"), dated October 16, 1997, is
entered into by EQUITY OFFICE PROPERTIES TRUST, a Maryland real estate
investment trust, as managing general partner (the "GENERAL PARTNER") of EOP
Operating Limited Partnership, a Delaware limited partnership (the
"PARTNERSHIP"), for itself and on behalf of the limited partners of the
Partnership.
WHEREAS, on the date hereof, 1120 20th Street Associates
("1120") is receiving 1,645,885 Class A Units, subject to adjustment as provided
in the Contribution Agreement, of limited partnership interest ("OP UNITS") in
the Partnership in exchange for the office property known as One Lafayette
Centre, 1120 20th Street, N.W., Washington, D.C. (the "PROPERTY") pursuant to a
closing under, and as more particularly described in, that certain Contribution
Agreement dated September 4, 1997, as amended, by and between the Partnership
and 1120 (the "CONTRIBUTION AGREEMENT");
WHEREAS, pursuant to the authority granted to the General
Partner under the Agreement of Limited Partnership of the Partnership dated as
of July 3, 1997, as amended (the "PARTNERSHIP AGREEMENT"), the General Partner
desires to amend the Partnership Agreement to admit 1120 as a result of the
foregoing transactions, and to amend and restate Exhibit A thereto to reflect
the admission of 1120 as an Additional Limited Partner and the holder of the OP
Units; and
WHEREAS, 1120 desires to become a party to the Partnership
Agreement and to be bound by all of the terms, conditions and other provisions
of this Amendment and the Partnership Agreement.
NOW, THEREFORE, in consideration of the premises and for other
good and valuable consideration, the receipt and sufficiency of which hereby are
acknowledged, the General Partner hereby amends the Partnership Agreement as
follows:
1. 1120 hereby agrees to become a party to the Partnership
Agreement and to be bound by all of the terms, conditions and other provisions
of the Partnership Agreement.
2. Exhibit A to the Partnership Agreement is hereby amended by
-1-
<PAGE> 93
replacing such Exhibit A with Exhibit "A" attached to this Amendment, and 1120
hereby is admitted as an Additional Limited Partner in accordance with Section
12.2 of the Partnership Agreement holding the OP Units. In the event the
post-closing adjustments called for under the Contribution Agreement result in
adjustments to the number of OP Units 1120 is entitled to, the parties hereto
agree to further amend the Partnership Agreement to reflect such adjustment.
3. Notwithstanding any other provision of this Amendment or
the Partnership Agreement to the contrary, upon liquidation of the Partnership,
1120 shall be required to contribute to the Partnership the deficit balance in
its Capital Account computed in accordance with Sections 1.752-2(b)(1) and (2)
of the Regulations, provided, however, that such contribution obligation shall
not exceed $14,000,000 (the "DEFICIT OBLIGATION"). 1120 specifically waives any
right of contribution or subrogation with respect to such Deficit Obligation and
neither the General Partners nor any other Partner or other Person shall be
required to reimburse 1120 for such contribution. Irrespective of the balance in
the Capital Account of 1120, 1120 agrees to indemnify the Partnership and the
General Partners to the extent that the recourse obligations of the Partnership
exceed the assets of the Partnership available to satisfy such recourse
obligations. This indemnity obligation is intended to protect and hold the
Partnership and the General Partners harmless for such recourse obligations
without regard to obligations imposed on the General Partners under applicable
state law or other contract provisions. This indemnity obligation shall be
limited to $14,000,000 (the "INDEMNITY OBLIGATION"). 1120 hereby specifically
waives any right of contribution from or subrogation against the General Partner
or any other Partner and neither the Partnership nor any other Partner shall be
required to contribute to or otherwise reimburse 1120 with respect to such
indemnity. Upon payment of such indemnity, 1120's Capital Account shall be
credited with such payment only to the extent of any deficit in such Capital
Account. Amounts paid to the Partnership pursuant to the Deficit Obligation or
the Indemnity Obligation shall be used to satisfy the recourse obligations of
the Partnership.
Upon the sale, redemption, conversion or other disposition of the OP
Units, the Deficit Obligation and the Indemnity Obligation of 1120 under this
provision shall terminate; provided however, a transferee of 1120 may, in its
sole discretion, assume the Deficit Obligation and/or the Indemnity Obligation
of 1120 and, in such event, the Deficit Obligation and the Indemnity Obligation
shall be the obligation solely of such transferee (but 1120's obligation shall
in all events be terminated as of the date of any disposition of its interest in
the Partnership). Nothing in this paragraph 4 of the Amendment shall in any way
effect the sale, exchange or conversion rights of 1120 under the Partnership
Agreement or this Amendment.
4. Time is of the essence of each and every provision of this
Amendment.
-2-
<PAGE> 94
5. All capitalized terms used in this Amendment and not
otherwise defined shall have the meanings assigned in the Partnership Agreement.
Except as modified herein, all terms and conditions of the Partnership Agreement
shall remain in full force and effect, which terms and conditions the General
Partner hereby ratifies and affirms.
6. To facilitate execution, this Amendment may be executed in
as many counterparts as may be required; and it shall not be necessary that the
signatures of, or on behalf of, each party, or that the signatures of all
persons required to bind any party, appear on each counterpart; but it shall be
sufficient that the signature of, or on behalf of, each party, or that the
signatures of the persons required to bind any party, appear on one or more of
the counterparts. All counterparts shall collectively constitute a single
agreement. It shall not be necessary in making proof of this Amendment to
produce or account for more than a number of counterparts containing the
respective signatures of, or on behalf of, all of the parties hereto.
[signatures begin next page]
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<PAGE> 95
IN WITNESS WHEREOF, the undersigned have executed this
Amendment as of the date first set forth above.
EQUITY OFFICE PROPERTIES TRUST, a
Maryland real estate investment
trust, as General Partner of EOP
Operating Limited Partnership and on
behalf of existing Limited Partners
By: /s/ Stanley M. Stevens
-------------------------------
Stanley M. Stevens
Executive Vice President
[signatures continue next page]
-4-
<PAGE> 96
1120 20TH STREET ASSOCIATES, a District of
Columbia limited partnership
By: 1120 Developers Group, Inc., a District
of Columbia corporation
By: /s/ John J. Pohanka
----------------------------------
Name: John J. Pohanka
---------------------------------
Title: President
--------------------------------
-5-
<PAGE> 97
FURTHER ADDENDUM DATED AS OF November 21, 1997
TO EOP OPERATING LIMITED PARTNERSHIP
AGREEMENT OF LIMITED PARTNERSHIP
This Further Addendum to EOP Operating Limited Partnership Agreement of
Limited Partnership dated as of November 21, 1997 (the "Addendum"), which
Addendum is incorporated into that certain EOP Operating Limited Partnership
Agreement of Limited Partnership dated as of July 3, 1997 (the "Partnership
Agreement"), is executed and delivered by each of the undersigned. Each of the
undersigned designated as an Existing Limited Partner has previously been
admitted as a Limited Partner of the Partnership. As of the date hereof, each of
the undersigned has been issued additional Class B Units in the Partnership, and
by said undersigned's execution and delivery hereof, said undersigned agrees to
be bound by the terms and provisions of the Partnership Agreement with respect
to such additional Class B Units. Both the number of additional Class B Units
issued as of the date hereof to each of the undersigned designated as an
Existing Limited Partner, and the total number of Class B Units heretofore and
hereby issued to each of the undersigned designated as an Existing Limited
Partner, is shown opposite such Existing Limited Partner's signature below. All
terms used herein and not otherwise defined shall have the meanings given them
in the Partnership Agreement.
This Addendum may be executed in two (2) or more counterparts, each of
which shall be deemed an original but all of which collectively shall constitute
one and the same document.
GENERAL PARTNER
EQUITY OFFICE PROPERTIES TRUST,
a Maryland real estate investment trust
By: /s/ Matthew Gworek
------------------------------
Name: Matthew Gworek
Title: Vice President - Acquisitions
EXISTING LIMITED PARTNERS:
Additional Total
Class B Units Class B Units(1)
51,005 290,311 /s/ David A. Gardner
---------------------------------------
DAVID A. GARDNER
SS ####-##-####
51,005 290,300 /s/ Donald J. Resnick
---------------------------------------
DONALD J. RESNICK
SS ####-##-####
22,338 43,714 /s/ Mark D. Quigley
---------------------------------------
MARK D. QUIGLEY
SS ####-##-####
- --------
(1) Inclusive of both (i) Class B Units issued on October 7, 1997 as evidenced
by that certain Second Addendum dated as of October 7, 1997 to EOP Operating
Limited Partnership Agreement of Limited Partnership, and (ii) the additional
Class B Units evidenced by this Further Addendum.
<PAGE> 98
THIRD AMENDMENT TO
AGREEMENT OF LIMITED PARTNERSHIP
OF
EOP OPERATING LIMITED PARTNERSHIP
THIS THIRD AMENDMENT TO AGREEMENT OF LIMITED PARTNERSHIP OF EOP
OPERATING LIMITED PARTNERSHIP (this "AMENDMENT"), dated December 16, 1997, is
entered into by EQUITY OFFICE PROPERTIES TRUST, a Maryland real estate
investment trust, as managing general partner (the "GENERAL PARTNER") of EOP
Operating Limited Partnership, a Delaware limited partnership (the
"PARTNERSHIP"), for itself and on behalf of the Limited Partners of the
Partnership.
WHEREAS, on the date hereof, (i) Wright Runstad Asset Management L.P.,
a Washington limited partnership ("WRAM"), is receiving 446,890 Class B Units
(WRP Series) of limited partnership interest in the Partnership in exchange for
certain partnership interests ("Titleholder Interests") in Wright Runstad
Properties L.P., a Delaware limited partnership (the "Titleholder"), pursuant to
a closing under, and as more particularly described in, that certain
Contribution Agreement dated December 16, 1997, by and between the Partnership,
WRAM, WRH (as defined below) and certain other parties (the "Contribution
Agreement"), (ii) Wright Runstad Holdings L.P., a Washington limited partnership
("WRH"), is receiving 2,168,810 Class B Units (WRP Series) of limited
partnership interest in the Partnership in exchange for certain Titleholder
Interests pursuant to a closing under, and as more particularly described in,
the Contribution Agreement, and (iii) H. Jon Runstad ("Runstad"), Douglas E.
Norberg ("Norberg") and John F. Nordby ("Nordby") are receiving, in the
aggregate, 137,427 Class B Units ("WRP Series) of limited partnership interests
in the Partnership in exchange for certain limited partnership interests ("WRALP
Interests") in Wright Runstad Associates Limited Partnership, a Washington
limited partnership ("WRALP"), pursuant to a closing under, and as more
particularly described in, that certain WRALP Investment Agreement dated
December 16, 1997, by and among the Partnership, WRALP, Runstad, Norberg, Nordby
and certain other parties (the "Investment Agreement"). WRAM and WRH are
collectively referred to herein as the "Contributors." Runstad, Norberg, Nordby
are collectively referred to herein as the "Principals". The Class B Units (WRP
Series) are collectively referred to herein as the "OP Units." The Titleholder
is the owner of certain property (the "WRP Property") described in the
Contribution Agreement.
WHEREAS, pursuant to the authority granted to the General Partner under
the Agreement of Limited Partnership of Partnership dated as of July 3, 1997, as
amended by the First Amendment to Agreement of Limited Partnership of the
Partnership dated September 2, 1997 and the Second Amendment to Agreement of
Limited Partnership of the Partnership dated October 16, 1997 (collectively, the
"Partnership Agreement"), the General Partner desires to amend the Partnership
Agreement to reflect the admission of the Contributors and the Principals
<PAGE> 99
as Additional Limited Partners and the holders of the OP Units and certain other
matters described herein.
WHEREAS, each Contributor and each Principal desires to become a party
to the Partnership Agreement and to be bound by all of the terms, conditions and
other provisions of this Amendment and the Partnership Agreement.
NOW, THEREFORE, in consideration of the premises and for other good and
valuable consideration, the receipt and sufficiency of which hereby are
acknowledged, the General Partner hereby amends the Partnership Agreement as
follows:
1. AGREEMENT TO PARTNERSHIP AGREEMENT. Each Contributor and each
Principal hereby agrees to become a party to the Partnership Agreement and to be
bound by all of the terms, conditions and other provisions of the Partnership
Agreement, including but not limited to the power of attorney set forth in
Section 15.11 of the Partnership Agreement.
2. RESTATEMENT OF EXHIBIT A. Exhibit A to the Partnership Agreement
hereby is amended by replacing such Exhibit A with Exhibit "A" attached to this
Amendment, and each Contributor and each Principal hereby is admitted as an
Additional Limited Partner in accordance with Section 12.2 of the Partnership
Agreement holding the OP Units.
3. RIGHT TO ASSIGN. Notwithstanding any other provision of this
Amendment or of the Partnership Agreement, each Contributor shall have the right
to assign all or any portion of its OP Units, together with any and all other
rights of such Contributor pursuant to this Amendment or the Partnership
Agreement, to one or more of the constituent partners or shareholders, members,
partners or beneficiaries of constituent partners of such Contributor on the
date hereof, without the need for the consent of the Managing General Partner or
any other General Partner or Limited Partner and without being subject to the
right of first refusal set forth in Section 11.3.A(a) of the Partnership
Agreement, but in each case subject to the restrictions and conditions set forth
in Sections 11.3.C, 11.3.D, 11.3.E, 11.6.E and 11.6.F of the Partnership
Agreement. Upon the delivery of written notice of such an assignment to the
Managing General Partner, each assignee of OP Units pursuant to the immediately
preceding sentence shall be admitted to the Partnership as a Substituted Limited
Partner owning the OP Units so assigned and having all of the rights of a
Limited Partner under the Partnership Agreement and this Amendment, subject only
to such assignee executing and delivering to the Partnership an acceptance of
all of the terms and conditions of the Partnership Agreement and such other
documents or instruments as the Managing General Partner may reasonably require
to effect such admission, in accordance with Section 11.4.B of the Partnership
Agreement. Each permitted assignee of any of the OP Units issued to a
Contributor pursuant to the Contribution Agreement that is admitted as a
Substituted Limited Partner in accordance with this Section 3 or Article XI of
the Partnership Agreement, for so long as such Person owns any such OP Units, is
referred to in this Amendment as a "Contributor Limited Partner." Upon
satisfaction of the condition described in the second sentence of this Section
3, the Managing General Partner shall
2
<PAGE> 100
amend Exhibit A to the Partnership Agreement in the manner described in Section
11.4.C of the Partnership Agreement. For purposes of Section 8.6 of the
Partnership Agreement, each Contributor Limited Partner which is a permitted
assignee of a Contributor shall be entitled to exercise its right to require the
Partnership to redeem all or any portion of the OP Units assigned to it by such
Contributor at any time on or after the first anniversary date of the issuance
of the OP Units to such Contributor (which one-year period shall include the
period of time from the date such OP Units were issued to such Contributor as
other than Class A Units until the date any such OP Units are converted
automatically to Class A Units pursuant to the Partnership Agreement).
4. ADJUSTMENTS TO CARRYING VALUES.
(a) Upon the admission of the Contributors and the Principals
to the Partnership and upon the distribution by the Partnership of the
Cash Amount to either Contributor or to any Principal or any
Contributor Limited Partner pursuant to the exercise of the Redemption
Right with respect to the OP Units held by such Contributor, Principal
or Contributor Limited Partner, the Carrying Values of the Assets of
the Partnership shall be adjusted in accordance with the procedures
described in Section 1.D of Exhibit B to the Partnership Agreement;
provided, however, that in order to minimize the administrative burden
associated with the adjustments required by this Section 4(a) in
connection with the distribution of the Cash Amount to a Contributor, a
Principal or a Contributor Limited Partner, the Partnership shall make
the adjustments to the Carrying Values of the Partnership's Assets (and
the resulting adjustments to the Capital Accounts of the Partners) only
upon the happening of the most material event during the calendar year
that is described in Section 1.D(2) of Exhibit B to the Partnership
Agreement (the "Annual Adjustment"); and provided further, that upon
the distribution of the Cash Amount to a Contributor, a Principal or a
Contributor Limited Partner or, at the option of the General Partner,
upon the occurrence of any other event described in Section 1.D(2) of
Exhibit B to the Partnership Agreement, that occurs during any year
other than as of the date of the Annual Adjustment, the Partnership
shall, at the time of such distribution, make adjustments to the
Carrying Values of the Partnership's Assets in accordance with the
procedures described in Section 1.D of Exhibit B to the Partnership
Agreement for purposes of adjusting the Capital Account of such
Contributor, such Principal or such Contributor Limited Partner who has
exercised his Redemption Right or such other affected Partner, but no
such adjustments shall be necessary at such time with respect to the
Capital Account balances of Partners who remain Partners through the
date of the Annual Adjustment or are otherwise not directly affected by
any such other event.
(b) Any determination of the fair market value of Partnership
assets pursuant to Section 1.D of Exhibit B to the Partnership
Agreement (for purposes of calculating Unrealized Gain or Unrealized
Loss), with respect to adjusting the Carrying Values of Partnership
assets in connection with the exercise of Redemption Rights by a
Contributor,
3
<PAGE> 101
any Principal or any Contributor Limited Partner shall be made by
assuming that the aggregate fair market value of all Partnership assets
is equal to the aggregate Cash Amount that would be distributed by the
Partnership if all Partnership Units held by all Partners (including
the General Partners) were redeemed in exchange for the Cash Amount
with respect to each such Partnership Unit at such time, provided,
however, such valuation methodology shall not be utilized for purposes
of determining the fair market value of the Partnership's assets with
respect to any such exercise of Redemption Rights in contemplation of
an assignment by or reorganization of the Partnership for the benefit
of creditors and any liquidation of the Partnership related thereto or
following the filing by (or in contemplation of a filing) by the
Partnership of a case under Title 11 of the U.S. Code.
5. ALLOCATIONS. Notwithstanding the provisions of Section 2.C of
Exhibit C to the Partnership Agreement, for purposes of allocating items of
income, gain, loss and deduction with respect to the WRP Property in the manner
required by Section 704(c) of the Code, the Partnership shall employ, and shall
cause any entity controlled by the Partnership which holds title to any of the
WRP Property to employ, the "traditional method" as set forth in Regulation
Section 1.704-3(b).
6. OBLIGATION TO RESTORE DEFICIT CAPITAL ACCOUNT.
(a) For purposes of this Section 6, the following terms shall
have the meanings set forth below:
(i) "DRO Amount" means (A) with respect to WRAM,
$10,873,678, (B) with respect to WRH, $63,014,285 and (C) with
respect to each Scheduled Assignee, the amount set forth
opposite such Scheduled Assignee's name on Schedule 1 hereto.
(ii) "Partner Contribution Agreement" means one or
more agreements in favor of that certain partnership or
partnerships that are partners in WRH, which are being
executed concurrently with this Amendment and have been
assigned by such partnerships to WRH, pursuant to which a
Second-Tier Partner has agreed to make certain capital
contributions to WRH on the terms and subject to the
conditions set forth in such Partner Contribution Agreement.
(iii) "Partner Contribution Amount" means, with
respect to each Second-Tier Partner, the amount set forth
opposite such Second-Tier Partner's name on Schedule 1 hereto,
which amount is the amount of capital contributions agreed to
be made by such Second-Tier Partner pursuant to the Partner
Contribution Agreement to which he is a party.
4
<PAGE> 102
(iv) "Scheduled Assignee" means each permitted
assignee of any of the OP Units of either WRAM or WRH listed
on Schedule 1 hereto and the successors and assigns of such
Scheduled Assignee.
(v) "Second-Tier Partners" means those persons listed
on Schedule 1 hereto who are partners in certain general
partnerships that are partners in WRH and who have executed
and delivered one or more Partner Contribution Agreements.
(b) Notwithstanding any other provisions of the Partnership
Agreement, upon liquidation of the Partnership or upon the liquidation
of the Partnership Interest of a Contributor or a Scheduled Assignee,
each Contributor or Scheduled Assignee whose interest is being
liquidated shall contribute to the Partnership in accordance with
Treasury Regulation Section 1.704 - 1(b) (2) (ii) (b) (2) the deficit
balance, if any, in its Capital Account, calculated after the
allocation for such year of all items of Net Income, Net Losses, Gross
Income and Unrealized Gain or Unrealized Loss allocated in accordance
with Section 1.D of Exhibit B to the Partnership Agreement; provided,
however, that in no event shall such contribution obligation for any
Contributor or Scheduled Assignee exceed such Contributor's or
Scheduled Assignee's DRO Amount. In addition, WRH hereby assigns and
conveys to the Partnership, effective upon distribution of the OP Units
by WRH, all of WRH's rights under each Partner Contribution Agreement
provided by a Second-Tier Partner; provided, that in no event shall the
contribution obligation pursuant to such Partner Contribution Amount
exceed such Second-Tier Partner's Partner Contribution Amount. The
obligation created pursuant to this Section 6(b) shall be for the
benefit of the Partnership, its general partners (the "General
Partners"), the creditors of the Partnership or any other person to
whom any debts, liabilities or obligations are owed by (or who
otherwise has any claim against) the Partnership or the General
Partners in their capacities as general partners of the Partnership and
shall be enforceable by such parties. Each Contributor and Scheduled
Assignee unconditionally and irrevocably waives any subrogation,
reimbursement or similar rights to which it might otherwise be entitled
as the result of its performance with respect to the obligation created
pursuant to Section 6(b), whether such rights arise with respect to the
Partnership, another Partner of the Partnership or a third party;
provided, however, that the General Partners shall in all events be
entitled to enforce the contribution obligation of a Contributor or
Scheduled Assignee undertaken pursuant to Section 6(b).
(c) Notwithstanding the foregoing, in the event that the
Managing General Partner, pursuant to Section 8.6B of the Partnership
Agreement, elects to assume directly and satisfy a Redemption Right
exercised by a Contributor or a Scheduled Assignee (a "Tendering
Limited Partner"), the Managing General Partner shall assume the
obligation of the Tendering Limited Partner pursuant to Section 6(b)
above with respect to the OP Units transferred to the Managing General
Partner by such Tendering Limited Partner;
5
<PAGE> 103
provided, however, that if the adjustment to the Carrying Values of
Partnership Assets and the related adjustments to the Capital Accounts
of the Partners pursuant to Section 4 hereof and Section 1.D of Exhibit
B to the Partnership Agreement that would have been undertaken pursuant
to Section 4 hereof had the Partnership satisfied the Redemption Right
exercised by such Tendering Limited Partner would have resulted in the
Capital Account of the Tendering Limited Partner having a zero or
positive balance, then, with respect to such OP Units acquired from the
Tendering Limited Partner, the Managing General Partner shall have no
obligation pursuant to Section 6(b) hereof with respect to a
liquidation of the Partnership or a liquidation of the Partnership
interest reflected by such OP Units that occurs more than twelve months
following the acquisition of such OP Units by the Managing General
Partner.
(d) In the event that the liquidation of the Partnership
Interest of a Tendering Limited Partner, other than in connection with
the liquidation of the Partnership, would trigger an obligation
pursuant to Section 6(b) hereof to contribute an amount to the
Partnership, then the Net Income of the Partnership for the portion of
such year ending on the Specified Redemption Date with respect to such
Tendering Limited Partner shall be specially allocated to such
Tendering Limited Partner in the amount necessary to eliminate the
deficit balance in its Capital Account remaining after all other
adjustments for such year (including any adjustments made pursuant to
Section 1.D of Exhibit B to the Partnership Agreement).
7. MAINTENANCE OF RECOURSE DEBT. The Partnership shall maintain
unsecured liability as to which the creditor has recourse to the General
Partners, including any such unsecured recourse liability (as to which the
creditor has recourse to the General Partners in their capacities as General
Partners) of any other entity that is allocable to the Partnership, in an
aggregate amount not less than the amount necessary such that (a) prior to the
distribution by WRAM and WRH of OP Units issued to them pursuant to the
Contribution Agreement, the amount of Partnership recourse liabilities allocated
to each of WRAM and WRH shall be not less than its DRO Amount and (b) following
the distribution by WRAM and WRH of OP Units issued to them pursuant to the
Contribution Agreement, the amount of Partnership recourse liabilities allocated
directly or indirectly to all Scheduled Assignees and Second-Tier Partners shall
be not less than the sum of their respective DRO Amounts and Partner
Contribution Amounts. In making such determination, the Partnership shall take
into account any and all allocations of Partnership recourse liabilities to
other Partners by reason of any guaranties, indemnities, restoration obligations
or other, similar arrangements with respect to any such Partners, and the
liability by reason of any such Partner's status as a general partner of the
Partnership.
8. TIME IS OF THE ESSENCE. Time is of the essence of each and every
provision of this Amendment.
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<PAGE> 104
9. AMENDMENTS. Notwithstanding any provision in the Partnership
Agreement to the contrary, the provisions of this Amendment may be waived or
amended or otherwise modified with the prior written consent of holders of more
than fifty percent (50%) of the OP Units at the time outstanding and without the
consent of any other Limited Partner.
All capitalized terms used in this Amendment and not otherwise defined
shall have the meanings assigned to them in the Partnership Agreement. Except as
modified herein, all terms and conditions of the Partnership Agreement shall
remain in full force and effect, which terms and conditions the General Partner
hereby ratifies and affirms.
7
<PAGE> 105
IN WITNESS WHEREOF, the undersigned has executed this Amendment as of
the date first set forth above.
EQUITY OFFICE PROPERTIES
TRUST, a Maryland real estate investment
trust, as General Partner of EOP Operating
Limited Partnership and on behalf of
existing Limited Partners
By: /s/ Ross Satter White
-------------------------------------
Name: Ross Satter White
-------------------------------
Title: Vice President/Acquisitions
------------------------------
CONTRIBUTORS:
WRIGHT RUNSTAD ASSET MANAGEMENT L.P., a
Washington limited partnership
By: WRAM, INC.,
its general partner
By: /s/ Douglas E. Norberg
--------------------------
Name: Douglas E. Norberg
--------------------
Title: President
-------------------
8
<PAGE> 106
WRIGHT RUNSTAD HOLDINGS LIMITED
PARTNERSHIP, a Washington limited
partnership
By: WRIGHT RUNSTAD ASSOCIATES LIMITED
PARTNERSHIP, a Washington limited
partnership, its general partner
By: WRIGHT RUNSTAD & COMPANY,
a Washington corporation,
its general partner
By: WRAM INC.
Name: /s/ DOUGLAS E. NORBERG
------------------------
Title: President
-----------------------
PRINCIPALS:
/s/ H. JON RUNSTAD
------------------------------
H. Jon Runstad
/s/ DOUGLAS E. NORBERG
------------------------------
Douglas E. Norberg
/s/ JON F. NORDBY
------------------------------
Jon F. Nordby
9
<PAGE> 107
FOURTH AMENDMENT TO
AGREEMENT OF LIMITED PARTNERSHIP
OF
EOP OPERATING LIMITED PARTNERSHIP
This Fourth Amendment is made as of December 19, 1997 by and among
Equity Office Properties Trust, a Maryland real estate investment trust, as
managing general partner (the "Company" or the "Managing General Partner") of
EOP Operating Limited Partnership, a Delaware limited partnership (the
"Partnership"), and as attorney-in-fact for the Persons named on Exhibit A to
the Agreement of Limited Partnership of EOP Operating Limited Partnership, dated
as of July 3, 1997, as amended, (the "Partnership Agreement") for the purpose of
amending the Partnership Agreement. Capitalized terms used herein and not
defined shall have the meanings given to them in the Partnership Agreement.
WHEREAS, the Company and the Partnership are parties to an
Agreement and Plan of Merger, dated as of September 15, 1997, as amended (the
"Merger Agreement"), with Beacon Properties Corporation, a Maryland corporation
("Beacon"), and Beacon Properties, L.P., a Delaware limited partnership ("Beacon
Partnership"), pursuant to which Beacon has merged with and into the Company
(the "Company Merger") and Beacon Partnership has merged with and into the
Partnership (the "Partnership Merger," together with the Company Merger, the
"Mergers");
WHEREAS, the Company has issued 8,000,000 8.98% Series A
Cumulative Redeemable Preferred Shares (the "Series A Preferred Shares") in
connection with the Company Merger;
WHEREAS, the Managing General Partner has determined that, in
connection with the Mergers, it is necessary and desirable to amend the
Partnership Agreement (i) to create additional Partnership Units having
designations, preferences and other rights which are substantially the same as
the economic rights of the Series A Preferred Shares and (ii) to admit as
Additional Limited Partners the partners of Beacon Partnership.
NOW, THEREFORE, in consideration of the premises and for other
good and valuable consideration, the receipt and sufficiency of which hereby are
<PAGE> 108
acknowledged, the Managing General Partner hereby amends the Partnership
Agreement as follows:
1. Article I of the Partnership Agreement is hereby amended by
(i) adding the following definitions:
"Series A Preferred Shares" means the 8.98% Series A Cumulative
Redeemable Preferred Shares of the Company issued in connection with the Company
Merger; and
"Series A Preferred Units" means the series of Partnership Units
representing units of Limited Partnership Interests designated as the 8.98%
Series A Cumulative Redeemable Preferred Units with the designations,
preferences and other rights set forth herein; and
(ii) by deleting the definition of "Deemed Value of the Partnership Interest"
and replacing it with the following:
"DEEMED VALUE OF PARTNERSHIP INTEREST" means, as of any date with
respect to any class of Partnership Interests, (a) if the common shares of
beneficial interests (or other comparable equity interests) of the General
Partner Entity are Publicly Traded (i) the total number of shares of beneficial
interest (or other comparable equity interest) of the General Partner Entity
corresponding to such class of Partnership Interest (as provided for in Section
4.2.B) issued and outstanding as of the close of business on such date
(excluding any treasury shares) multiplied by the Value of a share of such
beneficial interest (or other comparable equity interests) on such date DIVIDED
BY (ii) the Percentage Interests of the Managing General Partner, held directly
or indirectly through another entity, in such class of Partnership Interests on
such date, and (b) otherwise, the aggregate Value of such class of Partnership
Interests determined as set forth in fourth and fifth sentences of the
definition of Value. For purposes of clause (a) of the preceding sentence,
"Value" means the average of the daily market price of such corresponding shares
of beneficial interest (or other comparable equity interests) of the General
Partner Entity for such number of consecutive trading days or the Business Day
immediately preceding the date with respect to which Value must be determined
(which number of days or the Business Day shall be determined by the Managing
General Partner in its sole discretion), with the market price for each such
trading day being the closing price, regular way, on such day, of if no such
sale takes place on such day, the average of the closing bid and asked prices on
such day. Notwithstanding any of the foregoing, with respect to any class or
series of Partnership Interests that is entitled to a preference as compared to
the class of Partnership Interests corresponding to common shares of beneficial
interests (or other comparable equity interests) of the General Partner Entity,
"Value" means the stated liquidation preference or value of such class or series
of Partnership
2
<PAGE> 109
Interests provided in the instrument establishing such class or series of
Partnership Interests (unless otherwise provided in such instrument).
2. In accordance with Section 4.2.A of the Partnership
Agreement, set forth below are the terms and conditions of the Series A
Preferred Units hereby established and issued to the Company in connection with
the Partnership Merger.
A. DESIGNATION AND NUMBER. A series of Partnership Units
designated as Series A Preferred Units is hereby established. The number of
Series A Preferred Units shall be 8,000,000.
B. RANK. The Series A Preferred Units will, with respect to
distribution rights and rights upon liquidation, dissolution or winding up of
the Partnership, rank (a) senior to the Class A Units, Class B Units and all
Partnership Interests ranking junior to the Series A Preferred Units; (b) on a
parity with all Partnership Interests issued by the Partnership the terms of
which specifically provide that such Partnership Interests rank on a parity with
the Series A Preferred Units; and (c) junior to all Partnership Interests issued
by the Partnership the terms of which specifically provide that such Partnership
Interests rank senior to the Series A Preferred Units.
C. DISTRIBUTIONS.
(i) Pursuant to Section 5.1 of the Partnership Agreement,
holders of Series A Preferred Units shall be entitled to receive, out of
Available Cash, cumulative preferential distributions of Available Cash at the
rate of 8.98% of the $25.00 liquidation preference per annum (equivalent to a
fixed annual amount of $2.245 per unit). Such distributions shall be cumulative
from the last date on which any distributions were paid with respect to the
Series A Preferred Units of Beacon Partnership for which the Series A Preferred
Units were exchanged in connection with the Partnership Merger and shall be
payable quarterly in arrears on or before March 15, June 15, September 15 and
December 15 of each year or, if not a business day, the next succeeding business
day (each a "Series A Preferred Unit Distribution Payment Date"). Any
distribution payable on the Series A Preferred Units for any partial
distribution period will be computed on the basis of a 360-day year consisting
of twelve 30-day months.
(ii) No distributions on Series A Preferred Units shall be
authorized or paid or set apart for payment at such time as the terms and
provisions of any agreement of the Partnership, including any agreement relating
to its indebtedness, prohibits such authorization, payment or setting apart for
payment or provides that such authorization, payment or setting apart for
payment would constitute a breach
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<PAGE> 110
thereof, or a default thereunder, or if such authorization or payment shall be
restricted or prohibited by law.
(iii) Notwithstanding the foregoing, distributions with respect
to the Series A Preferred Units will accrue whether or not the terms and
provisions set forth in Section 2.C.(ii) at any time prohibit the current
payment of distributions, whether or not there is sufficient Available Cash for
such distributions and whether or not such distributions are authorized. Accrued
but unpaid distributions on the Series A Preferred Units will accumulate as of
the Series A Preferred Unit Distribution Payment Date on which they first become
payable.
(iv) When distributions are not paid in full (or a sum
sufficient for such full payment is not so set apart) upon the Series A
Preferred Units and any other Partnership Interests ranking on a parity as to
distributions with the Series A Preferred Units, all distributions authorized
upon the Series A Preferred Units and any other Partnership Interests ranking on
a parity as to distributions with the Series A Preferred Units shall be
authorized pro rata so that the amount of distributions authorized per
Partnership Unit of Series A Preferred Units and such other Partnership
Interests shall in all cases bear to each other the same ratio that accrued
distributions per Partnership Unit on the Series A Preferred Units and such
other Partnership Interests (which shall not include any accrual in respect of
unpaid distributions for prior distribution periods if such other Partnership
Interests do not have a cumulative distribution) bear to each other. No
interest, or sum of money in lieu of interest, shall be payable in respect of
any distribution payment or payments on Series A Preferred Units which may be in
arrears.
(v) Except as provided in Section 2.B.(iv), unless full
cumulative distributions on the Series A Preferred Units have been or
contemporaneously are authorized and paid or authorized and a sum sufficient for
the payment thereof is set apart for payment for all past distribution periods
and the then current distribution period, no distributions (other than in
Partnership Interests ranking junior to the Series A Preferred Units as to
distributions and upon liquidation) shall be authorized or paid or set aside for
payment nor shall any other distribution be authorized or made upon the Class A
Units, the Class B Units, or any other Partnership Interests ranking junior to
or on a parity with the Series A Preferred Units as to distributions or upon
liquidation, nor shall any Class A Units, Class B Units, or any other
Partnership Interests ranking junior to or on a parity with the Series A
Preferred Shares as to distributions or upon liquidation be redeemed, purchased
or otherwise acquired for any consideration (or any moneys be paid to or made
available for a sinking fund for the redemption of any such units or other
Partnership Interests) by the Partnership (except by conversion into or exchange
for Partnership Interests ranking junior to the Series A Preferred Units as to
distributions and upon liquidation).
(vi) Holders of the Series A Preferred Units shall not be
entitled to any distribution, whether payable in cash, property or Partnership
Units in excess of full
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cumulative distributions on the Series A Preferred Units as described above. Any
distribution payment made on the Series A Preferred Units shall first be
credited against the earliest accrued but unpaid distribution due with respect
to such Series A Preferred Units which remains payable.
D. ALLOCATIONS.
Allocations of the Partnership's items of income, gain, loss and
deduction shall be allocated among holders of Series A Preferred Units in
accordance with Article VI of the Partnership Agreement.
E. LIQUIDATION PREFERENCE.
(i) Upon any voluntary or involuntary liquidation, dissolution
or winding up of the affairs of the Partnership, the holders of Series A
Preferred Units then outstanding are entitled to be paid out of the assets of
the Partnership available for distribution to the Partners pursuant to Section
13.2.A of the Partnership Agreement a liquidation preference of $25.00 per
Series A Preferred Unit, plus an amount equal to any accrued and unpaid
distributions to the date of payment, before any distribution of assets is made
to holders of Class A Units, Class B Units or any other Partnership Interests
that rank junior to the Series A Preferred Units as to liquidation rights.
(ii) In the event that, upon any such voluntary or involuntary
liquidation, dissolution or winding up, the available assets of the Partnership
are insufficient to pay the amount of the liquidating distributions on all
outstanding Series A Preferred Units and the corresponding amounts payable on
all other Partnership Interests ranking on a parity with the Series A Preferred
Units in the distribution of assets, then such assets shall be allocated among
the Series A Preferred Units, as a class, and each class or series of such other
such Partnership Interests, as a class, in proportion to the full liquidating
distributions to which they would otherwise be respectively entitled.
(iii) After payment of the full amount of the liquidating
distributions to which they are entitled, the holders of Series A Preferred
Units will have no right or claim to any of the remaining assets of the
Partnership.
(iv) The consolidation or merger of the Partnership with or into
any other partnership, corporation, trust or entity or of any other partnership,
corporation, trust or other entity with or into the Partnership or the sale,
lease or conveyance of all or substantially all of, the property or business of
the Partnership, shall not be deemed to constitute a liquidation, dissolution or
winding up of the Partnership for purposes of this Section 2.E.
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F. REDEMPTION.
In connection with a redemption by the Company of any or all of
the Series A Preferred Shares, the Partnership shall provide cash to the Company
for such purpose which shall be equal to redemption price of the Series A
Preferred Shares to be redeemed and one Series A Preferred Unit shall be
canceled with respect to each Series A Preferred Share so redeemed. From and
after the date in which the Series A Preferred Shares are redeemed, the Series A
Preferred Units so canceled shall no longer be outstanding and all rights
hereunder, to distributions or otherwise, with respect to such Series A
Preferred Units shall cease.
3. Section 6.1.C of the Partnership Agreement is deleted and
replaced with the following:
C. ALLOCATION OF NONRECOURSE DEBT. For purposes of Regulation
Section 1.752-3(a), the Partners agree that Nonrecourse
Liabilities of the Partnership in excess of the sum of (i)
the amount of Partnership Minimum Gain and (ii) the total
amount of Nonrecourse Built-in Gain shall be allocated by
the Managing General Partner by taking into account facts
and circumstances relating to each Partner's respective
interest in the profits of the Partnership. For this
purpose, the Managing General partner will have discretion
in any fiscal year to allocate such excess Nonrecourse
Liabilities among the Partners in any manner permitted
under Code Section 752 and the Regulations thereunder.
4. Section 13.2.A of the Partnership Agreement is amending
redesignating subparagraph (4) as subparagraph (5) and inserting the following
new subparagraph (4):
(4) Fourth, to the holders of Partnership Interests that
are entitled to any preference in distribution upon
liquidation in accordance with the rights of any
such class or series of Partnership Interests (and,
within each such class or series, to each holder
thereof pro rata based on the proportion of the
total number of outstanding units of such class or
series represented by such holder's units of such
series or class) and
5. Exhibit A to the Partnership Agreement is hereby amended by
replacing such Exhibit A with "EXHIBIT A" attached to this Amendment and, upon
execution of this Amendment, each of the Persons listed on "EXHIBIT A" to this
Amendment and identified as a Beacon Partner (a "Beacon Partner") shall be
admitted, effective as of the effective time of this Amendment, as an Additional
Limited Partner in accordance with Section 12.2 of the Partnership Agreement
holding the Partnership Units and Percentage Interests set forth opposite such
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<PAGE> 113
Person's name on EXHIBIT A attached to this Amendment. By executing this
Amendment, each Beacon Partner hereby agrees to become a party to the
Partnership Agreement and to be bound by all of the terms, conditions and
provisions of the Partnership Agreement, including but not limited to the power
of attorney set forth in Section 15.11 of the Partnership Agreement, provided,
however, that, notwithstanding any provision of the Partnership Agreement to the
contrary or any provision of the partnership agreement of Beacon Partnership or
any agreement entered into in connection therewith, no Beacon Partner shall be
required to contribute to the Partnership any deficit or negative balance
existing in its capital account for the Beacon Partnership immediately prior to
the effective time of the Partnership Merger.
6. Except as modified herein, all terms and conditions of the
Partnership Agreement shall remain in full force and effect, which terms and
conditions the Managing General Partner hereby ratifies and confirms.
7. This Amendment is effective as of the effective time of the
Partnership Merger.
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IN WITNESS WHEREOF, the undersigned have executed this Amendment
as of the date first set forth above.
EQUITY OFFICE PROPERTIES TRUST, a
Maryland real estate investment trust,
as Managing General Partner of EOP
Operating Limited Partnership and on
behalf of existing Limited Partners.
By: /s/ Stanley M. Stevens
------------------------------------
Name: Stanley M. Stevens
----------------------------------
Title: Executive Vice President and
Chief Legal Counsel
ZELL/MERRILL LYNCH REAL ESTATE
OPPORTUNITY PARTNERS LIMITED
PARTNERSHIP II, General Partner
By: Equity Office Properties Trust, its
managing general partner
By: /s/ Stanley M. Stevens
--------------------------------
Name: Stanley M. Stevens
------------------------------
Title: Executive Vice President and
Chief Legal Counsel
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<PAGE> 1
Exhibit 10.2
------------
REGISTRATION RIGHTS AGREEMENT
Dated as of July 11, 1997
by and among
EQUITY OFFICE PROPERTIES TRUST
and
the Persons Listed on
the Signature Pages Hereto
================================================================================
<PAGE> 2
REGISTRATION RIGHTS AGREEMENT
THIS REGISTRATION RIGHTS AGREEMENT (this "Agreement") is made and
entered into as of July 11, 1997, by and among EQUITY OFFICE PROPERTIES TRUST, a
Maryland real estate investment trust (the "Company"), and the persons listed on
the signature pages hereto, including their successors, assigns and transferees
(herein referred to collectively as the "Holders" and individually as a
"Holder").
WHEREAS, on the date hereof each Holder expects to become the owner of
Units (as defined below) in the Operating Partnership (as defined below) or
Common Shares (as defined below) in connection with certain transactions (the
"Formation Transactions") described in the IPO Registration Statement (as
defined below); and
WHEREAS, as a condition to receiving the consent or agreement of the
Holders to the Formation Transactions, the Company has agreed to grant the
Holders the registration rights provided for in this Agreement; and
NOW, THEREFORE, the parties hereto, in consideration of the foregoing,
the mutual covenants and agreements hereinafter set forth, and other good and
valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, agree as follows:
1. DEFINITIONS.
As used in this Agreement, the following capitalized defined terms shall
have the following meanings:
"AFFILIATE" shall have the meaning set forth for such term in Rule 144
under the Securities Act.
"CLOSING PRICE" of the Common Shares for any given day shall mean (i) if
the Common Shares are listed or admitted to trading on a national securities
exchange, the reported last sale price of the Common Shares regular way on such
day or, in case no such sale takes place on such day, the average of the
reported closing bid and asked prices regular way, on such national securities
exchange on such day or (ii) if the Common Shares are not listed or admitted to
trading on any national securities exchange but are traded in the
over-the-counter market, the average of the closing bid and asked prices in the
over-the-counter market on such day.
"COMMON SHARES" shall mean the common shares of beneficial interest, par
value $.01 per share, of the Company.
"COMPANY" shall mean Equity Office Properties Trust, a Maryland real
estate investment trust, and its successors.
"DEMAND REGISTRATION" shall have the meaning set forth in Section 2(a)
hereof.
"EXCHANGE ACT" shall mean the Securities Exchange Act of 1934, as
amended from time to time.
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<PAGE> 3
"HOLDER" or "HOLDERS" shall mean the persons listed on the signature
pages hereto (other than the Company), including their successors, assigns and
transferees.
"IPO REGISTRATION STATEMENT" shall mean the registration statement on
Form S-11 (No. 333-26629) relating to the initial public offering of the Common
Shares by the Company.
"NOTICE" shall have the meaning set forth in Section 2(a) hereof.
"OPERATING PARTNERSHIP" shall mean EOP Operating Limited Partnership, a
Delaware limited partnership, and its successors.
"PERSON" shall mean an individual, partnership, corporation, trust,
unincorporated organization or other legal entity or a government or agency or
political subdivision thereof.
"PROSPECTUS" shall have the meaning set forth in Section 5(b) hereof.
"REGISTRABLE SECURITIES" shall mean the Shares, excluding (i) Shares
that have been disposed of pursuant to a Demand Registration Statement, Shelf
Registration Statement or any other effective registration statement, (ii)
Shares sold or otherwise transferred pursuant to Rule 144 under the Securities
Act, and (iii) Shares that are held by Holders who are not Affiliates of the
Company that are eligible for sale pursuant to Rule 144(k) under the Securities
Act.
"REGISTRATION EXPENSES" shall mean any and all expenses incident to
performance of or compliance with this Agreement, including, without limitation:
(i) all applicable registration and filing fees imposed by the SEC, the New York
Stock Exchange, Inc. or the National Association of Securities Dealers, Inc.
("NASD"), (ii) all fees and expenses incurred in connection with compliance with
state securities or "blue sky" laws (including reasonable fees and disbursements
of counsel in connection with qualification of any of the Registrable Securities
under any state securities or blue sky laws and the preparation of a blue sky
memorandum) and compliance with the rules of the NASD, (iii) all expenses of any
Persons in preparing or assisting in preparing, word processing, printing and
distributing the Shelf Registration Statement, any prospectus, certificates and
other documents relating to the performance of and compliance with this
Agreement, (iv) all fees and expenses incurred in connection with the listing,
if any, of any of the Registrable Securities on any securities exchange or
exchanges pursuant to Section 6(l) hereof, and (v) the fees and disbursements of
counsel for the Company and of the independent public accountants of the
Company, including the expenses of any special audits or "cold comfort" letters
required by or incident to such performance and compliance. Registration
Expenses shall specifically exclude underwriting discounts and commissions, the
fees and disbursements of counsel representing a selling Holder or any
underwriter or agent acting on behalf of a Holder, and transfer taxes, if any,
relating to the sale or disposition of Registrable Securities by a selling
Holder, all of which shall be borne by such Holder in all cases.
"REGISTRATION NOTICE" shall have the meaning set forth in Section 5(b)
hereof.
"RULE 144(f) REGISTRABLE SECURITIES" shall mean the number of
Registrable Securities, when aggregated with the number of Shares actually sold
pursuant to Rule 144 by the Holder during the preceding three-month period,
equal to less than 1% of the outstanding Common Shares at the time a request for
registration is made under Section 2(a), and, in the case of any Holder who is
not an Affiliate of the Company at the time of the proposed sale, only such
Shares (subject to the foregoing volume limitation) that the Holder proposes to
sell in "block trades"
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<PAGE> 4
which are not "brokers' transactions" in compliance with the "manner of sale"
requirement of Rule 144(f).
"SEC" shall mean the Securities and Exchange Commission.
"SECURITIES ACT" shall mean the Securities Act of 1933, as amended from
time to time.
"SELLING HOLDER" shall mean any Holder who sells Registrable Securities
pursuant to a public offering registered hereunder.
"SHARES" shall mean any Common Shares issued, or issuable in connection
with the Formation Transactions, to the persons listed on the signature pages
hereto or to Holders upon conversion of their Units and any additional Common
Shares issued as a dividend, distribution or exchange for, or in respect of such
Common Shares prior to the Selling Holder's exercise of its rights hereunder.
"SHELF REGISTRATION" shall mean a registration required to be effected
pursuant to Section 4 hereof.
"SHELF REGISTRATION STATEMENT" shall have the meaning set forth in
Section 3(a) hereof.
"STATE STREET" shall mean State Street Bank & Trust Co., as trustee of
the three BellSouth Corporation employee benefit plans.
"UNITS" shall mean the limited partnership interests of the Operating
Partnership issued to the persons listed on the signature pages hereto, which
interests are exchangeable for Common Shares, or at the Company's option, cash.
2. DEMAND REGISTRATION
(a) REQUEST FOR REGISTRATION.
At any time after the first anniversary of the effective
date of the IPO Registration Statement, each Holder may make up to one written
request during each 12-month period commencing on such first anniversary
(specifying the intended method of disposition) for registration under the
Securities Act (each, a "Demand Registration") of all or part of such Holder's
Registrable Securities (but such part, together with the number of securities
requested by other Holders to be included in such Demand Registration pursuant
to this Section 2(a), shall have an estimated market value at the time of such
request (based upon the then market price of a Common Share of the Company) of
at least $10,000,000). Notwithstanding the foregoing, the Company shall not be
required to file any registration statement pursuant to this Section 2 on behalf
of any Holder within six months after the effective date of any earlier
registration statement so long as the Holder requesting the Demand Registration
was given a notice offering it the opportunity to sell Registrable Securities
under the earlier registration statement and such Holder did not request that
all of its Registrable Securities be included; PROVIDED, HOWEVER, that if a
Holder requested that all or a part of its Registrable Securities be included in
the earlier registration statement but not all or such part were so included
through no fault of the Holder, such Holder may, but shall not be obligated to,
require the Company to file another registration statement pursuant to a Demand
Registration (subject, in the event of a Demand Registration for less than all
such remaining Registrable Securities, to the same $10,000,000 limitation set
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<PAGE> 5
forth above) exercised by such Holder within six months of the effective date of
such earlier registration statement. Within ten days after receipt of a request
for a Demand Registration, the Company shall give written notice (the "Notice")
of such request to all other Holders and shall include in such registration all
Registrable Securities that the Company has received written requests for
inclusion therein within 15 days after the Notice is given. Thereafter, the
Company may elect to include in such registration additional Common Shares to be
issued by the Company. In such event, such shares to be issued by the Company in
connection with a Demand Registration shall be deemed to be Registrable
Securities and the Company shall be deemed to be a holder thereof. All Requests
made pursuant to this Section 2(a) shall specify the aggregate number of
Registrable Securities to be registered. Each Holder shall be entitled to one
Demand Registration hereunder. Upon the second anniversary of the effective date
of the IPO Registration Statement all rights to Demand Registrations hereunder
shall terminate and be of no further force and effect, except that each of State
Street and each Holder that is an Affiliate of the Company shall continue
thereafter to have a right to request registration pursuant to this Section,
subject to all the terms and conditions of this Agreement, with respect to all
Registrable Securities issued to such Holder in the Formation Transactions.
(b) EFFECTIVE REGISTRATION AND EXPENSES
A registration shall not constitute a Demand Registration
under Section 2(a) hereof until it has become effective. In any registration
initiated as a Demand Registration, the Company shall pay all Registration
Expenses incurred in connection therewith, whether or not such Demand
Registration becomes effective, unless such Demand Registration fails to become
effective as a result of the fault of one or more Holders, in which case the
Company will not be required to pay the Registration Expenses incurred with
respect to the offering of such Holder or Holders' Registrable Securities. The
Registration Expenses incurred with respect to the offering of such Holder or
Holder's Registrable Securities shall be the product of (a) the aggregate amount
of all Registration Expenses incurred in connection with such registration and
(b) the ratio that the number of such Registrable Securities bears to the total
number of Registrable Securities included in the registration.
(c) PRIORITY ON DEMAND REGISTRATIONS
The Holder making the Demand Registration may elect
whether the offering of such Registrable Securities pursuant to such Demand
Registration shall be in the form of a firm commitment underwritten offering or
that such offering be made on a delayed or continuous basis pursuant to Rule 415
under the Securities Act as provided in Section 3 hereof. In any case in which
an offering is in the form of a firm commitment underwritten offering, if the
managing underwriter or underwriters of such offering advise the Company in
writing that in its or their opinion the number of Registrable Securities
proposed to be sold in such offering exceeds the number of Registrable
Securities that can be sold in such offering without adversely affecting the
market for the Company's Common Shares, the Company will include in such
registration the number of Registrable Securities that in the opinion of such
managing underwriters can be sold without adversely affecting the market for the
Company's Common Shares. In such event, the number of Registrable Securities, if
any, to be offered for the accounts of Holders (including the Holder making the
Demand Registration) shall be reduced PRO RATA on the basis of the relative
number of any Registrable Securities requested by each such Holder to be
included in such registration to the extent necessary to reduce the total
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<PAGE> 6
number of Registrable Securities to be included in such offering to the number
recommended by such managing underwriter or underwriters.
(d) SELECTION OF UNDERWRITERS
If any of the Registrable Securities covered by a Demand
Registration are to be sold in an underwritten offering, the Company shall have
the right to select the investment banker or investment bankers and manager or
managers that will underwrite the offering; PROVIDED, HOWEVER, that such
investment bankers and managers must be reasonably acceptable to the Selling
Holders.
3. SHELF REGISTRATION UNDER THE SECURITIES ACT
(a) FILING OF SHELF REGISTRATION STATEMENT
In fulfillment of its obligation to file a registration
statement pursuant to Section 2 hereof, upon the written request of a Holder the
Company may cause to be filed a shelf registration statement (the "Shelf
Registration Statement") providing for the sale by the Holders of their
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 SEC as soon thereafter as is practicable. The Company agrees to
use its reasonable efforts to keep the Shelf Registration Statement with respect
to the Registrable Securities continuously effective for a period expiring on
the earlier of (i) the date on which all of the Registrable Securities covered
by the Shelf Registration Statement have been sold pursuant thereto and (ii) the
date on which (A) all Shares that such Holders own or have the right to obtain
in exchange for Units held by Holders who are not Affiliates of the Company, in
the opinion of counsel for the Company, which counsel shall be reasonably
acceptable to such Holders, are eligible for sale pursuant to Rule 144(k) under
the Securities Act and (B) all Shares that such Holders own or have the right to
obtain in exchange for Units held by each Holder who is an Affiliate of the
Company, in the opinion of counsel for the Company, which counsel shall be
reasonably acceptable to such Holder, are eligible for sale pursuant to Rule 144
under the Securities Act and could be sold in one transaction in accordance with
the volume limitations contained in Rule 144(e)(1)(i) under the Securities Act.
Subject to Sections 5(b), 5(i) and 6, 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 Selling Holders 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
registration statement and the SEC has not declared it effective or except as
otherwise permitted by the last three sentences of Section 5(b).
(b) EXPENSES
Except as provided herein, the Company shall pay all
Registration Expenses in connection with the registration pursuant to Section
3(a). The Company shall not be liable for any underwriting discounts and
commissions, the fees and disbursements of counsel representing a Holder or any
underwriter or agent acting on behalf of a Holder, and
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<PAGE> 7
transfer taxes, if any, relating to the sale or disposition of such Holder's
Registrable Securities pursuant to the Shelf Registration Statement or Rule 144
under the Securities Act.
(c) INCLUSION IN SHELF REGISTRATION STATEMENT.
Any Holder who does not provide the information
reasonably requested by the Company in connection with the Shelf Registration
Statement as promptly as practicable after receipt of such request, but in no
event later than ten (10) days thereafter, shall not be entitled to have its
Registrable Securities included in the Shelf Registration Statement.
4. HOLDBACK AGREEMENTS
(a) Each Holder (a) participating in an underwritten offering
covered by any Demand Registration or (b) in the event the Company is issuing
shares of beneficial interest to the public in an underwritten offering, agrees,
if requested by the managing underwriter or underwriters for such underwritten
offering, not to effect any public sale or distribution of Registrable
Securities or any securities convertible into or exchangeable or exercisable for
such Registrable Securities, including a sale pursuant to Rule 144 (or any
similar provision then in force) under the Securities Act, during the 14 days
prior to, and during the 180-day period beginning on, the effective date of such
Demand Registration or other underwritten offering (except as part of such
underwritten offering).
(b) In addition, each Holder agrees that with respect to any
registration statement covering Registrable Securities that is effective prior
to the second anniversary of the effective date of the IPO Registration
Statement, during any three-month period, such Holder shall sell only Rule
144(f) Registrable Securities under such registration statement prior to the
second anniversary of the effective date of the IPO Registration Statement.
After the second anniversary of the effective date of the IPO Registration
Statement, sales of all Registrable Securities shall be permitted hereunder.
