<PAGE> 1
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON JUNE 5, 1998
REGISTRATION NO. 333-08806
================================================================================
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
------------------------
AMENDMENT NO. 1
TO
FORM S-4
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
GLENBOROUGH PROPERTIES, L.P.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
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CALIFORNIA 7001 94-3231041
(STATE OR OTHER JURISDICTION OF (PRIMARY STANDARD INDUSTRIAL (I.R.S. EMPLOYER
INCORPORATION OF ORGANIZATION) CLASSIFICATION CODE NUMBERS) IDENTIFICATION NUMBER)
</TABLE>
400 SOUTH EL CAMINO REAL, 11TH FLOOR
SAN MATEO, CALIFORNIA 94402
(650) 343-9300
(ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING AREA CODE,
OF REGISTRANT'S PRINCIPAL EXECUTIVE OFFICES)
FRANK E. AUSTIN, ESQ.
SENIOR VICE PRESIDENT
OF GLENBOROUGH REALTY TRUST INCORPORATED,
GENERAL PARTNER OF THE REGISTRANT
400 SOUTH EL CAMINO REAL, 11TH FLOOR
SAN MATEO, CALIFORNIA 94402
(650) 343-9300
(NAME, ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING AREA CODE,
OF AGENT FOR SERVICE)
COPIES TO:
STEPHEN J. SCHRADER, ESQ.
JUSTIN L. BASTIAN, ESQ.
MORRISON & FOERSTER LLP
755 PAGE MILL ROAD
PALO ALTO, CALIFORNIA 94304
(650) 813-5600
APPROXIMATE DATE OF COMMENCEMENT OF SALE TO THE PUBLIC:
As soon as practicable after this Registration Statement becomes effective.
If the securities being registered on this Form are to be offered in
connection with the formation of a holding company and there is compliance with
General Instruction G, check the following box. [ ]
CALCULATION OF REGISTRATION FEE
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL
FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(A) OF
THE SECURITIES ACT OF 1933, AS AMENDED, OR UNTIL THE REGISTRATION STATEMENT
SHALL BECOME EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SUCH
SECTION 8(A), MAY DETERMINE.
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INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. A
REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED WITH THE
SECURITIES AND EXCHANGE COMMISSION. THESE SECURITIES MAY NOT BE SOLD NOR MAY
OFFERS TO BUY BE ACCEPTED PRIOR TO THE TIME THE REGISTRATION STATEMENT BECOMES
EFFECTIVE. THIS PROSPECTUS SHALL NOT CONSTITUTE AN OFFER TO SELL OR THE
SOLICITATION OF AN OFFER TO BUY NOR SHALL THERE BE ANY SALE OF THESE SECURITIES
IN ANY STATE IN WHICH SUCH OFFER, SOLICITATION OR SALE WOULD BE UNLAWFUL PRIOR
TO REGISTRATION OR QUALIFICATION UNDER THE SECURITIES LAWS OF ANY SUCH STATE.
SUBJECT TO COMPLETION, DATED JUNE 5, 1998
GLENBOROUGH PROPERTIES, L.P.
OFFER TO EXCHANGE ALL OUTSTANDING 7 5/8% SENIOR NOTES DUE 2005
($150,000,000 PRINCIPAL AMOUNT OUTSTANDING)
FOR 7 5/8% SENIOR NOTES DUE 2005 WHICH HAVE
BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933
------------------------
THE EXCHANGE OFFER AND WITHDRAWAL RIGHTS WILL EXPIRE AT 5:00 P.M., NEW YORK
CITY TIME, ON , 1998 (AS SUCH DATE MAY BE EXTENDED, THE
"EXPIRATION DATE").
Glenborough Properties, L.P., a California limited partnership (the
"Operating Partnership") hereby offers (the "Exchange Offer"), upon the terms
and subject to the conditions set forth in this Prospectus and the accompanying
letter of transmittal (the "Letter of Transmittal"), to exchange $150,000 or
integral multiples of $1,000 in excess thereof in principal amount of its 7 5/8%
Senior Notes due 2005 (the "New Notes") for each $150,000 or integral multiples
of $1,000 in excess thereof in principal amount of its outstanding 7 5/8% Senior
Notes due 2005 (the "Old Notes") (the New Notes and the Old Notes are
collectively referred to herein as the "Notes").
Each broker-dealer that receives New Notes for its own account pursuant to
the Exchange Offer must acknowledge that it will deliver a prospectus in
connection with any resale of such New Notes. The Letter of Transmittal states
that by so acknowledging and by delivering a prospectus, a broker-dealer will
not be deemed to admit that it is an "underwriter" within the meaning of the
Securities Act of 1933, as amended. This Prospectus, as it may be amended or
supplemented from time to time, may be used by a broker-dealer in connection
with resales of New Notes received in exchange for Notes where such Notes were
acquired by such broker-dealer as a result of market-making activities or other
trading activities. The Operating Partnership has agreed that, starting on the
Expiration Date (as defined herein) and ending on the close of business one year
after the Expiration Date, it will make this Prospectus available to any
broker-dealer for use in connection with any such resale. See "Plan of
Distribution."
The Operating Partnership will accept for exchange any and all Old Notes
that are validly tendered prior to 5:00 p.m., New York City time, on the
Expiration Date. Tenders of Old Notes may be withdrawn at any time prior to 5:00
p.m., New York City time, on the Expiration Date. The Exchange Offer is not
conditioned upon any minimum principal amount of the Old Notes being tendered
for exchange. However, the Exchange Offer is subject to the terms and provisions
of the Registration Rights Agreement, dated as of March 23, 1998 (the
"Registration Rights Agreement"), between the Operating Partnership, Bear,
Stearns & Co. Inc., and Salomon Brothers Inc. (the "Initial Purchasers"). The
Old Notes may be tendered only in multiples of $150,000 or integral multiples of
$1,000 in excess thereof. See "The Exchange Offer."
The Old Notes were issued in a transaction (the "Initial Offering")
pursuant to which the Operating Partnership issued an aggregate of $150,000,000
principal amount of the Old Notes to the Initial Purchasers on March 23, 1998
(the "Closing Date") pursuant to an Indenture, and supplement thereto, each
dated March 23, 1998 (the "Indenture"), among the Operating Partnership, the
Company, as general partner of the Operating Partnership, and Chase Manhattan
Bank and Trust Company, National Association, as trustee (the "Trustee"). The
Initial Purchasers subsequently resold the Old Notes in reliance on Rule 144A
under the Securities Act of 1933, as amended (the "Securities Act"). The
Operating Partnership and the Initial Purchasers also entered into the
Registration Rights Agreement pursuant to which the Operating Partnership
granted certain registration rights for the benefit of the holders of the Old
Notes. The Exchange Offer is intended to satisfy certain of the Operating
Partnership's obligations under the Registration Rights Agreement with respect
to the Old Notes. The New Notes will be obligations of the Operating Partnership
evidencing the same indebtedness as the Old Notes and will be issued under and
entitled to the benefits of the Indenture. The form and terms of the New Notes
will be registered under the Securities Act, and therefore such New Notes will
not be subject to certain transfer restrictions, registration rights and related
Special Interest (as defined herein) provisions applicable to the Old Notes. See
"The Exchange Offer -- Purpose and Effect."
(continued on next page)
------------------------
SEE "RISK FACTORS" BEGINNING ON PAGE 10 FOR A DISCUSSION OF CERTAIN FACTORS THAT
SHOULD BE CONSIDERED BY HOLDERS IN EVALUATING THE EXCHANGE OFFER.
------------------------
THE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
The date of this Prospectus is , 1998
<PAGE> 3
(continued from cover)
The New Notes will bear interest at the rate of 7 5/8% per annum, payable
semi-annually in arrears on March 15 and September 15 of each year, commencing
September 15, 1998, to holders of record on the immediately preceding March 1
and September 1 and will mature on March 15, 2005. Holders whose Old Notes are
accepted for exchange will have the right to receive interest accrued thereof
from the date of the original issuance of the Old Notes or date of the last
interest payment, as applicable, to, but not including, the date of issuance of
the New Notes, such interest to be payable with the first interest payment on
the New Notes. The Notes are subject to redemption at any time at the option of
the Operating Partnership, in whole or in part, at the redemption prices set
forth herein, plus accrued and unpaid interest and the Make Whole amount (as
defined herein), if any, thereon to the date fixed for redemption.
The New Notes will be general unsecured and unsubordinated obligations of
the Operating Partnership and will rank pari passu with all other unsecured and
unsubordinated indebtedness of the Operating Partnership from time to time
outstanding. However, the New Notes will be effectively subordinated to such
secured borrowing arrangements that the Operating Partnership has and from time
to time may enter into with various banks and other lenders, and to the prior
claims of each secured mortgage lender to any specific property owned by the
Operating Partnership which secures any lender's mortgage. As of March 31, 1998,
such arrangements and mortgages aggregated approximately $242.1 million; as
adjusted to reflect the Pro Forma Adjustments (as defined herein), such
arrangements and mortgages would have aggregated approximately 272.3 million as
of March 31, 1998. Subject to certain limitations set forth in the Indenture,
the Indenture permits the Operating Partnership to incur additional indebtedness
and additional secured indebtedness. See "Description of Notes -- Covenants" and
"Recent Activities -- Financing Activities."
The Operating Partnership is making the Exchange Offer in reliance on the
position of the staff of the Securities and Exchange Commission (the
"Commission") as set forth in certain interpretive letters issued to third
parties in other transactions. However, the Operating Partnership has not sought
its own interpretive letter, and there can be no assurance that the Commission
would make a similar determination with respect to the Exchange Offer. Based on
the Commission interpretations, the Operating Partnership believes that New
Notes issued pursuant to the Exchange Offer to any holder of Old Notes in
exchange for Old Notes may be offered for resale, resold and otherwise
transferred by such holder (other than a broker-dealer who purchased Old Notes
directly from the Operating Partnership for resale pursuant to Rule 144A under
the Securities Act or any other available exemption under the Securities Act)
without further compliance with the registration and prospectus delivery
provisions of the Securities Act, provided that such holder is not an affiliate
of the Operating Partnership, is acquiring the New Notes in the ordinary course
of business and is not participating, and has no arrangement or understanding
with any person to participate, in the distribution of the New Notes. Holders
wishing to accept the Exchange Offer must represent to the Operating Partnership
that such conditions have been met. In addition, if such holder is not a
broker-dealer, it must represent that it is not engaged in, and does not intend
to engage in, a distribution of the New Notes. Each broker-dealer that receives
New Notes for its own account in exchange for Old Notes, where such Notes were
acquired by such broker-dealer as a result of market-making activities or other
trading activities, must acknowledge that it will deliver a prospectus in
connection with any resale of such New Notes. See "The Exchange Offer -- Resales
of the New Notes" and "Plan of Distribution." This Prospectus, as it may be
amended or supplemented from time to time, may be used by a broker-dealer in
connection with resales of New Notes received in exchange for Old Notes where
such Old Notes were acquired by such broker-dealer as a result of market-making
or other trading activities.
There has previously been only a limited secondary market, and no public
market, for the Old Notes. The Old Notes are eligible for trading in the Private
Offering, Resales and Trading through Automatic Linkages ("PORTAL") market. In
addition, the Initial Purchasers have advised the Operating Partnership that
they currently intend to make a market in the New Notes; however, the Initial
Purchasers are not obligated to do so and any market making activities may be
discontinued by the Initial Purchasers at any time. Therefore, there can be no
assurance that an active market for the New Notes will develop. If such trading
market develops for the New Notes, future trading prices will depend on many
factors, including, among other things, prevailing interest rates, the Operating
Partnership's results of operations and the market for similar securities.
<PAGE> 4
Depending on such factors, the New Notes may trade at a discount from their face
value. See "Risk Factors -- Lack of Public Market."
THE EXCHANGE OFFER IS NOT BEING MADE TO, NOR WILL THE COMPANY ACCEPT
SURRENDERS FOR EXCHANGE FROM, HOLDERS OF OLD NOTES IN ANY JURISDICTION IN WHICH
THE EXCHANGE OFFER OR THE ACCEPTANCE THEREOF WOULD NOT BE IN COMPLIANCE WITH THE
SECURITIES OR BLUE SKY LAWS OF SUCH JURISDICTION.
The Old Notes were issued originally in global form (the "Global Old
Note"). The Global Old Note was deposited with the Trustee as custodian of, or
on behalf of, The Depository Trust Operating Partnership ("DTC"), as the initial
depository with respect to the Old Notes (in such capacity, the "Depositary").
The Global Old Note is registered in the name of Cede & Co. ("Cede"), as nominee
of DTC, and beneficial interests in the Global Old Note are shown on, and
transfers thereof are effected only through, records maintained by the
Depositary and its participants, and anyone holding a beneficial interest in an
Old Note registered in the name of such a participant, to transfer interests in
the Old Notes electronically in accordance with the Depositary's established
procedures without the need to transfer a physical certificate. New Notes issued
in exchange for the Global Old Note will also be issued initially as a note in
global form (the "Global New Note," and, together with the Global Old Note, the
"Global Notes") and deposited with the Trustee as custodian of, or on behalf of,
the Depositary. After the initial issuance of the Global New Note, New Notes in
certificated form will be issued in exchange for a holder's proportionate
interest in the Global New Note only as set forth in the Indenture.
THE OPERATING PARTNERSHIP WILL NOT RECEIVE ANY PROCEEDS FROM THIS EXCHANGE
OFFER. PURSUANT TO THE REGISTRATION RIGHTS AGREEMENT, THE OPERATING PARTNERSHIP
WILL BEAR CERTAIN REGISTRATION EXPENSES.
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TABLE OF CONTENTS
<TABLE>
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PAGE
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Available Information....................................... 1
Incorporation by Reference.................................. 1
Prospectus Summary.......................................... 3
Operating Partnership..................................... 3
The Initial Offering...................................... 4
The Exchange Offer........................................ 5
Description of New Notes.................................. 7
Risk Factors.............................................. 9
Risk Factors................................................ 10
Risks Associated With Acquisitions........................ 10
Dependence on Executive Officers.......................... 11
Risks Associated With Debt Financing...................... 11
Absence of a Public Market for the Notes.................. 12
Risks Relating to Real Estate............................. 12
Limitation On Ownership of Common Stock May Preclude
Acquisition of Control................................. 16
Litigation Related to Consolidation....................... 16
Chapter 11 Reorganization of Partnership Consolidation by
Senior Management...................................... 16
Board of Directors May Change Investment Policies......... 17
Year 2000 Compliance...................................... 17
The Exchange Offer.......................................... 18
Purpose and Effect........................................ 18
Consequences of Failure to Exchange Old Notes............. 18
Terms of the Exchange Offer............................... 18
Expiration Date; Extensions; Amendments................... 19
Conditions of the Exchange Offer.......................... 19
Termination of Certain Rights............................. 19
Accrued Interest.......................................... 19
Procedures For Tendering Old Notes........................ 20
Guaranteed Delivery Procedures............................ 21
Acceptance of Old Notes for Exchange; Delivery of New
Notes.................................................. 22
Withdrawal Rights......................................... 22
The Exchange Agent; Assistance............................ 23
Fees and Expenses......................................... 23
Accounting Treatment...................................... 23
Resales of the New Notes.................................. 23
Capitalization.............................................. 25
Selected Historical and Pro Forma Financial and Other
Data...................................................... 26
Pro Forma Financial Information............................. 30
Management's Discussion and Analysis of Financial Condition
and Results of Operation.................................. 39
Overview.................................................. 39
Results of Operations..................................... 39
Liquidity and Capital Resources........................... 44
Inflation................................................. 45
Forward Looking Statements; Factors That May Affect
Operating Results...................................... 45
Year 2000 Compliance...................................... 46
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i
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TABLE OF CONTENTS
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PAGE
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The Operating Partnership................................... 47
Growth Strategy........................................... 47
Financing Policies........................................ 48
Investment Policies....................................... 49
Legal Proceedings........................................... 50
Recent Activities........................................... 51
Pending Acquisitions...................................... 51
1998 and 1997 Completed Acquisitions...................... 52
Other Acquisition Opportunities........................... 54
Redeployment of Assets.................................... 54
Financing Activities...................................... 55
Ratio of Earnings to Fixed Charges........................ 56
Business & Properties....................................... 57
Management.................................................. 62
Description of Notes........................................ 64
General................................................... 64
Ranking................................................... 65
Principal, Maturity and Interest.......................... 65
Optional Redemption....................................... 66
Registration Rights; Liquidated Damages................... 66
Merger, Consolidation or Sale............................. 67
Covenants................................................. 68
Certain Definitions....................................... 70
Events of Default, Notice and Waiver...................... 72
Discharge, Defeasance and Covenant Defeasance............. 74
Modification of the Indenture............................. 75
Transfer and Exchange..................................... 76
United States Federal Income Tax Consequences............... 77
Exchange Offer............................................ 77
U.S. Holders.............................................. 77
Non-U.S. Holders.......................................... 78
Information Reporting and Backup Withholding.............. 78
Prospective Final Regulations............................. 79
Plan of Distribution........................................ 80
Legal Matters............................................... 80
</TABLE>
ii
<PAGE> 7
AVAILABLE INFORMATION
The Operating Partnership has filed a registration statement on Form S-4
(together with any amendments thereto, the "Registration Statement") with the
Commission under the Securities Act with respect to the New Notes. This
Prospectus, which constitutes a part of the Registration Statement, omits
certain information contained in the Registration Statement and reference is
made to the Registration Statement and the exhibits and schedules thereto for
further information with respect to the Operating Partnership and the New Notes
offered hereby. This Prospectus contains summaries of the material terms and
provisions of certain documents and in each instance reference is made to the
Registration Statement and the exhibits and schedules thereto for further
information with respect to the Operating Partnership and the New Notes offered
hereby. This Prospectus contains summaries of the material terms and provisions
of certain documents and in each instance reference is made to the copy of such
document filed as an exhibit to the Registration Statement. Each such summary is
qualified in its entirety by such reference.
The Company (as defined herein) is subject to the informational
requirements of the Securities Exchange Act of 1934, as amended (the "Exchange
Act"), and in accordance therewith the Company files proxy statements and other
information with the Commission. All reports, proxy statements and other
information filed with the Commission can be inspected and copied at the
Commission's Public Reference Section, 450 Fifth Street, N.W., Washington, D.C.,
20549, and at the following regional offices of the Commission: Seven World
Trade Center, 13th Floor, New York, New York 10048 and 500 West Madison Street,
Suite 1400, Chicago, Illinois 60661-2511. Copies of such material can be
obtained from the Public Reference Section of the Commission, 450 Fifth Street,
N.W., Washington, D.C. 20549, at prescribed rates. The address of the
Commission's Web Site is (http://www.sec.gov). In addition, the Common Stock is
listed on the New York Stock Exchange and similar information concerning the
Company can be inspected and copied at the offices of the New York Stock
Exchange, Inc., 20 Broad Street, New York, New York 10005.
The Operating Partnership is not currently subject to the periodic
reporting and other informational requirements of the Exchange Act. The
Operating Partnership has agreed that, whether or not required by the rules and
regulations of the Commission, so long as any Notes are outstanding, the
Operating Partnership will furnish to the Holders of Notes (i) all quarterly and
annual financial information that would be required to be contained in a filing
with the Commission on Forms 10-Q and 10-K if the Operating Partnership were
required to file such Forms, including a "Management's Discussion and Analysis
of Financial Condition and Results of Operations" that describes the financial
condition and results of operations of the Operating Partnership and its
consolidated Subsidiaries and, with respect to the annual information only, a
report thereon by the Operating Partnership's certified independent accountants
and (ii) all current reports that would be required to be filed with the
Commission on Form 8-K if the Operating Partnership were required to file such
reports. In addition, whether or not required by the rules and regulations of
the Commission, the Operating Partnership will file a copy of all such
information and reports with the Commission for public availability (unless the
Commission will not accept such a filing) and make such information available to
securities analysts and prospective investors upon request. In addition, the
Operating Partnership will agree that, for so long as any Notes remain
outstanding, it will furnish to the Holders and to securities analysts and
prospective investors, upon their request, the information required to be
delivered by Rule 144(d)(4) under the Securities Act.
INCORPORATION BY REFERENCE
The documents listed below have been filed by the Company under the
Exchange Act with the Commission and are incorporated herein by reference:
a. The Company's Annual Report on Form 10-K for the year ended
December 31, 1997;
b. The Company's Quarterly Report on Form 10-Q for the quarter ended
March 31, 1998;
c. The Company's Current Reports on Form 8-K filed with the Commission
on April 29, 1998 and May 7, 1998;
1
<PAGE> 8
d. The Company's Current Reports on Form 8-K/A filed with the
Commission on May 15, 1998;
e. The description of the Registrant's Common Stock contained in the
Company's Registration Statement on Form 8-A (File No. 1-14162); and
f. The description of the Company's 7 3/4% Convertible Preferred Stock
(liquidation preference $25.00 per share), par value $0.001 per share,
contained in the Company's Registration Statement on Form 8-A (File No.
1-14162).
All documents filed by the Operating Partnership pursuant to Sections
13(a), 13(c), 14 or 15(d) of the Exchange Act subsequent to the date of this
Prospectus and prior to the termination of the Exchange Offer shall be deemed to
be incorporated by reference into this Prospectus and to be a part hereof from
the date of filing of such documents.
As used herein, the terms "Prospectus" and "herein" mean this Prospectus,
including the documents incorporated or deemed to be incorporated herein by
reference, as the same may be amended, supplemented or otherwise modified from
time to time. Statements contained in this Prospectus as to the contents of any
contract or other document referred to are not necessarily complete and in each
instance reference is made to the copy of such contract or other document,
copies of which are available from the Operating Partnership as described below,
each such statement being qualified in all respects by such reference.
The Operating Partnership will provide without charge to each person to
whom this Prospectus is delivered, upon the written or oral request of such
person, a copy of any or all of the documents referred to above which have been
or may be incorporated by reference in this Prospectus (excluding exhibits to
the information that is incorporated herein by reference unless such exhibits
are specifically incorporated by reference into the information that this
Prospectus incorporates). Requests for such copies should be directed to
Investor Relations, Glenborough Realty Trust Incorporated, 400 South El Camino
Real Suite 1100, San Mateo, California 95402-1708; telephone number (650)
343-9300.
Any statement contained herein or in a document incorporated or deemed to
be incorporated by reference herein shall be deemed to be modified or superseded
for purposes of this Prospectus to the extent that a statement contained herein
(or in the applicable Prospectus) or in any other subsequently filed document
which also is or is deemed to be incorporated by reference herein modifies or
supersedes such statement. Any such statement so modified or superseded shall
not be deemed, except as so modified or superseded, to constitute a part of this
Prospectus (or in the applicable Prospectus).
2
<PAGE> 9
PROSPECTUS SUMMARY
The following is qualified in its entirety by the more detailed information
and financial statements appearing elsewhere in this Prospectus. As used herein,
the term "Operating Partnership" means Glenborough Properties, L.P., a
California limited partnership, and the term "Company" means Glenborough Realty
Trust Incorporated, a Maryland corporation, and its consolidated subsidiaries
for the periods from and after December 31, 1995 (the date the Company merged
(the "Consolidation") with and into Glenborough Corporation, a California
corporation ("Old GC") and eight public limited partnerships (collectively with
Old GC, the "GRT Predecessor Entities")) and the Company's predecessor
partnerships and companies for periods prior to the Consolidation, unless the
context indicates otherwise. The previous offering and sale in a private
placement of $150,000,000 aggregate principal amount of 7 5/8% Senior Notes Due
2005 (the "Old Notes"), which closed on March 23, 1998 (the "Closing Date"), is
herein referred to as the "Initial Offering," and the exchange offering of the
Old Notes for up to $150,000,000 aggregate principal amount of 7 5/8% Senior
Notes Due 2005 (the "New Notes") which have been registered with the Commission
under the Securities Act of 1933 (the "Securities Act") made hereby is herein
referred to as the "Exchange Offer." As used herein, the term "Pro Forma
Adjustments" with respect to March 31, 1998 calculations, means that such
calculations have been adjusted to reflect the acquisition of the Eaton & Lauth
Portfolio, the completion of the Pending Acquisitions and certain other
adjustments (see "Pro Forma Financial Information"), as if such transactions had
been completed on March 31, 1998. Unless otherwise indicated, ownership
percentages of the units of limited partnership interests in the Operating
Partnership have been calculated assuming the entire Preferred Partner Interest
(as defined below) has been converted into such units. This Prospectus contains
forward-looking statements within the meaning of Section 27A of the Securities
Act of 1933 (the "Securities Act") and Section 21E of the Securities and
Exchange Act of 1934 (the "Exchange Act"), which statements involve risks and
uncertainties. The Operating Partnership's and the Company's actual results
could differ materially from those anticipated in these forward-looking
statements as a result of certain factors, including those set forth herein
under "Risk Factors" and elsewhere in this Prospectus.
OPERATING PARTNERSHIP
The Operating Partnership is managed by its general partner, the Company, a
self-administered and self-managed real estate investment trust ("REIT"). As of
the date of this Prospectus, the Operating Partnership owned a diversified
portfolio of 157 office, office/flex, industrial, retail, multi-family and hotel
properties (collectively, the "Properties," and each a "Property") aggregating
approximately 18.0 million square feet located in 24 states throughout the
country. In addition, two associated companies, Glenborough Corporation ("GC")
and Glenborough Hotel Group ("GHG," and together with GC, the "Associated
Companies"), provide comprehensive asset, partnership and property management
services for a diversified portfolio of 46 additional properties that are not
owned by the Operating Partnership. The combined portfolios encompass
approximately 22.8 million rentable square feet in 24 states. In addition, the
Operating Partnership is in the process of acquiring the Covance Property and
the Pru-Bache Portfolio (each as defined below, the "Pending Acquisitions"). The
Pending Acquisitions represent approximately 790,470 rentable square feet, with
an acquisition cost of approximately $64.4 million. See "Recent Activities."
The Operating Partnership holds directly or indirectly all of the Company's
interests in the Properties and all of the Company's operations relating to the
Properties are conducted through the Operating Partnership. The Operating
Partnership is controlled by the Company as its sole general partner and, as of
May 22, 1998, the Company owned a 1% general partnership interest and an
approximate 92% limited partnership interest in the Operating Partnership. The
description of the Company's business and properties (excluding shares of
non-voting preferred stock in GHG held by the Company and shares of non-voting
preferred stock in GC previously held by the Company) incorporated by reference
herein, would apply, without material differences, to the Operating
Partnership's business and properties.
The Operating Partnership's principal growth strategy is to capitalize on
the opportunity to acquire diversified portfolios or individual properties on
attractive terms. This strategy has evolved from the Company's predecessors'
experience since 1978 in managing real estate partnerships and their assets and,
since 1989, in acquiring portfolios and management interests from third parties.
As of the date of the Consolidation, the GRT Predecessor Entities had 17 years
of experience in owning and operating properties.
3
<PAGE> 10
In particular, unlike most REITs, which typically purchase specific types
of properties or properties located in regional markets, the Company through the
Operating Partnership seeks to purchase portfolios of properties which are
diversified by both property type and location. The management believes the
Operating Partnership can acquire such diversified portfolios at attractive
prices from partnerships as well as REITs, life insurance companies and other
institutions because it can provide liquidity to portfolio owners who might
otherwise face a limited market for their diversified portfolios, or who might
otherwise face a limited market for their diversified portfolios, or who might
be forced to liquidate through multiple sales of the individual properties which
can be more expensive and time consuming than the single sale of the entire
portfolio.
Furthermore, the Operating Partnership's UPREIT structure allows it to
address the current owners' tax concerns and structure transactions that may
defer taxable gains. The Operating Partnership has issued partnership units in
the Operating Partnership, which are redeemable for cash or exchangeable for the
Company's Common Stock, to sellers in connection with the acquisition of
Properties with a total acquisition cost of over $349.0 million.
The Operating Partnership's executive offices are located at 400 South El
Camino Real, Suite 1100, San Mateo, California 94402-1708 and its telephone
number is (650) 343-9300.
The following table sets forth certain information with respect to the
Operating Partnership's Properties as of March 31, 1998. For information
regarding the individual Properties the Operating Partnership owned as of May
22, 1998, see "The Properties."
PROPERTY TABLE BY PROPERTY TYPE(1)
<TABLE>
<CAPTION>
OCCUPANCY RATE
RENTABLE AS OF
TYPE OF PROPERTY SQ. FT. MARCH 31, 1998(2)
---------------- ---------- -----------------
<S> <C> <C>
Office......................................... 6,675,796 96%
Office/Flex.................................... 3,938,657 93
Industrial..................................... 3,430,898 96
Retail......................................... 1,224,055 96
---------- --
Subtotal/Weighted Average................. 15,269,406 95%
---------- --
</TABLE>
<TABLE>
<CAPTION>
OCCUPANCY RATE
RENTABLE AS OF
UNITS/ROOMS SQ. FT. MARCH 31, 1998
----------- ---------- --------------
<S> <C> <C> <C>
Multi-family........................ 2,817 2,453,384 96%
Hotels.............................. 744 326,701 71(3)
----------
Subtotal Square Feet........... 2,780,085
----------
Total Square Feet......... 18,049,491
==========
</TABLE>
- ---------------
(1) Includes properties acquired subsequent to March 31, 1998. Excludes
properties disposed of subsequent to March 31, 1998 and properties expected
to be acquired, see "Recent Activities -- Pending Acquisitions."
(2) Represents economic occupancy as of March 31, 1998.
(3) Represents average economic occupancy for the three months ended March 31,
1998.
THE INITIAL OFFERING
The outstanding $150.0 million principal amount of Old Notes were sold by
the Operating Partnership to the Initial Purchasers on the Closing Date pursuant
to the Indenture among the Operating Partnership, the Company and the Trustee.
The Initial Purchasers subsequently resold the Old Notes in reliance on Rule
144A under the Securities Act. The Operating Partnership and the Initial
Purchasers also entered into the Registration Rights Agreement pursuant to which
the Operating Partnership granted certain registration rights
4
<PAGE> 11
for the benefit of the holders of the Old Notes. The Exchange Offer is intended
to satisfy certain of the Operating Partnership's obligations under the
Registration Rights Agreement with respect to the Old Notes. See "The Exchange
Offer" and "The Exchange Offer -- Purpose and Effect."
THE EXCHANGE OFFER
Securities Offered............ Up to $150.0 million principal amount of 7 5/8%
Senior Notes Due 2005, which have been
registered under the Securities Act. The form
and term of the New Notes are substantially
identical to the Old Notes in all material
respects, except that the New Notes will be
registered under the Securities Act, and
therefore will not be subject to certain
transfer restrictions, registration rights and
related Special Interest provisions applicable
to the Old Notes.
The Exchange Offer............ The Operating Partnership is offering, upon the
terms and subject to the conditions set forth
herein and in the Letter of Transmittal, to
exchange $150,000 or integral multiples of
$1,000 in excess thereof in principal amount of
New Notes for each $150,000 or integral
multiples of $1,000 in excess thereof in
principal amount of outstanding Old Notes of the
corresponding maturity, with Global New Notes
being exchanged for Global Old Notes. As of the
date of this Prospectus $150.0 million in
aggregate principal amount of the Old Notes were
outstanding. As of , 1998
there was one registered holder of the Old
Notes, Cede & Co., which held the entire $150.0
million of Old Notes for of
its participants. See "The Exchange
Offer -- Terms of the Exchange Offer."
Expiration Date............... The Exchange Offer will expire at 5:00 p.m., New
York City time, on , 1998,
or such later date and time to which it is
extended. See "The Exchange Offer -- Terms of
the Exchange Offer."
Withdrawal.................... Tenders of Old Notes pursuant to the Exchange
Offer may be withdrawn at any time prior to 5:00
p.m. New York City time on the Expiration Date.
See "The Exchange Offer -- Expiration Date:
Extensions; Amendments."
Conditions of the Exchange
Offer......................... The Exchange Offer is not conditioned upon any
minimum principal amount of Old Notes being
tendered for exchange. The only condition to the
Exchange Offer is the declaration by the
Commission of the effectiveness of the
Registration Statement of which this Prospectus
constitutes a part. See "The Exchange
offer -- Conditions of the Exchange Offer."
Procedures for Tendering Old
Notes......................... Each holder of Old Notes desiring to accept the
Exchange Offer must complete, sign and date the
Letter of Transmittal according to the
instructions contained herein and therein, and
mail or otherwise deliver the Letter of
Transmittal, together with the Old Notes and any
other required documents, to the Exchange Agent
(as defined herein) at the address set forth
herein prior to 5:00 p.m., New York City time,
on the Expiration Date. Any beneficial owner
whose Old Notes are registered in the name of a
broker, dealer, commercial bank, trust company
or other nominee and who wishes to tender such
5
<PAGE> 12
Old Notes in the Exchange Offer should instruct
such entity or person to promptly tender on such
beneficial owner's behalf.
Guaranteed Delivery
Procedures.................... Holders of Old Notes who wish to tender their
Old Notes and (i) whose Old Notes are not
immediately available or (ii) who cannot deliver
their Old Notes, the Letter of Transmittal or
any other documents required by the Letter of
Transmittal to the Exchange Agent prior to the
Expiration Date may tender their Old Notes
according to the guaranteed delivery procedures
set forth in the Letter of Transmittal. See "The
Exchange -- Guaranteed Delivery Procedures."
Acceptance of Old Notes and
Delivery of New Notes......... Upon effectiveness of the Registration Statement
of which this Prospectus constitutes a part and
consummation of the Exchange Offer, the
Operating Partnership will accept any and all
Old Notes that are properly tendered in the
Exchange Offer prior to 5:00 p.m., New York City
time, on the Expiration Date. The New Notes
issued pursuant to the Exchange Offer will be
delivered promptly after acceptance of the Old
Notes. See "Exchange Offer -- Acceptance of Old
Notes for Exchange; Delivery of New Notes."
The Exchange Agent............ Chase Manhattan Bank and Trust Company, National
Association has agreed to serve as the exchange
agent (in such capacity, the "Exchange Agent")
in connection with the Exchange Offer. See "The
Exchange Offer -- The Exchange Agent."
Federal Income Tax
Consequences.................. There will be no U.S. Federal income tax
consequences to holders exchanging Old Notes
pursuant to the Exchange Offer. See "United
States Federal Income Tax Consequences."
Use of Proceeds............... There will be no proceeds to the Operating
Partnership from the exchange pursuant to the
Exchange Offer. See "Use of Proceeds."
Fees and Expenses............. All expenses incident to the Operating
Partnership's consummation of the Exchange Offer
and compliance with the Registration Rights
Agreement will be borne by the Operating
Partnership. The Operating Partnership will also
pay certain transfer taxes applicable to the
Exchange Offer. See "The Exchange Offer -- Fees
and Expenses."
Termination of Certain
Rights........................ Pursuant to the Registration Rights Agreement,
holders of Old Notes (i) have rights to receive
Special Interest and (ii) have certain rights
intended for the holders of unregistered
securities. As used herein, "Special Interest"
means additional interest of .50% per annum of
the principal amount of the Old Notes during the
first 90 days of a Registration Default (defined
herein), increasing by an additional (0.50% per
annum for each additional 90-day period (up to a
maximum of 2.0% per annum of the principal
amount) for any period during which a
Registration Default is continuing pursuant to
the terms of the Registration Rights Agreement.
Holders of New Notes will no longer be, and upon
consummation of the Exchange Offer, holders of
Old Notes will no longer be, entitled to (i) the
right to receive Special Interest and (ii)
certain other rights under the Registration
Rights Agreement intended for holders of
unregistered securities. See "The Exchange
Offer -- Termination of Certain Rights" and
"Procedures for Tendering Old Notes."
6
<PAGE> 13
Accrued Interest.............. The New Notes will bear interest at a rate equal
to 7 5/8% per annum from their date of issuance.
Holders whose Old Notes are accepted for
exchange will have the right to receive interest
accrued thereon from the date of original
issuance or date of the last interest payment,
as applicable, to, but not including, the date
of issuance of the New Notes, such interest to
be payable with the first interest payment on
the New Notes. Interest on the Old Notes
accepted for exchange will cease to accrue on
the day prior to the issuance of the New Notes.
See "Description of Notes -- Principal, Maturity
and Interest."
Resales of New Notes.......... Based on the position of the staff of the
Commission as set forth in certain interpretive
letters issued to third parties in other
transactions, the Operating Partnership believes
that the New Notes issued pursuant to the
Exchange Offer to any holder of Old Notes in
exchange for Old Notes may be offered for
resale, resold and otherwise transferred by a
holder (other than (i) a broker-dealer who
purchased the Old Notes directly form the
Operating Partnership for resale pursuant to
Rule 144A under the Securities Act or any other
available exemption under the Securities Act of
and (ii) a person that is an affiliate of the
Operating Partnership within the meaning of Rule
405 under the Securities Act), without further
compliance with the registration and prospectus
delivery provisions of the Securities Act,
provided that such holder is not an affiliate of
the Operating Partnership, in acquiring the New
Notes in the ordinary course of business and is
not participating, and has no arrangement or
understanding with any person to participate, in
a distribution of the New Notes. Each
broker-dealer that receives New Notes for its
own account in exchange for Old Notes, where
such Old Notes were acquired by such broker as a
result of market-making or other trading
activities, must acknowledge that it will
deliver a prospectus in connection with any
resale of such New Notes. See "The Exchange
Offer -- Resales of the New Notes" and "Plan of
Distribution."
Effect of Not Tendering Old
Notes for Exchange............ Old Notes that are not tendered or that are not
properly tendered will, following the expiration
of the Exchange Offer, continue to be subject to
the existing restriction upon transfer thereof.
The Operating Partnership will have no further
obligations to provide for the registration
under the Securities Act of such Old Notes and
such Old Notes will, following the expiration of
the Exchange Offer, bear interest at the same
rate as the New Notes.
DESCRIPTION OF NEW NOTES
The form and terms of the New Notes will be identical in all material
respects to the form and terms of the Old Notes, except that the New Notes will
be registered under the Securities Act, and therefore will not be subject to
certain transfer restrictions, registration rights and related Special Interest
provisions applicable to the Old Notes. The Exchange Offer shall be deemed
consummated upon the occurrence of the delivery by the Operating Partnership to
the Exchange Agent of New Notes in the same aggregate principal amount as the
aggregate principal amount of Old Notes that are validly tendered by holders
thereof pursuant to the Exchange Offer. See "The Exchange Offer -- Termination
of Certain Rights" and "-- Procedures for Tendering Old Notes" and "Description
of Notes."
7
<PAGE> 14
Securities Offered............ $150.0 million aggregate principal amount of
7 5/8% Senior Notes Due 2005 of the Operating
Partnership
Maturity Date................. March 15, 2005.
Denominations................. $150,000 minimum or integral multiples of $1,000
in excess thereof.
Interest Payment Dates........ Interest on the New Notes is payable
semi-annually on March 15 and September 15 of
each year, commencing September 15, 1998.
Optional Redemption by the
Operating Partnership......... The New Notes are redeemable at any time at the
option of the Operating Partnership, in whole or
in part, at a redemption price equal to the sum
of (i) the principal amount of the New Notes
being redeemed plus accrued interest to the
redemption date, and (ii) the Make-Whole Amount,
if any. See "Description of Notes -- Optional
Redemption."
Ranking....................... The New Notes will be general unsecured and
unsubordinated obligations of the Operating
Partnership and will rank pari passu with all
other unsecured and unsubordinated indebtedness
of the Operating Partnership from time to time
outstanding. However, the New Notes will be
effectively subordinated to secured borrowing
arrangements that the Operating Partnership has
and from time to time may enter into with
various banks and other lenders, and to the
prior claims of each secured mortgage lender to
any specific Property which secures any lender's
mortgage. As of March 31, 1998, such
arrangements and mortgages aggregated
approximately $242.1 million; as adjusted to
reflect the Pro Forma Adjustments, such
arrangements and mortgages would have aggregated
$272.3 million as of March 31, 1998. See "Recent
Activities -- Financing Activities" and
"Capitalization." Subject to certain limitations
set forth in the Indenture, the Indenture
permits the Operating Partnership to incur
additional indebtedness and additional secured
indebtedness. See "Description of
Notes -- Covenants."