5. REGISTRATION PROCEDURES
In connection with the obligations of the Company with respect to
a registration contemplated by Section 2 and 3 hereof, the Company shall:
(a) prepare and file with the SEC, as soon as reasonably
practicable after receipt of a written request pursuant to Section 2 or Section
3, a registration statement, which registration statement shall (i) be available
for the sale of the Registrable Securities in accordance with the intended
method or methods of distribution by the Selling Holders thereof and (ii) comply
as to form in all material respects with the requirements of the applicable form
and include all financial statements required by the SEC to be filed therewith;
(b) subject to the last three sentences of this Section 5(b)
and Section 5(i) hereof, (i) prepare and file with the SEC such amendments in
such registration statement as may be necessary to keep such registration
statement effective for the applicable period; (ii) cause the prospectus which
is part of such registration statement (a "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 SEC with respect to the
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 registration statement during the applicable period
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<PAGE> 8
in accordance with the intended method or methods of distribution by the Selling
Holders thereof. 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 5(b), Section 5(d) or Section 5(i) with
respect to each Holder of Registrable Securities (x) to the extent that the
Company is in possession of material non-public information that it deems
advisable not to disclose or is engaged in active negotiations or planning for a
merger or acquisition or disposition transaction and it delivers written notice
to each such Selling Holder of Registrable Securities to the effect that such
Selling Holder may not make offers or sales under the registration statement for
a period not to exceed thirty (30) days from the date of such notice; PROVIDED,
HOWEVER, that the Company may deliver only two such notices within any
twelve-month period, (y) unless and until the Company has received a written
notice (a "Registration Notice") from a Selling Holder that such Selling Holder
intends to make offers or sales under a registration statement as specified in
such 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 Registration Notice or such longer period as is reasonably
necessary if such preparation and filing are not commercially practicable within
ten (10) business days or (z) to the extent the Company elects pursuant to
Section 6 hereof to purchase the Shares which are the subject of the
Registration Notice. One a Selling Holder has delivered a Registration Notice to
the Company, such Selling Holder shall promptly provide to the Company such
information as the Company reasonably requests in order to identify such Selling
Holder and the method of distribution in a post-effective amendment to the
registration statement or a supplement to the Prospectus. Such Selling Holder
also shall notify the Company in writing upon completion of such offer or sale
or at such time as such Selling Holder no longer intends to make offers or sales
under the registration statement;
(c) furnish to each Selling Holder of Registrable Securities,
without charge, as many copies of each Prospectus and any amendment or
supplement thereto as such Holder may reasonably request in order to facilitate
the public sale or other disposition of the Registrable Securities; the Company
consents to the use of the Prospectus and any amendment or supplement thereto by
each such Selling Holder of Registrable Securities in connection with the
offering and sale of the Registrable Securities covered by the Prospectus or
amendment or supplement thereto;
(d) use its reasonable efforts to register or qualify the
Registrable Securities by the time a registration statement is declared
effective by the SEC under all applicable state securities or blue sky laws of
such jurisdictions in the United States and its territories and possessions as
any Holder of Registrable Securities covered by a registration statement shall
reasonably request in writing, keep each such registration or qualification
effective during the period such registration statement is required to be kept
effective or during the period offers or sales are being made by a Selling
Holder that has delivered a Registration Notice to the Company, whichever is
shorter; PROVIDED, HOWEVER, that in connection therewith, the Company shall not
be required to (i) qualify as a foreign corporation to do business or to
register as a broker or dealer in any such jurisdiction where it would not
otherwise be required to qualify or register but for this Section 5(d), (ii)
subject itself to taxation in any such jurisdiction, or (iii) file a general
consent to service of process in any such jurisdiction;
(e) notify each Selling Holder of Registrable Securities promptly
and, if requested by such Selling Holder, confirm in writing, (i) when a
registration statement and any post-effective amendments thereto have become
effective, (ii) when any amendment or supplement to the applicable Prospectus
has been filed with the SEC, (iii) of the issuance by the SEC or any state
securities authority of any stop order suspending the effectiveness of a
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<PAGE> 9
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) of the happening of any event during the period a registration statement
is effective as a result of which (A) such registration statement contains any
untrue statement of a material fact or omits to state any material fact required
to be stated therein or necessary to make the statements therein not misleading
or (B) the applicable Prospectus as then amended or supplemented contains any
untrue statement of a material fact or omits to state any material fact
necessary in order to make the statements therein, in light of the circumstances
under which they were made, not misleading;
(f) make every reasonable effort to obtain the withdrawal of any
order suspending the effectiveness of the registration statement or any part
thereof as promptly as possible;
(g) furnish to each Selling Holder of Registrable Securities
without charge, at least one conformed copy of the applicable registration
statement and any post-effective amendment thereto (without documents
incorporated therein by reference or exhibits thereto, unless requested);
(h) cooperate with the Selling Holders of Registrable Securities
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 at least two
business days prior to any sale of Registrable Securities for such numbers of
shares and registered in such names as the Selling Holders may reasonably
request, upon ten (10) business days prior notice;
(i) subject to the last three sentences of Section 5(b) hereof,
upon the occurrence of any event contemplated by clause (x) of Section 5(b) or
clause (v) of Section 5(e) hereof, use its reasonable efforts promptly to
prepare and file an amendment or a supplement to the Prospectus or any document
incorporated therein by reference or prepare, file and obtain effectiveness of a
post-effective amendment to the 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
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 the light of the circumstances under which they are
made, not misleading;
(j) make available for inspection by the Selling Holders of
Registrable Securities and any counsel, accountants or other representatives
retained by such Selling Holders 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 such Selling Holders, counsel, accountants
or representatives in connection with the registration statement; PROVIDED,
HOWEVER, that such records, documents or information which the Company
determines in good faith to be confidential and with respect to which the
Company notifies such Selling Holders, counsel, accountants or representatives
in writing that such records, documents or information are confidential, shall
not be disclosed by such Selling Holders, 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;
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(k) a reasonable time prior to the filing of any registration
statement or any amendment thereto, or any Prospectus or any amendment or
supplement thereto, provide copies of such document (not including any documents
incorporated by reference therein unless requested) to the Selling Holders of
Registrable Securities;
(l) use its reasonable efforts to cause all Registrable
Securities to be listed on any securities exchange on which similar securities
issued by the Company are then listed;
(m) provide a CUSIP number for all Registrable Securities, not
later than the effective date of any applicable statement;
(n) use its reasonable efforts to make available to its security
holders, as soon as reasonably practicable, an earnings statement covering at
least 12 months which shall satisfy the provisions of Section 11(a) of the
Securities Act and Rule 158 thereunder;
(o) if requested by a Selling Holder and any underwriters engaged
by such Selling Holder for purposes of distributing the Registrable Securities,
enter into such agreements (including an underwriting agreement in form, scope
and substance as is customary in underwritten offerings) and take all such other
reasonable actions in connection therewith (including those reasonably requested
by the underwriters or such Selling Holder) in order to expedite or facilitate
the disposition of such Registrable Securities, and in such connection, (i) make
such representations and warranties to the underwriters with respect to the
business of the Company and the registration statement, Prospectus and
documents, if any, incorporated or deemed to be incorporated by reference
therein, in each case, in form, substance and scope as are customarily made by
issuers to underwriters in underwritten offerings, and confirm the same if and
when requested; (ii) obtain opinions of counsel to the Company and updates
thereof (which shall be in form and substance reasonably satisfactory to the
underwriters and their counsel), addressed to such Selling Holder and each of
the underwriters covering the matters customarily covered in opinions requested
in underwritten offerings and such other matters as may be reasonably requested
by such counsel and underwriters; (iii) obtain "cold comfort" letters and
updates thereof from the independent certified public accountants of the
Company, addressed to such Selling Holder and each of the underwriters, such
letters to be in customary form and covering matters of the type customarily
covered in "cold comfort" letters in connection with underwritten offerings (in
each case, to the extent permitted by applicable accounting rules and
guidelines); (iv) if an underwriting agreement is entered into, the same shall
contain indemnification provisions and procedures no less favorable to the
underwriters than those set forth in Section 7 hereof and cross indemnification
by the underwriters similar to that set forth in Section 7 hereof in favor of
the Company or the Selling Holders, as the case may be; and (v) deliver such
documents and certificates as may be reasonably requested by the managing
underwriters and their counsel to evidence the continued validity of the
representations and warranties made pursuant to clause (i) above of this Section
5(o) and to evidence compliance with any customary conditions contained in the
underwriting agreement entered into by the Company.
The Company may require each Selling Holder of Registrable
Securities to furnish to the Company in writing such information regarding the
proposed distribution by such Selling Holder of such Registrable Securities as
the Company may from time to time reasonably request in writing.
In connection with and as a condition to the Company's
obligations with respect to the Shelf Registration Statement pursuant to Section
3 hereof and this Section 5, each
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Selling Holder covenants and agrees that (i) it will not offer or sell any
Registrable Securities under the Shelf Registration Statement until it has
provided a Registration Notice pursuant to Section 5(b) and has received copies
of the Prospectus as then amended or supplemented as contemplated by Section
5(c) and notice from the Company that the registration statement and any
post-effective amendments thereto have become effective as contemplated by
Section 5(e); (ii) upon receipt of any notice from the Company contemplated by
Section 5(b) (in respect of the occurrence of an event contemplated by clause
(x) of Section 5(b)) or Section 5(e) (in respect of the occurrence of an event
contemplated by clause (v) of Section 5(e)), such Selling Holder shall not offer
or sell any Registrable Securities pursuant to the Shelf Registration Statement
until such Selling Holder receives copies of the supplemented or amended
Prospectus contemplated by Section 5(i) hereof and receives notice that any
post-effective amendment has become effective, and, if so directed by the
Company, such Selling Holder will deliver to the Company (at the expense of the
Company) all copies in its possession, other than permanent file copies then in
such Selling Holder's possession, of the Prospectus as amended or supplemented
at the time of receipt of such notice; (iii) all offers and sales by such
Selling Holder under the Shelf Registration Statement must be completed within
sixty (60) days after the first date on which offers or sales can be made
pursuant to clause (i) above, and upon expiration of such sixty (60) day period,
the Selling Holder may not offer or sell any Registrable Securities under the
Shelf Registration Statement until it has again complied with the provisions of
clause (i) above; (iv) such Selling Holder and any of its partners, officers,
trustees, directors or affiliates, if any, must comply with the provisions of
Regulation M under the Exchange Act as applicable to them in connection with
sales of Registrable Securities pursuant to the Shelf Registration Statement;
and (v) such Selling Holder and any of its partners, officers, trustees,
directors or affiliates, if any, must enter into such written agreements as the
Company shall reasonably request to ensure compliance with clause (iv) above.
6. REPURCHASE BY COMPANY OF SHARES SUBJECT TO REGISTRATION NOTICE.
(a) Upon receipt by the Company of a Registration Notice, the
Company may, but shall not be obligated to, purchase from such Holder all, but
not less than all, of the Shares which are the subject of such Registration
Notice at a price per share equal to the average of the Closing Prices of the
Common Shares for the five trading days immediately preceding the date of the
Registration Notice. In the event the Company elects to purchase the Shares
which are the subject of a Registration Notice, the Company shall notify the
Holder of such Shares within five business days of the date of receipt of the
Registration Notice by the Company, which notice shall indicate: (i) that the
Company will purchase the Shares which are the subject of the Registration
Notice, (ii) the price per share, calculated in accordance with the preceding
sentence, which the Company will pay to such Holder and (iii) the date upon
which the Company shall purchase such Shares, which date shall not be later than
the tenth business day after receipt of the Registration Notice relating to such
Shares.
(b) If the Company purchases the Shares which are the subject of
a Registration Notice in accordance with this Section 6, the Company shall be
relieved of its obligations under this Agreement with respect to such Shares.
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<PAGE> 12
7. INDEMNIFICATION; CONTRIBUTION.
(a) INDEMNIFICATION BY THE COMPANY.
The Company agrees to indemnify and holder harmless each
Holder and its officers and directors and each Person, if any, who controls any
Holder within the meaning of Section 15 of the Securities Act as follows:
(i) against any and all loss, liability, claim, damage
and expense whatsoever, as incurred, to which such Holder, officer,
director or controlling Person may become subject under the Securities
Act or otherwise (A) that arise out of or are based upon any untrue
statement or alleged untrue statement of a material fact contained in a
registration statement or any amendment thereto, or the omission or
alleged omission to state therein a material fact required to be stated
therein or necessary to make the statements therein not misleading or
(B) that arise out of or are based upon any untrue statement or alleged
untrue statement of a material fact contained in any Prospectus or any
amendment or supplement thereto, or the omission or alleged omission to
state therein a material fact necessary in order to make the statements
therein, in the light of the circumstances under which they were made,
not misleading;
(ii) against any and all loss, liability, claim, damage
and expense whatsoever, as 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 contained
in a registration statement, if such settlement is effected with the
written consent of the Company; and
(iii) subject to the limitations set forth in Section
7(c), against any and all expense whatsoever, as incurred (including
reasonable fees and disbursements of counsel), reasonably incurred 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 subparagraph (i) or (ii) above;
PROVIDED, HOWEVER, that the indemnity provided pursuant to this Section
7(a) shall not apply to any Holder with respect to any loss, liability,
claim, damage or expense that arise out of or are based upon any untrue
statement or alleged untrue statement or omission or alleged omission
made in reliance upon and in conformity with written information
furnished to the Company by such Holder expressly for use in a
registration statement or any amendment thereto or the Prospectus or any
amendment or supplement thereto.
(b) INDEMNIFICATION BY HOLDERS.
Each Holder severally agrees to indemnify and hold
harmless the Company and the other Selling Holders, and each of their respective
partners, trustees, directors and officers (including each trustee and officer
of the Company who signed the
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<PAGE> 13
registration statement), and each Person, if any, who controls the Company or
any other Selling Holder within the meaning of Section 15 of the Securities Act,
to the same extent as the indemnity contained in Section 7(a) hereof, but only
insofar as such loss, liability, claim, damage or expense arises out of or is
based upon any untrue statement or alleged untrue statement or omission or
alleged omission made in a registration statement or any amendment thereto or
the Prospectus or any amendment or supplement thereto in reliance upon and in
conformity with written information furnished to the Company by such Selling
Holder for use therein relating to the Holder's status as a selling security
holder.
(c) CONDUCT OF INDEMNIFICATION PROCEEDINGS.
Each indemnified party shall give reasonably prompt
notice to each indemnifying party of any action or proceeding commenced against
it in respect of which indemnity may be sought hereunder, but failure to so
notify an indemnifying party (i) shall not relieve it from any liability which
it may have under the indemnity agreement provided in Section 7(a) or (b) above,
unless and to the extent it did not otherwise learn of such action and the lack
of notice by the indemnified party materially prejudices the indemnifying party
or results in the forfeiture by the indemnifying party of substantial rights and
defenses and (ii) shall not, in any event, relieve the indemnifying party from
any obligations to any indemnified party other than the indemnification
obligation provided under Section 7(a) or (b) above. After receipt of such
notice, the indemnifying party shall be entitled to participate in and, at its
option, jointly with any other indemnifying party so notified, to assume the
defense of such action or proceeding at such indemnifying party's own expense
with counsel chosen by such indemnifying party and approved by the indemnified
party, which approval shall not be unreasonably withheld; PROVIDED, HOWEVER,
that, if the defendants in any such action or proceeding include both the
indemnified party and the indemnifying party and the indemnified party
reasonably determines, upon advice of counsel, that a conflict of interest
exists or that there may be legal defenses available to it or other indemnified
parties that are different from or in addition to those available to the
indemnifying party, then the indemnified party shall be entitled to one separate
counsel, the reasonable fees and expenses of which shall be paid by the
indemnifying party. 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 not
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 second sentence of this Section 7(c).
(d) CONTRIBUTION.
In order to provide for just and equitable contribution in
circumstances in which the indemnity agreement provided for in this Section 7 is
for any reason held to be unenforceable although applicable in accordance with
its terms, the Company and the Selling Holders shall contribute to the aggregate
losses, liabilities, claims, damages and expenses of the nature contemplated by
such indemnity agreement incurred by the Company and the Selling Holders, in
such proportion as is appropriate to reflect the relative fault of and benefits
to the Company on the one hand and the Selling Holders on the other (in such
proportions that the
15
<PAGE> 14
Selling Holders are severally, not jointly, responsible for the balance), in
connection with the statements or omissions which resulted in such losses,
claims, damages, liabilities or expenses, as well as any other relevant
equitable considerations. The relative benefits to the indemnifying party and
indemnified parties shall be determined by reference to, among other things, the
total proceeds received by the indemnified party and indemnified parties in
connection with the offering to which such losses, claims, damages, liabilities
or expenses relate. The relative fault of the indemnifying party and indemnified
parties shall be determined by reference to, among other things, whether the
action in question, including any untrue or alleged untrue statement of a
material fact or omission or alleged omission to state a material fact, has been
made by, or relates to information supplied by, such indemnifying party or the
indemnified parties, and the parties' relative intent, pledge, access to
information and opportunity to correct or prevent such action.
The parties hereto agree that it would not be just or equitable
if contribution pursuant to this Section 7(d) were determined by pro rata
allocation or by any other method of allocation which does not take account of
the equitable considerations referred to in the immediately preceding paragraph.
Notwithstanding the provisions of this Section 7(d), no Selling Holder shall be
required to contribute any amount in excess of the amount by which the total
price at which the Registrable Securities of such Selling Holder were offered to
the public exceeds the amount of any damages which such Selling Holder would
otherwise have been required to pay by reason of such untrue statement or
omission.
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 7(d), each Person, if
any, who controls a Holder within the meaning of Section 15 of the Securities
Act and directors and officers of a Holder shall have the same rights to
contribution as such Holder, and each trustee of the Company, each officer of
the Company who signed the 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.
8. RULE 144 SALES.
(a) COMPLIANCE.
The Company covenants that, so long as it is subject to
the reporting requirements of the Exchange Act, it will file the reports
required to be filed by it under the Exchange Act so as to enable any Holder to
sell Registrable Securities pursuant to Rule 144 under the Securities Act.
(b) COOPERATION WITH HOLDERS.
In connection with any sale, transfer or other
disposition by any Holder of any Registrable Securities pursuant to Rule 144
under the Securities Act, the Company shall cooperate with such Holder 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 at lease two
business days prior
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<PAGE> 15
to any sale of Registrable Securities for such number of shares and registered
in such names as the Selling Holders may reasonable request upon ten (10)
business days prior notice. The Company's obligation set forth in the previous
sentence shall be subject to the delivery, if reasonably requested by the
Company or its transfer agent, by counsel to such Holder, in form and substance
reasonably satisfactory to the Company and its transfer agent, of an opinion
that such Securities Act legend need not appear on such certificate.
9. MISCELLANEOUS.
(a) AMENDMENTS AND WAIVERS.
The provisions of this Agreement, including the
provisions of this sentence, may not be amended, modified, supplemented or
waived, nor may consent to departures therefrom be given, without the written
consent of the Company and the Holders of a majority of the outstanding
Registrable Securities (treating for the purpose of such computation the Holders
of Units as the Holders of Registrable Securities issuable upon exchange of such
Units), PROVIDED, HOWEVER, that no amendment, modification, supplement or waiver
of, or consent to the departure from, the provisions of Sections 2, 3, 4, 5, 7
or 8 hereof shall be effective as against any Holder of Registrable Securities
unless consented to in writing by such Holder of Registrable Securities. Notice
of any such amendment, modification, supplement, waiver or consent adopted in
accordance with this Section 9(a) shall be provided by the Company to each
Holder of Registrable Securities at least thirty (30) days prior to the
effective date of such amendment, modification, supplement, waiver or consent.
(b) NOTICES.
All notices and other communications provided for or
permitted hereunder shall be made in writing by hand-delivery, registered
first-class mail, telex, telecopies, or any courier guaranteeing overnight
delivery, (i) if to a Holder, at such Holder's registered address appearing on
the share register of the Company or the Unit register of the Operating
Partnership or (ii) if to the Company, at Two North Riverside Plaza, Suite 2200,
Chicago, IL 60606, Attention: Timothy H. Callahan, President and Chief Executive
Officer.
All such notices and communications shall be deemed to
have been duly given: at the time delivered by hand, if personally delivered;
five business days after being deposited in the mail, postage prepaid, if
mailed; when answered back, if telexed; when receipt is acknowledged, if
telecopied; or at the time delivered if delivered by an air courier guaranteeing
overnight delivery.
(c) SUCCESSORS AND ASSIGNS.
This Agreement shall inure to the benefit of and be
binding upon the successors, assigns and transferees of each of the parties,
including, without limitation and without the need for an express assignment,
subsequent Holders. If any successor, assignee or transferee of any Holder shall
acquire Registrable Securities, in any manner, whether by operation of law or
otherwise, such Registrable Securities, in any manner, whether by operation of
law or otherwise, such Registrable Securities shall be held subject to all of
the terms of this
17
<PAGE> 16
Agreement, and by taking and holding Registrable Securities such Person shall be
conclusively deemed to have agreed to be bound by all of the terms and
provisions hereof.
(d) COUNTERPARTS.
This Agreement may be executed in any number of
counterparts and by the parties hereto in separate counterparts, each of which
when so executed shall be deemed to be an original and all of which taken
together shall constitute one and the same agreement.
(e) HEADINGS.
The headings in this Agreement are for convenience of
reference only and shall not limit or otherwise affect the meaning hereof.
(f) GOVERNING LAW.
This Agreement shall be governed by and construed in
accordance with the laws of the State of Maryland without giving effect to the
conflicts of law provisions thereof.
(g) SPECIFIC PERFORMANCE.
The parties hereto acknowledge that there would be no
adequate remedy at law if any party fails to perform any of its obligations
hereunder, and accordingly, agree that each party, in addition to any other
remedy to which it may be entitled at law or in equity, shall be entitled to
compel specific performance of the obligations of any other party under this
Agreement in accordance with the terms and conditions of this Agreement in any
court of the Untied States or any State thereof having jurisdiction.
(h) ENTIRE AGREEMENT.
This Agreement is intended by the parties as a final
expression of their agreement and intended to be a complete and exclusive
statement of the agreement and understanding of the parties hereto in respect of
the subject matter contained herein. This Agreement supersedes all prior
agreements and understanding between the parties with respect to such subject
matter.
(i) LIMITATION OF LIABILITY OF SHAREHOLDERS AND OFFICERS OF
THE COMPANY.
ANY OBLIGATION OR LIABILITY WHATSOEVER OF THE COMPANY
WHICH MAY ARISE AT ANYTIME 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 THE
COMPANY'S ASSETS ONLY. NO SUCH OBLIGATION OR LIABILITY, OTHER THAN THIS
AGREEMENT AS IT RELATES TO EACH OF THE
18
<PAGE> 17
HOLDERS, SHALL BE PERSONALLY BINDING UPON, NOR SHALL RESORT FOR THE ENFORECEMENT
THEREOF BE HAD TO, THE PROPERTY OF ANY OF ITS SHAREHOLDERS, TRUSTEES, OFFICERS,
EMPLOYEES OR AGENTS (SOLELY AS A RESULT OF THEIR STATUS AS SHAREHOLDERS,
TRUSTEES, OFFICERS, EMPLOYEES OR AGENTS), REGARDLESS OF WHETHER SUCH OBLIGATION
OR LIABILITY IS IN THE NATURE OF CONTRACT, TORT OR OTHERWISE. NOTWITHSTANDING
THE FOREGOING, THIS SECTION 9(i) SHALL NOT IN ANY WAY AFFECT OR LIMIT ANY
OBLIGATION OR LIABILITY OF ANY HOLDER UNDER THIS AGREEMENT.
19
<PAGE> 18
IN WITNESS WHEREOF, the parties have executed this Agreement as of the
date first written above.
EQUITY OFFICE PROPERTIES TRUST
By: /s/ Timothy H. Callahan
----------------------------------------
Name: Timothy H. Callahan
Title: President and Chief Executive Officer
EQUITY OFFICE HOLDINGS
By: /s/ Stanley M. Stevens
----------------------------------------
Name: Stanley M. Stevens
Title: Executive Vice President
EQUITY GROUP INVESTMENTS, INC.
By: /s/ Jim Alef
----------------------------------------
Name: Jim Alef
Title: Executive Vice President
20
<PAGE> 19
ZELL/MERRILL LYNCH REAL ESTATE OPPORTUNITY
PARTNERS LIMITED PARTNERSHIP
By: Equity Office Properties Trust, its managing
general partner
By: /s/ Stanley M. Stevens
----------------------------------------
Name: Stanley M. Stevens
Title: Executive Vice President
ZELL/MERRILL LYNCH REAL ESTATE OPPORTUNITY
PARTNERS LIMITED PARTNERSHIP II
By: Equity Office Properties Trust, its managing
general partner
By: /s/ Stanley M. Stevens
----------------------------------------
Name: Stanley M. Stevens
Title: Executive Vice President
ZELL/MERRILL LYNCH REAL ESTATE OPPORTUNITY
PARTNERS LIMITED PARTNERSHIP III
By: Equity Office Properties Trust, its managing
general partner
By: /s/ Stanley M. Stevens
----------------------------------------
Name: Stanley M. Stevens
Title: Executive Vice President
ZELL/MERRILL LYNCH REAL ESTATE OPPORTUNITY
PARTNERS LIMITED PARTNERSHIP IV
By: Equity Office Properties Trust, its managing
general partner
By: /s/ Stanley M. Stevens
----------------------------------------
Name: Stanley M. Stevens
Title: Executive Vice President
21
<PAGE> 20
[UNITHOLDERS]
------------------------------------------------
22
<PAGE> 21
[ZML SHAREHOLDERS]
------------------------------------------------
23
<PAGE> 1
EXHIBIT 10.3
NON-COMPETITION AGREEMENT
THIS NON-COMPETITION AGREEMENT (the "Agreement") is made and entered into
as of the 30th day of May, 1997, by and between EQUITY OFFICE PROPERTIES TRUST,
a Maryland real estate investment trust (the "Company") and SAMUEL ZELL (the
"Trustee').
RECITALS
A. The Company and the related entities listed on Exhibit A attached
hereto and various subsidiaries thereof (the "Operating Subsidiaries") are
engaged in the business of owning, operating, buying, selling, financing and
managing office and parking facility properties throughout the United States
(the "Business").
B. The Trustee has been associated with the Company as a trustee since the
Company was formed. As a trustee of the Company, the Trustee will have access
to the Company's business plans, financial data and other highly confidential
matters.
C. The Company desires to have the Trustee enter into this Agreement in
order to protect the Company and the Operating Subsidiaries from unfair
competition. The Trustee is willing to enter into this Agreement as further
inducement for the Company's acquisition of the Management Business (as defined
in that certain Contribution Agreement dated as of April 30, 1997 among the
Company, certain affiliates of the Trustee and the other parties thereto).
NOW, THEREFORE, for good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged by the Company and the Trustee,
the parties hereto agree as follows:
1. Covenant Not to Compete. Subject to Section 2 below, the Trustee
hereby agrees that during the term hereof, the Trustee shall not compete, in
any manner directly or indirectly, on his own behalf, or on behalf of any
corporation, partnership, trust, joint venture, individual or other entity,
with the Business of the Company or any of the Operating Subsidiaries. As
required by Maryland law (but throughout the entire term of this Agreement),
the Trustee hereby agrees that any potential acquisitions of office and/or
parking facility properties located in the United States of which he is aware
will be offered to the Company.
2. Permitted Activities. The restrictions against competition contained
in Section 1 above shall not prohibit the Trustee, in any manner, directly or
indirectly, on his own behalf or on behalf of any corporation, partnership,
trust, joint venture, individual or other entity, from engaging in:
(i) other activities related to real estate or the office property or
parking facility business which do not compete with the Business;
(ii) the Business with respect to Trustee's activities undertaken through
Trustee's ownership interest in various entities which own the office
properties and parking facility listed on Exhibit B attached hereto;
(iii) the acquisition, operation, development, management, leasing or
disposition of any office or parking facility properties which competes with
the Business by any
<PAGE> 2
entity (an "Investment Entity") in which Trustee owns or acquires an equity
interest (including interests as a general partner) either (xx) as a passive
investor having no managerial or similar role with respect to such property or
(yy) to the extent permitted by Maryland law, where the Investment Entity owned
the properties which are competitive with the Business prior to the Trustee's
investment therein, the ownership and operation of such properties is
incidental to the primary business activities of the Investment Entity, and
subject to the rights of third party contractors, Trustee exercises his
commercially reasonable best efforts to cause Equity Office Properties
Management Corp. to enjoy a right of first refusal for the management of such
properties; and
(iv) the Business during the "Tail Period" (as defined in Section 3 below)
so long as such activities relate to existing or proposed (a) office properties
which are or will be located at least twenty-five (25) miles from any other
office property or (b) parking facilities which are or will be located at least
twenty-five (25) miles from any other parking facility property, in either case
owned or managed by the Company or any of the Operating Subsidiaries.
In addition, the Company acknowledges that the Trustee is a shareholder or
otherwise has an ownership interest in (either directly or indirectly) and is
an officer and/or a director of Equity Group Investments, Inc., Equity
Residential Properties Trust, American Classic Voyages Co., Anixter
International Inc., Antec Corporation, Jacor Communications, Inc., Capsure
Holdings Corp., Manufactured Home Communities, Inc., Sealy Corporation, Quality
Food Centers, Inc., Ramco Energy plc, TeleTech Holdings, Inc. and Chart House
Enterprises, Inc. and that the covenants contained in Section 1 above shall not
be deemed to prohibit such companies from engaging in the Business in
competition with the Company and the Operating Subsidiaries, although to the
best of the Trustee's knowledge, such aforementioned entities as of the date
hereof have no intention of doing so.
3. Term. This Agreement shall be in effect for such time as the Trustee
is an officer, director or trustee of the Company or any of the Operating
Subsidiaries and for a period of one (1) year thereafter (such additional one
year period being referred to herein as the "Tail Period").
4. Consideration. In consideration of the Trustee's non-competition
commitments provided for herein, the Company agrees to acquire the Management
Business from the Trustee's affiliates.
5. Adequate Consideration and Ability to Earn Livelihood. The Trustee
expressly acknowledges: (i) that he will be able to earn a livelihood without
violating the covenants set forth in this Agreement, and (ii) that his ability
to do so was a condition precedent to the Company's entering into this
Agreement.
6. Reasonable Limit. The Company and the Trustee have attempted to limit
the Trustee's right to compete only to the extent necessary to protect the
Company and the Operating Subsidiaries from unfair competition. The Trustee
expressly acknowledges that the restrictive covenant contained in Section 1
above, along with the exceptions thereto contained in Section 2 above,
constitute a reasonable restriction. If, however, the scope or enforceability
of the restrictive covenant contained in this Agreement is disputed at any
time, a court or other
<PAGE> 3
trier of fact may modify and enforce the covenant to the extent that it
believes is reasonable under the circumstances existing at that time.
7. Breach of Agreement
(a) A party aggrieved shall notify the other party in writing of any
conflicts, disputes or claims of breach arising under this Agreement. Within
ten (10) working days after such notice is sent, the parties shall meet, shall
develop, as fully as possible, the facts relating to the conflict, dispute or
alleged breach, and shall attempt to resolve the same. If resolution of the
dispute is not made to the satisfaction of the aggrieved party within thirty
(30) days after the notice is sent, the aggrieved party may pursue its legal
and equitable remedies.
(b) In the event of breach of this Agreement, the Trustee acknowledges
that the remedy at law would be inadequate and that, in addition to monetary
damages, the Company and the Operating Subsidiaries shall be entitled, after
compliance with the dispute mechanism described in Section 7(a) above, without
necessity of posting any bond, to an injunctive order restraining such breach
immediately upon the commencement of any suit therefor by the Company or any of
the Operating Subsidiaries.
8. Transferability. The parties hereto agree that this Agreement shall
inure to the benefit of the Company, the Operating Subsidiaries, and their
respective successors and assigns and shall be fully transferable and
assignable by the Company and each such Operating Subsidiary. Upon such
transfer or assignment, this Agreement shall remain in full force and effect,
under the terms herein, between the trustee and such transferees, assignees or
successors in interest. This Agreement shall be binding upon the successors
and assigns of the Trustee.
9. Waiver. The waiver by any party to this Agreement of a breach by any
party of any provision of this Agreement shall not operate or be construed as a
waiver of any subsequent breach by any other party. No waiver of any provision
of this Agreement shall be effective, unless in writing and signed by the party
waiving its rights, and then such waiver or consent shall be effective only in
the specific instance and for the specific purpose for which given.
10. Notices. All notices, requests, demands and other communications
given by any party hereto shall be in writing and shall be deemed to be duly
given if delivered, or if mailed first class, return receipt requested,
addressed as follows:
<PAGE> 4
To the Company: To the Trustee:
Equity Office Properties Trust Two North Riverside Plaza
Two North Riverside Plaza Suite 600
Suite 2200 Chicago, Illinois 60606
Chicago, Illinois 60606
Attention: President with a copy to:
Equity Group Investments, Inc.
Donald J. Liebentritt
General Counsel
Two North Riverside Plaza
Suite 600
Chicago, Illinois 60606
11. Entire Agreement. This instrument supersedes all prior understandings
and agreements of the parties hereto and contains the entire agreement of the
parties with respect to the subject matter hereof and may not be amended or
changed, except by an agreement in writing entered into by the parties hereto.
12. Applicable Law. This Agreement shall be governed by, and construed in
accordance with, the laws of the State of Illinois.
13. Severability. If a court of competent jurisdiction adjudicates any
one or more of this Agreement's provisions as invalid, illegal or unenforceable
in any respect, such provision(s) shall be ineffective only to the extent and
duration of such invalidity, illegality or unenforceability and such
invalidity, illegality or unenforceability shall not affect the remaining
substance of such provision or any of this Agreement's other provisions, and
this Agreement shall be construed as if it had never contained such invalid,
illegal or unenforceable provision.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed as of the date first above written.
COMPANY: TRUSTEE:
EQUITY OFFICE PROPERTIES TRUST,
a Maryland real estate investment trust
By: /s/ Stanley M. Stevens /s/ Samuel Zell
---------------------------- --------------------
Its: Executive Vice President Name: Samuel Zell
----------------------------
<PAGE> 5
EXHIBIT A
RELATED ENTITIES
EOP Operating Limited Partnership and any subsidiary partnerships, limited
liability companies, trusts or corporations in which it has an interest
Equity Office Properties Management Corp.
Any corporation, partnership, limited liability company or trust in which the
Company has an interest
<PAGE> 6
EXHIBIT B
OTHER OFFICE AND PARKING FACILITY PROPERTIES
<TABLE>
<S> <C>
OFFICE PROPERTIES LOCATION
------------------------------ ---------------------
ZELL/LURIE
6300 West Loop South Bellaire, Texas
Concourse Office Plaza Skokie, Illinois
Eastland Commerce Columbus, Ohio
Jefferson Plaza Arlington, Virginia
Palo Alto Square Palo Alto, California
Two North Riverside Chicago, Illinois
FIRST CAPITAL
12356 Featherwood Houston, Texas
1800 Sherman Evanston, Illinois
Brookwood Metroplex Birmingham, Alabama
Burlington I Ann Arbor, Michigan
Burlington II Ann Arbor, Michigan
Burlington III Ann Arbor, Michigan
Citrus Center Orlando, Florida
Ellis Building Sarasota, Florida
Foxhall Square Washington, DC
Holiday Office Park Lansing, Michigan
Lakeview Office Park Indianapolis, Indiana
Meidinger Tower Louisville, Kentucky
Park Plaza Professional Houston, Texas
Prentice Plaza Englewood, Colorado
PARKING FACILITIES
------------------
Washington Madison Wells Chicago, Illinois
</TABLE>
<PAGE> 1
EXHIBIT 10.4
CONTRIBUTION AGREEMENT
BY AND AMONG
ZELL/MERRILL LYNCH REAL ESTATE OPPORTUNITY PARTNERS LIMITED
PARTNERSHIP
ZELL/MERRILL LYNCH REAL ESTATE OPPORTUNITY PARTNERS LIMITED
PARTNERSHIP II
ZELL/MERRILL LYNCH REAL ESTATE OPPORTUNITY PARTNERS LIMITED
PARTNERSHIP III
ZELL/MERRILL LYNCH REAL ESTATE OPPORTUNITY PARTNERS LIMITED
PARTNERSHIP IV
EQUITY OFFICE HOLDINGS, L.L.C.
EQUITY GROUP INVESTMENTS, INC.
AND
EOP OPERATING LIMITED PARTNERSHIP
DATED AS OF APRIL 30, 1997
<PAGE> 2
CONTRIBUTION AGREEMENT
THIS CONTRIBUTION AGREEMENT (hereinafter referred to as the "Contribution
Agreement") is made and entered into as of April 30, 1997 by and among EOP
Operating Limited Partnership, a Delaware limited partnership (the "Operating
Partnership") and each of Zell/Merrill Lynch Real Estate Opportunity Partners
Limited Partnership, an Illinois limited partnership ("Opportunity Partnership
I"); Zell/Merrill Lynch Real Estate Opportunity Partners Limited Partnership
II, an Illinois limited partnership ("Opportunity Partnership II");
Zell/Merrill Lynch Real Estate Opportunity Partners Limited Partnership III, an
Illinois limited partnership ("Opportunity Partnership III"); Zell/Merrill
Lynch Real Estate Opportunity Partners Limited Partnership IV, an Illinois
limited partnership ("Opportunity Partnership IV" and, together with
Opportunity Partnership I, Opportunity Partnership II and Opportunity
Partnership III, the "Opportunity Partnerships"); Equity Office Holdings,
L.L.C., a Delaware limited liability company ("EOH"); and Equity Group
Investments, Inc., an Illinois corporation ("EGI" and, together with EOH,
"Equity Office"). Each of the Opportunity Partnerships, EOH and EGI may be
referred to herein individually as a "Contributor" and, collectively, as the
"Contributors." Capitalized terms used but not defined herein shall have the
meaning ascribed to them in the Glossary attached hereto.
RECITALS
A. Each of the Opportunity Partnerships owns or will, as of the Closing
Date (as defined in Section 2.2 below), own the unencumbered direct or indirect
ownership interests in certain limited partnerships, limited liability
companies and other entities (collectively, the "Titleholders"), as identified
in the attached Exhibits A-1, A-2, A-3 or A-4 (the "Titleholder Interests").
B. Each of the Titleholders will have been, as of the Closing Date,
validly formed pursuant to a limited partnership agreement, limited liability
company agreement or other agreement (each an "Organizational Document"), to
hold or acquire fee simple or beneficial title to, a ground leasehold estate
in, or a mortgage interest in, a discrete office or garage property
(individually, a "Property" and collectively, the "Properties"), as generally
identified in the attached Exhibit B.
C. The Opportunity Partnerships desire to contribute the Titleholder
Interests to the Operating Partnership in consideration for units evidencing an
ownership interest in the Operating Partnership ("Units").
D. Equity Office desires to contribute to the Operating Partnership, also
in consideration for Units, all of its right, title and interest in certain
assets, personal property and management contracts as identified on Exhibit C
constituting all of the assets (except only for the Excluded Assets referenced
in said Exhibit C) and liabilities relating to Equity Office's office and
parking management and leasing businesses (inclusive of the assets and
liabilities of EOH's subsidiary entities, Equity Office Properties, L.L.C. and
Equity Capital Holdings, L.L.C.) for the period from and after the Closing Date
hereunder (collectively, the "Management Business").
E. The purpose and intent of this Contribution Agreement is to set forth
the terms and conditions pursuant to which the foregoing contributions shall
occur.
<PAGE> 3
TERMS OF AGREEMENT
NOW, THEREFORE, for and in consideration of the foregoing premises, and
the mutual undertakings set forth below, the parties hereto agree as follows:
1. CONTRIBUTION OF TITLEHOLDER INTERESTS AND MANAGEMENT BUSINESS IN
EXCHANGE FOR UNITS
1.1 CONTRIBUTIONS TO THE OPERATING PARTNERSHIP.
(a) At the Closing and subject to the terms and conditions contained
herein, each Opportunity Partnership shall contribute or cause to be
contributed to the Operating Partnership all of its Titleholder Interests and
other property interests described herein (for each Opportunity Partnership,
collectively its "Contributed Opportunity Partnership Assets") by executing,
acknowledging and delivering the following:
1. One or several Assignment and Assumption Agreements
substantially in the form attached hereto as Exhibit D as required
to transfer all of the Titleholder Interests owned by such
Opportunity Partnership (each an "Assignment and Assumption
Agreement");
2. A bill of sale conveying to the Operating Partnership all
personal property owned by the Opportunity Partnership; exclusive of
cash required to be distributed to the partners of such Opportunity
Partnership in order to permit the ZML REIT therein to make a
distribution to its shareholders immediately prior to the Closing in
an amount sufficient to satisfy the distribution requirements
applicable to REITs for avoidance of the payment of any federal
income or excise tax (the "Required REIT Distribution") and any
additional sum which such Opportunity Partnership elects to
distribute thereafter to its partners from the proceeds of its prior
sale of non-office assets; but including, without limitation, all
personal property owned by the Opportunity Partnership and used in
connection with the ownership or operation of the Properties,
substantially in the form attached hereto as Exhibit E (each a "Bill
of Sale");
3. An Assignment and Assumption of Intangible Rights Agreement
substantially in the form attached hereto as Exhibit F (the
"Assignment and Assumption of Intangible Rights");
4. Stock certificates or other indicia of ownership in the
Titleholders (or interests therein) and promissory notes, if any,
held by the Opportunity Partnership, assigned or endorsed in blank;
and
5. Amended and Restated Agreement of Limited Partnership for the
Operating Partnership (the "OP Agreement") substantially in the form
attached hereto as Exhibit G.
(b) At the Closing and subject to the terms and conditions contained
herein, Equity Office shall contribute or cause to be contributed to the
Operating Partnership the Management Business by executing, acknowledging and
delivering the following:
1. An Assignment and Assumption of Management Business Agreement
substantially in the form attached hereto as Exhibit H (the
"Assignment and Assumption of Management Business Agreement");
2. A bill of sale assigning to the Operating Partnership all
personal property (other than the "Excluded Assets" as described in
Exhibit C hereto) now or hereafter owned by Equity Office in
connection with the Management Business substantially in the form
attached hereto as Exhibit I (the "Management Business Bill of
Sale");
3. As required in the discretion of the Operating Partnership's
counsel, assignments and assumptions of leasehold estates, together
with any necessary consents of landlords; and
2
<PAGE> 4
4. The OP Agreement.
(c) At the Closing and subject to the terms and conditions contained
herein, the Operating Partnership will accept the contributions made by or on
behalf of the Opportunity Partnerships and Equity Office by executing,
acknowledging and delivering each of the foregoing documents requiring its
signature and shall prepare Exhibit A to the OP Agreement in order to reflect
the issuance of Units in accordance with the provisions of this Agreement.
(d) The parties hereto shall take such additional actions and execute such
additional documentation as may be required by the Organizational Documents,
the OP Agreement or, in the reasonable judgment of counsel to the Operating
Partnership, in order to effect fully the transactions contemplated hereby,
including, without limitation, amendments to the Organizational Documents as
required to admit the Operating Partnership or its designee as the owner of the
Titleholder Interests in lieu of an Opportunity Partnership.
1.2 CALCULATION OF UNITS TO BE ISSUED.
Subject to Section 1.3 below, the Operating Partnership shall at Closing,
in consideration for the Contributed Opportunity Partnership Assets or the
Management Business, as the case may be, transfer to each Contributor a number
of Units equal to the product of:
(x) the quotient of
(i) the Adjusted Consideration (as defined below)
for each such Contributor
divided by
(ii) the sum of the Adjusted Consideration for all
Contributors (without regard to the proceeds from the IPO)
multiplied by
(y) the excess of
(i) the quotient of
(A) the number of shares of beneficial
interest (without regard to any overallotment option) of
Equity Office Properties Trust, a Maryland real estate
investment trust (the "Company" and the "Common Shares")
sold to the public in the initial public offering of such
shares, when and if it occurs (the "IPO")
divided by
(B) the fractional ownership interest
(expressed in decimal form) in the Operating Partnership
that the Common Shares sold in the IPO represent upon
their issuance (without regard to any overallotment
option)
over
(ii) the number of Common Shares sold in the IPO
(without regard to any overallotment option).
3
<PAGE> 5
1.3 ADJUSTED CONSIDERATION.
(a) The "Initial Consideration" for the real and tangible personal
property interests included in each Opportunity Partnership's Contributed
Opportunity Partnership Assets has been determined and fixed, on a collective
basis, as of December 31, 1996 (the "Initial Valuation Date") to be the dollar
amount so designated on Exhibit A-1, A-2, A-3 or A-4. In order to determine
the final valuation amount (the "Adjusted Consideration") for each Opportunity
Partnership's contribution to the Operating Partnership, its Initial
Consideration amount shall be increased or decreased as of the last day of the
calendar month first preceding the month in which the preliminary prospectus
used in connection with the IPO is dated (the "Final Valuation Date") as
follows:
first: by adding the amount of its cash then on hand (exclusive of cash
held for the account of third parties) after deduction of (x) the
sum which the Contributor estimates to be required to be distributed
to its partners in order to make any Required REIT Distribution and
(y) any additional sum which the Contributor elects to distribute
thereafter to its partners from the proceeds of its prior sale of
non-office assets;
second: by adding the value (which shall be determined in good faith by
the Operating Partnership and reasonably acceptable to such
Contributor) of all intangible non-real estate assets (exclusive of
cash and accounts receivable) to be contributed by such Contributor
hereunder;
third: by adding or deducting, as appropriate, a credit or charge
(determined in good faith by the Operating Partnership and
reasonably acceptable to the Contributor) reflective of the amount
by which the terms of the Contributor's mortgage indebtedness are
above or below prevailing market terms;
fourth: by deducting the principal amount of all then-outstanding
mortgage indebtedness of such Contributor (exclusive of such
indebtedness having a remaining term of less than one year);
fifth: by adding or deducting, as appropriate, the Net Proration Amount;
sixth: by deducting the amount of any unexpended capital transaction
proceeds paid to the Opportunity Partnership after the Initial
Valuation Date and prior to the Final Valuation Date as a result of
an insurance recovery or condemnation or assignment in lieu of
condemnation;
seventh: by adding or deducting, as appropriate, the amount by which the
Consolidation Expenses paid or reserved by such Contributor exceeded
or was less than such Contributor's proportionate share of all such
Consolidation Expenses which were paid or reserved prior to the
Final Valuation Date by all of the Contributors (calculated in the
same proportion as its Initial Consideration amount bears to the
aggregate of all Initial Consideration amounts) (each Contributor's
"Proportionate Expense Allocation Adjustment:);
eighth: by deducting, in the case of Opportunity Partnership I, the
Initial Consideration amounts for any Properties sold subsequent to
the Initial Valuation Date and prior to the Final Valuation Date
(being the aggregate sum of $66,625,000 for Barton Oaks and 8383
Wilshire); and
ninth: by adding the gross purchase price for any Properties acquired by
such Contributor subsequent to the Initial Valuation Date and prior
to the Final Valuation Date.
The parties agree that, inasmuch as Properties acquired or optioned subsequent
to the Final Valuation Date will be purchased, in part, from cash balances
reflected in clause first above and are not included in the Initial
Consideration amounts, no adjustment is required to be made in the calculation
of the Adjusted Consideration for Properties that may be acquired or optioned
subsequent to the Final Valuation Date, notwithstanding that those Properties
shall be included within the definition of the Opportunity Partnership's
Contributed Opportunity Partnership Assets and in the determination of such
Opportunity Partnership's Titleholder Interests.
4
<PAGE> 6
(b) The "Adjusted Consideration" for the Management Business is One
Hundred Sixty Million Dollars ($160,000,000) and shall not be subject to
adjustment, except only for any required Proportionate Expense Allocation
Adjustment which Equity Office does not pay in cash at or prior to Closing.
1.4 TREATMENT AS CONTRIBUTION.
The transfer, assignment and exchange of interests effectuated with
respect to the Operating Partnership pursuant to this Contribution Agreement
shall constitute a "Capital Contribution" pursuant to Article IV of the OP
Agreement and is intended to be governed by Section 721(a) of the Internal
Revenue Code of 1986, as amended (the "Code").
2. CLOSING
2.1 CONDITIONS PRECEDENT.
The closing of the Company's IPO on or before March 31, 1998, is a
condition precedent to the obligations of all parties to this Contribution
Agreement to effect the transactions contemplated hereunder.
In addition to the foregoing, the Operating Partnership shall not be
obligated to close hereunder absent satisfaction of the following additional
conditions precedent if such failure is, in the judgment of the Operating
Partnership, either intentional or likely to have a Material Adverse Effect on
the Operating Partnership or its future operations:
(a) The representations and warranties of each of the Contributors
contained herein shall have been true and correct on the date such
representations and warranties were made, and shall be true and correct on the
Closing Date as if made at and as of such date;
(b) Each of the obligations hereunder of each of the Contributors shall
have been duly performed on or before the Closing Date;
(c) Concurrently with the Closing, each of the Contributors shall have
executed and delivered to the Operating Partnership the documents required to
be delivered hereunder;
(d) Except as otherwise permitted herein, each of the Contributors shall
have obtained all consents or approvals of any Governmental Entity or third
party to the consummation of the transactions contemplated hereunder or in the
Proxy Solicitation;
(e) No order, statute, rule, regulation, executive order, injunction,
stay, decree or restraining order shall have been enacted, entered, promulgated
or enforced by any court of competent jurisdiction or Governmental Entity that
prohibits the consummation of the transactions contemplated herein, and no
litigation or governmental proceeding seeking any such order shall be pending
or threatened in writing; and
(f) There shall not have occurred between the date hereof and the Closing
Date any adverse change in any Titleholder's assets, business, financial
condition, results of operations or prospects or the Management Business.
2.2 TIME AND PLACE.
The date, time and place of the transactions contemplated hereunder be the
day the Operating Partnership receives the proceeds from the IPO at 10:00 a.m.
in the office of Rosenberg & Liebentritt, P.C., Suite 1600, Two North Riverside
Plaza, Chicago, Illinois 60606 (the "Closing" or "Closing Date"); provided that
if the Closing has not occurred on or prior to March 31, 1998, then any
Contributor or the Operating Partnership may terminate this Contribution
Agreement upon written notice delivered to all other parties hereto and upon
such termination, no party shall have any further rights, obligations or
liabilities hereunder, except for any rights, obligations or liabilities
5
<PAGE> 7
expressly surviving the termination of this Contribution Agreement. The
transfers described herein and all closing deliveries, and the consummation of
the IPO, shall be deemed concurrent for all purposes.
2.3 CLOSING DELIVERIES.
At the Closing, the parties shall make, execute, acknowledge and deliver,
or cause to be made, executed, acknowledged and delivered, as appropriate, the
legal documents and other items (collectively the "Closing Documents")
necessary in the judgment of counsel to the Company to carry out the intention
of this Contribution Agreement and the S-11 Registration Statement, which
Closing Documents and other items shall include, without limitation, the
documents described in Section 1.1 above, together with the following:
(i) Each of the Opportunity Partnerships shall deliver, to the Operating
Partnership, the books and records, title insurance policies, leases, lease
files, contracts, stock certificates, original promissory notes, and other
indicia of ownership for the Titleholders and Titleholder Interests in which it
has an ownership interest;
(ii) Equity Office shall deliver to the Operating Partnership all books
and records, stock certificates or other indicia of ownership for assets
included within the definition of the Management Business;
(iii) Each of the Contributors shall deliver to the Operating Partnership
its affidavit stating the Contributor's United States Taxpayer Identification
Number and that the Contributor is not a foreign person pursuant to section
1445(b)(2) of the Code and a comparable affidavit satisfying any other
withholding requirements;
(iv) There shall have been adopted an amendment to each Opportunity
Partnership's Agreement of Limited Partnership substantially in the form
attached hereto as Exhibit J-1, J-2, J-3 or J-4;
(v) Each ZML REIT shall have executed a merger agreement so as to merge
into the Company substantially in the form attached hereto as Exhibit K (the
"Merger Agreement");
(vi) The title policies and endorsements described in Exhibit L hereto,
subject to such exceptions, if any, as may be acceptable to the Company
(collectively the "Title Policies") shall have been issued to the Operating
Partnership, or other proper party as specified in Exhibit L, effective as of
the Closing Date; and
(vii) Endorsement of all other insurance policies (exclusive of insurance
maintained by tenants) naming an Opportunity Partnership or Equity Office as an
insured or other beneficiary shall have been issued in order to substitute the
Operating Partnership in lieu of the Opportunity Partnership or Equity Office.
(viii) Equity Office shall deliver to the Operating Partnership an
estoppel certificate from each ownership entity under each of the material
management contracts comprising the Management Business (collectively the
"Management Contracts") confirming the absence of any material defaults or
claims for indemnification thereunder and consenting to the assignment of the
Management Contracts to the Operating Partnership.
(ix) Equity Office shall contribute to Equity Office Properties
Management Corp. the sum of One Hundred Fifty Thousand Dollars ($150,000), in
cash, as consideration for one hundred percent (100%) of the voting common
stock [representing a five percent (5%) profits interest] in said Equity Office
Properties Management Corp.
2.4 CLOSING COSTS.
The Operating Partnership shall pay any documentary transfer taxes, escrow
charges, title charges and recording taxes or fees incurred in connection with
the transactions contemplated hereby.
6
<PAGE> 8
3. REPRESENTATIONS AND WARRANTIES.
3.1 REPRESENTATIONS AND WARRANTIES OF THE OPERATING PARTNERSHIP.
The Operating Partnership hereby represents and warrants to each of the
Contributors that:
(a) Organization; Authority. The Operating Partnership (i) is duly
formed, validly existing and in good standing under the laws of the
jurisdiction of its formation, and (ii) has all requisite power and authority
to enter into this Contribution Agreement and all agreements contemplated
hereby and to issue the Units. The persons and entities executing this
Contribution Agreement and all agreements contemplated hereby on behalf of the
Operating Partnership have the power and authority to enter into this
Contribution Agreement and such other contemplated agreements.
(b) Due Authorization. The execution, delivery and performance by the
Operating Partnership of its obligations under this Contribution Agreement and
all agreements contemplated hereby will not contravene any provision of
applicable law, the OP Agreement, charter, declaration of trust or other
constituent document of the Operating Partnership or the Company, or any
agreement or other instrument binding upon the Operating Partnership or any
judgment, order or decree of any governmental body, agency or court having
jurisdiction over the Operating Partnership, and no consent, approval,
authorization or order of or qualification with any governmental body or agency
is required for the performance by the Operating Partnership of its obligations
under this Contribution Agreement and all other agreements contemplated hereby.
(c) Solvency. The Operating Partnership has been solvent at all times
prior to and immediately following the transfer of the Units to the
Contributors.
(d) No Violation. None of the execution, delivery or performance of this
Contribution Agreement and the transactions contemplated hereby does or will,
with or without the giving of notice, lapse of time, or both, (i) violate,
conflict with, result in a breach of, or constitute a default under or give to
others any right of termination or cancellation of (A) the OP Agreement, (B)
any material agreement, document or instrument to which the Operating
Partnership is a party or by which the Operating Partnership is bound or (C)
any term or provision of any judgment, order, writ, injunction, or decree of
any Governmental Entity binding on the Operating Partnership or by which the
Operating Partnership or any of its assets or properties are bound or subject
or (ii) result in the creation of any Lien, other than a Permitted Lien, upon
the Units.
(e) Compliance with Laws. To the actual knowledge, without investigation,
of the officers of the Company having a rank of senior vice president or
higher, the Operating Partnership has complied and on the date hereof does
substantially comply in all material respects with all applicable laws,
ordinances, rules and regulations, whether federal, state or local, foreign,
statutory or common, including, without limitation all securities laws. The
Operating Partnership has not been informed of any material violation of any
such laws, rules or regulations, or that any investigation has been commenced
or is contemplated respecting any such possible violation.
(f) Consents and Approvals. No consent, waiver, approval or authorization
of any third party is required to be obtained by the Operating Partnership in
connection with the execution, delivery and performance of this Contribution
Agreement and the transactions contemplated hereby, except any of the foregoing
that shall have been satisfied prior to the Closing Date.
3.2 REPRESENTATIONS AND WARRANTIES OF EACH OF THE OPPORTUNITY
PARTNERSHIPS.
Each Opportunity Partnership makes the following representations and
warranties to the Operating Partnership only with respect to: (i) itself, (ii)
the Properties identified on such Opportunity Partnership's respective Exhibit
A-1, A-2, A-3 or A-4 hereto, and (iii) the Titleholder Interests to be
transferred by such Opportunity Partnership.
7
<PAGE> 9
(a) Organization; Authority. The Opportunity Partnership (i) is duly
formed, is validly existing and in good standing under the laws of the
jurisdiction of its formation, and (ii) has all requisite power and authority
to own, lease or operate its property and to carry on its business as presently
conducted and, to the extent required under applicable law, is qualified to do
business and is in good standing in each jurisdiction in which the nature of
its business or the character of its property make such qualification
necessary.
(b) Due Authorization. The execution, delivery and performance of the
Contribution Agreement by the Opportunity Partnership has been duly and validly
authorized by all necessary action of the Opportunity Partnership. This
Contribution Agreement and each agreement, document and instrument executed and
delivered by or on behalf of the Opportunity Partnership pursuant to this
Contribution Agreement constitutes, or when executed and delivered will
constitute, the legal, valid and binding obligation of such Opportunity
Partnership, enforceable against such Opportunity Partnership in accordance
with its terms, as such enforceability may be limited by bankruptcy or the
application of equitable principles.
(c) Consents and Approvals. No consent, waiver, approval or authorization
of any third party is required to be obtained by the Opportunity Partnership in
connection with the execution, delivery and performance of this Contribution
Agreement and the transactions contemplated hereby, except any of the foregoing
that shall have been obtained prior to the Closing Date or in respect to
mortgage loans which the Operating Partnership determines, in its sole
discretion, can be re-financed on terms acceptable to it at or within one
hundred eighty (180) days of Closing, unless, in its judgment, failure to
obtain any such consent, waiver, approval or authorization would not have a
Material Adverse Effect on the future operations of the Operating Partnership.
(d) Ownership of the Titleholder Interests. The Opportunity Partnership
is the sole owner of the Titleholder Interests shown as owned by it on the
attached Exhibits A-1, A-2, A-3 or A-4 subject to no adverse claims or
interests other than Permitted Liens and liens, if any, given to secure
mortgage indebtedness otherwise encumbering the Properties. Effective as of
the consummation of the transactions described herein, the Operating
Partnership's title to the Titleholder Interests will be free and clear of any
liens, encumbrances, debts, charges, liabilities or obligations except for
Permitted Liens and liens, if any, given to secure mortgage indebtedness
encumbering the Properties.