Certain Covenants............. The Indenture with respect to the Notes contains
various covenants, including the following:
(1) The Operating Partnership will not incur any
Debt if, after giving effect thereto, the
aggregate principal amount of all outstanding
Debt of the Operating Partnership is greater
than 60% of the sum of (i) Total Assets as of
the end of the Operating Partnership's fiscal
quarter ended immediately prior to the
incurrence of such additional Debt and (ii) the
increase in Total Assets since the end of such
quarter, including any increase in Total Assets
resulting from the incurrence of such additional
Debt (such increase, together with the Total
Assets, the "Adjusted Total Assets"). As of
March 31, 1998, as adjusted to reflect the Pro
Forma Adjustments, the Operating Partnership's
aggregate principal amount of all outstanding
Debt would have been 38.1% of Adjusted Total
Assets.
(2) The Operating Partnership will not incur any
Debt if the ratio of Consolidated Income
Available for Debt Service to the Annual Service
Charge on all debt outstanding immediately after
the incurrence of such additional Debt for the
four consecutive fiscal quarters most recently
ended prior to the date of the incurrence of
such
8
<PAGE> 15
additional Debt, on a pro forma basis, would be
less than 1.5 to 1.0. As of March 31, 1998, as
adjusted to reflect the pro forma adjustments as
described under the caption "Pro Forma Financial
Information," the Operating Partnership's ratio
of Consolidated Income Available for Debt
Service would have been 3.09 times the Annual
Service Charge on all Debt.
(3) The Operating Partnership will not incur any
Secured Debt if, after giving effect thereto,
the aggregate amount of all outstanding Secured
Debt is greater than 40% of Adjusted Total
Assets. As of March 31, 1998, as adjusted to
reflect the Pro Forma Adjustments, the Operating
Partnership's aggregate amount of all
outstanding Secured Debt would have been 17.7%
of Adjusted Total Assets.
(4) The Operating Partnership will maintain
Total Unencumbered Assets of not less than 150%
of the aggregate outstanding principal amount of
Unsecured Debt. As of March 31, 1998, as
adjusted to reflect the Pro Forma Adjustments,
the Operating Partnership's Total Unencumbered
Assets would have been 312% of the aggregate
outstanding principal amount of Unsecured Debt.
For a more complete description of the terms and
definitions used in the foregoing limitations,
see "Description of Notes -- Certain Covenants."
RISK FACTORS
Prospective purchasers of the Notes should carefully consider the matters
set forth under "Risk Factors" and as well as the other information, historical
financial statements and data and the pro forma financial data included in this
Prospectus in evaluating the Exchange Offer.
9
<PAGE> 16
RISK FACTORS
Prospective investors should read this entire Prospectus carefully,
including all appendices and supplements hereto, and should consider carefully
the following factors in evaluating the Exchange Offer.
RISKS ASSOCIATED WITH ACQUISITIONS
Risks Associated with the Addition of a Substantial Number of New Properties
The Operating Partnership is currently experiencing a period of rapid
growth. Since the Consolidation on December 31, 1995, the Operating Partnership
has invested approximately $1.4 billion in properties, as of May 22, 1998. The
Operating Partnership's ability to manage its growth effectively will require it
to apply successfully its experience managing its existing portfolio to new
markets and to an increased number of properties. There can be no assurance that
the Operating Partnership will be able to manage these operations effectively.
The Operating Partnership's inability to effectively manage its expansion could
have an adverse effect on the Operating Partnership's results of operations,
financial condition and ability to service debt.
Acquisitions Could Adversely Affect Operations
Consistent with its growth strategy, the Operating Partnership is
continually pursuing and evaluating potential acquisition opportunities, and is
from time to time actively considering the possible acquisition of specific
properties, which may include properties managed or controlled by one of the
Associated Companies or owned by affiliated parties. It is possible that one or
more of such possible future acquisitions, if completed, could adversely affect
the Operating Partnership's results of operations, financial condition and
ability to service debt.
Assumption of General Partner Liabilities
The Operating Partnership and its predecessors have acquired a number of
their properties by acquiring partnerships that own the properties or by first
acquiring general partnership interests and at a later date acquiring the
properties, and the Operating Partnership may pursue acquisitions in this manner
in the future. When the Operating Partnership uses this acquisition technique, a
subsidiary of the Company becomes a general partner. As a general partner, the
Company's subsidiary becomes generally liable for the debts and obligations of
the partnership, including debts and obligations that may be contingent or
unknown at the time of the acquisition. In addition, the Company's subsidiary
assumes obligations under the partnership agreements, which may include
obligations to make future contributions for the benefit of other partners. The
Company undertakes detailed due diligence reviews to ascertain the nature and
extent of obligations that its subsidiary will assume when it becomes a general
partner, but there can be no assurance that the obligations assumed will not
exceed the Company's estimates or that the assumed liabilities will not have an
adverse effect on the Operating Partnership's results of operations or financial
condition and ability to service debt.
Risks Relating to Tender Offers
The Operating Partnership may, as part of its growth strategy, acquire
properties and portfolios of properties through tender offer acquisitions of
interests in public and private partnerships and REITs. Tender offers often
result in competing tender offers, as well as litigation initiated by limited
partners in the subject partnerships or by competing bidders. Due to the
inherent uncertainty of litigation, the Operating Partnership could be subject
to adverse judgments in substantial amounts. As the Operating Partnership has
not yet attempted an acquisition through the tender offer process, and because
of competing offers and possible litigation, there can be no assurance that, if
undertaken, the Operating Partnership would be successful in acquiring
properties through a tender offer or that the tender offer process would not
result in litigation and a significant judgment adverse to the Operating
Partnership.
10
<PAGE> 17
Conflict of Interest
The Operating Partnership has acquired, and from time to time may acquire,
properties from partnerships that Robert Batinovich, the Company's Chairman and
Chief Executive Officer, and Andrew Batinovich, the Company's President and
Chief Operating Officer, control, and in which they and members of their
families have substantial interests. These transactions involve or will involve
conflicts of interest. These transactions may provide substantial economic
benefits such as payments or unit issuances, relief or deferral of tax
liabilities, relief of primary or secondary liability for debt, and reduction in
exposure to other property-related liabilities. Despite the presence of
appraisals or fairness opinions or review by parties who have no interest in the
transactions, the transactions will not be the product of arm's-length
negotiation and there can be no assurance that these transactions will be as
favorable to the Operating Partnership as transactions that the Operating
Partnership negotiates with unrelated parties or will not result in undue
benefit to Robert and Andrew Batinovich and members of their families. Neither
Robert Batinovich nor Andrew Batinovich has guaranteed that any properties
acquired from entities they control or in which they or their families have a
significant interest will be as profitable as other investments made by the
Operating Partnership or will not result in losses.
DEPENDENCE ON EXECUTIVE OFFICERS
The Operating Partnership is dependent on the efforts of Robert and Andrew
Batinovich, the Chief Executive Officer and the President and Chief Operating
Officer, respectively, of the Company, as the Operating Partnership's general
partner, and of the Company's other executive officers. The loss of the services
of any of them could have an adverse effect on the results of operations and
financial condition of the Company and the Operating Partnership. Both Robert
and Andrew Batinovich have entered into employment agreements with the Company.
RISKS ASSOCIATED WITH DEBT FINANCING
The Operating Partnership selectively seeks to use leverage to increase the
rate of return on its investments and to allow the Operating Partnership to make
more investments than it otherwise could. Such use of leverage presents an
element of risk in the event that the cash flow from the Operating Partnership's
properties is insufficient to meet the Operating Partnership's debt service
requirements (including with respect to the Notes). Subject to the limitations
contained in the Indenture and the Acquisition Credit Facility (as defined
below), to the extent the Operating Partnership determines to obtain additional
debt financing in the future, it may do so through mortgages on some of its
properties. As of March 31, 1998, $242.1 million of the Operating Partnership's
outstanding debt was secured by mortgages. The existing mortgages, a substantial
portion of which are cross-collateralized, are on non-recourse or
cross-collateralized bases. To the extent indebtedness is cross-collateralized,
lenders may seek to foreclose upon properties which are not the primary
collateral for their loans, which may, in turn, result in acceleration of other
indebtedness secured by the properties. Holders of indebtedness which is secured
by any of the properties will have a claim against such properties which is
senior to the claim of holders of the Notes. Foreclosure on properties would
result in a loss of income and asset value to the Operating Partnership.
The Company's organizational documents limit the Company's ability to
incur, or permit any consolidated partnership or subsidiary corporation to
incur, additional debt if the total debt, including the additional debt, would
exceed 50% of the Borrowing Base, defined as the greater of Fair Market Value or
Total Market Capitalization. The debt of the Operating Partnership is included
in the calculation of such additional debt and total debt. Fair Market Value is
based upon the value of the Company's assets as determined by an independent
appraiser. Total Market Capitalization is based upon the market value of the
Company's outstanding capital stock, including shares issuable on exercise of
redemption options by holders of units of the Operating Partnership. An
exception is made for refinancings and borrowings required to make distributions
to maintain the Company's status as a REIT. As of March 31, 1998, as adjusted to
reflect the Pro Forma Adjustments, the Company's debt was 31.2% of the Borrowing
Base.
11
<PAGE> 18
The Operating Partnership has a $250 million unsecured line of credit (the
"Acquisition Credit Facility") with Wells Fargo Bank, N.A. ("Wells Fargo Bank").
The Acquisition Credit Facility has a three year term and bears interest on a
sliding scale ranging from LIBOR plus 1.1% to LIBOR plus 1.3%. The Acquisition
Credit Facility agreement provides that if the Operating Partnership's debt
securities receive certain ratings from at least two rating agencies, as
specified in the Acquisition Credit Facility agreement, the interest rate will
decrease to a sliding scale ranging from LIBOR plus 0.8% to LIBOR plus 1.15%,
depending upon the rating.
The Acquisition Credit Facility also provides that distributions may not
exceed 90% of funds from operations and that, in the event of a failure to pay
principal or interest on borrowings thereunder when due (subject to any
applicable grace period), distributions may not exceed the lesser of (i) 90% of
funds from operations and (ii) the minimum amount that the Company must
distribute to its stockholders in order to avoid federal tax liability and
remain qualified as a REIT. If the Operating Partnership is unable to obtain
acceptable financing to repay indebtedness at maturity, the Operating
Partnership may have to sell properties to repay indebtedness or properties may
be foreclosed upon, which could have an adverse effect on the Operating
Partnership's results of operations and financial condition.
ABSENCE OF A PUBLIC MARKET FOR THE NOTES
The Notes are a new issue of securities for which there is currently no
public market. The Operating Partnership does not intend to apply for listing of
the Notes on any securities exchange or on the Nasdaq National Market. Although
the Initial Purchasers have informed the Operating Partnership that they
currently intend to make a market in the Notes, they are not obligated to do so
and any such market-making may be discontinued at any time without notice.
Accordingly, there can be no assurance as to the development or liquidity of any
market for the Notes. If a market for the Notes were to develop, the Notes may
trade at prices that may be higher or lower than their respective initial
offering price depending upon many factors, including prevailing interest rates,
the Operating Partnership's operating results and the markets for similar
securities. In addition, such market making activity may be limited during the
Exchange Offer and the pendency of any Shelf Registration Statement. See
"Description of Notes -- Registration Rights; Liquidated Damages." Therefore,
there can be no assurance that an active market for the Notes or, if issued, the
Exchange Notes will develop or, if such a market develops, that it will
continue.
RISKS RELATING TO REAL ESTATE
Environmental Matters
Under federal, state and local laws, ordinances and regulations relating to
protection of the environment ("Environmental Laws"), a current or previous
owner or operator of real estate may be liable for contamination resulting from
the presence or discharge of petroleum products or other hazardous or toxic
substances at such property, and may be required to investigate and clean-up
such contamination at such property or such contamination which has migrated
from such property. Such laws typically impose liability and clean-up
responsibility without regard to whether the owner or operator knew of, or was
responsible for, the presence of such contamination, and the liability under
such laws has been interpreted to be joint and several unless the harm is
divisible and there is a reasonable basis for allocation of responsibility. In
addition, the owner or operator of a property may be subject to claims by third
parties based on personal injury, property damage and/or other costs, including
investigation and clean-up costs, resulting from environmental contamination
present at or emanating from such property. Environmental Laws may also impose
restrictions on the manner in which a property may be used or transferred or in
which business may be operated, and these restrictions may require expenditures.
Under the Environmental Laws, any person who arranges for the transportation,
disposal or treatment of hazardous or toxic substances may also be liable for
the costs of investigation or clean-up of such substances at the disposal or
treatment facility, whether or not such facility is or ever was owned or
operated by such person.
Environmental Laws also govern the presence, maintenance and removal of
asbestos-containing building materials ("ACM"). Such laws require that ACM be
properly managed and maintained, that those who may
12
<PAGE> 19
come into contact with ACM be adequately apprised and trained, and that special
precautions, including removal or other abatement, be undertaken in the event
ACM is disturbed during renovation or demolition of a building. Such laws may
impose fines and penalties on building owners or operators for failure 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.
Some of the Properties, as well as properties previously owned by the
Operating Partnership, are leased or have been leased, in part, to owners and
operators of businesses that use, store or otherwise handle petroleum products
or other hazardous or toxic substances. Some of these Properties contain, or may
have contained, underground storage tanks for the storage of petroleum products
and other hazardous or toxic substances. These operations create a potential for
the release of petroleum products or other hazardous or toxic substances. Some
of the Properties are adjacent to or near other properties that have contained
or currently contain underground storage tanks used to store petroleum products
or other hazardous or toxic substances. Several of the Properties have been
contaminated with petroleum products or other hazardous or toxic substances from
on-site operations or operations on adjacent or nearby properties. In addition,
certain of the Properties are on, or are adjacent to or near other properties
upon which others, including former owners or tenants of the Properties, have
engaged or may in the future engage in activities that may release petroleum
products or other hazardous or toxic substances.
All of the Properties presently owned by the Operating Partnership have
been subject to Phase I environmental assessments by independent environmental
consultants. Some of the Phase I environmental assessments recommended further
investigations in the form of Phase II environmental assessments, including soil
and groundwater sampling, and all of these investigations have been completed by
the Operating Partnership or are in the process of being completed. Certain of
the Properties owned by the Operating Partnership have been found to contain
ACMs. The Operating Partnership believes that these materials have been
adequately contained and that an ACM operations and maintenance program has been
implemented or is in the process of being implemented for the Properties found
to contain ACMs.
Although tenants of the Properties owned by the Operating Partnership
generally are required by their leases to operate in compliance with all
applicable federal, state and local environmental laws, ordinances and
regulations and to indemnify the Operating Partnership against any environmental
liability arising from the tenants' activities on the Properties, the Operating
Partnership could nevertheless be subject to environmental liability relating to
its management of the Properties or strict liability by virtue of its ownership
interest in the Properties and there can be no assurance that the tenants would
satisfy their indemnification obligations under the leases. There can be no
assurance that any environmental assessments of the Properties owned by the
Operating Partnership, or properties being considered for acquisition by the
Operating Partnership, have revealed all potential environmental liabilities,
that any prior owner or prior or current operator of such properties did not
create an environmental condition not known to the Operating Partnership or that
an environmental condition does not otherwise exist as to any one or more of
such properties that could have an adverse effect on the Operating Partnership's
results of operations or financial condition. Moreover, there can be no
assurance that (i) future Environmental Laws, ordinances or regulations will not
have an adverse effect on the Operating Partnership's results of operations and
financial condition or (ii) the current environmental condition of such
properties will not be affected by tenants and occupants of such properties, by
the condition of land or operations in the vicinity of the properties (such as
the presence of underground storage tanks), or by third parties unrelated to the
Operating Partnership.
The Operating Partnership's operating costs may be affected by the
obligation to pay for the cost of complying with existing Environmental Laws as
well as the cost of complying with future legislation. In addition, the presence
of petroleum products or other hazardous or toxic substances at any of the
Properties owned by the Operating Partnership, or the failure to remediate such
property properly, may adversely affect the Operating Partnership's ability to
borrow by using such real property as collateral. The cost of defending against
claims of liability and the cost of complying with Environmental Laws, including
investigation or clean-up of contaminated property, could materially adversely
affect the Operating Partnership's results of operations and financial
conditions.
13
<PAGE> 20
Risks Related to Ownership and Financing of Real Estate
The Operating Partnership is subject to risks generally incidental to the
ownership of real estate, including changes in general economic or local
conditions, changes in supply of or demand for similar or competing properties
in an area, the impact of environmental protection laws, changes in interest
rates and availability of financing which may render the sale or financing of a
property difficult or unattractive, changes in tax, real estate and zoning laws,
and the creation of mechanics' liens or similar encumbrances placed on the
property by a lessee or other parties without the Operating Partnership's
knowledge and consent. Should any of these events occur, there could be an
adverse effect on the Operating Partnership's results of operations, financial
condition and ability to service debt.
Availability of and Competition for Real Estate Acquisitions
The Operating Partnership's growth is dependent upon acquisitions. There
can be no assurance that properties will be available for acquisition or, if
available, that the Operating Partnership will be able to purchase such
properties on favorable terms. If such acquisitions are not available it could
have a negative impact on the growth of the Operating Partnership. Furthermore,
the Operating Partnership faces competition from other businesses, individuals,
fiduciary accounts and plans and other entities in the acquisition, operation
and sale of its properties. Some of the Operating Partnership's competitors are
larger and have greater financial resources than the Operating Partnership. This
competition may result in a higher cost for properties the Operating Partnership
wishes to purchase.
Competition for Tenants
The Operating Partnership is subject to the risk that when space becomes
available at its properties the leases may not be renewed, the space may not be
let or relet, or the terms of the renewal or reletting (including the cost of
required renovations or concessions to tenants) may be less favorable to the
Operating Partnership. Although the Operating Partnership has established annual
property budgets that include estimates of costs for renovation and reletting
expenses that it believes are reasonable in light of each property's situation,
no assurance can be given that these estimates will sufficiently cover these
expenses. If the Operating Partnership is unable to promptly lease all or
substantially all of the space at its properties, if the rental rates are
significantly lower than expected, or if the Operating Partnership's reserves
for these purposes prove inadequate, then there could be an adverse effect on
the Operating Partnership's results of operations, financial condition and
ability to service debt.
Tenants' Defaults
The ability of the Operating Partnership to manage its assets is subject to
federal bankruptcy laws and state laws affecting creditors' rights and remedies
available to real property owners. In the event of the financial failure or
bankruptcy of a tenant, there can be no assurance that the Operating Partnership
could promptly recover the tenant's premises from the tenant or that the
Operating Partnership would receive rent in the proceeding sufficient to cover
its expenses with respect to the premises. In the event of the bankruptcy of a
tenant, the Operating Partnership will be subject to the provisions of the
federal bankruptcy code, which in some instances may restrict the amount and
recoverability of claims held by the Operating Partnership against the tenant.
If any tenant defaults on its obligations to the Operating Partnership, there
could be an adverse effect on the Operating Partnership's results of operations,
financial condition and ability to service debt.
Management, Leasing and Brokerage Risks
The Operating Partnership is subject to the risks associated with the
property management, leasing and brokerage businesses. These risks include the
risk that management contracts or service agreements may be terminated, that
contracts will not be renewed upon expiration or will not be renewed on terms
consistent with current terms, and that leasing and brokerage activity generally
may decline. The occurrence of one or more of these events could have an adverse
effect on the Operating Partnership's results of operations, financial condition
and ability to service debt.
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Uninsured Loss
The Operating Partnership or in certain instances tenants of the properties
carry comprehensive liability, fire and extended coverage with respect to the
Operating Partnership's Properties, with policy specification and insured limits
customarily carried for similar properties. There are, however, certain types of
losses (such as from earthquakes and floods) that may be either uninsurable or
not economically insurable. Further, certain of the properties are located in
areas that are subject to earthquake activity and floods. Should a Property
sustain damage as a result of an earthquake or flood, the Operating Partnership
may incur losses due to insurance deductibles, co-payments on insured losses or
uninsured losses. Should an uninsured loss occur, the Operating Partnership
could lose some or all of its capital investment, cash flow and anticipated
profits related to one or more Properties, which could have an adverse effect on
the Operating Partnership's results of operations, financial condition and
ability to service debt.
Illiquidity of Real Estate
Real estate investments are relatively illiquid and, therefore, will tend
to limit the ability of the Operating Partnership to vary its portfolio promptly
in response to changes in economic or other conditions. In addition, the
Internal Revenue Code of 1986, as amended (the "Code"), and individual
agreements with sellers of properties place limits on the Company's ability to
sell properties. Forty-two of the Properties owned by the Operating Partnership
were acquired on terms and conditions under which they can be disposed of only
in a like-kind exchange or other non-taxable transaction.
Potential Liability Under the Americans With Disabilities Act
The Operating Partnership's Properties are required to be in compliance
with the Americans With Disabilities Act (the "ADA"). The ADA generally requires
that places of public accommodation be made accessible to people with
disabilities to the extent readily achievable. Compliance with the ADA
requirements could require removal of access barriers and non-compliance could
result in imposition of fines by the federal government, an award of damages to
private litigants and/or a court order to remove access barriers. Because of the
limited history of the ADA, the impact of its application to the Operating
Partnership's properties, including the extent and timing of required
renovations, is uncertain. Pursuant to certain lease agreements with tenants in
certain of the "single-tenant" Properties, the tenants are obligated to comply
with the ADA provisions. If due to the ADA the Operating Partnership's costs are
greater than anticipated or tenants are unable to meet their obligations, there
could be an adverse effect on the Operating Partnership's results of operations,
financial condition and ability to service debt.
Risks Related to Development Joint Ventures
The Operating Partnership may from time to time enter into joint ventures
with selected developers ("JV Partners") for the purpose of developing new
projects in which such JV Partner has, in the opinion of the Operating
Partnership, significant expertise or experience. Such projects generally
require various governmental and other approvals, the receipt of which cannot be
assured. Such development activities may entail certain risks, including the
risk that: (i) the expenditure of funds on and devotion of management's time to
projects which may not come to fruition; (ii) construction costs of a project
may exceed original estimates, possibly making the project uneconomical; (iii)
occupancy rates and rents at a completed project may be less than anticipated;
and (iv) expenses at a completed development may be higher than anticipated. In
addition, JV Partners may have significant control over the operation of the
joint venture assets. Therefore, such investments may, under certain
circumstances, involve risks such as the possibility that the JV Partner might
become bankrupt, have economic or business interests or goals that are
inconsistent with the business interests or goals of the Operating Partnership,
or be in a position to take action contrary to the instructions or the requests
of the Operating Partnership or contrary to the Operating Partnership's policies
or objectives. Consequently, actions by a JV Partner might result in subjecting
property owned by the joint venture to additional risk. Although the Operating
Partnership will seek to maintain sufficient control of any joint venture to
permit the Operating Partnership's objectives to be achieved, it may be unable
to take action without the approval of its JV Partners or its JV Partners could
take actions binding the joint venture without the Operating Partnership's
consent. Additionally, should a JV Partner become bankrupt, the Operating
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<PAGE> 22
Partnership could become liable for such JV Partner's share of joint venture
liabilities. These risks may result in a development project having an adverse
effect on the Operating Partnership's result of operations and financial
condition.
LIMITATION ON OWNERSHIP OF COMMON STOCK MAY PRECLUDE ACQUISITION OF CONTROL
Provisions of the Company's Charter are designed to assist the Company in
maintaining its qualification as a REIT under the Code by preventing
concentrated ownership of the Company which might jeopardize REIT qualification.
Among other things, these provisions provide that (a) any transfer or
acquisition of capital stock of the Company that would result in the
disqualification of the Company as a REIT under the Code will be void, and (b)
if any person attempts to acquire shares of capital stock of the Company that
after the acquisition would cause the person to own or to be deemed to own, by
operation of certain attribution rules set out in the Code, an amount of capital
stock of the Company in excess of a predetermined limit, which, pursuant to
Board action, currently is 9.9% of the value of the outstanding shares of
capital stock of the Company (the "Ownership Limitation" and as to the capital
stock of the Company, the transfer of which would cause any person to actually
own capital stock of the Company in excess of the Ownership Limitation, the
"Excess Shares"), the transfer shall be void and the capital stock of the
Company subject to the transfer shall automatically be transferred to an
unaffiliated trustee for the benefit of a charitable organization designated by
the Board of Directors of the Company until sold by the trustee to a third party
or purchased by the Company. This limitation on the ownership of capital stock
of the Company may have the effect of precluding the acquisition of control of
the Company by a third party without the consent of the Board of Directors. If
the Board of Directors waives the Ownership Limitation for any person, the
Ownership Limitation shall be proportionally and automatically reduced with
regard to all other persons such that no five persons may own more than 50% of
the value of the capital stock of the Company (the aggregate Ownership
Limitations as to all of these persons, as adjusted, the "Adjusted Ownership
Limitation").
LITIGATION RELATED TO CONSOLIDATION
Recent business reorganizations sponsored by others involving the
conversion of partnerships into corporations have given rise to a number of
investor lawsuits. These lawsuits have included claims against the general
partners of the participating partnerships, the partnerships themselves and
related persons involved in the structuring of or benefiting from the conversion
or reorganization, as well as claims against the surviving entity and its
directors and officers. The lawsuits have included, among others, claims that
the structure of the reorganizations, as well as the manner in which they were
submitted for investor approval, involved violations of federal and state
securities laws, common law fraud and negligent misrepresentations, breaches of
fiduciary duty, unfair and deceptive trade practices, negligence and waste,
breaches of the partnership documents of the participating partnerships, failure
to comply with applicable reporting requirements, violations of the rules of the
NASD on suitability and fair practices, and violations of the Racketeer
Influenced and Corrupt Organizations Act. Two lawsuits have been filed
contesting the fairness of the Consolidation, one in California state court and
one in federal court. A settlement of the state court action was approved by the
court, but objectors to the settlement appealed that approval. On February 17,
1998, the Court of Appeals rejected the objectors' contentions and upheld the
settlement. The objectors filed with the California Supreme Court a petition for
review, which was denied on May 21, 1998. Plaintiffs in the federal court action
voluntarily dismissed the action pending resolution of the state court action.
From time to time the Company and the Operating Partnership are involved in
other litigation arising out of their business activities. It is possible that
this litigation and the other litigation previously described could result in
significant losses in excess of amounts reserved, which could have an adverse
effect on the Company's or the Operating Partnership's results of operations and
the financial condition of the Company or the Operating Partnership.
CHAPTER 11 REORGANIZATION OF PARTNERSHIP CONSOLIDATION BY SENIOR MANAGEMENT
Robert and Andrew Batinovich, two of the senior officers of the Company,
were also senior members of a management team that formed a publicly registered
limited partnership in 1986 to consolidate a number of predecessor partnerships.
That public partnership was involved in litigation with its primary creditor and
in
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order to prevent foreclosure filed a petition for reorganization under Chapter
11 of the United States Bankruptcy Code in May 1992. The public partnership,
which owns an approximate 1.7% limited partner interest in the Operating
Partnership along with other substantial real estate assets, and a less than
0.4% interest in the Company, settled the litigation and obtained confirmation
of a plan of reorganization in January 1994.
BOARD OF DIRECTORS MAY CHANGE INVESTMENT POLICIES
The descriptions in this Prospectus of the major policies and the various
types of investments to be made by the Operating Partnership reflect only the
current plans of the Board of Directors of the Company, the Operating
Partnership's general partner. The Company's Board of Directors may change the
investment policies of the Operating Partnership without a vote of the
stockholders of the Company or of the limited partners of the Operating
Partnership. In addition, the methods of implementing the Operating
Partnership's investment policies may vary as new investment techniques are
developed.
YEAR 2000 COMPLIANCE
The Operating Partnership utilizes a number of computer software programs
and operating systems across its entire organization, including applications
used in financial business systems and various administrative functions. To the
extent that the Operating Partnership's software applications contain source
code that is unable to appropriately interpret the upcoming calendar year "2000"
and beyond, some level of modification, or replacement of such applications will
be necessary. In addition, the ability of third parties ("Third Parties") with
whom the Operating Partnership transacts business to adequately address their
Year 2000 issues is outside of the Operating Partnership's control. The
Operating Partnership has completed its identification of applications that are
not yet "Year 2000" compliant and has commenced modification or replacement of
such applications, as necessary. Given information known at this time about the
Operating Partnership's systems that are non-compliant, coupled with the
Operating Partnership's ongoing, normal course-of-business efforts to upgrade or
replace critical systems, as necessary, management does not expect Year 2000
compliance costs to have any material adverse impact on the Operating
Partnership's liquidity or ongoing results of operations. No assurance can be
given, however, that all of the Operating Partnership's or Third Parties'
systems will be Year 2000 compliant or that compliance costs or the impact of
the Operating Partnership's or Third Parties' failure to achieve substantial
Year 2000 compliance will not have a material adverse effect on the Operating
Partnership's future liquidity or results of operations.
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THE EXCHANGE OFFER
The summary herein of certain provisions of the Registration Rights
Agreement does not purport to be complete and reference is made to the
provisions of the Registration Rights Agreement, which has been filed as an
exhibit to the Registration Statement and a copy of which is available upon
request to the Trustee.
PURPOSE AND EFFECT
The Old Notes were sold by the Operating Partnership to the Initial
Purchasers on March 23, 1998. The Initial Purchasers subsequently resold the Old
Notes in reliance on Rule 144A under the Securities Act. The Operating
Partnership and the Initial Purchasers entered into the Registration Rights
Agreement, pursuant to which the Operating Partnership agreed, with respect to
the Old Notes and subject to the Operating Partnership's determination that the
Exchange Offer is permitted under applicable law, to (i) cause to be filed, on
or prior to May 22, 1998, a registration statement with the Commission under the
Securities Act concerning the Exchange Offer, and, (ii) use its best efforts to
(a) cause such registration statement to be declared effective by the Commission
on or prior to August 20, 1998, and (b) to consummate the Exchange Offer on or
prior to October 2, 1998. The Operating Partnership will keep the Exchange Offer
open for a period of not less than 20 days (or longer if required by applicable
law) after the date the notice of the Exchange Offer is mailed to the holders of
the Old Notes. This Exchange Offer is intended to satisfy the Operating
Partnership's exchange offer obligations under the Registration Rights
Agreement.
CONSEQUENCES OF FAILURE TO EXCHANGE OLD NOTES
Following the expiration of the Exchange Offer, holders of Old Notes not
tendered, or not properly tendered will not have any further registration rights
and such Old Notes will continue to be subject to the existing restrictions on
transfer thereof. Accordingly, the liquidity of the market for a holder's Old
Notes could be adversely affected upon expiration of the Exchange Offer if such
holder elects not to participate in the Exchange Offer.
TERMS OF THE EXCHANGE OFFER
The Operating Partnership hereby offers, upon the terms and subject to the
conditions set forth herein and in the accompanying Letter of Transmittal, to
exchange $150 million aggregate principal amount of New Notes for up to $150
million aggregate principal amount of the outstanding Old Notes. The Operating
Partnership will accept for exchange any and all Old Notes that are validly
tendered on or prior to 5:00 p.m., New York City time, on the Expiration Date.
Tenders of the Old Notes may be withdrawn at any time prior to 5:00 p.m., New
York City time, on the Expiration Date. The Exchange Offer is not conditioned
upon any minimum principal amount of Old Notes being tendered for exchange.
However, the Exchange Offer is subject to the terms and provisions of the
Registration Rights Agreement. See "-- Conditions of the Exchange Offer."
As of the date of this Prospectus, $150 million in aggregate principal
amount of the Old Notes was outstanding. Only a holder of the Old Notes (or such
holder's legal representative or attorney-in-fact) may participate in the
Exchange Offer. There will be no fixed record date for determining holders of
the Old Notes entitled to participate in the Exchange Offer. The Operating
Partnership believes that, as of the date of this Prospectus, no such holder is
an affiliate (as defined in Rule 405 under the Securities Act) of the Operating
Partnership.
The Operating Partnership shall be deemed to have accepted validly tendered
Old Notes when, as and if the Operating Partnership has given oral or written
notice thereof to the Exchange Agent. The Exchange Agent will act as agent for
the tendering holders of Old Notes and for the purposes of receiving the New
Notes from the Operating Partnership.
If any tendered Old Notes are not accepted for exchange because of an
invalid tender, the occurrence of certain other events set forth herein or
otherwise, certificates for any such unaccepted Old Notes will be
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returned, without expense, to the tendering holder thereof as promptly as
practicable after the Expiration Date.
EXPIRATION DATE; EXTENSIONS; AMENDMENTS
The Expiration Date shall be , 1998 at 5:00 p.m., New
York City time, unless the Operating Partnership, in its sole discretion,
extends the Exchange Offer, in which case the Expiration Date shall be the
latest date and time to which the Exchange Offer is extended.
In order to extend the Exchange Offer, the Operating Partnership will
notify the Exchange Agent of any extension by oral or written notice and will
make a public announcement thereof, each prior to 9:00 a.m., New York City time,
on the next business day after the previously scheduled Expiration Date.
The Operating Partnership reserves the right, in its sole discretion, (i)
to delay accepting any Old Notes, (ii) to extend the Exchange Offer, in which
event the term "Expiration Date" shall mean the latest time and date to which
the Exchange Offer is extended, and (iii) to amend the terms of the Exchange
Offer in any manner. If the Exchange Offer is amended in a manner determined by
the Operating Partnership to constitute a material change, the Operating
Partnership will promptly disclose such amendments by means of a prospectus
supplement that will be distributed to the registered holders of the Old Notes.
Modifications of the Exchange Offer, including but not limited to extension of
the period during which the Exchange Offer is open, may require that at least
five business days remain in the Exchange Offer. In order to extend the Exchange
Offer, the Operating Partnership will notify the Exchange Agent of any extension
by oral or written notice and will make a public announcement thereof, each
prior to 9:00 a.m., New York City time, on the next business day after the
previously scheduled Expiration Date.
CONDITIONS OF THE EXCHANGE OFFER
The Exchange Offer is not conditioned upon any minimum principal amount of
the Old Notes being tendered for exchange. However, the Exchange Offer is
conditioned upon the declaration by the Commission of the effectiveness of the
Registration Statement of which this Prospectus constitutes a part.
TERMINATION OF CERTAIN RIGHTS
The Registration Rights Agreement provides that, subject to certain
exceptions, in the event of a Registration Default (as defined below), holders
of Old Notes are entitled to receive Liquidated Damages of 0.5% per annum of the
principal amount of the Old Notes during the first 90 days of a Registration
Default, increasing by an additional 0.5% per annum for each additional 90 day
period of a Registration Default (up to a maximum of 2.0% per annum). A
"Registration Default" with respect to the Exchange Offer shall occur if: (i)
the Operating Partnership fails to file the Exchange Offer Registration
Statement on or prior to May 22, 1998, (ii) the Registration Statement is not
declared effective by the Commission on or prior to August 20, 1998 or (iii) the
Operating Partnership fails to consummate the Exchange Offer on or prior to
October 2, 1998 or the Exchange Offer Registration Statement is declared
effective but thereafter ceases to be effective during the period specified in
the Registration Rights Agreement. Holders of New Notes will not be and, upon
consummation of the Exchange Offer, holders of Old Notes will no longer be,
entitled to (i) the right to receive the Liquidated Damages and (ii) certain
other rights under the Registration Rights Agreement intended for holders of Old
Notes. The Exchange Offer shall be deemed consummated upon the occurrence of the
delivery by the Operating Partnership to the Registrar under the Indenture of
New Notes in the same aggregate principal amount as the aggregate principal
amount of Old Notes that are tendered by holders thereof pursuant to the
Exchange Offer.
ACCRUED INTEREST
The New Notes will bear interest at a rate equal to 7 5/8% per annum from
and including their date of issuance. Holders whose Old Notes are accepted for
exchange will have the right to receive interest accrued thereon from the last
date on which interest was paid on the Old Notes, or if no interest had been
paid on such Old Notes, from the date of their original issue, to, but not
including, the date of issuance of the New Notes,
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such interest to be payable with the first interest payment on the New Notes.
Interest on the Old Notes accepted for exchange, which interest accrued at the
rate of 7 5/8% per annum, will cease to accrue on the day prior to the issuance
of the New Notes. See "Description of Notes -- Exchange Offer; Registration
Rights."
PROCEDURES FOR TENDERING OLD NOTES
The tender of a holder's Old Notes as set forth below and the acceptance
thereof by the Operating Partnership will constitute a binding agreement between
the tendering holder and the Operating Partnership upon the terms and subject to
the conditions set forth in this Prospectus and in the accompanying Letter of
Transmittal. Except as set forth below, a holder who wishes to tender Old Notes
for exchange pursuant to the Exchange Offer must transmit such Old Notes,
together with a properly completed and duly executed Letter of Transmittal,
including all other documents required by such Letter of Transmittal, to the
Exchange Agent at the address set forth on the back cover page of this
Prospectus prior to 5:00 p.m., New York City time, on the Expiration Date. THE
METHOD OF DELIVERY OF OLD NOTES, LETTERS OF TRANSMITTAL AND ALL OTHER REQUIRED
DOCUMENTS IS AT THE ELECTION AND RISK OF THE HOLDER. IF SUCH DELIVERY IS BY
MAIL, IT IS RECOMMENDED THAT REGISTERED MAIL, PROPERLY INSURED, WITH RETURN
RECEIPT REQUESTED, BE USED. INSTEAD OF DELIVERY BY MAIL, IT IS RECOMMENDED THAT
THE HOLDER USE AN OVERNIGHT OR HAND DELIVERY SERVICE. IN ALL CASES, SUFFICIENT
TIME SHOULD BE ALLOWED TO ENSURE TIMELY DELIVERY.
Any financial institution that is a participant in DTC's Book-Entry
Transfer Facility system may make book-entry delivery of the Old Notes by
causing DTC to transfer such Old Notes into the Exchange Agent's account in
accordance with DTC's procedures for such transfer. In connection with a
book-entry transfer, a Letter of Transmittal need not be transmitted to the
Exchange Agent, provided that the book-entry transfer procedure is made in
accordance with DTC's ATOP (as defined below) procedures for transfer and such
procedures are complied with prior to 5:00 p.m., New York City time, on the
Expiration Date.
DTC's Automated Tender Offer Program ("ATOP") is the only method of
processing exchange offers through DTC. To accept the Exchange Offer through
ATOP, participants in DTC must send electronic instructions to DTC through DTC's
communication system, prior to 5:00 p.m., New York City time, on the Expiration
Date, in place of sending a signed, hard copy Letter of Transmittal. DTC is
obligated to communicate those electronic instructions to the Exchange Agent by
an "Agent's Message." To tender Old Notes through ATOP, the electronic
instructions sent to DTC and transmitted by DTC to the Exchange Agent must
contain the participant's acknowledgement of its receipt of and agreement to be
bound by the Letter of Transmittal for such Old Notes.
Each signature on a Letter of Transmittal or a notice of withdrawal, as the
case may be, must be guaranteed unless the Old Notes surrendered for exchange
pursuant hereto are tendered (i) by a registered holder of the Old Notes who has
not completed either the box entitled "Special Exchange Instructions" or the box
entitled "Special Delivery Instructions" in the Letter of Transmittal, or (ii)
by an Eligible Institution (as defined below). In the event that a signature on
a Letter of Transmittal or a notice of withdrawal, as the case may be, is
required to be guaranteed, such guarantee must be by a firm which is a member of
a registered national securities exchange or the National Association of
Securities Dealers, Inc., a commercial bank or trust company having an office or
correspondent in the United States or otherwise be an "eligible guarantor
institution" within the meaning of Rule 17Ad-15 under the Exchange Act
(collectively, "Eligible Institutions"). If the Letter of Transmittal is signed
by a person other than the registered holder of the Old Notes, the Old Notes
surrendered for exchange must either (i) be endorsed by the registered holder,
with the signature thereon guaranteed by an Eligible Institution or (ii) be
accompanied by a bond power, in satisfactory form as determined by the Operating
Partnership in its sole discretion, duly executed by the registered holder, with
the signature thereon guaranteed by an Eligible Institution. The term
"registered holder" as used herein with respect to the Old Notes means any
person in whose name the Old Notes are registered on the books of the Registrar.
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All questions as to the validity, form, eligibility (including time of
receipt), acceptance and withdrawal of Old Notes tendered for exchange will be
determined by the Operating Partnership in its sole discretion, which
determination shall be final and binding. The Operating Partnership reserves the
absolute right to reject any and all Old Notes not properly tendered and to
reject any Old Notes the Operating Partnership's acceptance of which might, in
the judgment of the Operating Partnership or its counsel, be unlawful. The
Operating Partnership also reserves the absolute right to waive any defects or
irregularities or conditions of the Exchange Offer as to particular Old Notes
either before or after the Expiration Date (including the right to waive the
ineligibility of any holder who seeks to tender Old Notes in the Exchange
Offer). The interpretation of the terms and conditions of the Exchange Offer
(including the Letter of Transmittal and the instructions thereto) by the
Operating Partnership shall be final and binding on all parties. Unless waived,
any defects or irregularities in connection with tenders of Old Notes for
exchange must be cured within such period of time as the Operating Partnership
shall determine. The Operating Partnership will use reasonable efforts to give
notification of defects or irregularities with respect to tenders of Old Notes
for exchange but shall not incur any liability for failure to give such
notification. Tenders of the Old Notes will not be deemed to have been made
until such irregularities have been cured or waived.
If any Letter of Transmittal, endorsement, bond power, power of attorney or
any other document required by the Letter of Transmittal is signed by a trustee,
executor, corporation or other person acting in a fiduciary or representative
capacity, such person should so indicate when signing, and, unless waived by the
Operating Partnership, proper evidence satisfactory to the Operating
Partnership, in its sole discretion, of such person's authority to so act must
be submitted.
Any beneficial owner of the Old Notes (a "Beneficial Owner") whose Old
Notes are registered in the name of a broker, dealer, commercial bank, trust
company or other nominee and who wishes to tender Old Notes in the Exchange
Offer should contact such registered holder promptly and instruct such
registered holder to tender on such Beneficial Owner's behalf. If such
Beneficial Owner wishes to tender directly, such Beneficial Owner must, prior to
completing and executing the Letter of Transmittal and tendering Old Notes, make
appropriate arrangements to register ownership of the Old Notes in such
Beneficial Owner's name. Beneficial Owners should be aware that the transfer of
registered ownership may take considerable time.
By tendering, each registered holder will represent to the Operating
Partnership that, among other things, (i) the New Notes to be acquired in
connection with the Exchange Offer by the holder and each Beneficial Owner of
the Old Notes are being acquired by the holder and each Beneficial Owner in the
ordinary course of business of the holder and each Beneficial Owner, (ii) the
holder and each Beneficial Owner are not participating, do not intend to
participate, and have no arrangement or understanding with any person to
participate, in the distribution of the New Notes, (iii) the holder and each
Beneficial Owner acknowledge and agree that any person participating in the
Exchange Offer for the purpose of distributing the New Notes must comply with
the registration and prospectus delivery requirements of the Securities Act in
connection with a secondary resale transaction of the New Notes acquired by such
person and cannot rely on the position of the staff of the Commission set forth
in no-action letters that are discussed herein under "Resales of the New Notes,"
(iv) that if the holder is a broker-dealer that acquired Old Notes as a result
of market making or other trading activities, it will deliver a prospectus in
connection with any resale of New Notes acquired in the Exchange Offer, (v) the
holder and each Beneficial Owner understand that a secondary resale transaction
described in clause (iii) above should be covered by an effective registration
statement containing the selling security holder information required by Item
507 of Regulation S-K of the Commission, and (vi) neither the holder nor any
Beneficial Owner is an "affiliate," as defined under Rule 405 of the Securities
Act, of the Operating Partnership except as otherwise disclosed to the Operating
Partnership in writing. In connection with a book-entry transfer, each
participant will confirm that it makes the representations and warranties
contained in the Letter of Transmittal.
GUARANTEED DELIVERY PROCEDURES
Holders who wish to tender their Old Notes and (i) whose Old Notes are not
immediately available or (ii) who cannot deliver their Old Notes or any other
documents required by the Letter of Transmittal to the Exchange Agent prior to
the Expiration Date (or complete the procedure for book-entry transfer on a
timely
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basis), may tender their Old Notes according to the guaranteed delivery
procedures set forth in the Letter of Transmittal. Pursuant to such procedures:
(i) such tender must be made by or through an Eligible Institution and a Notice
of Guaranteed Delivery (as defined in the Letter of Transmittal) must be signed
by such Holder, (ii) on or prior to the Expiration Date, the Exchange Agent must
have received from the Holder and the Eligible Institution a properly completed
and duly executed Notice of Guaranteed Delivery (by facsimile transmission, mail
or hand delivery) setting forth the name and address of the Holder, the
certificate number or numbers of the tendered Old Notes, and the principal
amount of tendered Old Notes, stating that the tender is being made thereby and
guaranteeing that, within five New York Stock Exchange trading days after the
date of delivery of the Notice of Guaranteed Delivery, the tendered Old Notes, a
duly executed Letter of Transmittal and any other required documents will be
deposited by the Eligible Institution with the Exchange Agent; and (iii) such
properly completed and executed documents required by the Letter of Transmittal
and the tendered Old Notes in proper form for transfer (or confirmation of a
book-entry transfer of such Old Notes into the Exchange Agent's account at DTC)
must be received by the Exchange Agent within five New York Stock Exchange
trading days after the Expiration Date. Any Holder who wishes to tender Old
Notes pursuant to the guaranteed delivery procedures described above must ensure
that the Exchange Agent receives the Notice of Guaranteed Delivery and Letter of
Transmittal relating to such Old Notes to 5:00 p.m., New York City time, on the
Expiration Date. DTC participants may also submit the Notice of Guaranteed
Delivery through ATOP.
ACCEPTANCE OF OLD NOTES FOR EXCHANGE; DELIVERY OF NEW NOTES
Upon satisfaction or waiver of all the conditions to the Exchange Offer,
the Operating Partnership will accept any and all Old Notes that are properly
tendered in the Exchange Offer prior to 5:00 p.m., New York City time, on the
Expiration Date. The New Notes issued pursuant to the Exchange Offer will be
delivered promptly after acceptance of the Old Notes. For purposes of the
Exchange Offer, the Operating Partnership shall be deemed to have accepted
validly tendered Old Notes, when, as, and if the Operating Partnership has given
oral or written notice thereof to the Exchange Agent.
In all cases, issuances of New Notes for Old Notes that are accepted for
exchange pursuant to the Exchange Offer will be made only after timely receipt
by the Exchange Agent of such Old Notes, a properly completed and duly executed
Letter of Transmittal and all other required documents (or of confirmation of a
book-entry transfer of such Old Notes into the Exchange Agent's account at DTC);
provided, however, that the Operating Partnership reserves the absolute right to
waive any defects or irregularities in the tender or conditions of the Exchange
Offer. If any tendered Old Notes are not accepted for any reason, such
unaccepted Old Notes will be returned without expense to the tendering Holder
thereof as promptly as practicable after the expiration or termination of the
Exchange Offer.
WITHDRAWAL RIGHTS
Tenders of the Old Notes may be withdrawn by delivery of a written notice
(or for DTC participants, transmission of a notice through ATOP) to the Exchange
Agent, at its address set forth on the back cover page of this Prospectus, at
any time prior to 5:00 p.m., New York City time, on the Expiration Date. Any
such notice of withdrawal must (i) specify the name of the person having
deposited the Old Notes to be withdrawn (the "Depositor"), (ii) identify the Old
Notes to be withdrawn (including the certificate number or numbers and principal
amount of such Old Notes, as applicable), (iii) be signed by the Holder in the
same manner as the original signature on the Letter of Transmittal by which such
Old Notes were tendered (including any required signature guarantees) or be
accompanied by a bond power in the name of the person withdrawing the tender, in
satisfactory form as determined by the Operating Partnership in its sole
discretion, duly executed by the registered holder, with the signature thereon
guaranteed by an Eligible Institution together with the other documents required
upon transfer by the Indenture, and (iv) specify the name in which such Old
Notes are to be re-registered, if different from the Depositor, pursuant to such
documents of transfer. Any questions as to the validity, form and eligibility
(including time of receipt) of such notices will be determined by the Operating
Partnership, in its sole discretion. The Old Notes so withdrawn will be deemed
not to have been validly tendered for exchange for purposes of the Exchange
Offer. Any Old Notes which have been tendered
22
<PAGE> 29
for exchange but which are withdrawn will be returned to the Holder thereof
without cost to such Holder as soon as practicable after withdrawal. Properly
withdrawn Old Notes may be retendered by following one of the procedures
described under "The Exchange Offer -- Procedures for Tendering Old Notes" at
any time on or prior to the Expiration Date.
THE EXCHANGE AGENT; ASSISTANCE
The Trustee is the Exchange Agent. All tendered Old Notes, executed Letters
of Transmittal and other related documents should be directed to the Exchange
Agent. Questions and requests for assistance and requests for additional copies
of the Prospectus, the letter of Transmittal and other related documents should
be addressed to the Exchange Agent as follows:
By Hand, or Overnight Courier:
Facsimile Transmissions (Eligible Institutions Only):
To confirm by telephone or for information call:
FEES AND EXPENSES
All expenses incident to the Operating Partnership's consummation of the
Exchange Offer and compliance with the Registration Agreement will be borne by
the Operating Partnership, including, without limitation: (i) all registration
and filing fees (including, without limitation, fees and expenses of compliance
with state securities or Blue Sky laws); (ii) printing expenses (including,
without limitation, expenses of printing certificates for the New Notes in a
form eligible for deposit with DTC and of printing Prospectuses); (iii)
messenger, telephone and delivery expenses; (iv) fees and disbursements of
counsel for the Operating Partnership; (v) fees and disbursements of independent
certified public accountants; (vi) rating agency fees; and (vii) internal
expenses of the Operating Partnership (including, without limitation, all
salaries and expenses of officers and employees of the Operating Partnership
performing legal or accounting duties).
The Operating Partnership has not retained any dealer-manager in connection
with the Exchange Offer and will not make any payments to brokers, dealers or
others soliciting acceptance of the Exchange Offer. The Operating Partnership,
however, will pay the Exchange Agent reasonable and customary fees for its
services and will reimburse it for its reasonable out-of-pocket expenses in
connection therewith.
The Operating Partnership will pay all transfer taxes, if any, applicable
to the exchange of Old Notes pursuant to the Exchange Offer. If, however, a
transfer tax is imposed for any reason other than the exchange of Old Notes
pursuant to the Exchange Offer, then the amount of any such transfer taxes
(whether imposed on the registered holder or any other persons) will be payable
by the tendering holder. If satisfactory evidence of payment of such taxes or
exemption is not submitted with the Letter of Transmittal, the amount of such
transfer taxes will be billed directly to such tendering holder.
ACCOUNTING TREATMENT
The New Notes will be recorded at the same carrying value as the Old Notes,
as reflected in the Operating Partnership's accounting records on the date of
the exchange. Accordingly, no gain or loss will be recognized by the Operating
Partnership for accounting purposes. The expenses of the Exchange Offer will be
amortized over the term of the New Notes.
RESALES OF THE NEW NOTES
Based on the position of the staff of the Commission as set forth in
certain interpretive letters issued to third parties in other transactions, the
Operating Partnership believes that the New Notes issued pursuant to the
Exchange Offer to any holder of Old Notes in exchange for Old Notes may be
offered for resale, resold
23
<PAGE> 30
and otherwise transferred by such holder (other than (i) a broker-dealer who
purchased Old Notes directly from the Operating Partnership for resale pursuant
to Rule 144A under the Securities Act or any other available exemption under the
Securities Act, or (ii) a person that is an affiliate of the Operating
Partnership within the meaning of Rule 405 under the Securities Act) without
further compliance with the registration and prospectus delivery provisions of
the Securities Act, provided that such holder is not an affiliate of the
Operating Partnership, is acquiring the New Notes in the ordinary course of
business and is not participating, and has no arrangement or understanding with
any person to participate, in the distribution of the New Notes. However, the
Operating Partnership has not sought its own interpretive letter and there can
be no assurance that the Commission would make a similar determination with
respect to the Exchange Offer. The Operating Partnership and holders of Old
Notes are not entitled to rely on interpretive letter and there can be no
assurance that the Commission would make a similar determination with respect to
the Exchange Offer. The Operating Partnership and holders of Old Notes are not
entitled to rely on interpretive advice provided by the staff to other persons,
which advice was based on the facts and conditions represented in such letters.
However, the Exchange Offer is being conducted in a manner intended to be
consistent with the facts and conditions represented in such letters. If any
holder acquires New Notes in the Exchange Offer for the purpose of distributing
or participating in a distribution of the New Notes, such holder cannot rely on
the position of the staff of the Commission enunciated in Morgan Stanley & Co.
Incorporated (available June 5, 1991) and Exxon Capital Holdings Corporation
(available May 13, 1989), or interpreted in the Commission's letter to Shearman
and Sterling (available July 2, 1993), or similar no-action or interpretive
letters and must comply with the registration and prospectus delivery
requirements of the Securities Act in connection with a secondary resale
transaction, unless an exemption from registration is otherwise available. Each
broker-dealer that receives New Notes for its own account in exchange for Old
Notes, where such Old Notes were acquired by such broker-dealer as a result of
market making or other trading activities, must acknowledge that it will deliver
a prospectus in connection with any resale of such New Notes. See "Plan of
Distribution."
It is expected that the New Notes will be freely transferable by the
holders thereof, subject to the limitations described in the immediately
preceding paragraph. Sales of New Notes acquired in the Exchange Offer by
holders who are "affiliates" of the Operating Partnership within the meaning of
the Securities Act will be subject to certain limitations on resale under Rule
144 of the Securities Act. Such persons will only be entitled to sell New Notes
in compliance with the volume limitations set forth in Rule 144, and sales of
New Notes by affiliates will be subject to certain Rule 144 requirements as to
the manner of use, notice and the availability of current public information
regarding the Operating Partnership. The foregoing is a summary only of Rule 144
as it may apply to affiliates of the Operating Partnership. Any such persons
must consult their own legal counsel for advice as to any restrictions that
might apply to the resale of their Notes.
24
<PAGE> 31
CAPITALIZATION
The following table sets forth the historical capitalization of the
Operating Partnership as of March 31, 1998, and on a pro forma basis as if the
acquisitions of the Eaton & Lauth Portfolio, the BGK Portfolio and the Pending
Acquisitions and indebtedness incurred and equity issued in connection
therewith, had each been completed on March 31, 1998. This capitalization table
should be read in conjunction with all pro forma and historical financial
statements and notes thereto included in this Prospectus.
<TABLE>
<CAPTION>
AS OF MARCH 31, 1998
------------------------
HISTORICAL PRO FORMA
---------- ----------
(IN THOUSANDS)
<S> <C> <C>
DEBT:
Acquisition Credit Facility(1).............................. $ 50,332 $ 140,861
Mortgage loans(2)........................................... 242,083 272,327
The Old Notes............................................... 150,000 --
The New Notes(3)............................................ -- 150,000
---------- ----------
Total debt........................................ 442,415 563,188
---------- ----------
PARTNERS' CAPITAL
General Partner, 314,568 and 345,139 partnership units
outstanding, respectively(4)........................... 5,515 5,804
Limited Partner, 31,142,256 and 34,168,773 partnership
units outstanding, respectively(4)..................... 883,229 911,885
---------- ----------
Total Partners' Equity...................................... 888,744 917,689
---------- ----------
TOTAL CAPITALIZATION........................................ $1,331,159 $1,480,877
========== ==========
</TABLE>
- ---------------
(1) The pro forma balance reflects borrowings under the Acquisition Credit
Facility due to property acquisitions completed after March 31, 1998.
(2) The pro forma balance reflects the assumption of mortgage loans in
connection with the acquisition of the Eaton & Lauth Portfolio.
(3) The pro forma balance reflects the issuance of $150.0 million of 7 5/8%
Senior Notes in connection with the Exchange Offering.
(4) Pro forma amounts reflect the issuance of 672,653 units of partnership
interest in the Operating Partnership in connection with the acquisitions of
the Eaton & Lauth Portfolio and the Covance Property, and 2,248,869 units to
the Company in connection with the contribution of 100% of the non-voting
preferred stock of Glenborough Corporation and other assets to the Operating
Partnership. In addition, the Operating Partnership issued or will issue
135,566 units of partnership interest in the Operating Partnership to the
Company related to the issuance of an equal number of shares of Common Stock
of the Company in connection with the acquisitions of the Eaton & Lauth
Portfolio and the Covance Property.
25
<PAGE> 32
SELECTED HISTORICAL AND PRO FORMA FINANCIAL AND OTHER DATA
The following table sets forth selected financial and other data on a
historical, as adjusted and pro forma basis for the Operating Partnership, and
on a historical combined basis for the GRT Predecessor Entities.
The following unaudited pro forma operating and other data for the three
months ended March 31, 1998 and for the year ended December 31, 1997 have been
prepared to reflect: (i) all property acquisitions completed in 1997 and in 1998
through the date hereof, as described under "Recent Activities -- 1998 and 1997
Completed Acquisitions;" (ii) the Pending Acquisitions as described under the
caption "Recent Activities -- Pending Acquisitions;" (iii) the Exchange Offer;
(iv) the Initial Offering, the January 1998 Offering, the October 1997 Offering,
the July 1997 Offering and the March 1997 Offering (each as defined herein) and
the application of the respective net proceeds therefrom; (v) debt assumed and
borrowings under the Interim Loan and the Acquisition Credit Facility, as
described under the caption "Recent Activities -- Financing Activities;" (vi)
the repayment of certain mortgage loans, the Operating Partnership's previous
$50 million line of credit, a $114 million interim unsecured loan, the Interim
Loan and a portion of the borrowings on the Acquisition Credit Facility; (vii)
the sale of certain properties, and use of sales proceeds for the repayment of
related mortgage debt and the funding of certain property acquisitions; (viii)
the collection of a mortgage loan receiveable and (ix) the contribution by the
Company to the Operating Partnership of 100% of the outstanding non-voting
preferred stock of Glenborough Corporation as if each of such transactions had
been completed on January 1, 1997. The unaudited pro forma balance sheet data as
of March 31, 1998 has been prepared to reflect (i) all property acquisitions
completed in 1998 through the date hereof, as described under "Recent Activities
- -- 1998 and 1997 Completed Acquisitions;" (ii) the Pending Acquisitions as
described under the caption "Recent Activities -- Pending Acquisitions;" (iii)
the Exchange Offer; (iv) debt assumed and borrowings under the Acquisition
Credit Facility, as described under the caption "Recent Activities -- Financing
Activities;" (v) repayment of certain mortgage loans and a portion of the
borrowings on the Acquisition Credit Facility; (vi) the sale of a certain
property and the use of those sales proceeds for the repayment of related
mortgage debt and for the funding of certain property acquisitions and (vii) the
contribution by the Company to the Operating Partnership of 100% of the
outstanding non-voting preferred stock of Glenborough Corporation as if each of
such transactions had been completed on March 31, 1998.
The following unaudited as adjusted operating data, balance sheet data, and
other data have been prepared to reflect the Consolidation and related
transactions as if such transactions had occurred on January 1, 1994.
The pro forma selected financial and other data is unaudited and is not
necessarily indicative of the consolidated results which would have occurred if
the transactions had been consummated in the periods presented, or on any
particular date in the future, nor does it purport to represent the financial
position, results of operations or cash flows for future periods. The following
table should be read in conjunction with Management's Discussion and Analysis of
Financial Condition and Results of Operations and with all financial statements
and notes thereto included in this Prospectus Supplement and the accompanying
Prospectus or incorporated herein and therein by reference.
26
<PAGE> 33
<TABLE>
<CAPTION>
AS OF AND FOR THE
THREE MONTHS ENDED MARCH 31, AS OF AND FOR THE YEAR ENDED DECEMBER 31,
------------------------------------ -----------------------------------------------
AS
PROFORMA HISTORICAL HISTORICAL PRO FORMA HISTORICAL HISTORICAL ADJUSTED
1998 1998 1997 1997 1997 1996 1995
---------- ---------- ---------- ---------- ---------- ---------- --------
<S> <C> <C> <C> <C> <C> <C> <C>
Operating Data:
Rental Revenue................... $ 52,260 $ 45,963 $ 7,907 $ 202,543 $ 61,393 $ 17,943 $13,495
Equity in earnings of Associated
Company........................ 106 -- -- 1,637 -- -- --
Fees and reimbursements.......... -- -- -- -- -- -- --
Interest and other income........ 337 337 299 1,577 1,627 1,070 982
Total Revenues(1)................ 52,703 47,745 8,360 205,757 64,511 19,334 14,477
Property operating expenses...... 17,632 15,671 2,639 70,212 20,904 5,735 4,624
General and administrative....... 1,928 1,873 589 5,441 4,002 1,490 983
Interest expense................. 10,551 9,173 1,573 41,957 9,668 3,913 2,767
Depreciation and Amortization.... 10,855 9,951 1,504 41,009 14,698 4,452 3,654
Income (loss) from operations
before extraordinary items and
Preferred Partner Interest
distributions.................. 11,737 12,696 2,055 47,138 15,239 (3,493) 1,586
Net-income (loss) before
Preferred Partner Interest
distributions (2).............. 11,737 12,696 2,055 47,138 14,396 (3,679) 1,586
Net income (loss) allocable to
Operating Partnership Units.... $ 6,167 $ 8,786 $ 2,055 $ 24,857 $ 14,396 $ (3,679) $ 1,586
Per unit (3):
Net income (loss) before
extraordinary items allocable
to Operating Partnership
Units........................ $ .18 $ 0.28 $ 0.25 $ 0.72 $ 0.91 $ (0.72) $ 0.40
Net income (loss) allocable to
Operating Partnership
Units........................ $ .18 $ 0.28 $ 0.25 $ 0.72 $ 0.86 $ (0.76) $ 0.40
Balance Sheet Data:
Net investment in real estate.... $1,454,118 $1,306,931 -- -- $825,218 $161,945 --
Mortgage loans receivable, net... 3,740 3,740 -- -- 3,692 9,905 --
Total assets..................... 1,503,547 1,353,229 -- -- 855,740 177,752 --
Total debt....................... 563,188 442,415 -- -- 228,299 75,891 --
Partners' equity................. $ 917,689 $ 888,744 -- -- $615,174 $ 98,545 --
Other Data:
Distributions per unit (excluding
Preferred Partner Interest
distributions)(4).............. $ 0.42 $ 0.42 $ 0.32 $ 0.42 $ 1.38 $ 1.22 $ 1.20
Preferred Partner Interest
distributions.................. 5,570 3,910 -- -- -- -- --
EBIDA(5)......................... $ 33,143 $ 30,375 $ 4,978 130,104 38,114 $ 11,788 $ 8,870
Ratios:
Ratio of Earnings to Fixed
Charges(6)..................... 2.09x 1.78x -- 2.09x 2.58x 1.96x --
Ratio of Earnings to Fixed
Charges and Preferred Partner
Interest distributions (7)..... 1.38x 1.25x -- 1.38 2.58x 1.96x --
Annual Service Charge
Coverage(8).................... 3.09x 3.71x -- -- 4.03 3.17x --
Debt to Total Assets(9).......... 38.1% 33.5% -- -- 27.0% 39.0% --
Secured Debt to Total
Assets(10)..................... 17.7% 17.4% -- -- 16.7% 37.3% --
Total Unencumbered Assets to
Unsecured Debt(11)............. 312.0% 403.2% -- -- 632.9% -- --
Cash flow provided by (used for):
Operating activities............. $ 27,592 $ 15,906 $ (240) $ 88,147 $ 18,851 $ 4,852 $ --
<CAPTION>
AS OF AND FOR THE YEAR ENDED DECEMBER 31,
-----------------------------------------------
AS
HISTORICAL ADJUSTED HISTORICAL HISTORICAL
1995 1994 1994 1993
---------- -------- ---------- ----------
<S> <C> <C> <C> <C>
Operating Data:
Rental Revenue................... $ 15,454 $12,867 $ 13,797 $ 13,546
Equity in earnings of Associated
Company........................ -- -- -- --
Fees and reimbursements.......... 16,019 -- 13,327 15,439
Interest and other income........ 2,698 1,109 3,557 3,239
Total Revenues(1)................ 34,171 13,976 30,681 32,224
Property operating expenses...... 8,576 4,188 6,782 7,553
General and administrative....... 15,947 954 13,454 14,321
Interest expense................. 2,129 2,767 1,140 1,301
Depreciation and Amortization.... 4,762 3,442 4,041 4,572
Income (loss) from operations
before extraordinary items and
Preferred Partner Interest
distributions.................. 524 (5,145) 1,580 2,144
Net-income (loss) before
Preferred Partner Interest
distributions (2).............. 524 (5,145) 1,580 4,418
Net income (loss) allocable to
Operating Partnership Units.... $ 524 $(5,145) $ 1,580 $ 4,418
Per unit (3):
Net income (loss) before
extraordinary items allocable
to Operating Partnership
Units........................ $ -- $ (1.29) $ -- $ --
Net income (loss) allocable to
Operating Partnership
Units........................ $ -- $ (1.29) $ -- $ --
Balance Sheet Data:
Net investment in real estate.... $ 77,574 -- $ 63,994 $ 70,245
Mortgage loans receivable, net... 7,216 -- 19,953 18,825
Total assets..................... 95,801 -- 117,321 102,635
Total debt....................... 33,685 -- 17,906 12,172
Partners' equity................. $ 57,592 -- $ 80,558 $ 85,841
Other Data:
Distributions per unit (excluding
Preferred Partner Interest
distributions)(4).............. $ -- $ 1.20 $ -- --
Preferred Partner Interest
distributions.................. -- -- -- --
EBIDA(5)......................... $ 9,291 $ 8,834 $ 10,269 $ 10,326
Ratios:
Ratio of Earnings to Fixed
Charges(6)..................... 1.41x -- 2.58x 2.67x
Ratio of Earnings to Fixed
Charges and Preferred Partner
Interest distributions (7)..... 1.41x -- 2.58x 2.67x
Annual Service Charge
Coverage(8).................... -- -- -- --
Debt to Total Assets(9).......... -- -- -- --
Secured Debt to Total
Assets(10)..................... -- -- -- --
Total Unencumbered Assets to
Unsecured Debt(11)............. -- -- -- --
Cash flow provided by (used for):
Operating activities............. $ (15,057) $ -- $ 22,426 $ 12,505
</TABLE>
27
<PAGE> 34
<TABLE>
<CAPTION>
AS OF AND FOR THE
THREE MONTHS ENDED MARCH 31, AS OF AND FOR THE YEAR ENDED DECEMBER 31,
------------------------------------ -----------------------------------------------
AS
PROFORMA HISTORICAL HISTORICAL PRO FORMA HISTORICAL HISTORICAL ADJUSTED
1998 1998 1997 1997 1997 1996 1995
---------- ---------- ---------- ---------- ---------- ---------- --------
<S> <C> <C> <C> <C> <C> <C> <C>
Investing activities............. (48) 384,074 (1,621) (1,055,081) (567,802) (62,094) --
Financing activities............. $ (20,066) $ 370,736 $42,800 $ 966,366 $551,836 $ 57,889 $ --
<CAPTION>
AS OF AND FOR THE YEAR ENDED DECEMBER 31,
-----------------------------------------------
AS
HISTORICAL ADJUSTED HISTORICAL HISTORICAL
1995 1994 1994 1993
---------- -------- ---------- ----------
<S> <C> <C> <C> <C>
Investing activities............. 8,656 -- (1,947) (2,002)
Financing activities............. $ (17,390) $ -- $ (2,745) $ (8,927)
</TABLE>
28
<PAGE> 35
- ---------------
(1) Pro forma amounts exclude gains on the disposition of property and
collection of a mortgage loan receivable which were recognized on an
historical basis. Certain revenues which are included in the historical
combined amounts for 1995 and prior are not included on an as adjusted
basis. These revenues are included in the financial statements of the
unconsolidated Associated Companies, on an as adjusted basis, from which
the Operating Partnership receives lease payments and the Company and the
Operating Partnership receive dividends.
(2) Historical 1996 and as adjusted 1994 net losses reflect $7,237 of
Consolidation and litigation costs incurred in connection with the
Consolidation. As adjusted 1994 data give effect to the Consolidation and
related transactions as if such transactions had occurred on January 1,
1994, whereas historical 1996 data reflect such transactions in the periods
they were expensed. The Consolidation and litigation costs were expensed on
January 1, 1996, the Operating Partnership's first day of operations.
(3) Pro Forma net income per unit (excluding Preferred Partner Interest
distributions) is based upon pro forma weighted average units outstanding
of 34,513,912 for the three months ended March 31, 1998 and the year ended
December 31, 1997. As adjusted net income per unit is based upon as
adjusted weighted average units outstanding of 3,979,376 for 1995 and 1994.
(4) Historical distributions per unit for the three months ended March 31, 1998
and 1997 and for the year ended December 31, 1997 consist of distributions
declared for the periods then ended. Pro forma distributions per unit for
the three months ended March 31, 1998 and the year ended December 31, 1997
are based upon $0.42 per unit per quarter. As adjusted distributions per
unit for each of the years ended December 31, 1995 and 1994 are based on
$0.30 per unit per quarter.
(5) EBITDA represents and is computed as earnings before interest expense,
depreciation, amortization, loss provisions, gain or loss on disposal of
real estate properties and extraordinary items. The Operating Partnership
believes that in addition to cash flows and net income, EBITDA is a useful
financial performance measurement for assessing the operating performance
of the Operating Partnership because, together with net income and cash
flows, EBITDA provides investors with an additional basis to evaluate the
ability of the Operating Partnership to incur and service debt and to fund
acquisitions and other capital expenditures. To evaluate EBITDA and the
trends it depicts, the components of EBITDA, such as rental revenues,
rental expenses, real estate taxes and general and administrative expenses,
should be considered. See "Management's Discussion and Analysis of
Financial Condition and Results of the Operations." Excluded from EBITDA
are financing costs such as interest as well as depreciation and
amortization, each of which can significantly affect the Operating
Partnership's results of operations and liquidity and should be considered
in evaluating the Operating Partnership's operating performance. Further,
EBITDA does not represent net income or cash flows from operating,
financing and investing activities as defined by generally accepted
accounting principles and does not necessarily indicate that cash flows
will be sufficient to fund cash needs. It should not be considered as an
alternative to net income as an indicator of the Operating Partnership's
operating performance or to cash flows as a measure of liquidity.
(6) The ratio of earnings to fixed charges is computed as income (loss) from
operations, before extraordinary and others non-recurring items, plus fixed
charges (excluding capitalized interest) divided by fixed charges. Fixed
charges consist of interest costs including amortization of deferred
financing costs.
(7) The ratio of earnings to fixed charges and Preferred Partner Interest
distributions is computed as income (loss) from operations, before
extraordinary and other non-recurring items, plus fixed charges (excluding
capitalized interest) divided by fixed charges plus Preferred Partner
Interest distributions. Fixed charges consist of interest costs including
amortization of deferred financing costs.
(8) The annual service charges coverage is computed as EBITDA divided by annual
service charge, as defined in "Description of Notes -- Certain
Definitions."
(9) Debt to total assets is computed as debt divided by total assets, both as
defined in "Description of Notes -- Certain Definitions."
29
<PAGE> 36
(10) Secured debt to total assets is computed as secured debt divided by total
assets, as defined in "Description of Notes -- Certain Definitions."
(11) Total unencumbered assets to unsecured debt is computed as total
unencumbered assets divided by unsecured debt, both as defined in
"Description of Notes -- Certain Definitions"
PRO FORMA FINANCIAL INFORMATION
The following unaudited pro forma balance sheet data as of March 31, 1998
has been prepared to reflect (i) all property acquisitions completed in 1998
through the date hereof, as described under "Recent Activities -- 1998 and 1997
Completed Acquisitions;" (ii) the Pending Acquisitions as described under the
caption "Recent Activities -- Pending Acquisitions;" (iii) the Exchange Offer;
(iv) debt assumed and borrowings under the Acquisition Credit Facility, as
described under the caption "Recent Activities -- Financing Activities;" (v)
repayment of certain mortgage loans and a portion of the borrowings on the
Acquisition Credit Facility; and (vi) the sale of a certain property and the use
of sales proceeds therefrom for the repayment of related mortgage debt and for
the funding of certain property acquisitions and (vii) the contribution by the
Company to the Operating Partnership of 100% of the non-voting preferred stock
of Glenborough Corporation as if each of such transactions had been completed on
March 31, 1998.
The following unaudited pro forma operating and other data for the three
months ended March 31, 1998 and for the year ended December 31, 1997 have been
prepared to reflect: (i) all property acquisitions completed in 1997 and in 1998
through the date hereof, as described under "Recent Activities -- 1998 and 1997
Completed Acquisitions;" (ii) the Pending Acquisitions as described under the
caption "Recent Activities -- Pending Acquisitions;" (iii) the Exchange Offer;
(iv) the Initial Offering, the January 1998 Offering, the October 1997 Offering,
the July 1997 Offering and the March 1997 Offering and the application of the
respective net proceeds therefrom; (v) debt assumed and borrowings under the
Interim Loan and the Acquisition Credit Facility, as described under the caption
"Recent Activities -- Financing Activities;" (vi) the repayment of certain
mortgage loans, the Operating Partnership's previous $50 million line of credit,
a $114 million interim unsecured loan, the Interim Loan and a portion of the
borrowings on the Acquisition Credit Facility; (vii) the sale of certain
properties and use of sales proceeds therefrom for the repayment of related
mortgage debt and the funding of certain property acquisitions; (viii) the
collection of a mortgage loan receivable and (ix) the contribution by the
Company to the Operating Partnership of 100% of the non-voting preferred stock
of Glenborough Corporation as if each of such transactions had been completed on
January 1, 1997.
These unaudited, pro forma consolidated financial statements should be read
in conjunction with the financial statements and related notes of the Operating
Partnership included herein and in the Company's reports filed under the
Exchange Act which are incorporated by reference in this Prospectus. In the
opinion of management, all adjustments necessary to reflect the effects of the
transactions have been made.
The pro forma consolidated financial information is unaudited and is not
necessarily indicative of the results of which would have occurred if the
transactions had been consummated in the periods presented, or on any particular
date in the future, nor does it purport to represent the financial position,
results of operations, or cash flows for future periods.
30
<PAGE> 37
GLENBOROUGH PROPERTIES, L.P.
A CALIFORNIA LIMITED PARTNERSHIP
PRO FORMA CONSOLIDATED BALANCE SHEET
AS OF MARCH 31, 1998
(UNAUDITED, DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
COMPLETED PENDING EXCHANGE OTHER
HISTORICAL(1) TRANSACTIONS(2) ACQUISITIONS(3) OFFER(4) ADJUSTMENTS(5) PRO FORMA
------------- --------------- --------------- --------- -------------- ----------
<S> <C> <C> <C> <C> <C> <C>
ASSETS
Rental property, net............ $1,303,781 $ 88,800 $64,400 $ -- $(2,863) $1,454,118
Investment in Associated
Company....................... -- -- -- -- 8,119 8,119
Mortgage loans receivable,
net........................... 3,740 -- -- -- -- 3,740
Cash and cash equivalents....... 9,388 (10,285) 400 (250) 1,747 1,000
Other Assets.................... 36,320 -- -- 250 -- 36,570
---------- -------- ------- --------- ------- ----------
Total Assets.............. $1,353,229 $ 78,515 $64,800 $ -- $ 7,003 $1,503,547
========== ======== ======= ========= ======= ==========
LIABILITIES
Acquisition Credit Facility..... $ 50,332 $ 30,496 60,033 $ -- $ -- $ 140,861
Mortgage loans.................. 242,083 31,980 -- -- (1,736) 272,327
Old Notes....................... 150,000 -- -- (150,000) -- --
The New Notes................... -- -- -- 150,000 -- 150,000
Other liabilities............... 22,070 200 400 -- -- 22,670
---------- -------- ------- --------- ------- ----------
Total Liabilities......... 464,485 62,676 60,433 -- (1,736) 585,858
---------- -------- ------- --------- ------- ----------
PARTNERS' EQUITY
General Partner................. 5,515 158 44 -- 87 5,804
Limited Partners................ 883,229 15,681 4,323 -- 8,652 911,885
---------- -------- ------- --------- ------- ----------
Total Equity.............. 888,744 15,839 4,367 -- 8,739 917,689
---------- -------- ------- --------- ------- ----------
Total liabilities and
Partners' Equity........ $1,353,229 $ 78,515 $64,800 -- $ 7,003 $1,503,547
========== ======== ======= ========= ======= ==========
</TABLE>
31
<PAGE> 38
GLENBOROUGH PROPERTIES, L.P.
A CALIFORNIA LIMITED PARTNERSHIP
NOTES AND ADJUSTMENTS TO PRO FORMA
CONSOLIDATED BALANCE SHEET
AS OF MARCH 31, 1998
(UNAUDITED)
1. Reflects the historical consolidated balance sheet of the Operating
Partnership as of March 31, 1998, which includes the acquisitions of the
following properties and property portfolios:
<TABLE>
<CAPTION>
PURCHASE PRICE
PROPERTY (IN 000'S) DATE ACQUIRED
-------- -------------- -------------
<S> <C> <C>
BKG Portfolio............................. $ 50,200 March 27, 1998
400 El Camino Real........................ 34,700 March 6, 1998
Capitol Center............................ 12,300 February 27, 1998
Windsor Portfolio......................... 423,200 January 8, 1998
Marion Bass Portfolio..................... 58,300 December 31, 1997
Opus Portfolio............................ 27,900 December 22, 1997
Thousand Oaks............................. 51,300 December 13, 1997
Bryant Lake............................... 9,400 November 4, 1997
Copley Properties......................... 63,700 October 24, 1997
Citibank Park Property.................... 23,300 September 30, 1997
Advance Properties........................ 103,000 September 12, 1997
T. Rowe Price Properties.................. 146,800 September 12, 1997
Centerstone Property...................... 30,400 July 1, 1997
CRI Properties............................ 14,800 June 18, 1997
CIGNA Properties.......................... 45,400 April 29, 1997
E&L Properties............................ 22,200 April 18, 1997
Riverview Property........................ 20,500 April 14, 1997
Lennar Properties......................... 23,200 April 8, 1997
Scottsdale Hotel.......................... 12,100 February 28, 1997
</TABLE>
Also reflects the sale of sixteen retail, one residential, two industrial
and one office/flex property during 1997 and through March 31, 1998 for an
aggregate sales price of approximately $42.3 million.
Certain deposits for properties to be acquired have been reclassified to
cash from investments in real estate to properly reflect the flow of funds
as the related acquisitions are completed on a pro forma basis.
2. Reflects the completed acquisitions of the following properties and property
portfolios:
<TABLE>
<CAPTION>
PURCHASE PRICE
(IN 000'S) DATE ACQUIRED
-------------- -----------------
<S> <C> <C>
One Pacific Place.......................... $ 20,100 May 20, 1998
Eaton & Lauth Portfolio.................... 68,700 April 22, 1998
</TABLE>
The debt assumed in the acquisition of the Eaton & Lauth Portfolio bears
interest at rates ranging from 7.86% to 8.47% and matures between 2005 and
2007. The Acquisition Credit Facility has a three year term and bears
interest on a sliding scale ranging from LIBOR plus 1.1% to LIBOR plus 1.3%
(assumed to be 6.788% for the three months ended March 31, 1998 and for the
year ended December 31, 1997).
Tenant security deposits of approximately $200,000 related to these
acquisitions are reflected as cash and other liabilities.
32
<PAGE> 39
GLENBOROUGH PROPERTIES, L.P.
A CALIFORNIA LIMITED PARTNERSHIP
NOTES AND ADJUSTMENTS TO PRO FORMA
CONSOLIDATED BALANCE SHEET (CONTINUED)
AS OF MARCH 31, 1998
(UNAUDITED)
3. Reflects the pending acquisitions of the following properties and property
portfolios:
<TABLE>
<CAPTION>
PURCHASE
PRICE
(IN 000'S)
----------
<S> <C>
Covance..................................................... $16,500
Pru-Bache Portfolio......................................... 47,900
</TABLE>
Tenant security deposits of approximately $400,000 related to these
acquisitions are reflected as an increase in cash and other liabilities.
4. Reflects the Exchange Offering of $150,000,000 of Old Notes, for an equal
amount of New Notes with identical rates and terms. In connection with the
Exchange Offering, the Operating Partnership is expected to incur costs of
approximately $250,000.
5. Reflects the sale of an office/flex property in April, 1998 to an
unaffiliated third party for approximately $3.6 million. The sale generated
a gain of approximately $466,000. The proceeds were used in part to pay off
related mortgage indebtedness. In addition, also reflects the contribution
by the Company of 100% of the outstanding non-voting preferred stock of
Glenborough Corporation to the Operating Partnership in April, 1998 in
exchange for 2,248,869 units in the Operating Partnership.