(e) Titleholder Interests. The Titleholder Interests constitute all of
the interests owned by the Opportunity Partnership in the Titleholders as set
forth on the attached Exhibits A-1, A-2, A-3 and A-4. Each such Titleholder
Interest is validly issued, fully paid and non-assessable, and was not issued
in violation of any preemptive rights. Each such Titleholder Interest has been
issued in compliance with applicable law and the relevant Organizational
Documents (as then in effect). Except as set forth on Exhibit M attached
hereto, there are no enforceable rights, subscriptions, warrants, options,
conversion rights, preemptive rights or agreements of any kind outstanding to
purchase or to otherwise acquire any of the interests which comprise the
Titleholder Interests or any securities or obligations of any kind convertible
into any of the interests which comprise such Titleholder Interests or other
equity interests or profit participation of any kind in the Titleholders.
(f) No Violation. None of the execution, delivery or performance of this
Contribution Agreement and the transactions contemplated hereby does or will,
with or without the giving of notice, lapse of time, or both, (i) violate,
conflict with, result in a material breach of, or constitute a material default
under or give to others any right of termination or cancellation of (A) the
organizational documents, including the Organizational Documents, charters and
bylaws, if any, of the Opportunity Partnership or the applicable Titleholders,
(B) except as otherwise provided in Section 3.2(c) above, any material
agreement, document or instrument to which the Opportunity Partnership or any
of its Titleholders is a party or by which the Opportunity Partnership or the
applicable Titleholders or its Property is bound or (C) any term or provision
of any judgment, order, writ, injunction, or decree of any Governmental Entity
binding on the Opportunity Partnership or any applicable Titleholder or by
which the Opportunity Partnership or the applicable Titleholder or any of its
assets or properties are bound or subject or (ii) result in the creation of any
Lien, other than a Permitted Lien, upon the Property or any Titleholder
Interest of the Operating Partnership. Nothing contained in this Section 3.2
or elsewhere in this Agreement shall be deemed to constitute a representation
or warranty as to the amount of transfer taxes payable in connection with the
subject transaction.
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(g) Non-foreign Status. The Opportunity Partnership is not a foreign
person, foreign corporation, foreign partnership, foreign trust or foreign
estate (as defined in the Code), and is, therefore, not subject to the
provisions of the Code relating to the withholding of sales proceeds to foreign
persons.
(h) Investment Purposes. The Opportunity Partnership acknowledges its
understanding that the offering and sale of the Units to be acquired pursuant
to this Contribution Agreement are intended to be exempt from registration
under the Securities Act of 1933, as amended, and the rules and regulations in
effect thereunder (the "Act"). In furtherance thereof, the Opportunity
Partnership represents and warrants to the Company that such Opportunity
Partnership is an "accredited investor" (as such term is defined in Rule 501
(a) of Regulation D under the Act) and has no intention of engaging in a public
distribution of such Units.
(i) Compliance with Laws. The applicable Titleholders on the date hereof
comply in all material respects with all applicable laws, ordinances, rules and
regulations, whether federal, state or local, statutory or common where failure
to comply would have a material adverse effect on the Opportunity Partnership
or its Properties taken as a whole, and neither any Titleholder nor, to
Knowledge, any third party has been informed in writing of any continuing
violation in any material respect of any such laws, rules or regulations, or
that any investigation has been commenced and is continuing or is contemplated
respecting any such possible violation.
(j) Eminent Domain. Except as described in the attached Exhibit N, there
is no existing or, to Knowledge, proposed or threatened condemnation, eminent
domain or similar proceeding, or private purchase in lieu of such a proceeding,
which would affect any of the Properties owned by such Opportunity Partnership
in any material respect.
(k) Licenses and Permits. To Knowledge, all material notices, licenses,
permits, certificates and authority of a material nature required for the
continued use, occupancy, management, leasing and operation of the Properties
have been obtained or can be obtained without material cost, are in full force
and effect, are in good standing and (to the extent required in connection with
the transactions contemplated hereby) are assignable to the Operating
Partnership. Neither the applicable Titleholders, nor, to Knowledge, any third
party has taken any action that would (or failed to take any action the
omission of which would) result in the revocation of such notices, licenses,
permits, certificates and authority, that would have a material adverse effect
on the operations of the Properties, nor has any of them received any written
notice of violation from any Governmental Entity or written notice of the
intention of any entity to revoke any of them, that in each case has not been
cured or otherwise resolved to the satisfaction of such Governmental Entity.
(l) Taxes. No tax lien or other charge exists or will exist upon
consummation of the transactions contemplated hereby with respect to any
Property except such tax liens for which the tax is not yet due and payable or
which are the subject of a valid tax protest or tax liens or other charges
which individually or in the aggregate are immaterial in amount.
(m) Real Property.
(i) None of the Opportunity Partnership, the applicable
Titleholders, nor, to Knowledge, any other party to any agreement
affecting any Property, has given or received any notice of default with
respect to any material term or condition of any agreement (other than a
Lease for space) affecting such Property, including, without limitation
any ground lease, which would have a material adverse effect on the
Property, and, no event has occurred or, to Knowledge, is threatened in
writing, which would have a material adverse effect on the Property and
which through the passage of time or the giving of notice, or both, would
constitute a material default thereunder, or except as otherwise provided
in Section 3.2(c) above, would cause the acceleration of any material
obligation of any party thereto or the creation of a Lien upon any asset
of the Opportunity Partnership or the applicable Titleholders, except for
Permitted Liens. For purposes of this Section 3.2, the term "material
agreement" shall be defined with reference to the Property to which such
agreement relates. To Knowledge, such material agreements are valid and
binding and in full force and effect, have not been materially amended,
modified or supplemented since such time as such
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agreements were made available to the Operating Partnership for its
review, except for such amendments, modifications and supplements
heretofore made available to representatives of the Operating
Partnership, and there are no other material agreements (exclusive of
space Leases) with any third parties affecting the Properties which will
survive the Closing and be binding on the Operating Partnership.
(ii) As presently conducted, the operation of the buildings,
fixtures and other improvements located on the Properties is not in
violation in any material respect of any applicable building code, zoning
ordinance or other law or regulation, except for any such violations
which individually or in the aggregate would not have a material adverse
effect on the Opportunity Partnership or its Properties taken as a whole.
(iii) Except as set forth in the reports listed on Exhibit O to
Knowledge, (i) there is presently no noncompliance, liability or other
Claims in connection with Environmental Laws relating to the Properties;
(ii) no notices of any uncorrected violation or alleged violation of any
Environmental Laws relating to the Properties or their use, have been
received by any present owner, or, to Knowledge, by any prior owner,
operator or occupant of the Property; and (iii) there are no writs,
injunctions, decrees, orders or judgments outstanding, or any Claims,
relating to the Environmental Laws and the ownership, use, maintenance or
operation of the Properties. Any instances of noncompliance, notices of
violations, and writs, injunctions, decrees, orders or judgments which
may exist or may be outstanding are of the type that individually or in
the aggregate would not have a material adverse effect on the Opportunity
Partnership or its Properties taken as a whole.
(iv) All material reports of environmental surveys, audits,
investigations and assessments relating to the Properties, including, but
not limited to, the Environmental Reports in the possession or control of
the Opportunity Partnership or its affiliates have been made available to
representatives of the Operating Partnership.
(v) Except as has been disclosed in writing to the Operating
Partnership prior to the date hereof, to Knowledge, all material permits
and licenses required under any Environmental Laws in respect of the
operation of the Properties have been obtained or can be obtained without
material cost and the Properties are in compliance, in all material
respects, with the terms and conditions of such permits and licenses.
(p) Trademarks and Tradenames; Proprietary Rights.
(i) There are no actions or other judicial or administrative
proceedings involving the Opportunity Partnership, the Titleholders, or
the Properties pending, or threatened in writing, that concern any
copyrights, copyright application, trademarks, trademark registrations,
trade names, service marks, service mark registrations, trade names and
trade name registrations or any trade secrets being transferred to the
Operating Partnership hereunder (the "Proprietary Rights").
(ii) To Knowledge, the Opportunity Partnership has the right and
authority to use each Proprietary Right necessary in connection with the
operation of the Properties in the manner in which it is currently used,
and to convey such right and authority to the Operating Partnership at
the Closing. To Knowledge, current use of the Proprietary Rights does
not, and did not, conflict with, infringe upon or violate any copyright,
trade secret, trademark or registration of any other person.
(iii) There are no outstanding or, to Knowledge, threatened
disputes or disagreements with respect to any Proprietary Right or any
license, contract, agreement or other commitment, written or oral,
relating to the same.
(q) Litigation and Claims.
(i) Except as identified in Exhibit P hereto (or as may be reserved
for in an amount reasonably acceptable to the Operating Partnership in
the calculation of the Net Proration Amount), there are no
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Claims which could reasonably be anticipated to result in damages in
excess of $50,000 that directly or indirectly affect the Opportunity
Partnership, the applicable Titleholders or the Properties.
(ii) Neither the Opportunity Partnership nor any of its applicable
Titleholders nor any of its Properties are operating under, subject to or
in default with respect to any decision, order, writ, injunction or
decree of any court or federal, state or municipal entity or other
Governmental Entity.
(r) No Brokers. Neither the Opportunity Partnership nor any of its
general partners or the respective officers, directors or employees thereof has
employed or made any agreement with any broker, finder or similar agent or any
person or firm which will result in the obligation of the Operating Partnership
or any of its affiliates to pay any finder's fee, brokerage fees or commissions
or similar payment in connection with the transactions contemplated by this
Contribution Agreement.
(s) Solvency. The Opportunity Partnership has been and will be solvent at
all times prior to and immediately following the transfer of the Titleholder
Interests to the Operating Partnership.
(t) No Misrepresentations. To Knowledge, no representation, warranty or
statement made, or information provided, by the Opportunity Partnership in this
Contribution Agreement or in any other document or instrument furnished or to
be furnished by or on behalf of the Opportunity Partnerships pursuant hereto
(i) contains or will contain any untrue statement of a material fact or (ii)
omits or will omit to state a material fact necessary to make the statements
contained herein or therein not misleading when read together with all other
such documents and instruments.
(u) Partners/Members. The Opportunity Partnership has made available to
the Operating Partnership a true and accurate list of all of the partners,
other equity holders or members or record, as applicable, of (i) the
Opportunity Partnership and (ii) the Titleholders that own, directly or
indirectly, an interest in any of the Properties, together with their
percentage interests in the Opportunity Partnership or each Titleholder.
(v) Insurance. Each Titleholder currently has in place the public
liability, casualty and other insurance coverage with respect to each Property
as the Opportunity Partnership reasonably deems necessary. Each of the
insurance policies with respect to the Properties is in full force and effect
and all premiums due and payable thereunder have been fully paid when due. No
Opportunity Partnership or Titleholder has received from any insurance company
any notices of cancellation or intent to cancel any insurance.
(w) Leases. A true and correct copy of all leases (and all amendments
thereto or modifications thereof) to which a Titleholder is a party or by which
a Titleholder or Property is bound or subject (collectively, the "Leases") has
been delivered to or made available to the Operating Partnership or its
representatives. To Knowledge except as otherwise disclosed to the Operating
Partnership or its representatives, each of the Leases is and will be valid and
binding and is in full force and effect in all material respects. To
Knowledge, except as otherwise disclosed to the Operating Partnership or its
representatives, no party to any Lease has breached or defaulted under the
terms of any Lease, except for such breaches or defaults that would not have a
material adverse effect on the condition, financial or otherwise, or on the
earnings, assets, business affairs or business prospects of any Property.
(x) Schedule of Liabilities and Assets. The schedule of liabilities and
assets to be delivered in connection with the calculation of the Net Proration
Amount shall be true, correct and complete in all material respects; provided
that, for these purposes, a liability which has not been asserted in writing or
is otherwise based on a written agreement shall not be deemed to exist unless
it is for goods and services provided or agreed to be provided and shall not
include liabilities for which the Operating Partnership agrees that there are
valid defenses to payment which are reasonably likely to prevail.
(y) Financial Statements; Undisclosed Liabilities. The financial
statements which the Opportunity Partnership provided to the Operating
Partnership have been prepared in accordance with generally accepted accounting
principles ("GAAP") applied on a consistent basis during the periods involved
(except as may be indicated in the notes thereto) and fairly presented, in
accordance with the applicable requirements of GAAP, the
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consolidated financial position of such Contributor as of the dates thereof and
the consolidated results of operations and cash flows for the periods then
ended (subject, in the case of unaudited statements, to normal year-end audit
adjustments). Except as set forth in such financial statements, neither any
Contributor nor any subsidiary has any liabilities or obligations of any nature
(whether accrued, absolute, contingent or otherwise) required by GAAP to be set
forth on a consolidated balance sheet of the Contributor or in the notes
thereto and which, individually or in the aggregate, would have a Material
Adverse Effect.
3.3 REPRESENTATIONS AND WARRANTIES OF EQUITY OFFICE.
Each of EOH and EGI makes the following representations and warranties to
the Operating Partnership solely with respect to itself and the Management
Business contributed by it hereunder:
(a) Organization; Authority. Each of EOH and EGI is duly formed, validly
existing and in good standing (to the extent applicable) under the laws of the
jurisdiction of its formation, and has all requisite power and authority to
own, lease or operate its property and to carry on its business as presently
conducted and, to the extent required under applicable law, is qualified to do
business and is in good standing in each jurisdiction in which the nature of
its business or the character of its property make such qualification
necessary.
(b) Due Authorization. The execution, delivery and performance of this
Contribution Agreement by each of EOH and EGI has been duly and validly
authorized by all necessary action of each of them. The Contribution Agreement
has been duly executed and delivered by each of EOH and EGI and constitutes a
legal, valid and binding obligation of each of them enforceable against each of
them in accordance with its terms, as such enforceability may be limited by
bankruptcy or the application of equitable principles.
(c) Consents and Approvals. No consent, waiver, approval or authorization
of any third party is required to be obtained by EOH or EGI in connection with
the execution, delivery and performance by any of them of the Contribution
Agreement and the transactions contemplated hereby, except for any of the
foregoing that shall have been obtained prior to the Closing Date.
(d) Ownership of the Management Business. Each of EOH and EGI is the sole
owner of the Management Business to be contributed by it and has not pledged,
assigned, hypothecated or otherwise encumbered such Management Business. EOH is
the successor owner to all portions of the Management Business previously owned
by its subsidiary entities, Equity Captial Holdings, L.L.C. and Equity Office
Properties, L.L.C.
(e) Management Contracts. A true and correct copy of all of the contracts
or other written understandings, to which each of EOH and EGI is a party or by
which EOH and EGI is bound that relate to its Management Business except for
contracts or understandings that are not material to the business and
operations of the Management Business (collectively, the "Management
Contracts") has been delivered to or made available to the Operating
Partnership. Each of the Management Contracts is valid and binding and in full
force and effect in all material respects. No party to the Management
Contracts has breached or defaulted under the terms of any Management Contract,
except for such breaches or defaults that would not have a material adverse
effect on the condition, financial or otherwise, or on the earnings, assets,
business affairs or business prospects of the Management Business.
(f) Permits. To the Knowledge of EOH and EGI, each has such franchises,
certificates, licenses, permits and other authorizations from governmental
political subdivisions or regulatory authorities (collectively "Permits") as
are necessary for the ownership, use, operation and licensing of the Management
Business, except for any Permits for which the failure to possess would not
have a material adverse effect on the condition, financial or otherwise, or on
the earnings, assets, business affairs or business prospects of the Management
Business, and neither EOH nor EGI is in violation of any such material Permit
in any material respect.
(g) Non-Foreign Status. Neither EOH nor EGI is a foreign person, foreign
corporation, foreign partnership, foreign trust or foreign estate (as defined
in the Code), and none of them is, therefore, subject to the provisions of the
Code relating to the withholding of sales proceeds to foreign persons.
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(h) Investment Purposes. Each of EOH and EGI acknowledges its
understanding that the offering and sale of the Units to be acquired pursuant
to the Contribution Agreement are intended to be exempt from registration under
the Act. In furtherance thereof, each of EOH and EGI represents and warrants
only with respect to itself to the Company that it is an "accredited investor"
(as such term is defined in Rule 501(a) of Regulation D under the Act) and has
no intention of engaging in a public distribution of such Units.
(i) No Brokers. Neither EOH nor EGI nor any of its respective officers,
directors or employees has incurred or will incur any liability for any
brokerage fees, commissions or finders' fees that have been paid or may become
payable by the Operating Partnership or any of its affiliates to any broker or
finder engaged by or on behalf of any of them or any of their officers,
directors or employees in connection with the transaction contemplated by this
Contribution Agreement.
(j) Compliance with Laws. Neither EOH nor EGI has received any written
notice of any violation and there are no such violations, of any employment,
environmental, or other regulatory law, order, regulation, or requirement
relating to the Management Business which, individually or in the aggregate,
would have a material adverse effect on the condition, financial or otherwise,
or on the earnings, assets, business affairs or business prospects of the
Management Business.
(k) Insurance. Each of EOH and EGI currently has in place public
liability, casualty and other insurance coverage with respect to the Management
Business as is usual and customary for the conduct of similar businesses. To
the Knowledge of EOH and EGI, each of the insurance policies with respect to
the Management Business is in full force and effect. All premiums due and
payable in respect to such insurance policies have been fully paid when due.
Neither EOH nor EGI has received from any insurance company any notices of
cancellation or intent to cancel any insurance.
(l) Taxes. No tax lien or other charge exists or will exist upon
consummation of the transactions contemplated hereby with respect to the
Management Business except such tax liens for which the tax is not yet due and
payable or tax liens or other charges which individually or in the aggregate
would not have a material adverse effect on the Operating Partnership.
(m) No Violation. None of the execution, delivery or performance of this
Contribution Agreement and the transactions contemplated hereby does or will,
with or without the giving of notice, lapse of time, or both, (i) violate,
conflict with, result in a breach of, or constitute a default under or give to
others any right of termination or cancellation of (A) the organizational
documents of EOH or EGI, (B) any material agreement, document or instrument to
which EOH or EGI or its Management Business is bound or (C) any term or
provision of any judgment, order, writ, injunction, or decree of any
Governmental Entity binding on EOH or EGI or any of its assets or properties or
(ii) result in the creation of any Lien, other than Permitted Liens, upon the
Management Business.
(n) Solvency. Each of EOH and EGI has been and will be solvent at all
times prior to and immediately following the transfer of the Management
Business to the Operating Partnership.
(o) No Misrepresentations. To Knowledge, no representation, warranty or
statement made, or information provided, by EOH, EGI or any Opportunity
Partnership in this Contribution Agreement or in any other document or
instrument furnished or to be furnished by or on behalf of EOH or EGI or any
Opportunity Partnership pursuant hereto (i) contains or will contain any untrue
statement of a material fact or (ii) intentionally omits or will intentionally
omit to state a material fact necessary to make the statements contained herein
or therein not misleading when read together with all other such documents and
instruments.
(p) Schedule of Liabilities and Assets. The schedule of liabilities and
assets which Equity Office hereby agrees to deliver at or prior to Closing,
calculated as of the Final Valuation Date in respect to the Management
Business, shall be true, correct and complete in all material respects;
provided that, for these purposes, a liability which has not been asserted in
writing or is otherwise based on a written agreement shall not be deemed to
exist
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unless it is for goods and services provided or agreed to be provided and shall
not include liabilities for which the Operating Partnership agrees that there
are valid defenses to payment which are reasonably likely to prevail.
3.4 LEGENDING.
Each certificate representing the Units (and any Common Shares that might
be exchanged therefor) shall bear the a legend substantially in the form set
forth below:
THE SECURITIES EVIDENCED HEREBY HAVE NOT BEEN REGISTERED UNDER THE SECURITIES
ACT OF 1933, AS AMENDED (THE "ACT"), OR THE SECURITIES LAWS OF ANY STATE AND
MAY NOT BE SOLD, TRANSFERRED OR OTHERWISE DISPOSED OF IN THE ABSENCE OF SUCH
REGISTRATION, UNLESS THE TRANSFEROR DELIVERS TO THE COMPANY AN OPINION OF
COUNSEL SATISFACTORY TO THE COMPANY, TO THE EFFECT THAT THE PROPOSED SALE,
TRANSFER OR OTHER DISPOSITION MAY BE EFFECTED WITHOUT REGISTRATION UNDER THE
ACT AND UNDER APPLICABLE STATE SECURITIES OR "BLUE SKY" LAWS.
In addition, the Common Shares for which the Units might be exchanged
shall also bear a legend which generally provides the following:
THE COMMON SHARES REPRESENTED BY THIS CERTIFICATE ARE SUBJECT TO RESTRICTIONS
ON BENEFICIAL AND CONSTRUCTIVE OWNERSHIP AND TRANSFER FOR THE PURPOSE OF THE
COMPANY'S MAINTENANCE OF ITS STATUS AS A REAL ESTATE INVESTMENT TRUST UNDER THE
INTERNAL REVENUE CODE OF 1986, AS AMENDED (THE "CODE"). SUBJECT TO CERTAIN
FURTHER RESTRICTIONS AND EXCEPT AS EXPRESSLY PROVIDED IN THE COMPANY'S
DECLARATION OF TRUST, (1) NO PERSON MAY BENEFICIALLY OWN OR CONSTRUCTIVELY OWN
THE COMPANY'S COMMON SHARES IN EXCESS OF 9.9% (BY VALUE OR BY NUMBER OF SHARES,
WHICHEVER IS MORE RESTRICTIVE) OF THE OUTSTANDING COMMON SHARES OF THE COMPANY;
(2) NO PERSON MAY BENEFICIALLY OR CONSTRUCTIVELY OWN COMMON SHARES THAT WOULD
RESULT IN THE COMPANY BEING "CLOSELY HELD" UNDER SECTION 856(H) OF THE CODE OR
OTHERWISE CAUSE THE COMPANY TO FAIL TO QUALIFY AS A REIT; AND (3) NO PERSON MAY
TRANSFER COMMON SHARES IF SUCH TRANSFER WOULD RESULT IN THE SHARES OF
BENEFICIAL INTEREST OF THE COMPANY BEING OWNED BY FEWER THAN 100 PERSONS. ANY
PERSON WHO BENEFICIALLY OR CONSTRUCTIVELY OWNS OR ATTEMPTS TO BENEFICIALLY OR
CONSTRUCTIVELY OWN COMMON SHARES WHICH CAUSES OR WILL CAUSE A PERSON TO
BENEFICIALLY OR CONSTRUCTIVELY OWN COMMON SHARES IN EXCESS OF THE ABOVE
LIMITATIONS MUST IMMEDIATELY NOTIFY THE COMPANY. IF ANY OF THE RESTRICTIONS ON
TRANSFER OR OWNERSHIP ARE VIOLATED, THE COMMON SHARES REPRESENTED HEREBY WILL
BE AUTOMATICALLY TRANSFERRED TO A TRUSTEE OF A TRUST FOR THE BENEFIT OF ONE OR
MORE CHARITABLE BENEFICIARIES. IN ADDITION, THE COMPANY MAY REDEEM SHARES UPON
THE TERMS AND CONDITIONS SPECIFIED BY THE BOARD OF TRUSTEES IN ITS SOLE
DISCRETION IF THE BOARD OF TRUSTEES DETERMINES THAT OWNERSHIP OR A TRANSFER OR
OTHER EVENT MAY VIOLATE THE RESTRICTIONS DESCRIBED ABOVE. FURTHERMORE, UPON
THE OCCURRENCE OF CERTAIN EVENTS, ATTEMPTED TRANSFERS IN VIOLATION OF THE
RESTRICTIONS DESCRIBED ABOVE MAY BE VOID AB INITIO. ALL UNDERSCORED TERMS IN
THIS LEGEND HAVE THE MEANINGS DEFINED IN THE DECLARATION OF TRUST OF THE
COMPANY, AS THE SAME MAY BE AMENDED FROM TIME TO TIME, A COPY OF WHICH,
INCLUDING THE RESTRICTIONS ON TRANSFER AND OWNERSHIP, WILL BE FURNISHED TO EACH
HOLDER OF COMMON SHARES ON REQUEST AND WITHOUT CHARGE. REQUESTS FOR SUCH A
COPY MAY BE DIRECTED TO THE SECRETARY OF THE COMPANY.
4. COVENANTS OF CONTRIBUTORS
From the date hereof through the Closing, each of the Opportunity
Partnerships shall itself and shall cause each of its Titleholders to conduct
its business and Equity Office shall conduct the Management Business, in each
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case, in the ordinary course, consistent with past practice, and shall not
itself and shall not cause or permit any of its Titleholders to or, in the case
of Equity Office, in respect to the Management Business shall not:
(i) Enter into any material transaction not in the ordinary course of
business;
(ii) Sell or transfer any material assets of the Titleholders or the
Management Business; provided that nothing contained herein shall be deemed to
constitute a limitation on the right of (w) any Opportunity Partnership to
distribute to its partners net proceeds from the sale of non-office assets; (x)
any Opportunity Partnership to distribute to its partners, or reserve for
future distribution to its partners, amounts which it believes to be necessary
for the continued qualification of any limited partner thereof as a real estate
investment trust; (y) EOH and each of its subsidiary entities, Equity Office
Properties, L.L.C. and Equity Capital Holdings, L.L.C., to distribute to their
respective members, and EGI to distribute to its shareholders, cash generated
from the operation of the Management Business for the period prior to the
Closing Date; or (z) Opportunity Partnership I to distribute, directly or
indirectly, to its partners its entire right, title and interest in ZML-Swansea
Mall Limited Partnership;
(iii) Mortgage, pledge or encumber (or permit to become further
encumbered except by Permitted Liens) any Titleholder Interests or the
Management Business;
(iv) Materially amend, modify or terminate any material agreements
(including, without limitation, those agreements which constitute Management
Contracts) or other instruments to which any of the Titleholders or the
Management Business are a party except such agreements or instruments that may
terminate pursuant to their own terms prior to Closing; or
(v) Materially alter the manner of keeping the Titleholders' or the
Management Business' books, accounts or records or the accounting practices
therein reflected.
5. SURVIVAL OF REPRESENTATIONS AND WARRANTIES; REMEDIES;
INDEMNIFICATION.
5.1 SURVIVAL OF REPRESENTATIONS AND WARRANTIES; REMEDY FOR
BREACH.
All of the representations and warranties contained in this Contribution
Agreement or in any document delivered pursuant hereto shall survive the
Closing for a period of one (1) year from and after the Closing. Any claim for
indemnification under Sections 5.3 hereof must be asserted in writing by the
Indemnified Party, as the case may be, stating the nature of the Losses and the
basis for the indemnification therefor within one (1) year from and after the
Closing. If so asserted in writing within one (1) year from and after the
Closing, such claims for indemnification shall survive until resolved by mutual
agreement between the parties to such claim or until final judicial
determination. Any claim for indemnification not so asserted in writing within
one (1) year from and after the Closing shall not thereafter be asserted and
shall forever be waived.
5.2 INDEMNIFICATION BY OPERATING PARTNERSHIP.
The Operating Partnership hereby agrees to indemnify and hold harmless
each of the Opportunity Partnerships, each of their constituent partners,
Equity Office, its members and shareholders and each of their respective
directors, members, managers, officers, employees, agents, representatives and
affiliates (each an "Indemnified Contributor Party") of and from and against
any and all Losses asserted against, imposed upon or incurred by the
Indemnified Contributor Party in connection with: (i) any breach of a
representation or warranty of the Operating Partnership contained in this
Contribution Agreement; (ii) any liabilities or obligations incurred, arising
from or out of, in connection with or as a result of any Claims made or Actions
brought by or against the Opportunity Partnership, the Titleholders, the
Properties or an Indemnified Contributor Party, that arise from or out of, in
connection with or as a result of any Contamination of the Properties
regardless of when or how occurring, except to the extent, and only to the
extent, such Losses arise from a breach of a representation and warranty of the
Indemnified Contributor Party under Section 3.2 hereof; (iii) the operation or
ownership of the Properties or the Titleholder Interests, whether before or
after Closing (except to the extent such loss is attributable to a breach of a
representation or warranty of the Indemnified Contributor Party contained
herein); and (iv) all fees, costs and
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expenses incurred in connection with the actions contemplated by this
Contribution Agreement, including without limitation any and all costs
associated with the transfers contemplated herein.
5.3 INDEMNIFICATION BY CONTRIBUTORS.
Each Contributor hereby agrees to indemnify and hold harmless the
Operating Partnership and its affiliates and each of their respective
directors, managers, officers, employees, agents, representatives and
affiliates (each of which is an "Indemnified Party") from and against any and
all losses, claims, liabilities, damages, costs and expenses ("Loss") asserted
against, imposed upon or incurred by the Indemnified Party in connection with
or as a result of any breach of a representation or warranty of such
Contributor contained in this Contribution Agreement or in any document
delivered by the Contributor pursuant to this Contribution Agreement (with any
such breach being determined solely for purposes of this Section 5.3 without
regard to whether such breach has a Material Adverse Effect on the Operating
Partnership).
In addition, EOH and EGI hereby agree to indemnify and hold harmless the
Operating Partnership from and against any and all Losses asserted against,
imposed upon or incurred by the Operating Partnership as a result of its
ownership or operation of the Management Business but only to the extent that
such Losses are attributable to the period prior to the Closing Date.
5.4 NOTICE AND DEFENSE OF CLAIMS.
As soon as reasonably practicable after receipt by the Indemnified Party
of notice of any liability or claim incurred by or asserted against the
Indemnified Party that is subject to indemnification under this Section 5, the
Indemnified Party shall give notice thereof to the Contributor, including
liabilities or claims to be applied against the indemnification threshold
established pursuant to Section 5.5 hereof. The Indemnified Party may at its
option demand indemnity under this Section 5 as soon as a claim has been
threatened by a third party, regardless of whether any actual Losses have been
suffered, so long as the Indemnified Party shall in good faith determine that
such claim is not frivolous and that the Indemnified Party may be liable for,
or otherwise incur, Losses as a result thereof and shall give notice of such
determination to the Contributor. The Indemnified Party shall permit the
Contributor, at its option and expense, to assume the defense of any such claim
by counsel selected by the Contributor and reasonably satisfactory to the
Indemnified Party, and to settle or otherwise dispose of the same; provided,
however, that the Indemnified Party may at all times participate in such
defense at its expense; and provided further, however, that the Contributor
shall not, in defense of any such claim, except with the prior written consent
of the Indemnified Party in its sole and absolute discretion, consent to the
entry of any judgment or enter into any settlement that does not include as an
unconditional term thereof the giving by the claimant or plaintiff in question
to the Indemnified Party and its affiliates a release of all liabilities in
respect of such claims, or that does not result only in the payment of money
damages. If the Contributor shall fail to undertake such defense within 30
days after such notice, or within such shorter time as may be reasonable under
the circumstances, then the Indemnified Party shall have the right to undertake
the defense, compromise or settlement of such liability or claim on behalf of
and for the account of the Contributor.
5.5 LIMITATIONS ON AND THRESHOLD FOR INDEMNIFICATION
(a) No Contributor shall be liable under Sections 3.2, 3.3 or 5.3 hereof
unless and until the aggregate amount recoverable from Indemnifying Parties
under the indemnification provisions set forth in Section 5.3 exceeds
$250,000; provided, however, that once the total amount recoverable from
Indemnifying Parties exceeds $250,000 in the aggregate, the Contributor's
obligation under Section 5.3 hereof shall be for the full amount of such
obligation.
(b) Notwithstanding anything contained herein to the contrary, no
Opportunity Partnership shall be liable or obligated to make payments under
this Agreement or any document delivered pursuant to its terms to the extent
such payments when aggregated with any payments made by its parent ZML REIT
under Section 6.3 of the Merger Agreement would exceed the net realizable value
(calculated from time to time as of the date or dates on
16
<PAGE> 18
which claims are paid hereunder) of one percent (1%) of the Shares issued or
which may be issued in exchange for Units issued to such Opportunity
Partnership pursuant to Section 1.3 hereof.
(c) Notwithstanding anything contained herein to the contrary, neither EOH
nor EGI, shall individually or collectively be liable pursuant to this
Agreement for an amount which is greater than Fifteen Million Dollars
($15,000,000) in the aggregate.
6. MISCELLANEOUS
6.1 FURTHER ASSURANCES.
Each of the Contributors shall take such other actions and execute such
additional documents following the Closing as the Operating Partnership may
reasonably request in order to effect the transactions contemplated hereby.
6.2 COUNTERPARTS.
This Contribution 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.
6.3 GOVERNING LAW.
This Contribution Agreement shall be governed by the internal laws of the
State of Illinois, without regard to the choice of law provisions thereof.
6.4 NOTICES.
Any notice to be given hereunder by any party to the other shall be given
in writing by personal delivery or by registered or certified mail, postage
prepaid, return receipt requested, and shall be deemed communicated as of the
date of personal delivery (including delivery by overnight courier). Mailed
notices shall be addressed as set forth below, but any party may change the
address set forth below by written notice to other parties in accordance with
this Section 7.4.
17
<PAGE> 19
<TABLE>
<S> <C>
TO THE OPPORTUNITY PARTNERSHIPS: TO EQUITY OFFICE:
c/o Rosenberg & Liebentritt, P.C. c/o Rosenberg & Liebentritt, P.C.
Two North Riverside Plaza Two North Riverside Plaza
Suite 1515 Suite 1515
Chicago, Illinois 60606 Chicago, Illinois 60606
Attn.: Donald J. Liebentritt Attn.: Donald J. Liebentritt
Tel: 312.466.3362 Tel: 312.466.3362
Fax: 312.454.0335 Fax: 312.454.0335
TO THE OPERATING PARTNERSHIP:
c/o Equity Office Properties Trust
Two North Riverside Plaza
Suite 2200
Chicago, Illinois 60606
Attn.: Chief Legal Counsel
Tel: 312.466.3362
Fax: 312.559.5021
</TABLE>
IN WITNESS WHEREOF, the parties have executed this Contribution Agreement
as of the date first written above.
"OPERATING PARTNERSHIP"
EOP OPERATING LIMITED PARTNERSHIP,
a Delaware limited partnership
By: EQUITY OFFICE PROPERTIES TRUST,
a Maryland real estate investment trust
By: /s/ Stanley M. Stevens
---------------------------------
Name: Stanley M. Stevens
---------------------------------
Title: Executive Vice President
---------------------------------
18
<PAGE> 20
"CONTRIBUTOR"
Zell/Merrill Lynch Real Estate Opportunity Partners Limited Partnership, an
Illinois limited partnership
By: ZML Partners Limited Partnership, an Illinois limited partnership, its
general partner
By: ZM Investors Limited Partnership, an Illinois limited partnership, its
general partner
By: ZM, Inc., an Illinois corporation, its general partner
By: /s/ Donald J. Liebentritt
---------------------------
Its: Vice President
---------------------------
Zell/Merrill Lynch Real Estate Opportunity Partners Limited Partnership II, an
Illinois limited partnership
By: ZML Partners Limited Partnership II, an Illinois limited partnership, its
general partner
By: ZM Investors Limited Partnership II, an Illinois limited partnership,
its general partner
By: Zell/Merrill II, Inc., an Illinois corporation,
its general partner
By: /s/ Donald J. Liebentritt
---------------------------
Its: Vice President
---------------------------
Zell/Merrill Lynch Real Estate Opportunity Partners Limited Partnership III, an
Illinois limited partnership
By: ZML Partners Limited Partnership III, an Illinois limited partnership, its
general partner
By: ZM Investors Limited Partnership III, an Illinois limited partnership,
its general partner
By: Zell/Merrill III, Inc., an Illinois corporation,
its general partner
By: /s/ Donald J. Liebentritt
---------------------------
Its: Vice President
---------------------------
19
<PAGE> 21
Zell/Merrill Lynch Real Estate Opportunity Partners Limited Partnership IV, an
Illinois limited partnership
By: ZML Partners Limited Partnership IV, an Illinois limited partnership, its
general partner
By: ZM Investors Limited Partnership IV, an Illinois limited partnership,
its general partner
By: Zell/Merrill IV, Inc., an Illinois corporation,
its general partner
By: /s/ Donald J. Liebentritt
---------------------------
Its: Vice President
---------------------------
EQUITY OFFICE HOLDINGS, L.L.C.
By: /s/ Stanley M. Stevens
---------------------------
Its: Vice President
---------------------------
EQUITY GROUP INVESTMENTS, INC.
By: /s/ Donald J. Liebentritt
---------------------------
Its: Vice President
---------------------------
20
<PAGE> 22
SCHEDULE OF EXHIBITS TO CONTRIBUTION AGREEMENT
<TABLE>
<S> <C>
Exhibit A-1 Constituent Interests of Opportunity Partnership I Titleholder Interests
Exhibit A-2 Constituent Interests of Opportunity Partnership II Titleholder Interests
Exhibit A-3 Constituent Interests of Opportunity Partnership III Titleholder Interests
Exhibit A-4 Constituent Interests of Opportunity Partnership IV Titleholder Interests
Exhibit B Titleholders' Real Property Interests
Exhibit C Management Business
Exhibit D Opportunity Partnership Assignment and Assumption Agreement
Exhibit E Bill of Sale
Exhibit F Assignment and Assumption of Intangible Rights
Exhibit G Amended and Restated Agreement of Limited Partnership for the Operating Partnership
Exhibit H Assignment and Assumption of Management Business Agreement
Exhibit I Management Business Bill of Sale
Exhibit J-1 Amendment to Partnership Agreement for Opportunity Partnership 1
Exhibit J-2 Amendment to Partnership Agreement for Opportunity Partnership 2
Exhibit J-3 Amendment to Partnership Agreement for Opportunity Partnership 3
Exhibit J-4 Amendment to Partnership Agreement for Opportunity Partnership 4
Exhibit K Merger Agreement
Exhibit L Title Policies
Exhibit M Schedule of Third Party Rights to Acquire Interests in Titleholders
Exhibit N Pending Condemnations
Exhibit O Schedule of Environmental Reports
Exhibit P Schedule of Pending Claims
</TABLE>
<PAGE> 23
EXHIBIT C
TO
CONTRIBUTION AGREEMENT
MANAGEMENT BUSINESS TO BE CONTRIBUTED
Management Agreements:
As specified on Schedule C-1 as attached
Office Personal Property:
1. All Office furniture and Equipment of EOH and EOP.
2. All Telephone System Equipment of EOH and EOP.
3. All Data Processing Systems and Equipment of EOH and EOP.
4. All Deposits held by EOH and EOP for the account of third parties.
Insurance Reserve:
Amounts held as a reserve against payment of future health insurance claims of
employees.
Excluded Assets:
(a) income tax refunds;
(b) Equity Office's corporate records, including without limitation,
Limited Liability Company Agreements, minute books and other records
having to do exclusively with the legal organization of Equity Office;
(c) except as specified above, all cash, cash equivalents and accounts
receivable;
(d) all leasing commissions due Equity Office as a result of leases,
extensions or amendments which are identified in a schedule of
"protected transactions" to be submitted to the Operating Partnership
at the Closing but only if such leases, extensions or amendments are
executed on or before the sixtieth (60th) day after the Closing Date;
(e) all other management fees, acquisition fees, leasing/supervisory
fees, development fees, engineering, consulting or other fees due
Equity Office for services rendered prior to the Closing Date; and
(f) the benefit of all insurance policies to the extent they insure the
Management Business prior to the Closing Date.
<PAGE> 24
GLOSSARY
The following terms have the meanings set forth below. Terms which are
not defined below shall have the meaning set forth for those terms as defined
in the Contribution Agreement:
Actions: Means all actions, complaints, charges, accusations,
investigations, petitions, suits or other proceedings, whether civil or
criminal, at law or in equity, or before any arbitrator or Governmental Entity.
Claims: Means claims, disputes, actions, suits, arbitrations, proceedings
or investigations pending or, to Knowledge, threatened in writing that directly
or indirectly affect any of the Contributors, the Titleholders, the Properties
or the Management Business.
Consolidation Expenses: Means all costs and expenses incurred in
structuring and consummating the consolidation of the four Opportunity
Partnerships and the merger of the four ZML REITs (collectively, the
"Consolidation") including, but not limited to, legal fees, accounting fees and
all other costs and expenses in connection with (a) the formation and
organization of the Operating Partnerships and the Company, (b) the structuring
of the terms and conditions of the Consolidation, (c) the offering and issuance
of the Units and common shares in the Company, (d) all steps taken to conduct
the transaction in compliance with applicable federal and state corporate,
partnership, securities and other laws, (e) the receipt of all necessary
consents and approvals, including those required from regulatory bodies on or
before (and remaining in effect at the consummation of) the Consolidation, (f)
the solicitation of consents from the Investors in each of the ZML REITs and
the Opportunity Partnerships to participate in the Consolidation, (g) the
acquisition by the Operating Partnership in the Consolidation of the assets and
the existing liabilities of each of the Operating Partnerships, (h) fairness
opinions, and (i) engagement of any financial advisor to the shareholders of
the ZML REITs or owners of Units in the Opportunity Partnerships.
Contamination: Means emissions, discharges, releases or threatened
releases of "Hazardous Materials," substances, pollutants, contaminants or
hazardous or toxic substances, materials or wastes whether solid, liquid or
gaseous in nature, into the air, surface water, ground water or land, or
relating to the manufacture, processing, distribution, use, treatment, storage,
disposal, transport or handling of substances, pollutants, contaminants or
hazardous or toxic substances, materials, or wastes, whether solid, liquid or
gaseous in nature.
Environmental Law: Means all applicable statutes, regulations, rules,
ordinances, codes, licenses, permits, orders, demands, approvals,
authorizations and similar items of all governmental agencies, departments,
commissions, boards, bureaus or instrumentalities of the United States, states
and political subdivisions thereof and all applicable judicial, administrative
and regulatory decrees, judgments and orders relating to the protection of
human health or the environment as in effect on the Closing Date, including all
requirements as of the Closing Date, including but not limited to those
pertaining to reporting, licensing, permitting, investigation, removal and
remediation of Contamination, including without limitation: (x) the
Comprehensive Environmental Response, Compensation and Liability Act (42 U.S.C.
Section 9601 et seq.), the Resource Conservation and Recovery Act (42 U.S.C.
Section 6901 et seq.), the Clean Air Act (42 U.S.C. Section 7401 et seq.),
the Federal Water Pollution Control Act (33 U.S.C. Section 1251), the Safe
Drinking Water Act (42 U.S.C. 300 et seq.), the Toxic Substances Control Act
(15 U.S.C. 2601 et seq.), the Endangered Species Act (16 U.S.C. 1531 et seq.),
the Emergency Planning and Community Right-to-Know Act of 1986 (42 U.S.C. 1001
et seq.), and (y) applicable state and local statutory and regulatory schemes
pertaining to hazardous materials.
Governmental Entity: Means any government or agency, bureau, board,
commission, court, department, official, political subdivision, tribunal or
other instrumentality of any government, whether federal, state or local,
domestic or foreign.
Hazardous Material: Means any substance:
(i) the presence of which requires investigation or remediation under any
Environmental Law action or policy, administrative request or civil complaint
under the foregoing or under common law; or
<PAGE> 25
(ii) which is controlled, regulated or prohibited under any Environmental
Law as in effect as of the Closing Date, including the Comprehensive
Environmental Response, Compensation and Liability Act (42 U.S.C. Section 9601
et seq.) and the Resource Conservation and Recovery Act (42 U.S.C. Section 6901
et seq.); or
(iii) which is toxic, explosive, corrosive, flammable, infectious,
radioactive, carcinogenic, mutagenic or otherwise hazardous and as of the
Closing Date is regulated by any governmental authority, agency, department,
commission, board, agency or instrumentality of the United States, or any state
or any political subdivision thereof having or asserting jurisdiction over the
Properties; or
(iv) the presence of which on, under or about, a Property poses a hazard
to the health or safety of persons on or about such Property; or
(v) which contains gasoline, diesel fuel or other petroleum hydrocarbons,
polychlorinated biphenyls (PCBs) or asbestos or asbestos-containing materials
or urea formaldehyde foam insulation; or
(vi) radon gas.
Indemnifying Party: Means any party required to indemnify any other party
under Section 5.3 hereof.
Knowledge: Means, with respect to any representation or warranty so
indicated (whether or not made by Equity Office or an Opportunity Partnership),
the actual knowledge (without any imputation or the obligation to make any
investigation whatsoever) of every regional manager and every officer
(including the Chairman of the Board) of Equity Office Holdings, L.L.C., Equity
Office Properties, L.L.C. Equity Capital Holdings, L.L.C. or Equity Group
Investments, Inc. whose title is Senior Vice President or higher.
Known Contamination: Means Contamination currently existing on or
affecting the applicable Property as of the Closing, and which such
Contamination is disclosed in environmental reports received by the Contributor
or the Titleholders on or before the Closing (the "Environmental Reports").
Lease: All Leases affecting one or several of the Properties to which a
Titleholder is a lessor or by which a Titleholder or Property is bound or
subject.
Liens: Means, with respect to any real and personal property, all
mortgages, pledges, liens, options, charges, security interests, restrictions,
prior assignments, encumbrances, covenants, encroachments, assessments, rights
of others, licenses, easements, liabilities or claims of any kind or nature
whatsoever, direct or indirect, including, without limitation, interests in or
claims to revenues generated by such property.
Losses: Means, any and all claims, losses, damages, liabilities and
expenses, including, without limitation, amounts paid in settlement, reasonable
attorneys' fees, costs of investigation and remediation, costs of
investigative, judicial or administrative proceedings or appeals therefrom, and
costs of attachment or similar bonds.
"Material Adverse Effect" means the consequence of any event,
circumstance, occurrence or condition which, either individually or together
with all other such events, circumstances, occurrences or conditions described
in Section 2.1, in the judgment of the Company, is likely to have a material
adverse effect on the assets, business, financial condition, results of
operations or prospects of the Operating Partnership and its subsidiaries,
taken as a whole; provided that, for these purposes, an insured casualty loss
or a taking by way of condemnation or assignment in lieu of condemnation shall
not be considered in determining whether there has been a Material Adverse
Effect.
Net Proration Amount: Means, for each Opportunity Partnership's
Contributed Opportunity Partnership Assets, a sum calculated in accordance with
a proration schedule prepared by such Opportunity Partnership, but subject to
the Operating Partnership's reasonable approval, calculated as of the Final
Valuation Date describing all then-known liabilities (exclusive of liabilities
for mortgage indebtedness then having a term greater than one year) and
receivables of such Contributor and its affiliated Titleholders [which, for
these purposes may be estimated in good
<PAGE> 26
faith and shall be deemed to include as an asset any sums held in escrow for
the payment of real estate taxes, insurance or other costs of ownership or
operation of the Properties and may be subject to creation of such reserves
and, in the case of accounts receivables, such credit quality adjustments as
the Contributor and the Operating Partnership reasonably deem appropriate].
Permitted Liens: Means (a) Liens, or deposits made to secure the release
of such Liens, securing taxes, the payment of which is not delinquent or the
payment of which is actively being contested in good faith by appropriate
proceedings diligently pursued;
(b) Zoning laws and ordinances generally applicable to the districts in
which the Properties are located which are not violated, to any material
extent, by the existing structures or present uses thereof;
(c) Liens imposed by laws, such as carriers', warehousemen's and
mechanics' liens, and other similar liens arising in the ordinary course of
business which secure payment of obligations not more than 60 days past due or
which are being contested in good faith by appropriate proceedings diligently
pursued;
(d) non-exclusive easements for public utilities, minor encroachments,
rights of access or other non-monetary matters that do not have a material
adverse effect upon, or materially interfere with the use of, the Properties;
(e) any exceptions contained in the Title Policies; and
(f) Liens arising through the Operating Partnership.
Person: Means any individual, corporation, limited liability company,
partnership, joint venture, association, joint-stock company, trust,
unincorporated organization or governmental entity.
REIT Shares: Shall have the meaning set forth in the OP Agreement.
S-11 Registration Statement: Means the Company's S-11 Registration
Statement for the offering of Common Shares filed with the Securities and
Exchange Commission under date of May 7, 1997, as it may be amended from time
to time.
Third-Party Management Business: Collectively, all Management Contracts
with ownership entities whose beneficial owners include entities which are not
direct or indirect partners in an Opportunity Partnership; and the Management
Contract for the Plaza at LaJolla Village.
ZML REIT: Shall mean any of ZML Investors, Inc., ZML Investors II, Inc.,
Zell/Merrill Lynch Real Estate Opportunity Partners III Trust or Zell/Merrill
Lynch Real Estate Opportunity Partners IV Trust, each of which is a limited
partner of Opportunity Partnership I, Opportunity Partnership II, Opportunity
Partnership III or Opportunity Partnership IV respectively (collectively, the
"ZML REITs").
<PAGE> 1
EXHIBIT 10.5
MERGER AGREEMENT
Dated as of April 30, 1997,
Among
EQUITY OFFICE PROPERTIES TRUST,
ZML INVESTORS, INC.,
ZML INVESTORS II, INC.,
ZELL/MERRILL LYNCH REAL ESTATE
OPPORTUNITY PARTNERS III TRUST
And
ZELL/MERRILL LYNCH REAL ESTATE
OPPORTUNITY PARTNERS IV TRUST
<PAGE> 2
THIS MERGER AGREEMENT (this "Agreement") dated as of April 30, 1997 is made
and entered into among Equity Office Properties Trust, a Maryland real estate
investment trust (the "Company"), ZML Investors, Inc., a Delaware corporation
("ZML REIT I"), ZML Investors II, Inc., a Delaware corporation ("ZML REIT II"),
Zell/Merrill Lynch Real Estate Opportunity Partners III Trust, a Maryland real
estate investment trust ("ZML REIT III"), and Zell/Merrill Lynch Real Estate
Opportunity Partners IV Trust, a Maryland real estate investment trust ("ZML
REIT IV" and, together with ZML REIT I, ZML REIT II and ZML REIT III, the "ZML
REITs").
RECITALS
(a) Certain capitalized terms used herein shall have the meanings assigned
to them in Section 8.1.
(b) The Boards of Directors or Boards of Trustees, as applicable, of the
Company and each of the ZML REITs and the shareholders of each of the ZML REITs
have approved the merger of each of the ZML REITs with and into the Company as
set forth below (the "Mergers"), upon the terms and subject to the conditions
set forth in this Agreement, whereby (i) each issued and outstanding share of
common stock, par value $.01 per share, of ZML REIT I (the "ZML I Common
Stock") will be converted into the right to receive the ZML I Merger
Consideration (as defined below); (ii) each issued and outstanding share of
Class A common stock, par value $.01 per share, of ZML REIT II (the "ZML II
Class A Common Stock") will be converted into the right to receive the ZML II
Class A Merger Consideration (as defined below); (iii) each issued and
outstanding share of Class B common stock, par value $.01 per share, of ZML
REIT II (the "ZML II Class B Common Stock," and together with the ZML II Class
A Common Stock the "ZML II Common Stock") will be converted into the right to
receive the ZML II Class B Contingent Merger Consideration (as defined below);
(iv) each issued and outstanding Class A common share of beneficial interest,
par value $.01 per share, of ZML REIT III (the "ZML III Class A Common Shares")
will be converted into the right to receive the ZML III Merger Consideration
(as defined below); (v) each issued and outstanding Class B share of beneficial
interest, par value $.01 per share, of ZML REIT III (the "ZML III Class B
Common Shares," and together with the ZML III Class A Common Shares the "ZML
III Common Shares") will be converted into the right to receive the ZML III
Class B Contingent Merger Consideration (as defined below); and (vi) each
issued and outstanding common share of beneficial interest, par value $.01 per
share, of ZML REIT IV (the "ZML IV Common Shares" and, together with the ZML I
Common Stock, the ZML II Common Stock and the ZML III Common Shares, the "ZML
REIT Shares") will be converted into the right to receive the ZML IV Merger
Consideration (as defined below).
(c) The Company and each of the ZML REITs desire to make certain
representations, warranties, covenants and agreements in connection with the
Merger and also to prescribe various conditions to the Merger.
(d) For federal income tax purposes it is intended that the Merger qualify
as a reorganization within the meaning of Section 368(a) of the Internal
Revenue Code of 1986, as amended (the "Code").
<PAGE> 3
NOW, THEREFORE, in consideration of the representations, warranties,
covenants and agreements contained in this Agreement, the parties hereto agree
as follows:
ARTICLE I
THE MERGER
SECTION 1.1 THE MERGER.
Upon the terms and subject to the conditions set forth in this Agreement,
and in accordance with the corporation law of Delaware (the "Corporation Law")
and the Maryland General Corporation Law, as applicable to real estate
investment trusts ("MGCL"), each of the ZML REITs shall be merged with and into
the Company at the Effective Time. Following the Merger, the separate
corporate existence of each of the ZML REITs shall cease and the Company shall
continue as the surviving corporation (the "Surviving Corporation") and shall
succeed to and assume all the rights and obligations of each ZML REIT in
accordance with the MGCL.
SECTION 1.2 CLOSING.
The closing of the Merger will take place at 10:00 a.m. on a date to be
specified by the parties, which (subject to satisfaction or waiver of the
conditions set forth in Sections 5.2 and 5.3) shall be no later than the second
business day after satisfaction or waiver of the conditions set forth in
Section 5.1 (the "Closing Date"), at the offices of Rosenberg & Liebentritt,
P.C., Two North Riverside Plaza, Suite 1515, Chicago, Illinois, unless another
date or place is agreed to by the parties hereto.
SECTION 1.3 EFFECTIVE TIME.
As soon as practicable following the satisfaction or waiver of the
conditions set forth in Article V, the parties shall file certificates of
merger or other appropriate documents (the "Certificates of Merger") executed
in accordance with the Corporation Law and articles of merger or other
appropriate documents (the "Articles of Merger") executed in accordance with
the MGCL and shall make all other filings or recordings required under the
Corporation Law or the MGCL. The Merger shall become effective upon the later
of: (i) the issuance of all certificates of merger by the State Department of
Assessments and Taxation of Maryland ("SDAT") in accordance with the MGCL and
(ii) the filing of the Certificates of Merger with the Secretary of State of
the State of Delaware, or at such later time which the Company and the ZML
REITs have agreed upon and designated in such filings in accordance with
applicable law (the time the Merger becomes effective being the "Effective
Time"), it being understood that the parties shall cause the Effective Time to
occur on the Closing Date.
SECTION 1.4 EFFECTS OF THE MERGER.
The Merger shall have the effects set forth in the Corporation Law and the
MGCL.
2
<PAGE> 4
SECTION 1.5 DECLARATION OF TRUST.
The Declaration of Trust of the Company, as in effect immediately prior to
the Effective Time, shall be the Declaration of Trust of the Surviving
Corporation, until duly amended in accordance with applicable law. The Bylaws
of the Company, as in effect immediately prior to the Effective Time, shall be
the Bylaws of the Surviving Corporation.
ARTICLE II
EFFECT OF THE MERGER ON THE CAPITAL STOCK OF THE
CONSTITUENT CORPORATIONS AND REAL ESTATE INVESTMENT TRUSTS; EXCHANGE OF
CERTIFICATES
SECTION 2.1 EFFECT ON CAPITAL STOCK.
By virtue of the Merger and without any action on the part of the holder
of any ZML REIT Shares or the holder of any shares of beneficial interest of
the Company:
(A) CANCELLATION OF TREASURY STOCK.
As of the Effective Time, (i) any shares of capital stock of ZML REIT I
that are owned by ZML REIT I or any ZML I Subsidiary (as defined below), (ii)
any shares of capital stock of ZML REIT II that are owned by ZML REIT II or any
ZML II Subsidiary, (iii) any shares of beneficial interest of ZML REIT III that
are owned by ZML REIT III or any ZML III Subsidiary and (iv) any shares of
beneficial interest of ZML REIT IV that are owned by ZML REIT IV or any ZML IV
Subsidiary shall automatically be canceled and retired and all rights with
respect thereto shall cease to exist, and no consideration shall be delivered
in exchange therefor.
(B) CONVERSION OF ZML I COMMON STOCK.
Upon the Effective Time, each issued and outstanding share of ZML I Common
Stock (other than any shares to be canceled in accordance with Section 2.1(a))
shall be converted into the right to receive from the Company 51.56
fully paid and nonassessable common shares of beneficial interest, par value
$.01 per share, of the Company (each a "Company Common Share"). As of the
Effective Time, all shares of ZML I Common Stock shall no longer be outstanding
and shall automatically be canceled and retired and all rights with respect
thereto shall cease to exist, and each holder of a certificate representing any
such shares of ZML I Common Stock shall cease to have any rights with respect
thereto, except the right to receive, upon surrender of such certificate,
certificates representing the Company Common Shares required to be delivered
under this Section 2.1(b) and any cash in lieu of fractional shares of Company
Common Shares to be issued or paid in consideration therefor upon surrender of
such certificate (the "ZML I Merger Consideration") as set forth in Section
2.2(e), and any dividends or other distributions to which such holder is
entitled pursuant to Section 2.2(b), in each case without interest and less any
required withholding taxes.
3
<PAGE> 5
(C) CONVERSION OF ZML II COMMON STOCK.
Upon the Effective Time, (i) each issued and outstanding share of ZML II
Class A Common Stock (other than any shares to be canceled in accordance with
Section 2.1(a)) shall be converted into the right to receive from the Company
71.76 fully paid and nonassessable Company Common Shares, and (ii) each
issued and outstanding share of ZML II Class B Common Stock (other than any
shares to be canceled in accordance with Section 2.1(a)) shall be converted
into the right to receive one-one million two hundred seven thousand six
hundred thirty eighth (1/1,207,638) of any ZML II Class B Contingent Shares (as
defined in, and determined as set forth in, Section 2.4) (the "ZML II Class B
Contingent Merger Consideration"). As of the Effective Time, all shares of ZML
II Common Stock shall no longer be outstanding and shall automatically be
canceled and retired and all rights with respect thereto shall cease to exist,
and each holder of a certificate representing any such shares of ZML II Common
Stock shall cease to have any rights with respect thereto, except the right to
receive, upon surrender of such certificate, (x) in the case of the ZML II
Class A Common Stock, certificates representing the Company Common Shares
required to be delivered under this Section 2.1(c) and any cash in lieu of
fractional shares of Company Common Shares to be issued or paid in
consideration therefor upon surrender of such certificate (the "ZML II Class A
Merger Consideration") as set forth in Section 2.2(e), and any dividends or
other distributions to which such holder is entitled pursuant to Section
2.2(b), and (y) in the case of the ZML II Class B Common Stock, the ZML II
Class B Contingent Merger Consideration, if any, when and if payable, as
determined pursuant to Section 2.4, in each case without interest and less any
required withholding taxes.
(D) CONVERSION OF ZML III COMMON SHARES.
Upon the Effective Time, (i) each issued and outstanding ZML III Class A
Common Share (other than any shares to be canceled in accordance with Section
2.1(a)) shall be converted into the right to receive from the Company (i)
72.17 fully paid and nonassessable Company Common Shares, and (ii) each
issued and outstanding ZML III Class B Common Share (other than any shares to
be canceled in accordance with Section 2.1(a)) shall be converted into the
right to receive 1/692,290 of any ZML III Class B Contingent Shares (as
defined in, and determined as set forth in, Section 2.4) (the "ZML III Class B
Contingent Merger Consideration"). As of the Effective Time, all ZML III
Common Shares shall no longer be outstanding and shall automatically be
canceled and retired and all rights with respect thereto shall cease to exist,
and each holder of a certificate representing any such ZML III Common Shares
shall cease to have any rights with respect thereto, except the right to
receive, upon surrender of such certificate, (x) in the case of the ZML III
Class A Common Shares, certificates representing the Company Common Shares
required to be delivered under this Section 2.1(d) and any cash in lieu of
fractional shares of Company Common Shares to be issued or paid in
consideration therefor upon surrender of such certificate (the "ZML III Class A
Merger Consideration") as set forth in Section 2.2(e), and any dividends or
other distributions to which such holder is entitled pursuant to Section
2.2(b), and (y) in the case of the ZML III Class B Common Shares, the ZML III
Class B Contingent Merger Consideration, if any, when and if payable, as
determined pursuant to Section 2.4 in each case without interest and less any
required withholding taxes.
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(E) CONVERSION OF ZML IV COMMON SHARES.
Upon the Effective Time, each issued and outstanding ZML IV Common Share
(other than any shares to be canceled in accordance with Section 2.1(a)) shall
be converted into the right to receive from the Company 52.59 fully paid
and nonassessable Company Common Shares. As of the Effective Time, all ZML IV
Common Shares shall no longer be outstanding and shall automatically be
canceled and retired and all rights with respect thereto shall cease to exist,
and each holder of a certificate representing any such ZML IV Common Shares
shall cease to have any rights with respect thereto, except the right to
receive, upon surrender of such certificate, certificates representing the
Company Common Shares required to be delivered under this Section 2.1(e) and
any cash in lieu of fractional shares of Company Common Shares to be issued or
paid in consideration therefor upon surrender of such certificate (the "ZML IV
Merger Consideration" and, together with the ZML I Merger Consideration, the
ZML II Class A Merger Consideration, the ZML II Class B Merger Consolidation,
ZML III Class A Merger Consideration, the ZML III Class B Contingent Merger
Consolidation, the "Merger Consideration") as set forth in Section 2.2(e), and
any dividends or other distributions to which such holder is entitled pursuant
to Section 2.2(b), in each case without interest and less any required
withholding taxes.
(F) COMPANY COMMON SHARES.
Upon the Effective Time, each Company Common Share outstanding immediately
prior to the Effective Time shall remain outstanding and shall represent one
validly issued, fully paid and nonassessable Company Common Share.
SECTION 2.2 EXCHANGE OF CERTIFICATES.
(A) EXCHANGE AGENT.
Prior to the Effective Time, the Company shall appoint Boston Equiserv
L.P. or another bank or trust company reasonably acceptable to each of the ZML
REITs to act as exchange agent (the "Exchange Agent") for the exchange of the
Merger Consideration upon surrender of certificates representing issued and
outstanding ZML REIT Shares ("Certificates"). Each ZML REIT shall deposit with
the Exchange Agent, immediately prior to the Effective Time, from its own
assets (including, without limitation, distributions received by such ZML REIT
from the "opportunity partnership" in which such ZML REIT is a limited partner)
an amount of cash sufficient for the payment of the Final ZML REIT Dividend (as
defined in Section 2.2(b)) to be paid by such ZML REIT. None of the cash to
pay the Final ZML REIT Dividends shall be provided, directly or indirectly, by
or from the assets of the Company.
(B) RECORD DATES FOR FINAL DIVIDENDS; DISTRIBUTIONS WITH RESPECT TO
UNEXCHANGED SHARES.
(i) For the taxable year of each of the ZML REITs ending at the Effective
Time, each ZML REIT shall declare a dividend (each, a "Final ZML REIT
Dividend") to holders of such ZML REIT's ZML REIT Shares, the record date for
which shall be close of business on the last business day prior to the
Effective Time, in an amount equal to the minimum dividend sufficient to permit
such ZML REIT both to satisfy such requirements and to avoid any United States
federal income tax for such year (and any preceding taxable year) or
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any excise tax pursuant to Section 4982 of the Code. The dividends payable
hereunder to holders of ZML REIT Shares shall be paid upon presentation of the
Certificates for exchange in accordance with this Article II.
(ii) No dividends or other distributions with respect to Company Common
Shares with a record date after the Effective Time shall be paid to the holder
of any unsurrendered Certificate with respect to the Company Common Shares
represented thereby, and no cash payment in lieu of fractional shares shall be
paid to any such holder pursuant to Section 2.2(e), in each case until the
surrender of such Certificate in accordance with this Article II. Subject to
the effect of applicable escheat laws, following surrender of any such
Certificate there shall be paid to the holder of such Certificate, without
interest, (i) at the time of such surrender, the amount of any cash payable in
lieu of any fractional Company Common Share to which such holder is entitled
pursuant to Section 2.2(e) and (ii) if such Certificate is exchangeable for one
or more whole Company Common Shares, (x) at the time of such surrender the
amount of dividends or other distributions with a record date after the
Effective Time theretofore paid with respect to such whole Company Common
Shares and (y) at the appropriate payment date, the amount of dividends or
other distributions with a record date after the Effective Time but prior to
such surrender and with a payment date subsequent to such surrender payable
with respect to such whole Company Common Shares.
(C) NO FURTHER OWNERSHIP RIGHTS IN ZML REIT SHARES.
All Merger Consideration payable upon the surrender of Certificates in
accordance with the terms of this Article II (and any cash paid pursuant to
Section 2.2(e)) (which shall including amounts payable as ZML II Class B
Contingent Merger Consideration and ZML III Class B Contingent Merger
Consolidation) shall be deemed to have been paid in full satisfaction of all
rights pertaining to the ZML REIT Shares theretofore represented by such
Certificates; provided, however, that each ZML REIT shall transfer to the
Exchange Agent cash sufficient to pay any dividends or make any other
distributions with a record date prior to the Effective Time which may have
been declared or made by such ZML REIT on such ZML REIT's respective ZML REIT
Shares in accordance with the terms of this Agreement or prior to the date of
this Agreement and which remain unpaid at the Effective Time and have not been
paid prior to such surrender, and there shall be no further registration of
transfers on the stock transfer books of any ZML REIT of the ZML REIT Shares
which were outstanding immediately prior to the Effective Time. If, after the
Effective Time, Certificates are presented to the Surviving Corporation for any
reason, they shall be canceled and exchanged as provided in this Article II.
(D) NO LIABILITY.
None of the Company, the ZML REITs or the Exchange Agent shall be liable
to any person in respect of any Merger Consideration or dividends delivered to
a public official pursuant to any applicable abandoned property, escheat or
similar law.
(E) NO FRACTIONAL SHARES.
(i) No certificates or scrip representing fractional Company Common Shares
shall be issued upon the surrender for exchange of Certificates, and such
fractional
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share interests will not entitle the owner thereof to vote, to receive
dividends or to any other rights of a stockholder of the Company.
(ii) Notwithstanding any other provision of this Agreement, each holder of
ZML REIT Shares exchanged pursuant to the Merger who would otherwise have been
entitled to receive a fraction of a Company Common Share (after taking into
account all Certificates delivered by such holder) shall receive, from the
Exchange Agent in accordance with the provisions of this Section 2.2(e), a cash
payment in lieu of such fractional Company Common Share, as applicable based on
the initial public offering price of the Company Common Shares.
SECTION 2.3 ESCROW OF COMPANY COMMON SHARES.
(i) Five percent (5%) of the Company Common Shares to be received by
each shareholder of ZML REIT I as part of the Merger Consideration and (ii) ten
percent (10%) of the Company Common Shares to be received by each shareholder
of ZML REIT II, ZML REIT III and ZML REIT IV as part of the Merger
Consideration (other than any Common Shares to be received as ZML II Class B
Contingent Consideration or ZML III Class B Contingent Consideration), shall be
deposited by the recipient shareholder into escrow on the Closing Date pursuant
to those certain Escrow Agreements dated as of July 11, 1997 between the
Company and State Street Bank and Trust Company, as escrow agent, relating to
each of the ZML REITs. The Escrow Agreements are attached hereto as Exhibits
A.1, A.2, A.3 and A.4. The Exchange Agent, as agent for such shareholders,
shall receive such Company Common Shares on behalf of the shareholders of the
ZML REITs and shall deliver them to State Street Bank and Trust Company, as
escrow agent, on behalf of such shareholders to hold and apply in accordance
with the terms of the applicable Escrow Agreement.
SECTION 2.4 CONTINGENT ISSUANCE OF COMPANY COMMON SHARES.
(A) ZML II CLASS B CONTINGENT CONSIDERATION.
If the Company, as the successor to ZML REIT II, shall receive from
Zell/Merrill Lynch Real Estate Opportunity Partners Limited Partnership II
("Opportunity Partnership II") units of limited partnership interest in EOP
Operating Limited Partnership ("Units") that constitute a Class B Distribution
(as defined below), the Company shall issue one Company Common Share for each
such Unit received (each such Company Common Share is referred to as a ZML II
Class B Contingent Share). The ZML II Class B Contingent Shares shall be
issued to the former holders of the ZML II Class B Common Stock at the
Effective Time of the Merger, with the holder of each share of ZML II Class B
Common Stock entitled to receive one-one million three hundred thirty-seven
thousand six hundred thirty eighth (1/1,337,638) of any ZML II Class B
Contingent Shares issued by the Company. In lieu of any fractional ZML II
Class B Contingent Shares, each former holder of ZML II Class B Common Stock
who would be entitled to receive a fraction of a ZML II Class B Contingent
Share shall in lieu thereof receive a cash payment representing the fair value,
as determined by the Company, of such fraction of a ZML II Class B Contingent
Share.
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Class B Distribution" shall mean with respect to Opportunity Partnership
II, any distribution to the Company pursuant to Section 5.04(C) or Section
5.05(C)(4) of the Agreement of Limited Partnership of Opportunity Partnership
II (the "Opportunity Partnership II Agreement") to the extent such distribution
is determined in accordance with ZML REIT II's Table 2.13(ii) Amount as set
forth in Section 2.13 of the Opportunity Partnership II Agreement .
(B) ZML III CLASS B CONTINGENT CONSIDERATION.
If the Company, as the successor to ZML REIT III, shall receive from
Zell Merrill Lynch Real Estate Opportunity Partners Limited Partnership III
("Opportunity Partnership III") Units that constitute a Class B Distribution
(as defined below), the Company shall issue one Company Common Share for each
such Unit received (each such Company Common Share is referred to as a ZML III
Class B Contingent Share). The ZML III Class B Contingent Shares shall be
issued to the former holders of the ZML III Class B Common Shares at the
Effective Time of the Merger, with the holder of each ZML III Class B Common
Share entitled to receive one-one million six hundred thirty-three thousand
three hundred twenty fifth (1/1,633,325) of any ZML III Class B Contingent
Shares issued by the Company. In lieu of any fractional ZML III Class B
Contingent Shares, each former holder of ZML III Class B Common Shares who
would be entitled to receive a fraction of a ZML III Class B Contingent Share
shall in lieu thereof receive a cash payment representing the fair value, as
determined by the Company, of such fraction of a ZML III Class B Contingent
Share.
"Class B Distribution" shall mean with respect to Opportunity Partnership
III, any distribution to the Company pursuant to Section 5.04(D) or Section
5.05(C)(4) of the Agreement of Limited Partnership of Opportunity Partnership
III (the "Opportunity Partnership III Agreement") to the extent such
distribution is determined in accordance with ZML REIT III's Table 2.14 Amount
as set forth in Section 2.14 of the Opportunity Partnership III Agreement.
ARTICLE III
REPRESENTATIONS AND WARRANTIES
SECTION 3.1 REPRESENTATIONS AND WARRANTIES OF THE ZML REITS.
Each ZML REIT represents and warrants as to itself to the Company as
follows:
(A) ORGANIZATION, STANDING AND CORPORATE OR TRUST POWER OF ZML
REIT.
The ZML REIT is a corporation duly organized and validly existing under
the laws of Delaware or a real estate investment trust organized and validly
existing under the laws of Maryland, as applicable, and has the requisite
corporate or trust power and authority to carry on its business as now being
conducted. The ZML REIT is duly qualified or licensed to do business and is in
good standing in each jurisdiction in which the nature of its business or the
ownership or leasing of its properties makes such qualification or licensing
necessary, other than in such jurisdictions where the failure to be so
qualified or licensed, individually or in the aggregate, would not have a
material adverse effect on the business, properties, assets, financial
condition or results of operations of the ZML REIT taken as a whole (a "ZML
REIT
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Material Adverse Effect"). The ZML REIT has delivered to the Company complete
and correct copies of its Certificate of Incorporation or Declaration of Trust,
as applicable, and Bylaws, each as amended to the date of this Agreement.
(B) CAPITAL STRUCTURE.
The authorized and, as of the date hereof, issued and outstanding capital
stock or shares of beneficial interest of the ZML REIT is as set forth on
Schedule 3.1(b) attached hereto. On the date of this Agreement, except as set
forth on Schedule 3.1(b), no shares of capital stock or shares of beneficial
interest or other voting securities of the ZML REIT were issued, reserved for
issuance or outstanding. There are no outstanding stock appreciation rights
relating to the capital stock or shares of beneficial interest of the ZML REIT.
All outstanding shares of capital stock or shares of beneficial interest of
the ZML REIT are duly authorized, validly issued, fully paid and nonassessable
and not subject to preemptive rights. There are no bonds, debentures, notes or
other indebtedness of the ZML REIT having the right to vote (or convertible
into, or exchangeable for, securities having the right to vote) on any matters
on which shareholders of the ZML REIT may vote. Except as set forth in
Schedule 3.1(b), as of the date of this Agreement there are no outstanding
securities, options, warrants, calls, rights, commitments, agreements,
arrangements or undertakings of any kind to which the ZML REIT is a party or by
which such entity is bound, obligating the ZML REIT to issue, deliver or sell,
or cause to be issued, delivered or sold, additional shares of capital stock or
shares of beneficial interest, voting securities or other ownership interests
of the ZML REIT or obligating the ZML REIT to issue, grant, extend or enter
into any such security, option, warrant, call, right, commitment, agreement,
arrangement or undertaking (other than to the ZML REIT). Except as set forth
on Schedule 3.1(b), there are no outstanding contractual obligations of the ZML
REIT to repurchase, redeem or otherwise acquire any shares of capital stock or
shares of beneficial interest of the ZML REIT or make any material investment
(in the form of a loan, capital contribution or otherwise) in any person.
(C) AUTHORITY; NONCONTRAVENTION; CONSENTS.
The ZML REIT has the requisite corporate or trust power and authority to
enter into this Agreement and, including approval of this Agreement by the vote
of the holders of such ZML REIT's ZML REIT Shares required to approve this
Agreement and the transactions contemplated hereby (the "ZML REIT Shareholder
Approvals"), to consummate the transactions contemplated by this Agreement to
which the ZML REIT is a party. The execution and delivery of this Agreement by
the ZML REIT and the consummation by the ZML REIT of the transactions
contemplated by this Agreement to which the ZML REIT is a party have been duly
authorized by all necessary corporate or trust action on the part of the ZML
REIT. This Agreement has been duly executed and delivered by the ZML REIT and
constitutes a valid and binding obligation of the ZML REIT, enforceable against
the ZML REIT in accordance with its terms. Except as set forth in Schedule
3.1(c) attached hereto, the execution and delivery of this Agreement by the ZML
REIT do not, and the consummation of the transactions contemplated by this
Agreement to which the ZML REIT is a party and compliance by the ZML REIT with
the provisions of this Agreement will not, conflict with, or result in any
violation of, or default (with or without notice or lapse of time, or both)
under, or give rise to a right of termination, cancellation or acceleration of
any obligation or to loss of a material benefit under, or result in the
creation of any lien upon any of the properties or assets of the ZML REIT
under, (i) the Certificate of Incorporation or Declaration of Trust, as
applicable, or the Bylaws of the ZML REIT, (ii) any loan
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or credit agreement, note, bond, mortgage, indenture, reciprocal easement
agreement, lease or other agreement, instrument, permit, concession, contract,
franchise or license applicable to the ZML REIT or its properties or assets or
(iii) subject to the governmental filings and other matters referred to in the
following sentence, any judgment, order, decree, statute, law, ordinance, rule
or regulation (collectively, "Laws") applicable to the ZML REIT or its
properties or assets, other than, in the case of clause (ii) or (iii), any such
conflicts, violations, defaults, rights or liens that individually or in the
aggregate would not (x) have a ZML REIT Material Adverse Effect or (y) prevent
the consummation of the transactions contemplated by this Agreement. No
consent, approval, order or authorization of, or registration, declaration or
filing with, any federal, state or local government or any court,
administrative or regulatory agency or commission or other governmental
authority or agency, domestic or foreign (a "Governmental Entity"), is required
by or with respect to the ZML REIT in connection with the execution and
delivery of this Agreement by the ZML REIT or the consummation by the ZML REIT
of the transactions contemplated by this Agreement, except for (i) the filing
of the Articles of Merger with the SDAT and the Certificates of Merger with the
Secretary of State of the State of Delaware and (ii) such other consents,
approvals, orders, authorizations, registrations, declarations and filings (A)
as are set forth in Schedule 3.1(c), (B) as may be required under (x) federal,
state or local environmental laws or (y) the "blue sky" laws of various states
or (C) which, if not obtained or made, would not prevent or delay in any
material respect the consummation of any of the transactions contemplated by
this Agreement or otherwise prevent the ZML REIT from performing its
obligations under this Agreement in any material respect or have, individually
or in the aggregate, a ZML REIT Material Adverse Effect.
(D) TAXES.
(i) The ZML REIT has (A) filed all Tax returns and reports required to be
filed by it (after giving effect to any filing extension properly granted by a
Governmental Entity having authority to do so) and all such returns and reports
are accurate and complete in all material respects; and (B) paid all Taxes
shown on such returns and reports as required to be paid by it, and the most
recent financial statements of the ZML REIT reflect an adequate reserve for all
material Taxes payable by the ZML REIT for all taxable periods and portions
thereof through the date of such financial statements. True, correct and
complete copies of all federal, state and local Tax returns and reports for the
ZML REIT, and all written communications relating thereto, have been delivered
or made available to representatives of the Company. Since the date of the
last ZML REIT financial statements made available to the Company, the ZML REIT
has incurred no liability for taxes under Sections 857(b), 860(c) or 4981 of
the Code, and the ZML REIT has not incurred any material liability for Taxes
other than in the ordinary course of business. To the knowledge of the ZML
REIT, no event has occurred, and no condition or circumstance exists, which
presents a material risk that any material Tax described in the preceding
sentence will be imposed upon the ZML REIT. Except as set forth on Schedule
3.1(d) attached hereto, to the knowledge of the ZML REIT, no deficiencies for
any Taxes have been proposed, asserted or assessed against the ZML REIT, and no
requests for waivers of the time to assess any such Taxes are pending. As used
in this Agreement, "Taxes" shall include all federal, state, local and foreign
income, property, sales, excise and other taxes, tariffs or governmental
charges of any nature whatsoever, together with penalties, interest or
additions to Tax with respect thereto.
(ii) The ZML REIT (A) for all taxable years commencing with 1989, 1992,
1994 and 1996 for ZML REIT I, ZML REIT II, ZML REIT III and ZML REIT IV,
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respectively, through December 31, 1996 has qualified for taxation as a real
estate investment trust (a "REIT") within the meaning of the Code, (B) has
operated, and intends to continue to operate, in such a manner as to qualify as
a REIT for the tax year ending December 31, 1997, and (C) has not taken or
omitted to take any action which would reasonably be expected to result in a
challenge to its status as a REIT, and to the ZML REIT's knowledge, no such
challenge is pending or threatened. The ZML REIT does not hold any asset (x)
the disposition of which would be subject to rules similar to Section 1374 of
the Code as a result of an election under IRS Notice 88-19 or (y) that is
subject to a consent filed pursuant to Section 341(f) of the Code and the
regulations thereunder.
(E) INVESTMENT COMPANY ACT OF 1940.
The ZML REIT is not, and at the Effective Time will not be, required to be
registered under the Investment Company Act of 1940, as amended (the "1940
Act").
SECTION 3.2 REPRESENTATIONS AND WARRANTIES OF THE COMPANY.
The Company represents and warrants to each of the ZML REITs as follows:
(A) ORGANIZATION, STANDING AND TRUST POWER OF THE COMPANY.
The Company is a real estate investment trust duly organized and validly
existing under the laws of Maryland and has the requisite trust power and
authority to carry on its business as now being conducted. The Company is duly
qualified or licensed to do business and is in good standing in each
jurisdiction in which the nature of its business or the ownership or leasing of
its properties makes such qualification or licensing necessary, other than in
such jurisdictions where the failure to be so qualified or licensed,
individually or in the aggregate, would not have a material adverse effect on
the business, properties, assets, financial condition or results of operations
of the Company taken as a whole (a "Company Material Adverse Effect"). The
Company has delivered to each of the ZML REITs complete and correct copies of
its Declaration of Trust and Bylaws, each as amended to the date of this
Agreement.
(B) CAPITAL STRUCTURE.
The authorized and, as of the date hereof, issued and outstanding capital
stock of the Company is as set forth on Schedule 3.2(b) attached hereto. On
the date of this Agreement, except as set forth on Schedule 3.2(b), no shares
of capital stock or other voting securities of the Company were issued,
reserved for issuance or outstanding. There are no outstanding stock
appreciation rights relating to the capital stock of the Company. All
outstanding shares of capital stock of the Company are duly authorized, validly
issued, fully paid and nonassessable and not subject to preemptive rights.
There are no bonds, debentures, notes or other indebtedness of the Company
having the right to vote (or convertible into, or exchangeable for, securities
having the right to vote) on any matters on which shareholders of Company may
vote. Except as set forth in Schedule 3.2(b), as of the date of this Agreement
there are no outstanding securities, options, warrants, calls, rights,
commitments, agreements, arrangements or undertakings of any kind to which the
Company is a party or by which such entity is bound, obligating the Company to
issue, deliver or sell, or cause to be issued, delivered or sold, additional
shares of capital stock, voting securities or other ownership interests of the
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Company or obligating the Company to issue, grant, extend or enter into any
such security, option, warrant, call, right, commitment, agreement, arrangement
or undertaking (other than to the Company). Except as set forth on Schedule
3.2(b), there are no outstanding contractual obligations of the Company to
repurchase, redeem or otherwise acquire any shares of capital stock of the
Company or make any material investment (in the form of a loan, capital
contribution or otherwise) in any person.
(C) AUTHORITY; NONCONTRAVENTION; CONSENTS.
The Company has the requisite trust power and authority to enter into this
Agreement and to consummate the transactions contemplated by this Agreement to
which the Company is a party. The execution and delivery of this Agreement by
the Company and the consummation by the Company of the transactions
contemplated by this Agreement to which the Company is a party have been duly
authorized by all necessary trust action on the part of the Company. This
Agreement has been duly executed and delivered by the Company and constitutes a
valid and binding obligation of the Company, enforceable against the Company in
accordance with its terms. Except as set forth in Schedule 3.2(c) attached
hereto, the execution and delivery of this Agreement by the Company do not, and
the consummation of the transactions contemplated by this Agreement to which
the Company is a party and compliance by the Company with the provisions of
this Agreement will not, conflict with, or result in any violation of, or
default (with or without notice or lapse of time, or both) under, or give rise
to a right of termination, cancellation or acceleration of any obligation or to
loss of a material benefit under, or result in the creation of any lien upon
any of the properties or assets of the Company under, (i) the Declaration of
Trust or the Bylaws of the Company, (ii) any loan or credit agreement, note,
bond, mortgage, indenture, reciprocal easement agreement, lease or other
agreement, instrument, permit, concession, contract, franchise or license
applicable to the Company or its properties or assets or (iii) subject to the
governmental filings and other matters referred to in the following sentence,
any Laws applicable to the Company or its properties or assets, other than, in
the case of clause (ii) or (iii), any such conflicts, violations, defaults,
rights or liens that individually or in the aggregate would not (x) have a
Company Material Adverse Effect or (y) prevent the consummation of the
transactions contemplated by this Agreement. No consent, approval, order or
authorization of, or registration, declaration or filing with, any Governmental
Entity is required by or with respect to the Company in connection with the
execution and delivery of this Agreement by the Company or the consummation by
the Company of the transactions contemplated by this Agreement, except for (i)
the filing of the Articles of Merger with the SDAT and the Certificates of
Merger with the Secretary of State of the State of Delaware and (ii) such other
consents, approvals, orders, authorizations, registrations, declarations and
filings (A) as are set forth in Schedule 3.2(c), (B) as may be required under
(x) federal, state or local environmental laws or (y) the "blue sky" laws of
various states or (C) which, if not obtained or made, would not prevent or
delay in any material respect the consummation of any of the transactions
contemplated by this Agreement or otherwise prevent the Company from performing
its obligations under this Agreement in any material respect or have,
individually or in the aggregate, a Company Material Adverse Effect.
(D) TAXES.
The Company is organized in conformity with the requirements for
qualification as a REIT under the Code, and the method of operation of the
Company will permit the
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Company to meet the requirements for taxation as a REIT under the Code
beginning with its taxable year ending December 31, 1997 and continuing for its
subsequent taxable years.
(E) INVESTMENT COMPANY ACT OF 1940.
The Company is not, and at the Effective Time will not be, required to be
registered under the 1940 Act.
ARTICLE IV
COVENANTS
SECTION 4.1 CONDUCT OF BUSINESS BY THE ZML REITS.
During the period from the date of this Agreement to the Effective Time,
each of the ZML REITs shall carry on its businesses in the usual, regular and
ordinary course in substantially the same manner as heretofore conducted and,
to the extent consistent therewith, use commercially reasonable efforts to
preserve intact its current business organization, goodwill and ongoing
businesses.
SECTION 4.2 TAX TREATMENT.
Each of the ZML REITs and the Company shall use its reasonable best
efforts to cause the Merger to qualify as a reorganization under the provisions
of Section 368(a) of the Code.
ARTICLE V
CONDITIONS PRECEDENT
SECTION 5.1 CONDITIONS TO EACH PARTY'S OBLIGATION TO EFFECT THE MERGER.
The respective obligation of each party to effect the Merger and to
consummate the other transactions contemplated to occur on the Closing Date is
subject to the satisfaction or waiver on or prior to the Effective Time of the
following conditions:
(A) LISTING OF SHARES.
The New York Stock Exchange shall have approved for listing the Company
Common Shares to be issued in the Merger.
(B) NO INJUNCTIONS OR RESTRAINTS.
No temporary restraining order, preliminary or permanent injunction or
other order issued by any court of competent jurisdiction or other legal
restraint or prohibition
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preventing the consummation of the Merger or any of the other transactions
contemplate hereby shall be in effect.
(C) BLUE SKY LAWS.
The Company shall have received all state securities or "blue sky" permits
and other authorizations necessary to issue the Company Common Shares
comprising the Merger Consideration.
(D) CERTAIN ACTIONS AND CONSENTS.
All material actions by or in respect of or filings with any Governmental
Entity required for the consummation of the transactions contemplated hereby
shall have been obtained or made.
(E) ISSUANCE OF FAIRNESS OPINION.
J.P. Morgan Securities, Inc. shall have delivered to the Board of Director
or Board of Trustees, as applicable, of each of the ZML REITs a fairness
opinion substantially in the form attached as Exhibit B hereto.
SECTION 5.2 CONDITIONS TO OBLIGATION OF THE COMPANY.
The obligation of the Company to effect the Merger and to consummate the
other transactions contemplated to occur on the Closing Date are further
subject to the following conditions, any one or more of which may be waived by
the Company:
(A) REPRESENTATIONS AND WARRANTIES.
The representations and warranties of each of the ZML REITs set forth in
this Agreement shall be true and correct as of the Closing Date, as though made
on and as of the Closing Date, except to the extent the representation or
warranty is expressly limited by its terms to another date, and the Company
shall have received certificates (which certificates may be qualified by
knowledge to the same extent as such representations and warranties are so
qualified) signed on behalf of each of the ZML REITs by the chief executive
officer or the chief financial officer of such ZML REIT to such effect. This
condition shall be deemed satisfied unless any or all breaches of each ZML
REIT's representations and warranties in this Agreement (without giving effect
to any materiality qualification or limitation) is reasonably expected to have
a ZML REIT Material Adverse Effect.
(B) MATERIAL ADVERSE CHANGE.
Since the date of this Agreement, there shall have been no Material
Adverse Change as to any ZML REIT.
(C) CONSENTS.
All consents and waivers from third parties described in Section 3.1(c)
shall have been obtained, other than such consents and waivers from third
parties, which, if not
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obtained, would not result, individually or in the aggregate, in a ZML REIT
Material Adverse Effect or a Company Material Adverse Effect.
Notwithstanding the foregoing, the Company shall not be obligated to
effect the Merger if the failure of one or more of the conditions set forth in
Sections 5.2(a), 5.2(b) and 5.2(c) to be satisfied, in the aggregate, causes a
Company Material Adverse Effect.
SECTION 5.3 CONDITIONS TO OBLIGATIONS OF THE ZML REITS.
The obligations of each of the ZML REITs to effect the Merger and to
consummate the other transactions contemplated to occur on the Closing Date is
further subject to the following conditions, any one or more of which may be
waived by each ZML REIT:
(A) REPRESENTATIONS AND WARRANTIES.
The representations and warranties of the Company set forth in this
Agreement shall be true and correct as of the date of this Agreement and as of
the Closing Date, as though made on and as of the Closing Date, except to the
extent the representation or warranty is expressly limited by its terms to
another date, and each ZML REIT shall have received a certificate (which
certificate may be qualified by knowledge to the same extent as the
representations and warranties of the Company contained herein are so
qualified) signed on behalf of the Company by the Company's chief executive
officer and chief financial officer to such effect. This condition shall be
deemed satisfied unless any or all breaches of the Company's representations
and warranties in this Agreement (without giving effect to any materiality
qualification or limitation) is reasonably expected to have a Company Material
Adverse Effect.
(B) CONSENTS.
All consents and waivers from third parties described in Section 3.5(c)
shall have been obtained, other than such consents and waivers from third
parties, which, if not obtained, would not have a ZML REIT Material Adverse
Effect or a Company Material Adverse Effect.
Notwithstanding the foregoing, no ZML REIT shall be obligated to effect
the Merger if the failure of one or more of the conditions set forth in
Sections 5.3(a) and 5.3(b) to be satisfied, in the aggregate, causes such ZML
REIT a ZML REIT Material Adverse Effect.
15
<PAGE> 17
ARTICLE VI
SURVIVAL OF REPRESENTATIONS AND
WARRANTIES; REMEDIES; INDEMNIFICATION
SECTION 6.1 SURVIVAL OF REPRESENTATIONS AND WARRANTIES; REMEDY FOR
BREACH.
All of the representations and warranties contained in this Merger
Agreement or in any document delivered pursuant hereto shall survive the
Effective Time for a period of one (1) year from and after the Effective Time.
Any claim for indemnification under Section 6.3 must be asserted in writing by
the Indemnified Party, as the case may be, stating the nature of the Losses and
the basis for the indemnification therefor within one (1) year from and after
the Effective Time. If so asserted in writing within one (1) year from and
after the Effective Time, such claims for indemnification shall survive until
resolved by mutual agreement between the parties to such claim or until final
judicial determination. Any claim for indemnification not so asserted in
writing within one (1) year from and after the Effective Time shall not
thereafter be asserted and shall forever be waived.
SECTION 6.2 INDEMNIFICATION BY COMPANY.
The Company hereby agrees to indemnify and hold harmless each of the ZML
REITs, each of their respective directors, officers, employees, agents,
representatives and affiliates (each an "Indemnified Party") from and against
any and all Losses asserted against, imposed upon or incurred by the
Indemnified Party in connection with any breach of a representation or warranty
of the Company contained in this Merger Agreement.
SECTION 6.3 INDEMNIFICATION BY ZML REITS.
Each ZML REIT hereby agrees to indemnify and hold harmless the Company and
its affiliates and each of their respective directors, managers, officers,
employees, agents, representatives and affiliates (each of which is an
"Indemnified Party") from and against any and all losses, claims, liabilities,
damages, costs and expenses ("Loss") asserted against, imposed upon or incurred
by the Indemnified Party in connection with or as a result of any breach of a
representation or warranty of such ZML REITs contained in this Merger Agreement
or in any document delivered by the ZML REITs pursuant to this Merger Agreement
(with any such breach being determined solely for purposes of this Section 6.3
without regard to whether such breach has a Material Adverse Effect on the
Company).
SECTION 6.4 NOTICE AND DEFENSE OF CLAIMS.
As soon as reasonably practicable after receipt by the Indemnified Party
of notice of any liability or claim incurred by or asserted against the
Indemnified Party that is subject to indemnification under this Section 6 the
Indemnified Party shall give notice thereof to the ZML REIT, including
liabilities or claims to be applied against the indemnification threshold
established pursuant to Section 6.5 hereof. The Indemnified Party may at its
option demand indemnity under this Article VI as soon as a claim has been
threatened by a third party,
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<PAGE> 18
regardless of whether any actual Losses have been suffered, so long as the
Indemnified Party shall in good faith determine that such claim is not
frivolous and that the Indemnified Party may be liable for, or otherwise incur,
Losses as a result thereof and shall give notice of such determination to the
ZML REIT. The Indemnified Party shall permit the ZML REIT, at its option and
expense, to assume the defense of any such claim by counsel selected by the ZML
REIT and reasonably satisfactory to the Indemnified Party, and to settle or
otherwise dispose of the same; provided, however, that the Indemnified Party
may at all times participate in such defense at its expense; and provided
further, however, that the ZML REIT shall not, in defense of any such claim,
except with the prior written consent of the Indemnified Party in its sole and
absolute discretion, consent to the entry of any judgment or enter into any
settlement that does not include as an unconditional term thereof the giving by
the claimant or plaintiff in question to the Indemnified Party and its
affiliates a release of all liabilities in respect of such claims, or that does
not result only in the payment of money damages. If the ZML REIT shall fail to
undertake such defense within 30 days after such notice, or within such shorter
time as may be reasonable under the circumstances, then the Indemnified Party
shall have the right to undertake the defense, compromise or settlement of such
liability or claim on behalf of and for the account of the ZML REIT.
SECTION 6.5 LIMITATIONS ON AND THRESHOLD FOR INDEMNIFICATION.
(a) No ZML REIT shall be liable under Sections 3.1 or 6.3 hereof unless
and until the aggregate amount recoverable from Indemnifying Parties under the
indemnification provisions set forth in Section 6.3 exceeds $250,000 provided,
however, that once the total amount recoverable from Indemnifying Parties
exceeds $250,000 in the aggregate, the ZML REIT's obligation under Section 6.3
shall be for the full amount of such obligation.
(b) Notwithstanding anything contained herein to the contrary, no ZML REIT
shall be liable or obligated to make payments under this Agreement on any
document deliveries pursuant to its terms to the extent such payments; when
aggregated with any payments made by its subsidiary Opportunity Partnership
under Section 5.3 of the Contribution Agreement, would exceed the net
realizable value (calculated from time to time as of the date or dates on which
claims are paid hereunder) of one percent (1%) of the Company Common Shares
issued or which may be issued in exchange for Units issued to such Opportunity
Partnership pursuant to Section 1.3 of the Contribution Agreement.
ARTICLE VII
TERMINATION, AMENDMENT AND WAIVER
SECTION 7.1 TERMINATION.
This Agreement may be terminated at any time prior to the filing of the
Certificates of Merger with the Secretary of State of the State of Delaware and
the filing of the Articles of Merger with the SDAT:
(a) by mutual written consent duly authorized by the respective Boards of
Directors or Boards of Trustees of each ZML REIT and the Company;
17
<PAGE> 19
(b) by the Company, upon a breach of any representation, warranty,
covenant or agreement on the part of any ZML REIT set forth in this Agreement,
or if any representation or warranty of the Company shall have become untrue,
in either case such that the condition set forth in Section 5.2(a) or 5.2(b),
as the case may be, would be incapable of being satisfied by March 31 , 1998
(or as otherwise extended);
(c) by any ZML REIT, upon a breach of any representation, warranty,
covenant or agreement on the part of the Company set forth in this Agreement,
or if any representation or warranty of the Company shall have become untrue,
in either case such that the conditions set forth in Section 5.3(a) would be
incapable of being satisfied by March 31 , 1998 (or as otherwise extended);
(d) by any ZML REIT or the Company, if any judgment, injunction, order,
decree or action by any Governmental Entity of competent authority preventing
the consummation of the Merger shall have become final and nonappealable; and
(e) by any ZML REIT or the Company, if the Merger shall not have been
consummated before March 31 , 1998; provided, however, that a party that has
willfully and materially breached a representation, warranty or covenant of
such party set forth in this Agreement shall not be entitled to exercise its
right to terminate under this Section 6.1(e).
SECTION 7.2 EFFECT OF TERMINATION.
In the event of termination of this Agreement by any ZML REIT or the
Company as provided in Section 7.1, this Agreement shall forthwith become void
and have no effect, without any liability or obligation on the part of any ZML
REIT or the Company, other than Article VI and except to the extent that such
termination results from a material breach by a party of any of its
representations, warranties, covenants or agreements set forth in this
Agreement.
SECTION 7.3 AMENDMENT.
This Agreement may be amended by the parties in writing by action of their
respective Boards of Directors or Boards of Trustees at any time before or
after any Shareholder Approvals are obtained and prior to the filing of the
Certificates of Merger with the Secretary of State of the State of Delaware and
the Articles of Merger with SDAT; provided, however, that, after the
Shareholder Approvals are obtained, no such amendment, modification or
supplement shall alter the amount or change the form of the consideration to be
delivered to each ZML REIT's shareholders or alter or change any of the terms
or conditions of this Agreement if such alteration or change would adversely
affect the Company's shareholders or any ZML REIT's shareholders.
SECTION 7.4 EXTENSION; WAIVER.
At any time prior to the Effective Time, the parties may (a) extend the
time for the performance of any of the obligations or other acts of the other
party, (b) waive any inaccuracies in the representations and warranties of the
other party contained in this Agreement or in any document delivered pursuant
to this Agreement or (c) subject to the
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<PAGE> 20
proviso of Section 7.3, waive compliance with any of the agreements or
conditions of the other party contained in this Agreement. Any agreement on
the part of a party to any such extension or waiver shall be valid only if set
forth in an instrument in writing signed on behalf of such party. The failure
of any party to this Agreement to assert any of its rights under this Agreement
or otherwise shall not constitute a waiver of those rights.
ARTICLE VIII
GENERAL PROVISIONS
SECTION 8.1 CERTAIN DEFINITIONS.
For purposes of this Agreement:
"Material Adverse Change" means, with respect to a party hereto, any
change that would have a ZML REIT Material Adverse Effect or a Company Material
Adverse Effect, as applicable.
"Subsidiary" of any person means any corporation, partnership, limited
liability company, joint venture or other legal entity of which such person
(either directly or through or together with another Subsidiary of such person)
owns 20% or more of the capital stock or other equity interests of such
corporation, partnership, limited liability company, joint venture or other
legal entity.
SECTION 8.2 COUNTERPARTS.
This Agreement may be executed in one or more counterparts, all of which
shall be considered one and the same agreement and shall become effective when
one or more counterparts have been signed by each of the parties and delivered
to the other parties.
SECTION 8.3 GOVERNING LAW.
THIS AGREEMENT SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE
LAWS OF THE STATE OF MARYLAND, REGARDLESS OF THE LAWS THAT MIGHT OTHERWISE
GOVERN UNDER APPLICABLE PRINCIPLES OF CONFLICT OF LAWS THEREOF, EXCEPT TO THE
EXTENT THAT THE MERGER OR OTHER TRANSACTIONS CONTEMPLATED HEREBY ARE REQUIRED
TO BE GOVERNED BY THE CORPORATION LAW.
SECTION 8.4 ASSIGNMENT.
Neither this Agreement nor any of the rights, interests or obligations
under this Agreement shall be assigned or delegated, in whole or in part, by
operation of law or otherwise by any of the parties without the prior written
consent of the other parties. Subject to the preceding sentence, this
Agreement will be binding upon, inure to the benefit of, and be enforceable by,
the parties and their respective successors and assigns.
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<PAGE> 21
SECTION 8.6 SEVERABILITY.
If any provision of this Agreement is held to be illegal, invalid or
unenforceable under any current or future law, and if the rights or obligations
of the parties under this Agreement would not be materially and adversely
affected thereby, such provision shall be fully separable, and this Agreement
shall be construed and enforced as if such illegal, invalid or unenforceable
provision had never comprised a part thereof, the remaining provisions of this
Agreement shall remain in full force and effect and shall not be affected by
the illegal, invalid or unenforceable provision or by its severance therefrom.
In lieu of such illegal, invalid or unenforceable provision, there shall be
added automatically as a part of this Agreement, a legal, valid and enforceable
provision as similar in terms to such illegal, invalid or unenforceable
provision as may be possible, and the parties hereto request the court or any
arbitrator to whom disputes relating to this Agreement are submitted to reform
the otherwise illegal, invalid or unenforceable provision in accordance with
this Section 8.7.
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<PAGE> 22
IN WITNESS WHEREOF, each of the Company, ZML REIT I, ZML REIT II, ZML REIT
III and ZML REIT IV has caused this Agreement to be signed by its respective
officers thereunto duly authorized, all as of the date first written above.
Equity Office Properties Trust
By: /s/ Stanley M. Stevens
---------------------------
Name: Stanley M. Stevens
Title: Vice President
ZML Investors, Inc.
By: /s/ Sheli Z. Rosenberg
---------------------------
Name: Sheli Z. Rosenberg
Title: Vice President
ZML Investors II, Inc.
By: /s/ Sheli Z. Rosenberg
---------------------------
Name: Sheli Z. Rosenberg
Title: Vice President
Zell/Merrill Lynch Real Estate Opportunity
Partners III Trust
By: /s/ Donald J. Liebentritt
---------------------------
Name: Donald J. Liebentritt
Title: Vice President
Zell/Merrill Lynch Real Estate Opportunity
Partners IV Trust
By: /s/ Donald J. Liebentritt
---------------------------
Name: Donald J. Liebentritt
Title: Vice President
21
<PAGE> 1
Exhibit 10.6
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INDEMNIFICATION AGREEMENT
THIS INDEMNIFICATION AGREEMENT (the "Agreement") is entered into as of
October 9, 1996, by and between Equity Office Properties Trust ("EOP"), a
Maryland real estate investment trust, and Samuel Zell (the "Indemnitee").
WHEREAS, the Indemnitee is an officer or a member of the Board of Trustees
of EOP and in such capacity is performing a valuable service for EOP;
WHEREAS, the law of EOP's state of organization permits EOP to enter into
contracts with its officers or members of its Board of Trustees with respect to
indemnification of such persons; and
WHEREAS, to induce the Indemnitee to continue to provide services to EOP as
an officer or a member of the Board of Trustees, and to provide the Indemnitee
with specific contractual assurance that indemnification will be available to
the Indemnitee regardless of, among other things, any amendment to or revocation
of EOP's Amended and Restated Declaration of Trust ("Declaration of Trust"), or
any acquisition transaction relating to EOP, EOP desires to provide the
Indemnitee with protection against personal liability.
NOW, THEREFORE, in consideration of the premises and the covenants contained
herein, EOP and the Indemnitee hereby agree as follows:
1. DEFINITIONS.
For purposes of this Agreement:
(A) "Change in Control" shall mean a change in the possession, directly or
indirectly, of the power to direct or cause the direction of the
management and policies of EOP, or any successor in interest thereto,
whether through the ownership of voting securities, by contract or
otherwise, including but not limited to a change which would be
required to be reported under Item 6(e) of Schedule 14A of Regulation
14A promulgated under the Securities Exchange Act of 1934 as in effect
on the date hereof (the "Exchange Act") or as may otherwise be
determined pursuant to a resolution of the Board of Trustees. A
rebuttable presumption of a Change in Control shall be created by any
of the following which first occur after the date hereof and EOP shall
have the burden of proof to overcome such presumption:
i. the ability of any "Person" (as such term is defined in Sections
13(d) and 14(d) of the Exchange Act) together with an "Affiliate"
or "Associate" (as defined in Rule 12b-2 of the Exchange Act) or
"Group" (within the meaning of Section 13(d)(3) of the Exchange
Act) to exercise or direct the exercise of 20% or more of the
combined voting power of all outstanding shares of beneficial
interest of EOP in the election of its trustees ("Interested
Party") (provided, however, "Interested Party" shall not include
an agent, broker, nominee, custodian or trustee, solely in their
capacity as such, for one or more persons who do not individually
or as a group possess such power),
<PAGE> 2
ii. during any period of two consecutive years, individuals who at
the beginning of such period constitute the Board of Trustees of
EOP cease for any reason to constitute at least a majority
thereof, unless the election of each trustee who was not a
trustee at the beginning of such period has been approved in
advance by the trustees representing two-thirds of the trustees
then in office who were the trustees at the beginning of the
period,
iii. the approval of the shareholders of EOP of:
(a) a merger or consolidation of EOP with any Interested Party,
(b) any sale, lease, exchange, mortgage, pledge, transfer, or
other disposition, to or with any Interested Party in any
transaction or series of transactions, of EOP's assets or
the assets of any subsidiary of EOP having a market value
equal to 10% or more of the aggregate market value of all
assets of EOP determined on a consolidated basis, all
outstanding shares of beneficial interest of EOP, or the
earning power or net income of EOP, determined on a
consolidated basis,
(c) the issuance or transfer by EOP, or any subsidiary thereof,
to any Interested Party in any transaction or a series of
transactions, of capital securities with a value equal to 5%
or more of the aggregate market value of the then
outstanding voting shares of beneficial interest of EOP
other than the issuance or transfer of such shares of
beneficial interest to all EOP shareholders on a pro rata
basis,
(d) the adoption of any plan or proposal for the partial or
complete liquidation or dissolution of EOP proposed by an
Interested Party or pursuant to any agreement, arrangement
or understanding, whether or not in writing, with any
Interested Party, or
(e) any reclassification of securities, including, without
limitation, any share split, share dividend, or other
distributions of shares, or any reverse share split,
recapitalization of EOP, or any merger or consolidation of
EOP with any subsidiary thereof, or any other transaction
proposed by, or pursuant to, any agreement, arrangement, or
understanding, whether or not in writing, with any
Interested Party which has the effect, directly or
indirectly, of increasing the proportionate voting shares of
beneficial interest of EOP directly or indirectly owned by
any such Interested Party, or
iv. any receipt by any Interested Party, directly or indirectly, of
any loans, advances, guarantees, pledges or other financial
assistance, or any tax credits or other tax advantages provided
by or through EOP other than the receipt of such advantages which
are provided to all EOP shareholders on a pro rata basis.
(B) "Corporate Status" describes the status of a person who is or was a
trustee, officer, employee, agent or fiduciary of EOP or of any other
corporation, partnership, joint venture, trust, employee benefit plan
or other enterprise (whether conducted for profit or not for profit)
which such person is or was serving at the request of EOP.
2
<PAGE> 3
(C) "Disinterested Trustee" means a trustee of EOP who is not and was not a
party to the Proceeding (as hereinafter defined) in respect of which
indemnification is sought by the Indemnitee.
(D) "Effective Date" means the date of this Agreement as set forth above.
(E) "Expenses" shall include all attorneys and paralegals' fees, retainers,
court costs, transcript costs, fees of experts, witness fees, travel
expenses, duplicating costs, printing and binding costs, telephone
charges, postage, delivery service fees, and all other disbursements or
expenses of the types customarily incurred in connection with
prosecuting, defending, preparing to prosecute or defend,
investigating, or being or preparing to be a witness in a Proceeding.
(F) "Independent Counsel" means a law firm, or a member of a law firm, that
is experienced in matters of corporation law and neither presently is,
or in the past two (2) years has been, retained to represent (i) EOP or
the Indemnitee in any matter material to either such party, or (ii) any
other party to the Proceeding giving rise to a claim for
indemnification hereunder.
(G) "Proceeding" includes any action, suit, arbitration, alternate dispute
resolution mechanism, investigation, administrative hearing, or any
other proceeding, including appeals therefrom, whether civil, criminal,
administrative, or investigative, except one initiated by the
Indemnitee pursuant to paragraph 8 of this Agreement to enforce such
Indemnitee's rights under this Agreement.
2. INDEMNIFICATION--GENERAL
The Indemnitee shall be entitled to the rights of indemnification provided
in this paragraph 2 and under applicable law, the Amended and Restated
Declaration of Trust, EOP's Bylaws, any agreement, a vote of shareholders or
resolution of the Board of Trustees or otherwise if, by reason of such
Indemnitee's Corporate Status, such Indemnitee is, or is threatened to be
made, a party to any threatened, pending, or completed Proceeding, including
a Proceeding by or in the right of EOP. Unless prohibited by paragraph 13
hereof, the Indemnitee shall be indemnified against Expenses, judgments,
penalties, fines, and settlement amounts actually and reasonably incurred by
or on behalf of such Indemnitee in connection with such Proceeding or any
claim, issue or matter therein.
3. EXPENSES OF A SUCCESSFUL PARTY
Without limiting the effect of any other provision of this Agreement, to the
extent that the Indemnitee is, by reason of such Indemnitee's Corporate
Status, a party to and is successful, on the merits or otherwise, in any
Proceeding pursuant to a final non-appealable order, such Indemnitee shall
be indemnified against all Expenses actually and reasonably incurred by or
on behalf of such Indemnitee in connection therewith. If the Indemnitee is
not wholly successful in such Proceeding pursuant to a final non-appealable
order but is successful, on the merits or otherwise, as to one or more but
less than all claims, issues, or matters in such Proceeding pursuant to a
final non-appealable order, EOP shall indemnify the Indemnitee against all
Expenses actually and reasonably incurred by or on behalf of
3
<PAGE> 4
such Indemnitee in connection with each successfully resolved claim, issue
or matter. For purposes of this paragraph and without limitation, the
termination of any claim, issue or matter in such Proceeding by dismissal,
with or without prejudice, shall be deemed to be a successful result as to
such claim, issue or matter.
4. WITNESS EXPENSES
Notwithstanding any other provision of this Agreement, to the extent that
the Indemnitee is, by reason of such Indemnitee's Corporate Status, a
witness for any reason in any Proceeding to which such Indemnitee is not a
party, such Indemnitee shall be indemnified against all Expenses actually
and reasonably incurred by or on behalf of such Indemnitee in connection
therewith.
5. ADVANCES
EOP shall advance all reasonable Expenses incurred by or on behalf of the
Indemnitee in connection with any Proceeding within twenty (20) days after
the receipt by EOP of a statement from the Indemnitee requesting such
advance from time to time, whether prior to or after final disposition of
such Proceeding. Such statement shall reasonably evidence the Expenses
incurred by the Indemnitee and shall include or be preceded or accompanied
by an undertaking by or on behalf of the Indemnitee to repay any Expenses
advanced if it shall ultimately be determined that the Indemnitee is not
entitled to be indemnified against such Expenses.
6. DETERMINATION OF ENTITLEMENT TO INDEMNIFICATION
(A) To obtain indemnification under this Agreement, the Indemnitee shall
submit to EOP a written request, including therewith such documentation
and information reasonably necessary to determine whether and to what
extent the Indemnitee is entitled to indemnification.
(B) Upon such written request pursuant to subparagraph 6(A), a
determination with respect to the Indemnitee's entitlement thereto
shall be made in the specific case: (i) if a Change in Control shall
have occurred, by Independent Counsel in a written opinion to the Board
of Trustees, a copy of which shall be delivered to the Indemnitee
(unless the Indemnitee shall request that such determination be made by
the Board of Trustees or the shareholders of EOP, in which case by the
person or persons or in the manner provided in clauses (ii) or (iii) of
this paragraph 6(B)); (ii) if a Change in Control shall not have
occurred, (A) by the Board of Trustees by a majority vote of a quorum
consisting of Disinterested Trustees, or (B) if a quorum of the Board
of Trustees consisting of Disinterested Trustees is not obtainable, or,
even if obtainable, if such quorum of Disinterested Trustees so
directs, by Independent Counsel in a written opinion to the Board of
Trustees, a copy of which shall be delivered to the Trustee, or (C) by
the shareholders of EOP; or (iii) as provided in paragraph 7(B) of this
Agreement. If it is so determined that the Indemnitee is entitled to
indemnification, payment to the Indemnitee shall be made within ten
(10) days after such determination.
(C) The Indemnitee shall cooperate with the person or entity making such
determination with respect to the Indemnitee's entitlement to
indemnification, including providing upon
4
<PAGE> 5
reasonable advance request any documentation or information which is
not privileged or otherwise protected from disclosure and which is
reasonably available to the Indemnitee and reasonably necessary to such
determination. Any costs or expenses (including attorneys' fees and
disbursements) incurred by the Indemnitee in so cooperating shall be
borne by EOP (irrespective of the determination as to the Indemnitee's
entitlement to indemnification) and EOP hereby indemnifies and agrees
to hold the Indemnitee's harmless therefrom.
(D) In the event the determination of entitlement to indemnification is to
be made by Independent Counsel pursuant to paragraph 6(B) hereof, the
Independent Counsel shall be selected as provided in this paragraph
6(D). If a Change in Control shall not have occurred, the Independent
Counsel shall be selected by the Board of Trustees, and EOP shall give
written notice to the Indemnitee advising such Indemnitee of the
identity of the Independent Counsel so selected. If a Change in Control
shall have occurred, the Independent Counsel shall be selected by the
Indemnitee (unless the Indemnitee shall request that such selection be
made by the Board of Trustees, in which event the preceding sentence
shall apply), and the Indemnitee shall give written notice to EOP
advising it of the identity of the Independent Counsel so selected. In
either event, the Indemnitee, or EOP, as the case may be, may, within
seven (7) days after such written notice of selection shall have been
given, deliver to EOP or to the Indemnitee, as the case may be, a
written objection to such selection. Such objection may be asserted
only on the grounds that the Independent Counsel so selected does not
meet the requirements of "Independent Counsel" as defined in paragraph
1 of this Agreement. If such written objection is made, the Independent
Counsel so selected may not serve as Independent Counsel until a court
has determined that such objection is without merit. If, within twenty
(20) days after submission by the Indemnitee of a written request for
indemnification pursuant to paragraph 6(A) hereof, no Independent
Counsel shall have been selected or, if selected, shall have been
objected to, either EOP or the Indemnitee may petition a court for
resolution of any objection which shall have been made by EOP or the
Indemnitee to the other's selection of Independent Counsel and/or for
the appointment as Independent Counsel of a person selected by the
court or by such other person as the court shall designate, and the
person with respect to whom an objection is so resolved or the person
so appointed shall act as Independent Counsel under paragraph 6(B)
hereof. EOP shall pay all reasonable fees and expenses of Independent
Counsel incurred in connection with acting pursuant to paragraph 6(B)
hereof, and all reasonable fees and expenses incident to the selection
of such Independent Counsel pursuant to this paragraph 6(D). In the
event that a determination of entitlement to indemnification is to be
made by Independent Counsel and such determination shall not have been
made and delivered in a written opinion within ninety (90) days after
the receipt by EOP of the Indemnitee's request in accordance with
paragraph 6(A), upon the due commencement of any judicial proceeding in
accordance with paragraph 8(A) of this Agreement, Independent Counsel
shall be discharged and relieved of any further responsibility in such
capacity.
7. PRESUMPTIONS
(A) In making a determination with respect to entitlement or
indemnification hereunder, the person or entity making such
determination shall presume that the Indemnitee is
5
<PAGE> 6
entitled to indemnification under this Agreement and EOP shall have the
burden of proof to overcome such presumption.
(B) If the person or entity making the determination whether the Indemnitee
is entitled to indemnification shall not have made a determination
within sixty (60) days after receipt by EOP of the request therefor,
the requisite determination of entitlement to indemnification shall be
deemed to have been made and the Indemnitee shall be entitled to such
indemnification, absent: (i) a misstatement by the Indemnitee of a
material fact, or an omission of a material fact necessary to make the
Indemnitee's statement not materially misleading, in connection with
the request for indemnification, or (ii) a prohibition of such
indemnification under applicable law. Such sixty (60)-day period may be
extended for a reasonable time, not to exceed an additional thirty (30)
days, if the person or entity making said determination in good faith
requires additional time for the obtaining or evaluating of
documentation and/or information relating thereto. The foregoing
provisions of this paragraph 7(B) shall not apply: (i) if the
determination of entitlement to indemnification is to be made by the
shareholders and if within fifteen (15) days after receipt by EOP of
the request for such determination the Board of Trustees resolves to
submit such determination to the shareholders for consideration at an
annual or special meeting thereof to be held within seventy-five (75)
days after such receipt and such determination is made at such meeting,
or (ii) if the determination of entitlement to indemnification is to be
made by Independent Counsel pursuant to paragraph 6(B) of this
Agreement.