33
<PAGE> 40
GLENBOROUGH PROPERTIES, L.P.
A CALIFORNIA LIMITED PARTNERSHIP
PRO FORMA CONSOLIDATED STATEMENT OF OPERATIONS
FOR THE THREE MONTHS ENDED MARCH 31, 1998
(UNAUDITED, DOLLARS IN THOUSANDS, EXCEPT SHARE DATA)
<TABLE>
<CAPTION>
OTHER
COMPLETED PENDING DEBT TRANS- ADJUST- PRO
HISTORICAL(1) TRANSACTIONS(2) ACQUISITIONS(3) ACTIONS(4) MENTS(5) FORMA
------------- --------------- --------------- ----------- -------- ----------
<S> <C> <C> <C> <C> <C> <C>
REVENUES
Rental revenue.......... $ 45,963 $ 4,490 $ 2,132 $ -- $ (325) $ 52,260
Equity in earnings of
Associated Company... -- -- -- -- 106 106
Fees, interest and other
income............... 337 -- -- -- -- 337
---------- ------- ------- -------- -------- ----------
Total Revenue... 46,300 4,490 2,132 -- (219) 52,703
---------- ------- ------- -------- -------- ----------
OPERATING EXPENSES
Operating expenses...... 15,671 1,479 593 -- (111) 17,632
General and
administrative....... 1,873 30 25 -- -- 1,928
Depreciation and
amortization......... 9,951 592 383 -- (71) 10,855
Interest expense........ 9,173 1,296 1,026 (807) (137) 10,551
---------- ------- ------- -------- -------- ----------
Total operating
expenses...... 36,668 3,397 2,027 (807) (319) 40,966
---------- ------- ------- -------- -------- ----------
Net income before
Preferred Partner
Interest
Distributions(6)..... 9,632 1,093 105 807 100 11,737
Preferred Partner
Interest
Distributions........ (3,910) -- -- -- (1,660) (5,570)
---------- ------- ------- -------- -------- ----------
Net income allocable to
Operating Partnership
units................ $ 5,722 $ 1,093 $ 105 $ 807 $ (1,560) $ 6,167
========== ======= ======= ======== ======== ==========
Net income per unit..... $0.18 $ 0.18
========== ==========
Weighted average units
outstanding excluding
Preferred Partner
Interest............. 31,454,370 34,513,912
========== ==========
</TABLE>
34
<PAGE> 41
GLENBOROUGH PROPERTIES, L.P.
A CALIFORNIA LIMITED PARTNERSHIP
PRO FORMA CONSOLIDATED STATEMENT OF OPERATIONS
FOR THE YEAR ENDED DECEMBER 31, 1997
(UNAUDITED, DOLLARS IN THOUSANDS, EXCEPT SHARE DATA)
<TABLE>
<CAPTION>
OTHER
COMPLETED PENDING DEBT TRANS- ADJUST- PRO
HISTORICAL(1) TRANSACTIONS(2) ACQUISITIONS(3) ACTIONS(4) MENTS(5) FORMA
------------- --------------- --------------- ----------- -------- ----------
<S> <C> <C> <C> <C> <C> <C>
REVENUES
Rental revenue............... $ 61,393 $135,134 $ 8,160 $ -- $ (2,144) $ 202,543
Equity in earnings of
Associated Company........ -- -- -- -- 1,637 1,637
Fees, interest and other
income.................... 1,627 -- -- -- (50) 1,577
--------- -------- ------- -------- -------- ----------
Total Revenue........ 63,020 135,134 8,160 -- (557) 205,757
--------- -------- ------- -------- -------- ----------
OPERATING EXPENSES
Operating expenses........... 20,904 47,362 2,523 -- (577) 70,212
General and administrative... 4,002 1,269 170 -- -- 5,441
Depreciation and
amortization.............. 14,698 25,340 1,404 -- (433) 41,009
Interest expense............. 9,668 18,660 4,104 10,125 (600) 41,957
--------- -------- ------- -------- -------- ----------
Total operating
expenses........... 49,272 92,631 8,201 10,125 (1,610) 158,619
--------- -------- ------- -------- -------- ----------
Net income before Preferred
Partner Interest
Distributions(6).......... $ 13,748 $ 42,503 $ (41) $(10,125) $ 1,053 $ 47,138
Preferred Partner Interest
Distributions............. -- -- -- -- (22,281) (22,281)
--------- -------- ------- -------- -------- ----------
Net income allocable to
Operating Partnership
units..................... $ 13,748 $ 42,503 $ (41) $(10,125) $(21,228) $ 24,857
--------- -------- ------- -------- -------- ----------
Net income per unit.......... $ 1.08 $ 0.72
========= ==========
Weighted average units
outstanding excluding
Preferred Partner
Interest.................. 12,750,658 34,513,912
========= ==========
</TABLE>
35
<PAGE> 42
GLENBOROUGH PROPERTIES, L.P.
A CALIFORNIA LIMITED PARTNERSHIP
NOTES AND ADJUSTMENTS TO PRO FORMA
CONSOLIDATED STATEMENTS OF OPERATIONS
FOR THE THREE MONTHS ENDED MARCH 31, 1998 AND
FOR THE YEAR ENDED DECEMBER 31, 1997
(UNAUDITED, DOLLARS IN THOUSANDS)
1. Reflects the historical consolidated operations of the Operating Partnership
for the three months ended March 31, 1998, excluding the gains on the sale of
property totaling $1,446, and reflects the historical consolidated operations
of the Operating Partnership for the year ended December 31, 1997, excluding
the gains on the sale of property and the collection of a note receivable
totaling $1,491 and an extraordinary loss on refinancing of debt of $843.
2. Reflects the historical operations of One Pacific Place, Eaton & Lauth, the
BGK Portfolio, 400 El Camino Real, Capitol Center, and the Windsor Portfolio,
(collectively the "Recent Acquisitions") for the three months ended March 31,
1998, portion of 1998 prior to acquisition.
<TABLE>
<CAPTION>
THREE MONTHS ENDED MARCH 31, 1998
(OR PORTION OF 1998 PRIOR TO ACQUISITION)
--------------------------------------------------------------------------------------
BGK 400 EL CAPITOL WINDSOR EATON ONE PACIFIC COMBINED
PORTFOLIO CAMINO REAL CENTER PORTFOLIO & LAUTH PLACE TOTAL
--------- ----------- ------- --------- ------------- ----------- --------
<S> <C> <C> <C> <C> <C> <C> <C>
Revenues........................ $70 $207 $376 $736 $2,358 $743 $ 4,490
Operating expenses.............. (26) (91) (162) (279) (697) (224) (1,479)
--- ---- ---- ---- ------ ---- -------
$44 $116 $214 $457 $1,661 $519 $ 3,011
=== ==== ==== ==== ====== ==== =======
</TABLE>
Also reflects the historical operations of the Recent Acquisitions and the
1997 Acquisitions for the year ended December 31, 1997 or the portion of
1997 prior to acquisition.
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31, 1997
(OR PORTION OF 1997 PRIOR TO ACQUISITION)
-------------------------------------------------------------------------------------------------
BGK 400 EL CAPITOL WINDSOR EATON ONE PACIFIC 1997 COMBINED
PORTFOLIO CAMINO REAL CENTER PORTFOLIO & LAUTH PLACE ACQUISITIONS TOTAL
----------- ----------- ------- --------- ------- ----------- ------------ --------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Revenues............. $ 6,157 $ 3,019 $ 2,369 $ 53,732 $9,362 $2,742 $ 57,753 $135,134
Operating expenses... (2,120) (1,331) (1,018) (20,402) (3,034) (977) (18,480) (47,362)
------- ------- ------- -------- ------ ------ -------- --------
$ 4,037 $ 1,688 $ 1,351 $ 33,330 $6,328 $1,765 $ 39,273 $ 87,772
======= ======= ======= ======== ====== ====== ======== ========
</TABLE>
Also, reflects estimated annual depreciation and amortization, based upon
estimated useful lives of 30 years on a straight-line basis and estimated
general and administrative expenses related to these acquisitions.
Also, reflects the estimated pro forma interest on the mortgage debt
assumed in connection with the acquisition of the Eaton & Lauth Portfolio,
the BGK Portfolio, the Windsor Portfolio, Marion Bass Portfolio, Advance
Properties, E&L Properties, and the Scottsdale Hotel, and the pro forma
advances under the Acquisition Credit Facility in connection with the
various 1998 and 1997 completed property acquisitions, less amounts
capitalized of $235 and $1,266 in the three months ended March 31, 1998 and
the year ended December 31, 1997, respectively. The estimated interest on
the mortgage loans assumed is based upon rates ranging from 7.25% to 9.25%.
The Acquisition Credit Facility bears interest on a sliding scale ranging
from LIBOR plus 1.1% to LIBOR plus 1.3% (assumed to be 6.788% for the three
months ended March 31, 1998 and for the year ended December 31, 1997). A
1/8% change in LIBOR would cause the interest expense on the outstanding
pro forma balance of the Acquisition Credit Facility as of March 31, 1998
to change by $176 on an annualized basis.
36
<PAGE> 43
GLENBOROUGH PROPERTIES, L.P.
A CALIFORNIA LIMITED PARTNERSHIP
NOTES AND ADJUSTMENTS TO PRO FORMA
CONSOLIDATED STATEMENTS OF OPERATIONS (CONTINUED)
FOR THE THREE MONTHS ENDED MARCH 31, 1998 AND
FOR THE YEAR ENDED DECEMBER 31, 1997
(UNAUDITED, DOLLARS IN THOUSANDS)
3. Reflects the historical operations of the Pending Acquisitions for the three
months ended March 31, 1998 and for the year ended December 31, 1997,
respectively.
<TABLE>
<CAPTION>
THREE MONTHS ENDED
MARCH 31, 1998
--------------------------------
PRU-BACHE COMBINED
PORTFOLIO COVANCE TOTAL
--------- ------- --------
<S> <C> <C> <C>
Revenues............................................ $ 1,876 $ 256 $ 2,132
Operating expenses.................................. (593) -- (593)
------- ------- --------
$ 1,283 $ 256 $ 1,539
======= ======= ========
</TABLE>
<TABLE>
<CAPTION>
YEAR ENDED
DECEMBER 31, 1997
--------------------------------
PRU-BACHE COMBINED
PORTFOLIO COVANCE TOTAL
--------- ------- --------
<S> <C> <C> <C>
Revenues............................................ $ 7,138 $ 1,022 $ 8,160
Operating expenses.................................. (2,523) -- (2,523)
------- ------- --------
$ 4,615 $ 1,022 $ 5,637
======= ======= ========
</TABLE>
Also, reflects estimated annual depreciation and amortization, based upon
estimated useful lives of 30 years on a straight-line basis and estimated
general and administrative expenses related to these acquisitions.
Also, reflects the estimated interest on advances under the Acquisition
Credit Facility which bear interest on a sliding scale ranging from LIBOR
plus 1.1% to LIBOR plus 1.3% (assumed to be 6.788% for the three months
ended March 31, 1998 and for the year ended December 31, 1997).
4. Reflects the estimated pro forma interest and the related effect on loan fee
amortization expense on the repayment of the previous line of credit, a
$114,000 interim unsecured loan, certain mortgage debt, the Interim Loan and
a portion of the Acquisition Credit Facility. Also reflects the pro forma
loan fee amortization expense and unused facility fees related to the
Acquisition Credit Facility for each of the periods presented. Also reflects
the estimated pro forma interest and the related effect on loan fee
amortization expense on the Notes for each of the periods presented. These
transactions result in net changes to interest expense consisting of the
following:
<TABLE>
<CAPTION>
THREE MONTHS ENDED YEAR ENDED
MARCH 31, 1998 DECEMBER 31, 1997
------------------ -----------------
<S> <C> <C>
Interest differential............................. $ 2,402 $16,011
Interest on repayments............................ (3,004) (6,619)
Amortization of new loan fees..................... 62 674
Amortization of old loan fees..................... (308) (105)
Unused Acquisition Credit Facility fees........... 41 164
------- -------
$ (807) $10,125
======= =======
</TABLE>
The Notes bear interest at a fixed rate of 7.625% and have a term of seven
years, unless previously redeemed.
37
<PAGE> 44
GLENBOROUGH PROPERTIES, L.P.
A CALIFORNIA LIMITED PARTNERSHIP
NOTES AND ADJUSTMENTS TO PRO FORMA
CONSOLIDATED STATEMENTS OF OPERATIONS (CONTINUED)
FOR THE THREE MONTHS ENDED MARCH 31, 1998 AND
FOR THE YEAR ENDED DECEMBER 31, 1997
(UNAUDITED, DOLLARS IN THOUSANDS)
The Acquisition Credit Facility has a three year term and bears interest on
a sliding scale ranging from LIBOR plus 1.1% to LIBOR plus 1.3% (assumed to
be 6.788% for the three months ended March 31, 1998 and for the year ended
December 31, 1997).
A $114,000 interim unsecured loan and the Company's previous line of credit
have no net impact on pro forma interest expense as these loans were repaid
in full from a capital contribution by the Company from the proceeds of the
October 1997 Offering.
The amortization of the new loan fees is based upon total estimated fees
and costs of approximately $3,908 over the respective terms of the related
Acquisition Credit Facility, the Interim Loan and the New Notes. The unused
Acquisition Credit Facility fees are based upon 0.15% of the pro forma
unused Acquisition Credit Facility capacity as of March 31, 1998 of
approximately $109,139.
5. Reflects the following adjustments:
<TABLE>
<CAPTION>
FOR THE THREE
MONTHS ENDED FOR THE YEAR ENDED
MARCH 31, 1998 DECEMBER 31, 1997
-------------- ------------------
<S> <C> <C>
Rental Revenue
Elimination of revenues of Sold Properties............. $(325) $(2,144)
===== =======
Equity in earnings of Associated Company................. $ 106 $ 1,637
===== =======
Fees, interest and other income
Reduction of interest due to collection of Hovpark note
receivable at 8% per annum.......................... -- (50)
----- -------
Net decrease in fees, interest and other income.......... $ -- $ (50)
===== =======
Operating expenses
Elimination of expenses of Sold Properties............. $(111) $ (603)
Additional expenses of the E&L Properties.............. -- 26
----- -------
Net decrease in operating expenses....................... $(111) $ (577)
===== =======
Depreciation and amortization
Elimination of expenses of Sold Properties............. $ (71) $ (433)
===== =======
Interest expense and loan fee amortization expense
reduction due to repayment of mortgage debt from
proceeds from Sold Properties.......................... $(137) $ (600)
===== =======
</TABLE>
Excludes the effects of the sale of the Shannon Crossing Property which will
not occur until late 1998 and excludes the sale of the Belshaw Industrial
property which management believes is not material to the accompanying pro
forma consolidated statements of operations for the three months ended March
31, 1998 and for the twelve months ended December 31, 1997.
38
<PAGE> 45
GLENBOROUGH PROPERTIES, L.P.
A CALIFORNIA LIMITED PARTNERSHIP
NOTES AND ADJUSTMENTS TO PRO FORMA
CONSOLIDATED STATEMENTS OF OPERATIONS (CONTINUED)
FOR THE THREE MONTHS ENDED MARCH 31, 1998 AND
FOR THE YEAR ENDED DECEMBER 31, 1997
(UNAUDITED, DOLLARS IN THOUSANDS)
6. The pro forma taxable income for the Operating Partnership for the three
months ended March 31, 1998 and for the year ended December 31, 1997 is
calculated as follows:
<TABLE>
<CAPTION>
FOR THE THREE
MONTHS ENDED FOR THE YEAR ENDED
MARCH 31, 1998 DECEMBER 31, 1997
-------------- ------------------
<S> <C> <C>
Pro forma net income from operations..................... $ 11,732 $ 47,138
Add: GAAP basis depreciation and amortization.......... 10,855 41,009
Less: Tax basis depreciation and amortization.......... (7,100) (28,398)
Other book-to-tax differences.......................... 570 (691)
-------- --------
Pro forma taxable income............................... $ 16,057 $ 59,058
======== ========
</TABLE>
39
<PAGE> 46
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
OVERVIEW
As part of the Consolidation, on December 31, 1995, the Operating
Partnership's predecessors, the GRT Predecessor Entities, added to the Operating
Partnership approximately 1,980,761 rentable square feet of office, office/flex,
industrial and retail Properties, multi-family Properties aggregating 104 units
and hotel Properties aggregating 499 rooms. Since the Consolidation, the
Operating Partnership has completed approximately $1.4 billion of acquisitions,
consisting of (i) 51 office Properties, 44 office/flex Properties, 21 industrial
Properties and ten retail Properties aggregating approximately 14,248,250
rentable square feet, (ii) 16 multi-family Properties aggregating 2,817 units
and (iii) two hotels aggregating 227 rooms. If each of the Pending Acquisitions
is completed, then, upon completion, the Operating Partnership will have
completed since the Consolidation property acquisitions aggregating a total
acquisition cost in excess of $1.4 billion.
RESULTS OF OPERATIONS
The statements of operations and cash flows for the year ended December 31,
1995 of the GRT Predecessor Entities include the historical operations of GC and
the Partnerships. These statements have been adjusted to reflect the
consolidation of two joint ventures which were, in aggregate, wholly owned by
the Partnerships. The statements of operations and cash flows for the year ended
December 31, 1995 of the GRT Predecessor entities are included as the
Consolidation of these entities to form the Operating Partnership did not occur
until December 31, 1995.
Certain components of the Operating Partnership's results of operations are
not comparable to those of the GRT Predecessor Entities. The primary reason for
the difference is the segregation in 1996 of the operations (management fees and
reimbursements, as well as related expenses) of certain affiliated companies,
all of which were combined in the GRT Predecessor Entities 1995 financial
statements. Also, contributing to the comparability difference is the change in
the operational structure of three original hotel properties, not including the
San Antonio Hotel which was acquired in 1996 and the Irving, Texas Hotel, (the
"Hotels").
The Hotels were wholly owned by the GRT Predecessor Entities and, thus, the
operations of the Hotels were included in the financial statements of the GRT
Predecessor Entities. Under the current structure, the Operating Partnership
owns the Hotels but leases them to Glenborough Hotel Group ("GHG"), an
affiliated company. The Operating Partnership includes only the related lease
payments earned from GHG in its statement of operations. When comparing
historical year ended December 31, 1996 to historical year ended December 31,
1995, the decreases in fees and reimbursements, property operating expenses and
general and administrative expenses are the primary components affected by these
changes in structure.
COMPARISON OF THE HISTORICAL THREE MONTHS ENDED MARCH 31, 1998 TO THE HISTORICAL
THREE MONTHS ENDED MARCH 31, 1997.
Rental Revenues. Rental revenues increased $38,056,000, or 481%, to
$45,963,000 for the three months ended March 31, 1998, from $7,907,000 for the
three months ended March 31, 1997. The increase included growth in revenues from
the office, industrial, office/flex, retail, multi-family and hotel Properties
of $23,716,000, $2,243,000, $8,192,000, $921,000, $2,632,000 and $352,000,
respectively. Of the rental revenue for the three months ended March 31, 1998,
$4,379,000 represented rental revenues generated from the acquisition of 20
properties in the third and fourth quarters of 1996 (the "1996 Acquisitions"),
$23,894,000 represented rental revenues generated from the acquisition of 90
properties in 1997 (the "1997 Acquisitions") and $14,688,000 represented rental
revenues generated from the acquisition of 23 properties during the three months
ended March 31, 1998 (the "1998 Acquisitions").
Interest and Other Income. Interest and other income increased $38,000, or
13%, to $337,000 for the three months ended March 31, 1998, from $299,000 for
the three months ended March 31, 1997. This
40
<PAGE> 47
increase is primarily due to higher invested cash balances during the three
months ended March 31, 1998 as compared to the three months ended March 31,
1997.
Net Gain on Sales of Rental Properties. The net gain on sales of rental
properties of $1,446,000 during the three months ended March 31, 1998, resulted
from the sales of one multi-family property, two industrial properties and one
office/flex property from the Operating Partnership's portfolio.
Gain on Collection of Mortgage Loan Receivable. The gain on collection of
mortgage loan receivable of $154,000 during the three months ended March 31,
1997 resulted from the collection of a mortgage loan receivable which had a net
carrying value of $6,700,000. The payoff amount totaled $6,863,000, which, net
of legal costs, resulted in a gain of $154,000.
Property Operating Expenses. Property operating expenses increased
$13,032,000, or 494%, to $15,671,000 for the three months ended March 31, 1998,
from $2,639,000 for the three months ended March 31, 1997. Of this increase,
$13,061,000 represents property operating expenses attributable to the 1997
Acquisitions and the 1998 Acquisitions. This increase is partially offset by
decreases in property operating expenses due to the 1997 and 1998 sales of
properties. Property operating expenses include property management fees and
salary reimbursements paid to the Company of $3,039,000 and $456,000 for the
three months ended March 31, 1998 and 1997, respectively.
General and Administrative Expenses. General and administrative expenses
increased $1,284,000, or 218%, to $1,873,000 for the three months ended March
31, 1998, from $589,000 for the three months ended March 31, 1997. This increase
is primarily due to an increase in asset management fees paid to the Company of
$1,333,000. Asset management fees are calculated and paid to the Company based
on the estimated fair value of the Operating Partnership's real estate assets
which have increased from $173,316,000 as of March 31, 1997 to $1,306,931,000 as
of March 31, 1998. General and administrative expenses include asset management
fees paid to the Company of $1,815,000 and $482,000 for the three months ended
March 31, 1998 and 1997, respectively.
Depreciation and Amortization. Depreciation and amortization increased
$8,447,000, or 562%, to $9,951,000 for the three months ended March 31, 1998,
from $1,504,000 for the three months ended March 31, 1997. The increase is
primarily due to depreciation and amortization associated with the 1997
Acquisitions and 1998 Acquisitions.
Interest Expense. Interest expense increased $7,600,000, or 483%, to
$9,173,000 for the three months ended March 31, 1998, from $1,573,000 for the
three months ended March 31, 1997. Substantially all of the increase was the
result of higher average borrowings during the three months ended March 31,
1998, as compared to the three months ended March 31, 1997, due to new debt and
the assumption of debt related to the 1997 Acquisitions and 1998 Acquisitions.
COMPARISON OF THE HISTORICAL YEAR ENDED DECEMBER 31, 1997 TO THE HISTORICAL YEAR
ENDED DECEMBER 31, 1996.
Rental Revenue. Rental revenue increased $43,450,000, or 242%, to
$61,393,000 for the year ended December 31, 1997, from $17,943,000 for the year
ended December 31, 1996. The increase included growth in revenue from the
office, office/flex, industrial, retail, multi-family and hotel Properties of
$21,166,000, $9,585,000, $3,829,000, $3,478,000, $4,017,000 and $1,467,000,
respectively. Of the rental revenue for the year ended December 31, 1997,
$48,030,000 represents rental revenue generated from the 1996 Acquisitions in
the third and fourth quarters of 1996 and the 1997 Acquisitions. The increase in
rental revenue for the year ended December 31, 1997, was partially offset by a
decrease in revenue due to the 1996 sale of two industrial properties and the
1997 sales of 16 retail properties.
Interest and Other Income. Interest and other income, which consists
primarily of interest on cash investments and mortgage loans receivable,
increased $557,000, or 52%, to $1,627,000 for the year ended December 31, 1997,
from $1,070,000 for the year ended December 31, 1996. The increase was primarily
due to a $786,000 increase in interest income as a result of higher invested
cash balances and a $365,000 increase in interest income from the Grunow
mortgage loan receivable. This increase in interest income is partially
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offset by a $649,000 reduction in interest and other income due to the payoff of
the Hovpark mortgage loan receivable in January 1997.
Net Gain on Sales of Rental Properties. The net gain on sales of rental
properties of $839,000 during the year ended December 31, 1997, resulted from
the sales of 16 retail properties. The net gain on sales of rental properties of
$321,000 during the year ended December 31, 1996, resulted from the sale of two
self-storage facilities from the Operating Partnership's industrial portfolio.
Gain on Collection of Mortgage Loan Receivable. The gain on collection of
mortgage loan receivable of $652,000 during the year ended December 31, 1997
resulted from the collection of the Hovpark mortgage loan receivable which had a
net carrying value of $6,700,000. The payoff amount totaled $6,863,000 in cash,
plus a $500,000 note receivable, which, net of legal costs, resulted in a gain
of $652,000.
Property Operating Expenses. Property operating expenses increased
$15,169,000, or 264%, to $20,904,000 for the year ended December 31, 1997, from
$5,735,000 for the year ended December 31, 1996. Of this increase, $15,060,000
represents property operating expenses attributable to the 1996 Acquisitions and
the 1997 Acquisitions, which was slightly offset by the reduction in expenses
resulting from the 1996 sale of two industrial properties and the 1997 sales of
16 retail properties. Property operating expenses include property management
fees and salary reimbursements paid to the Company of $3,028,000 and $769,000
during the years ended December 31, 1997 and 1996, respectively.
General and Administrative Expenses. General and administrative expenses
increased $2,512,000, or 169%, to $4,002,000 for the year ended December 31,
1997, from $1,490,000 for the year ended December 31, 1996. This increase is
primarily due to an increase in asset management fees paid to the Company of
$2,262,000. Asset management fees are calculated and paid to the Company based
on the estimated fair value of the Operating Partnership's real estate assets
which increased from $161,945,000 as of December 31, 1996 to $825,218,000 as of
December 31, 1997. General and administrative expenses include asset management
fees paid to the Company of $3,382,000 and $1,120,000 during the years ended
December 31, 1997 and 1996, respectively.
Depreciation and Amortization. Depreciation and amortization increased
$10,246,000, or 230%, to $14,698,000 for the year ended December 31, 1997, from
$4,452,000 for the year ended December 31, 1996. The increase is primarily due
to depreciation and amortization associated with the 1996 Acquisitions and the
1997 Acquisitions.
Interest Expense. Interest expense increased $5,755,000, or 147%, to
$9,668,000 for the year ended December 31, 1997, from $3,913,000 for the year
ended December 31, 1996. Substantially all of the increase was the result of
higher average borrowings during the year ended December 31, 1997, as compared
to the year ended December 31, 1996, due to new debt and the assumption of debt
related to the 1996 Acquisitions and the 1997 Acquisitions.
Loss on early extinguishment of debt. Loss on early extinguishment of debt
of $843,000 during the year ended December 31, 1997, resulted from the write-off
of unamortized loan fees related to the $50 million secured line of credit from
Wells Fargo Bank which was replaced with a new $250 Acquisition Credit Facility
from Wells Fargo Bank. Loss on early extinguishment of debt of $186,000 during
the year ended December 31, 1996, resulted from the write-off of unamortized
loan fees related to the $10,000,000 line of credit from Imperial Bank which was
paid-off with proceeds from the $50 million secured line of credit from Wells
Fargo Bank.
COMPARISON OF THE HISTORICAL YEAR ENDED DECEMBER 31, 1996 TO THE HISTORICAL YEAR
ENDED DECEMBER 31, 1995.
Rental Revenue. Rental Revenue increased by $2,489,000, or 16%, to
$17,943,000 in 1996 from $15,454,000 in 1995. Of this increase, $4,442,000
represents rental revenues generated from the 1996 Acquisitions. The increase in
1996 revenues was offset by the elimination of revenues from the All American
Industrial Properties due to the sale of such properties in June 1996. The
increase in rental revenues was also offset by a decrease in hotel revenues due
to the change in the operational structure of the Hotels as discussed above.
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Fees and Reimbursements. Fees and reimbursements revenue decreased to $0
for the year ended December 31, 1996 from $16,019,000 for the year ended
December 31, 1995. As previously discussed, the primary reason for the
difference between 1996 and 1995 results is the segregation in 1996 of the
operations of certain affiliated companies. In 1995, the earnings of these
affiliated companies were consolidated with the partnerships participating in
the Consolidation; however, in 1996, these earnings are excluded.
Interest and Other Income. Interest and other income decreased $1,628,000,
or 60%, in 1996 to $1,070,000 from $2,698,000 in 1995. This decrease resulted
primarily from a lower note receivable balance in 1996, primarily as a result of
the early repayment of various notes receivable in 1995. Also, in 1996, cash
balances decreased primarily as a result of the payment of distributions and the
payment of costs associated with the Consolidation.
Net Gain on Sales of Rental Properties. The net gain on sales of rental
properties of $321,000 in 1996 resulted from the sale of the two self-storage
facilities from the Operating Partnership's industrial portfolio.
Property Operating Expenses. Property operating expenses decreased
$2,841,000, or 33%, to $5,735,000 in 1996 from $8,576,000 in 1995. Of the
decrease, $4,993,000 is primarily the result of the change in the operational
structure of the hotels, as previously discussed. The decrease was offset by an
increase of $1,601,000 associated with the operating expenses of the 1996
Acquisitions. Property operating expenses include property management fees and
salary reimbursements paid to the Company of $769,000 during the year ended
December 31, 1996.
General and Administrative. General and administrative expenses decreased
to $1,490,000 in 1996 from $15,947,000 in 1995. The decrease is due primarily to
the segregation in 1996 of the operations of certain affiliated companies, as
previously discussed. General and administrative expenses include asset
management fees paid to the Company of $1,120,000 during the year ended December
31, 1996.
Depreciation and Amortization. Depreciation and amortization decreased to
$4,452,000 in 1996 from $4,762,000 in 1995. Depreciation and amortization in
1995 includes the amortization of GRT Predecessor Entities' management
contracts, which are no longer reflected in the Operating Partnership's results
of operations in 1996. Depreciation and amortization in 1996 includes
depreciation and amortization related to the 1996 Acquisitions.
Interest Expense. Interest expense increased $1,784,000, or 84%, to
$3,913,000 in 1996 from $2,129,000 in 1995. Substantially all of the increase
was the result of higher average borrowings during 1996 as compared to 1995. The
increased borrowings were used to finance the 1996 Acquisitions.
Consolidation Costs. Consolidation costs for the year ended December 31,
1996, consist of the costs associated with preparing, printing and mailing the
Prospectus/Consent Solicitation Statement and other documents related to the
Consolidation, and all other costs incurred in the forwarding of the Prospectus/
Consent Solicitation Statement to investors.
Litigation Costs. Litigation costs for the year ended December 31, 1996,
consist of the legal fees incurred in connection with defending two class action
complaints filed by investors in certain of the GRT Predecessor Entities as well
as an accrual for the proposed settlement in one case.
COMPARISON OF THE HISTORICAL YEAR ENDED DECEMBER 31, 1996 TO THE AS ADJUSTED
YEAR ENDED DECEMBER 31, 1995.
Set forth below is a discussion comparing the historical results of
operations for the year ended December 31, 1996 to the results of operations for
the year ended December 31, 1995 adjusted to reflect the Consolidation as if the
Consolidation had occurred on January 1, 1994.
Rental Revenues. Rental Revenues increased by $4,448,000, or 33%, to
$17,943,000 for the year ended December 31, 1996 from $13,495,000 for the as
adjusted year ended December 31, 1995. The increase consisted of increases in
revenues from the office, office/flex, industrial, retail, multi-family and
hotel properties of $2,625,000, $127,000, $380,000, $737,000 and $579,000,
respectively. Moreover, of this increase, $4,442,000 represents rental revenues
generated from the 1996 Acquisitions. The increase was offset by the
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elimination of revenues from the All American Industrial Properties due to the
sale of such properties in June 1996. These properties represented annual
revenues of approximately $600,000.
Interest and Other Income. Interest and other income consists primarily of
interest on mortgage loans receivable and increased slightly to $1,070,000 in
1996 from $982,000 in 1995.
Property Operating Expenses. Property operating expenses increased by
$1,111,000, or 24%, to $5,735,000 in the year ended December 31, 1996 from
$4,624,000 for the as adjusted year ended December 31, 1995. Of this increase,
$1,601,000 represents expenses of the 1996 Acquisitions, offset in part by the
reduction in expenses resulting from the sale of the All American Self Storage
industrial properties.
General and Administrative Expenses. General and administrative expenses
increased $507,000, or 52%, from $983,000 in 1995 to $1,490,000 in 1996. The
increase is due in part to increased overhead costs resulting from the 1996
Acquisitions, including a portion of the transaction costs relating to the 1996
Acquisitions.
Interest Expense. Interest expense increased by $1,146,000, or 41%, to
$3,913,000 in the year ended December 31, 1996 from $2,767,000 in the as
adjusted year ended December 31, 1995. Substantially all of the increase was the
result of higher average borrowings during 1996 as compared to 1995. The
increased borrowings in 1996 were used to finance the cash portion of the 1996
Acquisitions.
Depreciation and Amortization. Depreciation and amortization increased
$798,000, or 22%, to $4,452,000 in 1996 from $3,654,000 in 1995. This increase
was primarily due to depreciation and amortization associated with the 1996
Acquisitions.
Gain or Sale of Rental Properties. Gain on sale of rental properties of
$321,000 during 1996 resulted from the sale of the All American Industrial
Properties held in the Operating Partnership's industrial portfolio.
Consolidation Costs. Consolidation costs in 1996 consist of the costs
associated with preparing, printing and mailing the Prospectus/Consent
Solicitation Statement and other documents related to the Consolidation, and all
other costs incurred in the forwarding of the Prospectus/Consent Solicitation
Statement to investors.
Litigation Costs. Litigation costs consist of the legal fees incurred in
connection with defending two class action complaints filed by investors in
certain of the GRT Predecessor Entities as well as an accrual for the proposed
settlement in one case.
Loss on Debt Refinancing. Loss on debt refinancing of $186,000 during the
year ended December 31, 1996 resulted from the write-off of unamortized loan
fees when the $10,000,000 Imperial Bank line of credit was paid off with
proceeds from the Wells Fargo bank Line of Credit.
LIQUIDITY AND CAPITAL RESOURCES
For the three months ended March 31, 1998, cash provided by operating
activities increased $16,146,000 to $15,906,000 as compared to $240,000 used for
operating activities for the same period in 1997. The increase is primarily due
to an increase in net income before depreciation and amortization of $19,442,000
due to the 1997 Acquisitions and 1998 Acquisitions. This increase is partially
offset by the $1,446,000 net gain on sales of rental properties in 1998. Cash
used for investing activities increased by $382,453,000 to $384,074,000 for the
three months ended March 31, 1998, as compared to $1,621,000 for the same period
in 1997. The increase is primarily due to the 1998 Acquisitions. Cash provided
by financing activities increased by $327,936,000 to $370,736,000 for the three
months ended March 31, 1998, as compared to $42,800,000 for the same period in
1997. This increase was primarily due to the contributions of the net proceeds
from the January 1998 Convertible Preferred Stock Offering (as defined below)
and the proceeds from new debt.
The Operating Partnership expects to meet its short-term liquidity
requirements generally through its working capital, its Acquisition Credit
Facility (as defined below) and cash generated by operations. As of March 31,
1998, the Operating Partnership had no material commitments for capital
improvements. Planned capital improvements consist of tenant improvements,
expenditures necessary to lease and maintain the Properties and expenditures for
furniture and fixtures and building improvements at the hotel Properties.
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The Operating Partnership's principal sources of funding for acquisitions,
development, expansion and renovation of properties include an unsecured
Acquisition Credit Facility, permanent debt financing, contributions from the
Company, privately placed financing, issuance of Operating Partnership units and
cash flow provided by operations.
Mortgage loans payable increased from $148,139,000 at December 31, 1997, to
$242,083,000 at March 31, 1998. This increase primarily resulted from the
assumption of mortgage loans totaling $105,789,000 in connection with the 1998
Acquisitions. These increases were partially offset by the payoff of $11,845,000
of mortgage loans in connection with 1998 sales of properties and scheduled
principal payments on other mortgage debt.
The Operating Partnership has a $250,000,000 unsecured Acquisition Credit
Facility. Outstanding borrowings under the Acquisition Credit Facility decreased
from $80,160,000 at December 31, 1997, to $50,332,000 at March 31, 1998. The
$80,160,000 balance outstanding at December 31, 1997, was paid off in January
1998 with proceeds from the January 1998 Convertible Preferred Stock Offering
(as defined below). The $50,332,000 balance outstanding at March 31, 1998,
consists of draws for 1998 Acquisitions. Borrowings under the Acquisition Credit
Facility currently bear interest at an annual rate of LIBOR plus 1.1% or prime
rate.
In January 1998, the Operating Partnership closed a $150 million loan with
Wells Fargo Bank (the "Interim Loan"). The Interim Loan had a term of three
months with interest at LIBOR plus 1.75%. The purpose of the Interim Loan was to
fund acquisitions. The Interim Loan was paid off in March 1998 with proceeds
from the issuance of $150 million of unsecured Senior Notes (discussed below).
In March 1998, the Operating Partnership issued $150 million of 7 5/8%
unsecured Senior Notes in an unregistered 144A offering. The Old Notes mature on
March 15, 2005, unless previously redeemed. Interest on the Old Notes is payable
semiannually on March 15 and September 15, commencing September 15, 1998. The
Operating Partnership used the net proceeds of the offering to repay the
outstanding balance under the Interim Loan.
At March 31, 1998, the Operating Partnership's total indebtedness included
fixed-rate debt of $389,274,000 (including $85,437,000 subject to
cross-collateralization) and floating-rate indebtedness of $53,141,000.
Approximately 34% of the Operating Partnership's total assets, comprising 51
properties, is encumbered by debt at March 31, 1998.
In January 1998, the Company completed a public offering of 11,500,000
shares of 7 3/4% Series A Convertible Preferred Stock. The 11,500,000 shares
were sold at a per share price of $25.00 for net proceeds of approximately $276
million, which were contributed to the Operating Partnership and then used to
repay the outstanding balance under the Operating Partnership's Acquisition
Credit Facility, to fund certain subsequent property acquisitions and for
general corporate purposes.
INFLATION
Substantially all of the leases at the retail Properties provide for
pass-through to tenants of certain operating costs, including real estate taxes,
common area maintenance expenses, and insurance. Leases at the multi-family
Properties generally provide for an initial term of one month or one year and
allow for rent adjustments at the time of renewal. Leases at the office
Properties typically provide for rent adjustment and pass-through of certain
operating expenses during the term of the lease. All of these provisions may
permit the Operating Partnership to increase rental rates or other charges to
tenants in response to rising prices and therefore, serve to reduce the
Operating Partnership's exposure to the adverse effects of inflation.
FORWARD LOOKING STATEMENTS; FACTORS THAT MAY AFFECT OPERATING RESULTS
These financial statements contain forward looking statements within the
meaning of Section 27A of the Securities Act of 1933 and Section 21E of the
Securities and Exchange Act of 1934, including statements regarding the
Operating Partnership's expectations, hopes, intentions, beliefs and strategies
regarding the future. Forward looking statements include statements regarding
potential acquisitions, the anticipated
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performance of future acquisitions, recently completed acquisitions and existing
properties, and statements regarding the Operating Partnership's financing
activities. All forward looking statements included in this document are based
on information available to the Operating Partnership on the date hereof, and
the Operating Partnership assumes no obligation to update any such forward
looking statements. It is important to note that the Operating Partnership's
actual results could differ materially from those stated or implied in such
forward-looking statements.
Factors which may cause the Operating Partnership's results to differ
include the inability to complete anticipated future acquisitions, defaults or
non-renewal of leases, increased interest rates and operational costs, failure
to obtain necessary outside financing, difficulties in identifying properties to
acquire and in effecting acquisitions, environmental uncertainties, risks
related to natural disasters, financial market fluctuations, changes in real
estate and zoning laws and increases in real property tax rates.
YEAR 2000 COMPLIANCE
The Operating Partnership utilizes a number of computer software programs
and operating systems across its entire organization, including applications
used in financial business systems and various administrative functions. To the
extent that the Operating Partnership's software applications contain source
code that is unable to appropriately interpret the upcoming calendar year "2000"
and beyond, some level of modification, or replacement of such applications will
be necessary. The Operating Partnership has completed its identification of
applications that are not yet "Year 2000" compliant and has commenced
modification or replacement of such applications, as necessary. Given
information known at this time about the Operating Partnership's systems that
are non-compliant, coupled with the Operating Partnership's ongoing, normal
course-of-business efforts to upgrade or replace critical systems, as necessary,
management does not expect Year 2000 compliance costs to have any material
adverse impact on the Operating Partnership's liquidity or ongoing results of
operations. No assurance can be given, however, that all of the Operating
Partnership's systems will be Year 2000 compliant or that compliance costs or
the impact of the Operating Partnership's failure to achieve substantial Year
2000 compliance will not have a material adverse effect on the Operating
Partnership's future liquidity or results of operations.