(C) The termination of any Proceeding or of any claim, issue or matter
therein, by judgment, order, settlement, or conviction, or upon a plea
of nolo contendere or its equivalent, shall not (except as otherwise
expressly provided in this Agreement) of itself adversely affect the
right of the Indemnitee to indemnification.
8. REMEDIES
(A) In the event that: (i) a determination is made that the Indemnitee is
not entitled to indemnification under this Agreement, or (ii)
advancement of Expenses is not timely made pursuant to this Agreement,
or (iii) payment of indemnification due the Indemnitee under this
Agreement is not timely made, the Indemnitee shall be entitled to an
adjudication in an appropriate court of competent jurisdiction of such
Indemnitee's entitlement to such indemnification or advancement of
Expenses.
(B) In the event that a determination shall have been made pursuant to this
Agreement that the Indemnitee is not entitled to indemnification, any
judicial proceeding commenced pursuant to this paragraph 8 shall be
conducted in all respects as a de novo trial, on the merits and the
Indemnitee shall not be prejudiced by reason of that adverse
determination. In any judicial proceeding or arbitration commenced
pursuant to this paragraph 8, EOP shall have the burden of proving that
the Indemnitee is not entitled to indemnification or advancement of
Expenses, as the case may be.
(C) If a determination shall have been made or deemed to have been made
pursuant to this Agreement that the Indemnitee is entitled to
indemnification, EOP shall be bound by such determination in any
judicial proceeding commenced pursuant to this paragraph 8, absent: (i)
a misstatement by the Indemnitee of a material fact, or an
6
<PAGE> 7
omission of a material fact necessary to make the Indemnitee's
statement not materially misleading, in connection with the request for
indemnification, or (ii) a prohibition of such indemnification under
applicable law.
(D) EOP shall be precluded from asserting in any judicial proceeding
commenced pursuant to this paragraph 8 that the procedures and
presumptions of this Agreement are not valid, binding and enforceable
and shall stipulate in any such court that EOP is bound by all the
provisions of this Agreement.
(E) In the event that the Indemnitee, pursuant to this paragraph 8, seeks a
judicial adjudication of such Indemnitee's rights under, or to recover
damages for breach of, this Agreement, if successful in whole or in
part, the Indemnitee shall be entitled to recover from EOP, and shall
be indemnified by EOP against, any and all Expenses actually and
reasonably incurred by such Indemnitee in such judicial adjudication.
9. ESTABLISHMENT OF TRUST
In the event of a Change in Control, EOP shall, upon written request by the
Indemnitee, create a trust for the benefit of the Indemnitee ("Trust") and
from time-to-time upon written request by the Indemnitee, shall fund such
Trust in an amount sufficient to satisfy any and all Expenses, judgments,
penalties, fines and settlement amounts actually and reasonably incurred by
or on behalf of such Indemnitee or claimed, reasonably anticipated or
proposed to be paid in accordance with the terms of this Agreement. The
amount to be deposited in the Trust pursuant to the foregoing funding
obligation shall be determined by Independent Counsel. The terms of the
Trust shall provide that upon a Change in Control: (i) the Trust shall not
be revoked or the principal thereof invaded, without the prior written
consent of the Indemnitee, (ii) the trustee of the Trust ("Trustee") shall
advance, within two business days of a request by the Indemnitee and in
accordance with paragraph 5 of this Agreement, any and all Expenses to the
Indemnitee, (iii) the Trust shall continue to be funded by EOP in accordance
with the funding obligation set forth above, (iv) the Trustee shall promptly
pay to the Indemnitee all amounts for which the Indemnitee shall be entitled
to indemnification pursuant to this Agreement or otherwise, and (v) all
unexpended funds in such Trust shall revert to EOP upon a final
determination by Independent Counsel that the Indemnitee has been fully
indemnified under the terms of this Agreement. The Trustee shall be chosen
by the Indemnitee and agreed to by EOP. Nothing in this Section 9 shall
relieve EOP of any of its obligations under this Agreement.
10. NON-EXCLUSIVITY; SURVIVAL OF RIGHTS; INSURANCE SUBROGATION
(A) The rights of indemnification and to receive advancement of Expenses as
provided by this Agreement shall not be deemed exclusive of any other
rights to which the Indemnitee may at any time be entitled under
applicable law, the Amended and Restated Declaration of Trust, EOP's
Bylaws, any agreement, a vote of shareholders or a resolution of the
Board of Trustees, or otherwise. No amendment, alteration or repeal of
this Agreement or any provision hereof shall be effective as to the
Indemnitee with respect to any action taken or omitted by the
Indemnitee as a member of the Board of Trustees prior to such
amendment, alteration or repeal.
7
<PAGE> 8
(B) To the extent that EOP maintains an insurance policy or policies
providing liability insurance for trustees of EOP, the Indemnitee shall
be covered by such policy or policies in accordance with its or their
terms to the maximum extent of the coverage available and upon any
"Change in Control" EOP shall obtain continuation and/or "tail"
coverage for the Indemnitee to the maximum extent obtainable at such
time.
(C) In the event of any payment under this Agreement, EOP shall be
subrogated to the extent of such payment to all of the rights of
recovery of the Indemnitee, who shall execute all papers required and
take all actions necessary to secure such rights, including execution
of such documents as are necessary to enable EOP to bring suit to
enforce such rights.
(D) EOP shall not be liable under this Agreement to make any payment of
amounts otherwise indemnifiable hereunder if and to the extent that the
Indemnitee has otherwise actually received such payment under any
insurance policy, contract, agreement, or otherwise.
11. CONTINUATION OF INDEMNITY
All agreements and obligations of EOP contained herein shall continue during
the period the Indemnitee is an officer or a member of the Board of Trustees of
EOP and shall continue thereafter so long as the Indemnitee shall be subject to
any threatened, pending or completed Proceeding by reason of such Indemnitee's
Corporate Status and during the period of statute of limitations for any act or
omission occurring during the Indemnitee's term of Corporate Status. No legal
action shall be brought and no cause of action shall be asserted by or on behalf
of EOP against the Indemnitee, the Indemnitee's spouse, heirs, executors or
personal or legal representatives after the expiration of two (2) years from the
date of accrual of such cause of action, and any claim or cause of action of EOP
shall be extinguished and deemed released unless asserted by the timely filing
of a legal action within such two (2) year period; provided, however, that if
any shorter period of limitations is otherwise applicable to any such cause of
action such shorter period shall govern. This Agreement shall be binding upon
EOP and its successors and assigns and shall inure to the benefit of the
Indemnitee and such Indemnitee's heirs, executors and administrators.
12. SEVERABILITY
If any provision or provisions of this Agreement shall be held to be
invalid, illegal, or unenforceable for any reason whatsoever, (i) the validity,
legality, and enforceability of the remaining provisions of this Agreement
(including, without limitation, each portion of any paragraph of this Agreement
containing any such provision held to be invalid, illegal, or unenforceable,
that is not itself invalid, illegal, or unenforceable) shall not in any way be
affected or impaired thereby, and (ii) to the fullest extent possible, the
provisions of this Agreement (including, without limitation, each portion of any
paragraph of this Agreement containing any such provision held to be invalid,
illegal, or unenforceable, that is not itself invalid, illegal, or
unenforceable) shall be construed so as to give effect to the intent manifested
by the provisions held invalid, illegal, or unenforceable.
13. EXCEPTIONS TO RIGHT OF INDEMNIFICATION OR ADVANCEMENT OF EXPENSES
8
<PAGE> 9
Notwithstanding any other provisions of this Agreement, the Indemnitee shall
not be entitled to indemnification or advancement of Expenses under this
Agreement: (i) with respect to any Proceeding initiated by such Indemnitee
against EOP other than a proceeding commenced pursuant to paragraph 8, or (ii)
with respect to any Proceeding in which such Indemnitee's act or omission was
material to the cause of action adjudicated and was committed in bad faith or
was the result of active and deliberate dishonesty, or (iii) if the Indemnitee
actually received an improper personal benefit in money, property, or services.
14. HEADINGS
The headings of the paragraph of this Agreement are inserted for convenience
only and shall not be deemed to constitute part of this Agreement or to affect
the construction thereof.
15. MODIFICATION AND WAIVER
No supplement, modification, or amendment of this Agreement shall be binding
unless executed in writing by both of the parties hereto. No waiver of any of
the provisions of this Agreement shall be deemed or shall constitute a waiver of
any other provisions hereof (whether or not similar) nor shall such waiver
constitute a continuing waiver.
16. NOTICE BY THE INDEMNITEE
The Indemnitee agrees promptly to notify EOP in writing upon being served
with any summons, citation, subpoena, complaint, indictment, information, or
other document relating to any Proceeding or matter which may be subject to
indemnification or advancement of Expenses covered hereunder.
17. NOTICES
All notices, requests, demands, and other communications hereunder shall be
in writing and shall be deemed to have been duly given if (i) delivered by hand
and receipted for by the party to whom said notice or other communication shall
have been directed, or (ii) mailed by certified or registered mail with postage
prepaid, on the third business day after the date on which it is so mailed, if
so delivered or mailed, as the case may be, to the following addresses:
If to the Indemnitee, to the address set forth in the records of EOP.
If to EOP, to: Equity Office Properties Trust
Two North Riverside Plaza, Suite 2200
Chicago, Illinois 60606
Attn.: Chief Legal Counsel
or to such other address as may have been furnished to the Indemnitee by EOP or
to EOP by the Indemnitee, as the case may be.
18. GOVERNING LAW
The parties agree that this Agreement shall be governed by, and construed
and enforced in accordance with, the laws of the State of Maryland.
9
<PAGE> 10
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of
the day and year first above written.
EQUITY OFFICE PROPERTIES TRUST,
a Maryland real estate investment trust
By: /s/ Stanley M. Stevens
------------------------------------
Its: Executive Vice President
-----------------------------------
/s/ Samuel Zell
----------------------------------------
Samuel Zell, an individual
10
<PAGE> 1
\[EQUITY LOGO] EXHIBIT 13.1
Equity Office Properties Trust
2 North Riverside Plaza
Chicago, IL 60606
EQUITY OFFICE PROPERTIES TRUST 1997 ANNUAL REPORT
[USA BUILDING GRAPHIC]
Equity Office Properties Trust 1997 Annual Report
<PAGE> 2
[USA PEOPLE GRAPHIC]
THE NATIONAL ADVANTAGE
<PAGE> 3
EQUITY OFFICE PROPERTIES TRUST
Equity Office Properties Trust is a fully integrated real estate investment
trust (REIT) that owns, leases, and manages office properties and parking
facilities located throughout the United States. With a highly diversified
portfolio of 65.3 million square feet in 258 buildings in 24 states and the
District of Columbia, Equity Office is the country's largest public owner and
manager of office properties. Its subsidiary, Equity Capital Holdings, L.P.,
owns 17 stand-alone parking facilities comprising 16,749 spaces. More than 1,450
employees in its corporate office and six regions are dedicated to providing
high-quality working environments to its customers and creating value for its
shareholders. Equity Office completed its initial public offering in July 1997.
Its shares are traded on the New York Stock Exchange under the symbol EOP.
<TABLE>
<S> <C>
Financial Highlights 4
Timeline 5
Letter from the Chairman of the Board 10
Letter from the Chief Executive Officer 12
Management Team 17
The National Advantage 18
Portfolio Description and Property Listing 34
Financial Information 37
Corporate Data 80
</TABLE>
<PAGE> 4
CURRENT PROPERTY COUNT 258+ located in 39 markets nationwide
[USA BUILDING GRAPHIC]
<PAGE> 5
1456 Current employees sharing a network of information and resources
[USA PEOPLE GRAPHIC]
Serving 5676+ current customers across the United States.
Equity Office Properties Trust is the first publicly traded owner and operator
of office properties to attain national status with office properties in
virtually every major metropolitan area of the country. Our customers across the
United States are served by a group of employees dedicated to delivering
consistent, high-quality service, and linked via a national information
infrastructure. Equity Office's national advantage means unparalleled access to
low-cost capital, to expansion and acquisition opportunities, to real time
market information, and to the top talent in the industry. This access, combined
with our ability to leverage our size, scope, and immense local market
resources, is the platform from which Equity Office strives to deliver value to
our customers and shareholders alike.
<PAGE> 6
4
FINANCIAL HIGHLIGHTS [GRAPH]
<TABLE>
<CAPTION>
(Dollars in thousands) 1997 1996 1995
- -------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Total Revenue $752,072 $508,124 $371,457
Net Property Operating Income $450,766 $292,329 $205,471
Property Operating Margin 61.4% 59.2% 57.6%
Funds From Operations $276,275 $160,460 $ 96,104
Office Square Footage (in millions) 65.3 29.2 23.1
</TABLE>
Financial information depicted for the period prior to the company's initial
public offering of its common shares on July 11, 1997 is for the Equity Office
Predecessors as described in the financial statements and accompanying notes.
[GRAPHS]
<TABLE>
<CAPTION>
NET PROPERTY FUNDS FROM OFFICE SQUARE
TOTAL REVENUE OPERATING INCOME OPERATIONS FOOTAGE
------------- ---------------- ---------- -------
(in Thousands) (in Thousands) (in Thousands) (in Millions)
<S> <C> <C> <C> <C>
95 $371,457 $205,471 $ 96,104 23.1
96 $508,124 $292,329 $160,460 29.2
97 $752,072 $450,766 $276,275 65.3
</TABLE>
<PAGE> 7
5
STRATEGICALLY
BUILDING
A NATIONAL OPERATION
Equity Office's roots date to 1976, when an in-house management group for office
assets was first established within the organization founded by Samuel Zell. In
1988, with the launch of the first in a series of real estate opportunity funds
with institutional partners, we began building a diversified, national, and
integrated real estate company. The strategy: to acquire a national portfolio of
prime office properties and create a management company focused on providing
superior customer service with coast-to-coast consistency. Equity Office has
always focused on identifying markets with strong economic fundamentals, such as
job growth and barriers to new supply, and then targeting high-quality real
estate within those markets.
<PAGE> 8
E V O L U T I O N O F E Q U I T Y O F F I C E
[FLOW CHART]
<PAGE> 9
I N I T I A L P U B L I C O F F E R I N G
[FLOW CHART]
<PAGE> 10
I N I T I A L P U B L I C O F F E R I N G
[FLOW CHART]
<PAGE> 11
10
DEAR FELLOW SHAREHOLDERS:
EQUITY OFFICE: OPPORTUNITY IN LIQUID REAL ESTATE
Equity Office's public offering in July 1997 represented the highly successful
culmination of a strategy begun in partnership with a group of institutional
investors more than ten years ago. In building a truly national portfolio,
Equity Office has been able to capitalize on the strength of the recovering
office market while insulating against regional and local fluctuations. We enjoy
extraordinary success in accessing the capital markets, and, as this report
describes, have demonstrated our ability to achieve operating efficiencies and
economies of scale. Most importantly, I believe we have assembled one of the
finest management teams in the industry, dedicated to superior customer service,
with a disciplined investment process and unparalleled infrastructure for growth
and revenue enhancement. Our extraordinary performance in 1997 emanates from the
philosophy that the real estate markets have changed forever. We believe Equity
Office is uniquely positioned to benefit from the opportunities generated by the
transformation of the real estate industry.
LIQUID REAL ESTATE
Equity Office was built upon the premise that the office building industry was
poised for fundamental change. The condition of the commercial real estate
market at the end of the 1980s was extensive oversupply. Legislation
substantially restricted lending sources. As the failure of the system became
obvious, the industry was forced to seek new solutions. In 1988, we launched the
first of the four Zell/Merrill Lynch funds, a series of four institutional funds
totaling more than $2.1 billion in equity capital commitments. Over the past ten
years, we were able to assemble an extraordinary portfolio at substantial
discount to replacement cost, and build an infrastructure to lease and manage
this asset base. This foundation, built over our years as a private owner, gives
us a substantial advantage today over those just beginning to pursue national or
expansionist strategies.
Today, traditional sources of capital have been replaced by a reliance on
public markets. The inability to rely on historical experience resulted in a
redefinition of the risks of real estate. Real estate has begun to be viewed as
any other capital-intensive industry. Companies are no longer valued based on
asset appraisals but rather on a multiple of cash flow. With the equitization of
real estate has come a level of information and disclosure creating a discipline
that has never before existed in the real estate industry. Predictability,
accountability, and transparency are the mantras of real estate investors today.
EXPECTATIONS FOR MANAGEMENT
The public markets demand that large collections of assets produce cash flows
that are measurably greater and less volatile than those of stand-alone assets.
As management strives to improve operating margins, the benefits of scale
increase in relevance. For example, purchasing power in services and goods such
as insurance and supplies grows with the amount of services being purchased.
Equity Office has pursued a strategy of developing critical mass in multiple
metropolitan areas that also allows it to benefit from enhanced efficiencies
within local market concentrations.
CONSOLIDATION
Much has been made of the consolidation of the real estate business, with a
particular emphasis on "when will the next mergers happen." While we still may
see fortuitous combinations such as our merger with Beacon Properties
Corporation (described
<PAGE> 12
11
PERFORMANCE
The Opportunity in Office
Total Institutional Quality Office Space:
3 Billion S.F.
[PIE CHART OMITTED]
elsewhere in this report), in the near term we see that the greater
opportunities lie in the vast amount of real estate still held directly in
private hands: traditional institutional owners of real estate. There is close
to three billion square feet of institutional-grade office space in the United
States, and only 12% of it is held by public REITs. We believe that institutions
will find it increasingly attractive to transfer assets to public ownership and
retain stock (our currency) as a more liquid investment vehicle. Companies such
as Equity Office, which have built a size and national scope, will be in the
best position to absorb multi-location portfolios and leverage operating
synergies.
WHERE NO COMPANY HAS GONE BEFORE
I have written elsewhere that the most successful property companies will be
those that adopt operational methods long utilized by mainstream industrial
America. Managerial vision; low, long-term capital costs; operating
efficiencies; enhanced revenue opportunities; and risk management across a
national platform are the essential success factors for the office building
industry today.
The real estate industry in the future will succeed because it learns to
compete for capital with the rest of the business world. We believe that Equity
Office is well positioned to take advantage of the new world order. For more
than ten years our organization has focused on combining local market expertise
and responsiveness to customers and tenants with national resources. The
fundamental advantages we have built as the premier office building operating
company will allow us to capitalize on the advantages of cycles (such as
acquisition and pricing advantages due to lower competitive cost of capital),
and minimize the negative impact of local events (such as resurgence of
development in certain markets) as they occur. More importantly, we believe that
the public ownership structure, as it continues to increase in attractiveness,
will mitigate the effects of excess in any particular market segment. Wall
Street is very quick to condemn behavior it does not approve.
This report details our national advantage and the scope it gives us to
truly build a brand in the office building industry: something no one has ever
done before. While we are proud of what we have built to date, it is even more
gratifying to look ahead and see how we are really only just beginning.
Sincerely,
/S/ Samuel Zell
MARCH 5, 1998 SAMUEL ZELL
CHAIRMAN OF THE BOARD OF TRUSTEES
EXTRAORDINARY
Our extraordinary performance in 1997 emanates from the philosophy that the real
estate markets have changed forever.
[PHOTO]
<PAGE> 13
TO OUR SHAREHOLDERS:
On July 11, we launched one of the most successful initial public offerings ever
issued for a REIT, raising $603.8 million from the sale of 28,750,000 common
shares. The market's enthusiastic response to our offering and ultimately to our
value proposition was very gratifying. Our offering was oversubscribed by 300
percent. And in the first day of trading, our share price increased 28 percent,
closing at $26.87 per share. By year-end, our equity capital had grown to $9
billion, and our total market capitalization to $13.3 billion.
Our financial performance in 1997 was also outstanding. Funds from operations
for the year increased 72 percent, totaling $276.3 million, while revenue for
the year increased 48 percent to $752.1 million. Same store net operating income
for the year increased 11.7 percent on a GAAP basis and 12.1 percent on a cash
basis. This level of performance in 1997 resulted from our acquisition of $7
billion in office and parking properties combined with strong internal growth as
evidenced by our same store results.
In December, the rating agencies gave us an unprecedented vote of confidence
when three agencies issued investment grade ratings for Equity Office. Moody's
issued a Baa1 rating; Standard & Poor's gave us a BBB rating with a positive
outlook, and Duff & Phelps issued a BBB+ rating. Moreover, we received these
ratings in less than six months from the date of our IPO -- setting a REIT
industry record for receiving the highest and fastest initial investment grade
ratings ever.
GROWTH
Since our initial public offering just a little over nine months ago, we have
acquired 168 office buildings -- more than doubling our size. Today, we are
nearly twice the size of any other office REIT, with 65.3 million square feet
and 258 buildings in 24 states and the District of Columbia.
At the time of our IPO, no one could have anticipated the incredible pace at
which the real estate industry would consolidate. Nonetheless, because we had
already established a strong, national infrastructure with six regional offices
and field staff in 39 markets, we were uniquely positioned to take advantage of
the growth opportunities presented by consolidation. We have not, however,
acquired any properties simply to increase our size. Our acquisition strategy
has always been to acquire distinctive assets in superior locations and create
critical mass in metropolitan markets with strong and growing business sectors.
We define critical mass as the ability to leverage operating efficiencies across
numerous properties while providing a broader range of space alternatives to our
customers.
Eighty-six percent of our acquisitions in 1997 allowed us to continue to
build critical mass in key markets. As a result, we now own more than 1 million
square feet in 17 markets and in 11 of those markets, we have more than 2
million square feet. The remaining 14 percent of the properties we acquired in
1997 were in markets that we had previously targeted for expansion -- most
notably Minneapolis and Seattle. With our purchase of LaSalle Plaza in downtown
Minneapolis in November we accomplished our
DOUBLING SIZE
Since our initial public offering, we have acquired 168 office buildings -- more
than doubling our size. Today, we are nearly twice the size of any other office
REIT.
<PAGE> 14
SERVICE VALUE
stated goal of entering that market. And, our acquisition of 10 buildings from
Wright Runstad & Company provided us with both an entree into the Pacific
Northwest -- a region with strong office markets -- and immediate, significant
market presence. Our acquisition in October of 11 properties in suburban
Philadelphia complemented our existing property in Philadelphia's central
business district and created critical mass in that market. In that same month,
we further strengthened our CBD/suburban mix in Philadelphia with the purchase
of 1700 Market Street, a downtown property.
By leveraging our national economies of scale and operating efficiencies, we can
afford to provide Equity Office tenants with a better array of services than
competitors can offer. This, in turn, results in greater tenant satisfaction and
ultimately in value creation for our shareholders.
Our most significant transaction in 1997 was our $4.3 billion merger with
Beacon Properties Corporation in December. In a single stroke, we solidified our
critical mass in six key markets and added 130 office properties and 21 million
square feet to our portfolio. Tremendous synergies existed between Equity Office
and Beacon. All six of Beacon's markets overlapped with existing Equity Office
locations and Beacon's tenant mix and product type were of comparable quality.
Beacon was also a good fit culturally. It was an organization that shared
Equity Office's commitment to providing the absolute best service possible to
tenants. This cultural compatibility helped us to smoothly and seamlessly
integrate Beacon's properties as well as approximately 340 Beacon employees into
Equity Office. In addition, we managed to complete this transaction two months
ahead of schedule, thanks to the hard work and dedication of employees from both
companies.
At the time of the merger, we projected $15-$20 million in cost savings. We
have already reduced annual costs by $21 million through immediate overhead
reductions and we have identified an additional $1.5 million in savings that can
be generated by taking advantage of operating and financial efficiencies.
OPERATING PERFORMANCE
Our strong internal growth in 1997 is the direct result of our long-term focus
on leveraging operational and financial efficiencies across our national
portfolio while delivering superior customer service to our tenants.
Corporations increasingly view their office space as a strategic asset that
helps them to recruit and retain the best and brightest in a tight job market.
Additionally, they demand more value for their money. By leveraging our national
economies of scale and operating efficiencies we can afford to provide Equity
Office tenants with a better array of services than competitors can offer. We
believe that this, in turn, results in greater tenant satisfaction and
ultimately in value creation for our shareholders.
<PAGE> 15
We have extensive experience leveraging national economies of scale and local
market operating efficiencies. When we acquire a building, we significantly
reduce operating costs, with savings often in the neighborhood of $0.50 per
square foot. The majority of these cost savings are used to improve the
selection and quality of services we offer our tenants. Our goal is always
highest quality at the lowest cost. Our success is evident in our operating
margin, which increased to 61.4 percent for 1997 compared to 59.2 percent for
1996. In addition, we were able to reduce controllable costs (operating expenses
less real estate taxes) by 0.1 percent for same store results, despite the fact
that same store occupancy increased from 88.5 percent in 1996 to 94.7 percent in
1997. At the same time, we experienced a decrease in average revenue-enhancing
tenant improvement costs and leasing commissions from $30.26 in 1996 to $19.74
in 1997. And while some competitors have achieved critical mass locally and even
regionally, we are the only office building operator with the ability to
leverage local, regional, and national economies of scale to reduce costs and
improve service across our entire portfolio.
Providing superior customer service, however, requires more than cost
cutting. The quality of our service ultimately depends upon the quality of the
people who interface day in and day out with our tenants. I believe we have some
of the best and most experienced people in the industry. Our size and scope
allow us to provide our staff with significant advancement and development
opportunities, which in turn helps us to recruit and retain some of the top
talent in the industry. We have always believed that owners make better
managers. Consequently, nearly every Equity Office employee receives share
options. In early 1998, we also established an employee share purchase program
that enables employees to purchase shares through payroll deductions, further
emphasizing the concept of ownership throughout the company.
STRATEGY BUILDING
Our strategy, articulated at the time of our IPO, remains unchanged -- to
compile a diversified, national portfolio of office properties, while building
critical mass in key markets and leveraging local operating efficiencies and
national economies of scale to reduce unit costs.
CAPITAL MARKET ACTIVITIES
The size and scope of our portfolio combined with the relationships we have
developed over time with institutional lenders and investors provide us with
unparalleled access to low-cost capital. Immediately after going public in July,
we closed on a $600 million unsecured line of credit. In October, we added a
$1.5 billion unsecured credit facility with very attractive terms.
We also raised $180 million through our direct private placement of unrated,
senior unsecured notes to Teachers Insurance and Annuity Association, part of
TIAA-CREF pension and insurance organization. The following month, we raised
$200 million through a direct sale of common shares to Stichting Pensioenfonds
ABP, one of the largest Dutch pension funds and a long-term institutional
investor in Equity Office. In both cases, we were able to secure funds without
paying underwriting fees.
<PAGE> 16
15
The size and scope of our portfolio combined with the relationships we have
developed over time with institutional investors provide us with unparalleled
access to low-cost capital.
ACCESS
Most recently, we completed the largest unsecured debt offering by a REIT
with our private placement of $1.5 billion in senior unsecured notes. This
offering is a billion dollars larger than any REIT has ever accomplished before.
We concurrently raised $300 million through a convertible preferred shares
issue, which achieved the lowest dividend rate (5.25%) and the highest
convertible ratio (20%) yet seen in the REIT universe.
Both transactions demonstrated our ability to raise low-cost capital while
significantly broadening our investor base, eliminating substantially all of the
company's floating rate indebtedness and providing investors with highly liquid
securities.
NON-TRADITIONAL REVENUE SOURCES
In 1997 we aggressively pursued non-traditional revenue sources. We have been a
leader in the real estate industry in maximizing the revenue potential of
leasing roof-top antenna space and internal riser space to a wide array of
communications providers. In the coming year, we will explore additional sources
of non-traditional revenue, including opportunities to partner with retailers
and service providers to simultaneously increase revenues and the services we
offer to our tenants. Here again, our national reach provides us with greater
access to such partners, who are eager to tap our national network of office
properties.
FUTURE OPPORTUNITIES
Our strategy, articulated at the time of our IPO, remains unchanged -- to
compile a diversified, national portfolio of office properties, while building
critical mass in key markets and leveraging local operating efficiencies and
national economies of scale to reduce unit costs. In this way, we can continue
to deliver superior service to our tenants and superior returns to our
shareholders. We also plan to continue to leverage our unique ability to service
national companies with multiple locations through our National Accounts
Program, which provides such tenants with a single point of contact within
Equity Office for meeting their nationwide space needs.
PARKING, DEVELOPMENT AND CONSTRUCTION
In a similar vein, we have focused additional efforts on bringing consolidation
and operating efficiencies to the parking facility business. In addition to the
approximately 48,000 parking spaces attached to our existing office buildings,
we have also acquired 17 facilities in markets with multiple demand drivers,
such as strong shopping and theater traffic, as well as business traffic. In
keeping with our strategy, we recently signed an agreement to purchase, upon
completion, Rand Tower parking facility in Minneapolis -- a market with numerous
sources of parking demand.
On the development front, we have no plans to establish a development company
or division as a stand-alone business. We will, however, pursue strategic joint
ventures and take-out arrangements with developers to ensure that we have access
to a pipeline of new construction in desirable locations. For instance, in 1997
we made a minority investment in Wright Runstad & Company, which in our opinion
is the premier developer in the Pacific Northwest. As a result of our
investment, we have the right of first refusal on new buildings developed by
them. And, in March 1998, we announced an agreement with Holder Properties to
purchase, upon completion, an office property located in Buckhead, the strongest
submarket in the Atlanta office market.
<PAGE> 17
16
Additionally, the combination of our original land holdings (usually land
acquired adjacent to existing office buildings) and numerous stand-alone sites
acquired as part of the Beacon portfolio, will allow us to continue to form
joint ventures with partners who have both construction expertise and local
development knowledge.
Recently, the REIT analyst community and the general press have written
extensively about office development in certain markets. We have developed our
own database to actively track construction activity in the top 30 metropolitan
areas using our national network of employees and third-party sources. Based on
our research, we believe that office development in most markets is justified by
pent-up demand and strong office-based job growth. The amount of timely,
accurate information regarding development activity is positive, and one of the
many ways that the capital markets are influencing our industry. We believe the
growing discipline of the capital markets will continue to be a constraint
inhibiting speculative overbuilding in the marketplace.
FOUNDATION FOR GROWTH
The strong fundamentals of our existing portfolio position us for continued
internal growth. The average rental rate for our portfolio at year-end was
$21.90 per square foot -- $3.00 below our estimate of average market rates. With
45 percent of our leases scheduled to roll over in the next four years, we have
a significant opportunity to increase future revenue flows.
Furthermore, we expect the consolidation of the real estate industry to
continue at its current pace throughout 1998 as institutional investors seeking
greater liquidity continue to convert from direct ownership of assets to
indirect ownership through investments in REITs and as private sellers seek ways
to recapitalize their development companies now that supply and demand are in
greater equilibrium. As the only public national owner and operator of office
properties in the country, we are well positioned to capitalize on this
consolidation. We have fully and successfully integrated our 1997 acquisitions
and expect to make significant further acquisitions in 1998. Our access to
low-cost capital and to deal flow, combined with the broad acceptance of both
our shares and operating units in exchange for properties, provide us with
excellent external growth potential.
We are very bullish about our future prospects. By adopting management models
from other industries, we continue to build a true operating company, as
distinguished from a collection of assets. On the following pages, you will find
examples of how we leverage our national advantage to deliver value to our
tenants and shareholders alike. Above all, our focus remains on generating cash
flow and long-term returns for our shareholders.
Finally, in 1998 Ed Sidman, former chairman of Beacon Properties, and Jon
Runstad, chairman and chief executive officer of Wright Runstad & Company,
joined our board of trustees. We are extremely pleased to have them join us, as
they both bring broad experience and an attitude of involvement that we welcome
and encourage.
In summary, we feel the fundamentals in the office sector have never been
stronger. Equity Office has built an excellent foundation to take advantage of
the increasing opportunity available to us in 1998 and beyond.
Sincerely,
/s/ Timothy H. Callahan
MARCH 13, 1998 TIMOTHY H. CALLAHAN
PRESIDENT AND CHIEF EXECUTIVE OFFICER
<PAGE> 18
[GRAPHIC OF PEOPLE OMITTED]
Equity Office's executive officers (top row, left to right): Jeff Johnson,
senior vice president and chief investment officer; Mike Steele, executive vice
president and chief operating officer; Gary Beller, executive vice president --
parking facilities; (second row) Richard Kincaid, executive vice president and
chief financial officer; Stan Stevens, executive vice president and chief legal
officer; Dave Naus, senior vice president -- acquisitions; Sybil Ellis, senior
vice president -- acquisitions; (front) Tim Callahan, president and chief
executive officer.
The Management Team
Equity Office has built its management team to provide our customers with
responsive, consistent, quality service; to maximize long-term value through
strategic growth and innovative ownership; and to promote an environment which
inspires employees to test limits and exceed expectations. To fulfill this
mission, extensive in-house resources based in Chicago and the six regional
offices support the on-site property management, leasing, and maintenance teams
who are our front-line contact with our customers. Each regional team of
property management, leasing, engineering, MIS, and administrative professionals
is responsible for prompt decisions and accurate information flow. Equity
Office's investment processes insure property management, finance, and
acquisitions teams are integrated at every step of a decision to buy a property
or portfolio.
[NATIONAL EXPERTISE GRAPHIC OMITTED]
<PAGE> 19
MOBILIZING NATIONALLY AND LOCALLY TO INTEGRATE ACQUISITIONS
Over the past 10 years we have built a national infrastructure of regional
and local offices which provides us with a unique advantage in evaluating
and integrating acquisitions - particularly multi-location portfolios. We
employ a focused and disciplined approach that utilizes every resource of
our powerful national network.
With Equity Office employees in 78 submarkets, we have a competitive
edge in analyzing potential acquisitions. We leverage our local staff's
first-hand knowledge of the subtle nuances in a market's economic,
business, and political climate throughout the due diligence process. And
in the rare case that our staff is not intimately familiar with a property
under consideration, we can direct a local employee to make a physical
inspection, within hours.
The role of our local staff doesn't end once we sign a purchase
contract. The hands-on involvement of our local employees in the
integration process played a key role in our successfully and seamlessly
incorporating nearly $7 billion in acquisitions into Equity Office in
1997.
Our successful $4.3 billion merger with Beacon Properties
Corporation in 1997, which added 130 buildings, 1,694 new tenants and 340
employees to our company, is a testament to the value of our national
infrastructure. By combining the strength of our corporate and regional
resources with the contacts and accessibility of local on-site staffs, we
were able to complete the merger two months ahead of schedule. This feat
is particularly impressive given the fact that we increased our staff and
portfolio of properties by approximately 50 percent. We were able to
mobilize local and corporate teams to complete the deal quickly -- with
the single goal of a smooth transition for customers.
BRINGING NEW EMPLOYEES INTO THE FOLD
Upon announcing the intent to merge Beacon into Equity Office, both
companies began implementing systems to relay an ongoing stream of
information to employees. One week later, Equity Office executives mounted
a massive road show - meeting with Beacon employees at every location. The
purpose of the road show was to define Equity Office as an excellent
employer, outline operating goals, highlight the benefits of the merger,
and introduce Equity Office's culture of dedication to the job,
collaboration, and respect for each other. Within 30 days, individual
benefit summary packages were given to each Beacon employee. Also within
the month, a full orientation and systems training program was underway
across the country.
While the Beacon merger was the largest single transaction, 38 other
buildings were acquired throughout the country in the months following
Equity Office's initial public offering. In each case, rapid orientation
and local market attention from nearby Equity Office personnel helped get
new acquisitions quickly up to speed.
INTRODUCING EQUITY OFFICE TO ITS NEW TENANTS
To ensure a seamless merger for customers, we immediately formed a
transition team, consisting of Equity Office and Beacon staff, for every
function from accounting and marketing to MIS and engineering. These teams
worked tirelessly to anticipate and plan for any and all tenant concerns
and needs. As a result, plans for integrating every system were in place
by the closing date. On the actual day of the closing, key contacts at
each of our new tenant firms received a hand-delivered letter of
introduction from Equity Office. The following Monday, the 75,000
employees at those firms each received an introductory card and small
gift. Tenants received a warm and positive introduction to Equity Office.
<PAGE> 20
INTEGRATING
ACQUISITIONS SEAMLESSLY
<PAGE> 21
Equity Office worked hard to ensure that its employees were informed and at ease
during the merger with Beacon Properties Corporation. Shortly after the
announcement, Equity Office's senior management took to the road, meeting all
its soon-to-be employees in the six overlapping markets. On the morning of the
merger, new employees were treated to breakfast hosted by their Equity Office
co-workers. On the day of closing, new employees also received their new
business cards.
"The shared commitment to quality made the transition
[GRAPHIC OF PEOPLE OMITTED]
to Equity Office comfortable for employees coming to the firm
Ongoing training and a "buddy system" help keep information flowing, so new
employees, in turn, can help ensure positive relationships are built with our
new tenants. One of the greatest challenges was in Boston, where the quick
integration of Beacon's large local presence was crucial. Boston employees like
Monica Juan, (right, second row), general manager of 28 State (Equity Office's
existing Boston location at the time of the merger), worked with Maryann
Gilligan Suydam, general manager of 175 Federal, and Kevin Tucker, regional IS
specialist, to smoothly transition 183 people and more than 8 million square
feet into a single Boston portfolio.
through the merger." MARYANN GILLIGAN SUYDAM, GENERAL MANAGER, 175 FEDERAL
<PAGE> 22
22 MEETING THE NEEDS OF NATIONAL MULTI-LOCATION CUSTOMERS
Our national presence, with properties in virtually every major city in
the U.S., combined with our focus on creating coast-to-coast service
consistency provides us with a unique advantage in meeting the space needs
of companies with multiple locations across the country. To leverage this
opportunity, we have developed a National Accounts Program which offers
customers a single point of contact within Equity Office. In addition, the
diversity of our portfolio, with both Class A and B quality properties and
suburban and central business district locations, allows us tremendous
flexibility in responding to varying requirements, whether customers need
high-end head-quarters space or value-added back offices.
Our National Accounts Program includes 160 premier companies such as
Andersen Worldwide, AT&T, Citibank, Coopers & Lybrand, Merrill Lynch,
Price Waterhouse and Salomon Smith Barney, to name just a few. National
Accounts customers occupy more than 10 million square feet in Equity
Office properties across the country. Their space needs may involve
several smaller locations or a few very large sites: Andersen Worldwide
leases 958,000 square feet in nine buildings; Merrill Lynch occupies
247,000 square feet in ten locations; and Coopers & Lybrand leases 417,000
square feet in five locations.
The process of negotiating a lease for new space is significantly
faster and simpler for our National Accounts customers. We understand
their business, and can react -- or even anticipate -- their needs. For
example, by entering into a new transaction with a lease already in use
between Equity Office and the client, we begin from a position of
understanding and can dramatically reduce negotiations, to weeks rather
than months.
STRONG RELATIONSHIPS TRANSLATE INTO BOTTOM-LINE BENEFITS
A key element of our National Accounts Program is our focus on
orchestrating the seamless delivery of service across our network. The
strong relationships we have developed through this program pay handsome
dividends to both customers and to us. Salomon Smith Barney, a tenant with
269,000 square feet in 14 Equity Office buildings nationwide, is a
long-time member of our National Accounts Program. When the firm merged
with Shearson and needed to consolidate staff into one location, we were
able to accommodate their needs in Indianapolis and Durham, North
Carolina. Later, through the strong relationship we had established, we
learned of their need for a large block of space in Boston. Because
Salomon Smith Barney knew Equity Office as an owner, the firm had a high
comfort level in signing the first lease at 28 State - a building
undergoing a total renovation that was 18 months from completion. In May
1997, they moved into 50,000 square feet, on time and on budget.
Through our National Accounts Program, we can help customers prepare
to meet major space needs two to three years away. In today's tighter
markets, where large blocks can be hard to find, we offer our customers a
long-term, strategic advantage.
Our focus on delivering superior service and finding creative
solutions doesn't end with our National Accounts customers. It is extended
to every Equity Office customer - regardless of size. For instance, a
Chicago law firm was rapidly outgrowing its space at 161 N. Clark Street.
While the firm wanted to continue its relationship with Equity Office,
space at another of our nearby buildings better met its budget and space
requirements. We were able to move the tenant, nearly doubling its space.
We were also successful in re-leasing the newly vacated offices at 161 N.
Clark Street at higher rates, for a mutually advantageous transaction all
around.
<PAGE> 23
MEETING NATIONAL CUSTOMER NEEDS
<PAGE> 24
The process of negotiating a lease for new space is significantly faster and
simpler for Equity Office's National Accounts customers, since we don't have to
start each negotiation from square one. The trusting relationship developed
over time and promise of consistent service also give our National Accounts
clients a high comfort level when seeking space in a new Equity Office property
or market. The speed and ease of working with a national provider of office
space were apparent when MetLife approached Equity Office with an urgent need
for space in Houston.
"If not for our relationship with Equity Office, this deal would have been
[PHOTO]
nearly impossible. Beginning with an existing lease helped streamline
negotiations
Within a day of calling local leasing representative Trish McQueen, MetLife had
viewed and approved a slab space at Northborough Tower. MetLife needed its
office totally constructed in just six weeks. Just weeks before, another lease
had been negotiated with MetLife at The Quadrant by our Denver leasing director
Randy Garfield (left, third row). As a result, normally lengthy negotiations
were cut to just two days, and MetLife occupied its new offices just four weeks
after signing the lease. MetLife currently leases 170,000 square feet in 14
Equity Office locations.
and got us into the space on time." SCOTT FRANCIS, REGIONAL VICE PRESIDENT,
METLIFE
<PAGE> 25
26 LEVERAGING OPERATING EFFICIENCIES AND ECONOMIES OF SCALE
At Equity Office, we strive to provide our tenants with optimal office
space solutions. To deliver on this promise, we must pay constant
attention to cost efficiency, and at the same time, give our customers the
best array of services and amenities possible. Consequently, at the
national, regional and local levels we are zealous about both reducing
costs and improving customer service.
The size and scope of our national portfolio provides us with
unparalleled purchasing power. As a result, we have been able to
significantly outperform the industry on operating costs. In markets where
we have achieved critical mass, our 1997 operating expenses were $1.34 per
square foot less than the industry average defined by BOMA in 1996. Our
goal upon acquiring new properties is to establish the Equity Office level
of service, which can often be accomplished while reducing costs.
STRATEGIC SOURCING DELIVERS BOTTOM-LINE BENEFITS AND BETTER SERVICE
On a national level, our internal experts in strategic sourcing have
leveraged our portfolio's combined purchasing power to negotiate extremely
favorable contracts with national service suppliers and vendors. One of
our most significant advantages is in insurance. Upon closing our merger
with Beacon, we renegotiated insurance premiums for our entire 65.3
million-square-foot portfolio, reducing our total costs by 28 percent. As
a result, we will save $2.6 million in 1998, while increasing earthquake
coverage four-fold and obtaining greater control in managing claim
settlements.
We have very favorable national service contracts with a wide range
of companies including W.W. Grainger for building supplies; Otis,
Montgomery and Schindler for elevator maintenance; and Carrier and Trane
for servicing our heating, ventilation and air conditioning systems. Our
discounts with such vendors range from 15 to 65 percent. We have also
implemented a national purchasing card system. Our purchasing card, a
"credit card" based system that eliminates paperwork, was used for more
than $14 million in purchases last year, saving $225,000 in operating
costs.
LOCAL AND REGIONAL OPERATING EFFICIENCIES GENERATE SIGNIFICANT SAVINGS
Each additional acquisition in a market creates significant operating
efficiencies that we can leverage to create savings and improve service.
When we acquire a building, we can often consolidate staff with other
properties in that market without affecting the level of service
delivered. We saved an average of 18 percent in administrative payroll
expenses on newly acquired properties in 1997.
Achieving critical mass in a market also allows us to move the
leasing function in-house, which results in significant savings as well as
enhanced service. In San Francisco, our market share created enough
revenue potential to entice some of the city's best leasing agents to join
our staff. From that, we saved on commissions that would have otherwise
gone to an outside leasing firm. By bringing leasing in-house after the
acquisition of Two California Plaza in Los Angeles, we positioned
ourselves to save more than $2.4 million - which equates to an additional
$1.21 per square foot in income for Equity Office's downtown Los Angeles
portfolio. Just as important, in-house leasing agents significantly
improve the level of service we can deliver to customers. They have a
long-term focus on each transaction and recognize the importance of
satisfying our customers.
<PAGE> 26
LEVERAGING
SIZE AND SCALE
<PAGE> 27
Providing our tenants with a well-run building and value for their rent dollar
is a priority in all parts of our organization. Locally, at Indianapolis' Bank
One Center, this commitment is exemplified by maintenance assistant John Mabry,
who won our internal 1997 Alpha Award for star performance and responsiveness to
customers. Nationally, it takes the form of innovative programs like our
national elevator service contracts, which help employees such as John deliver
consistent care and service across our portfolio.
Applying our existing elevator service contracts to 1997 acquisitions saved
$484,000. In many cases, vendor relationships were maintained and service
expanded. Elevator maintenance costs on our existing portfolio decreased by
$121,000, and similar savings are expected with the former Beacon portfolio. We
also bid services such as security, cleaning, and landscaping locally and
regionally. The combined bidding of cleaning contracts in our Northeast region
saved $323,000, and in Chicago saved $200,000, savings that ultimately benefit
the customer. All these efforts help us deliver the best possible service at the
lowest possible cost.
<PAGE> 28
[PHOTO]
"Not only does Equity Office encourage employees at
[PHOTO]
every level to take responsibility for smooth operations --
[PHOTO]
they reward it." JOHN MABRY, MAINTENANCE ASSISTANT, BANK ONE CENTER
[PHOTO]
<PAGE> 29
30 NATIONAL EXPERTS, LOCAL EXPERTISE EQUAL EXPONENTIAL ADVANTAGE
We have always believed that real estate is a local business. We have more
than 1,200 Equity Office employee/owners located in 78 submarkets across
the country. Our strong, local presence provides us with market
information on a real-time basis, allowing us to accurately anticipate
market trends and to adapt accordingly. Our field staff also plays a key
role in evaluating potential purchases, and the expertise of our on-site
management is pivotal in delivering superior service to our tenants.
Combining our local market knowledge with the resources of our
national and regional staff is how we consistently out-service and
out-deliver competitors. To facilitate the flow of ideas, information, and
input throughout our organization, we have made significant investments in
training and technology. These range from e-mail and extensive Lotus Notes
databases, to on-line manuals, to our orientation program that involves
two full days in Chicago for newly hired employees. Each year, at our
three-day National Conference we bring together our property management
and leasing teams, and regional and corporate staffs for formal training,
to share ideas and learn from each other.
NATIONAL EXPERTS DELIVER VALUE LOCALLY
Our size and national scope allow us to hire in-house experts in a number
of disciplines beyond the staples of a traditional real estate company. In
areas as diverse as legal issues and preventative maintenance, these
experts routinely add value to every project we own and manage nationwide.
One area in which our national resources have brought savings to
bear locally is in energy costs. Because energy costs account for
approximately 24 percent of the total cost of operating an office
building, we have created an energy conservation effort involving on-staff
architects and mechanical engineers. We routinely conduct energy audits
and manage lighting retrofits and the installation of sophisticated energy
management systems. For example, recent lighting retrofits at 28 buildings
yielded $1.7 million in savings. And through this group's consultation
with local property engineers, we have significantly reduced the costs of
maintaining our sophisticated heating, ventilation, and air conditioning
systems.
At the national level, we monitor and track the status of utility
deregulation on a state-by-state and market-by-market basis to ensure that
every Equity Office property is prepared to realize the bottom line
benefits of deregulation. Results are clear at properties like 1601 Market
Street, which was included in a Philadelphia pilot program to test
deregulation. Consequently, our annual energy costs on this
681,000-square-foot building are expected to decrease by approximately
$225,000.
LOCAL IDEAS ARE LEVERAGED INTO NATIONAL INITIATIVES
We pride ourselves on the dynamic flow of information within our
organization. Ideas, information and input flow from the top down and the
bottom up, as well as across our network of local offices. Our primary
customer service initiatives often develop from building management teams.
The National Advisory Council, selected from winners of Equity Office's
internal excellence programs, ensures constant local input into national
planning. We strive to maximize the advantages of our national
infrastructure by leveraging successful field ideas across our entire
portfolio.
<PAGE> 30
SHARING EXPERTISE ACROSS OUR PORTFOLIO
<PAGE> 31
The Equity Office Quality Assurance (EQA) program, pioneered at 1920 & 2010 Main
Plaza in Orange County, California, by general manager Mitch Sigband, is one
local initiative that has been embraced company-wide. EQA now stands as the
company's quality service banner, and property teams nationwide implement EQA
programs that cement solid relationships with tenants like Barron Harley of
Snell & Wilmer.
The EQA program includes elements ranging from training and employee empowerment
programs, to special events for tenants. It also includes printed materials
designed to encourage communication with tenants. Program materials, today
produced centrally by Equity Office and distributed coast-to-coast, now cost
only a few dollars per property but return big benefits. Mitch's idea grew into
a national program that reinforces our commitment to customers and builds the
Equity Office brand across our portfolio.
<PAGE> 32
[PHOTO]
"Our customers deserve more than attractive, efficient space.
[PHOTO]
They also deserve responsive service, and an owner that is committed
[PHOTO]
to helping them succeed." MITCH SIGBAND, GENERAL MANAGER, 1920 & 2010 MAIN PLAZA
[PHOTO]
<PAGE> 33
34
NATIONAL PORTFOLIO
Equity Office has built a highly diversified portfolio of top quality office
buildings across geographic regions, suburban and downtown locations, and major
metropolitan areas. In addition, its subsidiary Equity Capital Holdings, L.P.
has assembled a portfolio of stand-alone parking facilities focused on major
metropolitan areas where demand factors create high-yield opportunities.
MANAGEMENT REGIONS
[UNITED STATES GRAPHIC]
REGIONAL DISTRIBUTION OFFICE CONCENTRATION
[PIE CHART] [PIE CHART]
<PAGE> 34
35
NORTHEAST REGION
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Metropolitan Area/ Number Rentable % Occupied
Property of Buildings Square Feet as of 12/31/97
- -----------------------------------------------------------------------------------------
<S> <C> <C> <C>
STAMFORD, CT
Shelton Point 1 159,848 96.2%
One Stamford Plaza 1 212,244 100.0%
Two Stamford Plaza 1 253,020 97.4%
Three Stamford Plaza 1 241,575 97.3%
Four Stamford Plaza 1 260,581 95.9%
177 Broad Street 1 187,573 95.5%
300 Atlantic Street 1 272,458 100.0%
Canterbury Green 1 224,405 100.0%
WASHINGTON, D.C
1111 19th Street 1 252,014 98.8%
1620 L Street 1 156,272 98.0%
One Lafayette Centre 1 314,634 99.1%
1333 H Street 1 247,014 90.8%
1600 Duke Street 1 68,770 100.0%
Polk and Taylor Buildings 2 896,003 100.0%
Centerpointe I & II 2 407,723 99.8%
Fair Oaks Plaza 1 177,917 92.7%
Northridge I 1 124,319 100.0%
Reston Town Center 3 726,045 100.0%
1300 North 17th Street 1 379,199 99.7%
1616 N. Fort Myer Drive 1 293,058 100.0%
E. J. Randolph 1 165,116 98.9%
John Marshall I 1 255,558 100.0%
BOSTON, MA
150 Federal Street 1 529,730 100.0%
175 Federal Street 1 207,366 92.2%
2 Oliver Street-147 Milk Street 1 270,302 92.8%
225 Franklin Street 1 938,632 99.4%
28 State Street 1 570,040 57.8%
75 - 101 Federal Street 2 810,963 93.9%
One Post Office Square 1 765,780 98.7%
Rowes Wharf 3 344,698 96.5%
Russia Wharf 1 312,563 99.9%
South Station 1 146,149 100.0%
Center Plaza 1 637,002 93.7%
One Canal Park 1 97,912 98.6%
Riverview I & II 2 263,892 100.0%
Ten Canal Park 1 110,843 100.0%
Crosby Corporate Center 6 337,292 97.8%
New England Executive Park 9 807,521 92.2%
Westwood Business Center 1 165,851 95.7%
Wellesley Office Park 8 638,229 98.4%
NEW YORK CITY, NY
850 Third Avenue 1 562,567 100.0%
PHILADELPHIA, PA
Four Falls Corporate Center 1 254,355 99.8%
1601 Market Street 1 681,289 95.0%
1700 Market Street 1 825,547 85.6%
Oak Hill Plaza 1 164,360 100.0%
Walnut Hill Plaza 1 149,716 97.5%
One Devon Square 1 73,267 100.0%
Two Devon Square 1 63,226 91.8%
Three Devon Square 1 6,000 100.0%
One Valley Square 1 70,289 100.0%
Two Valley Square 1 70,622 100.0%
Three Valley Square 1 84,605 98.3%
Four and Five Valley Square 2 68,321 100.0%
NORFOLK, VA
Dominion Tower 1 403,276 96.2%
- -----------------------------------------------------------------------------------------
Total/Weighted Average 83 17,707,551 95.8%
</TABLE>
CENTRAL REGION
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Metropolitan Area/ Number Rentable % Occupied
Property of Buildings Square Feet as of 12/31/97
- -----------------------------------------------------------------------------
<S> <C> <C> <C>
CHICAGO, IL
161 N. Clark 1 1,010,520 80.1%
200 West Adams 1 677,222 89.6%
30 N. LaSalle Street 1 925,950 95.2%
One North Franklin 1 617,592 99.3%
10 & 30 S. Wacker 2 2,003,288 95.8%
101 N. Wacker 1 575,294 89.4%
Civic Opera Building 1 826,472 82.6%
Presidents Plaza 4 794,396 93.2%
1700 Higgins 1 133,876 100.0%
AT&T Plaza 1 224,847 98.0%
Oakbrook Terrace Tower 1 772,928 87.9%
Westbrook Corporate Center 5 1,106,608 89.3%
Tri-State International 5 546,263 84.6%
INDIANAPOLIS, IN
Bank One Center/Tower 2 1,057,877 93.3%
CLEVELAND, OH
BP Tower 1 1,242,144 94.0%
COLUMBUS, OH
One Columbus 1 407,472 92.6%
Community Corporate Center 1 250,169 99.1%
One Crosswoods Center 1 129,583 96.4%
- -----------------------------------------------------------------------------
Total/Weighted Average 31 13,302,501 91.4%
</TABLE>
<TABLE>
<CAPTION>
PACIFIC REGION
- --------------------------------------------------------------------------------
<S> <C> <C> <C>
LOS ANGELES, CA
550 S. Hope 1 566,434 86.8%
Two California Plaza 1 1,329,809 87.4%
Pasadena Towers 2 439,367 90.9%
10880 Wilshire Boulevard 1 534,007 85.1%
10960 Wilshire Boulevard 1 550,430 83.3%
ORANGE COUNTY, CA
500 Orange Tower 1 290,765 94.5%
1100 Executive Tower 1 366,747 100.0%
1920 Main Plaza 1 305,662 97.1%
2010 Main Plaza 1 280,882 94.3%
SAN DIEGO, CA
The Plaza at La Jolla Village 5 635,419 99.9%
Smith Barney Tower 1 187,999 82.2%
SAN FRANCISCO, CA
201 Mission Street 1 483,289 99.6%
580 California 1 313,012 100.0%
60 Spear Street 1 133,782 100.0%
One Maritime Plaza 1 523,929 84.0%
One Market 1 1,460,081 93.8%
SAN JOSE, CA
Shoreline Technology Park 12 726,508 100.0%
Lake Marriott Business Park 7 400,058 84.6%
Sunnyvale Business Center 3 175,000 100.0%
- ------------------------------------------------------------------------------
Total/Weighted Average 43 9,703,180 92.1%
</TABLE>
<PAGE> 35
36
<TABLE>
<CAPTION>
WEST REGION
- -------------------------------------------------------------------------
Metropolitan Area/ Number Rentable % Occupied as
Property of Buildings Square Feet of 12/31/97
- -------------------------------------------------------------------------
<S> <C> <C> <C>
ANCHORAGE, AK
Calais Office Center 2 190,599 100.0%
PHOENIX, AZ
49 East Thomas Road 1 18,892 60.8%
One Phoenix Plaza 1 586,403 100.0%
MINNEAPOLIS, MN
LaSalle Plaza 1 589,432 97.1%
DENVER, CO
Denver Corporate
Center II & III 2 358,357 100.0%
The Quadrant 1 313,302 83.8%
ST. LOUIS, MO
Interco Corporate Tower 1 339,163 100.0%
ALBUQUERQUE, NM
500 Marquette Building 1 230,022 93.6%
OKLAHOMA CITY, OK
Atrium Towers 2 155,865 94.2%
5100 Brookline 1 105,459 76.4%
PORTLAND, OR
1001 Fifth Avenue 1 368,018 95.7%
DALLAS, TX
Four Forest 1 394,324 96.1%
Lakeside Square 1 392,537 99.1%
North Central Plaza Three 1 346,575 90.7%
8080 Central 1 283,707 87.1%
9400 NCX 1 379,556 91.0%
Preston Commons 3 418,604 91.8%
Sterling Plaza 1 302,747 91.1%
FT. WORTH, TX
Summit Office Park 2 239,095 94.3%
SEATTLE, WA
One Bellevue Center 1 344,715 91.7%
Rainer Plaza 1 410,855 99.4%
1111 Third Avenue 1 528,282 96.7%
First Interstate 1 915,883 97.9%
Second and Seneca 2 480,272 99.5%
Nordstrom Medical Tower 1 101,431 96.1%
- -------------------------------------------------------------------------
Total/Weighted Average 32 8,794,095 95.3%
</TABLE>
<TABLE>
<CAPTION>
SOUTHWEST REGION
- ----------------------------------------------------------------------
<S> <C> <C> <C>
NEW ORLEANS, LA
LL&E Tower 1 545,157 84.4%
Texaco Center 1 619,714 87.1%
One Lakeway Center 1 289,112 90.8%
Two Lakeway Center 1 440,826 94.4%
Three Lakeway Center 1 462,890 97.6%
AUSTIN, TX
Franklin Plaza 1 517,849 91.5%
One American Center 1 505,770 92.8%
San Jacinto Center 1 400,329 98.0%
HOUSTON, TX
San Felipe Plaza 1 959,466 93.6%
Intercontinental Center 1 194,801 99.4%
Northborough Tower 1 207,908 95.1%
Brookhollow Central 3 797,971 88.8%
Destec Tower 1 574,216 97.6%
SAN ANTONIO, TX
Union Square 1 194,398 88.7%
Colonade I 1 168,637 92.4%
Northwest Center 1 241,248 88.2%
- ----------------------------------------------------------------------
Total/Weighted Average 18 7,120,292 92.2%
</TABLE>
<TABLE>
<CAPTION>
SOUTHEAST REGION
- -------------------------------------------------------------------------------------
Metropolitan Area/ Number Rentable % Occupied as
Property of Buildings Square Feet of 12/31/97
- -------------------------------------------------------------------------------------
<S> <C> <C> <C>
FT. LAUDERDALE, FL
First Union Center 1 225,500 99.0%
ORLANDO, FL
SunTrust Center 1 640,385 94.4%
PALM BEACH COUNTY, FL
One Clearlake Centre 1 215,104 90.2%
SARASOTA, FL
Sarasota City Center 1 247,891 90.5%
TAMPA, FL
Tampa Commons 1 254,808 99.2%
Westshore Center 1 215,523 96.8%
ATLANTA, GA
125 Perimeter Center West 1 223,059 100.0%
20 - 26 Perimeter Center East 4 69,664 98.4%
219 - 223 Perimeter Center Parkway 2 255,657 100.0%
245 Perimeter Center Parkway 1 229,131 100.0%
28 - 32 Perimeter Center East 3 105,287 99.0%
301 - 303 Perimeter Center North 2 317,116 100.0%
41 - 47 Perimeter Center East 2 172,374 98.3%
50 - 66 Perimeter Center East 5 738,803 99.1%
70 - 76 Perimeter Center East 4 60,351 97.5%
8 - 16 Perimeter Center East 5 65,435 93.9%
Central Park 2 612,733 97.5%
Lakeside Office Park 5 390,238 94.0%
Park Place Shopping Center 1 61,830 98.9%
Perimeter -- North/South Terraces 2 966,779 91.9%
Promenade 1 770,840 97.1%
Paces West 2 641,263 95.1%
CHARLOTTE, NC
Wachovia Center 1 581,666 100.0%
RALEIGH/DURHAM, NC
University Tower 1 181,221 93.4%
NASHVILLE, TN
NationsBank Plaza 1 421,513 97.9%
- -------------------------------------------------------------------------------------
Total/Weighted Average 51 8,664,171 96.5%
- -------------------------------------------------------------------------------------
PORTFOLIO TOTAL/
WEIGHTED AVERAGE 258 65,291,790 94.0%
=====================================================================================
</TABLE>
<TABLE>
<CAPTION>
STAND-ALONE PARKING FACILITIES
- --------------------------------------------------------------------
Metropolitan Area/ Number Number Retail
Property of Facilities of Spaces Square Feet
- --------------------------------------------------------------------
<S> <C> <C> <C>
BOSTON, MA
Boston Harbor 1 1,380 29,725
CHICAGO, IL
203 N. LaSalle 1 1,172 41,307
Theatre District Garage 1 1,006 7,700
Adams-Wabash 1 670 14,722
INDIANAPOLIS, IN
Capitol Commons 1 950 0
MILWAUKEE, WI
Milwaukee Center 1 876 0
NEW ORLEANS, LA
601 Tchoupitoulas 1 759 9,700
PHILADELPHIA, PA
Juniper & Locust 1 541 0
17th & Chancellor 1 416 3,750
15th & Sansom Street 1 313 918
1111 Sansom Steet 1 250 0
1616 Sansom Street 1 240 4,800
PITTSBURGH, PA
Stanwix* 1 712 10,000
ST. LOUIS, MO
Civic Parking 4 7,464 75,403
- --------------------------------------------------------------------
Total 17 16,749 198,025
</TABLE>
*Not including 45,780 sq. ft. of office space and 64,910 sq. ft. of residential
space
<PAGE> 36
FINANCIAL CONTENTS
37
<TABLE>
<S> <C>
Selected Financial Data 38
Management's Discussion and Analysis of
Financial Condition and Results of Operations 40
Report of Independent Auditors 54
Consolidated and Combined Financial Statements 55
Notes to Consolidated and Combined
Financial Statements 59
</TABLE>
<PAGE> 37
38 EQUITY OFFICE PROPERTIES TRUST SELECTED FINANCIAL DATA(1)
The following sets forth selected consolidated and combined financial and
operating information on an historical basis for Equity Office Properties
Trust, together with its subsidiaries including EOP Operating Limited
Partnership and the Company's predecessors ("Equity Office Predecessors")
(the "Company"). The following information should be read in conjunction with
the consolidated and combined financial statements and notes thereto of the
Company and Equity Office Predecessors included elsewhere in this Annual
Report.