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THE OPERATING PARTNERSHIP
The Operating Partnership is managed by its general partner, the Company, a
self-administered and self-managed REIT. As of May 22, 1998, the Operating
Partnership owned a diversified portfolio of 157 office, office/flex,
industrial, retail, multi-family and hotel properties aggregating approximately
18.0 million square feet located in 24 states throughout the country. In
addition, the Associated Companies provide comprehensive asset, partnership and
property management services for a diversified portfolio of 46 additional
properties that are not owned by the Operating Partnership. The combined
portfolios encompass over 22.8 million rentable square feet in 24 states.
The Company holds a 1% interest as the sole general partner of the
Operating Partnership and an approximate 92% limited partnership interest in the
Operating Partnership.
GROWTH STRATEGY
The Operating Partnership seeks to achieve sustainable long-term growth in
Funds from Operations primarily through the following strategies:
- Acquiring diversified portfolios or individual properties on attractive
terms, often from public and private partnerships as well as from REITs
and life insurance companies and other institutions;
- Improving the performance of the Properties in the Operating
Partnership's portfolio;
- Constantly reviewing the Operating Partnership's current portfolio for
opportunities to redeploy capital from certain Properties into other
properties which the Operating Partnership believes are more suited to
its strategy and operating goals; and
- Entering into real estate development joint ventures with selected real
estate developers.
Acquisitions
Acquisition Characteristics. The Operating Partnership primarily seeks to
acquire diversified portfolios and individual properties with certain of the
following characteristics: (i) a stable stream of income, both historical and
projected; (ii) existing management fees and costs that, when internalized,
would augment the Operating Partnership's investment return; (iii) generally
constructed after 1980; (iv) little or no exposure to hazardous materials; (v)
prudent debt levels; (vi) potential for substantial overhead savings; (vii)
low-to-moderate vacancy levels; (viii) diversified tenant risk; (ix)
low-to-moderate deferred maintenance; (x) substantial geographic overlap with
the Operating Partnership's existing portfolio, to capitalize on the Operating
Partnership's existing management capabilities; and (xi) comprised of office,
office/flex, industrial, retail or multi-family properties.
Portfolio Acquisitions. The Operating Partnership seeks to grow by
acquiring diversified property portfolios, and believes there are significant
acquisition opportunities for such portfolios from public and private
partnerships, other REITs and life insurance companies and other institutions.
For example, according to Robert A. Stanger & Co., Inc. ("Stanger"), a
substantial percentage of public and private partnerships, representing original
equity investments in excess of $70 billion, own portfolios that are diversified
geographically or by property type or both. Furthermore, the Operating
Partnership believes that there is a limited number of buyers who seek to
purchase diversified portfolios. For example, most REITs pursue a strategy that
focuses either on specific property types or geographic regions or both, and
thus do not provide an outlet for bulk sales by diversified portfolio owners.
For a diversified portfolio seller that is seeking to liquidate, an alternative
to a bulk sale might be a gradual sell-off of assets, which may require an
extended period of time and/or be prohibitively expensive.
The Operating Partnership believes that, in particular, limited
partnerships and the limited partners in such partnerships face difficult
liquidity alternatives. According to Stanger, few of the private partnerships,
and less than half of the public partnerships, are traded in any active
secondary market. The Operating Partnership believes the majority of the limited
partners in these partnerships would be interested in solutions providing
liquidity. The principal options available to such limited partners include: (i)
selling their units for cash on the secondary market, which according to
Stanger, has a pricing structure that typically discounts unit values relative
to underlying asset values; and (ii) more recently, selling their units for cash
to large, well-
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financed investors who solicit limited partners to sell their interests at
prices that are higher than prevailing secondary market prices but generally
lower than the seller's underlying asset value. In addition to their discounted
pricing structure, these solutions may not be preferred by limited partners who,
as a result of past tax benefits or other factors, may incur significant tax
liabilities as a result of such sale.
The Operating Partnership believes that it can acquire diversified
portfolios on attractive terms because, through the Company's issuance of shares
of Common Stock or the Operating Partnership's issuance of partnership units
which may be redeemed for cash or exchanged for Common Stock, it can provide
owners with liquidity as well as address the owners' tax concerns and structure
transactions that may defer taxable gains. By providing sellers with Common
Stock or partnership units in the Operating Partnership as partial consideration
in acquisition transactions, the Operating Partnership reduces its need to raise
capital to finance such transactions. The Operating Partnership has issued
partnership units to sellers as a portion of the consideration in connection
with the acquisition of Properties aggregating a total acquisition cost of over
$345 million.
Individual Property Acquisitions. From time to time the Operating
Partnership will acquire individual properties that it believes will enhance the
Operating Partnership's profitability and take advantage of existing management
resources.
Possible Tender Offer Acquisitions. In addition to its current program of
negotiated portfolio and individual property acquisitions, the Operating
Partnership may consider opportunities to acquire interests in portfolios and
individual properties through tender offers for public and private limited
partnerships and other REITs. Depending upon the opportunity and the
circumstances, such offers may be made with or without the cooperation of their
respective general partners or boards of directors. See "Risk Factors -- Risks
Associated with Acquisitions -- Risks Relating to Tender Offers."
Internal Growth
The Operating Partnership seeks to increase cash flow from its existing
portfolio by: (i) increasing the occupancy of all Properties that are not fully
leased; (ii) increasing rental rates of expiring leases; (iii) maintaining high
occupancy rates; (iv) increasing economies of scale in management and leasing
activities; and (v) controlling operating expenses and capital expenditures.
Development Joint Ventures
The Operating Partnership has entered into and intends to continue to, on a
limited basis, enter into joint ventures with selected developers for the
purposes of developing new projects within a region in which such developer has
significant expertise and experience. The Operating Partnership believes that
such alliances provide it with the flexibility to develop certain property types
in selected markets where it becomes economically viable without having to make
a significant investment in development infrastructure.
Redeployment of Assets
The Operating Partnership periodically reviews its current portfolio for
opportunities to redeploy capital from certain existing Properties into other
properties which the Operating Partnership believes have characteristics more
suited to its overall growth strategy and operating goals. For example, the
Operating Partnership may: (i) sell properties that have matured beyond a point
of significant future growth potential and replace them with properties with
higher growth potential; and (ii) sell smaller or management intensive
properties and replace them with larger or more management-efficient properties.
By redeploying assets in this manner, the Operating Partnership believes it can
achieve certain economies of scale with respect to staffing and overhead levels.
See "Recent Activities -- Redeployment of Assets."
FINANCING POLICIES
Conservative Debt Strategy. The Operating Partnership's total indebtedness
as of March 31, 1998 was approximately $442.4 million, which represents
approximately 25.6% of the total market capitalization of the Company (debt
divided by the sum of debt plus the market value of equity, including common
stock, preferred stock and redeemable Operating Partnership Units). This ratio
is consistent with the Operating Partnership's conservative strategy of
maintaining its debt to total market capitalization ratio at a level of 30%
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or less. In addition, the Company's organizational documents limit the Company's
ability to incur, or permit any consolidated partnership or subsidiary
corporation to incur, additional debt if the total debt, including the
additional debt, would exceed 50% of the Borrowing Base, defined as the greater
of Fair Market Value or Total Market Capitalization. The debt of the Operating
Partnership is included in the calculation of such additional debt and total
debt. Fair Market Value is based upon the value of the Company's assets as
determined by an independent appraiser. Total Market Capitalization is based
upon the market value of the Company's outstanding capital stock, including
shares issuable on exercise of redemption options by holders of units of the
Operating Partnership. An exception is made for refinancings and borrowings
required to make distributions to maintain the Company's status as a REIT. As of
March 31, 1998, as adjusted to reflect the Pro Forma Adjustments, the Company's
debt was 31.2% of the Borrowing Base. This debt limitation contained in the
Company's Charter cannot be changed without the affirmative vote of the
stockholders of the Company in accordance with Maryland General Corporation Law.
Limited Floating Interest Rate Debt. The Operating Partnership seeks to
limit the amount of its indebtedness that is subject to floating interest rates.
As of March 31, 1998, approximately $53.1 million, or 12% of the Company's
aggregate indebtedness, was subject to floating rates of interest.
INVESTMENT POLICIES
The Operating Partnership seeks to invest in income-producing property,
both directly and through joint ventures with unaffiliated third parties,
including institutional investors. Prospective real estate investment
opportunities undergo an underwriting process that evaluates the following: (i)
reasonably anticipated levels of net cash and ultimate sales value, based on
evaluation of a range of factors including, but not limited to, rental levels
under existing leases; (ii) financial strength of tenants; (iii) levels of
expense required to maintain operating services and routine building maintenance
at competitive levels; and (iv) levels of capital expenditures required to
maintain the capital components of the building in good working order and in
conformance with building codes, health, safety and environmental and other
standards.
The Operating Partnership conducts physical site inspections of each
property under consideration and also engages outside professionals to
independently inspect properties prior to acquisition. The Operating Partnership
either engages outside professionals to conduct Phase I environmental
assessments for all acquisitions, or relies on either: (i) the availability of a
recent report prepared for a third party; or (ii) in the case of a property
managed by an Associated Company, the experience of the Associated Company in
managing the property, when the incremental benefit of obtaining a report is
believed by the Company to be outweighed by the cost. Based upon the results of
these inspections, assessments, reports and experience, the Company evaluates
the risks associated with a proposed acquisition prior to its completion and
takes appropriate corrective measures.
The Operating Partnership emphasizes equity real estate investments, but
may also invest in mortgages, securitized mortgage portfolios or other assets
consistent with maintaining qualification as a REIT. The Operating Partnership
will not invest in derivative financial instruments except for the limited
purpose of prudently hedging interest rate risk under variable interest rate
debt. The Operating Partnership has no current plans to invest in derivative
financial instruments.
The Board of Directors of the Company, the general partner of the Operating
Partnership, reviews the investment policies of the Operating Partnership
periodically to determine that the investment policies being followed by the
Operating Partnership at any time are in the best interests of the limited
partners of the Operating Partnership. The Board of Directors may alter the
Operating Partnership's investment policies if it determines in the future that
such a change is in the best interests of the limited partners of the Operating
Partnership. The methods of implementing the Company's investment policies may
vary as new investment and financing techniques are developed or for other
reasons.
The Company has adopted a policy that no acquisition of properties from
Glenborough Partners or Robert or Andrew Batinovich or their families or from
other entities in which they have an interest will be made without the approval
of at least two-thirds of the Company's independent directors.
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LEGAL PROCEEDINGS
Recent business reorganizations sponsored by others involving the
conversion of partnerships into corporations have given rise to a number of
investor lawsuits. These lawsuits have included claims against the general
partners of the participating partnerships, the partnerships themselves and
related persons involved in the structuring of or benefiting from the conversion
or reorganization, as well as claims against the surviving entity and its
directors and officers. The lawsuits have included, among others, claims that
the structure of the reorganizations, as well as the manner in which they were
submitted for investor approval, involved violations of federal and state
securities laws, common law fraud and negligent misrepresentations, breaches of
fiduciary duty, unfair and deceptive trade practices, negligence and waste,
breaches of the partnership documents of the participating partnerships, failure
to comply with applicable reporting requirements, violations of the rules of the
NASD on suitability and fair practices, and violations of the Racketeer
Influenced and Corrupt Organizations Act. Two lawsuits have been filed
contesting the fairness of the Consolidation, one in California state court and
one in federal court. A settlement of the state court action was approved by the
court, but objectors to the settlement appealed that approval. On February 17,
1998, the Court of Appeals rejected the objectors' contentions and upheld the
settlement. The objectors filed with the California Supreme Court a petition for
review, which was denied on May 21, 1998. Plaintiffs in the federal court action
voluntarily dismissed the action pending resolution of the state court action.
From time to time the Company and the Operating Partnership are involved in
other litigation arising out of their business activities. It is possible that
this litigation and the other litigation previously described could result in
significant losses in excess of amounts reserved, which could have an adverse
effect on the Company's or the Operating Partnership's results of operations and
the financial condition of the Company or the Operating Partnership.
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<PAGE> 57
RECENT ACTIVITIES
The following is a summary of the Operating Partnership's acquisition and
financing activities since January 1, 1997.
PENDING ACQUISITIONS
Covance Property. The Operating Partnership has entered into a definitive
agreement to acquire a 263,000 square foot office property (the "Covance
Property") from a partnership in which affiliates of Eaton & Lauth serve as
general partners. The total acquisition cost, including capitalized costs, is
expected to be approximately $16.5 million, comprising: (i) approximately $4.4
million of equity which will consist of: (a) approximately $200,000 in the form
of 8,802 shares of common stock (based on a negotiated per share value of
$25.00); and (b) approximately $4.1 million in the form of 165,865 operating
partnership units in the Operating Partnership (based on a negotiated per unit
value of $25.00); and (ii) the balance in cash from borrowings under the
Acquisition Credit Facility. The Covance Property is located in Indianapolis,
Indiana. This acquisition is subject to a number of contingencies including the
negotiation of terms of a definitive agreement, approval of the assumption of
loans, satisfactory completion of due diligence and customary closing
conditions. As a result, there can be no assurance that this transaction will be
completed.
COVANCE PROPERTY
<TABLE>
<CAPTION>
OCCUPANCY
RATE AS OF
YEAR RENTABLE MARCH 31,
PROPERTY CITY ST COMPLETED SQ. FT. 1998(1)
-------- ------------ --- --------- -------- ----------
<S> <C> <C> <C> <C> <C>
Office
Covance............................... Indianapolis IN 1994 263,000 100%
</TABLE>
- ---------------
(1) Represents economic occupancy.
Pru-Bache Portfolio. The Operating Partnership has entered into a
definitive agreement to acquire all of the real estate assets of
Prudential-Bache/Equitec Real Estate Partnership, a California limited
partnership in which the managing general partner is Prudential-Bache
Properties, Inc., and in which Glenborough Corporation and Robert Batinovich,
the Company's Chairman and Chief Executive Officer, have served as co-general
partners since March 1994, but do not hold a material equity or economic
interest (the "Pru-Bache Portfolio"). The total acquisition cost, including
capitalized costs, is expected to be approximately $47.9 million, which is to be
paid entirely in cash, including cash from borrowings under the Acquisition
Credit Facility. The Pru-Bache Portfolio comprises four office buildings
aggregating 405,825 square feet and one office/flex property containing 121,645
square feet. This acquisition is subject to a number of contingencies including
approval of the acquisition by a majority vote of the limited partners of
Prudential-Bache/Equitec Real Estate Partnership, satisfactory completion of due
diligence and customary closing conditions. As a result, there can be no
assurance that this acquisition will be completed.
PRU-BACHE PORTFOLIO
<TABLE>
<CAPTION>
OCCUPANCY
RATE AS OF
YEAR RENTABLE MARCH 31,
PROPERTY CITY ST COMPLETED SQ. FT. 1998(1)
-------- ---------- --- --------- -------- ----------
<S> <C> <C> <C> <C> <C>
OFFICE
Gateway Professional Center............. Sacramento CA 1985 50,556 96%
Park Plaza.............................. Sacramento CA 1985 67,688 75
Montrose Office Park.................... Rockville MD 1980 186,680 89
Poplar Towers........................... Memphis TN 1974 100,901 86
------- ---------
Total Office............................ 405,825 84%
======= =========
OFFICE/FLEX
Totem Valley............................ Kirkland WA 1983 121,645 99%
------- ---------
Total Pru-Bache Portfolio............... 527,470 90%
======= =========
</TABLE>
51
<PAGE> 58
- ---------------
(1) Represents economic occupancy.
1998 AND 1997 COMPLETED ACQUISITIONS
One Pacific Place. In May 1998, the Operating Partnership acquired a
125,507 square foot office building and adjacent 87,120 square foot parcel of
land located in Omaha, Nebraska ("One Pacific Place"). The total acquisition
cost, including capitalized costs, was approximately $20.1 million, all of which
was paid in cash, including cash from borrowings under the Acquisition Credit
Facility.
Eaton & Lauth Portfolio. In April 1998, the Operating Partnership acquired
a portfolio of three office properties and four retail properties aggregating
417,745 square feet and three multi-family properties containing 670 units (the
"Eaton & Lauth Portfolio") from a number of partnerships in which affiliates of
Eaton & Lauth serve as general partners. The total acquisition cost, including
capitalized costs, was approximately $68.7 million, comprising: (i)
approximately $32.0 million of net assumed debt; (ii) approximately $15.9
million of equity which consists of: (a) approximately $3.2 million in the form
of 126,764 shares of Common Stock of the Company (based on an agreed per share
value of $25.00); (b) approximately $12.7 million in the form of 506,788
partnership units in the Operating Partnership (based on an agreed per unit
value of $25.00); and (iii) the balance in cash. The cash portion was financed
through advances under the Acquisition Credit Facility. The Eaton & Lauth
Portfolio properties are located in the Indianapolis, Indiana area.
The BGK Portfolio. In April 1998, the Operating Partnership acquired a
portfolio of seven properties (the "BGK Portfolio"), comprising six properties
in Massachusetts and one in Kansas, aggregating 515,445 rentable square feet.
The Operating Partnership acquired the BGK Portfolio from BGK Equities, Inc., of
Santa Fe, New Mexico. Four of the properties are office, one is office/flex and
two are industrial. The total acquisition costs, including capitalized costs,
was approximately $50.2 million, comprised of: (i) approximately $13.4 million
in assumption of debt, and (ii) the balance in cash, including cash from
borrowings under the Acquisition Credit Facility.
400 El Camino Real. In March 1998, the Operating Partnership acquired a
15-story office property located in San Mateo, California ("400 El Camino
Real"), containing 139,109 square feet, which currently houses the Company's
corporate headquarters, from Prudential Insurance Company of America. The
Company's corporate headquarters occupy approximately 30,000 square feet and the
balance of the rentable square feet is leased to third parties. The 400 El
Camino Real property includes a contiguous parking garage. The total acquisition
cost, including capitalized costs, was approximately $34.7 million, which was
paid in cash, including cash from borrowings under the Acquisition Credit
Facility.
Capitol Center. In February 1998, the Operating Partnership acquired a
161,468 square foot office complex ("Capitol Center") located in Des Moines,
Iowa. The total acquisition cost, including capitalized costs, was approximately
$12.3 million, comprising: (i) approximately $116,000 in the form of 3,874
partnership units in the Operating Partnership (based on an agreed per unit
value of $30.00) and (ii) the balance in cash.
Windsor Portfolio. In January 1998, the Operating Partnership acquired a
portfolio of 13 suburban office Properties and one office/flex Property (the
"Windsor Portfolio") located in eight states. The Company acquired the Windsor
Portfolio from Windsor Realty Fund II, L.P., of which Windsor Advisor, LLC is
the general partner and DuPont Pension Fund Investments and Gid/S&S Limited
Partnership are limited partners, and other entities affiliated with Windsor
Realty Fund II, L.P. The Windsor Portfolio properties aggregate 3,383,240 net
rentable square feet, located in the eastern and mid-western United States and
are concentrated in suburban Washington, D.C., Chicago, Atlanta, Boston,
Philadelphia, Tampa, Florida and Cary, North Carolina. The total acquisition
cost, including capitalized costs, was approximately $423.2 million, comprised
of: (i) approximately $160.5 million in assumption of debt and (ii) the balance
in cash, including cash from borrowings under a $150.0 million interim loan with
Wells Fargo Bank (the "Interim Loan") and the Acquisition Credit Facility.
Marion Bass Portfolio. In December 1997, the Operating Partnership acquired
10 multi-family Properties (the "Marion Bass Portfolio") aggregating 1,385 units
from 14 limited partnerships each of whose general partner is Marion Bass Real
Estate Group. The total acquisition cost, including capitalized costs, was
approximately $58.3 million, comprising $23.5 million of assumed debt and the
balance in cash, including cash
52
<PAGE> 59
from borrowings under the Acquisition Credit Facility. Of the 10 Marion Bass
Properties, six are located in Charlotte, North Carolina, two are in Monroe,
North Carolina, one is in Raleigh, North Carolina and one is in Pineville, North
Carolina.
Opus Portfolio. In December 1997, the Operating Partnership acquired four
office/flex Properties and one office Property (the "Opus Portfolio")
aggregating 289,874 square feet from four limited liability companies affiliated
with Opus Properties, LLC. The total acquisition cost, including capitalized
costs, was approximately $27.9 million, all of which was paid in cash, including
cash from borrowings under the Acquisition Credit Facility. Four of the Opus
Portfolio Properties are located in or near Tampa, Florida, and one is located
in Denver, Colorado.
Thousand Oaks. In December 1997, the Operating Partnership acquired an
office complex consisting of three office buildings, aggregating 418,457 square
feet ("Thousand Oaks"). The total acquisition cost, including capitalized costs,
was approximately $51.3 million, which was paid entirely in cash, including cash
from borrowings under the Acquisition Credit Facility. The Thousand Oaks
property includes 10 acres suitable for the development of 182,000 square feet
of office space. Thousand Oaks is located in Memphis Tennessee.
Bryant Lake. In November 1997, the Operating Partnership acquired a 171,789
square-foot office/flex building in Eden Prairie, Minnesota ("Bryant Lake"),
from Outlook Income Fund 9, a limited partnership in which GC is managing
general partner. Robert Batinovich is co-general partner of Outlook Income Fund
9 and holds an indirect economic interest therein equal to an approximate 0.83%
limited partnership interest. Because of this affiliation, and consistent with
the Company's Board of Directors' policy, neither Robert Batinovich nor Andrew
Batinovich voted when the Board of Directors considered and acted to approve
this acquisition. The price paid for Bryant Lake equaled 100% of the appraised
value as determined by an independent appraiser. The total acquisition cost,
including capitalized costs, was approximately $9.4 million, comprising
approximately $4.6 million in the form of cash and the balance in the form of
assumption of debt.
Copley Properties. In October 1997, the Operating Partnership acquired
eight Properties from six separate limited partnerships in which affiliates of
AEW Capital Management, L.P. (successors in interest to one or more affiliates
of Copley Advisors Inc.) serve as general partners (the "Copley Properties").
The total acquisition cost, including capitalized costs, was approximately $63.7
million, which was paid entirely in cash. The Copley Properties comprise 766,269
square feet of industrial space, with one property located in Tempe, Arizona,
one in Anaheim, California, one in Columbia, Maryland and five in Las Vegas,
Nevada.
Citibank Park. In September 1997, the Operating Partnership acquired a
147,978 square-foot office building in Las Vegas, Nevada ("Citibank Park"). The
total acquisition cost, including capitalized costs, was approximately $23.3
million, which consisted of: (i) approximately $1.66 million in the form of
61,222 partnership units in the Operating Partnership (based on an agreed per
unit value of $27.156); and (ii) the balance in cash.
Advance Properties. In September 1997, the Operating Partnership acquired
from a group of partnerships affiliated with The Advance Group a portfolio of 10
Properties aggregating 755,006 square feet (the "Advance Properties"). The total
acquisition cost, including capitalized costs, was approximately $103.0 million,
which consisted of: (i) approximately $13.6 million in the form of 599,508
partnership units in the Operating Partnership (based on an agreed per unit
value of $22.625); (ii) approximately $7.4 million in assumption of debt; and
(iii) the balance in cash. The Advance Properties consist of five office
Properties and three office/flex Properties located in northern New Jersey and
Maryland and two industrial Properties located in northern New Jersey.
Concurrent with this acquisition, the Operating Partnership entered into a joint
venture with The Advance Group for the development of selected new projects.
This joint venture owns 57 acres of land suitable for office and office/flex
development of up to 560,000 square feet.
T. Rowe Price Properties. In September 1997, the Operating Partnership
acquired from five limited partnerships, two general partnerships and one
private REIT, each organized by affiliates of T. Rowe Price, a portfolio of 27
properties aggregating approximately 2,888,000 square feet (the "T. Rowe Price
Properties"). The total acquisition cost, including capitalized costs, was
approximately $146.8 million, which was paid entirely in cash. The T. Rowe Price
Properties consist of four office Properties, 12 office/flex Properties, eight
industrial Properties and three retail Properties located in 12 states.
53
<PAGE> 60
Centerstone Property. In July 1997, the Operating Partnership acquired an
office property containing 157,579 square feet (the "Centerstone Property")
located in Irvine, California. The total acquisition cost, including capitalized
costs, was approximately $30.4 million, which consisted of: (i) approximately
$5.5 million in the form of 275,000 partnership units in the Operating
Partnership (based on an agreed per unit value of $20.00); and (ii) the balance
in cash.
CRI Properties. In June 1997, the Operating Partnership acquired from
Carlsberg Realty Inc. a portfolio of three Properties, aggregating approximately
245,600 square feet (the "CRI Properties"). The total acquisition cost,
including capitalized costs, was approximately $14.8 million, which was paid
entirely in cash. The CRI Properties consist of one office Property in
California and one office/flex Property and one industrial Property in Arizona.
The CRI Properties have been managed by GC since November 1996.
CIGNA Properties. In April 1997, the Operating Partnership acquired from
two partnerships formed and managed by affiliates of CIGNA a portfolio of six
Properties, aggregating approximately 616,000 square feet and 224 multi-family
units (the "CIGNA Properties"). The total acquisition cost, including
capitalized costs, was approximately $45.4 million, which was paid entirely in
cash. The CIGNA Properties consist of two office Properties, two office/flex
Properties, a shopping center and a multi-family Property, and are located in
four states.
E&L Properties. In April 1997, the Operating Partnership acquired from
seven partnerships and their general partner, a Southern California syndicator,
a portfolio of 11 Properties, aggregating approximately 523,000 square feet,
together with associated management interests (the "E&L Properties"). The total
acquisition cost, including capitalized costs, was approximately $22.2 million,
which consisted of: (i) approximately $12.8 million of mortgage debt assumed;
(ii) approximately $6.7 million in the form of 352,197 partnership units in the
Operating Partnership (based on an agreed per unit value of $19.075); (iii)
approximately $633,000 in the form of approximately 33,198 shares of Common
Stock of the Company (based on an agreed per share value of $19.075); and (iv)
the balance in cash. The E&L Properties consist of one office Property, nine
office/flex Properties and one industrial Property, all located in Southern
California.
Riverview Property. In April 1997, the Operating Partnership acquired from
a private seller a 15-story office property containing 227,129 square feet
located in Bloomington, Minnesota (the "Riverview Property"). The total
acquisition cost, including capitalized costs, was approximately $20.5 million,
which was paid entirely in cash.
Lennar Properties. In April 1997, the Operating Partnership acquired from
two limited partnerships and one limited liability company managed by affiliates
of Lennar Partners a portfolio of three Properties, aggregating approximately
282,000 square feet (the "Lennar Properties"). The total acquisition cost,
including capitalized costs, was approximately $23.2 million, which was paid
entirely in cash. The Lennar Properties consist of one office Property located
in Virginia and one office/flex Property and one industrial Property, each
located in Massachusetts.
Scottsdale Hotel. In February 1997, the Operating Partnership acquired a
163-suite hotel Property (the "Scottsdale Hotel"), which began operations in
January 1996 and is located in Scottsdale, Arizona. The total acquisition cost,
including capitalized costs, was approximately $12.1 million, which consisted of
approximately $4.6 million of mortgage debt assumed, and the balance in cash.
The Scottsdale Hotel and four of the Operating Partnership's other hotel
Properties are marketed as Country Suites by Carlson.
OTHER ACQUISITION OPPORTUNITIES
Acquisition Pipeline. The Operating Partnership maintains an active
acquisition department which identifies, evaluates, negotiates and consummates
portfolio and individual property investments. Currently, other than the Pending
Acquisitions, the Operating Partnership has no potential acquisitions that it
considers probable, but is considering acquisitions involving, in the aggregate,
in excess of $1.0 billion in total capitalized costs. Any future acquisition
would be subject to a number of contingencies, including a review of the
physical and economic characteristics of the properties involved, negotiation of
detailed terms and formal documentation. There can be no assurance that any of
the acquisitions under consideration will ultimately be consummated.
REDEPLOYMENT OF ASSETS
The Operating Partnership periodically reviews its current portfolio of
investments for opportunities to redeploy capital from certain existing
Properties or mortgage receivables to other properties or investments
54
<PAGE> 61
that the Operating Partnership believes have characteristics more suited to its
overall growth strategy and operating goals. The Operating Partnership used the
net proceeds from the sale of such properties to fund the acquisition of
properties which the Operating Partnership believes have greater growth
potential. The Operating Partnership also has entered into a definitive
agreement to sell from its retail portfolio the Shannon Crossing Property. This
sale is subject to a number of contingencies, and there can be no assurance that
such sale will be consummated.
FINANCING ACTIVITIES
The Operating Partnership seeks to utilize the most appropriate sources of
capital for acquisitions, development, expansion and renovation of properties
and joint ventures, which sources include undistributed Funds from Operations,
borrowings under its credit facilities, permanent secured or unsecured debt
financing, contribution of cash from public equity and privately placed
financing of the Company, issuance of partnership units in the Operating
Partnership and/or bank and other institutional borrowings. As of March 31,
1998, the Operating Partnership's total debt constituted approximately 31.2% of
the total market capitalization of the Company on a pro forma basis, after
giving effect to the completion of the Pending Acquisitions, and certain other
pro forma adjustments. See "Selected Historical and Pro Forma Financial and
Other Data."
Initial Offering. In March 1998 the Operating Partnership completed the
Initial Offering, a private placement of $150 million of 7 5/8% Senior Notes due
2005. The net proceeds of approximately $148.2 million were used to repay
substantially all of the outstanding balance under the Interim Loan (defined
below).
January 1998 Offering. In January 1998, the Company completed a public
offering of 11,500,000 shares of 7 3/4% Series A Convertible Preferred Stock
(which are convertible into 8,757,234 shares of Common Stock of the Company) at
a price of $25.00 per share (the "January 1998 Offering"). The net proceeds of
approximately $275.5 million were contributed to the Operating Partnership and
used to fund acquisition activity, to repay approximately $257.1 million of
indebtedness and for general corporate purposes.
$150 Million Interim Loan. In January 1998, the Operating Partnership
closed a $150 million unsecured loan agreement with Wells Fargo Bank (the
"Interim Loan"). The Interim Loan bears interest at LIBOR plus 1.75% and has a
term of three months with an option to extend the term an additional three
months. The purpose of the Interim Loan was to fund the acquisition of the
Windsor Portfolio.
$250 Million Acquisition Credit Facility. In December 1997, the Operating
Partnership replaced its previous $50 million secured line of credit with a new
$250 million unsecured Acquisition Credit Facility with Wells Fargo Bank. The
Acquisition Credit Facility has a three year term and bears interest on a
sliding scale ranging from LIBOR plus 1.1% to LIBOR plus 1.3%. The Acquisition
Credit Facility agreement provides that if the Operating Partnership's debt
securities receive certain ratings from at least two rating agencies, as
specified in the Acquisition Credit Facility agreement, the interest rate will
decrease to a sliding scale ranging from LIBOR plus 0.8% to LIBOR plus 1.15%,
depending upon the rating.
Private Equity Issuance. In December 1997, the Operating Partnership issued
(the "Private Equity Issuance") approximately $12.1 million in the form of
433,362 partnership units in the Operating Partnership (based on an agreed per
unit value of $27.896), the Company issued approximately $2.0 million in the
form of 72,564 shares of Common Stock (based on an agreed per share value of
$27.896) and the Operating Partnership paid approximately $200,000 in cash to
acquire all of the limited partnership interests of GRC Airport Associates, a
California limited partnership ("GRCAA"). GRCAA's sole asset consisted of one
property that was sold to a third party in February 1998 and generated net cash
proceeds of approximately $14.1 million. By virtue of interests held directly or
indirectly in GRCAA, GC received consideration of approximately $1.7 million and
Robert Batinovich received consideration of approximately $2.2 million, both in
the form of partnership units in the Operating Partnership, in connection with
the Private Equity Issuance. Consistent with the Company's Board of Directors'
policy, neither Robert Batinovich nor Andrew Batinovich voted when the Board of
Directors considered and acted to approve this transaction.
October 1997 Offering. In October 1997, the Company completed a public
offering of 11,300,000 shares of Common Stock at a price of $25.00 per share
(the "October 1997 Offering"). The net proceeds of approximately $267.3 million
were contributed to the Operating Partnership and used for the acquisitions of
certain Properties, to repay approximately $142.8 million of indebtedness and
for general corporate purposes.
55
<PAGE> 62
July 1997 Offering. In July 1997, the Company completed a public offering
of 6,980,000 shares of Common Stock at a price of $22.625 per share (the "July
1997 Offering"). The net proceeds of approximately $149.2 million were
contributed to the Operating Partnership and used to fund acquisitions and for
general corporate purposes.
March 1997 Offering. In March 1997, the Company completed a public offering
of 3,500,000 shares of its Common Stock at a price of $20.25 per share (the
"March 1997 Offering"). The net proceeds of approximately $66.0 million were
contributed to the Operating Partnership and used for the acquisition of certain
Properties and to repay approximately $24.9 million of the then outstanding
balance under the Company's previous $50 million secured line of credit.
Increased Distributions. In January 1998, the Company announced a 31%
increase in its regular quarterly distribution from $.32 to $.42 per share of
Common Stock.
RATIO OF EARNINGS TO FIXED CHARGES
The Operating Partnership's ratio of earnings to fixed charges for the
years ended December 31, 1996 and 1997, and for the three-month period ended
March 31, 1998 was 1.96x, 2.58x and 1.78x, respectively. Prior to the
Consolidation, the Operating Partnership's predecessor's combined ration of
earnings to fixed charges for 1993, 1994 and 1995 was 2.67x, 2.58x and 1.41x,
respectively. The ratio of earnings to fixed charges is computed as income from
operations, before minority interest, income taxes and extraordinary items, plus
fixed charges (primarily interest expense) dividend by fixed charges.
Effective with the three months period ending March 31, 1998, the Operating
Partnerships' began paying a preferred partner interest distribution. The ratio
of earnings to fixed charges and preferred partner interest distributions for
the three months ended March 31, 1998 was 1.25x.
56
<PAGE> 63
BUSINESS AND PROPERTIES
The Operating Partnership owns a diversified portfolio of 157 office,
office/flex, industrial, retail, multi-family and hotel Properties located in 24
states throughout the country. In addition, the Associated Companies provide
comprehensive asset, partnership and property management services for a
diversified portfolio of 46 additional properties that are not owned by the
Operating Partnership. The following table lists the Properties owned by the
Operating Partnership, as of May 22, 1998 excluding the Pending Acquisitions and
the 46 additional properties.