<TABLE>
<CAPTION>
Equity Office
Predecessors
(Combined
Historical)
----------------------------------
Company
for the for the
period from period from
July 11, 1997 Jan. 1, 1997
to Dec. 31, to July 10,
(Dollars in thousands, except share data) 1997 1997
---------------------------------------------------------------------------------------------
<S> <C> <C>
OPERATING DATA:
REVENUES:
Rental, parking and other $ 406,713 $ 327,017
------------- -------------
Total revenues $ 412,968 $ 339,104
------------- -------------
EXPENSES:
Interest $ 76,675 $ 80,481
Depreciation and amortization 70,346 66,034
Property operating(2) 155,679 127,285
General and administrative 17,690 17,201
Provision for value impairment -- --
------------- -------------
Total expenses $ 320,390 $ 291,001
------------- -------------
Income before (income) loss allocated to minority
interests, income from investments in unconsolidated
joint ventures, gain on sales of real estate, and
extraordinary items $ 92,578 $ 48,103
Minority interests allocation (7,799) (912)
Income from investments in unconsolidated
joint ventures 3,173 1,982
Gain/(Loss) on sales of real estate and
extraordinary items (16,240) 12,236
------------- -------------
Net income before preferred dividends 71,712 61,409
Preferred dividends (649) --
------------- -------------
Net income available to Common Shares $ 71,063 $ 61,409
============= =============
Net income available per weighted average
Common Share outstanding -- Basic $ .44
=============
Net income available per weighted average
Common Share outstanding -- Diluted $ .43
=============
Weighted average Common Shares
outstanding -- Basic 162,591,477
=============
Weighted average Common Shares outstanding -- Diluted 180,014,027
=============
<CAPTION>
------------------------------------------------------------------
Equity Office Predecessors (Combined Historical)
for the years ended December 31,
(Dollars in thousands, except share data) 1996 1995 1994 1993
----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
OPERATING DATA:
REVENUES:
Rental, parking and other $ 493,396 $ 356,959 $ 230,428 $ 150,315
------------- ------------- ------------- -------------
Total revenues $ 508,124 $ 371,457 $ 240,878 $ 159,246
------------- ------------- ------------- -------------
EXPENSES:
Interest $ 119,595 $ 100,566 $ 59,316 $ 36,755
Depreciation and amortization 96,237 74,156 46,905 29,752
Property operating(2) 201,067 151,488 107,412 74,028
General and administrative 23,145 21,987 15,603 12,012
Provision for value impairment -- 20,248 -- --
------------- ------------- ------------- -------------
Total expenses $ 440,044 $ 368,445 $ 229,236 $ 152,547
------------- ------------- ------------- -------------
Income before (income) loss allocated to minority
interests, income from investments in unconsolidated
joint ventures, gain on sales of real estate, and
extraordinary items $ 68,080 $ 3,012 $ 11,642 $ 6,699
Minority interests allocation (2,086) (2,129) 1,437 1,772
Income from investments in unconsolidated
joint ventures 2,093 2,305 1,778 --
Gain/(Loss) on sales of real estate and
extraordinary items 5,338 31,271 1,705 --
------------- ------------- ------------- -------------
Net income before preferred dividends 73,425 34,459 16,562 8,471
Preferred dividends -- -- -- --
------------- ------------- ------------- -------------
Net income available to Common Shares $ 73,425 $ 34,459 $ 16,562 $ 8,471
============= ============= ============= =============
Net income available per weighted average
Common Share outstanding -- Basic
Net income available per weighted average
Common Share outstanding -- Diluted
Weighted average Common Shares
outstanding -- Basic
Weighted average Common Shares outstanding -- Diluted
</TABLE>
<PAGE> 38
EQUITY OFFICE PROPERTIES TRUST SELECTED FINANCIAL DATA(1) 39
<TABLE>
<CAPTION>
Equity Office
Predecessors
(Combined
Historical)
-----------------------------------
Company
for the for the
period from period from
July 11, 1997 Jan. 1, 1997
to Dec. 31, to July 10,
(Dollars in thousands, except share data) 1997 1997
-----------------------------------------------------------------------------------------
<S> <C> <C>
BALANCE SHEET DATA:
(at end of period)
Investment in real estate after
accumulated depreciation $ 10,976,319 --
------------ ------------
Total assets $ 11,751,672 --
------------ ------------
Mortgage debt, unsecured notes and lines
of credit $ 4,284,317 --
------------ ------------
Total liabilities $ 4,591,697 --
------------ ------------
Minority interests $ 754,818 --
------------ ------------
Shareholders'/Owners' equity $ 6,405,157 --
------------ ------------
OTHER DATA:
General and administrative expenses as a percentage
of total revenues 4.3% 5.1%
------------ ------------
Number of Office Properties owned at
period end(3) 258 --
------------ ------------
Net rentable square feet of Office Properties
owned at period end (in millions)(3) 65.3 --
------------ ------------
Occupancy of Office Properties owned at
period end(3) 94% --
------------ ------------
Number of Parking Facilities owned at period end 17 --
------------ ------------
Number of spaces at Parking Facilities owned
at period end 16,749 --
------------ ------------
Funds from Operations(4) $ 163,253 $ 113,022
------------ ------------
Cash flow from operating activities $ 190,754 $ 95,960
Cash flow used for investing activities $ (1,592,272) $ (571,068)
Cash flow from financing activities $ 1,630,346 $ 245,851
<CAPTION>
------------------------------------------------------------------
Equity Office Predecessors (Combined Historical)
for the years ended December 31,
(Dollars in thousands, except share data) 1996 1995 1994 1993
------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
BALANCE SHEET DATA:
(at end of period)
Investment in real estate after
accumulated depreciation $ 3,291,815 $ 2,393,403 $ 1,815,160 $ 1,220,268
------------ ------------ ------------ ------------
Total assets $ 3,912,565 $ 2,650,890 $ 2,090,933 $ 1,318,644
------------ ------------ ------------ ------------
Mortgage debt, unsecured notes and lines
of credit $ 1,964,892 $ 1,434,827 $ 1,261,156 $ 798,897
------------ ------------ ------------ ------------
Total liabilities $ 2,174,483 $ 1,529,334 $ 1,350,552 $ 845,315
------------ ------------ ------------ ------------
Minority interests $ 11,080 $ 31,587 $ 9,283 $ (15,298)
------------ ------------ ------------ ------------
Shareholders'/Owners' equity $ 1,727,002 $ 1,089,969 $ 731,098 $ 488,627
------------ ------------ ------------ ------------
OTHER DATA:
General and administrative expenses as a percentage
of total revenues 4.6% 5.9% 6.5% 7.5%
------------ ------------ ------------ ------------
Number of Office Properties owned at
period end(3) 83 73 63 48
------------ ------------ ------------ ------------
Net rentable square feet of Office Properties
owned at period end (in millions)(3) 29.2 23.1 18.5 13.6
------------ ------------ ------------ ------------
Occupancy of Office Properties owned at
period end(3) 90% 86% 88% 80%
------------ ------------ ------------ ------------
Number of Parking Facilities owned at period end 10 3 -- --
------------ ------------ ------------ ------------
Number of spaces at Parking Facilities owned
at period end 7,321 3,323 -- --
------------ ------------ ------------ ------------
Funds from Operations(4) $ 160,460 $ 96,104 $ 60,372 --
------------ ------------ ------------ ------------
Cash flow from operating activities $ 165,975 $ 93,878 $ 73,821 --
Cash flow used for investing activities $ (924,227) $ (380,615) $ (513,965) --
Cash flow from financing activities $ 1,057,551 $ 276,513 $ 514,923 --
</TABLE>
(1) The selected financial data at December 31, 1997, 1996 and 1995 and for
the four years ended December 31, 1997 has been derived from the historical
consolidated or combined financial statements of the Company and Equity
Office Predecessors, audited by Ernst & Young, LLP, independent auditors. The
selected financial data at December 31, 1994 and 1993 and for the year ended
December 31, 1993 has been derived from the historical unaudited combined
financial statements of Equity Office Predecessors.
(2) Includes property operating expenses, real estate taxes, insurance, as
well as repair and maintenance expenses.
(3) The data at the years ended December 31, 1997, 1996 and 1995, includes 28
State Street, a 570,040 square foot Office Property which, due to a
redevelopment, was vacant prior to May 1997. The weighted average occupancy,
excluding 28 State Street, as of December 31, 1997, 1996 and 1995, was
approximately 94%, 92% and 88%, respectively.
(4) The White Paper on Funds from Operations approved by the Board of
Governors of the National Association of Real Estate Investment Trusts
("NAREIT") in March 1995 defines Funds from Operations as net income (loss)
(computed in accordance with GAAP), excluding gains (or losses) from debt
restructuring and sales of properties, plus real estate related depreciation
and amortization and after adjustments for unconsolidated partnerships and
joint ventures. The Company believes that Funds from Operations is helpful to
investors as a measure of the performance of an equity REIT because, along
with cash flow from operating activities, financing activities and investing
activities, it provides investors with an indication of the ability of the
Company to incur and service debt, to make capital expenditures and to fund
other cash needs. The Company computes Funds from Operations in accordance
with standards established by NAREIT, which may not be comparable to Funds
from Operations reported by other REITs that do not define the term in
accordance with the current NAREIT definition or that interpret the current
NAREIT definition differently than the Company. Funds from Operations does
not represent cash generated from operating activities in accordance with
GAAP and should not be considered as an alternative to net income (determined
in accordance with GAAP) as an indication of the Company's financial
performance or to cash flow from operating activities (determined in
accordance with GAAP) as a measure of the Company's liquidity, nor is it
indicative of funds available to fund the Company's cash needs, including its
ability to make cash distributions. For a reconciliation of net income and
Funds from Operations, see "Management's Discussion and Analysis of Financial
Condition and Results of Operations -- Funds from Operations."
<PAGE> 39
40 EQUITY OFFICE PROPERTIES TRUST MANAGEMENT'S DISCUSSION AND
ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
OVERVIEW
The following discussion and analysis of the consolidated and combined
financial condition and results of operations should be read in conjunction
with the Consolidated Financial Statements of the Company and the Combined
Financial Statements of Equity Office Predecessors and Notes thereto
contained herein. All references to the historical activities of the Company
prior to July 11, 1997, the date of the Company's initial public offering
(the "IPO") contained in this "MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS" refer to the activities of the
Equity Office Predecessors. Terms employed herein as defined terms, but
without definition, shall have the meaning set forth in the financial
statements. Statements contained in this "MANAGEMENT'S DISCUSSION AND
ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS" which are not
historical facts may be forward-looking statements. Such statements are
subject to certain risks and uncertainties which could cause actual results
to differ materially from those projected. Readers are cautioned not to place
undue reliance on these forward-looking statements which speak only as of the
date hereof.
The Company was formed to continue and expand the national office property
business of the Equity Office Predecessors, organized by Mr. Samuel Zell,
Chairman of the Board of Trustees of the Company. On July 11, 1997, following
the completion of the Company's IPO and the related formation transactions,
the Company owned 90 office properties containing approximately 32.2 million
rentable square feet and 14 parking facilities containing 14,785 spaces.
During the period from July 11, 1997 to December 31, 1997, the Company
acquired an additional 168 office properties containing approximately 33.1
million square feet and three parking facilities containing 1,964 spaces. The
aggregate purchase price for these acquisitions was in excess of $6 billion.
These acquisitions, which included the successful completion of the merger
with Beacon Properties Corporation in December, effectively doubled the size
of the Company's portfolio in its first six months as a public company,
giving it a total of 258 office buildings with approximately 65.3 million
rentable square feet, and 17 parking facilities with approximately 16,749
spaces.
The Company owns substantially all of its assets and conducts
substantially all of its business through the Operating Partnership and its
subsidiaries. At December 31, 1997, the Company owned, directly or
indirectly, approximately 89.5% of the outstanding partnership interest in
the Operating Partnership.
In addition to the acquisition activity detailed above, the Company was
also active in the capital markets. Below is a schedule of significant
capital events which have taken place since the IPO on July 11, 1997 (see
Liquidity and Capital Resources below for the details of these transactions):
- On July 15, 1997, the Company closed on a $600 million revolving line of
Credit (the "$600 Million Credit Facility").
- On September 3, 1997, the Company closed on a $180 million private
unsecured notes offering (the "$180 Million Notes Offering").
- On October 2, 1997, the Company closed on a $1.5 billion unsecured term
loan (the "$1.5 Billion Credit Facility").
- In October 1997, the Company completed two private placements for a total
of 9,685,034 restricted Common Shares.
- In connection with the Beacon Merger and other acquisitions which took
place since the IPO, the Company issued a total of 87,861,544 Common
Shares, an additional 17,282,043 Units, 8,000,000 8.98% Series A
Cumulative Redeemable Preferred Shares, liquidation value of $25 per
share, and 5,000,000 warrants.
- In February 1998, the Company completed a $1.25 billion private senior
unsecured notes offering (the "$1.25 Billion Notes Offering") and a $250
million MandatOry Par Put Remarketed Securities ("MOPPRS") private
offering (the "$250 Million MOPPRS Offering").
- In February 1998, the Company completed a $300 million private offering of
5.25% Preferred Income Equity Redeemable Shares (the "$300 Million PIERS
Offering"), liquidation value of $50 per share.
<PAGE> 40
RESULTS OF OPERATIONS 41
GENERAL
The following discussion is based primarily on the Consolidated Financial
Statements of the Company and the Combined Financial Statements of Equity Office
Predecessors, as applicable, as of December 31, 1997 and 1996 and for each of
the years ended December 31, 1997, 1996 and 1995.
The Company receives income primarily from rental revenue from Office
Properties (including reimbursements from tenants for certain operating costs),
parking revenue from Office Properties and stand-alone Parking Facilities, and,
to a lesser extent, from fees from noncombined affiliates for the management of
the Managed Properties.
As of December 31, 1997, the Company owned or had an interest in 258
Office Properties totaling approximately 65.3 million square feet, and 17
stand-alone Parking Facilities with approximately 16,749 spaces, including
properties acquired through the Beacon Merger (the "Total Portfolio"). Of the
Total Portfolio, 71 of these Office Properties, totaling approximately 22.6
million square feet and three Parking Facilities were acquired prior to January
1, 1996; 11 Office Properties, totaling approximately 6.1 million square feet,
and seven Parking Facilities were acquired in 1996; and 176 Office Properties,
totaling approximately 36.6 million square feet, and seven Parking Facilities
were acquired during the year ended December 31, 1997. As a result of this rapid
growth in the size of the Total Portfolio, the financial data presented shows
large increases in revenues and expenses from year to year. For the foregoing
reasons, the Company does not believe its year to year financial data is
comparable. Therefore, the analysis below shows changes resulting from
Properties that were held during the entire period for the years being compared
(the "Core Portfolio") and the changes in Total Portfolio. The Core Portfolio
for the comparison between the year ended December 31, 1997 and 1996 consists of
70 Office Properties and three Parking Facilities acquired prior to January 1,
1996. The Core Portfolio for these comparisons excludes Barton Oaks Plaza II, a
118,529 square foot Office Property which was sold in January 1997, 8383
Wilshire, a 417,463 square foot Office Property, which was sold in May 1997, and
28 State Street, a 570,040 square foot Office Property, which was undergoing
major redevelopment for the periods discussed. The Core Portfolio for the
comparison between the years ended December 31, 1996 and 1995 consists of the 63
Office Properties acquired prior to January 1, 1995. The Core Portfolio for
these comparisons includes Barton Oaks Plaza II and 8383 Wilshire.
YEARS ENDED DECEMBER 31, 1997 AND 1996
The table below represents selected operating information for the Total
Portfolio and for the Core Portfolio which consists of the 70 Office Properties
and three Parking Facilities acquired prior to January 1, 1996. The Core
Portfolio excludes Barton Oaks Plaza II, which was sold in January 1997, 8383
Wilshire, which was sold in May 1997, and 28 State Street, which has recently
undergone major redevelopment and was vacant prior to May 1997.
<TABLE>
<CAPTION>
-------------------------------------------------
Total Portfolio
-------------------------------------------------
Increase/ %
(Dollars in thousands) 1997 1996 (Decrease) Change
- ------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Property revenues $ 733,730 $ 493,396 $ 240,334 48.7%
Interest income 13,392 9,608 3,784 39.4%
Fees from noncombined affiliates 4,950 5,120 (170) (3.3)%
--------- --------- --------- ----
Total revenues 752,072 508,124 243,948 48.0%
--------- --------- --------- ----
Interest expense 157,156 119,595 37,561 31.4%
Depreciation and amortization 136,380 96,237 40,143 41.7%
Property operating expenses 282,964 201,067 81,897 40.7%
General and administrative 34,891 23,145 11,746 50.7%
--------- --------- --------- ----
Total expenses 611,391 440,044 171,347 38.9%
--------- --------- --------- ----
Income before allocation to minority
interests, income from investment
in unconsolidated joint ventures,
gain on sales of real estate and
extraordinary items 140,681 68,080 72,601 106.6%
Minority interests (8,711) (2,086) (6,625) (317.6)%
Income from unconsolidated joint
ventures 5,155 2,093 3,062 146.3%
Gain on sales of real estate and
extraordinary items (4,004) 5,338 (9,342) (175.0)%
--------- --------- --------- ----
Net income $ 133,121 $ 73,425 $ 59,696 81.3%
========= ========= ========= ====
Property revenues less property
operating expenses $ 450,766 $ 292,329 $ 158,437 54.2%
========= ========= ========= ====
<CAPTION>
-------------------------------------------------
Core Portfolio
-------------------------------------------------
Increase/ %
(Dollars in thousands) 1997 1996 (Decrease) Change
- ------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Property revenues $ 458,968 $ 427,936 $ 31,032 7.3%
Interest income 1,056 1,882 (826) (43.9)%
Fees from noncombined affiliates -- -- -- --
--------- --------- --------- ----
Total revenues 460,024 429,818 30,206 7.0%
--------- --------- --------- ----
Interest expense 93,606 110,566 (16,960) (15.3)%
Depreciation and amortization 85,999 84,411 1,588 1.9%
Property operating expenses 177,972 176,432 1,540 0.9%
General and administrative N/A N/A N/A N/A
--------- --------- --------- ----
Total expenses 357,577 371,409 (13,832) (3.7)%
--------- --------- --------- ----
Income before allocation to minority
interests, income from investment
in unconsolidated joint ventures,
gain on sales of real estate and
extraordinary items 102,447 58,409 44,038 75.4%
Minority interests (1,679) (1,986) 307 15.5%
Income from unconsolidated joint
ventures 2,432 2,093 339 16.2%
Gain on sales of real estate and
extraordinary items (16,311) -- (16,311) --
--------- --------- --------- ----
Net income $ 86,889 $ 58,516 $ 28,373 48.5%
========= ========= ========= ====
Property revenues less property
operating expenses $ 280,996 $ 251,504 $ 29,492 11.7%
========= ========= ========= ====
</TABLE>
<PAGE> 41
42 PROPERTY REVENUES
The increase in rental revenues, tenant reimbursements, parking income and
other income ("Property Revenues") in the Core Portfolio resulted from a
combination of occupancy and rental rate increases. The weighted average
occupancy of the Core Portfolio increased from approximately 88.5% at January
1, 1996 to 94.8% as of December 31, 1997. This increase represents
approximately 1.4 million square feet of additional occupancy in the Core
Portfolio between January 1, 1996 and December 31, 1997. Included in Property
Revenues for the Core Portfolio are lease termination fees of approximately
$3.7 million and $5.6 million for the years ended December 31, 1997 and 1996,
respectively (which are included in the other revenue category on the
consolidated and combined statement of operations). These fees are related to
specific tenants who have paid a fee to terminate their lease obligations
before the end of the contractual term of the lease. Although the Company has
historically experienced similar levels of such termination fees, there is no
way of predicting the timing or amounts of future lease termination fees. The
straight-line rent adjustment which is included in rental revenues for the
Core Portfolio for the years ended December 31, 1997 and 1996, was
approximately $14.6 million and $13.9 million, respectively. The
straight-line rent adjustment which is included in rental revenues for the
Total Portfolio for the years ended December 31, 1997 and 1996 was
approximately $27.7 million and $18.4 million, respectively. Other income for
1996 also includes approximately $8.8 million relating to the Company's share
of a litigation settlement.
INTEREST INCOME
Interest income for the Total Portfolio increased by approximately $3.8
million to $13.4 million for the year ended December 31, 1997, compared to
$9.6 million for the year ended December 31, 1996. This increase in interest
income is primarily due to having a greater amount of cash reserves invested
in short term investments pending investment in property acquisitions prior
to the IPO. Prior to the Consolidation, each of the entities involved in the
Consolidation needed to maintain separate cash reserves which in the
aggregate were higher than the cash reserves the Company anticipates
maintaining going forward. Due to the availability of borrowings under the
Company's Credit Facilities, the Company currently maintains lower cash
reserves which are targeted to be between $25 and $50 million (although the
cash balance may at times be more or less in anticipation of pending
acquisitions or other transactions). The lower cash balance will result in
lower interest income in future periods, however, this loss in income should
be offset by savings on interest expense on the Company's Credit Facilities.
FEES FROM NONCOMBINED AFFILIATES
Fees from noncombined affiliates decreased in 1997 from approximately $5.1
million in 1996 to $4.9 million in 1997. These fees are expected to continue
to decrease in future periods as the Managed Properties are sold. Fee income
for the years ended December 31, 1997 and 1996, of approximately $0.4 million
and $1.3 million, respectively, was related to properties which have been
sold.
INTEREST EXPENSE
$119.6 million for the year ended December 31, 1996. This increase resulted
from having more debt outstanding in 1997. The increase in total debt and the
related increase in interest expense was directly related to Property
acquisitions. While the Company's total debt and total interest expense have
increased due to acquisition activity, the total debt as a percentage of
total assets decreased from 50% of total assets at December 31, 1996 to 36.5%
of total assets at December 31, 1997, and the Company's interest coverage
ratio increased from 2.4 times in 1996 to 2.8 times in 1997. In addition, the
weighted average interest rate on the Company's debt decreased from
approximately 7.7% at December 31, 1996 to approximately 7.2% at December 31,
1997. The decrease in interest expense in the Core Portfolio of $17.0 million
is primarily due to the replacement of secured debt with unsecured debt.
DEPRECIATION AND AMORTIZATION
Depreciation and amortization increased for the Total Portfolio as a result
of properties acquired during 1997 and the recording of substantially all the
Company's assets and liabilities at their fair market value in connection
with the Consolidation and the Company's IPO.
The increase in depreciation in the Core Portfolio resulted from the
recording of substantially all the Company's assets and liabilities at their
fair market value in connection with the Consolidation and the Company's IPO.
The decrease in amortization in the Core Portfolio resulted from the
write-off of deferred financing and leasing costs at the time of the
Consolidation and the Company's IPO.
PROPERTY OPERATING EXPENSES
The increase in real estate taxes and insurance, repairs and maintenance, and
property operating expenses ("Property Operating Expenses") in the Core
Portfolio relates primarily to increases in real estate taxes due to higher
property valuations partially offset by real estate tax refunds recorded in
the year ended December 31, 1997.
<PAGE> 42
GENERAL AND ADMINISTRATIVE EXPENSES 43
General and administrative expenses for the Total Portfolio increased by
approximately $11.8 million to $34.9 million for the year ended December 31,
1997, compared to $23.1 million for the year ended December 31, 1996. General
and administrative expenses as a percentage of total revenues was
approximately 4.6% for the years ended December 31, 1997 and 1996. The
primary reasons for the increase in general and administrative expenses are
the significant increase in the size of the Company's portfolio and increased
expenses associated with becoming a public company. While general and
administrative expenses will continue to increase as the size of the
Company's portfolio increases, it is anticipated that general and
administrative expenses as a percentage of total revenue will initially
remain stable (or increase slightly), as the full costs of running a public
company are reflected in operations, and then decrease over time as the
Company realizes increased economies of scale.
PARKING OPERATIONS
Included in the Total and Core Portfolio selected operating information, for
the years ended December 31, 1997 and 1996, are results of operations from
the stand-alone Parking Facilities, the summarized information for which is
presented below. As of December 31, 1997, the Company owned or had an
interest in 17 stand-alone Parking Facilities with approximately 16,749
spaces. Of the Total Portfolio, three Parking Facilities were acquired prior
to January 1, 1996; seven Parking Facilities were acquired in 1996; and seven
Parking Facilities were acquired during the year ended December 31, 1997. The
Core Portfolio for the comparison between the years ended December 31, 1997
and 1996 consist of three Parking Facilities acquired prior to January 1,
1996.
Comparison of the Year Ended December 31, 1997 to the Year Ended December 31,
1996
<TABLE>
<CAPTION>
Total Parking Portfolio
----------------------------------------------
Increase/ %
(Dollars in thousands) 1997 1996 (Decrease) Change
- --------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Property Revenues $ 22,577 $ 10,203 $ 12,374 121.3%
Interest income 249 141 108 76.6%
-------- -------- -------- -----
Total revenues 22,826 10,344 12,482 120.7%
-------- -------- -------- -----
Interest expense 5,427 1,814 3,613 199.2%
Depreciation and amortization 4,031 1,432 2,599 181.5%
Property Operating Expenses 5,124 3,152 1,972 62.6%
-------- -------- -------- -----
Total expenses 14,582 6,398 8,184 127.9%
-------- -------- -------- -----
Income before allocation to minority
interests and income from investment
in unconsolidated joint ventures 8,244 3,946 4,298 108.9%
Minority interests (323) (252) (71) (28.2)%
Income from unconsolidated joint ventures 2,461 -- 2,461 --
-------- -------- -------- -----
Net income $ 10,382 $ 3,694 $ 6,688 181.1%
-------- -------- -------- -----
Property Revenues less Property
Operating Expenses $ 17,453 $ 7,051 $ 10,402 147.5%
-------- -------- -------- -----
<CAPTION>
Core Parking Portfolio
----------------------------------------------
Increase/ %
(Dollars in thousands) 1997 1996 (Decrease) Change
- -------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Property Revenues $ 10,238 $ 9,873 $ 365 3.7%
Interest income 239 141 98 69.5%
-------- -------- -------- ----
Total revenues 10,477 10,014 463 4.6%
-------- -------- -------- ----
Interest expense 2,724 1,645 1,079 65.6%
Depreciation and amortization 1,708 1,359 349 25.7%
Property Operating Expenses 2,619 3,081 (462)
-------- -------- -------- ----
Total expenses 7,051 6,085 966 15.9%
-------- -------- -------- ----
Income before allocation to minority
interests and income from investment
in unconsolidated joint ventures 3,426 3,929 (503) (12.8)%
Minority interests (323) (252) (71) (28.2)%
Income from unconsolidated joint ventures -- -- -- --
-------- -------- -------- ----
Net income $ 3,103 $ 3,677 $ (574) (15.6)%
======== ======== ======== ====
Property Revenues less Property
Operating Expenses $ 7,619 $ 6,792 $ 827 12.2%
======== ======== ======== ====
</TABLE>
<PAGE> 43
44 YEARS ENDED DECEMBER 31, 1996 AND 1995
The table below presents selected operating information for the Total
Portfolio and for the Core Portfolio which consists of the 63 Office
Properties acquired prior to January 1, 1995. The Core Portfolio for this
comparison includes Barton Oaks Plaza II and 8383 Wilshire, which were sold
in 1997.
<TABLE>
<CAPTION>
Total Portfolio
--------------------------------------------------
Increase/ %
(Dollars in thousands) 1996 1995 (Decrease) Change
- -------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Property Revenues $ 493,396 $ 356,959 $ 136,437 38.2%
Interest income 9,608 8,599 1,009 11.7%
Fees from noncombined affiliates 5,120 5,899 (779) (13.2)%
--------- --------- --------- ----
Total revenues 508,124 371,457 136,667 36.8%
--------- --------- --------- ----
Interest expense 119,595 100,566 19,029 18.9%
Depreciation and amortization 96,237 74,156 22,081 29.8%
Property Operating Expenses 201,067 151,488 49,579 32.7%
General and administrative 23,145 21,987 1,158 5.3%
Provision for value impairment -- 20,248 (20,248) (100.0)%
--------- --------- --------- ----
Total expenses 440,044 368,445 71,599 19.4%
--------- --------- --------- ----
Income before allocation to minority
interests, income from investment
in unconsolidated joint ventures,
gain on sales of real estate and
extraordinary items 68,080 3,012 65,068 2,160.3%
Minority interests, net of extraordinary
gain of $20,035 in 1995 for the
total and core portfolios (2,086) (2,129) 43 2.0%
Income from unconsolidated joint ventures 2,093 2,305 (212) (9.2)%
Gain on sales of real estate and
extraordinary items 5,338 31,271 (25,933) (82.9)%
--------- --------- --------- ----
Net income $ 73,425 $ 34,459 $ 38,966 113.1%
========= ========= ========= ====
Property Revenues less Property
Operating Expenses $ 292,329 $ 205,471 $ 86,858 42.3%
========= ========= ========= ====
<CAPTION>
Core Portfolio
--------------------------------------------------
Increase/ %
(Dollars in thousands) 1996 1995 (Decrease) Change
- ----------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Property Revenues $ 349,810 $ 327,017 $ 22,793 7.0%
Interest income -- -- -- --
Fees from noncombined affiliates -- -- -- --
--------- --------- --------- ---
Total revenues 349,810 327,017 22,793 7.0%
--------- --------- --------- ---
Interest expense 85,225 85,371 (146) (0.2)%
Depreciation and amortization 71,969 68,226 3,743 5.5%
Property Operating Expenses 143,511 137,103 6,408 4.7%
General and administrative -- -- -- --
Provision for value impairment -- 20,248 (20,248) (100.0)%
--------- --------- --------- ---
Total expenses 300,705 310,948 (10,243) (3.3)%
--------- --------- --------- ---
Income before allocation to minority
interests, income from investment
in unconsolidated joint ventures,
gain on sales of real estate and
extraordinary items 49,105 16,069 33,036 205.6%
Minority interests, net of extraordinary
gain of $20,035 in 1995 for the
total and core portfolios (1,733) (2,023) 290 14.3%
Income from unconsolidated joint ventures 2,093 2,305 (212) (9.2)%
Gain on sales of real estate and
extraordinary items -- 31,271 (31,271) (100.0)%
--------- --------- --------- ---
Net income $ 49,465 $ 47,622 $ 1,843 3.9%
========= ========= ========= ===
Property Revenues less Property
Operating Expenses $ 206,299 $ 189,914 $ 16,385 8.6%
========= ========= ========= ===
</TABLE>
PROPERTY REVENUES
The increase in Property Revenues in the Core Portfolio resulted from a
combination of occupancy and rental rate increases. The weighted average
occupancy of the Core Portfolio increased from approximately 87.5 % at
January 1, 1995 to 94.3% as of December 31, 1996. This increase represents
approximately 1.3 million square feet of additional occupancy in the Core
Portfolio between January 1, 1995 and December 31, 1996. Included in Property
Revenues for the Core Portfolio are lease termination fees of $5.6 million
and $5.0 million for the years ended December 31, 1996 and 1995, respectively
(these amounts are included in the other revenue category on the combined
statements of operations). These fees are related to specific tenants who
have paid a fee to terminate their lease obligations before the end of the
contractual term of the lease. Although the Company has historically
experienced similar levels of such termination fees, there is no way of
predicting the timing or amounts of future lease termination fees. The
straight-line rent adjustment which is included in rental revenues for the
Core Portfolio for the years ended December 31, 1996 and 1995, was
approximately $6.8 million and $10.5 million, respectively. The straight-line
rent adjustment which is included in rental revenues for the Total Portfolio
for the years ended December 31, 1996 and 1995, was approximately $18.4
million and $12.7 million, respectively. Other income for 1996 also includes
approximately $8.8 million relating to the Company's share of a litigation
settlement.
<PAGE> 44
INTEREST INCOME 45
Interest income for the Total Portfolio increased by approximately $1.0
million to $9.6 million for the year ended December 31, 1996 compared to $8.6
million for the year ended December 31, 1995. This increase in interest
income is due primarily to having a larger amount of cash invested in short
term investments pending the purchase of new acquisitions.
FEES FROM NONCOMBINED AFFILIATES
Fee income from the Managed Properties for the Total Portfolio decreased as a
result of disposition activities in 1995 and 1996 which reduced the number of
properties being managed.
INTEREST EXPENSE
Interest expense increased by approximately $19.0 million for the Total
Portfolio to $119.6 million for the year ended December 31, 1996 compared to
$100.6 million for the year ended December 31, 1995. This increase was
primarily the result of increased debt obtained to finance acquisitions.
DEPRECIATION AND AMORTIZATION
The increase in depreciation and amortization in the Core Portfolio was
related to depreciation of capital and tenant improvements made at properties
in the Core Portfolio in 1995 and 1996 and the amortization of leasing
commissions and loan fees paid during that time period.
PROPERTY OPERATING EXPENSES
The increase in Property Operating Expenses in the Core Portfolio resulted
from an increase in maintenance expenses in 1996 and real estate tax refunds
received in 1995, with approximately $1.9 million relating to a single
property, which reduced the tax expense in 1995.
GENERAL AND ADMINISTRATIVE
General and administrative expenses increased by approximately $1.1 million
to $23.1 million for the year ended December 31, 1996 compared to $22.0
million for the year ended December 31, 1995. General and administrative
expenses as a percentage of total revenues was approximately 4.6% and 5.9%
for the years ended December 31, 1996 and 1995, respectively. While general
and administrative expenses will continue to increase as the size of the
Company's portfolio increases, it is anticipated that general and
administrative expenses as a percentage of total revenues will initially
remain stable (or increase slightly), as the full costs of running a public
company are reflected in operations, and then decrease over time as the
Company realizes increased economies of scale.
PROVISION FOR VALUE IMPAIRMENT
During 1995, the Financial Accounting Standards Board issued Statement No.
121 "Accounting for the Impairment of Long-Lived Assets to Be Disposed Of"
which established accounting standards for the evaluation of the potential
impairment of such assets. This statement was adopted by Equity Office
Predecessors as of January 1, 1995. Rental properties are individually
evaluated for impairment when conditions exist which may indicate that it is
probable that the sum of expected future cash flows (on an undiscounted
basis) from a rental property are less than its historical net cost basis.
Upon determination that a permanent impairment has occurred, rental
properties are reduced to their fair value. As a result of cash deficits, San
Felipe Plaza was evaluated for impairment and accordingly, during the year
ended December 31, 1995, Equity Office Predecessors recorded a provision for
value impairment of approximately $20.2 million, of which $17.5 million
related to the adjustment of investment in real estate and approximately $2.7
million related to unamortized lease acquisition costs.
<PAGE> 45
46 PARKING OPERATIONS
Included in the Total Portfolio numbers above are results of operations from
the stand-alone Parking Facilities, the summarized information for which is
presented below. As of December 31, 1996, the Company owned or had an
interest in 10 stand-alone Parking Facilities with approximately 7,144
spaces. During the year ended December 31, 1995, the Company acquired three
Parking Facilities with approximately 3,128 spaces. Of the Total Parking
Portfolio, there were no Parking Facilities acquired prior to January 1,
1995, therefore there is not a Core Portfolio for comparison purposes.
<TABLE>
<CAPTION>
Total Parking Portfolio
--------------------------
years ended December 31,
--------------------------
(Dollars in thousands) 1996 1995
- --------------------------------------------------------------------------------------
<S> <C> <C>
Property Revenues $ 10,203 $ 5,391
Interest income 141 17
-------- --------
Total Revenues 10,344 5,408
-------- --------
Interest expense 1,814 937
Depreciation and amortization 1,432 722
Property Operating Expenses 3,152 1,797
-------- --------
Total expenses 6,398 3,456
-------- --------
Income before allocation to minority interests 3,946 1,952
Minority interests (252) --
-------- --------
Net income $ 3,694 $ 1,952
======== ========
Property Revenues less Property Operating Expenses $ 7,051 $ 3,594
======== ========
</TABLE>
DISPOSITIONS OF PROPERTY
Equity Office Predecessors sold two Office Properties in 1997: Barton Oaks
Plaza II (118,529 net rentable square feet) was sold in January 1997 and 8383
Wilshire (417,463 net rentable square feet) was sold in May 1997. In January
1996, Equity Office Predecessors sold the condominium portion, comprised of a
210-room hotel, at Three Lakeway, a mixed-use property. Below is a summary of
the operations of these Office Properties for the years ended December 31,
1997, 1996 and 1995.
<TABLE>
<CAPTION>
----------------------------------------
Years ended December 31,
----------------------------------------
(Dollars in thousands) 1997 1996 1995
- --------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Property Revenues $ 3,246 $ 9,959 $ 9,445
-------- -------- --------
Interest expense 36 956 4,910
Depreciation and amortization 451 2,286 2,262
Property Operating Expenses 1,468 4,869 3,068
-------- -------- --------
Total expenses 1,955 8,111 10,240
-------- -------- --------
Income before gain on sales of real estate
and extraordinary items 1,291 1,848 (795)
Gain on sales of real estate and extraordinary items 13,088 5,338 --
-------- -------- --------
Net income (loss) $ 14,379 $ 7,186 $ (795)
======== ======== ========
Property Revenues less Property Operating Expenses $ 1,778 $ 5,090 $ 6,377
======== ======== ========
</TABLE>
LIQUIDITY AND CAPITAL RESOURCES
LIQUIDITY
Net cash provided from operations represents the primary source of liquidity
to fund distributions, debt service, recurring capital costs and non-revenue
enhancing tenant improvements. Prior to the IPO, the Company made annual
distributions equal to approximately 100% of taxable income. Cash generated
in excess of taxable income (resulting primarily from non-cash items such as
depreciation and amortization) was retained for working capital and to fund
capital improvements and non-revenue enhancing tenant improvements. The
Company intends to make regular quarterly distributions to holders of Series
A Preferred Shares, PIERS, Common Shares and Units. The Company established
initial distribution rates as follows: for each Series A Preferred Share
8.98% per annum ($2.245 per share), for each PIERS 5.25% per annum ($2.625
per share), and for each Common Share and Unit $1.20 per annum per Common
Share and Unit.
<PAGE> 46
47
The Company intends to fund recurring capital costs and non-revenue
enhancing tenant improvements from cash from operations and draws under its
credit facilities. The Company has no contractual obligations for material
capital costs, other than in connection with customary tenant improvements in
the ordinary course of business. The Company also expects that its credit
facilities will provide for temporary working capital, unanticipated cash
needs, and funding of acquisitions.
The anticipated size of the Company's distributions will not allow the
Company, using only cash from operations, to retire all of its debt as it
comes due and, therefore, the Company will be required to repay maturing debt
with funds from debt and/or equity financing.
DEBT FINANCING
The table below summarizes the mortgage debt, unsecured notes and credit
facility indebtedness outstanding at December 31, 1997 and 1996, including a
net premium on mortgage debt (net of accumulated amortization of
approximately $2.1 million) of approximately $1.2 million recorded in
connection with the Company's Consolidation and debt assumed in connection
with certain of the Company's acquisitions.
<TABLE>
<CAPTION>
December 31, December 31,
(Dollars in thousands) 1997 1996
- ---------------------------------------------------------------------
<S> <C> <C>
DEBT SUMMARY:
Balance
Fixed rate $ 2,219,496 $ 1,304,075
Variable rate 2,064,821 660,817
------------ ------------
Total $ 4,284,317 $ 1,964,892
============ ============
Percent of total debt:
Fixed rate 51.8% 66.4%
Variable rate 48.2% 33.6%
------------ ------------
Total 100.0% 100.0%
============ ============
Weighted average interest
Rate at end of period:
Fixed rate 7.5% 7.9%
Variable rate 6.9% 7.3%
------------ ------------
Weighted average 7.2% 7.7%
============ ============
</TABLE>
The variable rate debt shown above bore interest at a 30-day LIBOR-based
floating interest rate. The 30-day LIBOR at December 31, 1997 was 5.7188%
resulting in a weighted average spread over LIBOR at December 31, 1997 of
approximately 1.2%.
MORTGAGE FINANCING
Immediately prior to the IPO, the Company had approximately $1.94 billion of
mortgage financing outstanding of which $1.38 billion was fixed rate
financing and $560 million was variable rate financing. The Company utilized
the net IPO proceeds of $564.5 million and approximately $33.9 million of
cash on hand to repay $253.1 million of fixed rate mortgage financing and
$345.3 million of variable rate mortgage debt. In October 1997, the Company
closed on the $1.5 Billion Credit Facility and used approximately $236
million of the proceeds to repay the majority of the Company's remaining
variable rate mortgage debt outstanding at that time. The Company also
assumed approximately $627.5 million of secured debt (excluding the Company's
share of unconsolidated secured debt of approximately $92.4 million) in
connection with the Beacon Merger, $248.3 million of secured debt in
connection with the acquisition of the Wright Runstad Portfolio and $14.7
million of secured debt in connection with other acquisitions. In addition,
in December 1997, the Company obtained an $80 million mortgage loan on the
three properties located in New Orleans. The proceeds from this loan were
used to repay a portion of the $600 Million Credit Facility. As of December
31, 1997, the Company's total mortgage debt (excluding the Company's share of
unconsolidated debt of approximately $92.4 million) consisted of
approximately $2.0 billion of fixed rate debt with a weighted average
interest rate
<PAGE> 47
48 of approximately 7.53% and $23.5 million of variable rate debt bearing
interest at the 30-day LIBOR plus 1%. The Company's mortgage debt as of
December 31, 1997 will mature as follows:
<TABLE>
<CAPTION>
(Dollars in thousands)
-------------------------------------------------
<S> <C>
1998 $ 83,792
1999 52,908
2000 151,236
2001 432,962
2002 69,584
Thereafter 1,271,378
----------
Subtotal 2,061,860
Net premium (net of accumulated
amortization of $2.1 million) 1,157
----------
Total $2,063,017
==========
</TABLE>
The instruments encumbering the properties contain customary restrictions and
requirements such as transferability restrictions, payment of taxes on the
property, maintenance of the property in good condition, maintenance of
insurance on the property, prohibition on liens and obtaining lender consent
to leases with material tenants.
CREDIT FACILITIES
LINES OF CREDIT
On July 15, 1997, the Company obtained the $600 Million Credit Facility to be
used for acquisitions and other general corporate purposes. Amounts were
drawn on the $600 Million Credit Facility to repay the balance outstanding on
the Equity Office Predecessors credit facility which was terminated when the
$600 Million Credit Facility was obtained. The $600 Million Credit Facility
matures on July 15, 2000. The Company paid a commitment fee of approximately
$1.0 million at the closing of the facility. Prior to the Company obtaining
an investment grade credit rating on its unsecured debt of BBB- or Baa3 or
better from two or more credit rating agencies, the facility initially bore
interest at LIBOR plus 110 basis points, and required payment of a quarterly
unused commitment fee between .15% and .25% of the unused portion of the
facility, depending on the average unfunded balance of the facility during
the quarter. In November 1997, the facility was amended and the interest rate
was reduced to LIBOR plus 100 basis points. In December 1997, the Company
received an investment grade credit rating on its senior unsecured debt from
Moody's (Baa1), Duff & Phelps (BBB+) and Standard & Poor's (BBB). Per the
terms of the facility, these credit ratings resulted in the interest rate on
the facility being reduced from LIBOR plus 100 basis points to LIBOR plus 60
basis points, and the unused commitment fee was replaced with a facility fee
equal to .20% per annum. In addition, a competitive bid option, whereby the
lenders participating in the facility bid on the interest rate to be charged,
became available for up to $250 million of the facility. As of December 31,
1997, the balance of the $600 Million Credit Facility was approximately $559
million. Subsequent to year end, the Company repaid $509 million of the line
with available cash and the proceeds of the $1.25 Billion Notes Offering, the
$250 Million MOPPRS Offering and the $300 Million PIERS Offering described
below, leaving a balance of $50 million outstanding as of March 3, 1998.
TERM LOAN FACILITY
In October 1997, the Company obtained the $1.5 Billion Credit Facility. The
$1.5 Billion Credit Facility is available for the acquisition of properties
and general corporate purposes. The $1.5 Billion Credit Facility carried an
interest rate equal to LIBOR plus 100 basis points subject to an increase or
decrease upon the receipt of an investment grade unsecured debt rating. As
mentioned above, the Company received investment grade credit ratings in
December 1997 resulting in a reduction in the interest rate to LIBOR plus 80
basis points. The $1.5 Billion Credit Facility matures on July 1, 1998, and
may be extended to October 1, 1998. The Company paid an underwriting fee on
the $1.5 Billion Credit Facility at closing of approximately $4.9 million. In
addition, an unused commitment fee is payable quarterly in arrears based upon
the unused amount of the $1.5 Billion Credit Facility as follows: .15% per
annum if the unused amount is between 0% to 33%; .20% per annum if the unused
amount is more than 33% but less than 66%; .25% per annum if the unused
amount is greater than 66%. In October 1997, the Company used approximately
$236 million of proceeds from the $1.5 Billion Credit Facility to repay the
majority of the variable rate property mortgage indebtedness outstanding. The
Company repaid $150 million on the $1.5 Billion Credit Facility with proceeds
from the $200 million private placement of Common Shares in October 1997.
Under the terms of the facility agreement, any amounts repaid cannot be
drawn. In addition, amounts were drawn from the $1.5 Billion Credit Facility
for property acquisitions and general corporate
<PAGE> 48
49
purposes. As of December 31, 1997, the outstanding balance on the $1.5
Billion Credit Facility was approximately $1.044 billion. Subsequent to
December 31, 1997, the entire $1.044 billion outstanding was repaid with
proceeds received from the issuance of $300 Million PIERS Offering, $1.25
Billion Notes Offering and $250 Million MOPPRS Offering. The amount available
to draw under the $1.5 Billion Credit Facility as of March 3, 1998 is
approximately $306 million.
BEACON LINES
The Company assumed $533 million in unsecured debt in connection with the
Beacon Merger relating to the outstanding balance of the Beacon lines of
credit at the time of the closing of the Beacon Merger. The Company repaid
$95 million of the Beacon lines prior to December 31, 1997 and repaid the
remaining balance of the lines in February 1998 with the proceeds of the
unsecured $1.25 Billion Notes Offering, $250 Million MOPPRS Offering and $300
Million PIERS Offering described below. The lines were terminated upon
repayment in February 1998.
UNSECURED NOTES
$180 MILLION NOTES OFFERING
In September 1997, the Company completed the $180 Million Notes Offering with
an unaffiliated party. The terms of the $180 Million Notes Offering consist
of four tranches with maturities from seven to 10 years which were priced at
an interest rate spread over the corresponding Treasury rate. The Company
used the proceeds of these notes to repay a portion of the $600 Million
Credit Facility. In addition, the Company terminated $150 million of the $700
million of hedge agreements described below at a cost of approximately $3.9
million for the $180 Million Notes Offering. This amount will be amortized to
interest expense over the respective term of each tranche.
$1.25 BILLION NOTES OFFERING
In February 1998, the Company completed the private placement of the $1.25
Billion Notes Offering. The $1.25 Billion Notes Offering consist of four
tranches with maturities of five to 20 years which were priced at an interest
rate spread over the corresponding Treasury rate.
$250 MANDATORY PAR PUT REMARKETED SECURITIES OFFERING
In February 1998, the Company issued $250 million of 6.376%, "MOPPRS," due
February 15, 2012, which are subject to mandatory tender on February 15,
2002. The MOPPRS are senior, unsecured obligations of the Company.
The table below summarizes the Company's unsecured notes as of March 3,
1998:
<TABLE>
<CAPTION>
--------------------------------------
Stated Effective
Tranche Amount Rate Rate(A)
---------------------------------------------------------------------------
<S> <C> <C> <C>
4 Year MOPPRS due 2002 $ 250,000,000 6.38% 6.42%
5 Year Notes due 2003 300,000,000 6.38% 6.77%
7 Year Notes due 2004 30,000,000 7.24% 7.24%
7 Year Notes due 2005 400,000,000 6.63% 7.06%
8 Year Notes due 2005 50,000,000 7.36% 7.67%
9 Year Notes due 2006 50,000,000 7.44% 7.73%
10 Year Notes due 2007 50,000,000 7.42% 7.69%
10 Year Notes due 2008 300,000,000 6.75% 7.03%
20 Year Notes due 2018 250,000,000 7.25% 7.56%
--------------------------------------
$1,680,000,000 6.74% 7.04%
======================================
</TABLE>
(A) Includes the cost of the terminated interest rate protection agreements
and offering and transaction costs.
On March 5, 1998, the Company filed a registration statement (the "Exchange
Offer Registration Statement") relating to a registered offer to exchange the
unsecured notes issued in the $180 Million Notes Offering, the $1.25 Billion
Notes Offering and the $250 Million MOPPRS Offering for registered securities
of the Company with terms identical in all material respects to the terms of
the existing Notes.
<PAGE> 49
50 INTEREST RATE PROTECTION AGREEMENTS
In order to limit the market risk associated with variable rate debt, the
Company entered into several interest rate protection agreements. These
agreements effectively converted floating rate debt to a fixed rate basis, as
well as hedged anticipated financing transactions. Net amounts paid or
received under these agreements are recognized as an adjustment to interest
expense when such amounts were incurred or earned. Settlement amounts paid or
received under these agreements are deferred and amortized as an adjustment
to interest expense over the term of the related financing transaction on the
straight-line method which approximates the effective yield method. A summary
of the various interest rate hedge agreements is as follows: (1) On June 4,
1997, the Company entered into interest rate protection agreements with major
U.S. financial institutions for $700 million of indebtedness. As a result of
this arrangement, the Company essentially "locked into" U.S. Treasury rates
in effect as of June 4, 1997, for $700 million in indebtedness. In August
1997, the Company terminated $150 million of the $700 million of hedge
agreements at a cost of $3.9 million. The terminated agreements pertained to
the $180 Million Notes Offering. The portion of the $180 Million Notes
Offering protected by these agreements consisted of three tranches with
maturities of eight, nine and ten years, respectively. (2) On October 6,
1997, the Company entered into an additional $450 million of interest rate
protection agreements with major U.S. financial institutions based on the
U.S. Treasury rates in effect as of that date. In connection with the $1.25
Billion Notes Offering and the $250 Million MOPPRS Offering, the Company
terminated $700 million of hedge agreements at a cost of approximately $32.6
million. The cost of the terminated hedge agreements will be amortized to
interest expense over the respective terms of each tranche. The Company
terminated the remaining $300 million of hedge agreements in 1998 at a cost
of approximately $7.4 million which will be reflected as an extraordinary
loss. (3) Equity Office Predecessors entered into an interest rate swap
agreement in October 1995 which effectively fixed the interest rate on a
$93.6 million loan at 6.94% through the maturity of the loan on June 30,
2000.
Equity Office Predecessors sold several interest rate protection
agreements (aggregating $173 million of LIBOR based agreements) in June 1997
at a cost of approximately $1.1 million.
RESTRICTIONS AND COVENANTS
The $600 Million Credit Facility, the $180 Million Notes Offering, the $1.5
Billion Credit Facility, the $1.25 Billion Notes Offering and the $250
Million MOPPRS Offering contain certain customary restrictions and
requirements such as total debt to assets ratios, secured debt to total
assets ratios, debt service coverage ratios, minimum ratio of unencumbered
assets to unsecured debt and other limitations.
EQUITY SECURITIES
Below is a summary of the equity securities issued in connection with various
transactions occurring from and after the IPO:
- At the time of the IPO, the Company issued 151,678,030 Common Shares and
an additional 11,877,647 Units.
- In October 1997, the Company completed two private placements for a total
of 9,685,034 restricted Common Shares.
- In addition, the Company issued 5,958,030 Units in connection with various
acquisitions during the year (excluding the Wright Runstad acquisition
described below).
- On December 17, 1997, the Company purchased a portfolio of 10 properties
from an affiliate of Wright Runstad and Company, and also made a 30%
noncontrolling investment in Wright Runstad Asset Limited Partnership, a
development and property management company. The Company issued 3,435,688
Common Shares and an additional 2,753,127 Units in connection with this
transaction. In addition, the Company issued five year warrants to
purchase an additional 5,000,000 Common Shares at a price of $39.375 per
share.
- On December 19, 1997, the Company completed the Beacon Merger. In
connection with the merger, the Company issued 80,596,117 Common Shares,
8,000,000 8.98% Series A Cumulative Redeemable Preferred Shares with a
liquidation preference of $25 per share and an additional 8,570,886 Units.
In addition, the Company assumed the obligation to issue 4,732,822
additional Common Shares upon exercise of Beacon stock options, of which
3,829,739 Common Shares had been issued as of December 31, 1997.
- During the year, the Company also issued 298,000 restricted Common Shares
to senior executives, and 5,055 Common Shares to trustees as compensation.
- In February 1998, the Company completed the $300 Million PIERS Offering.
The PIERS are convertible at any time at the option of the holder to
Common Shares at a conversion price of $35.70 per Common Share (equivalent
to a conversion ratio of 1.40056 Common Shares for each PIERS). The PIERS
are non-callable for five years with a mandatory call in year 10. The
annual dividend of $2.625 per share will be paid in quarterly dividends of
$.65625. Proceeds from the PIERS Offering were used to pay down amounts
outstanding under the Company's credit facilities.
<PAGE> 50
CASH FLOWS 51
YEARS ENDED DECEMBER 31, 1997 AND 1996
For discussion purposes, the cash flows for the year ended December 31, 1997
combine the cash flows of Equity Office Predecessors for the period January
1, 1997 to July 10, 1997 and the cash flows of the Company for the period
July 11, 1997 to December 31, 1997. The cash flows for the year ended
December 31, 1996 represent solely the cash flows of Equity Office
Predecessors. Consequently, the comparison of the periods provides only
limited information regarding the cash flows of the Company.
Cash and cash equivalents decreased by approximately $181.5 million, to
approximately $228.9 million at December 31, 1997, compared to $410.4 million
at December 31, 1996. This decrease was the result of approximately $2.2
billion invested in new acquisitions, capital and tenant improvements, and
payment of leasing commissions reduced by approximately $286.7 million of
cash generated by operations and $1.9 billion generated from financing
activities (including the $181.1 million contributed by Equity Office
Predecessors). Net cash provided by operating activities increased by
approximately $120.7 million to approximately $286.7 million from $166.0
million primarily due to the additional cash flow generated by the increase
in the number of properties owned. Net cash used for investing activities
increased by approximately $1.3 billion from $0.9 billion to $2.2 billion
mainly due to an increase in the amount of real estate assets purchased
during the year ended December 31, 1997 compared to the year ended December
31, 1996. Net cash provided by financing activities increased by
approximately $0.8 billion from $1.1 billion to $1.9 billion due to net
proceeds from the sale of common stock, an increase in proceeds from lines of
credit and unsecured notes, partially offset by a decrease in proceeds from
mortgage notes and an increase in principal payments on mortgage notes and
lines of credit.
YEARS ENDED DECEMBER 31, 1996 AND 1995
Cash and cash equivalents increased by approximately $299.3 million, to
approximately $410.4 million at December 31, 1996, compared to $111.1 million
at December 31, 1995. This increase was the result of $166 million of cash
generated by operations, $1.1 billion generated from financing activities,
reduced by $924.2 million invested in new acquisitions, capital and tenant
improvements, and payment of leasing commissions. Net cash provided by
operating activities increased by $72.1 million from $93.9 million to $166.0
million primarily due to the additional cash flow generated by the increase
in the number of properties owned. Net cash used for investing activities
increased by $543.6 million from $380.6 million to $924.2 million mainly due
to an increase in the amount of real estate assets purchased during 1996
compared to 1995. Net cash provided by financing activities increased by
$781.1 million from $276.5 million to $1.1 billion due to an increase in
capital contributions and to an increase in proceeds received on mortgage
notes, and a net decrease in principal payments on mortgage notes and
revolving lines of credit offset in part by distributions to minority
interest partners.
CAPITAL IMPROVEMENTS
The Company has a history of acquiring and repositioning undercapitalized and
poorly managed properties, many of which have required significant capital
improvements due to deferred maintenance and/or required substantial
renovation to enable them to compete effectively. A number of the properties
also have had significant amounts of shell space requiring build out at the
time of acquisition. The Company takes these capital improvements and revenue
enhancing tenant improvements into consideration at the time of acquisition
in determining the amount of equity and debt financing required to purchase
the property and fund the improvements. Therefore, capital improvements made
during the first five years after acquisition of these properties are treated
separately from typical recurring capital expenditures, non-revenue enhancing
tenant improvements and leasing commissions required once these properties
have reached stabilized occupancy, and deferred maintenance and renovations
planned at the time of acquisition have been completed. Capital improvements
(including tenant improvements and leasing commissions for shell space) for
the years ended December 31, 1997, 1996 and 1995 were approximately $78.0
million, $100.3 million and $48.8 million, respectively or $1.19, $3.49 and
$2.16 per square foot, respectively. These amounts include approximately
$31.2 million, $47.3 million and $16.8 million for the years ended December
31, 1997, 1996 and 1995, respectively, for the redevelopment of the 28 State
Street Building.
The Company considers capital expenditures to be recurring expenditures
relating to the ongoing maintenance of the Office Properties. The table below
summarizes capital expenditures for the years ended December 31, 1997, 1996
and 1995. The capital expenditures set forth below are not necessarily
indicative of future capital expenditures.
<TABLE>
<CAPTION>
December 31, December 31, December 31,
1997 1996 1995
- -----------------------------------------------------------------------------------------
<S> <C> <C> <C>
Number of Office Properties 258 81 71
Rentable Square Feet (in millions) 65.3 28.7 22.6
Annual Capital Expenditures per square foot $.08 $.16 $.14
</TABLE>
<PAGE> 51
52
TENANT IMPROVEMENTS AND LEASING COMMISSION COSTS
The Company distinguishes its tenant improvements and leasing commissions
between those that are revenue enhancing (which are required for space which
is vacant at the time of acquisition or that has been vacant for nine months
or more) and non-revenue enhancing (which are required to maintain the
revenue being generated from currently leased space). The table below
summarizes the revenue enhancing and non-revenue enhancing tenant
improvements and leasing commissions for the years ended December 31, 1997,
1996 and 1995. The number of Office Properties shown below for all periods
presented excludes Barton Oaks Plaza II and 8383 Wilshire which were sold in
January 1997 and May 1997, respectively. The tenant improvement and leasing
commission costs set forth below are presented on an aggregate basis and do
not reflect significant regional variations and, in any event, are not
necessarily indicative of future tenant improvement and leasing commission
costs:
<TABLE>
<CAPTION>
December 31, December 31, December 31,
1997 1996 1995
- ------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Number of Office Properties 258 81 71
Rentable square feet (in millions) 65.3 28.7 22.6
Revenue enhancing tenant improvements and
leasing commissions:
Amounts (in thousands) $ 18,272 $ 31,534 $ 20,981
Per square foot improved $ 19.74(1) $ 30.26(2) $ 22.89
Per total square foot $ .27(1) $ 1.10(2) $ .93
Non-revenue enhancing tenant improvements and
leasing commissions:
Renewal space
Amounts (in thousands) $ 8,334 $ 15,486 $ 10,008
Per square foot improved $ 5.73(1) $ 6.79(2) $ 7.82
Per total square foot $ .12(1) $ .54(2) $ .44
Retenanted space
Amounts (in thousands) $ 14,806 $ 31,987 $ 8,446
Per square foot improved $ 15.10(1) $ 20.64(2) $ 19.80
Per square foot total $ .22(1) $ 1.11(2) $ .37
------------ ---------- ----------
Total non-revenue enhancing (in thousands) $ 23,140 $ 47,473 $ 18,454
Per square foot improved $ 9.50(1) $ 12.39 $ 10.81
Per total square foot $ .35(1) $ 1.65 $ .81
</TABLE>
(1) The per square foot calculations as of December 31, 1997 are calculated
taking the total dollars anticipated to be expended on tenant improvements
for tenants taking occupancy during the year ended December 31, 1997, divided
by the total square footage being improved or total building square footage.
The actual amounts expended as of December 31, 1997 for revenue enhancing and
non-revenue enhancing renewal and released space were $18.4 million, $12.4
million and $33.5 million, respectively.
(2) The per square foot calculations as of December 31, 1996 are calculated
taking the total dollars anticipated to be expended on tenant improvements in
process at December 31, 1996, divided by the total square footage being
improved or total building square footage. The actual amounts expended as of
December 31, 1996 for revenue enhancing and non-revenue enhancing renewal and
retenanted space were approximately $30.6 million, $14 million and $20.8
million, respectively.
YEAR 2000
The Year 2000 Issue is the result of computer programs being written using
two digits rather than four to define the applicable year. Any of the
Company's computer programs that have time-sensitive software may recognize a
date using "00" as the year 1900 rather than the year 2000. This could result
in a system failure or miscalculations causing disruptions of operations,
including, among other things, a temporary inability to process transactions,
send invoices or engage in similar normal business activities.
The Company does not believe that the impact of the recognition of the
year 2000 by its information and operating technology systems will have a
material adverse effect on the Company's financial condition and results of
operations. The majority of any necessary system changes will be upgraded in
the normal course of business. The Company has initiated formal
communications with all of its significant suppliers to determine the extent
to which the Company's interface systems are vulnerable to those third
parties' failure to remediate their own year 2000 issues. There can be no
guarantee that the systems of other companies on which the Company's systems
rely will be timely converted and would not have an adverse effect on the
Company's systems.
<PAGE> 52
INFLATION
Substantially all of the office leases require the tenant to pay, as
additional rent, a portion of any increases in real estate taxes (except, in
the case of certain California leases, which limit the ability of the
landlord to pass through to the tenants the effect of increased real estate
taxes attributable to a sale of real property interests) and operating
expenses over a base amount. In addition, many of the office leases provide
for fixed increases in base rent or indexed calculations (based on the
Consumer Price Index or other measures). The Company believes that
inflationary increases in expenses will be offset, in part, by the expense
reimbursements and contractual rent increases described above.
FUNDS FROM OPERATIONS
Management of the Company believes Funds from Operations, as defined by the
National Association of Real Estate Investment Trusts, Inc. ("NAREIT"), to be
an appropriate measure of performance for an equity REIT. While Funds from
Operations is a relevant and widely used measure of operating performance of
equity REITs, it does not represent cash flow from operations or net income
as defined by generally accepted accounting principles ("GAAP"), and it
should not be considered as an alternative to these indicators in evaluating
liquidity or operating performance of the Company.
The following table reflects the calculation of the Company's and Equity
Office Predecessor's combined Funds from Operations for the years ended
December 31, 1997, 1996 and 1995 on an historical basis.
<TABLE>
<CAPTION>
----------------------------------------------
Years ended December 31,
----------------------------------------------
(Dollars in thousands) 1997 1996 1995
---------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Income before income from investment in unconsolidated joint ventures,
gain on sales of real estate, extraordinary items and minority interests $ 140,681 $ 68,080 $ 3,012
Add back (deduct):
(Income) allocated to minority interests (1,701) (2,086) (2,129)
Income from investment in unconsolidated joint ventures 5,155 2,093 2,305
Provision for value impairment -- -- 20,248
Depreciation and amortization (real estate related) 130,465 92,373 72,668
Net amortization of loan premiums and discounts 2,324 -- --
Preferred dividends (649) -- --
Funds from Operations before effect of adjusting straight-line rental revenue ----------- ----------- -----------
and expenses included in Funds from Operations to a cash basis(1) 276,275 160,460 96,104
----------- ----------- -----------
Deferred rental revenue (27,740) (18,427) (12,663)
Deferred rental expense 2,206 788 --
----------- ----------- -----------
Funds from Operations excluding straight-line rental revenue and
expense adjustments $ 250,741 $ 142,821 $ 83,441
=========== =========== ===========
CASH FLOW PROVIDED BY (USED FOR):
Operating Activities $ 286,714 $ 165,975 $ 93,878
Investing Activities $(2,163,340) $ (924,227) $ (380,615)
Financing Activities(2) $ 1,876,197 $ 1,057,551 $ 276,513
</TABLE>
(1) The White Paper on Funds from Operations approved by the Board of
Governors of NAREIT in March 1995 defines Funds from Operations as net income
(loss) (computed in accordance with GAAP), excluding gains (or losses) from
debt restructuring and sales of properties, plus real estate related
depreciation and amortization and after adjustments for unconsolidated
partnerships and joint ventures. The Company believes that Funds from
Operations is helpful to investors as a measure of the performance of an
equity REIT because, along with cash flow from operating activities,
financing activities and investing activities, it provides investors with an
indication of the ability of the Company to incur and service debt, to make
capital expenditures and to fund other cash needs. The Company computes Funds
from Operations in accordance with standards established by NAREIT which may
not be comparable to Funds from Operations reported by other REITs that do
not define the term in accordance with the current NAREIT definition or that
interpret the current NAREIT definition differently than the Company. Funds
from Operations does not represent cash generated from operating activities
in accordance with GAAP and should not be considered as an alternative to net
income (determined in accordance with GAAP) as an indication of the Company's
financial performance or to cash flow from operating activities (determined
in accordance with GAAP) as a measure of the Company's liquidity, nor is it
indicative of funds available to fund the Company's cash needs, including its
ability to make cash distributions. (2)For the year ended December 31, 1997,
cash flow provided by financing activities includes approximately $181.1
million in cash contributed from Equity Office Predecessors in connection
with the Consolidation.
<PAGE> 53
54 REPORT OF INDEPENDENT AUDITORS
THE BOARD OF TRUSTEES AND SHAREHOLDERS OF EQUITY OFFICE PROPERTIES TRUST
We have audited the accompanying consolidated balance sheet of Equity Office
Properties Trust (the "Company") and the combined balance sheet of the Equity
Office Predecessors, as defined in Note 1, as of December 31, 1997 and 1996,
respectively, and the related consolidated statements of operations,
shareholders' equity and cash flows of the Company for the period from July
11, 1997 to December 31, 1997, and the related combined statements of
operations, owners' equity and cash flows of the Equity Office Predecessors,
as defined in Note 1, for the period from January 1, 1997 to July 10, 1997,
and for the years ended December 31, 1996 and 1995. These financial
statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based
on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free
of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial statements.
An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly,
in all material respects, the consolidated financial position of Equity
Office Properties Trust and the combined financial position of the Equity
Office Predecessors, as defined in Note 1, at December 31, 1997 and 1996,
respectively, and the consolidated results of Equity Office Properties
Trust's operations and cash flows for the period from July 11, 1997 to
December 31, 1997, and the combined results of the Equity Office
Predecessors,' as defined in Note 1, operations and cash flows for the period
from January 1, 1997 to July 10, 1997 and for the years ended December 31,
1996 and 1995 in conformity with generally accepted accounting principles.
/s/ Ernest & Young LLP
Chicago, Illinois
February 23, 1998, except for Note 25,
as to which the date is March 18, 1998
<PAGE> 54
EQUITY OFFICE PROPERTIES TRUST CONSOLIDATED BALANCE SHEET 55
AND EQUITY OFFICE PREDECESSORS COMBINED BALANCE SHEET
<TABLE>
<CAPTION>
Equity Office Equity Office
Properties Trust Predecessors
December 31, December 31,
(Dollars in thousands, except share data) 1997 1996
----------------------------------------------------------------------------------------------------------------
<S> <C> <C>
ASSETS:
Investment in real estate $ 11,041,014 $ 3,549,708
Accumulated depreciation (64,695) (257,893)
------------ ------------
10,976,319 3,291,815
Cash and cash equivalents 228,853 410,420
Tenant and other receivables (net of allowance for doubtful accounts of
$675 and $55, respectively) 32,531 8,675
Deferred rent receivable 20,050 49,986
Escrow deposits and restricted cash 25,772 32,593
Investment in unconsolidated joint ventures 387,332 26,910
Deferred financing costs (net of accumulated amortization of $1,855 and
$3,351, respectively) 5,090 8,372
Deferred leasing costs (net of accumulated amortization of $1,473 and
$18,455, respectively) 26,994 62,593
Prepaid expenses and other assets 48,731 21,201
------------ ------------
Total Assets $ 11,751,672 $ 3,912,565
============ ============
LIABILITIES AND SHAREHOLDERS'/OWNERS' EQUITY:
Mortgage debt (including a net premium of $1,157 and $0, respectively) $ 2,063,017 $ 1,837,767
Unsecured notes 180,000 --
Lines of credit 2,041,300 127,125
Accounts payable and accrued expenses 260,401 81,995
Due to affiliates 733 2,074
Distribution payable 1,191 96,500
Other liabilities 45,055 29,022
------------ ------------
Total Liabilities 4,591,697 2,174,483
------------ ------------
Commitments and contingencies (Note 24)
Minority interests:
Operating Partnership 725,206 --
Partially owned properties 29,612 11,080
------------ ------------
Total Minority Interests 754,818 11,080
------------ ------------
Owners' equity -- 1,727,002
Shareholders' equity:
8.98% Series A Cumulative Redeemable Preferred Shares, liquidation
preference $25.00 per share; 100,000,000 shares authorized, and
8,000,000 issued and outstanding 200,000 --
Common Shares, $0.01 par value; 750,000,000 shares authorized,
250,030,403 issued and 249,527,663 outstanding 2,495 --
Additional paid in capital 6,219,511 --
Dividends in excess of accumulated earnings (16,849) --
------------ ------------
Total Shareholders'/Owners' Equity 6,405,157 1,727,002
------------ ------------
Total Liabilities and Shareholders'/Owners' Equity $ 11,751,672 $ 3,912,565
============ ============
</TABLE>
See accompanying notes.
<PAGE> 55
56 EQUITY OFFICE PROPERTIES TRUST CONSOLIDATED STATEMENT OF OPERATIONS
AND EQUITY OFFICE PREDECESSORS COMBINED STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
Equity Office Equity Office Predecessors
Properties Trust --------------------------------------------------
for the for the for the for the
period from period from year ended year ended
July 11, 1997 to January 1, 1997 December 31, December 31,
(Dollars in thousands, except share data) December 31, 1997 to July 10, 1997 1996 1995
----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
REVENUES:
Rental $ 314,233 $ 256,146 $ 386,481 $ 289,320
Tenant reimbursements 63,196 43,241 62,036 41,935
Parking 25,960 21,091 27,253 15,390
Other 3,324 6,539 17,626 10,314
Fees from noncombined affiliates 2,440 2,510 5,120 5,899
Interest 3,815 9,577 9,608 8,599
------------- ------------- ------------- -------------
Total revenues 412,968 339,104 508,124 371,457
------------- ------------- ------------- -------------
EXPENSES:
Interest:
Expense incurred 76,675 80,481 119,595 100,566
Amortization of deferred financing costs 4,178 2,771 4,275 2,025
Depreciation 64,695 57,379 82,905 64,716
Amortization 1,473 5,884 9,057 7,415
Real estate taxes 47,579 34,000 52,182 37,978
Insurance 3,196 3,060 4,863 3,352
Repairs and maintenance 50,285 45,540 71,156 53,618
Property operating 54,619 44,685 72,866 56,540
General and administrative 17,690 17,201 23,145 21,987
Provision for value impairment -- -- -- 20,248
------------- ------------- ------------- -------------
Total expenses 320,390 291,001 440,044 368,445
------------- ------------- ------------- -------------
Income before allocation to minority interests,
income from investment in unconsolidated
joint ventures, gain on sales of real estate and
extraordinary items 92,578 48,103 68,080 3,012
Minority interests:
Operating Partnership (7,010) -- -- --
Partially owned properties, net of extraordinary
gain of $20,035 in 1995 (789) (912) (2,086) (2,129)
Income from unconsolidated joint ventures 3,173 1,982 2,093 2,305
Gain on sales of real estate 126 12,510 5,338 --
------------- ------------- ------------- -------------
Income before extraordinary items 88,078 61,683 73,425 3,188
Extraordinary items (16,366) (274) -- 31,271
------------- ------------- ------------- -------------
Net income 71,712 61,409 73,425 34,459
Preferred dividends (649) -- -- --
------------- ------------- ------------- -------------
Net income available for Common Shares $ 71,063 $ 61,409 $ 73,425 $ 34,459
============= ============= ============= =============
Net income available per weighted average
Common Share outstanding - Basic $ 0.44
=============
Weighted average Common Shares outstanding - Basic 162,591,477
=============
Net income available per weighted average
Common Share outstanding - Diluted $ 0.43
=============
Weighted average Common Shares outstanding - Diluted 180,014,027
=============
</TABLE>
See accompanying notes.
<PAGE> 56
EQUITY OFFICE PROPERTIES TRUST CONSOLIDATED STATEMENT OF CHANGES IN 57
SHAREHOLDERS' EQUITY OFFICE PREDECESSORS COMBINED STATEMENTS OF CHANGES IN
OWNERS' EQUITY
<TABLE>
<CAPTION>
Equity Office
Properties Trust Equity Office Predecessors
for the period for the period ------------------------------
July 11, 1997 to January 1, 1997 years ended December 31,
(Dollars in thousands) December 31, 1997 to July 10, 1997 1996 1995
- ----------------------------------------------------------------------------------------------------------------------------
PREFERRED SHARES:
<S> <C> <C> <C> <C>
Balance, beginning of period $ -- $ -- $ -- $ --
8.98% Series A Cumulative Redeemable 200,000 -- -- --
----------- ----------- ----------- -----------
Balance, end of period $ 200,000 $ -- $ -- $ --
=========== =========== =========== ===========
COMMON SHARES, $.01 PAR VALUE:
Balance, beginning of period $ -- $ -- $ -- $ --
Issuance of Common Shares for IPO 287 -- -- --
Contribution of net assets from Consolidation
at fair value in exchange for Common Shares 1,230 -- -- --
Issuance of Common Shares for acquisitions 34 -- -- --
Sale of Common Shares, net 97 -- -- --
Issuance of Common Shares for Beacon Merger 844 -- -- --
Common Shares issued for restricted shares and
trustee fees 3 -- -- --
----------- ----------- ----------- -----------
Balance, end of period $ 2,495 $ -- $ -- $ --
=========== =========== =========== ===========
ADDITIONAL PAID IN CAPITAL:
Balance, beginning of period $ -- $ -- $ -- $ --
Net proceeds from IPO 564,219 -- -- --
Contribution of net assets from Consolidation
at fair value in exchange for Common Shares 2,580,259 -- -- --
Issuance of Common Shares and Warrants
for acquisitions 114,966 -- -- --
Sale of Common Shares, net 273,853 -- -- --
Issuance of Common Shares for Beacon Merger 2,652,726 -- -- --
Common Shares issued for restricted shares and
trustee fees 162 -- -- --
Adjustment for minority interests ownership in
Operating Partnership 33,326 -- -- --
----------- ----------- ----------- -----------
Balance, end of period $ 6,219,511 $ -- $ -- $ --
=========== =========== =========== ===========
DISTRIBUTIONS IN EXCESS OF ACCUMULATED EARNINGS:
Balance, beginning of period $ -- $ -- $ -- $ --
Net income available for Common Shares 71,063 -- -- --
Dividends to Common Shares (87,912) -- -- --
----------- ----------- ----------- -----------
Balance, end of period $ (16,849) $ -- $ -- $ --
=========== =========== =========== ===========
OWNERS' EQUITY:
Balance, beginning of period/year $ -- $ 1,727,002 $ 1,089,969 $ 731,098
Contributions -- 285,542 661,265 337,048
Offering expenses -- -- (1,157) (128)
Distributions -- (189,752) (96,500) (12,508)
Net income -- 61,409 73,425 34,459
Contribution of Owners' Equity to the Company
in connection with the Consolidation -- (1,884,201) -- --
----------- ----------- ----------- -----------
Balance, end of period/year $ -- $ -- $ 1,727,002 $ 1,089,969
=========== =========== =========== ===========
</TABLE>
See accompanying notes.
<PAGE> 57
58 EQUITY OFFICE PROPERTIES TRUST CONSOLIDATED STATEMENT OF CASH FLOWS AND
EQUITY OFFICE PREDECESSORS COMBINED STATEMENT OF CASH FLOWS
<TABLE>
<CAPTION>
Equity Office Predecessors
Equity Office --------------------------------------------------------
Properties Trust for the year
the period from for the period from for the year ended ended
July 11, 1997 to January 1, 1997 December 31, December 31,
(Dollars in thousands) December 31, 1997 to July 10, 1997 1996 1995
OPERATING ACTIVITIES:
<S> <C> <C> <C> <C>
Net income before preferred dividends $ 71,712 $ 61,409 $ 73,425 $ 34,459
Adjustment to reconcile net income to net cash
provided by operating activities:
Depreciation and amortization 70,346 66,034 96,237 74,156
(Income) from unconsolidated joint ventures (3,173) (1,982) (2,093) (2,305)
(Gain) on sales of real estate (126) (12,510) (5,338) --
Provision for value impairment -- -- -- 20,248
Extraordinary loss from early extinguishments of debt 16,366 274 -- --
Extraordinary (gain) on repurchase of debt -- -- -- (31,271)
Provision for doubtful accounts 1,686 1,175 2,284 2,096
Allocation to minority interests 7,799 912 2,086 2,129
Changes in assets and liabilities:
Decrease (increase) in rents receivable 2,064 2,664 (1,550) (2,998)
(Increase) in deferred rent receivables (21,421) (8,061) (20,421) (14,413)
(Increase) decrease in other assets (29,551) (8,839) (9,747) 1,374
Increase in accounts payable and
accrued expenses 54,076 2,916 19,241 6,931
(Decrease) increase in due to affiliates (898) (722) 1,235 (89)
Increase (decrease) in other liabilities 21,874 (7,310) 10,616 3,561
----------- ----------- ----------- -----------
Net cash provided by operating activities 190,754 95,960 165,975 93,878
----------- ----------- ----------- -----------
INVESTING ACTIVITIES:
Cash received from Beacon Merger 79,786 -- -- --
Property acquisitions (1,508,928) (531,968) (768,906) (317,669)
Payments for capital and tenant improvements (99,586) (59,511) (129,485) (76,985)
Payment of Beacon Merger costs (62,069) -- -- --
Proceeds from sales of real estate -- 72,078 14,502 --
Distributions from (investments in) unconsolidated
joint ventures 4,571 (44,260) 1,688 2,300
Payments of lease acquisition costs (15,043) (9,260) (29,793) (16,106)
Decrease (increase) in escrow deposits and
restricted cash 8,997 1,853 (12,233) 27,845
----------- ----------- ----------- -----------
Net cash (used for) investing activities (1,592,272) (571,068) (924,227) (380,615)
----------- ----------- ----------- -----------
FINANCING ACTIVITIES:
Net proceeds from sale of Common Shares 838,456 -- -- --
Proceeds from exercise of Beacon options 68,191 -- -- --
Dividends/distributions to Common Shares and Units (95,569) -- -- --
Capital contributions -- 287,949 661,265 337,048
Capital distributions -- (288,652) (12,508) (17,800)
Payments for offering expenses -- -- (1,157) (128)
(Distributions to) contributions from minority
interests - partially owned properties (371) (3,401) (22,593) 141
Cash contributed by Equity Office Predecessors
in connection with Consolidation 181,138 -- -- --
Proceeds from mortgage debt 84,466 154,090 640,953 271,482
Proceeds from unsecured notes 180,000 -- -- --
Proceeds from lines of credit 2,530,425 218,000 216,943 288,000
Repurchase of debt -- -- -- (40,078)
Principal payments on mortgage debt (838,354) (47,472) (254,104) (182,244)
Principal payments on lines of credit (1,294,750) (72,500) (165,818) (378,000)
Payments of loan costs (7,039) (1,889) (5,430) (1,908)
Prepayment penalties on early extinguishments of debt (16,247) (274) -- --
----------- ----------- ----------- -----------
Net cash provided by financing activities 1,630,346 245,851 1,057,551 276,513
----------- ----------- ----------- -----------
Net increase (decrease) in cash and cash equivalents 228,828 (229,257) 299,299 (10,224)
Cash and cash equivalents at the beginning of the period 25 410,420 111,121 121,345
----------- ----------- ----------- -----------
Cash and cash equivalents at the end of the period $ 228,853 $ 181,163 $ 410,420 $ 111,121
=========== =========== =========== ===========
SUPPLEMENTAL INFORMATION:
Interest paid during the period, including
capitalized interest of $1,890, $3,669, $4,640
and $1,682, respectively $ 70,658 $ 82,969 $ 121,813 $ 100,700
=========== =========== =========== ===========
</TABLE>
See accompanying notes.
<PAGE> 58
EQUITY OFFICE PROPERTIES TRUST AND EQUITY OFFICE PREDECESSORS 59
NOTES TO CONSOLIDATED AND COMBINED FINANCIAL STATEMENTS
NOTE 1 -- BUSINESS AND FORMATION OF COMPANY
As used herein, "Company" means Equity Office Properties Trust, a Maryland
real estate investment trust, together with its subsidiaries including EOP
Operating Limited Partnership, a Delaware limited partnership (the "Operating
Partnership"), and the predecessors thereof ("Equity Office Predecessors").
The Company was formed on October 9, 1996 to continue and expand the national
office property business organized by Mr. Samuel Zell, Chairman of the Board
of Trustees of the Company and to complete the consolidation of the Equity
Office Predecessors (the "Consolidation") and its initial public offering
(the "IPO") on July 11, 1997. The Company is a fully integrated,
self-administered and self-managed real estate company engaged in acquiring,
owning, managing, leasing and renovating office properties and parking
facilities. The Company expects to qualify as a real estate investment trust
("REIT") for federal income tax purposes and generally will not be subject to
federal income tax if it distributes 95% of its taxable income and complies
with a number of organizational and operational requirements (see Note 2). As
of December 31, 1997, the Company owned or had an interest in 258 office
properties (the "Office Properties") containing approximately 65.3 million
rentable square feet of office space and owned 17 stand-alone parking
facilities containing approximately 16,749 parking spaces (the "Parking
Facilities" and, together with the Office Properties, the "Properties"). The
Office Properties are located in 78 submarkets in 39 markets in 24 states and
the District of Columbia. The Office Properties, by rentable square feet, are
located approximately 50% in central business districts ("CBDs") and 50% in
suburban markets.
On July 11, 1997, the Company consummated the IPO having sold 28,750,000
of its common shares of beneficial interest, $0.01 par value per share
("Common Shares") (including 3,750,000 Common Shares relating to the
underwriters overallotment option) at $21 per Common Share generating
proceeds of approximately $603.8 million. The Company contributed net
proceeds from the IPO (after deducting the underwriting discount of
approximately $39.2 million) of approximately $564.5 million to the Operating
Partnership in exchange for 28,750,000 units of partnership interest in the
Operating Partnership ("Units"). The Company used the net proceeds of the IPO
and available cash reserves to repay debt of approximately $678.4 million, of
which $598.4 million was mortgage debt and $80 million was a revolving line
of credit.
Concurrent with the IPO, the Company also completed the following
formation transactions which resulted in the Consolidation of the Equity
Office Predecessors into the Company:
- Zell/Merrill Lynch Real Estate Opportunity Partners Limited Partnership,
Zell/Merrill Lynch Real Estate Opportunity Partners Limited Partnership
II, Zell/Merrill Lynch Real Estate Opportunity Partners Partnership
Limited III and Zell/Merrill Lynch Real Estate Opportunity Partners
Limited Partners IV (collectively the "ZML Opportunity Partnerships"), the
predecessor owner of the Properties, contributed their interests in the
Properties to the Operating Partnership in exchange for 126,419,397 Units.
- ZML Investors Inc., ZML Investors II, Inc., Zell/Merrill Lynch Real Estate
Opportunity Partners III Trust and Zell/Merrill Lynch Real Estate
Opportunity Partners IV Trust (collectively "ZML REITs") merged into the
Company, with the Company succeeding to their interests in, and becoming
the managing general partners of each of the ZML Opportunity Partnerships.
Shareholders of the ZML REITs received 122,900,572 Common Shares of the
Company in exchange for their interests in the ZML REITs.
- Equity Group Investments, Inc. an Illinois corporation ("EGI"), and Equity
Office Holdings, L.L.C., a Delaware limited liability company ("EOH" and
together with EGI, the "Equity Group") contributed substantially all of
their interests in their office property and asset management business and
parking facilities management business (collectively the "Management
Business") to the Operating Partnership in exchange for 8,358,822 Units.
- The Operating Partnership transferred a portion of the office property
management business of EOH, the office property asset management business
and the parking asset management business of the Equity Group that relates
to the property management of the properties owned by the Equity Group,
together with the 18 Properties held in partnerships or subject to
participation agreements with unaffiliated parties (the "Joint Venture
Properties") (collectively, the "Managed Property Business") to Equity
Office Properties Management Corp., a Delaware corporation (the "EOP
Management Company"), in exchange for non-voting stock representing 95% of
the economic value in the EOP Management Company and EOH contributed
$150,000 to the EOP Management Company in exchange for voting stock
representing 5% of the economic value of the EOP Management Company.
- ZML Partners Limited Partnership, ZML Partners Limited Partnership II, ZML
Partners Limited Partnership III and ZML Partners Limited Partnership IV
(the "ZML Partners"), each of which is the general partner of one of the
ZML Opportunity Partnerships, each transferred their 5% interest in
certain corporations which owned a 1% general partnership interest in
certain of the property title holding entities to a newly formed qualified
REIT subsidiary in exchange for 26,458 Common Shares.
<PAGE> 59
60 - The Operating Partnership transferred its 95% interest in certain
corporations which owned a 1% general partner interest in certain of the
property title holding entities to a subsidiary of the Company in exchange
for 502,740 Common Shares. Such Common Shares have been treated as
treasury stock in the accompanying financial statements.
The table below summarizes the ownership of the Company and the Operating
Partnership upon the completion of the transactions described above:
OWNERSHIP OF EQUITY OFFICE PROPERTIES TRUST (AS OF IPO DATE):
<TABLE>
<CAPTION>
Number of
Common Shares Percentage
- ----------------------------------------------------------------------------------------------------------
<S> <C> <C>
Original capitalization (by Mr. Samuel Zell) 1,000 --
Common Shares sold in the IPO 28,750,000 18.9%
Common Shares issued to shareholders of ZML REITs 122,900,572 80.8%
Common Shares issued to the ZML Partners 26,458 --
Common Shares issued to the Operating Partnership 502,740 0.3%
----------- -----------
Total(see Note 12) 152,180,770 100.0%
=========== ===========
(Assuming all Units are converted to Common Shares):
Common Shares sold in the IPO 28,750,000 17.6%
Common Shares issued to shareholders of ZML REITs, including Mr. Zell 122,928,030 75.2%
Units convertible to Common Shares(see Note 12) 11,877,647 7.2%
----------- -----------
Total 163,555,677 100.0%
=========== ===========
</TABLE>
OWNERSHIP OF EOP OPERATING LIMITED PARTNERSHIP (AS OF IPO DATE):
<TABLE>
<CAPTION>
Number of Units Percentage
- ------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Equity Office Properties Trust (held directly) 28,777,458 17.6%
Equity Office Properties Trust (held through its interests in the
ZML Opportunity Partnerships) 122,900,572 75.1%
----------- -----------
Equity Office Properties Trust subtotal 151,678,030 92.7%
ZML Partners (held through its interest in ZML Opportunity Partnerships) 3,229,001 2.0%
Other limited partner (held through its interest in ZML Opportunity Partnership II) 289,824 0.2%
Equity Group Investments, Inc. 3,737,438 2.3%
Equity Office Holdings, L.L.C 4,621,384 2.8%
----------- -----------
Total 163,555,677 100.0%
=========== ===========
</TABLE>
NOTE 2 -- SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Basis of Presentation
The Consolidation was accounted for as a purchase in accordance with
Accounting Principles Board Opinion No. 16. Accordingly, the fair value of
the consideration given by the Company was used as the valuation basis for
the transactions. The assets acquired and liabilities assumed by the Company
were recorded at their fair value as of July 11, 1997 and the excess of the
purchase price over the related historical basis of the net assets acquired
was allocated primarily to investment in real estate.
The Company's assets, which include investments in joint ventures, are
primarily owned by, and its operations are substantially conducted through,
the Operating Partnership. The Company is the managing general partner of the
Operating Partnership. Due to the Company's ability as general partner to
control either through ownership or by contract the Operating Partnership and
various other subsidiaries, each such entity has been consolidated with the
Company for financial reporting purposes. In regard to EOP Management
Company, the Company owns a non-voting 95% interest but does not have legal
control; however, EOP Management Company is consolidated for financial
reporting purposes, the effect of which is immaterial. The remaining 5%
equity and the controlling voting interest is owned by an affiliate of the
Company.
The Beacon Merger (as defined in Note 4) was accounted for using the
purchase method in accordance with Accounting Principles Board Opinion No.
16. The fair value of the consideration given by the Company in the Beacon
Merger was used as the valuation basis of the combination. The assets
acquired and the liabilities assumed of Beacon were recorded at their
relative fair values as of December 19, 1997 (the "Beacon Closing Date"). The
results of operations of the Beacon properties for the period from the Beacon
Closing Date through December 31, 1997 are included in the Company's
consolidated statements of operations and cash flows. In connection with the
Beacon Merger, the Company also acquired a 99% equity interest in (but not
voting-control of) Beacon Property Management Corporation ("Beacon Management
Company"), which manages third-party and joint venture office and commercial
space, Beacon Design Company, which provided third-party tenant design
services prior to ceasing such operations upon the sale of its design
<PAGE> 60
61
service assets in 1998, and Beacon Construction Company, which provides
third-party construction services and is expected to cease such operations
upon completion of its existing contracts. Although the Company does not have
voting control of Beacon Management Company, Beacon Design Company and Beacon
Construction Company, they are consolidated for financial reporting purposes,
the effect of which is immaterial. The remaining 1% equity and the
controlling voting interest is owned by an affiliate of the Company.
The combined financial statements of Equity Office Predecessors prior to
the Consolidation and the IPO included interests in the Properties of the ZML
Opportunity Partnerships together with their limited and general partners
(collectively, the "ZML Funds" which includes ZML Fund I, ZML Fund II, ZML
Fund III and ZML Fund IV) and the Management Business. The financial
statements of Equity Office Predecessors are presented on a combined basis,
at historical cost, because the ZML Funds and the Management Business were
under common control. Minority interests have been recorded for those
entities that were not wholly owned by the ZML Funds. Where controlling
interests were not held by the ZML Funds, the entities were accounted for as
investments in unconsolidated joint ventures utilizing equity accounting. All
intercompany transactions and balances have been eliminated in combination.
Investment in Real Estate
Subsequent to the Consolidation, rental property and improvements, including
costs capitalized during construction and other costs incurred, are included
in investment in real estate and are stated at cost. Expenditures for
ordinary maintenance and repairs are expensed to operations as they are
incurred. Significant renovations and improvements which improve or extend
the useful life of the assets are capitalized. Except for amounts attributed
to land, rental property and improvements are depreciated over their
estimated useful lives using the straight-line method. The estimated useful
lives by asset category are:
Asset Category Estimated Useful Life
Building 40 years
Building improvements 4-40 years
Tenant improvements Term of lease
Furniture and fixtures 3-12 years
During 1995, the Financial Accounting Standards Board issued Statement No.
121 "Accounting for the Impairment of Long-Lived Assets to Be Disposed Of"
("Statement No. 121") which established accounting standards for the
evaluation of the potential impairment of such assets. Statement No. 121 was
adopted by Equity Office Predecessors as of January 1, 1995. Rental
properties are individually evaluated for impairment when conditions exist
which may indicate that it is probable that the sum of expected future cash
flows (on an undiscounted basis) from a rental property are less than its
historical net cost basis. Upon determination that a permanent impairment has
occurred, rental properties are reduced to their fair value. During the year
ended December 31, 1995, Equity Office Predecessors recorded a provision for
value impairment of approximately $20.2 million, of which $17.5 million
related to the adjustment of investment in real estate and approximately $2.7
million related to unamortized lease acquisition cost.
For properties to be disposed of, an impairment loss is recognized when
the fair value of the property, less the estimated cost to sell, is less than
the carrying amount of the property measured at the time the Company has a
commitment to sell the property and/or is actively marketing the property for
sale. Property to be disposed of is reported at the lower of its carrying
amount or its estimated fair value, less its cost to sell. Subsequent to the
date that a property is held for disposition, depreciation expense is not
provided for in the statement of operations.
Deferred Leasing and Financing Costs
Deferred leasing and financing costs are recorded at cost. The deferred
leasing costs are amortized over the terms of the respective leases and the
deferred financing costs are amortized over the terms of the respective
financings on a straight-line basis, which approximates the effective yield
method.
Rental Income
Certain leases of Office Properties provide for tenant occupancy during
periods for which no rent is due or where minimum rent payments increase
during the term of the lease. The Company records rental income for the full
term of each lease on a straight-line basis. Accordingly, the Company records
a receivable from tenants, net of reserves, which the Company expects to
collect over the remaining term of these leases rather than currently
("Deferred Rent Receivable"). For existing leases at acquired properties, the
term of the lease is considered to commence as of the acquisition date for
purposes of this calculation. The amounts included in rental income for the
periods July 11, 1997 to December 31, 1997 and January 1, 1997 to July 10,
1997 and the years ended December 31, 1996 and 1995, which were not currently
collectible as of such dates, were approximately $20.0 million, $7.7 million,
$18.4 million and $12.7 million, respectively. Deferred Rent Receivable is
not recognized for income tax purposes.
<PAGE> 61
62 Cash Equivalents
The Company considers cash equivalents to be all highly liquid investments
purchased with a maturity of three months or less at the date of purchase. As
of December 31, 1996 cash equivalents included deposits made to a commingled
bank account which was held in an affiliate's name. Such affiliate provided
centralized cash management services to Equity Office Predecessors.
Escrow Deposits and Restricted Cash
Escrow deposits primarily consist of amounts held by lenders to provide for
future real estate tax expenditures, tenant improvements and earnest money
deposits on acquisitions. Restricted cash represents amounts committed for
various utility deposits and security deposits. Certain of these amounts may
be reduced upon the fulfillment of certain obligations.
Fair Value of Financial Instruments
Management believes that the carrying basis of the Company's long-term debt,
consisting of mortgage loans, revolving bank loans and various interest rate
protection agreements, approximate their respective fair market values as of
December 31, 1997 and 1996, respectively. The current value of debt was
computed by discounting the projected debt service payments for each loan
based on the spread between the market rate and the effective rate, including
the amortization of loan origination costs, for each year. In addition, the
carrying values of cash and cash equivalents, restricted cash, escrow
deposits, tenant and other rents receivable, accounts payable and accrued
expenses are reasonable estimates of their fair value.
Interest Rate Protection Agreements
The Company periodically enters into certain interest rate protection
agreements to effectively convert or cap floating rate debt to a fixed rate
basis, as well as to hedge anticipated finance transactions. Net amounts paid
or received under these agreements are recognized as an adjustment to
interest expense when such amounts are incurred or earned. Settlement amounts
paid or received in connection with terminated interest rate protection
agreements are deferred and amortized as an adjustment to interest expense
over the term of the related financing transaction on the straight-line
method, which approximates the effective yield amount.
Income Taxes
The Office Properties, Parking Facilities and the Management Business are
primarily owned in limited partnerships or limited liability companies, which
are substantially pass-through entities. Some of these pass-through entities
have corporate general partners or members, which are subject to federal and
state income and franchise taxes. The Company incurred federal and state
income and franchise taxes of approximately $0.2 million, $0.9 million, $1.4
million and $1.6 million for the periods July 11, 1997 to December 31, 1997
and January 1, 1997 to July 10, 1997 and the years ended December 31, 1996
and 1995, respectively, which are included in general and administrative
expenses.
Commencing with the year ended December 31, 1997, the Company intends to
make an election to be taxed as a REIT, under Sections 856 through 860 of the
Internal Revenue Code of 1986, as amended (the "Code"). As a REIT, the
Company generally will not be subject to federal income tax if it distributes
at least 95% of its taxable income for each tax year to its shareholders.
REITs are subject to a number of organizational and operational requirements.
If the Company fails to qualify as a REIT in any taxable year, the Company
will be subject to federal income tax (including any applicable alternative
minimum tax) on its taxable income at regular corporate tax rates. Even if
the Company qualifies for taxation as a REIT, the Company may be subject to
state and local income taxes and to federal income tax and excise tax on its
undistributed income. The aggregate cost of land and depreciable property for
federal income tax purposes as of December 31, 1997 was approximately $7.5
billion.
Income per Common Share
In 1997, the Financial Accounting Standards Board issued Statement No. 128,
Earnings per Share ("Statement No. 128"). Statement No. 128 replaced the
calculation of primary and fully diluted earnings per share with basic and
diluted earnings per share. Unlike primary earnings per share, basic earnings
per share excludes any dilutive effects of options, warrants and convertible
securities. Diluted earnings per share is very similar to the previously
reported fully diluted earnings per share. All net income per weighted
average Common Share and net income per weighted average Common Share --
assuming dilution amounts for all periods have been presented, and where
appropriate, restated to conform to the Statement No. 128 requirements. The
effect of a conversion of a Unit to a Common Share has been excluded from
basic earnings per Common Share, due to certain restrictions.
Minority Interests
OPERATING PARTNERSHIP:
Net income is allocated to minority interests based on their respective
ownership percentage of the Operating Partnership. The ownership percentage
is calculated by dividing the number of Units held by the minority interests
by the total
<PAGE> 62
63
Units held by both the minority interests and the Company. Issuance of
additional Common Shares or Units changes the ownership interests of both the
minority interests and the Company. Such transactions and the proceeds
therefrom are treated as capital transactions.
Partially owned properties:
The Company reflects minority interests on the balance sheet for the portion
of properties, which are consolidated by the Company, that are not wholly
owned by the Company. The earnings or losses therefrom have been reflected as
minority interest in the Company's statements of operations.
Reclassification
Certain reclassifications have been made to the previously reported 1996 and
1995 statements in order to provide comparability with the 1997 statements
report herein. These reclassifications have not changed the 1996 and 1995
results or owners' equity.
Use of Estimates
The preparation of the consolidated financial statements of the Company and
the combined financial statements of Equity Office Predecessors in conformity
with generally accepted accounting principles requires management to make
estimates and assumptions that affect the reported amounts of assets and
liabilities and disclosure of contingent assets and liabilities at the date
of the financial statements and the reported amounts of revenues and expenses
during the reporting periods. Actual results could differ from those
estimates.
NOTE 3 -- INVESTMENT IN REAL ESTATE
Investment in real estate, including Office Properties and Parking
Facilities, was as follows:
<TABLE>
<CAPTION>
Equity Office Equity Office
Properties Trust Predecessors
December 31, December 31,
(Dollars in thousands) 1997 1996
- -------------------------------------------------------------------------
<S> <C> <C>
Land $ 1,185,411 $ 314,370
Building 9,706,956 2,871,690
Building improvements 55,278 161,497
Tenant improvements 89,455 196,093
Furniture and fixtures 3,914 6,058
------------ ------------
Gross investment in real estate 11,041,014 3,549,708
Accumulated depreciation (64,695) (257,893)
------------ ------------
Net investment in real estate $ 10,976,319 $ 3,291,815
============ ============
</TABLE>
In connection with the initial rental operations of the 28 State Street
property in Boston, the Company incurred and capitalized approximately $5.6
million and $4.7 million of interest costs in the years ended December 31,
1997 and 1996, respectively.
During the year ended December 31, 1997, the Company acquired the
Properties listed below. Each Property was purchased from an unaffiliated
party. The cash portions of the acquisitions were funded from the Company's
lines of credit or working capital. In connection with certain of the
acquisitions listed below, the Company assumed indebtedness of approximately
$1.4 billion and issued Common Shares, Units, preferred shares and warrants
with a value of $3.4 billion.
<TABLE>
<CAPTION>
Rentable Total Acquisition
Date Acquired Office Property/Portfolio Location Square Feet Cost (in thousands)
--------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
1/29/97 177 Broad Street(1) Stamford, CT 187,573 $36,254(2)
3/21/97 Preston Commons(1) Dallas, TX 418,604 55,174
4/16/97 Oakbrook Terrace Tower(1) Oakbrook Terrace, IL 772,928 130,108
4/21/97 One Maritime Plaza(1) San Francisco, CA 523,929 99,389
4/28/97 Smith Barney Tower(1) San Diego, CA 187,999 35,148
4/30/97 201 Mission Street(1) San Francisco, CA 483,289 74,634
6/13/97 30 North LaSalle(1) Chicago, IL 925,950 100,707
9/3/97 LL&E Tower New Orleans, LA 545,157 61,819
9/3/97 Texaco Center New Orleans, LA 619,714 66,819
10/1/97 Prudential Properties Houston, TX; Dallas, TX; Philadelphia, PA 2,481,441 284,199
10/6/97 550 South Hope Los Angeles, CA 566,434 100,135
10/7/97 10 & 30 South Wacker Drive Chicago, IL 2,003,288 484,772(3)
</TABLE>
(continued on next page)
<PAGE> 63
64
<TABLE>
<CAPTION>
Rentable Total Acquisition
Date Acquired Office Property/Portfolio Location Square Feet Cost (in thousands)
--------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
10/7/97 Acorn Properties Philadelphia, PA 849,867 130,088
10/17/97 One Lafayette Centre Washington, DC 314,634 82,546
11/21/97 Acorn Properties Philadelphia, PA 154,894 17,285
11/24/97 Lakeside Square Dallas, TX 392,537 55,524
11/24/97 Fair Oaks Plaza Fairfax, VA 177,917 24,077
11/24/97 1600 Duke Street Alexandria, VA 68,770 11,038
11/25/97 LaSalle Plaza Minneapolis, MN 589,432 96,704
12/17/97 Wright Runstad Properties Anchorage, AK; Portland, OR; Seattle, WA 3,340,055 640,000(4)
12/19/97 Beacon Properties Boston, Atlanta, Chicago, Los Angeles,
San Jose and Washington, DC 20,900,000 4,016,546
---------- ----------
36,504,412 $6,602,966
========== ==========
</TABLE>
<TABLE>
<CAPTION>
Total Acquisition
Date Acquired Parking Facility Location Parking Spaces Cost (in thousands)
<S> <C> <C>
8/11/97 Adams Wabash Facility Chicago, IL 670 $25,212
9/3/97 601 Tchoupitoulas Garage New Orleans, LA 759 11,757
11/25/97 Stanwix Parking Pittsburgh, PA 712 17,909
----- -------
2,141 $54,878
===== =======
</TABLE>
(1) These Properties were acquired by Equity Office Predecessors. The total
acquisition cost reflected above represents the cost paid by Equity Office
Predecessors to acquire each respective Property. The acquisition of the
Properties, or the interest therein, by the Company from Equity Office
Predecessors in connection with the Consolidation, was recorded as a
purchase. Accordingly, the assets were recorded by the Company at their fair
value.
(2) The total acquisition cost also included 161 residential units.
(3) The total acquisition cost includes $19.3 million related to real estate tax
liabilities assumed at closing.
(4) The Wright Runstad Properties acquisition cost includes $15.0 million
relating to 5,000,000 warrants which expire in December 2002, to purchase
Common Shares at $39.375 per Common Share (see Note 12).
NOTE 4 -- BEACON MERGER
On December 19, 1997, the Company, the Operating Partnership, Beacon
Properties Corporation, a Maryland corporation ("Beacon") and Beacon
Partnership L.P. ("Beacon Partnership") consummated the merger of Beacon with
and into the Company and Beacon Partnership with and into the Operating
Partnership (the "Beacon Merger") at a cost of approximately $4.3 billion. In
the Beacon Merger, (i) the Company issued 80,596,117 Common Shares in
exchange for all of the outstanding Beacon common shares, (ii) the Company
issued 8,000,000 Series A Preferred Shares in exchange for all of the
outstanding Beacon preferred shares, (iii) the Operating Partnership issued
8,570,886 Units in exchange for the outstanding common partnership units of
Beacon Partnership exclusive of those held by Beacon, and (iv) the Operating
Partnership issued to the Company 80,596,117 Units underlying the Common
Shares issued in exchange for the Beacon common shares and 8,000,000 Series A
preferred units underlying the Series A Cumulative Redeemable Preferred
Shares issued in exchange for the Beacon preferred shares. In addition, the
Company assumed the obligation to issue 4,732,822 Common Shares, of which
3,829,739 had been issued as of December 31, 1997 upon the exercise of
certain outstanding Beacon employee stock options. The $4.3 billion purchase
price is comprised of the following: (1) based on a share price of $31.30,
the Common Shares, including Common Shares issued for stock options, and
Units were valued at approximately $2.853 billion (which is net of a
reduction for cash received or to be received upon exercise of the stock
options of $86 million); (2) the issuance of 8,000,000 Series A Cumulative
Redeemable Preferred Shares valued at their liquidation value of $200
million; (3) the assumption of approximately $627 million of secured debt and
$533 million of unsecured debt; (4) merger costs of approximately $85 million
and; (5) net of the receipt of approximately $8 million of net assets.
As a result of the Beacon Merger, the Company acquired an interest in 130
Beacon properties containing approximately 20.9 million rentable square feet
of office space. The Beacon properties are located in 22 submarkets in six
markets: Boston, Atlanta, Chicago, Los Angeles, San Jose and Washington, D.C.
The Beacon properties, by rentable square feet, are located 65% in suburban
markets and 35% in CBDs, primarily Boston. As of December 31, 1997, the
Beacon properties were on a weighted average basis approximately 95% leased
by a total of approximately 1,694 tenants.
In connection with the Beacon Merger, the Company also acquired a 99%
equity interest in Beacon Management Company, which manages third-party
office and commercial space, Beacon Design Company, which provided
third-party and joint venture tenant design services prior to ceasing such
operations upon the sale of its design service assets in 1998, and Beacon
Construction Company, which provides third-party construction services and is
expected to cease such operations upon completion of its existing contracts.
<PAGE> 64
NOTE 5 -- DISPOSITIONS 65
In May 1997, Equity Office Predecessors sold 8383 Wilshire, an Office
Property located in Beverly Hills, California for approximately $59 million.
The gain for financial reporting purposes was approximately $6.7 million.
In January 1997, Equity Office Predecessors sold Barton Oaks Plaza II for
approximately $13.5 million. The gain for financial reporting purposes was
approximately $5.9 million.
Three Lakeway is a mixed-use property, that included a 210-room hotel and
an 18-story office complex. In January 1996, Equity Office Predecessors sold
the condominium portion of the property which comprised the hotel. The gross
sale price attributable to the land and building was approximately $14.8
million and the gain realized was approximately $5.3 million.
NOTE 6 -- INVESTMENT IN UNCONSOLIDATED JOINT VENTURES
Equity Office Predecessors acquired a mortgage receivable secured by the 500
Orange Tower Office Property ("500 Orange") and purchased land underlying and
adjacent to 500 Orange in July 1994, and acquired a 50% limited partnership
interest in Civic Parking, L.L.C. in April 1997. On December 17, 1997, the
Company acquired a 30% noncontrolling interest in Wright Runstad Asset
Limited Partnership ("WRALP") for $20.0 million and agreed to provide up to
$20.0 million in additional financing or credit support for future
development activities of WRALP. In connection with the Beacon Merger on
December 19, 1997, the Company acquired interests in four unconsolidated
joint ventures (the "Beacon Joint Ventures"). The Company's ownership in the
Beacon Joint Ventures is as follows:
Company's Ownership
Property as of December 31, 1997
- ---------------------------------------------
Polk & Taylor(A) 10%
One Post Office(B) 50%
75-101 Federal Street(C) 52%
Rowes Wharf(D) 50%
(A)The Company owns a 1% general partner interest and a 9% limited partner
interest.
(B)The Company is a general partner in the joint venture.
(C)The Company is a shareholder in the corporation (a private REIT) which owns
the property.
(D)The Company owns a 50% interest in the first mortgage.
These investments are accounted for utilizing the equity method of
accounting. Under this method of accounting the net equity investment of the
Company is reflected on the consolidated and combined balance sheets, and the
consolidated and combined statements of operations include the Company's
share of net income or loss from the unconsolidated joint ventures. As a
result of purchase method accounting for the Beacon Merger and the
Consolidation, any difference between the carrying amount of these
investments on the balance sheet of the Company and the underlying equity in
net assets is amortized as an adjustment to income from unconsolidated joint
ventures over 40 years.
Combined summarized financial information of the unconsolidated joint
ventures is as follows:
<TABLE>
<CAPTION>
December 31, December 31,
(Dollars in thousands) 1997 1996
- --------------------------------------------------------------------------------------------
<S> <C> <C>
BALANCE SHEETS:
Real estate, net $523,670 $ 26,555
Other assets 73,450 1,017
-------- --------
Total Assets $597,120 $ 27,572
======== ========
Mortgage notes and loans payable $344,427 $ --
Other liabilities 15,271 662
Partners' and shareholders' equity 237,422 26,910
-------- --------
Total Liabilities and Partners' and Shareholders' Equity $597,120 $ 27,572
======== ========
Company's share of equity $155,522 $ 26,910
Excess of cost of investments over the net book value
of underlying net assets, net of accumulated
depreciation of $99 231,810 --
-------- --------
Carrying value of investments in unconsolidated joint
ventures and corporation $387,332 $ 26,910
======== ========
</TABLE>
<PAGE> 65
66
<TABLE>
<CAPTION>
For the years ended December 31,
(Dollars in thousands) 1997 1996 1995
- ----------------------------------------------------------------------------------
<S> <C> <C> <C>
STATEMENTS OF OPERATIONS:
Revenues $16,687 $ 4,775 $ 5,002
Operating expenses 4,638 1,852 1,995
Interest expense 793 -- --
Depreciation and amortization 2,752 830 702
------- ------- -------
Net income $ 8,504 $ 2,093 $ 2,305
======= ======= =======
Company's share of net income $ 5,155 $ 2,093 $ 2,305
======= ======= =======
Company's share of depreciation and
amortization (real estate related) $ 1,524 $ 830 $ 702
======= ======= =======
</TABLE>
NOTE 7 -- MORTGAGE DEBT
The Company had outstanding mortgage indebtedness of approximately $2.1
billion and $1.8 billion as of December 31, 1997 and 1996, respectively. The
historical cost, net of accumulated depreciation, of encumbered properties at
December 31, 1997 and 1996 were approximately $4.3 billion and $2.0 billion,
respectively. During the years ended December 31, 1997 and 1996, the Company
(a) repaid approximately $885.8 million and $254.1 million, respectively, of
mortgage debt with proceeds from the IPO, the credit facilities and available
cash reserves; (b) assumed approximately $890.5 million and $92.1 million,
respectively, of mortgage debt in connection with the acquisition of certain
properties; and (c) obtained proceeds from the financing of certain
properties and draws on existing mortgages totaling approximately $238.6
million and $641.0 million, respectively.