<TABLE>
<CAPTION>
YEAR RENTABLE OCCUPANCY AS OF
PROPERTY CITY STATE COMPLETED SQ. FT. MARCH 31, 1998(1)
-------- ---- ----- --------- --------- -----------------
<S> <C> <C> <C> <C> <C>
OFFICE
Tradewinds Financial Center..... Phoenix AZ 1986 17,778 92%
Vintage Pointe.................. Phoenix AZ 1985 56,112 98
Warner Village Medical.......... Fountain Valley CA 1977 32,272 84
Hillcrest Office Plaza.......... Fullerton CA 1974 34,623 94
Centerstone Plaza............... Irvine CA 1988 157,579 98
University Tech Center.......... Pomona CA 1986 100,516 94
Academy Professional Center..... Rolling Hills CA 1974 29,960 74
Dallidet Professional Center.... San Luis Obispo CA 1993 23,051 87
400 El Camino Real.............. San Mateo CA 1973 139,109 100
Park Place...................... Clearwater FL 1986 162,604 97
Buschwood III................... Tampa FL 1989 76,930 92
Temple Terrace Business
Center....................... Temple Terrace FL 1997 79,393 100
Ashford Perimeter............... Atlanta GA 1983 288,273 99
Powers Ferry Landing East....... Atlanta GA 1985 393,672 100
Capitol Center I, II, III....... Des Moines IA 1984 161,468 100
Oak Brook International......... Oak Brook IL 1975 98,443 100
Oakbrook Terrace
Corporate Center III......... Oak Brook IL 1991 253,069 98
Columbia Centre II.............. Rosemont IL 1988 150,133 94
Embassy Plaza................... Schaumburg IL 1986 141,829 88
Crosspoint Four................. Indianapolis IN 1990 41,121 100
Meridian Park................... Indianapolis IN 1989 86,332 98
The Osram Building.............. Indianapolis IN 1990 45,265 100
Leawood Office Building......... Leawood KS 1981 93,667 100
Blue Ridge Office Building...... Braintree MA 1984 74,727 98
Hartwood Building............... Lexington MA 1985 52,721 100
Bronx Park I.................... Marlborough MA 1986 86,935 80
Marlborough Corporate Place..... Marlborough MA 1988 514,789 100
Westford Corporate Center....... Westford MA 1987 163,247 100
Montgomery Executive Center..... Gaithersburg MD 1982 116,348 87
Rockwall I & II................. Rockville MD 1985 340,220 88
Bond Street Building............ Farmington Hills MI 1986 40,595 95
Riverview Office Tower.......... Bloomington MN 1973 227,149 100
University Club Tower........... St. Louis MO 1974 272,443 91
Woodlands Plaza................. St. Louis MO 1993 72,966 99
Edinburgh Center................ Cary NC 1991 115,030 96
One Pacific Place............... Omaha NE 1988 125,507 94
One Professional Square......... Omaha NE 1980 34,836 86
Regency Westpointe.............. Omaha NE 1981 35,937 97
</TABLE>
57
<PAGE> 64
<TABLE>
<CAPTION>
YEAR RENTABLE OCCUPANCY AS OF
PROPERTY CITY STATE COMPLETED SQ. FT. MARCH 31, 1998(1)
-------- ---- ----- --------- --------- -----------------
<S> <C> <C> <C> <C> <C>
Morristown Medical Offices...... Bedminster NJ 1990 14,255 100
Bridgewater Exec. Quarters...... Bridgewater NJ 1995 65,000 100
Frontier Exec. Quarters I....... Bridgewater NJ 1986 224,314 100
Frontier Exec. Quarters II...... Bridgewater NJ 1987 40,565 100(2)
Gatehall........................ Parsipanny NJ 1983 113,604 87
25 Independence Boulevard....... Warren NJ 1989 106,879 100
Citibank Park................... Las Vegas NV 1987 147,841 86
Thousand Oaks................... Memphis TN 1990 418,458 92
Post Oak Place.................. Houston TX 1971 57,411 90
4500 Plaza...................... Salt Lake City UT 1983 70,001 100
700 South Washington............ Alexandria VA 1989 56,348 100
Cameron Run..................... Alexandria VA 1991 143,707 100
2000 Corporate Ridge............ McLean VA 1985 255,980 98
Globe Building.................. Mercer Island WA 1979 24,779 100
--------- ---
TOTAL OFFICE............ 6,675,796 96%
========= ===
OFFICE/FLEX
Hoover Industrial............... Mesa AZ 1985 57,441 89%
Magnolia Industrial............. Phoenix AZ 1984 35,385 100
Baseline Business Park.......... Tempe AZ 1984 100,204 97
Kraemer Industrial Park......... Anaheim CA 1974 55,246 86
Dominguez Industrial............ Carson CA 1973 85,120 96
Chatsworth Industrial Park...... Chatsworth CA 1975 29,764 100
Glassell Industrial Center...... Orange CA 1976 46,912 74
Dunn Way Industrial............. Placentia CA 1968 59,832 100
Monroe Industrial............... Placentia CA 1988 38,655 80
Rancho Bernardo................. Rancho Bernardo CA 1982 52,865 88
Scripps Terrace................. San Diego CA 1986 56,796 90
Tierrasanta Research Park....... San Diego CA 1985 104,234 78
Upland Industrial............... Upland CA 1978 27,414 100
Northglenn Business Center...... Denver CO 1997 65,000 100
Valley Business Park............ Denver CO 1984 202,540 90
Grand Regency Business Center... Brandon FL 1997 48,551 100
Newport Business Center......... Deerfield Beach FL 1984 61,786 92
Cypress Creek Business Center... Ft. Lauderdale FL 1982 66,371 91
Lake Point Business Park........ Orlando FL 1985 135,032 92
Fingerhut Business Center....... Tampa FL 1996 48,840 100
PrimeCo Business Center......... Tampa FL 1996 48,090 100
The Business Park............... Norcross GA 1984 157,153 94
Oakbrook Corners................ Norcross GA 1984 124,776 100
Park 100 -- Building 42......... Indianapolis IN 1980 37,200 79
Canton Business Center.......... Canton MA 1988 79,565 100
Fisher-Pierce................... Weymouth MA 1988 79,825 100
Columbia Warehouse.............. Columbia MD 1974 38,840 88
Germantown Business Center I &
II........................... Germantown MD 1993 60,000 100
Winnetka Industrial Center...... Crystal MN 1982 188,260 100
Bryant Lake Business Center..... Eden Prairie MN 1985 171,789 96
Riverview Industrial Park....... St. Paul MN 1978 113,700 100
</TABLE>
58
<PAGE> 65
<TABLE>
<CAPTION>
YEAR RENTABLE OCCUPANCY AS OF
PROPERTY CITY STATE COMPLETED SQ. FT. MARCH 31, 1998(1)
-------- ---- ----- --------- --------- -----------------
<S> <C> <C> <C> <C> <C>
Woodlands Tech Center........... St. Louis MO 1986 98,037 96
Fox Hollow Business Quarters.... Branchburg NJ 1987 42,173 86
Fairfield Business Quarters..... Fairfield NJ 1978 42,792 100
Palms Business Center III....... Las Vegas NV 1990 136,160 93
Palms Business Center IV........ Las Vegas NV 1991 37,414 74
Palms Business Center North..... Las Vegas NV 1988 92,087 100
Palms Business Center South..... Las Vegas NV 1988 132,387 69
Post Palms...................... Las Vegas NV 1991 139,949 82
Lehigh Valley Executive
Campus....................... Allentown PA 1989 161,421 95
Clark Avenue.................... King of Prussia PA 1965 40,000 100
Valley Forge Corporate Center... Norristown PA 1988 300,894 94
Walnut Creek Business Center.... Austin TX 1984 100,000 100
Kent Business Park.............. Kent WA 1981 138,157 100
--------- ---
TOTAL OFFICE/FLEX....... 3,938,657 93%
========= ===
INDUSTRIAL
Fifth Street Industrial......... Phoenix AZ 1986 109,699 100%
Fairmont Commerce Center........ Tempe AZ 1980 83,200 100
East Anaheim Industrial......... Anaheim CA 1986 106,232 100
Coronado Industrial............. Anaheim CA 1975 95,732 100
Benicia Industrial Park......... Benicia CA 1980 156,800 69
Springdale Commerce Center...... Santa Fe Springs CA 1985 144,000 100
Burnham Industrial Warehouse.... Boca Raton FL 1980 71,168 100
Airport Perimeter Business
Park......................... College Park GA 1982 120,986 81
Atlantic Industrial............. Norcross GA 1975 187,843 86
Bonnie Lane Business Center..... Elk Grove Village IL 1981 119,590 100
Navistar Intl. Transportation
Corp......................... W. Chicago IL 1977 474,426 100
Glenn Avenue Business Center.... Wheeling IL 1981 82,000 100
Wood Dale Business Center....... Wood Dale IL 1979 89,718 70
Park 100-Building 46............ Indianapolis IN 1981 102,400 100
J.I. Case Equipment Corp........ Kansas City KS 1975 199,750 100
Forest Street Business Center... Marlborough MA 1981 32,500 100
Flanders Industrial Park........ Westborough MA 1982 105,500 100
Southworth-Milton............... Milford MA 1989 146,125 100
Navistar Intl. Transportation
Corp......................... Baltimore MD 1962 274,000 100
Eatontown Industrial............ Eatontown NJ 1988 36,800 100
Jencraft Industrial............. Totowa NJ 1967 120,943 100
J.I. Case Equipment
Corporation.................. Memphis TN 1950 205,594 100
Pinewood Industrial............. Arlington TX 1971 46,060 100
Mercantile I.................... Dallas TX 1970 236,092 95
Quaker Industrial............... Dallas TX 1974 42,083 100
SeaTac II....................... Seattle WA 1984 41,657 100
--------- ---
TOTAL INDUSTRIAL........ 3,430,898 96%
========= ===
</TABLE>
59
<PAGE> 66
<TABLE>
<CAPTION>
YEAR RENTABLE OCCUPANCY AS OF
PROPERTY CITY STATE COMPLETED SQ. FT. MARCH 31, 1998(1)
-------- ---- ----- --------- --------- -----------------
<S> <C> <C> <C> <C> <C>
RETAIL
Park Center..................... Santa Ana CA 1979 73,500 98%
Sonora Plaza.................... Sonora CA 1974 162,126 99
Piedmont Plaza.................. Apopka FL 1985 151,000 98
River Run Shopping Center....... Miramar FL 1988 92,787 94
Westwood Plaza.................. Tampa FL 1984 99,304 99
Shannon Crossing................ Atlanta GA 1981 64,039 96
Westbrook Commons............... Westchester IL 1983 132,190 97
Broad Ripple Retail Centre...... Indianapolis IN 1988 37,540 100
Cross Creek Retail Centre....... Indianapolis IN 1989 76,908 96
Geist Retail Centre............. Indianapolis IN 1989 72,348 92
Woodfield Centre................ Indianapolis IN 1988 58,171 90
Goshen Plaza.................... Gaithersburg MD 1988 45,546 85
Auburn North Shopping Center.... Auburn WA 1978 158,596 96
--------- ---
TOTAL RETAIL............ 1,224,055 96%
========= ===
</TABLE>
<TABLE>
<CAPTION>
OCCUPANCY AS OF
YEAR RENTABLE MARCH 31,
PROPERTY CITY STATE COMPLETED SQ. FT. UNITS 1998(1)
-------- ---- ----- --------- ---------------- ----- ----------------
<S> <C> <C> <C> <C> <C> <C>
MULTI-FAMILY
Overlook Apartments.......... Scottsdale AZ 1988 188,432 224 96%
Crosscreek Apartments........ Indianapolis IN 1990 159,492 208 91
Harcourt Club Apartments..... Indianapolis IN 1991 149,900 148 95
Island Club Apartments....... Indianapolis IN 1990 245,389 314 88
Arrowood Crossing I & II..... Charlotte NC 1990 187,692 200 99
Sharonridge I & II........... Charlotte NC 1980 59,850 75 96
The Chase (Commonwealth)..... Charlotte NC 1986 105,360 132 97
The Courtyard................ Charlotte NC 1985 60,500 55 93
The Landing on Farmhurst..... Charlotte NC 1986 98,000 125 97
Wendover Glen................ Charlotte NC 1983 75,072 96 96
The Chase (Monroe)........... Monroe NC 1988 100,512 120 97
Willow Glen.................. Monroe NC 1981 104,040 120 99
Sabal Point I, II & III...... Pineville NC 1990 381,463 374 90
The Oaks..................... Raleigh NC 1985 68,256 88 92
Sahara Gardens............... Las Vegas NV 1983 277,056 312 91
Villas de Mission............ Las Vegas NV 1979 192,370 226 97
--------- ----- --
TOTAL MULTI-FAMILY............. 2,453,384 2,817 96%
========= ===== ==
</TABLE>
60
<PAGE> 67
<TABLE>
<CAPTION>
YEAR RENTABLE UNITS/ OCCUPANCY AS OF
PROPERTY CITY STATE COMPLETED SQ. FT. ROOMS MARCH 31, 1998
-------- ------------ ----- --------- ---------------- ------ ----------------
<S> <C> <C> <C> <C> <C> <C>
HOTELS
Country Inn and Suites by Scottsdale AZ 1995 80,568 163 80%
Carlson...................
Country Suites by Carlson.... Tucson AZ 1986 61,552 157 79
Country Suites by Carlson.... Ontario CA 1985 54,019 120 73
Country Suites by Carlson.... Arlington TX 1986 56,200 132 56
Country Suites by Carlson.... Irving TX 1986 45,032 108 61
Country Inn by Carlson....... San Antonio TX 1997 29,330 64 55
--------- ----- --
Total Hotels......... 326,701 744 71%
========= ===== ==
</TABLE>
- ---------------
(1) Represents economic occupancy as of March 31, 1998.
(2) This Property is 31% leased by the former owner of the Property for a period
of two years.
(3) Represents average economic occupancy for the three months ended March 31,
1998.
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<PAGE> 68
MANAGEMENT
The following table sets forth certain information with respect to the
directors and the executive officers of the Company, the general partner of the
Operating Partnership, including their ages.
<TABLE>
<CAPTION>
NAME AGE PRINCIPAL POSITION
---- --- ------------------
<S> <C> <C>
Robert Batinovich.............. 61 Chairman and Chief Executive Officer
Andrew Batinovich.............. 39 Director, President and Chief Operating Officer
Sandra L. Boyle................ 49 Executive Vice President
Stephen Saul................... 44 Executive Vice President, Chief Financial Officer
Frank E. Austin................ 50 Senior Vice President, General Counsel and Secretary
Terri Garnick.................. 37 Senior Vice President, Chief Accounting Officer and
Treasurer
Steven F. Hallsey.............. 46 Senior Vice President, Commercial Property Management
Richard C. Blum................ 61 Director
Patrick Foley.................. 65 Director
Richard A. Magnuson............ 40 Director
Laura Wallace.................. 44 Director
</TABLE>
ROBERT BATINOVICH has served as the Company's Chairman and Chief Executive
Officer since the Company began operations on December 31, 1995. Mr. Batinovich
also served as President of the Company since the Company began operations
through September 1997. He also was the founder of Old GC and certain of its
affiliates, and has been engaged in real estate investment and management, and
corporate finance, since 1970. He served as President, Chief Executive Officer
and Chairman of Old GC from its formation in 1978 until its consolidation and
merger with the Company (the "Consolidation") on December 31, 1995. Mr.
Batinovich served as a member of the California Public Utilities Commission from
1975 to 1979, serving as its President the last two years. He is a member of the
Board of Directors of the Farr Company, a publicly held company that
manufactures industrial filters. Mr. Batinovich's business background includes
seven years as an executive with Norris Industries, managing and/or owning
manufacturing, vending and service companies and a national bank, and providing
investment consulting to businesses and individuals. He has served on a number
of governmental commissions and participated in a variety of policy research
efforts sponsored by government bodies and universities.
ANDREW BATINOVICH has served as director, Chief Operating Officer and Chief
Financial Officer of the Company since the Company began operations on December
31, 1995 until September 1997 when he became President and Chief Operating
Officer of the Company. He also served as a director of Old GC prior to the
Consolidation, was employed by Old GC from 1983 until the Consolidation and
functioned as its Chief Operating Officer and Chief Financial Officer since
1987. Mr. Batinovich holds a California real estate broker's license and is a
Member of the National Advisory Council of Building Owners and Managers
Association ("BOMA") International. Prior to joining Glenborough, Mr. Batinovich
was a lending officer with the International Banking Group and the Corporate
Real Estate Division of Security Pacific National Bank. Mr. Batinovich has a
B.A. in International Finance from the American University of Paris.
SANDRA L. BOYLE has served as Executive Vice President of the Company since
September 1997, prior to which she served as Senior Vice President of the
Company since the Company began operations on December 31, 1995. Ms. Boyle has
been associated with Old GC or its affiliated entities since 1984. She was
originally responsible for residential marketing. Her responsibilities were
gradually expanded to include residential leasing and management in 1985, and
commercial leasing and management in 1987. She was elected Vice President of Old
GC in 1989. She currently supervises asset management, property management and
management information services for the Company. Ms. Boyle holds a California
real estate broker's license and a CPM designation, is a past President of BOMA
San Francisco, and is a member of the National Advisory and Finance Committee of
BOMA International, and the Board of Directors of BOMA San Francisco and BOMA
California.
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<PAGE> 69
STEPHEN R. SAUL has served as Vice President of the Company since May 1996
and became the Company's Executive Vice President and Chief Financial Officer in
September 1997. He has served as Manager of Real Estate Finance since joining
Old GC in April 1995. Prior to joining Old GC, Mr. Saul served for four years as
President of KSA Financial Corporation, a company which was based in Sacramento,
California and which originated equity and debt financing for real estate
projects in Northern California; he also served five years with Security Pacific
National Bank and five years with the development company of Harrington and
Kulakoff. Mr. Saul has a B.A. in Architecture and Urban Studies from Stanford
University and an M.B.A. from Harvard University.
FRANK E. AUSTIN has served as Senior Vice President, General Counsel and
Secretary of the Company since the Company began operations on December 31,
1995. Mr. Austin also served as a Vice President of Old GC from 1985 until the
completion of the Consolidation. He is a member of the State Bar of California.
Prior to joining Glenborough, Mr. Austin served for three years as committee
counsel in the California State Senate, three years with the law firm of
Neumiller & Beardslee, and four years at State Savings and Loan Association and
American Savings and Loan Association.
TERRI GARNICK has served as Senior Vice President, Chief Accounting Officer
and Treasurer of the Company since the Company began operations on December 31,
1995. Ms. Garnick joined Old GC in 1989, and between that time and the
completion of the Consolidation was responsible for property management,
accounting, financial statements, audits, SEC reports, and tax returns for
partnerships under management of Old GC and its affiliates. Prior to joining Old
GC in 1989, Ms. Garnick was a controller at August Financial Corporation from
1986 to 1989 and was a Senior Accountant at Deloitte Haskins & Sells from 1983
to 1986. She is a Certified Public Accountant.
STEVEN F. HALLSEY joined the Company on January 12, 1998, as Senior Vice
President of Commercial Property Management. Prior to joining the Company, Mr.
Hallsey served for three years as President and Chief Operating Officer of
Western National Group, a national property management firm based in Irvine,
California; and for two years as President of the Harbor Group of Norfolk,
Virginia, which owned and operated a regional portfolio of commercial and
multifamily properties. He also served four years as a Senior Vice President of
Balcor Property Management and six years as Senior Executive Vice President of
Clark Financial Corporation, a regional property management firm based in Salt
Lake City, Utah. Mr. Hallsey serves on the boards of directors of the National
Multi Housing Counsel and the California Apartment Association, and is the
founder of the South Coast Apartment Association.
RICHARD C. BLUM has served as a director of the Company since January 1998.
Mr. Blum is chairman and president of Richard C. Blum & Associates, Inc., which
is the general partner of Richard C. Blum & Associates, L.P., a merchant banking
firm which acts as general partner for various investment partnerships. Mr. Blum
also serves as a director of Northwest Airlines Corporation, URS Corporation
(architectural and engineering services) and CB Commercial Real Estate Group
(formerly Coldwell Banker, a holding company for various real estate
enterprises).
PATRICK FOLEY has served as director of the Company since January 11, 1996.
He is also Chairman and Chief Executive Officer of DHL Corporation, Inc. and its
major subsidiary, DHL Airways, positions he has held since 1988. Prior to
joining DHL, Mr. Foley was associated with the Hyatt Hotels Corporation
("Hyatt") for 26 years: in a variety of capacities, from 1962 to 1972; as
Executive Vice President for Operations, from 1972 to 1978; as President, from
1978 to 1984; as Chairman from 1984 to 1988; as Vice Chairman and later Chief
Executive Officer of Braniff Airlines, a Hyatt subsidiary, from 1984 to 1988.
Mr. Foley currently is a member of the board of directors of Continental
Airlines, Inc., Foundation Health Systems, Inc., Del Monte Foods Corporation and
Flextronics International Ltd.
RICHARD A. MAGNUSON has served as director of the Company since January 11,
1996. He is also currently Managing Director at Nomura International, plc.
("Nomura"). Mr. Magnuson joined Nomura in 1997, prior to which he served as a
director at Nomura Securities International Inc. ("Nomura International"), a
position he held since March 1994. Before joining Nomura International, Mr.
Magnuson was a director in Real Estate Investment Banking at Merrill Lynch & Co.
for five years. Mr. Magnuson is an active member of the Urban
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<PAGE> 70
Land Institute, the National Association of Real Estate Investment Trusts, and
the International Council of Shopping Centers.
LAURA WALLACE has served as director of the Company since January 11, 1996.
She is also Chief Investment Officer of the Public Employees Retirement System
of Nevada (the "System"), a position she has held since 1985 and to which she
was promoted after serving four years as Investment Analyst. The System
comprises 60,000 active members, 40,000 inactive members, and 15,000 benefit
recipients, with an investment portfolio of $10.0 billion. Prior to joining the
System, Ms. Wallace served from 1977 to 1980 as Manager of the Beaverton, Oregon
office of Safeco Title Insurance Company, and from 1975 to 1977 as Senior
Assistant Manager of the Beaverton office of Household Finance Corporation. Ms.
Wallace is a member of the executive council of the National Association of
State Investment Officers, of which she is past chairman; a member of the
National Council on Teacher Retirement; a member of the Advisory Board for the
Retired Senior Volunteer Program; past member of the Editorial Board of the
Institutional Real Estate Letter; and serves as guest lecturer at the University
of Nevada.
DESCRIPTION OF NOTES
Except as otherwise indicated below, the following summary of the material
provisions of the Indenture applies to both the Old Notes and the New Notes. As
used herein, the term "Notes" shall mean the Old Notes and the New Notes, unless
otherwise indicated.
The form and terms of the New Notes are substantially identical to the form
and terms of the Old Notes, except that the exchange of the New Notes pursuant
to the Exchange Offer will be registered under the Securities Act and,
therefore, the New Notes will not bear any legends restricting transfer thereof.
The New Notes will evidence the same debt as the Old Notes and will be treated
as a single class under the Indenture with any Old Notes that remain
outstanding. Each series of New Notes will be issued solely in exchange for an
equal principal amount of the corresponding series of Old Notes. As of the date
hereof, $150 million in aggregate principal amount of Old Notes is outstanding.
See "The Exchange Offer." The following summary of certain provisions of the
Indenture, a copy of which has been filed as an exhibit to the Registration
Statement of which this Prospectus is a part, does not purport to be complete
and is subject to, and is qualified in its entirety by reference to, all the
provisions of the Indenture, including the definitions of certain terms therein
and those terms made a part thereof by the Trust Indenture Act of 1939, as
amended. Whenever particular defined terms of the Indenture not otherwise
defined herein are referred to, the definitions ascribed to such terms in the
Indenture are incorporated herein by reference. For definitions of certain
capitalized terms used in the following summary, see "-- Certain Definitions."
GENERAL
The Old Notes were, and the New Notes will be, issued pursuant to an
Indenture. The Old Notes are a series of Debt Securities issued under the
Indenture designated as 7 5/8% Series A Senior Notes due 2005, and were issued
in a private transaction that was not subject to the registration requirements
of the Securities Act. The New Notes are a series of Debt Securities issuable
under the Indenture designated as 7 5/8% Series B Senior Notes due 2005, and
will be issued in the Exchange Offer. The Notes will be limited to $150,000,000
in aggregate principal amount. The terms of the Notes include those provisions
contained in the Notes and the Indenture. The following summary of certain
provisions of the Indenture does not purport to be complete and is qualified in
its entirety by reference to the Indenture, including the definitions therein of
certain terms used below but not defined herein.
Pursuant to the Indenture, the Operating Partnership may issue series of
debt securities (the "Debt Securities") in addition to the Notes. Except for any
series of Debt Securities which is specifically subordinated to other
indebtedness of the Operating Partnership, the Debt Securities will rank pari
passu with all other unsecured and unsubordinated indebtedness of the Operating
Partnership. Under the Indenture, the Debt Securities may be issued without
limit as to aggregate principal amount, in one or more series, in each case as
established from time to time in or pursuant to authority granted by a
resolution of the Board of Directors of the Company as sole general partner of
the Operating Partnership or as established in one or more
64
<PAGE> 71
indentures supplemental to the Indenture. All Debt Securities of 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 of the Debt Securities of such
series, for issuances of additional Debt Securities of such series.
Except as provided under "-- Merger, Consolidation or Sale" and
"-- Covenants" below, the Notes and the Indenture do not contain any other
provisions that would afford Holders of the Notes ("Holders") protection in the
event of (i) a highly leveraged or similar transaction involving the Operating
Partnership, the management of the Operating Partnership or the Company, or any
affiliate of either such party, (ii) a change of control or (iii) a
reorganization, restructuring, merger or similar transaction involving the
Operating Partnership that may adversely affect the Holders of the Notes. The
financial covenants of the Operating Partnership described below would continue
to apply, unless waived by Holders of the Notes, in the event of a highly
leveraged or similar transaction involving the Operating Partnership, management
of the Operating Partnership or the Company, or any affiliate of either such
party. See "-- Covenants." In addition, subject to the limitations set forth
below under "-- Merger, Consolidation or Sale," the Operating Partnership may,
in the future, enter into certain transactions such as the sale of all or
substantially all of its assets or the merger or consolidation of the Operating
Partnership that would increase the amount of the Operating Partnership's
indebtedness or substantially reduce or eliminate the Operating Partnership's
assets, which may have an adverse effect on the Operating Partnership's ability
to service its indebtedness, including the Notes. The Operating Partnership has
no present intention of engaging in a highly leveraged or similar transaction
involving the Operating Partnership. In addition, certain restrictions on
ownership and transfers of the Company's stock designed to preserve its status
as a REIT may act to prevent or hinder any such transactions or a change of
control.
RANKING
The Old Notes are, and the New Notes will be, general unsecured and
unsubordinated obligations of the Operating Partnership and will rank pari passu
with all other unsecured and unsubordinated indebtedness of the Operating
Partnership from time to time outstanding. However, the Old Notes are, and the
New Notes will be, effectively subordinated to such secured borrowing
arrangements that the Operating Partnership has and from time to time may enter
into with various banks and other lenders, and to the prior claims of each
secured mortgage lender to any specific property owned by the Operating
Partnership which secures any lender's mortgage. As of March 31, 1998, such
arrangements and mortgages aggregated $242.1 million; as adjusted to reflect the
Pro Forma Adjustments, such arrangements and mortgages would have aggregated
272.3 million as of March 31, 1998. Subject to certain limitations set forth in
the Indenture described below under the caption "Covenants," the Indenture will
permit the Operating Partnership to incur additional indebtedness and additional
secured indebtedness. See "-- Covenants," "Recent Activities -- Financing
Activities."
PRINCIPAL, MATURITY AND INTEREST
The Old Notes are, and the New Notes will be, limited in aggregate
principal amount to $150,000,000 and will mature on March 15, 2005 (the
"Maturity Date"). The New Notes will be issued in minimum denominations of
$150,000 and in integral multiples of $1,000 in excess thereof.
Interest on the Old Notes and on the New Notes will accrue at the rate of
7 5/8% per annum and will be payable semi-annually in arrears on March 15 and
September 15 of each year, commencing on September 15, 1998, to holders of
record on the immediately preceding March 1 and September 1. Holders of New
Notes will receive interest accrued thereof from the date of original issuance
of the Old Notes or the date of last interest payment as applicable, to, but not
including, the date of issuance of the New Notes. Interest on the Notes will
accrue from the most recent date to which interest has been paid or, if no
interest has been paid, from the date of original issuance. Interest will be
computed on the basis of a 360-day year comprised of twelve 30-day months.
Principal, premium, if any, and interest on the Notes will be payable at
the office or agency of the Operating Partnership maintained for such purpose
or, at the option of the Operating Partnership, payment
65
<PAGE> 72
may be made by check mailed to holders of the Notes at their respective
addresses set forth in the register of holders; provided that all payments with
respect to Notes the Holders of which have given wire transfer instructions to
the Operating Partnership will be required to be made by wire transfer of
immediately available funds to the accounts specified by the Holders thereof.
Until otherwise designated by the Operating Partnership, the Operating
Partnership's office or agency will be the office of the Trustee maintained for
such purpose in the Borough of Manhattan, The City of New York, which currently
is c/o Chase Manhattan Bank and Trust Company, National Association, 55 Water
Street, Room 234, and at the Trustee's corporate trust office at 101 California
Street, Suite 2725, San Francisco, California 94111.
OPTIONAL REDEMPTION
The Notes may be redeemed at any time at the option of the Operating
Partnership, in whole or from time to time in part, at a redemption price (the
"Redemption Price") equal to the sum of (i) the principal amount of the Notes
(or portion thereof) being redeemed plus accrued interest thereon to the
redemption date and (ii) the Make-Whole Amount, if any, with respect to the
Notes (or portion thereof).
If notice has been given as provided in the Indenture and funds for the
redemption of any Notes (or any portion thereof) called for redemption shall
have been made available on the redemption date referred to in such notice, such
Notes (or any portion thereof) will cease to bear interest on the date fixed for
such redemption specified in such notice and the only right of the Holders of
such Notes will be to receive payment of the Redemption Price.
Notice of any redemption of any Notes (or any portion thereof) will be
given to Holders at their addresses, as shown in the Note 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 Notes held by such Holder to be redeemed.
The Operating Partnership will notify the Trustee at least 45 days prior to
giving notice of redemption (or such shorter period as is satisfactory to the
Trustee) of the aggregate principal amount of such Notes to be redeemed and
their redemption date. If less than all of the Notes are to be redeemed at the
option of the Operating Partnership, the Trustee shall select, in such manner as
it shall deem fair and appropriate, such Notes to be redeemed in whole or in
part.
REGISTRATION RIGHTS; LIQUIDATED DAMAGES
In connection with the original issuance and sale of the Old Notes, the
Initial Purchasers and their assignees became entitled to the benefits of the
Registration Rights Agreement. Pursuant to the Registration Rights Agreement,
the Operating Partnership agreed to file with the Commission the Exchange Offer
Registration Statement on the appropriate form under the Securities Act with
respect to the Exchange Notes. Upon the effectiveness of the Exchange Offer
Registration Statement, the Operating Partnership will offer to the Holders of
Transfer-Restricted Securities pursuant to the Exchange Offer who are able to
make certain representations the opportunity to exchange their Transfer
Restricted Securities for Exchange Notes. If (i) the Operating Partnership is
not required to file the Exchange Offer Registration Statement or permitted to
consummate the Exchange Offer because the Exchange Offer is not permitted by
applicable law or Commission policy or (ii) any Holder of Transfer Restricted
Securities notifies the Operating Partnership on or prior to the 20th business
day following consummation of the Exchange Offer that (a) it is prohibited by
law or Commission policy from participating in the Exchange Offer or (b) that it
may not resell the Exchange Notes acquired by it in the Exchange Offer to the
public without delivering a prospectus and the prospectus contained in the
Exchange Offer Registration Statement is not appropriate or available for such
resales or (c) that it is a broker-dealer and owns Old Notes acquired directly
from the Operating Partnership or an affiliate of the Operating Partnership, the
Operating Partnership will file with the Commission a Shelf Registration
Statement to cover resales of the Notes by the Holders thereof who satisfy
certain conditions relating to the provision of information in connection with
the Shelf Registration Statement. The Operating Partnership will use its best
efforts to cause the applicable registration statement to be declared effective
as promptly as possible by the Commission. For purposes of the foregoing,
"Transfer Restricted Securities"
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<PAGE> 73
means each Old Note until (i) the date on which such Note has been exchanged by
a person other than a broker-dealer for an Exchange Note in the Exchange Offer,
(ii) following the exchange by a broker-dealer in the Exchange Offer of a Note
for an Exchange Note, the date on which such Exchange Note is sold to a
purchaser who receives from such broker-dealer on or prior to the date of such
sale a copy of the prospectus contained in the Exchange Offer Registration
Statement, (iii) the date on which such Note has been effectively registered
under the Securities Act and disposed of in accordance with the Shelf
Registration Statement or (iv) the date on which such Note is distributed to the
public pursuant to Rule 144 under the Act.
The Registration Rights Agreement provides that (i) the Operating
Partnership will file an Exchange Offer Registration Statement with the
Commission on or prior to 60 days after the Closing Date, (ii) the Operating
Partnership will use its best efforts to have the Exchange Offer Registration
Statement declared effective by the Commission on or prior to 150 days after the
Closing Date, (iii) unless the Exchange Offer would not be permitted by
applicable law or Commission policy, the Operating Partnership will commence the
Exchange Offer and use its best efforts to issue, on or prior to 30 business
days after the date on which the Exchange Offer Registration Statement was
declared effective by the Commission, Exchange Notes in exchange for all Notes
tendered prior thereto in the Exchange Offer and (iv) if obligated to file the
Shelf Registration Statement, the Operating Partnership will use its best
efforts to file the Shelf Registration Statement with the Commission on or prior
to 60 days after such filing obligation arises and to cause the Shelf
Registration to be declared effective by the Commission on or prior to 150 days
after such obligation arises. If (a) the Operating Partnership fails to file any
of the Registration Statements required by the Registration Rights Agreement on
or before the date specified for such filing, (b) any of such Registration
Statements is not declared effective by the Commission on or prior to the date
specified for such effectiveness (the "Effectiveness Target Date"), (c) the
Operating Partnership fails to consummate the Exchange Offer within 30 business
days of the Effectiveness Target Date with respect to the Exchange Offer
Registration Statement or (d) the Shelf Registration Statement or the Exchange
Offer Registration Statement is declared effective but thereafter ceases to be
effective or useable in connection with resales of Transfer Restricted
Securities during the periods specified in the Registration Rights Agreement
(each such event referred to in clauses (a) through (d) above a "Registration
Default"), then the Operating Partnership and the Company will pay Liquidated
Damages to each Holder of Notes, with respect to the first 90-day period
immediately following the occurrence of the first Registration Default, in an
amount equal to one-half of the one percentage point (0.5%) per annum of the
principal amount of Notes held by such Holder. The amount of the Liquidated
Damages will increase by an additional one-half of one percent (0.5%) per annum
for each subsequent 90-day period until all Registration Defaults have been
cured, up to a maximum amount of Liquidated Damages of two percent (2.0%) per
annum. All accrued Liquidated Damages will be paid on each Damages Payment Date
to the Global Note Holder by wire transfer of immediately available funds or by
federal funds check and to Holders of Definitive Notes by wire transfer to the
accounts specified by them or by mailing checks to their registered addresses if
no such accounts have been specified. Following the cure of all Registration
Defaults, the accrual of Liquidated Damages will cease.
Holders of the Old Notes are required to make certain representations to
the Operating Partnership (as described in the Registration Rights Agreement) in
order to participate in the Exchange Offer and will be required to deliver
information to be used in connection with the Shelf Registration Statement and
to provide information reasonably requested by the Operating Partnership for use
in connection with the Shelf Registration Statement within the time periods set
forth in the Registration Rights Agreement in order to have their Old Notes
included in the Shelf Registration Statement and benefit from the provisions
regarding Liquidated Damages set forth above.
MERGER, CONSOLIDATION OR SALE
The Operating Partnership 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 (a) either the Operating Partnership shall be the continuing
person, or the successor (if other than the Operating Partnership) formed by or
resulting from any such consolidation or merger or which shall have received the
transfer of such assets shall expressly assume
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payment of the principal, premium, if any, and interest on all of the Debt
Securities and the due and punctual performance and observance of all of the
covenants and conditions contained in the Indenture, (b) immediately after
giving effect to such transaction and treating any indebtedness which becomes an
obligation of the Operating Partnership or any Subsidiary as a result thereof as
having been incurred by the Operating Partnership or such Subsidiary at the time
of such transaction, no Event of Default under the Indenture, 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 and (c) an officers' certificate
of the Company as General Partner of the Operating Partnership and an opinion of
counsel covering such conditions shall be delivered to the Trustee.
COVENANTS
Limitations on Incurrence of Debt
The Operating Partnership 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 Company, the Operating Partnership and any of their Subsidiaries
(but only so long as such Debt is held solely by any of the Company, the
Operating Partnership and any Subsidiary) that is subordinate in right of
payment to the Notes, if, immediately after giving effect to the incurrence of
such additional Debt and the application of the net proceeds thereof, the
aggregate principal amount of all outstanding Debt of the Operating Partnership
and its Subsidiaries on a consolidated basis determined in accordance with GAAP
is greater than 60% of the sum (without duplication) of (i) Total Assets of the
Operating Partnership and its Subsidiaries as of the end of the most recently
completed fiscal quarter of the Operating Partnership for which financial
information is available prior to the incurrence of such additional Debt and
(ii) the purchase price or cost of any real estate assets or mortgages
receivable acquired or developed, and the amount of any securities offering
proceeds or asset sale proceeds received (to the extent that such proceeds were
not used to acquire real estate assets or mortgages receivable, to develop real
estate assets or to reduce Debt) by the Operating Partnership or any Subsidiary
since the end of such fiscal quarter, including those proceeds obtained in
connection with the incurrence of such additional Debt (such increase, together
with the Total Assets, is referred to as "Adjusted Total Assets").
In addition to the foregoing limitation on the incurrence of Debt, the
Operating Partnership will not, and will not permit any Subsidiary to, incur any
Debt if the ratio of Consolidated Income Available for Debt Service to the
Annual Service Charge on all Debt outstanding immediately after the incurrence
of such additional Debt for the four consecutive fiscal quarters most recently
ended prior to the date on which such additional Debt is to be incurred shall
have been less than 1.5 to 1.0, and calculated on the assumption that (i) such
Debt and any other Debt incurred by the Operating Partnership or its
Subsidiaries since the first day of such four-quarter period and the application
of the net proceeds therefrom, including to refinance other Debt, had occurred
at the beginning of such period, (ii) the repayment or retirement of any other
Debt by the Operating Partnership or its Subsidiaries since the first day of
such four-quarter period had been incurred, repaid or retired at the beginning
of such period (except that, in making such computation, 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) the income earned on any
increase in Adjusted Total Assets since the end of such four-quarter period had
been earned, on an annualized basis, during such period and (iv) in the case of
any acquisition or disposition by the Operating Partnership 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 acquisition or disposition or any related repayment of
Debt had occurred as of the first day of such period with the appropriate
adjustments with respect to such acquisition or disposition being included in
such pro forma calculation.
In addition to the foregoing limitations on the incurrence of Debt, the
Operating Partnership will not, and will not permit any Subsidiary to, incur any
Debt secured by any mortgage, lien, charge, pledge, encumbrance or security
interest of any kind upon any of the property of the Operating Partnership or
any Subsidiary ("Secured Debt"), whether owned at the date of the Indenture or
thereafter acquired, if, immediately after
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giving effect to the incurrence of such additional Secured Debt, the aggregate
principal amount of all outstanding Secured Debt is greater than 40% of Adjusted
Total Assets.
For purposes of the foregoing provisions regarding the limitation on the
incurrence of Debt, Debt shall be deemed to be "incurred" by the Operating
Partnership or a Subsidiary whenever the Operating Partnership and its
Subsidiary shall create, assume, guarantee or otherwise become liable in respect
thereof. In addition, the amount of Debt issued at a price that is less than the
principal amount thereof shall be equal to the amount of the liability in
respect thereof determined in accordance with GAAP.
Maintenance of Total Unencumbered Assets
The Operating Partnership is required to maintain Total Unencumbered Assets
of not less than 150% of the aggregate outstanding principal amount of all
outstanding Unsecured Debt.
Provision of Financial Information
The Indenture provides that upon the consummation of the Exchange Offer or
the effectiveness of the Shelf Registration Statement, as the case may be,
whether or not required by the rules and regulations of the Commission, so long
as any Notes are outstanding, the Operating Partnership will furnish to the
Holders of Notes (i) all quarterly and annual financial information that would
be required to be contained in a filing with the Commission on Forms 10-Q and
10-K if the Operating Partnership were required to file such Forms, including a
"Management's Discussion and Analysis of Financial Condition and Results of
Operations" that describes the financial condition and results of operations of
the Operating Partnership and its consolidated Subsidiaries and, with respect to
the annual information only, a report thereon by the Operating Partnership's
certified independent accountants and (ii) all current reports that would be
required to be filed with the Commission on Form 8-K if the Operating
Partnership were required to file such reports. In addition, whether or not
required by the rules and regulations of the Commission, the Operating
Partnership will file a copy of all such information and reports with the
Commission for public availability (unless the Commission will not accept such a
filing) and make such information available to securities analysts and
prospective investors upon request. In addition, the Operating Partnership has
agreed that, for so long as any Notes remain outstanding, it will furnish to the
Holders and to securities analysts and prospective investors, upon their
request, the information required to be delivered pursuant to Rule 144A(d)(4)
under the Securities Act.
Existence
Except as permitted under "Merger, Consolidation or Sale," the Indenture
requires each of the Operating Partnership and the Company to do or cause to be
done all things necessary to preserve and keep in full force and effect its
existence, rights (partnership and statutory) and franchises; provided, however,
that each of the Operating Partnership and the Company shall not be required to
preserve any right or franchise if the Board of Directors of the Company
determines that the preservation thereof is no longer desirable in the conduct
of the business of the Operating Partnership and that the loss thereof is not
disadvantageous in any material respect to the Holders of the Notes.
Maintenance of Properties
The Indenture requires each of the Operating Partnership and the Company to
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, all as in the judgment of the Operating
Partnership 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 Operating Partnership or the Company, as the case may be, and
its Subsidiaries shall not be prevented from selling or otherwise disposing of
their properties for value in the ordinary course of business.
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Insurance
The Indenture requires the Operating Partnership and each of its
Subsidiaries to keep its insurable Properties insured against loss or damage
with commercially reasonable amounts and types of insurance provided by insurers
of recognized responsibility.
Payment of Taxes and Other Claims
The Indenture requires each of the Operating Partnership and the Company to
pay or discharge or cause to be paid or discharged, before the same shall become
delinquent, (i) all taxes, assessments and governmental charges levied or
imposed upon it or any Subsidiary or upon its income, profits or property or
that of any Subsidiary and (ii) all lawful claims for labor, materials and
supplies which, if unpaid, might by law become a lien upon the property of the
Operating Partnership or any Subsidiary; provided, however, that the Operating
Partnership or the Company shall not be required to pay or discharge or cause to
be paid or discharged any tax, assessment, charge or claim whose amount or
applicability is being contested in good faith.
Waiver of Covenants; Compliance
The Operating Partnership may omit to comply with any term, provision or
condition of the foregoing covenants, and with any other term, provision or
condition with respect to the Notes (except any such term, provision or
condition which could not be amended without the consent of all Holders of
Notes), if before or after the time for such compliance the Holders of at least
a majority in principal amount of all the outstanding Notes either waive such
compliance in such instance or generally waive compliance with such covenant or
condition. Except to the extent so expressly waived, and until such waiver shall
become effective, the obligations of the Operating Partnership and the duties of
the Trustee in respect of any such term, provision or condition shall remain in
full force and effect. Notwithstanding the foregoing, the defeasance and
covenant defeasance provisions of the Indenture described under "-- Discharge,
Defeasance and Covenant Defeasance" below applies to the Notes.
The Operating Partnership will deliver to the Trustee, within 120 days
after the end of each fiscal year, a brief certificate as to the Operating
Partnership's compliance or non-compliance with the conditions and covenants
under the Indenture. Further, upon any request by the Operating Partnership to
the Trustee to take any action under the Indenture, the Operating Partnership
will furnish to the Trustee (a) an Officers' Certificate stating that all
conditions precedent, if any, provided for in the Indenture relating to the
proposed action have been complied with, and (b) an opinion of counsel stating
that in the opinion of such counsel all such conditions precedent, if any, have
been complied with.
CERTAIN DEFINITIONS
As used herein:
"Annual Service Charge" for any period means the aggregate interest expense
for such period in respect of, and the amortization during such period of any
original issue discount of, Debt of the Operating Partnership and its
Subsidiaries and the amount of dividends which are payable during such period in
respect of any Disqualified Stock.
"Capital Stock" means, with respect to any Person, any capital stock
(including preferred stock), shares, interests, participations or other
ownership interests (however designated) of such Person and any rights (other
than debt securities convertible into or exchangeable for corporate stock),
warrants or options to purchase any thereof.
"Consolidated Income Available For Debt Service" for any period means
Consolidated Net Income plus amounts which have been deducted, and minus amounts
which have been added, for the following (without duplication): (a) interest on
Debt of the Operating Partnership and its Subsidiaries, (b) provision for taxes
of the Operating Partnership and its Subsidiaries based on income, (c)
amortization of Debt discount, (d) provisions for gains and losses on
properties, (e) depreciation and amortization on properties, (f) the
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effect of any non-cash charge resulting from a change in accounting principles
in determining Consolidated Net Income for such period and (g) amortization of
deferred charges.
"Consolidated Net Income" for any period means the amount of consolidated
net income (or loss) of the Operating Partnership and its Subsidiaries for such
period determined on a consolidated basis in accordance with GAAP.
"Debt" of the Operating Partnership or any Subsidiary means any
indebtedness of the Operating Partnership or such Subsidiary, as applicable,
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 the Operating Partnership or such Subsidiary, (iii) the
reimbursement obligations, contingent or otherwise, in connection with any
letters of credit actually issued or amounts representing the balance that
constitutes an accrued expense or trade payable or (iv) any lease of property by
the Operating Partnership or such Subsidiary as lessee which is reflected in the
Operating Partnership's consolidated balance sheet as a capitalized lease in
accordance with generally accepted accounting principles, 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 the Operating
Partnership's consolidated balance sheet in accordance with generally accepted
accounting principles, and also includes, to the extent not otherwise included,
any obligation by the Operating Partnership or such Subsidiary 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 the Operating Partnership or any Subsidiary).
"Disqualified Stock" means, with respect to any Person, any Capital Stock
of such Person which by the terms of such Capital Stock (or by the terms of any
security into which it is convertible or for which it is exchangeable or
exercisable), upon the happening of any event or otherwise (i) matures or is
mandatorily redeemable, pursuant to a sinking fund obligation or otherwise
(other than Capital Stock which is redeemable solely in exchange for common
stock), (ii) is convertible into or exchangeable or exercisable for Debt or
Disqualified Stock or (iii) is redeemable at the option of the holder thereof,
in whole or in part (other than Capital Stock which is redeemable solely in
exchange for Capital Stock which is not Disqualified Stock or the redemption
price of which may, at the option of such Person, be paid in Capital Stock which
is not Disqualified Stock), in each case on or prior to the Maturity Date of the
Notes. For purposes of this definition, it is expressly understood that the
partnership units in the Operating Partnership and shares of perpetual preferred
stock of the Company (which do not possess any of the features of clauses (i),
(ii) or (iii) above) shall not constitute Disqualified Stock.
"GAAP" means generally accepted accounting principles set forth in the
opinions and pronouncements of the Accounting Principles Board of the American
Institute of Certified Public Accountants and statements and pronouncements of
the Financial Accounting Standards Board or in such other statements by such
other entity as have been approved by a significant segment of the accounting
profession, which are in effect from time to time.
"Make-Whole Amount" means, in connection with any optional redemption or
accelerated payment of any Notes, 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 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 or
accelerated payment 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 such notice of
redemption is given or declaration of acceleration is made) from the respective
dates on which such principal and interest would have been payable if such
redemption or accelerated payment had not been made, over (ii) the aggregate
principal amount of the Notes being redeemed or paid.
"Reinvestment Rate" means .25% plus the arithmetic mean of the yields under
the respective 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,
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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 purpose 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.
"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 establishes 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 Operating
Partnership.
"Subsidiary" means a corporation, partnership or limited liability company,
a majority of the outstanding voting stock, partnership interests or membership
interests, as the case may be, of which is owned or controlled, directly or
indirectly, by the Operating Partnership or by one or more other Subsidiaries of
the Operating Partnership. For the purposes of this definition, "voting stock"
means stock having the voting power for the election of directors, general
partners, managers or trustees, as the case may be, whether at all times or only
so long as no senior class of stock has such voting power by reason of any
contingency.
"Total Assets" as of any date means the sum of (i) Undepreciated Real
Estate Assets and (ii) all other assets of the Operating Partnership and its
Subsidiaries on a consolidated basis determined in accordance with GAAP (but
excluding intangibles and accounts receivable).
"Total Unencumbered Assets" means the sum of (i) those Undepreciated Real
Estate Assets which have not been pledged, mortgaged or otherwise encumbered by
the owner thereof to secure Debt, excluding infrastructure assessment bonds, and
(ii) all other assets of the Operating Partnership and its Subsidiaries
determined in accordance with GAAP (but excluding intangibles and accounts
receivable) which have not been pledged, mortgaged or otherwise encumbered by
the owner thereof to secure Debt.
"Undepreciated Real Estate Assets" as of any date means the cost (original
cost plus capital improvements) of real estate assets of the Operating
Partnership and its Subsidiaries on such date, before depreciation and
amortization, determined on a consolidated basis in accordance with GAAP.
"Unsecured Debt" means Debt which is not secured by any mortgage, lien,
charge, pledge, encumbrance or security interest of any kind upon any of the
properties of the Operating Partnership or any Subsidiary.
EVENTS OF DEFAULT, NOTICE AND WAIVER
The Indenture provides that the following events are "Events of Default'
with respect to the Notes: (a) default for 30 days in the payment of any
interest on the Notes; (b) default in the payment of any principal of, premium,
if any, or any Make-Whole Amount on any Notes when due; (c) default in the
performance of any other covenant or warranty of the Operating Partnership or
the Company contained in the Indenture with respect to the Notes, continued for
60 days after written notice as provided in the Indenture; (d) default under any
bond, debenture, note, indenture or instrument under which there may be issued
or by which there may be secured or evidenced any indebtedness for money
borrowed (except for nonrecourse mortgage indebtedness which individually or in
the aggregate does not exceed $20,000,000) by the Operating Partnership or the
Company (or by any Subsidiary, the repayment of which the Operating Partnership
or the Company has guaranteed or for which the Operating Partnership or the
Company is directly responsible or liable as obligor or guarantor), having an
aggregate principal amount outstanding of at least $10,000,000, whether such
indebtedness now exists or shall hereafter be created, which default shall have
resulted in such indebtedness 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 written notice to the
Operating Partnership or the Company, as the case may be, as provided in the
Indenture; (e) the entry by a court of competent jurisdiction of one or more
judgments, orders or decrees against the Operating Partnership or any Subsidiary
in an
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aggregate amount (excluding amounts covered by insurance) in excess of
$10,000,000 and such judgments, orders or decrees remain undischarged, unstayed
and unsatisfied in an aggregate amount (excluding amounts covered by insurance)
in excess of $10,000,000 for a period of 30 consecutive days; and (f) certain
events of bankruptcy, insolvency or reorganization, or court appointment of a
receiver, liquidator or trustee of the Operating Partnership or the Company or
any Significant Subsidiary. The term "Significant Subsidiary" has the meaning
ascribed to such term in Regulation S-X promulgated under the Securities Act. If
an Event of Default specified in clause (f) above relating to the Operating
Partnership or the Company or any Significant Subsidiary occurs, the principal
amount of, and the Make-Whole Amount, on all outstanding Notes shall become
automatically due and payable without any declaration or other act on the part
of the Trustee or of the Holders.
If an Event of Default under the Indenture with respect to the Notes occurs
and is continuing, then in every such case the Trustee or the Holders of not
less than a majority in principal amount of the then outstanding Notes may
declare the principal amount of all of the Notes to be due and payable
immediately by written notice thereof to the Company and the Operating
Partnership (and to the Trustee if given by the Holders). However, any time
after such a declaration of acceleration with respect to the Notes has been
made, but before a judgment or decree for payment of the money due has been
obtained by the Trustee, the Holders of not less then a majority in principal
amount of outstanding Notes may rescind and annul such declaration and its
consequences if (a) the Operating Partnership shall have paid or deposited with
the Trustee all required payments of the principal of, premium, if any, and
interest on the Notes plus certain fees, expenses, disbursements and advances of
the Trustee and (b) all Events of Default, other than the nonpayment of
accelerated principal or interest with respect to the Notes have been cured or
waived as provided in the Indenture. The Indenture will also provide that the
Holders of not less than a majority in principal amount of the outstanding Notes
may waive any past default with respect to such series and its consequences,
except a default (x) in the payment of the principal, premium, if any, or
interest on the Notes or (y) in respect of a covenant or provision contained in
the Indenture that cannot be modified or amended without the consent of the
Holder of each outstanding Note affected thereby.
The Trustee is required under the Indenture to give notice to the Holders
of Notes within 90 days of a default under the Indenture; provided, however,
that the Trustee may withhold from the Holders of the Notes notice of any
default (except a default in the payment of the principal, premium, if any, or
interest on the Notes) if the Responsible Officers of the Trustee consider such
withholding to be in the interest of such Holders.
The Indenture provides that no Holders of the Notes may institute any
proceedings, judicial or otherwise, with respect to the Indenture or for any
remedy thereunder, except in the case of failure of the Trustee, for 60 days, to
act after it has received a written request to institute proceedings in respect
of an Event of Default from the Holders of not less than a majority in principal
amount of the outstanding Notes, as well as an offer of reasonable indemnity.
This provision does not prevent, however, any Holder of Notes from instituting
suit for the enforcement of payment of the principal, premium, if any, and
interest on such Notes at the respective due date thereof.
Subject to provisions in the Indenture relating to its duties in case of
default, the Trustee is under no obligation to exercise any of its rights or
powers under the Indenture at the request or direction of any Holders of Notes
then outstanding under the Indenture, unless such Holders shall have offered to
the Trustee reasonable security or indemnity. The Holders of not less than a
majority in principal amount of the outstanding Notes 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 of exercising any trust or power
conferred upon the Trustee. However, the Trustee may refuse to follow any
direction which is in conflict with any law or the Indenture, which may involve
the Trustee in personal liability or which may be unduly prejudicial to the
Holders of Notes not joining therein.
Within 120 days after the close of each fiscal year, the Operating
Partnership and the Company must deliver to the Trustee a certificate, signed by
one of several specified officers of the Company, stating whether
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or not such officer has knowledge of any default under the Indenture and, if so,
specifying each such default and the nature and status thereof.
DISCHARGE, DEFEASANCE AND COVENANT DEFEASANCE
The Operating Partnership may discharge certain obligations to Holders of
the Notes that have not already been delivered to the Trustee for cancellation
and that either have become due and payable or will become due and payable
within one year (or are scheduled for redemption within one year) by irrevocably
depositing with the Trustee, in trust, funds in such currency or currencies,
currency unit or units or composite currency or currencies in which such Notes
are payable in an amount sufficient to pay the entire indebtedness on such Notes
in respect of principal of, premium, if any, and interest on the Notes to the
date of such deposit (if such Notes have become due and payable) or to the
Maturity Date or Redemption Date, as the case may be.
The Indenture provides that the Operating Partnership may elect either (a)
to decease and be discharged from any and all obligations with respect to such
Notes (except for the obligations to register the transfer or exchange of such
Notes, to replace temporary or mutilated, destroyed, lost or stolen Notes, to
maintain an office or agency in respect of such Notes to compensate the Trustee
and to hold moneys for payment in trust) ("defeasance") or (b) to be released
from its obligations with respect to such Notes under Sections 1006 through
1008, inclusive, of the Indenture (being the restrictions described under
"-- Covenants") or, if provided pursuant to Section 301 of the Indenture, its
obligations with respect to any other covenant, and any omission to comply with
such obligations shall not constitute a default or an Event of Default with
respect to such Notes ("covenant defeasance"), in either case upon the
irrevocable deposit by the Operating Partnership or the Company, as the case may
be, with the Trustee, in trust, of any amount, in such currency or currencies,
currency unit or units or composite currency or currencies in which such Notes
are payable on the Maturity Date, or Government Obligations, or both applicable
to such Notes which through the scheduled payment of principal and interest in
accordance with their terms will provide money in an amount sufficient to pay
the principal, premium, if any, and interest on such Notes, and any mandatory
sinking fund or analogous payments thereon, on the scheduled due dates therefor.
Such a trust may only be established if, among other things, the Operating
Partnership has delivered to the Trustee an Opinion of Counsel (as specified in
the Indenture) to the effect that the Holders of such Notes will not recognize
income, gain or loss for U.S. federal income tax purposes as a result of such
defeasance or covenant defeasance and will be subject to U.S. 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 or covenant defeasance had not occurred, and such
Opinion of Counsel, in the case of defeasance, must refer to and be based upon a
ruling of the Internal Revenue Service or a change in applicable United States
federal income tax law occurring after the date of the Indenture.
"Government Obligations" means securities which are (i) direct obligations
of The United States of America or the government which issued the Foreign
Currency in which the Notes 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 of America or
such government which issued the Foreign Currency in which the Notes of such
series are payable, the payment of which is unconditionally guaranteed as a full
faith and credit obligation by the United States of America 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 depository receipt issued by a
bank or trust company as custodian with respect to any such Government
Obligation or a specific payment of interest on or principal of any such
Government Obligation held by such custodian for the account of the holder of a
depository 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 depository 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 depository receipt.
If after the Operating Partnership or the Company, as the case may be, has
deposited funds and/or Government Obligations to effect defeasance or covenant
defeasance with respect to the Notes, (a) the
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Holder of a Note is entitled to, and does, elect pursuant to Section 301 of the
Indenture or the terms of such Note to receive payment in a currency, currency
unit or composite currency other than that in which such deposit has been made
in respect of such Note, or (b) a Conversion Event occurs in respect of the
currency, currency unit or composite currency in which such deposit has been
made, the indebtedness represented by such Note shall be deemed to have been,
and will be, fully discharged and satisfied through the payment of the
principal, premium, if any, and interest on such Note as the same becomes due
out of the proceeds yielded by converting the amount so deposited in respect of
such Note into the currency, currency unit or composite currency in which such
Note becomes payable as a result of such election or such cessation of usage
based on the applicable market exchange rate (Section 1405). "Conversion Event"
means the cessation of use of (i) a currency, currency unit or composite
currency either by the government of the country which issued such currency and
for the settlement of transactions by a central bank or other public
institutions or within the international banking community, (ii) the ECU either
within the European Monetary System or for the settlement of transactions by
public institutions of or within the European Communities or (iii) any currency
unit or composite currency other than the ECU for the purposes for which it was
established. (Section 101.) All payments of principal, premium, if any, and
interest on any Note that is payable in a Foreign Currency that cease to be used
by its government of issuance shall be made in U.S. dollars.
In the event the Operating Partnership or the Company, as the case may be,
effects covenant defeasance with respect to the Note and such Notes are declared
due and payable because of the occurrence of any Event of Default other than the
Event of Default described in clause (d) under "Events of Default, Notice and
Waiver" with respect to Section 1006 through 1008 of the Indenture (which
Sections would no longer be applicable to such Notes) or described in clause (g)
under "Events of Default, Notice and Waiver" with respect to any other covenant
as to which there has been covenant defeasance, the amount in such currency,
currency unit or composite currency in which such Notes are payable, and
Government Obligations on deposit with the Trustee, will be sufficient to pay
amounts due on such Notes at the time of the Maturity Date but may not be
sufficient to pay amounts due on such Notes at the time of the acceleration
resulting from such Event of Default. However, the Operating Partnership would
remain liable to make payment of such amounts due at the time of acceleration.
MODIFICATION OF THE INDENTURE
Modifications and amendments of provisions of the Indenture may be made
only with consent of the Holders of not less than a majority in principal amount
of the outstanding Notes; provided, however, that no such modification or
amendment may, without the consent of the Holder of each such Notes affected
thereby, (a) change the Maturity Date of the principal, premium, if any, or
interest on any such Notes; (b) reduce the principal amount of, or the rate or
amount of interest on, or any premium payable on redemption of, any such Notes,
or adversely affect any right of repayment of the Holder of any such Note; (c)
change the Place of Payment, or the coin or currency, for payment of principal
of, premium, if any, or interest on any such Note; (d) impair the right to
institute suit for the enforcement of any payment on or with respect to any such
Note on or after the Maturity Date thereof; (e) reduce the above-stated
percentage of outstanding Notes necessary to modify or amend the Indenture, to
waive compliance with certain provisions thereof or certain defaults and
consequences thereunder or to reduce the quorum or voting requirements set forth
in the Indenture; or (f) modify any of the foregoing provisions or any of the
provisions relating to the waiver of certain past defaults or certain covenants,
except to increase the required percentage to effect such action or to provide
that certain other provisions may not be modified or waived without the consent
of the Holder of such Note.
The Holders of not less than a majority in principal amount of outstanding
Notes have the right to waive compliance by the Operating Partnership or the
Company with certain covenants in the Indenture relating to such series.
Modifications and amendments of the Indenture may be made by the Operating
Partnership and the Company and the Trustee without the consent of any Holder of
Notes for any of the following purposes: (i) to evidence the succession of
another Person to the Operating Partnership as obligor under the Indenture; (ii)
to add to the covenants of the Operating Partnership and the Company for the
benefit of the Holders of the Notes or to surrender any right or power conferred
upon the Operating Partnership or the Company in the
75
<PAGE> 82
Indenture; (iii) to add Events of Default for the benefit of the Holders of the
Notes; (iv) to add or change any provisions of the Indenture to facilitate the
issuance of the Notes in bearer form, or to permit or facilitate the issuance of
the Notes in uncertificated form, provided that such action shall not adversely
affect the interests of the Holders of the Notes in any material respect; (v) to
secure the Notes; (vi) to provide for the acceptance of appointment by a
successor Trustee or facilitate the administration of the trust under the
Indenture by more than one Trustee; (vii) to cure any ambiguity, defect or
inconsistency in the Indenture, provided that such action shall not adversely
affect the interests of Holders of the Notes in any material respect; and (viii)
to supplement any of the provisions of the Indenture to the extent necessary to
permit or facilitate defeasance and discharge of any series of such Notes,
provided that such action shall not adversely affect the interests of the
Holders of the Notes in any material respect.
The Indenture contains provisions for convening meetings of the Holders of
Notes (Section 1501). A meeting may be called at any time by the Trustee, and
also, upon request, by the Operating Partnership or the Holders of at least 25%
in principal amount of the outstanding Notes, in any such case upon notice given
as provided in the Indenture. Except for any consent that must be given by the
Holder of each Note affected by certain modifications and amendments of the
Indenture, any resolution presented at a meeting or adjourned meeting duly
reconvened at which a quorum is present may be adopted by the affirmative vote
of the Holders of a majority in principal amount of the outstanding Notes;
provided, however, that, except as referred to above, any resolution with
respect to any request, demand, authorization, direction, notice, consent,
waiver or other action that 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 Notes may be adopted at a meeting or adjourned meeting duly
reconvened at which a quorum is present by the affirmative vote of the Holders
of such specified percentage in principal amount of the outstanding Notes. Any
resolution passed or decision taken at any meeting of Holders of Notes duly held
in accordance with the Indenture will be binding on all Holders of Notes. The
quorum at any meeting called to adopt a resolution, and at any reconvened
meeting, will be Persons holding or representing a majority in principal amount
of the outstanding Notes; provided, however, that if any action is to be taken
at such meeting with respect to a consent or waiver which may be given by the
Holders of not less than a specified percentage in principal amount of the
outstanding Notes, the Persons holding or representing such specified percentage
in principal amount of the outstanding Notes will constitute a quorum.
Notwithstanding the foregoing provisions, if any action is to be taken at a
meeting of Holders of Notes with respect to any request, demand, authorization,
direction, notice, consent, waiver or other action that the Indenture expressly
provides may be made, given or taken by the Holders of a specified percentage in
principal amount of all outstanding Notes: (i) there shall be no minimum quorum
requirement for such meeting and (ii) the principal amount of the outstanding
Notes that vote in favor of such request, demand, authorization, direction,
notice, consent, waiver or other action shall be taken into account in
determining whether such request, demand, authorization, direction, notice,
consent, waiver or other action has been made, given or taken under the
Indenture.
TRANSFER AND EXCHANGE
A holder of Notes may transfer or exchange Notes in accordance with the
Indenture. The Trustee may require a holder, among other things, to furnish
appropriate endorsements and transfer documents and the Operating Partnership
may require a holder to pay any taxes and fees required by law or permitted by
the Indenture. The Operating Partnership is not required to transfer or exchange
any Note selected for redemption. Also, the Operating Partnership is not
required to transfer or exchange any Note for a period of 15 days before a
selection of Notes to be redeemed.
The registered holder of a Note will be treated as the owner of it for all
purposes.
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<PAGE> 83
UNITED STATES FEDERAL INCOME TAX CONSEQUENCES
The following discussion is a summary of the material U.S. federal income
tax consequences relevant to the exchange of the Old Notes for New Notes
pursuant to the Exchange Offer and the ownership and disposition of the New
Notes by holders who acquire the New Notes pursuant to the Exchange Offer.
However, the following discussion does not purport to be a complete analysis of
all potential tax effects. The discussion is based upon the Internal Revenue
Code of 1986, as amended (the "Code"), U.S. Treasury Regulations
("Regulations"), Internal Revenue Service ("IRS") rulings and pronouncements and
judicial decisions all in effect as of the date hereof, all of which are subject
to change at any time, and any such change may be applied retroactively in a
manner that could adversely affect a holder of the New Notes. The discussion
does not address all of the U.S. federal income tax consequences that may be
relevant to a holder of the New Notes in light of such holder's particular
circumstances or to holders subject to special rules, such as certain financial
institutions, insurance companies, dealers in securities, tax-exempt
organizations and persons holding the New Notes as part of a "straddle," hedge"
or "conversion transaction." In addition, this discussion is limited to persons
exchanging the Old Notes for New Notes. Moreover, the effect of any applicable
state, local or foreign tax laws is not discussed. The discussion deals only
with New Notes held as "capital assets" within the meaning of Section 1221 of
the Code.
As used herein, "U.S. Holder" means a beneficial owner of the New Notes who
or that (i) is a citizen or resident of the United States, (ii) is a
corporation, partnership or other entity created or organized in or under the
laws of the United States or political subdivision thereof (unless, in the case
of a partnership, the U.S. Treasury provides otherwise by Regulations), (iii) is
an estate the income of which is subject to U.S. federal income taxation
regardless of its source (iv) is a trust if (A) a U.S. court is able to exercise
primary supervision over the administration of the trust and (B) one or more
U.S. persons, within the meaning of Section 7701(a)(30) of the Code ("U.S.
Persons"), have authority to control all substantial decisions of the trust, or
(v) is otherwise subject to U.S. federal income tax on a net income basis in
respect of the New Notes. As used herein, a "Non-U.S. Holder" means a holder of
the New Notes who or that is not a U.S. Holder.
The Operating Partnership has not sought and will not seek any rulings from
the IRS with respect to the matters discussed below. There can be no assurance
that the IRS will not take a different position concerning the tax consequences
of the purchase, ownership or disposition of the Notes or that any such position
would not be sustained.
PROSPECTIVE INVESTORS SHOULD CONSULT THEIR OWN TAX ADVISORS WITH REGARD TO
THE APPLICATION OF THE TAX CONSIDERATIONS DISCUSSED BELOW TO THEIR PARTICULAR
SITUATIONS AS WELL AS THE APPLICATION OF ANY STATE, LOCAL, FOREIGN OR OTHER TAX
LAWS INCLUDING GIFT AND ESTATE TAX LAWS.
EXCHANGE OFFER
The exchange of Old Notes for New Notes pursuant to the Exchange Offer will
not be treated as an exchange or other taxable event for U.S. federal income tax
purposes because, under the Regulations, the New Notes do not differ materially
in kind or extent from the Old Notes. Rather, the New Notes received by a holder
will be treated as a continuation of the Old Notes in the hands of such Holder.
As a result, there will be no U.S. federal income tax consequences to holders
who exchange Old Notes for New Notes pursuant to the Exchange Offer and any such
holder will have the same tax basis and holding period in the New Notes as it
had in the Old Notes immediately before the exchange.
U.S. HOLDERS
INTEREST. The stated interest on the New Notes generally will be taxable to
a U.S. Holder as ordinary income at the time that it is paid or accrued, in
accordance with the U.S. Holder's method of accounting for U.S. federal income
tax purposes. It is not anticipated that the New Notes will give rise to
"original issue discount" income in the hands of U.S. Holders.
77
<PAGE> 84
SALE, RETIREMENT OR REDEMPTION OF A NOTE. A U.S. Holder of a New Note will
recognize gain or loss upon the sale, retirement, redemption or other taxable
disposition of such New Note in an amount equal to the difference between (a)
the amount of cash and the fair market value of other property received in
exchange therefor (other than amounts attributable to accrued but unpaid stated
interest) and (b) the U.S. Holder's adjusted tax basis in such New Note. In
general, the maximum tax rate for noncorporate taxpayers on long-term capital
gain is 20% with respect to capital assets (including the New Notes), but only
if they have been held for more than 18 months at the time of disposition.
Capital gain on assets, having a holding period of more than one year but no
more than 18 months, is taxed as "mid-term gain" at a maximum 28% rate in the
hands of noncorporate taxpayers.
U.S. Holders should be aware that the resale of the New Notes may be
affected by the "market discount" ruled of the Code under which a purchaser of a
New Note acquiring the New Note at a market discount generally would be required
to include as ordinary income a portion of the gain realized upon the
disposition or retirement of such New Note, to the extent of the market discount
that has accrued but not been included in income while the debt instrument was
held by such purchaser.
NON-U.S. HOLDERS
U.S. Withholding Tax
Interest paid to Non-U.S. Holders of the New Notes will not be subject to
U.S. income or withholding tax, provided that (i) the Non-U.S. Holder does not
actually or constructively own 10% or more of the capital or profits of the
Operating Partnership, (ii) the Non-U.S. Holder is not (a) a "controlled foreign
corporation" for U.S. federal income tax purposes that is related to the
Operating Partnership through equity ownership of (b) a bank that received the
New Note on an extension of credit made pursuant to a loan agreement entered
into in the ordinary course of its trade or business, and (iii) the beneficial
owner of the New Note provides a statement signed under penalties of perjury
that includes its name and address and certifies that it is not a U.S. Person in
compliance with applicable requirements or an exemption is otherwise
established. If these requirements cannot be met, a Non-U.S. Holder will be
subject to U.S. withholding tax at a rate of 30% (or lower treaty rate, if
applicable) on interest payments on the New Notes.
In general, any gain realized by any Non-U.S. Holder upon the sale,
exchange or redemption of a New Note will not be subject to U.S. income or
withholding tax. However, such gain will be subject to U.S. withholding tax if
(i) a Non-U.S. Holder is an individual who is present in the United States for a
total of 183 days or more during the taxable year is which the gain is realized
and certain other conditions are satisfied or (ii) the Non-U.S. Holder is
subject to tax pursuant to the provisions of U.S. tax law applicable to certain
U.S. expatriates.
U.S. Estate Tax
New Notes owned or treated as owned by an individual who is not a citizen
or resident (as specially defined for U.S. federal estate tax purposes) of the
United States at the time of death ("Nonresident Decedent") will not be
includible in the Nonresident Decedent's gross estate for U.S. federal estate
tax purposes as a result of the Nonresident Decedent's death, provided that, at
the time of death, the Nonresident Decedent does not own, actually or
constructively, 10% or more of the capital or profits of the Operating
Partnership and payments with respect to such New Notes would not have been
effectively connected with the conduct of a trade or business in the United
States by the Nonresident Decedent. A Nonresident Decedent's estate may be
subject to U.S. federal estate tax on property includible in his or her estate
for U.S. federal estate tax purposes.
INFORMATION REPORTING AND BACKUP WITHHOLDING
Certain noncorporate U.S. Holders may be subject to IRS information
reporting and backup withholding at a rate of 31% on payments of principal and
interest on the New Notes, and the proceeds from a disposition of the New Notes:
Backup withholding will be imposed where the U.S. Holder: (i) fails to furnish
its taxpayer
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<PAGE> 85
identification number ("TIN"), which, for an individual, would ordinarily be his
or her social security number, (ii) furnishes an incorrect TIN, (iii) is
notified by the IRS that he or she has failed to properly report payments of
interest or dividends, or (iv) under certain circumstances, fails to certify,
under penalties of perjury, that he or she has furnished a correct TIN and has
not been notified by the IRS that he or she is subject to backup withholding.
The Operating Partnership also will institute backup withholding or payments
made on a New Note to a U.S. Holder if instructed to do so by the IRS. A U.S.
Holder's failure to provide a correct TIN to the Operating Partnership when
requested may also subject the U.S. holders to IRS penalties.
In general interest paid with respect to a new Note and received by a
Non-U.S. Holder will not be subject to IRS information reporting or backup
withholding if the payor has received appropriate certification statements and
provided that the payor does not have actual knowledge that the Non-U.S. Holder
is a U.S. Person. Holders of the New Notes should consult their own tax advisors
regarding their qualification for exemption from backup withholding and the
procedure for obtaining such an exemption, if applicable.
The payment of the proceeds from the disposition of New Notes to or through
the U.S. office of any U.S. or foreign broker will not be subject to IRS
information reporting and possibly backup withholding if the owner certifies as
to its non-U.S. status under penalties of perjury or otherwise establishes an
exemption, provided that the broker does not have actual knowledge that the
holder is a U.S. Person or that the conditions of any other exemption are not,
in fact, satisfied. The payment of the proceeds from the disposition of a New
Note to or through a non-U.S. broker that is not a U.S. related person will not
be subject to IRS information reporting or backup withholding. For this purpose,
a "U.S. related person" is (i) a "controlled foreign corporation" for U.S.
federal income tax purposes or (ii) a foreign person 50% of more of whose gross
income from all sources for the three-year period ending with the close of its
taxable year preceding the payment (or for such part of the period that the
broker has been in existence) is derived from activities that are effectively
connected with the conduct of a U.S. trade or business.
In the case of the payment of proceeds from the disposition of New Notes to
or through a non-U.S. office of a broker that is a U.S. related person, the
Regulations require IRS information reporting on the payment unless the broker
has documentary evidence in its files that the owner is a Non-U.S. Holder and
the broker has no knowledge to the contrary. Backup withholding will not apply
to payments made through foreign offices of a broker that is a U.S. Person or a
U.S. related person (absent actual knowledge that the payee is a U.S. Person).
Any amounts withheld under the backup withholding rules from a payment to a
Non-U.S. Holder will be allowed as a credit against such Non-U.S. Holder's U.S.
federal income tax liability, if any, or otherwise be refundable, provided that
the requisite IRS procedures are followed.
PROSPECTIVE FINAL REGULATIONS
On October 6, 1997, new Regulations ("New Regulations") were issued that
modify the requirements imposed on a Non-U.S. Holder and certain intermediaries
for establishing the recipient's status as a non-U.S. Holder eligible for
exemption from or reduction in U.S. withholding tax and backup withholding
described above. In general, the New Regulations do not significantly alter the
substantive withholding and information reporting requirements but rather unify
current certification procedures and forms and clarify reliance standards. The
New Regulations generally are effective for payments made after December 31,
1998, subject to certain transition rules. In addition, the New Regulations
impose more stringent conditions on the ability of financial intermediaries
acting for a Non-U.S. Holder to provide certifications on behalf of the Non-U.S.
Holder, which may include entering into an agreement with the IRS to audit
certain documentation with respect to such certifications. Non-U.S. Holders
should consult their own tax advisors to determine the effects of the
application on the New Regulations to their particular circumstances.
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<PAGE> 86
PLAN OF DISTRIBUTION
Each broker-dealer that received New Notes for its own account pursuant to
the Exchange Offer must acknowledge that it will deliver a prospectus in
connection with any resale of such New Notes. This Prospectus, as it may be
amended or supplemented from time to time, may be used by a broker-dealer in
connection with resales of New Notes received in exchange for Old Notes where
such Old Notes were acquired as a result of market-making activities or other
trading activities. The Operating Partnership has agreed that, starting on the
Expiration Date and ending one year after the Expiration Date, it will make this
Prospectus, as amended or supplemented, available to any broker-dealer for use
in connection with any such resale. In addition, until such date, all dealers
effecting transactions in the New Notes may be required to deliver a prospectus.
The Operating Partnership will not receive any proceeds from any sales of
New Notes by broker-dealers or others. New Notes received by broker-dealers for
their own account pursuant to the Exchange Offer may be sold from time to time
in one or more transactions in the over-the-counter market, in negotiated
transactions, through the writing of options on the New Notes or a combination
of such methods of resale, at market prices prevailing at the time of resale, at
prices related to such prevailing market prices or negotiated prices. Any such
resale may be made directly to purchasers or to or through brokers or dealers
who may receive compensation in the form of commissions or concessions from any
such broker-dealer and/or the purchasers of any such New Notes. Any
broker-dealer that resells New Notes that were received by it for its own
account pursuant to the Exchange Offer and any broker or dealer that
participates in a distribution of such New Notes may be deemed to be an
"underwriter" within the meaning of the Securities Act and any profit from any
such resale of New Notes and any commissions received by any such persons may be
deemed to be underwriting compensation under the Securities Act. The Letter of
Transmittal states that by acknowledging that it will deliver and by delivering
a prospectus, a broker-dealer will not be deemed to admit that it is an
"underwriter" within the meaning of the Securities Act.
For a period one year after the Expiration Date, the Operating Partnership
will promptly send additional copies of this Prospectus and any amendment or
supplement to this Prospectus to any broker-dealer that requests such documents
in the Letter of Transmittal. The Operating Partnership have agreed to pay
certain expenses incident to the Exchange Offer other than commissions or
concessions of any brokers or dealers and will indemnify the holders of the
Notes (including any broker-dealers) against certain liabilities, including
liabilities under the Securities Act.
LEGAL MATTERS
The validity of the New Notes offered by this Prospectus will be passed
upon for the Operating Partnership by Morrison & Foerster LLP, Palo Alto,
California. Morrison & Foerster LLP will rely upon the opinion of Hogan &
Hartson LLP, Baltimore, Maryland as to certain matters of Maryland law.
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<PAGE> 87
GLENBOROUGH PROPERTIES, L.P.
A CALIFORNIA LIMITED PARTNERSHIP
INDEX TO FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
CONSOLIDATED AND COMBINED FINANCIAL STATEMENTS OF
GLENBOROUGH PROPERTIES, L.P. AND COMBINED FINANCIAL
STATEMENTS OF THE GRT PREDECESSOR ENTITIES
Report of Independent Public Accountants.................... F-2
Glenborough Properties, L.P. Consolidated Balance Sheets as
of March 31, 1998, and December 31, 1997 and 1996......... F-3
Glenborough Properties, L.P. Consolidated Statements of
Operations for the three months ended March 31, 1998 and
1997...................................................... F-4
Glenborough Properties, L.P. and GRT Predecessor Entities
Consolidated and Combined Statements of Operations for the
years ended December 31, 1997, 1996 and 1995.............. F-5
Glenborough Properties, L.P. and GRT Predecessor Entities
Consolidated and Combined Statements of Equity for the
years ended December 31, 1997, 1996 and 1995 and the
three months ended March 31, 1998......................... F-6
Glenborough Properties, L.P. Consolidated Statements of Cash
Flows for the
three months ended March 31, 1998 and 1997................ F-7
Glenborough Properties, L.P. and GRT Predecessor Entities
Consolidated and Combined Statements of Cash Flows for the
years ended December 31, 1997, 1996 and 1995.............. F-8
Glenborough Properties, L.P. Notes to Consolidated Financial
Statements................................................ F-9
Glenborough Properties, L.P. Schedule III -- Real Estate and
Accumulated Depreciation.................................. F-27
Glenborough Properties, L.P. Schedule IV -- Mortgage Loans
Receivable, Secured by Real Estate........................ F-34
COMBINED STATEMENTS OF REVENUES AND CERTAIN EXPENSES OF THE
PRU-BACHE PORTFOLIO
Report of Independent Public Accountants.................... F-36
Combined Statements of Revenues and Certain Expenses of the
Pru-Bache Portfolio for the three months ended March 31,
1998 and each of the three years ended December 31, 1997,
1996
and 1995.................................................. F-37
Notes to Combined Statements of Revenue and Certain Expenses
of the Pru-Bache Portfolio for the three months ended
March 31, 1998 and each of the three years ended December
31, 1997, 1996 and 1995................................... F-38
</TABLE>
F-1
<PAGE> 88
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To the Partners of
GLENBOROUGH PROPERTIES, L.P.,
A CALIFORNIA LIMITED PARTNERSHIP
We have audited the accompanying consolidated balance sheets of GLENBOROUGH
PROPERTIES, L.P., A CALIFORNIA LIMITED PARTNERSHIP, as of December 31, 1997 and
1996, the related consolidated statements of operations, equity and cash flows
for the years ended December 31, 1997 and 1996, and the combined statements of
operations, equity and cash flows of the GRT Predecessor Entities for the year
ended December 31, 1995. These consolidated and combined financial statements
and the schedules referred to below are the responsibility of the Partnership's
management. Our responsibility is to express an opinion on these consolidated
and combined financial statements and schedules 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 GLENBOROUGH
PROPERTIES, L.P., A CALIFORNIA LIMITED PARTNERSHIP, as of December 31, 1997 and
1996, the consolidated results of its operations and its cash flows for the
years ended December 31, 1997 and 1996, and the combined results of operations
and cash flows of the GRT Predecessor Entities for the year ended December 31,
1995, in conformity with generally accepted accounting principles.
Our audits were made for the purpose of forming an opinion on the basic
consolidated and combined financial statements taken as a whole. The
accompanying schedules, Schedule III -- Real Estate and Accumulated Depreciation
and Schedule IV -- Mortgage Loans Receivable Secured by Real Estate, are
presented for the purpose of complying with the Securities and Exchange
Commission's rules and are not a required part of the basic consolidated and
combined financial statements. These schedules have been subjected to the
auditing procedures applied in our audits of the basic consolidated and combined
financial statements and, in our opinion, are fairly stated in all material
respects in relation to the basic consolidated and combined financial statements
taken as a whole.
ARTHUR ANDERSEN LLP
San Francisco, California
January 21, 1998
F-2
<PAGE> 89
GLENBOROUGH PROPERTIES, L.P.,
A CALIFORNIA LIMITED PARTNERSHIP
CONSOLIDATED BALANCE SHEETS
MARCH 31, 1998 AND DECEMBER 31, 1997 AND 1996
(IN THOUSANDS, EXCEPT UNIT AMOUNTS)
ASSETS
<TABLE>
<CAPTION>
MARCH 31, DECEMBER 31, DECEMBER 31,
1998 1997 1996
(UNAUDITED) (AUDITED) (AUDITED)
----------- ------------ ------------
<S> <C> <C> <C>
Rental property, net of accumulated depreciation of
$50,138, $41,213 and $28,784 in 1998, 1997 and 1996,
respectively......................................... $1,306,931 $825,218 $161,945
Mortgage loans receivable, net of provision for loss of
$863 in 1996......................................... 3,740 3,692 9,905
Cash and cash equivalents............................... 6,238 3,670 785
Other assets............................................ 36,320 23,160 5,117
---------- -------- --------
TOTAL ASSETS.................................... $1,353,229 $855,740 $177,752
========== ======== ========
LIABILITIES AND PARTNERS' EQUITY
Liabilities:
Mortgage loans.......................................... $ 242,083 $148,139 $ 54,584
Secured bank line....................................... -- -- 21,307
Unsecured bank line..................................... 50,332 80,160 --
Unsecured senior notes.................................. 150,000 -- --
Other liabilities....................................... 22,070 12,267 3,316
---------- -------- --------
Total liabilities.................................... 464,485 240,566 79,207
---------- -------- --------
Partners' Equity:
General partner, 314,568, 314,530 and 78,459 units
issued and outstanding at March 31, 1998 and December
31, 1997 and 1996, respectively...................... 5,515 5,669 930
Limited partners, 31,142,256, 31,138,420 and 7,767,439
units issued and outstanding at March 31, 1998 and
December 31, 1997 and 1996, respectively............. 883,229 609,505 97,615
---------- -------- --------
Total partners' equity............................... 888,744 615,174 98,545
---------- -------- --------
TOTAL LIABILITIES AND PARTNERS' EQUITY.......... $1,353,229 $855,740 $177,752
========== ======== ========
</TABLE>
See accompanying notes to consolidated financial statements.
F-3
<PAGE> 90
GLENBOROUGH PROPERTIES, L.P.,
A CALIFORNIA LIMITED PARTNERSHIP
CONSOLIDATED STATEMENTS OF OPERATIONS
FOR THE THREE MONTHS ENDED MARCH 31, 1998 AND 1997
(IN THOUSANDS, EXCEPT PER UNIT AMOUNTS)
(UNAUDITED)
<TABLE>
<CAPTION>
1998 1997
----------- ----------
<S> <C> <C>
REVENUE
Rental revenue............................................ $ 45,963 $ 7,907
Interest and other income................................. 337 299
Net gain on sales of rental properties.................... 1,446 --
Gain on collection of mortgage loan receivable............ -- 154
----------- ----------
Total revenue.......................................... 47,746 8,360
----------- ----------
EXPENSES
Property operating expenses, including $3,039 and $456
paid to an affiliate in 1998 and 1997, respectively.... 15,671 2,639
General and administrative, including $1,815 and $482 paid
to an affiliate in 1998 and 1997, respectively......... 1,873 589
Depreciation and amortization............................. 9,951 1,504
Interest expense.......................................... 9,173 1,573
----------- ----------
Total expenses......................................... 36,668 6,305
----------- ----------
Net income.................................................. $ 11,078 $ 2,055
----------- ----------
Preferred partner interest distribution..................... (3,910) --
----------- ----------
Net income allocable to general and limited partners........ $ 7,168 $ 2,055
=========== ==========
Net income allocable to general and limited partners per
partnership unit.......................................... $ 0.23 $ 0.25
=========== ==========
Weighted average number of partnership units outstanding.... 31,454,370 8,273,677
=========== ==========
</TABLE>
See accompanying notes to consolidated financial statements.