A summary of the Company's fixed and variable rate mortgage debt is as
follows:
Fixed Rate Mortgage Debt
As of December 31, 1997 and 1996, the Company had outstanding fixed rate
mortgage indebtedness of approximately $2.0 billion and $1.3 billion,
respectively. Payments on fixed rate mortgage debt are generally due in
monthly installations of principal and interest or interest only. As of
December 31, 1997 and 1996, fixed interest rates ranged from 6.67% to 8.63%
and 6.88% to 10%, respectively. The weighted average fixed interest rate was
approximately 7.53% and 7.89% as of December 31, 1997 and 1996, respectively.
Variable Rate Mortgage Debt
As of December 31, 1997 and 1996, the Company had outstanding variable rate
mortgage indebtedness of approximately $23.5 million and $533.7 million,
respectively. Payments on variable rate mortgage debt are generally due in
monthly installments of principal and interest or interest only. As of
December 31, 1997 the variable interest rate was 6.94% (LIBOR + 1%). As of
December 31, 1996, variable interest rates ranged from 6.56% (LIBOR + 1%) to
7.83% (LIBOR + 2.25%). The weighted average variable interest rate was
approximately 6.94% and 7.35% as of December 31, 1997 and 1996, respectively.
Draw Facilities
As stated in the respective loan agreements, the Company has the ability to
draw additional proceeds on certain of its mortgages for operating deficits,
capital and tenant improvements, and lease acquisition costs. As of December
31, 1997 and 1996, amounts available to draw under these mortgage notes were
approximately $19.0 million and $92.6 million, respectively.
Repayment Schedule
Scheduled payments of principal on mortgage debt for each of the next five
years and thereafter, as of December 31, 1997, are as follows:
<TABLE>
(Dollars in thousands)
<S> <C>
1998 $ 83,792
1999 52,908
2000 151,236
2001 432,962
2002 69,584
Thereafter 1,271,378
Subtotal 2,061,860
Net premium (net of accumulated
amortization of $2.1 million) 1,157
----------
Total $2,063,017
==========
</TABLE>
<PAGE> 66
NOTE 8 -- LINES OF CREDIT 67
A $200 million line of credit (the "$200 Million Line") was obtained in
October 1994 and canceled in September 1996. Interest was payable monthly
based on the LIBOR + .625%. The $200 Million Line was secured by the capital
commitments of certain investors and was used to finance acquisitions.
A $275 million acquisition and term loan facility (the "$275 Million
Line") was obtained in September 1996 with a maturity in September 1999 for
the purpose of providing financing for acquisitions. Interest only was
payable monthly with the interest based on various LIBOR options plus various
spreads ranging from 1.375% to 1.625% or the prime rate. As of December 31,
1996, the Company had an outstanding balance under the $275 Million Line of
approximately $127.1 million.
In April 1997, the Company amended and restated the $275 Million Line to a
$475 million unsecured revolving credit facility (the "$475 Million Line").
Under the $475 Million Line, the Company could draw amounts equal to the
lesser of a) 65% or 50% of the purchase price of certain office buildings or
parking facilities, respectively, or b) an amount based on net operating
income for such property. The $475 Million Line had a maturity of October 21,
1997 but was terminated on July 15, 1997. Interest only was payable monthly
with the interest based on various LIBOR options plus 1.625% or the prime
rate. The Company chose the LIBOR option.
On July 15, 1997, the Company obtained a $600 million credit facility (the
"$600 Million Credit Facility") to be used for acquisitions and other general
corporate purposes. Amounts were drawn on the $600 Million Credit Facility to
repay the balance outstanding on the $475 Million Line which was terminated
when the $600 Million Credit Facility was obtained. The $600 Million Credit
Facility matures on July 15, 2000. The Company paid a commitment fee of
approximately $1.0 million at the closing of the $600 Million Credit
Facility. Prior to the Company obtaining an investment grade credit rating on
its unsecured debt of BBB - or Baa3 or better from two or more credit rating
agencies, the $600 Million Credit Facility initially bore interest at LIBOR
plus 110 basis points, and required payment of a quarterly unused commitment
fee between .15% and .25% of the unused portion of the $600 Million Credit
Facility, depending on the average unfunded balance during the quarter. In
November 1997, the $600 Million Credit Facility was amended and the interest
rate was reduced to LIBOR plus 100 basis points. In December 1997, the
Company received an investment grade credit rating on its senior unsecured
debt from Moody's (Baa1), Duff & Phelps (BBB+) and Standard & Poor's (BBB).
Per the terms of the $600 Million Credit Facility, these credit ratings
resulted in the interest rate being reduced from LIBOR plus 100 basis points
to LIBOR plus 60 basis points, and the unused commitment fee was replaced
with a facility fee equal to .20% per annum. In addition, a competitive bid
option, whereby the lenders participating in the $600 Million Credit Facility
bid on the interest rate to be charged, became available for up to $250
million. As of December 31, 1997, the balance of the $600 Million Credit
Facility was approximately $559 million.
The Company assumed $533 million in unsecured debt in connection with the
Beacon Merger. The Company repaid $95 million prior to December 31, 1997 and
repaid the remaining balance in February 1998 with the proceeds from the
$1.25 Billion Notes Offering, the $250 Million MOPPRS Offering and the $300
Million PIERS Offering as described in Note 25, at which time the lines were
terminated.
Term Loan Facility
In October 1997, the Company obtained a $1.5 billion unsecured credit
facility (the "$1.5 Billion Credit Facility"). The $1.5 Billion Credit
Facility is available for the acquisition of properties and general corporate
purposes. The $1.5 Billion Credit Facility carries an interest rate equal to
LIBOR plus 100 basis points and may be increased or decreased upon receipt of
an investment grade unsecured debt rating. As mentioned above, the Company
received an investment grade rating in December 1997 resulting in a reduction
in the interest rate to LIBOR plus 80 basis points. The $1.5 Billion Credit
Facility matures July 1, 1998, and may be extended to October 1, 1998. The
Company paid an underwriting fee on the $1.5 Billion Credit Facility at
closing of approximately $4.9 million. In addition, an unused commitment fee
is payable quarterly in arrears based upon the unused amount of the $1.5
Billion Credit Facility as follows: .15% per annum if the unused amount is
between 0% to 33%; .20% per annum if the unused amount is more than 33% but
less than 66%; .25% per annum if the unused amount is greater than 66%. In
October 1997, the Company used approximately $236 million of proceeds from
the $1.5 Billion Credit Facility to repay the majority of the variable rate
property mortgage indebtedness outstanding as of September 30, 1997. The
Company repaid $150 million on the $1.5 Billion Credit Facility with the
proceeds from the $200 million private placement of Common Shares in October
1997. Under the terms of the $1.5 Billion Credit Facility agreement, any
amounts repaid cannot be re-drawn. In addition, amounts were drawn from the
$1.5 Billion Credit Facility for property acquisitions and general corporate
purposes. As of December 31, 1997, the outstanding balance on the $1.5
Billion Credit Facility was approximately $1.044 billion. The amount
available to draw under the $1.5 Billion Credit Facility was approximately
$306 million as of December 31, 1997.
<PAGE> 67
68 NOTE 9 -- UNSECURED NOTES
On September 3, 1997, the Company completed a private debt offering of $180
million (the "$180 Million Notes Offering") with an unaffiliated party. The
terms of the $180 Million Notes Offering consist of four tranches with
maturities from seven to 10 years which were priced at an interest rate
spread over the corresponding U.S. Treasury rate. The Company used the
proceeds of the $180 Million Notes Offering to repay a portion of the $600
Million Credit Facility. In addition, in connection with the $180 Million
Notes Offering, the Company terminated $150 million of hedge agreements at a
cost of approximately $3.9 million (see Note 10). A summary of the terms of
the $180 Million Notes Offering follows:
<TABLE>
<CAPTION>
Stated Effective
Tranche Amount Rate Rate(A)
-------------------------------------------------------------------------
<S> <C> <C> <C>
7 Year Senior Notes due 2004 $ 30,000,000 7.24% 7.24%
8 Year Senior Notes due 2005 50,000,000 7.36% 7.67%
9 Year Senior Notes due 2006 50,000,000 7.44% 7.73%
10 Year Senior Notes due 2007 50,000,000 7.42% 7.69%
------------ ---- ----
$180,000,000 7.38% 7.62%
============ ==== ====
</TABLE>
(A)Includes the cost of the terminated interest rate protection agreements.
NOTE 10 -- INTEREST RATE PROTECTION AGREEMENTS
In order to limit the market risk associated with variable rate debt, the
Company entered into several interest rate protection agreements. These
agreements effectively convert floating rate debt to a fixed rate basis, as
well as hedge anticipated financing transactions. A summary of the various
interest rate hedge agreements as of December 31, 1997 is as follows: (1) On
June 4, 1997, the Company entered into interest rate protection agreements
with major U.S. financial institutions for $700 million of indebtedness. As a
result of this agreement, the Company essentially "locked into" U.S. Treasury
rates in effect as of June 4, 1997, for $700 million in indebtedness. In
August 1997, the Company terminated $150 million of the $700 million of hedge
agreements at a cost of approximately $3.9 million related to the $180
Million Notes Offering (see Note 9). The portion of the $180 Million Notes
Offering protected by these agreements consisted of three tranches with
maturities of eight, nine and ten years, respectively. The cost of the
terminated hedge agreements is amortized to interest expense over the
respective terms of each tranche. (2) On October 6, 1997, the Company entered
into an additional $450 million of interest rate protection agreements based
on the U.S. Treasury rates in effect at that date. The Company has terminated
$700 million of hedge agreements in connection with the February 1998 notes
offering (see Note 25) at a cost of approximately $32.6 million. The cost of
these terminated hedge agreements will be amortized to interest expense over
the terms of the respective notes offering. The Company terminated the
remaining $300 million of hedge agreements in 1998 at a cost of approximately
$7.4 million which will be reflected as an extraordinary loss. (3) Equity
Office Predecessors entered into an interest rate swap agreement on October
1995, which effectively fixed the interest rate on a $93.6 million mortgage
loan at 6.94% through the maturity of the loan on June 30, 2000.
Equity Office Predecessors sold several interest rate protection
agreements (aggregating $173 million of LIBOR-based agreements) in June 1997
at a cost of approximately $1.1 million.
NOTE 11 -- MINORITY INTERESTS IN PARTIALLY OWNED PROPERTIES
The following properties are controlled and partially owned by the Company
but have partners with minority interests. The Company has included 100% of
the financial condition and results of operations of these properties in the
consolidated financial statements of the Company and the combined financial
statements of Equity Office Predecessors. The equity interests of the
unaffiliated partners are reflected as minority interests.
Company's Ownership as of
Property December 31, 1997
--------------------------------------------------------------------------
CIGNA Center 95%(1)
Plaza at La Jolla Village 66.67%(1)
San Felipe Plaza 35%(2)
Capitol Commons Garage 50%(3)
Acorn Properties 89%(4)
(1)The Company owns a controlling interest and is the managing general partner.
(2)The Company is the managing general partner and receives preferential
allocations which result in the Company receiving 100% of the economic
benefits. Prior to the IPO, an affiliate of the Company was the managing
general partner.
(3)The Company owns a controlling interest and receives preferential
allocations. The unaffiliated partner is entitled to receive 50% of the
remaining cash flow after the Company receives its preferential allocations.
(4)The Company has an 89% managing general partner interest in 11 properties and
receives preferential allocations which entitles it to 99% of the economic
benefits. The Company has the option of purchasing the remaining interest in
all 11 properties, exercisable for a designated period commencing three (3)
years after the respective closing dates on the initial purchases, for
additional consideration in the amount of approximately $2.1 million, all
payable in Units valued at $28.775 per Unit.
<PAGE> 68
69
The Company purchased the unaffiliated joint ventures partners' 3% interest
in First Union Center for approximately $775,000 in 1997. The Company now
effectively owns 100% of First Union Center.
NOTE 12 -- SHAREHOLDERS'/OWNERS' EQUITY AND MINORITY INTERESTS OF OPERATING
PARTNERSHIP
Common Shares and Units
In addition to the Common Shares and Units issued in connection with the
formation transactions described in Note 1 -- Business and Formation of
Company, the Company also issued Common Shares and/or Units in connection
with the following transactions:
<TABLE>
<CAPTION>
Transaction Common Shares Units
---------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Outstanding upon completion of the Consolidation and the IPO(see Note 1) 152,180,770 11,877,647
Common Shares/Units issued in exchange for Properties(1) 3,435,688 8,711,157
Restricted Shares awarded to Officers(see Note 21) 298,000 --
Common Shares issued as Trustee compensation 5,055 --
Sale of Common Shares(2) 9,685,034 --
Issuance of Common Shares for Beacon Merger (including 3,829,739 of
Beacon options exercised)(see Note 4) 84,425,856 8,570,886
Less Common Shares held as treasury stock(see Note 1) (502,740) --
----------- ----------
Total as of December 31, 1997 249,527,663 29,159,690
=========== ==========
</TABLE>
(1)In September 1997, the Company purchased two Office Properties and a
Parking Facility from an unaffiliated third party located in New Orleans,
Louisiana for a purchase price of approximately $140 million. Of this
amount, the Company issued 1,692,546 Units at a price of $29 per Unit for
a total of approximately $49.1 million.
In October 1997, the Company purchased four Office Properties from an
unaffiliated party located in Houston, Texas, Dallas, Texas and
Philadelphia, Pennsylvania for a purchase price of $289 million. Of this
amount, the Company issued 2,900,000 Units at a price of $24.50 per Unit
for a total of approximately $71.1 million.
In October 1997, the Company purchased from an unaffiliated party an
interest in nine Office Properties located in suburban Philadelphia for a
purchase price of approximately $127.5 million. Of this amount, the Company
issued 499,977 Units at a price of $28.775 per Unit for a total of
approximately $14.4 million. In November 1997, two additional properties
were purchased from the same party for a purchase price of approximately
$17.2 million. Of this amount, the Company issued 124,348 Units at a price
of $28.775 per Unit for a total of approximately $3.6 million.
Also, in October 1997, the Company purchased an Office Property from an
unaffiliated party located in Washington, D.C. for a purchase price of
approximately $81.7 million. Of this amount, the Company issued 741,159
Units at a price of $32.975 per Unit for a total of approximately $24.4
million.
In December 1997, the Company purchased 10 Office Properties from an
unaffiliated party located in Seattle and Bellevue, Washington, Portland,
Oregon and Anchorage, Alaska for a purchase price of $640 million. Of this
amount, the Company issued 2,615,700 Units at a price of $29.11 per Unit
for a total of approximately $76.1 million. Furthermore, the Company issued
3,435,688 Common Shares at a price of $29.11 per Common Share for a total
of approximately $100 million. In addition, the Company acquired a
non-controlling interest in the management company of the seller for
approximately $20 million. Of this amount, the Company issued 137,427 Units
at a price of $29.11 per Unit for a total of approximately $4.0 million.
(2)In October 1997, the Company completed two private placements for a total
of 9,685,034 restricted Common Shares for a total value of approximately
$273.9 million.
Ownership of Operating Partnership
The Company's ownership interest in the Operating Partnership as of December
31, 1997 was approximately 89.5%.
Warrants
In connection with the December 1997 purchase of 10 office properties, the
Company issued warrants that expire in December 2002 to purchase an aggregate
of 5,000,000 Common Shares at an exercise price of $39.375 per Common Share.
The warrants were valued at $3 per warrant utilizing the Black-Scholes
valuation model at the time of issuance and are reflected as a component of
additional paid in capital.
<PAGE> 69
70
Preferred Shares
On December 19, 1997, the Company issued 8,000,000 8.98% Series A Cumulative
Redeemable Preferred Shares, liquidation preference of $25.00 per share in
connection with the Beacon Merger (see Note 4). Holders of the shares are
entitled to receive, when and as authorized by the Company, cumulative
preferential cash distributions at the rate of 8.98% of the $25.00
liquidation preference per annum (equivalent to a fixed annual amount of
$2.245 per share). Such distributions are cumulative from December 19, 1997
and are payable quarterly in arrears on or before March 15, June 15,
September 15 and December 15 of each year. Holders of the shares have no
other voting rights except as provided by law and have no preemptive rights.
The shares are not convertible, redeemable or entitled to the benefit of any
sinking fund. On and after June 15, 2002, the Company, at its option and upon
not less than 30 nor more the 60 days' written notice, may redeem the shares,
in whole or in part, at any time or from time to time, for cash at a
redemption price of $25.00 per share, plus all accrued and unpaid
distributions thereon to the date fixed for redemption.
Dividends/Distributions
On September 26, 1997, the Company declared a dividend/distribution of $0.26
per Common Share/Unit outstanding representing a pro rata
dividend/distribution since the closing of the IPO on July 11, 1997, based
upon a full quarterly dividend/distribution of $0.30 per Common Share/Unit
and an annual dividend/distribution of $1.20 per Common Share/Unit, totaling
approximately $43.0 million. The dividend/distribution was paid on October 9,
1997 to shareholders and unitholders of record on September 29, 1997.
On November 14, 1997, the Company declared a dividend/distribution of
$0.30 per Common Share/Unit outstanding, totaling approximately $53.8
million. The dividend/distribution was paid on December 19, 1997 to the
common shareholders/unitholders of record at the close of business on
December 10, 1997. For federal income tax purposes, 19.03% (unaudited) of the
dividends paid in 1997 represented a non-taxable return of capital and the
remaining 80.97% (unaudited) represented ordinary income.
Equity Office Predecessors Capital Contributions/Distributions
As of July 10, 1997, the capital partners of Equity Office Predecessors
previously committed to contribute approximately $2.114 billion, of which
approximately $2.031 billion had been cumulatively contributed by capital
partners and approximately $83 million of the commitment had been canceled.
As of July 10, 1997, the Equity Office Predecessors had cumulatively
distributed approximately $305.9 million to their capital partners.
As of December 31, 1996, the net book value of the 14 apartment buildings
and two shopping centers owned by the ZML Funds (the "Non-Office
Properties"), which were not included in the Equity Office Predecessors
combined financial statements, was approximately $285.9 million. All cash
deficits incurred by the Non-Office Properties were reflected as
distributions and all excess cash flow generated by the Non-Office
Properties, including net proceeds from the sale of these properties, are
reflected as contributions to Equity Office Predecessors. The net
contributions for the period January 1, 1997 through July 10, 1997 and the
years ended December 31, 1996 and 1995 related to the Non-Office Properties
were approximately $98.7 million, $98.8 million and $0.9 million,
respectively.
During 1997, 13 Non-Office Properties were sold to an affiliated party and
two Non-Office Properties were sold to unaffiliated parties which generated
net proceeds of approximately $100.7 million which is included in the $98.7
million net contributions from the Non-Office Properties for the period from
January 1, 1997 to July 10, 1997. The ZML Fund I distributed its interest in
the remaining Non-Office Property to its capital partners prior to the
Consolidation.
During 1996, two Non-Office Properties were sold to unaffiliated parties
which generated net proceeds of approximately $96.7 million which was
included in the $98.8 million net contributions from Non-Office Properties
for the year ended December 31, 1996.
<PAGE> 70
NOTE 13 -- FUTURE MINIMUM RENTS 71
Future minimum rental receipts due on noncancelable operating leases at the
Office Properties and Parking Facilities as of December 31, 1997 were as
follows:
<TABLE>
(Dollars in thousands)
<S> <C>
1998 $1,049,857
1999 990,423
2000 865,410
2001 731,171
2002 587,791
Thereafter 1,982,691
----------
$6,207,343
==========
</TABLE>
The Company is subject to the usual business risks associated with the
collection of the above scheduled rents. The future minimum rents from the
Company's investment in unconsolidated joint ventures which are accounted for
utilizing the equity method, have not been included in the above schedule.
NOTE 14 -- FUTURE MINIMUM LEASE PAYMENTS
As of December 31, 1997, the Company's ownership of 13 Office Properties and
one of its Parking Facilities are subject to ground leases. Certain of these
leases are subject to rental increases based upon the appraised value of the
property at specified dates or certain financial calculations of the
respective property. As disclosed in Note 19, the Company leases its office
space from an affiliate. In addition, the Company has assumed lease
obligations of certain tenants at their former locations. Future minimum
lease obligations under these noncancelable leases, net of sublease rental
income, as of December 31, 1997 were as follows:
<TABLE>
(Dollars in thousands)
<S> <C>
1998 $ 6,099
1999 5,481
2000 5,531
2001 5,567
2002 4,604
Thereafter 456,289
--------
$483,571
========
</TABLE>
Rental expense for the years ended December 31, 1997, 1996 and 1995, was
approximately $7.2 million, $4.5 million and $2.4 million, respectively.
NOTE 15 -- EXTRAORDINARY ITEMS AND PROVISIONS FOR VALUE IMPAIRMENT
As reflected in the consolidated statement of operations for the period from
July 11, 1997 through December 31, 1997, and the combined statement of
operations for the period from January 1, 1997 through July 10, 1997, the
Company and Equity Office Predecessors reported an extraordinary loss of
approximately $16.4 million and $0.3 million, respectively, related to
pre-payment penalties on debt retired prior to maturity during the respective
periods with net proceeds from the IPO and available cash reserves.
As reflected in the combined statement of operations for the year ended
December 31, 1995, Equity Office Predecessors reported an extraordinary gain
of approximately $31.3 million on the repurchase of debt, which is net of the
$20.0 million minority partners' share, and a provision for value impairment
of approximately $20.2 million related to Equity Office Predecessors'
investment in San Felipe Plaza Ltd.
BP TOWER
Cleveland, Ohio
[BUILDING PHOTO]
<PAGE> 71
72
NOTE 16 -- EARNINGS PER SHARE
The following table sets forth the computation of basic and diluted earnings
per Common Share:
<TABLE>
<CAPTION>
For the period from
July 11, 1997 through
(Dollars in thousands, except share data) December 31, 1997
<S> <C>
NUMERATOR:
Net income available to Common Shares before extraordinary items
and gain on sales of real estate $ 87,303,000
Gain on sales of real estate 126,000
Extraordinary items (16,366,000)
-------------
Numerator for basic earnings per share -- income available
to Common Shares 71,063,000
Minority interest in Operating Partnership 7,010,000
Numerator for diluted earnings per share -- income available
to Common Shares $ 78,073,000
=============
DENOMINATOR:
Denominator for basic earnings per share -- weighted average Common
Shares 162,591,477
-------------
Effect of dilutive securities:
Conversion of Units to Common Shares 16,056,085
Stock options 1,366,465
-------------
Dilutive potential Common Shares 17,422,550
Denominator for diluted earnings per share -- adjusted
weighted average shares and assumed conversions 180,014,027
=============
BASIC EARNINGS AVAILABLE TO COMMON SHARES PER
WEIGHTED AVERAGE COMMON SHARE:
Net income before extraordinary items and gain on sales of real estate $ .54
Gain on sales of real estate --
Extraordinary items (.10)
-------------
Net income per Common Share $ .44
=============
DILUTED EARNINGS AVAILABLE TO COMMON SHARES PER
WEIGHTED AVERAGE COMMON SHARE:
Net income before extraordinary items and gain on sales of real estate $ .52
Gain on sales of real estate --
Extraordinary items (.09)
-------------
Net income per Common Share $ .43
=============
</TABLE>
For additional disclosures regarding the employee stock options and the
restricted shares see Note 21.
Options to purchase 726,500 Common Shares at a weighted average exercise
price of $32.93 per Common Share and warrants to purchase 5,000,000 Common
Shares at an exercise price of $39.375 per Common Share were outstanding
during 1997 but were not included in the computation of diluted earnings per
share because the respective exercise prices were greater than the average
market price of the Common Shares and, therefore, the effect would be
antidilutive.
On February 13, 1998, the Company issued 6,000,000 Preferred Income Equity
Redeemable Shares ("PIERS") and the net proceeds of $290.3 million were used
to repay debt (see Note 25). The PIERS are convertible at any time, at the
option of the holder, unless previously redeemed, into Common Shares at a
conversion price of $35.70 per Common Share. In addition, on February 17,
1998, the Company issued 2 million Options at an exercise price of $29.50 per
Common Share under the Employee Plan.
NOTE 17 -- PRO FORMA STATEMENT OF OPERATIONS (UNAUDITED)
The pro forma data presented below is included to illustrate the effect on
the Company's operations as a result of the transactions described below.
The pro forma condensed combined statement of operations for the year
ended December 31, 1997 reflects the following transactions as if they had
occurred on January 1, 1997: (a) the acquisition of 46 Office Properties and
seven Parking Facilities, including an interest in four parking facilities,
acquired between January 1, 1997 and December 17, 1997, and the disposition
of two Office Properties; (b) the $180 Million Notes Offering; (c) the
Consolidation and the
<PAGE> 72
73
IPO, and the decrease in interest expense resulting from the use of the net
proceeds for the repayment of mortgage debt; (d) the net change in interest
expense from draws on the various credit facilities (see Note 8) used to
refinance existing mortgage debt; (e) interest income from an interest in a
mortgage note; (f) the Beacon Merger (see Note 4); (g) the $1.25 Billion
Notes Offering and the $250 Million MOPPRS Offering (see Note 25); (h) the
$300 Million PIERS Offering (see Note 25); and (i) the financing of certain
properties.
The pro forma condensed combined statement of operations for the year
ended December 31, 1996 reflects the following transactions as if they had
occurred on January 1, 1996: (a) the acquisition of 57 Office Properties and
14 Parking Facilities, including an interest in four Parking Facilities,
acquired between January 1, 1996 and December 17, 1997, and the disposition
of two Office Properties; (b) the $180 Million Notes Offering; (c) the
Consolidation and the IPO, and the decrease in interest expense resulting
from the use of the net proceeds for the repayment of mortgage debt; (d) the
net change in interest expense from draws on the various credit facilities
(see Note 8) used to refinance existing mortgage debt; (e) interest income
from an interest in a mortgage note; (f) the Beacon Merger (see Note 4); (g)
the $1.25 Billion Notes Offering and the $250 Million MOPPRS Offering (see
Note 25); (g) the $300 Million PIERS Offering (see Note 25); and (h) the
financing of certain properties.
The accompanying pro forma combined statements of operations have been
prepared by management of the Company and do not purport to be indicative of
the results which would actually have been obtained had the transactions
described above been completed on the dates indicated or which may be
obtained in the future.
<TABLE>
<CAPTION>
For the years ended December 31,
--------------------------------
(Dollars in thousands, except share data) 1997 1996
------------------------------------------------------------------------------------------------------
<S> <C> <C>
REVENUES:
Rental $ 1,126,729 $ 1,023,596
Tenant reimbursements 201,678 170,096
Parking 63,707 60,209
Other 27,648 43,526
Fees from noncombined affiliates 8,210 8,125
Interest 23,140 21,143
------------- -------------
Total revenues 1,451,112 1,326,695
------------- -------------
EXPENSES:
Property operating 516,555 484,882
Interest 274,940 269,998
Depreciation 252,631 251,723
Amortization 12,214 8,782
General and administrative 56,966 32,644
------------- -------------
Total expenses 1,113,306 1,048,029
------------- -------------
Income before allocation to minority interests, income from
investment in unconsolidated joint ventures, gain on sales
of real estate and extraordinary items 337,806 278,666
DISCONTINUED OPERATIONS:
Loss from operations -- Construction Company (2,263) (2,609)
Loss on sale -- Construction Company -- (249)
MINORITY INTERESTS:
Operating Partnership (30,939) (28,333)
Partially owned properties (1,757) (2,142)
Income from investment in unconsolidated joint ventures 12,920 9,850
Gain on sales of real estate -- 21,843
Preferred dividends (33,710) (33,710)
------------- -------------
Income before extraordinary items 282,057 243,316
Extraordinary items (16,365) --
------------- -------------
Net income $ 265,692 $ 243,316
============= =============
Basic earnings per weighted average Common Share $ 1.06 $ .98
============= =============
Weighted average Common Shares outstanding -- Basic 249,527,663 249,527,663
============= =============
Diluted earnings per weighted average Common Share $ 1.05 $ .96
============= =============
Weighted average Common Shares outstanding -- Diluted 282,872,353 282,872,353
============= =============
</TABLE>
WESTBROOK CORPORATE CENTER
Westchester, Illinois
[BUILDING PHOTO]
<PAGE> 73
74
NOTE 18 -- QUARTERLY DATA (UNAUDITED)
The quarterly data is as follows:
<TABLE>
<CAPTION>
4Q 3Q 2Q 1Q
(Dollars in thousands, except share data) 12/31/97 9/30/97(A) 6/30/97 3/31/97
------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Total revenues $ 248,400 $ 183,886 $ 165,219 $ 154,567
============ ============ ============ ============
Income before allocation to minority interests $ 46,704 $ 45,736 $ 23,331 $ 24,910
============ ============ ============ ============
Net income $ 40,208 $ 31,290 $ 30,853 $ 30,769
============ ============ ============ ============
Net income available to Common Shares $ 39,559 $ 31,290 $ 30,853 $ 30,769
============ ============ ============ ============
Weighted average Common Shares
outstanding 172,307,010 151,691,121 -- --
============ ============ ============ ============
Basic earnings per weighted average
Common Shares $ 0.23 $ 0.21 $ -- $ --
============ ============ ============ ============
Diluted earnings per weighted average
Common Shares $ 0.22 $ 0.21 $ -- $ --
============ ============ ============ ============
</TABLE>
<TABLE>
<CAPTION>
4Q 3Q 2Q 1Q
(Dollars in thousands) 12/31/96 9/30/96 6/30/96 3/31/96
--------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Total revenues $154,887 $126,117 $116,970 $110,150
======== ======== ======== ========
Income before allocation to minority interests $ 29,688 $ 11,015 $ 14,543 $ 12,834
======== ======== ======== ========
Net income $ 30,383 $ 11,024 $ 14,040 $ 17,978
======== ======== ======== ========
</TABLE>
(A)This column includes the operations of Equity Office Predecessors from
July 1, 1997 through July 10, 1997 and the operations of the Company from
July 11, 1997 through September 30, 1997. The earnings per share disclosures
pertain only to the operations of the Company from July 11, 1997 through
September 30, 1997.
NOTE 19 -- RELATED PARTY TRANSACTIONS
Affiliates provide various services to the Company. Fees and reimbursements
paid by the Company to affiliates for the years ended December 31, 1997, 1996
and 1995 were as follows:
<TABLE>
<CAPTION>
Paid Payable as of
years ended December 31, December 31,
----------------------------------- ---------------------
(Dollars in thousands) 1997 1996 1995 1997 1996
------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Acquisition fees(A) $ 777 $ 3,068 $ 1,097 $ -- $ 587
Accounting and tax related services 68 797 554 -- 61
Legal fees and expenses(B) 3,006 3,481 3,230 550 1,295
Office rent(C) 1,068 777 668 79 --
Disposition fees -- 124 -- -- --
Development fees(D) 434 702 438 -- --
Reimbursement of property insurance premiums 6,790 5,032 3,735 32 --
Organizational and offering expenses(E) 106 778 180 -- 106
Administrative services(F) 473 822 609 71 20
Consulting 832 274 410 1 5
------- ------- ------- ------- -------
$13,554 $15,855 $10,921 $ 733 $ 2,074
======= ======= ======= ======= =======
</TABLE>
(A)Represents amounts paid by Equity Office Predecessors to Merrill Lynch, a
limited partner of the general partner of the ZML Funds.
(B)Represents amounts primarily paid to Rosenberg & Liebentritt, P.C., a law
firm, for legal fees and expenses in connection with acquisition,
corporate and leasing activity. A trustee of the Company was a principal
of this law firm until September 1, 1997 and is now of counsel.
(C)The Company leases its corporate office space from an affiliate of the
Equity Group.
(D)The renovation project at the 28 State Street Office Building was being
managed by an affiliate of the Equity Group. In consideration for their
services, the development managers were paid fees which management
believes are equal to or less than market for such services.
(E)Affiliates of the Equity Group were reimbursed for reasonable costs
incurred in connection with the organization and the offering of units in
the ZML Funds, including legal and accounting fees and expenses, printing
costs and filing fees.
(F)Administrative services include fees paid to EGI for centralized services
such as payroll processing, employee benefits, telecommunications,
publications and consulting services such as economic and demographics
research for possible acquisitions.
An affiliate of the Equity Group has an indirect minority interest in
Standard Parking Limited Partnership ("SPLP") which manages the parking
operations at certain Properties that are owned by the Company. Management
believes amounts paid to SPLP are equal to market for such services.
<PAGE> 74
Amounts received and due from affiliates 75
Affiliates of the Company lease space in certain of the Office Properties
owned by the Company. The provisions of the leases are consistent with terms
of unaffiliated tenants' leases. Total rents and other amounts paid by
affiliates under the terms of their respective leases were approximately $3.0
million and $3.5 million for the years ended December 31, 1997 and 1996,
respectively.
The Company provides asset and property management services to certain
noncombined office and garage properties owned by affiliates of the Equity
Group. Amounts due for these services as of December 31, 1997 and 1996 were
approximately $0.2 million and $0.8 million, respectively.
The Company entered into various lease agreements with SPLP whereby SPLP
leased certain of the Company's stand-alone Parking Facilities. Certain of
these lease agreements provide SPLP with annual successive options to extend
the term of the lease through various dates. The rent paid in the years ended
December 31, 1997 and 1996 under these lease agreements was approximately
$11.0 million and $3.2 million, respectively. In addition, the Company may
receive additional rent based upon actual gross revenues generated by these
Parking Facilities. In accordance with certain of these leases, the Company
may be obligated to make an early termination payment if agreement is not
reached as to rent amounts to be paid.
NOTE 20 -- NON-CASH INVESTING AND FINANCING ACTIVITIES
Additional supplemental disclosures of non-cash investing and financing
activities are as follows:
<TABLE>
<CAPTION>
Equity Office Properties Trust
for the period from
July 11, 1997 through
(Dollars in thousands) December 31, 1997
- ------------------------------------------------------------------------------------
<S> <C>
Mortgage loans and lines of credit assumed through Beacon Merger $1,160,451
==========
Net liabilities assumed through Beacon Merger $ 72,034
==========
Common Shares and Units issued through Beacon Merger
(assuming exercise of 4,732,822 Options) $2,853,266
==========
8.98% Series A Cumulative Redeemable Preferred Shares
issued through Beacon Merger $ 200,000
==========
Common Shares and Units issued through property acquisitions
(including warrants valued at $15.0 million) $ 357,672
==========
Mortgage loans assumed through property acquisitions $ 263,048
==========
Mortgage loans and line of credit assumed in the Consolidation $2,196,708
==========
Net liabilities assumed in the Consolidation $ 62,706
==========
Common Shares and Units issued in the Consolidation $2,830,918
==========
</TABLE>
In addition, Equity Office Predecessors assumed mortgage loans through
property acquisitions of approximately $92.1 million and $265.8 million for
the years ended December 31, 1996 and 1995, respectively.
NOTE 21 -- SHARE OPTION PLAN AND RESTRICTED SHARE PLAN
In July 1997, the Company adopted the 1997 Share Option and Share Award Plan
(the "Employee Plan"). The purpose of the Employee Plan is to attract and
retain highly qualified executive officers, trustees, employees and
consultants. Through the Employee Plan, certain officers, trustees, key
employees and consultants of the Company were offered the opportunity to
acquire Common Shares pursuant to grants of options to purchase Common Shares
("Options"), and to receive dividend equivalent rights with respect to Common
Shares ("Dividend Equivalents") and to receive Restricted Shares. The
Compensation Committee determines the vesting schedule, if any, of each
Option and the term, which term shall not exceed 10 years from the date of
grant. As to the Options that have been granted through December 31, 1997,
generally, one-third are exercisable one year after the initial grant,
one-third are exercisable two years following the date such Options were
granted and the remaining one-third are exercisable three years following the
date such Options were granted. With respect to the Restricted Shares granted
through December 31, 1997, generally, one-half vest three years after the
initial grant, one-fourth vest four years following the date such Restricted
Shares were granted and the remaining one-fourth vest five years following
the date such Restricted Shares were granted. The Common Shares subject to
Options under the Employee Plan were limited to 11,121,786. In connection
with the establishment of the Employee Plan, the Company granted Options to
purchase Common Shares to certain officers, trustees, employees and
consultants of the Company at the IPO price. In addition, the Employee Plan
permits the Company to issue Restricted Common Shares to executive or other
key employees upon such terms and conditions as shall be determined by the
Compensation Committee in its sole discretion.
<PAGE> 75
76
The exercise price for all Options under the Employee Plan shall not be
less than the fair market value of the underlying Common Shares at the time
the Option is granted. The Share Option Plan will terminate at such time as
no further Common Shares are available for issuance upon the exercise of
Options and all outstanding Options have expired or been exercised. The Board
of Trustees may at any time amend or terminate the Employee Plan, but
termination will not affect Options previously granted. Any Options which had
vested prior to such termination would remain exercisable by the holder
thereof.
The Employee Plan is administered by the Compensation Committee which is
appointed by the Board of Trustees. The Compensation Committee determines
those officers, key employees and consultants to whom, and the time or times
at which, grants of Options will be made. The Compensation Committee
interprets the Employee Plan, adopts rules relating thereto and determines
the terms and provisions of Options.
The Company has elected to apply the provisions of Accounting Principles
Board Opinion No. 25, "Accounting for Stock Issued to Employees," ("APB No.
25") in the computation of compensation expense. Under APB No. 25's intrinsic
value method, compensation expense is determined by computing the excess of
the market price of the shares over the exercise price on the measurement
date. For the Company's Options, the intrinsic value on the measurement date
(or grant date) is zero, and no compensation expense is recognized. Financial
Accounting Standards Board No. 123 ("FASB No. 123") requires the Company to
disclose pro forma net income and income per share as if a fair value based
accounting method had been used in the computation of compensation expense.
The fair value of the Options computed under FASB No. 123 would be recognized
over the vesting period of the Options. The fair value for the Company's
Options granted in 1997 was estimated at the time the Options were granted
using the Black-Scholes option pricing model with the following weighted
average assumptions: risk-free interest rate of 5.59%; dividend yields of 4%;
volatility factors of the expected market price of the Company's Common
Shares of .24; and a weighted average expected life of the Options and the
Restricted Shares of five years.
The Black-Scholes option valuation model was developed for use in
estimating the fair value of traded options which have no vesting
restrictions and are fully transferable. In addition, option valuation models
require the input of highly subjective assumptions including the expected
stock price volatility. Because the Company's Options have characteristics
significantly different from those of traded options, and because changes in
the subjective input assumptions can materially affect the fair value
estimate, in management's opinion, the existing models do not necessarily
provide a reliable single measure of the fair value of its Options.
For purposes of pro forma disclosures, the estimated fair value of the
Options is amortized to expense over the Options' vesting period. The
following is the unaudited pro forma information for the period from July 11,
1997 through December 31, 1997:
<TABLE>
<CAPTION>
For the period from July 11, 1997
(Dollars in thousands) through December 31, 1997
---------------------------------------------------------------------
<S> <C>
Pro forma net income before extraordinary items $ 85,654
Extraordinary items $(16,240)
--------
Pro forma net income available to Common Shares $ 69,414
========
</TABLE>
<TABLE>
<CAPTION>
Basic Diluted
earnings per earnings per
Common Share Common Share
-------------------------------------------------------------------------
<S> <C> <C>
Pro forma income before extraordinary items $.53 $.51
Extraordinary items $(.10) $(.09)
---- ----
Pro forma net income $.43 $.42
==== ====
</TABLE>
As of December 31, 1997, there were no Options issued under the Employee Plan
that were exercisable or Restricted Shares that were vested. Exercise prices
for the 4,911,500 Options outstanding as of December 31, 1997 ranged from
$21.00 to $33.00, with a weighted average exercise price of $22.80.
Expiration dates ranged from July 11, 2007 to December 19, 2007. The
remaining weighted average contractual life of Options was 9.65 years. The
weighted average grant date fair value of Options granted during 1997 was
$4.44. In addition, there were 298,000 Restricted Shares issued during 1997.
NOTE 22 -- EMPLOYEE SHARE PURCHASE PLAN
In July 1997, the Company adopted its 1997 Non-Qualified Employee Share
Purchase Plan (the "Purchase Plan") for the purpose of attracting highly
qualified executive officers, trustees and employees. The Company has
reserved 2 million Common Shares (subject to adjustment for share splits,
share distributions, recapitalizations, or other corporate restructurings)
for issuance pursuant to the Purchase Plan.
<PAGE> 76
77
The Purchase Plan is administered by the Compensation Committee and allows
eligible employees and trustees to acquire an interest in the Company through
the purchase of Common Shares from the Company at a price equal to 85% of the
lesser of (i) the closing price of the Common Shares on the New York Stock
Exchange ("NYSE") on the day prior to the purchase or (ii) the average
closing price of Common Shares on the NYSE for the six-month period prior to
the purchase.
Common Shares will be offered under the Purchase Plan in semi-annual
offering periods. No such Common Shares were offered as of December 31, 1997.
Eligible employees and trustees who elect to participate in the Purchase Plan
will be able to use funds accumulated through cash contributions or payroll
deductions to purchase Common Shares at a price less than the fair market
value of the Common Shares on the date of purchase.
NOTE 23 -- 401(k) PLAN
The Company has established the Equity Office Properties Trust Section 401(k)
Savings/Retirement Plan (the "401(k) Plan") to cover eligible employees of
the Company and any designated affiliate (including the Operating
Partnership).
The 401(k) Plan permits eligible employees of the Company to defer up to
16% of their annual compensation, subject to certain limitations imposed by
the Internal Revenue Code. The employees' elective deferrals are immediately
vested and nonforfeitable upon contribution to the 401(k) Plan. The Company
matches dollar for dollar employee contributions to the 401(k) Plan up to 4%
of the employee's annual salary. In addition, the Company may elect to make a
discretionary profit sharing contribution.
NOTE 24 -- COMMITMENTS AND CONTINGENCIES
Concentration of Credit Risk
The Company maintains its cash and cash equivalents at financial
institutions. The combined account balances at each institution periodically
exceeds FDIC insurance coverage, and, as a result, there is a concentration
of credit risk related to amounts on deposit in excess of FDIC insurance
coverage. Management of the Company believes that the risk is not
significant. In addition, the Company has entered into certain interest rate
protection agreements (see Note 10) and believes it has limited exposure to
the extent of non-performance by the swap counterparties since each
counterparty is a major U.S. financial institution, and management does not
anticipate their non-performance.
Environmental
The Company, as an owner of real estate, is subject to various environmental
laws of federal and local governments. Compliance by the Company with
existing laws has not had a material adverse effect on the Company's
financial condition and results of operations, and management does not
believe it will have such an impact in the future. However, the Company
cannot predict the impact of new or changed laws or regulations on its
current properties or on properties that it may acquire in the future.
Litigation
The Company has become a party to various legal actions resulting from the
operational activities transferred to the Operating Partnership in connection
with the Consolidation and the Beacon Merger. These actions are incidental to
the transferred business and management does not believe that these actions
will have a material adverse effect on the Company.
The Company is involved in continuing discussions with its joint venture
partner in One Post Office Square and Rowes Wharf, which was acquired in
connection with the Beacon Merger, with respect to the Company's control over
property management of such Properties. Such joint venture partner did not
consent to the transfer to the Company of Beacon's joint venture interest in
these Properties. Although the Company believes that such consent was not
required, unless the Company is able to reach an agreement with respect to
day-to-day management of such Properties, it is possible that the joint
venture partner could challenge the transfer of such Properties in the Beacon
Merger, or seek to trigger the buy-sell remedy found in the joint venture
documents.
Except as described above, management of the Company does not believe
there is any litigation threatened against the Company other than routine
litigation arising out of the ordinary course of business, some of which is
expected to be covered by liability insurance, and none of which is expected
to have a material adverse effect on the consolidated and combined financial
statements of the Company.
Intercontinental Center
Houston, Texas
[Building Photo]
<PAGE> 77
78 Geographical Risk
The Company carries earthquake insurance on all of the Properties, including
those located in California, subject to coverage limitations which the
Company believes are commercially reasonable. In light of the California
earthquake risk, California building codes since the early 1970s have
established construction standards for all new buildings. The current and
strictest construction standards were adopted in 1987. Of the 43 Properties
located in California, 12 have been built since January 1, 1988 and the
Company believes that all of the Properties were constructed in full
compliance with the applicable standards existing at the time of
construction. No assurance can be given that material losses in excess of
insurance proceeds will not occur in the future.
NOTE 25 -- SUBSEQUENT EVENTS
The following significant transactions relating to the Company occurred
during the period from January 1, 1998 to March 18, 1998:
1) In January 1998, the Company acquired BP Garage, located in Cleveland,
Ohio, from an unaffiliated third party for a purchase price of
approximately $10.2 million in cash.
2) In February 1998, the Company completed the private placement of 6,000,000
of its 5.25% Equity Redeemable Shares (PIERS), $50 liquidation per share.
This offering generated net proceeds of approximately $290.3 million after
offering costs of $9.7 million and was priced with a 20% conversion
premium. The PIERS are convertible at any time by the holder into Common
Shares at a conversion price of $35.70 per Common Share, equivalent to a
conversion ratio of 1.40056 Common Shares for each PIERS. Proceeds from
this sale have been used to pay down borrowings under the Company's credit
facilities. The PIERS are non-callable for five years with a mandatory
call in year 10. The annual dividend of $2.625 per PIERS will be paid
quarterly.
3) In February 1998, the Company completed the private placement of $1.25
billion of senior unsecured notes (the "$1.25 Billion Notes Offering").
The notes consist of four tranches with maturities of five to 20 years
which were priced at an interest rate spread over the corresponding
Treasury rate.
Additionally, the Company privately placed $250 million of 6.376%
MandatOry Par Put Remarketed Securities ("$250 Million MOPPRS Offering")
due February 15, 2012, which are subject to mandatory tender on February
15, 2002. The MOPPRS are senior unsecured obligations of the Company.
The proceeds to the Company from the issuance of the $1.25 Billion
Notes Offering and $250 Million MOPPRS Offering, net of offering costs,
were approximately $1.49 billion. The Company has terminated $700 million
of hedge agreements in connection with the $1.25 Billion Notes Offering
and the $250 Million MOPPRS Offering at a cost of approximately $32.6
million which will be amortized as an adjustment to interest expense. The
Company terminated the remaining $300 million of hedge agreements at a
cost of approximately $7.4 million in connection with the PIERS which will
be reflected as an extraordinary loss in 1998 (see Note 10). The weighted
average interest cost of the notes and MOPPRS, including the amortization
of the offering and transaction costs and the costs incurred in connection
with the termination of hedge agreements is approximately 6.97%.
A summary of the terms of the $1.25 Billion Notes Offering and $250
Million MOPPRS Offering are as follows:
<TABLE>
<CAPTION>
Stated Effective
Tranche Amount Rate Rate(A)
<S> <C> <C> <C>
4 Year MOPPRS due 2002 $ 250,000,000 6.38% 6.42%
5 Year Notes due 2003 300,000,000 6.38% 6.77%
7 Year Notes due 2005 400,000,000 6.63% 7.06%
10 Year Notes due 2008 300,000,000 6.75% 7.03%
20 Year Notes due 2018 250,000,000 7.25% 7.56%
-------------- ---- ----
$1,500,000,000 6.66% 6.97%
============== ==== ====
</TABLE>
(A)Includes the cost of the terminated interest rate protection agreements
and offering and transaction costs.
On March 5, 1998, the Company filed a registration statement relating to a
registered offer to exchange the $180 Million Notes Offering, the $1.25
Billion Notes Offering and the $250 Million MOPPRS Offering for registered
securities of the Company with terms identical in all material respects to
the terms of the existing notes.
<PAGE> 78
79
4) In February 1998, the Company entered into a contract to purchase the Rand
Tower Garage in Minneapolis, Minnesota, upon completion of the parking
structure. The purchase price for Rand Tower Garage, which is comprised of
589 parking spaces in Minneapolis' Central Business District, will be
approximately $19 million. Although the project is slated for completion
in January 1999, this transaction is contingent upon certain terms and
conditions as set forth in the purchase agreement. There can be no
assurance that this transaction will be consummated as described above.
5) In February 1998, the Company issued 2 million Options at an exercise
price of $29.50 per Common Share under the Employee Plan.
6) In February 1998, the Company obtained financing of $60 million
collateralized by the St. Louis Parking Garages. The Company has a 50%
ownership interest in this Parking Facility and, accordingly, received $30
million of the financing proceeds. This loan has a 6.85% fixed interest
rate and a six year term.
7) In March 1998, the Company's Board of Trustees declared a first quarter
dividend for the 8.98% Series A Cumulative Redeemable Preferred Shares. A
dividend of $0.56125 per share will be paid on March 15, 1998 to
shareholders of record as of March 9, 1998. In addition, the Company's
Board of Trustees declared a first quarter dividend/distribution in the
amount of $0.32 per Common Share/Unit payable on April 10, 1998, to the
common shareholders/unit holders of record at the close of business on
March 31, 1998.
8) In March 1998, the Company's Board of Trustees approved the purchase of
Prominence in Buckhead, an office building development in Atlanta,
Georgia. The property, which will consist of a 430,000 square foot
building and 1,350 parking spaces, will be acquired upon its completion in
mid 1999. The purchase will also include an 11.88-acre site that may be
used to develop Phase II to Prominence. The purchase price for the
described assets will be approximately $70 million. This transaction is
contingent upon certain terms and conditions as set forth in the purchase
agreement. There can be no assurance that this transaction will be
consummated as described above.
9) In March 1998, the Company purchased from an unaffiliated party 100 Summer
Street, which consists of approximately 1.0 million total square feet and
is located in Boston, Massachusetts. The purchase price was approximately
$222 million in cash.
161 North Clark
Chicago, Illinois
[Building Photo]
<PAGE> 79
80 EQUITY OFFICE PROPERTIES TRUST CORPORATE DATA
BOARD OF TRUSTEES
Samuel Zell
Chairman of the Board,
Equity Office Properties Trust
Chairman of the Board, Equity
Group Investments, Inc.
TIMOTHY H. CALLAHAN
President and Chief Executive Officer,
Equity Office Properties Trust
THOMAS E. DOBROWSKI
Managing Director, Real Estate
and Alternative Investments,
General Motors Investment
Management Corporation
WILLIAM M. GOODYEAR
Chairman,
Bank of America, Illinois
JAMES D. HARPER, JR.
President,
JDH Realty
Co-Managing Partner,
AH Development, S.E.
Co-Managing Partner,
AH HA Investments, S.E.
PETER D. LINNEMAN
Professor of Real Estate, Finance, and Public
Policy and Management, Wharton School,
University of Pennsylvania
DAVID K. MCKOWN
Group Executive, Diversified Finance
and Real Estate Operating Partnership,
BankBoston
JERRY M. REINSDORF
Chairman,
Chicago White Sox, Chicago Bulls
SHELI Z. ROSENBERG
President and Chief Executive Officer,
Equity Group Investments, Inc.
H. JON RUNSTAD
Chairman, Chief Executive Officer,
Wright Runstad & Company
EDWIN N. SIDMAN
President,
The Beacon Companies
TRANSFER AGENT
To keep securities information up-to-date and to ensure that holders of Equity
Office Properties Trust securities receive financial information as soon
possible after mailing, please advise the transfer agent of your new address or
change of name. Write to them directly at the following address:
BANK OF BOSTON
c/o Boston EquiServe L.P.
P.O. Box 8040
Boston, MA 02266-8040
781-575-3400
CORPORATE OFFICE
Equity Office Properties Trust
Two North Riverside Plaza
Chicago, Illinois 60606
312-466-3300
http://www.equityoffice.com
EXECUTIVE OFFICERS
Samuel Zell
Chairman of the Board
TIMOTHY H. CALLAHAN
President and Chief Executive Officer
RICHARD D. KINCAID
Executive Vice President and
Chief Financial Officer
MICHAEL A. STEELE
Executive Vice President-Real Estate
Operations and Chief Operating Officer
STANLEY M. STEVENS
Executive Vice President, Chief
Legal Counsel and Secretary
GARY A. BELLER
Executive Vice President-Parking Facilities
JEFFREY L. JOHNSON
Senior Vice President-Investments
and Chief Investment Officer
SYBIL J. ELLIS
Senior Vice President-Acquisitions
DAVID H. NAUS
Senior Vice President-Acquisitions
DAVID H. CRAWFORD
Senior Vice President-Administration and
General Counsel for Property Operations
FRANK FRANKINI
Senior Vice President-Design & Construction
FRANCES P. LEWIS
Senior Vice President-
Corporate Communications
DIANE M. MOREFIELD
Senior Vice President-Finance/Capital Markets
MICHAEL E. SHEINKOP
Senior Vice President-Portfolio Management
PETER H. ADAMS
Senior Vice President-Pacific Region
PETER D. JOHNSTON
Senior Vice President-Southwest Region
KIM J. KOEHN
Senior Vice President-West Region
CHRISTOPHER P. MUNDY
Senior Vice President-Northeast Region
ARVID A. POVILAITIS
Senior Vice President-Central Region
MARK E. SCULLY
Senior Vice President-Southeast Region
AUDITORS
Ernst & Young LLP
Chicago, IL
FORM 10-K AVAILABILITY
Requests for the Company's Form 10-K filed with the Securities and Exchange
Commission, and any other inquiries from individuals and institutional
investors, should be directed to:
DIANE M. MOREFIELD
Investor Relations
Equity Office Properties Trust
Two North Riverside Plaza
Chicago, IL 60606
800-692-5304
COMMON SHARE MARKET
PRICES AND DIVIDEND
The Company's common shares are listed on the New York Stock Exchange, ticker
symbol EOP. The high and low sales prices for 1997 on the NYSE were as follows:
<TABLE>
<CAPTION>
High Low Close Dividend
---------------------------------------------------------------------
<S> <C> <C> <C> <C>
Third Quarter $ 33.94 $ 26.06 $ 33.94 $ 0.26*
Fourth Quarter $ 34.69 $ 29.00 $ 31.56 $ 0.30
</TABLE>
*Prorated from IPO date of 7/11/97 based on $.30 for the full quarter.
ANNUAL MEETING
The annual meeting of shareholders of Equity Office Properties Trust is to be
held at 10:00 am on Friday, May 15, 1998 at One N. Franklin St., 3rd floor,
Chicago, IL 60606.
SAFE HARBOR STATEMENT
Certain matters discussed within this annual report are forward-looking
statements within the meaning of the federal securities laws. Although the
company believes that the expectations reflected in such forward-looking
statements are based upon reasonable assumptions, there can be no assurances
that these expectations will be realized. Factors that could cause actual
results to differ materially from current expectations include the failure of
pending investments to close, changes in industries in which the company's
principal tenants compete, the failure to timely lease unoccupied square
footage, the failure to timely re-lease occupied square footage upon expiration,
the inability to generate sufficient revenues to meet debt service payments and
other operating expenses, the unavailability of equity and debt financing and
other risks described in the company's filings with the Securities and Exchange
Commission.
<PAGE> 80
[LOGO EQUITY OFFICE]
Equity Office Properties Trust
2 North Riverside Plaza
Chicago, IL 60606
<PAGE> 1
EXHIBIT 23.1
We consent to the incorporation by reference in this Annual Report (Form 10-K)
of Equity Office Properties Trust of our report dated February 23, 1998, except
for Note 25, as to which the date is March 18, 1998, included in the 1997 Annual
Report to Shareholders of Equity Office Properties Trust.
Our audits also included the financial statement schedule III, Real Estate and
Accumulated Depreciation of Equity Office Properties Trust listed in Item 14(a).
This schedule is the responsibility of the Company's management. Our
responsibility is to express an opinion based on our audits. In our opinion, the
financial statement schedule referred to above, when considered in relation to
the basic financial statements taken as a whole, presents fairly in all material
respects the information set forth therein.
/s/ Ernst & Young LLP
ERNST & YOUNG LLP
Chicago, Illinois
March 26, 1998
63
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-START> JAN-01-1997
<PERIOD-END> DEC-31-1997
<CASH> 254,625
<SECURITIES> 0
<RECEIVABLES> 52,581
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 468,147
<PP&E> 11,041,014
<DEPRECIATION> 64,695
<TOTAL-ASSETS> 11,751,672
<CURRENT-LIABILITIES> 307,380
<BONDS> 4,284,317
0
0
<COMMON> 0
<OTHER-SE> 7,159,975
<TOTAL-LIABILITY-AND-EQUITY> 11,751,672
<SALES> 0
<TOTAL-REVENUES> 769,863
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 463,595
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 157,156
<INCOME-PRETAX> 0
<INCOME-TAX> 0
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 16,640
<CHANGES> 0
<NET-INCOME> 132,472
<EPS-PRIMARY> .44
<EPS-DILUTED> .33
</TABLE>