F-4
<PAGE> 91
GLENBOROUGH PROPERTIES, L.P.,
A CALIFORNIA LIMITED PARTNERSHIP
AND GRT PREDECESSOR ENTITIES
CONSOLIDATED AND COMBINED STATEMENTS OF OPERATIONS
FOR THE YEARS ENDED DECEMBER 31, 1997, 1996 AND 1995
(IN THOUSANDS, EXCEPT PER UNIT AMOUNTS)
(AUDITED)
<TABLE>
<CAPTION>
GLENBOROUGH GLENBOROUGH GRT
PROPERTIES, PROPERTIES, PREDECESSOR
L.P. L.P. ENTITIES
CONSOLIDATED CONSOLIDATED COMBINED
1997 1996 1995
------------ ------------ ------------
<S> <C> <C> <C>
REVENUE
Rental revenue...................................... $ 61,393 $ 17,943 $15,454
Fees and reimbursements, including $2,995 from
affiliates....................................... -- -- 16,019
Interest and other income........................... 1,627 1,070 2,698
Net gain on sales of rental properties.............. 839 321 --
Gain on collection of mortgage loan receivable...... 652 -- --
----------- ---------- -------
Total revenue.................................... 64,511 19,334 34,171
----------- ---------- -------
EXPENSES
Property operating expenses, including $3,028 and
$769 paid to an affiliate in 1997 and 1996,
respectively..................................... 20,904 5,735 8,576
General and administrative, including $3,382 and
$1,120 paid to an affiliate in 1997 and 1996,
respectively..................................... 4,002 1,490 15,947
Depreciation and amortization....................... 14,698 4,452 4,762
Interest expense.................................... 9,668 3,913 2,129
Provision for loss on investments in real estate,
real estate partnerships and mortgage loans
receivable....................................... -- -- 1,876
Consolidation costs................................. -- 6,082 --
Litigation costs.................................... -- 1,155 --
----------- ---------- -------
Total expenses................................... 49,272 22,827 33,290
----------- ---------- -------
Income (loss) from operations before provision for
income taxes and extraordinary item................. 15,239 (3,493) 881
Provision for income taxes............................ -- -- (357)
Loss on early extinguishment of debt.................. (843) (186) --
----------- ---------- -------
Net income (loss)..................................... $ 14,396 $ (3,679) $ 524
=========== ========== =======
PER PARTNERSHIP UNIT DATA:
Net income (loss) before extraordinary item........... $ 0.91 $ (0.72)
Extraordinary item.................................... (0.05) (0.04)
----------- ----------
Net income (loss)..................................... $ 0.86 $ (0.76)
=========== ==========
Weighted average number of partnership units
outstanding......................................... 16,776,445 4,855,779
=========== ==========
</TABLE>
See accompanying notes to consolidated financial statements.
F-5
<PAGE> 92
GLENBOROUGH PROPERTIES, L.P.,
A CALIFORNIA LIMITED PARTNERSHIP
AND GRT PREDECESSOR ENTITIES
CONSOLIDATED AND COMBINED STATEMENTS OF EQUITY
FOR THE YEARS ENDED DECEMBER 31, 1997, 1996 AND 1995 (AUDITED)
AND THE THREE MONTHS ENDED MARCH 31, 1998 (UNAUDITED)
(IN THOUSANDS)
<TABLE>
<CAPTION>
GRT PREDECESSOR ENTITIES COMBINED
------------------------------------------------------------------------------
ADDITIONAL RECEIVABLE RETAINED
GENERAL LIMITED COMMON PAID-IN FROM EARNINGS
PARTNER PARTNERS STOCK CAPITAL STOCKHOLDER (DEFICIT) TOTAL
------- -------- ------ ---------- ----------- ---------- --------
<S> <C> <C> <C> <C> <C> <C> <C>
BALANCE AT DECEMBER 31, 1994................ (1,730) 85,337 5 6,613 (8,763) (904) 80,558
Distributions............................. (117) (10,507) -- -- -- -- (10,624)
Redemption of shares...................... -- -- (2) (6,613) -- (6,533) (13,148)
Repayment of Stockholder advances, net.... -- -- -- -- 8,763 -- 8,763
Net income (loss)......................... 17 1,751 -- -- -- (1,244) 524
Issuance of investor notes in exchange for
units of limited partnership interest... -- (2,483) -- -- -- -- (2,483)
Equity in consolidation attributable to GC
and other assets of the Company......... -- (5,998) -- -- -- -- (5,998)
Consolidation and issuance of partnership
units................................... 1,830 (68,100) (3) -- -- 8,681 (57,592)
------- -------- --- ------- ------- ------- --------
BALANCE AT DECEMBER 31, 1995................ -- -- -- -- -- -- --
------- -------- --- ------- ------- ------- --------
Contributions............................. -- -- -- -- -- -- --
Distributions ($0.90 per unit)............ -- -- -- -- -- -- --
Net loss.................................. -- -- -- -- -- -- --
------- -------- --- ------- ------- ------- --------
BALANCE AT DECEMBER 31, 1996................ -- -- -- -- -- -- --
------- -------- --- ------- ------- ------- --------
Contributions............................. -- -- -- -- -- -- --
Distributions ($1.28 per unit)............ -- -- -- -- -- -- --
Net income................................ -- -- -- -- -- -- --
------- -------- --- ------- ------- ------- --------
BALANCE AT DECEMBER 31, 1997................ -- -- -- -- -- -- --
------- -------- --- ------- ------- ------- --------
Contributions............................. -- -- -- -- -- -- --
Distributions ($0.42 per unit)............ -- -- -- -- -- -- --
Net income................................ -- -- -- -- -- -- --
------- -------- --- ------- ------- ------- --------
BALANCE AT MARCH 31, 1998................... $ -- $ -- $-- $ -- $ -- $ -- $ --
======= ======== === ======= ======= ======= ========
<CAPTION>
GLENBOROUGH PROPERTIES, L.P.
CONSOLIDATED
-----------------------------
GENERAL LIMITED
PARTNER PARTNERS TOTAL
------- -------- --------
<S> <C> <C> <C>
BALANCE AT DECEMBER 31, 1994................ -- -- --
Distributions............................. -- -- --
Redemption of shares...................... -- -- --
Repayment of Stockholder advances, net.... -- -- --
Net income (loss)......................... -- -- --
Issuance of investor notes in exchange for
units of limited partnership interest... -- -- --
Equity in consolidation attributable to GC
and other assets of the Company......... -- -- --
Consolidation and issuance of partnership
units................................... 576 57,016 57,592
------ -------- --------
BALANCE AT DECEMBER 31, 1995................ 576 57,016 57,592
------ -------- --------
Contributions............................. 480 48,935 49,415
Distributions ($0.90 per unit)............ (89) (4,694) (4,783)
Net loss.................................. (37) (3,642) (3,679)
------ -------- --------
BALANCE AT DECEMBER 31, 1996................ 930 97,615 98,545
------ -------- --------
Contributions............................. 4,943 519,650 524,593
Distributions ($1.28 per unit)............ (348) (22,012) (22,360)
Net income................................ 144 14,252 14,396
------ -------- --------
BALANCE AT DECEMBER 31, 1997................ 5,669 609,505 615,174
------ -------- --------
Contributions............................. -- 275,796 275,796
Distributions ($0.42 per unit)............ (226) (13,078) (13,304)
Net income................................ 72 11,006 11,078
------ -------- --------
BALANCE AT MARCH 31, 1998................... $5,515 $883,229 $888,744
====== ======== ========
</TABLE>
See accompanying notes to consolidated financial statements.
F-6
<PAGE> 93
GLENBOROUGH PROPERTIES, L.P.,
A CALIFORNIA LIMITED PARTNERSHIP
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE THREE MONTHS ENDED MARCH 31, 1998 AND 1997
(IN THOUSANDS)
(UNAUDITED)
<TABLE>
<CAPTION>
1998 1997
--------- --------
<S> <C> <C>
Cash flows from operating activities:
Net income................................................ $ 11,078 $ 2,055
Adjustments to reconcile net income to net cash provided
by operating activities:
Depreciation and amortization.......................... 9,951 1,504
Amortization of loan fees, included in interest
expense............................................... 418 64
Gain on collection of mortgage loan receivable......... -- (154)
Net gain on sales of rental properties................. (1,446) --
Changes in certain assets and liabilities, net......... (4,095) (3,709)
--------- --------
Net cash provided by (used for) operating
activities...................................... 15,906 (240)
--------- --------
Cash flows from investing activities:
Net proceeds from sales of rental properties.............. 28,559 --
Additions to rental property.............................. (412,585) (8,226)
Additions to mortgage loans receivable.................... (49) (250)
Principal receipts on mortgage loans receivable........... 1 6,855
--------- --------
Net cash used for investing activities............ (384,074) (1,621)
--------- --------
Cash flows from financing activities:
Proceeds from borrowings.................................. $ 309,365 $ 10,700
Repayment of borrowings................................... (201,005) (32,196)
Partner contributions..................................... 275,680 66,817
Partner distributions..................................... (13,304) (2,521)
--------- --------
Net cash provided by financing activities......... 370,736 42,800
--------- --------
Net increase in cash and cash equivalents................... 2,568 40,939
Cash and cash equivalents at beginning of period............ 3,670 785
--------- --------
Cash and cash equivalents at end of period.................. $ 6,238 $ 41,724
========= ========
Supplemental disclosure of cash flow information:
Cash paid for interest.................................... $ 7,329 $ 1,467
========= ========
Supplemental disclosure of Non-Cash Investing and Financing
Activities:
Acquisition of real estate through assumption of first
trust deed notes payable............................... $ 105,756 $ 4,612
========= ========
Acquisition of real estate through issuance of Partnership
units.................................................. $ 116 $ --
========= ========
</TABLE>
See accompanying notes to consolidated financial statements.
F-7
<PAGE> 94
GLENBOROUGH PROPERTIES, L.P.,
A CALIFORNIA LIMITED PARTNERSHIP
AND GRT PREDECESSOR ENTITIES
CONSOLIDATED AND COMBINED STATEMENTS OF CASH FLOWS
FOR THE YEARS ENDED DECEMBER 31, 1997, 1996 AND 1995
(IN THOUSANDS)
(AUDITED)
<TABLE>
<CAPTION>
GLENBOROUGH GLENBOROUGH GRT
PROPERTIES, PROPERTIES, PREDECESSOR
L.P. L.P. ENTITIES
CONSOLIDATED CONSOLIDATED COMBINED
1997 1996 1995
------------ ------------ -----------
<S> <C> <C> <C>
Cash flows from operating activities:
Net income (loss)......................................... $ 14,396 $ (3,679) $ 524
Adjustments to reconcile net income (loss) to net cash
provided by (used for) operating activities:
Depreciation and amortization........................... 14,698 4,452 4,762
Amortization of loan fees, included in interest
expense............................................... 221 193 --
Provision for loss on investments in real estate, real
estate partnerships and mortgage loans receivable..... -- -- 1,876
Net gain on sales of rental properties.................. (839) (321) --
Gain on collection of mortgage loan receivable.......... (652) -- --
Loss on debt refinancing................................ 843 186 --
Consolidation costs..................................... -- 6,082 --
Litigation costs........................................ -- 1,155 --
-------- -------- --------
Changes in certain assets and liabilities, net.......... (9,816) (3,216) (22,219)
-------- -------- --------
Net cash provided by (used for) operating
activities....................................... 18,851 4,852 (15,057)
Cash flows from investing activities:
Net proceeds from sales of rental properties.............. 12,950 2,882 --
Additions to rental property.............................. (586,965) (62,286) (3,925)
Additions to mortgage loans receivable.................... (1,855) (2,694) --
Principal receipts on mortgage loans receivable........... 8,068 4 12,581
-------- -------- --------
Net cash provided by (used for) investing
activities....................................... (567,802) (62,094) 8,656
-------- -------- --------
Cash flows from financing activities:
Proceeds from borrowings.................................. $467,689 $ 52,599 $ 8,910
Repayment of borrowings................................... (375,909) (35,593) (14,050)
Advances to/repayments from Stockholder, net.............. -- -- 8,763
Redemption of shares...................................... -- -- (10,389)
Partner contributions..................................... 482,416 45,666 --
Partner distributions..................................... (22,360) (4,783) (10,624)
-------- -------- --------
Net cash provided by (used for) financing
activities....................................... 551,836 57,889 (17,390)
-------- -------- --------
Net increase (decrease) in cash and cash equivalents........ 2,885 647 (23,791)
Cash and cash equivalents at beginning of period............ 785 138 23,929
-------- -------- --------
Cash and cash equivalents at end of period.................. $ 3,670 $ 785 $ 138
======== ======== ========
Supplemental disclosure of cash flow information:
Cash paid for interest.................................... $ 9,352 $ 3,234 $ 1,951
======== ======== ========
Supplemental disclosure of Non-Cash Investing and Financing
Activities:
Acquisition of real estate through assumption of first
trust deed notes payable................................ $ 60,628 $ 25,200 $ --
======== ======== ========
Acquisition of real estate through issuance of Partnership
units................................................... $ 42,177 $ 3,749 $ --
======== ======== ========
Conversion of partnership units into investor notes
payable................................................. $ -- $ -- $ 2,483
======== ======== ========
Consolidation and issuance of partnership units........... $ -- $ -- $ 63,590
======== ======== ========
Refinancing of debt of GRT Predecessor Entities........... $ -- $ -- $ 28,200
======== ======== ========
Acquisition of real estate through foreclosure and
assumption of first trust deed note payable............. $ -- $ -- $ 3,908
======== ======== ========
</TABLE>
See accompanying notes to consolidated financial statements.
F-8
<PAGE> 95
GLENBOROUGH PROPERTIES, L.P.,
A CALIFORNIA LIMITED PARTNERSHIP
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
MARCH 31, 1998 (UNAUDITED), AND DECEMBER 31, 1997 (AUDITED) AND 1996 (AUDITED)
NOTE 1. ORGANIZATION
Glenborough Properties, L.P., a California Limited Partnership (the
"Operating Partnership") was organized in the State of California on August 23,
1995. The Operating Partnership is the primary operating subsidiary of
Glenborough Realty Trust Incorporated (the "Company"). On December 31, 1995, the
Company completed a consolidation (the "Consolidation") in which eight public
limited partnerships (the "Partnerships," collectively with Glenborough
Corporation (defined below), the "GRT Predecessor Entities"), merged with and
into the Company. The Company (i) issued 5,753,709 shares (the "Shares") of
$.001 par value Common Stock to the Partnerships in exchange for 3,979,376
Operating Partnership units; and (ii) merged with Glenborough Corporation, a
California Corporation ("GC"), with the Company being the surviving entity. The
Company then transferred certain real estate and related assets to the Operating
Partnership in exchange for a sole general partner interest of 1% and a limited
partnership interest of 85.37% (91.47% limited partnership interest as of March
31, 1998). The Operating Partnership also acquired interests in certain
warehouse distribution facilities from GPA, Ltd., a California limited
partnership ("GPA"). The Operating Partnership commenced operations on January
1, 1996.
The Operating Partnership, through several subsidiaries, is engaged
primarily in the ownership, operation, management, acquisition, expansion and
development of various income-producing properties. As of March 31, 1998, the
Operating Partnership, directly and through various subsidiaries in which it
owns 99% of the ownership interests, controls a total of 147 real estate
projects.
NOTE 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
BASIS OF PRESENTATION
The accompanying financial statements present the consolidated financial
position of the Operating Partnership and its majority owned subsidiaries as of
March 31, 1998 (unaudited), and December 31, 1997 and 1996, the consolidated
results of operations and cash flows of the Operating Partnership and its
majority owned subsidiaries for the three months ended March 31, 1998
(unaudited) and 1997 (unaudited) and the years ended December 31, 1997 and 1996,
and the combined results of operations and cash flows of the GRT Predecessor
Entities for the year ended December 31, 1995, as the Consolidation discussed in
Note 1 was not effective until December 31, 1995. All intercompany transactions,
receivables and payables have been eliminated in consolidation.
In the opinion of management, the accompanying unaudited financial
statements contain all adjustments (consisting of only normal accruals)
necessary to present fairly the financial position and results of operations of
the Operating Partnership as of March 31, 1998, and for the three months ended
March 31, 1998 and 1997.
USE OF ESTIMATES
The preparation of financial statements 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 results of operations during the reporting period. Actual
results could differ from those estimates.
NEW ACCOUNTING PRONOUNCEMENTS
In June 1997, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No. 131 (SFAS 131), "Disclosures about Segments
of an Enterprise and Related Information," which will be effective for financial
statements issued for fiscal years beginning after December 15, 1997. SFAS 131
will require the Operating Partnership to report certain financial and
descriptive information about
F-9
<PAGE> 96
GLENBOROUGH PROPERTIES, L.P.,
A CALIFORNIA LIMITED PARTNERSHIP
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
MARCH 31, 1998 (UNAUDITED), AND DECEMBER 31, 1997 (AUDITED) AND 1996 (AUDITED)
its reportable operating segments, segments for which separate financial
information is available that is evaluated regularly by management in deciding
how to allocate resources and in assessing performance. For these segments, SFAS
131 will require the Operating Partnership to report profit and loss, certain
specific revenue and expense items and assets. It also requires disclosures
about each segment's products and services, geographic areas of operation and
major customers. The Operating Partnership will adopt the disclosures required
by SFAS 131 in the financial statements for the year ended December 31, 1998.
INVESTMENTS IN REAL ESTATE
Investments in real estate are stated at cost unless circumstances indicate
that cost cannot be recovered, in which case, the carrying value of the property
is reduced to estimated fair value. Estimated fair value: (i) is based upon the
Operating Partnership's plans for the continued operation of each property; (ii)
is computed using estimated sales price, as determined by prevailing market
values for comparable properties and/or the use of capitalization rates
multiplied by annualized rental income based upon the age, construction and use
of the building, and (iii) does not purport, for a specific property, to
represent the current sales price that the Operating Partnership could obtain
from third parties for such property. The fulfillment of the Operating
Partnership's plans related to each of its properties is dependent upon, among
other things, the presence of economic conditions which will enable the
Operating Partnership to continue to hold and operate the properties prior to
their eventual sale. Due to uncertainties inherent in the valuation process and
in the economy, it is reasonably possible that the actual results of operating
and disposing of the Operating Partnership's properties could be materially
different than current expectations.
Depreciation is provided using the straight line method over the useful
lives of the respective assets.
The useful lives are as follows:
<TABLE>
<S> <C>
Buildings and Improvements.......... 10 to 40 years
Tenant Improvements................. Term of the related lease
Furniture and Equipment............. 5 to 7 years
</TABLE>
MORTGAGE LOANS RECEIVABLE
The Operating Partnership monitors the recoverability of its loans and
notes receivable through ongoing contact with the borrowers to ensure timely
receipt of interest and principal payments, and where appropriate, obtains
financial information concerning the operation of the properties. Interest on
mortgage loans is recognized as revenue as it accrues during the period the loan
is outstanding. Mortgage loans receivable will be evaluated for impairment if it
becomes evident that the borrower is unable to meet its debt service obligations
in a timely manner and cannot satisfy its payments using sources other than the
operations of the property securing the loan. If it is concluded that such
circumstances exist, then the loan will be considered to be impaired and its
recorded amount will be reduced to the fair value of the collateral securing it.
Interest income will also cease to accrue under such circumstances. Due to
uncertainties inherent in the valuation process, it is reasonably possible that
the amount ultimately realized from the Operating Partnership's collection on
these receivables will be different than the recorded amounts.
CASH EQUIVALENTS
The Operating Partnership considers short-term investments (including
certificates of deposit) with a maturity of three months or less at the time of
investment to be cash equivalents.
F-10
<PAGE> 97
GLENBOROUGH PROPERTIES, L.P.,
A CALIFORNIA LIMITED PARTNERSHIP
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
MARCH 31, 1998 (UNAUDITED), AND DECEMBER 31, 1997 (AUDITED) AND 1996 (AUDITED)
FAIR VALUE OF FINANCIAL INSTRUMENTS
Statement of Financial Accounting Standards No. 107 requires disclosure
about fair value for all financial instruments. Based on the borrowing rates
currently available to the Operating Partnership, the carrying amount of debt
approximates fair value. Cash and cash equivalents consist of demand deposits,
certificates of deposit and short-term investments with financial institutions.
The carrying amount of cash and cash equivalents, as well as the mortgage notes
receivable described above, approximates fair value.
DEFERRED FINANCING AND OTHER FEES
Fees paid in connection with the financing and leasing of the Operating
Partnership's properties are amortized over the term of the related notes
payable or leases and are included in other assets.
REVENUES
All leases are classified as operating leases. Rental revenue is recognized
as earned over the terms of the leases.
For the three months ended March 31, 1998 (unaudited), and the years ended
December 31, 1997 and 1996, no tenants represented 10% or more of rental revenue
of the Operating Partnership. For the year ended December 31, 1995, rental
revenue from two properties leased to Navistar International represented
approximately 10% of the GRT Predecessor Entities' total rental revenue.
Fees and reimbursement revenue (in 1995) consists of property management
fees, overhead administration fees and transaction fees from the acquisition,
disposition, refinancing, leasing and construction supervision of real estate
(see Note 7).
Revenues are recognized only after the Operating Partnership is
contractually entitled to receive payment, after the services for which the fee
is received have been provided, and after the ability and timing of payments are
reasonably assured and predictable.
NET INCOME (LOSS) PER PARTNERSHIP UNIT
Net income (loss) per partnership unit is calculated using the weighted
average number of partnership units outstanding during the period. No effect on
per unit amounts has been attributed to a potential conversion of the Preferred
Partner Interest (see Note 9) into limited partner units as the impact is anti-
dilutive. No other potentially dilutive securities of the Operating Partnership
exist.
INCOME TAXES
No provision for income taxes is included in the Consolidated Statements of
Operations for the three months ended March 31, 1998 (unaudited) and 1997
(unaudited) and the years ended December 31, 1997 and 1996, as the Operating
Partnership's results of operations are allocated to the partners for inclusion
in their respective income tax returns.
Certain of the Operating Partnership's predecessors were subject to income
taxes, the provisions for which have been included in the accompanying combined
results of operations of the GRT Predecessor Entities.
F-11
<PAGE> 98
GLENBOROUGH PROPERTIES, L.P.,
A CALIFORNIA LIMITED PARTNERSHIP
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
MARCH 31, 1998 (UNAUDITED), AND DECEMBER 31, 1997 (AUDITED) AND 1996 (AUDITED)
NOTE 3. INVESTMENTS IN REAL ESTATE
The cost and accumulated depreciation of real estate investments as of
March 31, 1998, and December 31, 1997 and 1996 are as follows (in thousands):
<TABLE>
<CAPTION>
BUILDINGS AND TOTAL ACCUMULATED NET
1998: LAND IMPROVEMENTS COST DEPRECIATION RECORDED VALUE
----- -------- ------------- ---------- ------------ --------------
<S> <C> <C> <C> <C> <C>
Office properties................... $ 89,686 $ 700,237 $ 789,923 $(15,242) $ 774,681
Office/Flex properties.............. 52,172 218,338 270,510 (5,080) 265,430
Industrial properties............... 18,619 77,482 96,101 (7,676) 88,425
Retail properties................... 16,687 52,069 68,756 (6,227) 62,529
Multi-family properties............. 17,247 70,324 87,571 (1,961) 85,610
Hotel properties.................... 5,587 38,621 44,208 (13,952) 30,256
-------- ---------- ---------- -------- ----------
Total............................... $199,998 $1,157,071 $1,357,069 $(50,138) $1,306,931
======== ========== ========== ======== ==========
1997:
Office properties................... $ 62,442 $ 282,129 $ 344,571 $ (9,310) $ 335,261
Office/Flex properties.............. 46,496 163,606 210,102 (3,274) 206,828
Industrial properties............... 20,903 88,802 109,705 (7,503) 102,202
Retail properties................... 16,687 50,447 67,134 (5,845) 61,289
Multi-family properties............. 19,512 71,288 90,800 (1,780) 89,020
Hotel properties.................... 5,587 38,532 44,119 (13,501) 30,618
-------- ---------- ---------- -------- ----------
Total............................... $171,627 $ 694,804 $ 866,431 $(41,213) $ 825,218
======== ========== ========== ======== ==========
1996:
Office properties................... $ 9,721 $ 39,582 $ 49,303 $ (4,224) $ 45,079
Office/Flex properties.............. 2,326 9,163 11,489 (624) 10,865
Industrial properties............... 4,293 23,633 27,926 (5,533) 22,393
Retail properties................... 16,578 30,681 47,259 (6,164) 41,095
Multi-family properties............. 5,652 17,440 23,092 (510) 22,582
Hotel properties.................... 5,586 26,074 31,660 (11,729) 19,931
-------- ---------- ---------- -------- ----------
Total............................... $ 44,156 $ 146,573 $ 190,729 $(28,784) $ 161,945
======== ========== ========== ======== ==========
</TABLE>
The Operating Partnership leases its commercial and industrial property
under non-cancelable operating lease agreements. Future minimum rents to be
received as of December 31, 1997 are as follows (in thousands):
<TABLE>
<CAPTION>
YEAR ENDING
DECEMBER 31,
------------
<S> <C>
1998............................................. $17,160
1999............................................. 13,131
2000............................................. 13,393
2001............................................. 12,109
2002............................................. 6,174
Thereafter....................................... 24,123
-------
$86,090
=======
</TABLE>
F-12
<PAGE> 99
GLENBOROUGH PROPERTIES, L.P.,
A CALIFORNIA LIMITED PARTNERSHIP
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
MARCH 31, 1998 (UNAUDITED), AND DECEMBER 31, 1997 (AUDITED) AND 1996 (AUDITED)
1996 PROPERTY ACQUISITIONS AND DISPOSITIONS (IN THOUSANDS, EXCEPT UNIT AND SHARE
AMOUNTS)
In June 1996, the Operating Partnership sold the two self-storage
facilities held in its industrial portfolio. The sales price for these two
facilities was $2,900. The sales generated a gain of $321 and cash proceeds of
$2,882. From these proceeds, $790 was paid down on the Operating Partnership's
previous secured line of credit from Wells Fargo Bank (the "Line of Credit").
The sale was an all-cash sale and the Operating Partnership has no continuing
obligations or involvement with these properties. Accordingly, the Operating
Partnership recognized the sale of the two self-storage facilities under the
full accrual method of accounting.
In July 1996, the Operating Partnership acquired a 23-story, 272,443 square
foot office building (the "UCT Property"), in St. Louis, Missouri. The total
acquisition cost, including capitalized costs, was approximately $18,844, which
consisted of $350 in the form of 23,333 Operating Partnership units (based on a
per unit value of $15.00), and the balance paid in cash. The cash portion was
financed through advances under the Line of Credit.
In August 1996, the Operating Partnership acquired a 64-room hotel property
(the "the San Antonio Hotel"), which is located in San Antonio, Texas. The total
acquisition cost, including capitalized costs, was approximately $2,805, which
was paid in cash. The acquisition was financed with an advance under the Line of
Credit.
In August 1996, the Operating Partnership also expanded an existing
shopping center in Tampa, Florida through a purchase-leaseback transaction with
the anchor tenant. The Operating Partnership's initial acquisition cost,
including capitalized costs, was approximately $1,617, all of which was paid in
cash through advances under the Line of Credit. In addition, the Operating
Partnership committed an additional $1,620 for future expansion and tenant
improvements, which the Operating Partnership expects will also be paid in cash.
In September 1996, the Operating Partnership acquired a two-story, 40,595
square foot office building (the "the Bond Street Property"), in Farmington
Hills, Michigan. The total acquisition cost, including capitalized costs, was
approximately $3,185, which consisted of $391 in the form of 26,067 Operating
Partnership units (based on a per unit value of $15.00), and the balance paid in
cash. The cash portion was financed through advances under the Line of Credit.
In October 1996, the Operating Partnership acquired a portfolio of 12
properties, aggregating approximately 784,000 square feet and 538 multi-family
units, together with associated management interests (the "TRP Properties"). The
total acquisition cost, including capitalized costs, was approximately $43,798,
which consisted of (i) approximately $16,300 of mortgage debt assumed, (ii)
approximately $760 in the form of 52,387 Operating Partnership units (based on a
per unit value of $14.50), (iii) approximately $2,600 in the form of 182,000
shares of Common Stock of the Company (based on a per share value of $14.50) and
(iv) the balance in cash. The cash portion was financed through advances under
the Line of Credit. The TRP Properties consist of three office, six industrial,
one retail and two multi-family Properties, located in six states.
In November 1996, the Operating Partnership acquired from various
partnerships and their general partner, a Southern California syndicator, a
portfolio of six Properties (including one property on which the Operating
Partnership made a mortgage loan which included a purchase option), aggregating
approximately 342,000 square feet, together with associated management interests
(the "the Carlsberg Properties"). The total acquisition cost including the
mortgage loan and capitalized costs, was approximately $23,152, which consisted
of (i) approximately $8,900 of mortgage debt assumed, (ii) approximately $350 in
the form of 24,844 shares of Common Stock of the Company (based on a per share
value of $14.09) and (iii) the balance in cash. The cash portion was financed
through advances under the Line of Credit. The Carlsberg Properties consist of
five office Properties and one retail Property, located in two states.
Concurrently with the Operating Partnership's acquisition of the Carlsberg
Properties, one of the Associated Companies assumed management
F-13
<PAGE> 100
GLENBOROUGH PROPERTIES, L.P.,
A CALIFORNIA LIMITED PARTNERSHIP
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
MARCH 31, 1998 (UNAUDITED), AND DECEMBER 31, 1997 (AUDITED) AND 1996 (AUDITED)
of a portfolio of 13 additional properties with an aggregate of one million
square feet under a venture with an affiliate of the seller.
1997 PROPERTY ACQUISITIONS AND DISPOSITIONS
In February 1997, the Operating Partnership acquired a 163-suite hotel
property (the "Scottsdale Hotel"), which began operations in January 1996 and is
located in Scottsdale, Arizona. The total acquisition cost, including
capitalized costs, was approximately $12.1 million, which consisted of
approximately $4.6 million of mortgage debt assumed, and the balance in cash.
The cash portion was financed through advances under the Line of Credit (see
Note 5). The Scottsdale Hotel is marketed as a Country Inn and Suites by
Carlson.
In April 1997, the Operating Partnership acquired from two limited
partnerships and one limited liability company managed by affiliates of Lennar
Partners, a portfolio of three properties, aggregating approximately 282,000
square feet (the "Lennar Properties"). The total acquisition cost, including
capitalized costs, was approximately $23.2 million, which was paid in cash from
the proceeds of the March 1997 Offering (see Note 9). The Lennar Properties
consist of one office property located in Virginia and one office/flex property
and one industrial property, each located in Massachusetts.
In April 1997, the Operating Partnership acquired from a private seller a
227,129 square foot, 15-story office building located in Bloomington, Minnesota
(the "Riverview Property"). The total acquisition cost, including capitalized
costs, was approximately $20.5 million, of which approximately $16.3 million was
paid in cash from the proceeds of the March 1997 Offering (see Note 9), and the
balance was paid in cash from borrowings under the Line of Credit.
In April 1997, the Operating Partnership acquired from seven partnerships
and their general partner, a Southern California syndicator, a portfolio of
eleven properties, aggregating approximately 523,000 square feet, together with
associated management interests (the "E&L Properties"). The total acquisition
cost, including capitalized costs, was approximately $22.2 million, which
consisted of (i) approximately $12.8 million of mortgage debt assumed; (ii)
approximately $6.7 million in the form of 352,197 Operating Partnership units
(based on an agreed per unit value of $19.075); (iii) approximately $633,000 in
the form of 33,198 shares of Common Stock of the Company (based on an agreed per
share value of $19.075); and (iv) the balance in cash. The cash portion was paid
from borrowings under the Line of Credit. Of the $12.8 million of mortgage debt
assumed in the acquisition, approximately $8.9 million was paid off on May 1,
1997, through a draw on the Line of Credit. The E&L Properties consist of one
office property, nine office/flex properties and one industrial property, all
located in Southern California.
In April 1997, the Operating Partnership acquired from two partnerships
formed and managed by affiliates of CIGNA, a portfolio of six properties,
aggregating approximately 616,000 square feet and 224 multi-family units (the
"CIGNA Properties"). The total acquisition cost, including capitalized costs,
was approximately $45.4 million, which was paid entirely in cash from the
proceeds of a $40 million unsecured loan from Wells Fargo Bank (see Note 5) and
a draw under the Line of Credit. The CIGNA Properties are located in four states
and consist of two office properties, two office/flex properties, a shopping
center and a multi-family property.
In June 1997, the Operating Partnership acquired from Carlsberg Realty,
Inc. a portfolio of three properties, aggregating approximately 245,600 square
feet (the "CRI Properties"). The total acquisition cost, including capitalized
costs, was approximately $14.8 million, which was paid entirely in cash from
borrowings under the Line of Credit. The CRI Properties consist of one office
property located in California and one
F-14
<PAGE> 101
GLENBOROUGH PROPERTIES, L.P.,
A CALIFORNIA LIMITED PARTNERSHIP
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
MARCH 31, 1998 (UNAUDITED), AND DECEMBER 31, 1997 (AUDITED) AND 1996 (AUDITED)
office/flex property and one industrial property, each located in Arizona. The
CRI Properties had been managed by GC since December 1996.
In June 1997, the Operating Partnership sold from its retail portfolio six
Atlanta Auto Care Center properties and nine of the ten QuikTrip properties for
an aggregate sales price of approximately $12 million. The proceeds from the
sale of the QuikTrip properties were used to fund the acquisition of the
Centerstone Property (as discussed below) and the proceeds from the sale of the
Auto Care Center properties were used to pay down the Line of Credit and to
payoff a mortgage loan. The remaining QuikTrip property was sold in October
1997, for a sales price of approximately $1.1 million. These sales generated a
net gain of $839,000.
In July 1997, the Operating Partnership acquired an office property
containing 157,579 square feet (the "Centerstone Property") located in Irvine,
California. The total acquisition cost, including capitalized costs, was
approximately $30.4 million, which consisted of (i) approximately $5.5 million
in the form of 275,000 Operating Partnership units (based on an agreed per unit
value of $20.00); and (ii) the balance in cash from a combination of borrowings
under the Line of Credit and the net proceeds from the sale of the QuikTrip
retail properties (as discussed above).
In September 1997, the Operating Partnership acquired a portfolio of 27
properties, aggregating approximately 2,888,000 square feet (the "T. Rowe Price
Properties") from five limited partnerships, two general partnerships and one
private REIT, each organized by affiliates of T. Rowe Price Associates, Inc. The
total acquisition cost, including capitalized costs, was approximately $146.8
million, which was paid entirely in cash from the proceeds of a $114 million
unsecured loan from Wells Fargo Bank (see Note 5), approximately $23 million of
the proceeds from a $60 million secured loan from Wells Fargo Bank (see Note 5),
a $6.5 million draw on the Line of Credit and the balance from the proceeds from
the July 1997 Offering (see Note 9). The T. Rowe Price Properties consist of
four office properties, twelve office/flex properties, eight industrial
properties and three retail properties located in 12 states.
In September 1997, the Operating Partnership acquired a portfolio of ten
properties, aggregating 755,006 square feet (the "Advance Properties") from a
group of partnerships affiliated with The Advance Group of Bedminster, New
Jersey. The total acquisition cost, including capitalized costs, was
approximately $103.0 million, which consisted of (i) approximately $7.4 million
of mortgage debt assumed; (ii) approximately $13.6 million in the form of
599,508 Operating Partnership units (based on an agreed per unit value of
$22.625); (iii) approximately $37 million of the proceeds from a $60 million
secured loan from Wells Fargo Bank (see Note 5); and (iv) the balance in cash.
The cash portion of the acquisition was paid with proceeds from the July 1997
Offering (see Note 9). The Advance Properties consist of five office properties,
three office/flex properties and two industrial properties. Nine of the
properties are located in New Jersey and one is located in Maryland. Concurrent
with this acquisition, the Operating Partnership invested $2,985,000 in exchange
for a 50% ownership interest in Advance/GLB Development Partners, LLC (the
"Joint Venture"), a Delaware limited liability company formed by the Operating
Partnership and The Advance Group for the development of selected new projects.
The Joint Venture owns 57 acres of land suitable for office and office/flex
development of up to 560,000 square feet. The Operating Partnership accounts for
its investment in the Joint Venture using the equity method as the Operating
Partnership has a significant ownership interest. At March 31, 1998 and December
31, 1997, the Operating Partnership's investment in the Joint Venture totaled
$7,251,000 and is included in other assets.
In September 1997, the Operating Partnership acquired a 147,978 square-foot
office building ("Citibank Park") located in Las Vegas, Nevada. The total
acquisition cost, including capitalized costs, was approximately $23.3 million,
which consisted of (i) approximately $1.66 million in the form of 61,222
Operating Partnership units (based on an agreed per unit value of $27.156); (ii)
a $19.4 million draw on the Line of Credit, and (iii) the balance in cash.
F-15
<PAGE> 102
GLENBOROUGH PROPERTIES, L.P.,
A CALIFORNIA LIMITED PARTNERSHIP
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
MARCH 31, 1998 (UNAUDITED), AND DECEMBER 31, 1997 (AUDITED) AND 1996 (AUDITED)
In October 1997, the Operating Partnership acquired eight properties,
aggregating 766,269 square feet, from six separate limited partnerships in which
affiliates of AEW Capital Management, L.P. (successors in interest to one or
more affiliates of Copley Advisors Inc.) serve as general partners (the "Copley
Properties"). The total acquisition cost, including capitalized costs, was
approximately $63.7 million, which was paid entirely in cash. The Copley
Properties are comprised of two industrial properties located in Tempe, Arizona
and Anaheim, California, and six office/flex properties, one in Columbia,
Maryland and five in Las Vegas, Nevada.
In November 1997, the Operating Partnership acquired a 171,789 square-foot
office/flex building in Eden Prairie, Minnesota ("Bryant Lake"), from Outlook
Income Fund 9, a limited partnership in which GC was the managing general
partner. Robert Batinovich was co-general partner of Outlook Income Fund 9 and
held an economic interest therein equal to an approximate 0.83% limited
partnership interest. Because of this affiliation, and consistent with the
Company's Board of Directors' policy, neither Robert Batinovich nor Andrew
Batinovich voted when the Board of Directors considered and acted to approve
this acquisition. The price paid for Bryant Lake equaled 100% of the appraised
value as determined by an independent appraiser. The total acquisition cost,
including capitalized costs, was approximately $9.4 million, comprising
approximately $4.6 million in the form of cash and the balance in the form of
assumption of debt.
In December 1997, the Operating Partnership acquired an office complex
consisting of three office buildings, aggregating 418,457 square feet ("Thousand
Oaks"). The total acquisition cost, including capitalized costs, was
approximately $51.3 million, which was paid entirely in cash, including cash
from borrowings under the Acquisition Credit Facility (see Note 5). The Thousand
Oaks property includes 10 acres suitable for the development of 182,000 square
feet of office space. Thousand Oaks is located in Memphis, Tennessee.
In December 1997, the Operating Partnership acquired four office/flex
properties and one office property (the "Opus Portfolio") aggregating 289,874
square feet from four limited liability companies affiliated with Opus
Properties, LLC. The total acquisition cost, including capitalized costs, was
approximately $27.9 million, all of which was paid in cash, including cash from
borrowings under the Acquisition Credit Facility. Four of the Opus Portfolio
properties are located in or near Tampa, Florida, and one is located in Denver,
Colorado.
In December 1997, the Operating Partnership acquired 10 multi-family
properties (the "Marion Bass Portfolio") aggregating 1,385 units from various
limited partnerships, each of whose general partner is Marion Bass Real Estate
Group. The total acquisition cost, including capitalized costs, was
approximately $58.3 million, comprising $23.5 million of assumed debt and the
balance in cash, including cash from borrowings under the Acquisition Credit
Facility. Of the 10 Marion Bass Portfolio properties, six are located in
Charlotte, North Carolina, two are in Monroe, North Carolina, one is in Raleigh,
North Carolina and one is in Pineville, North Carolina.
1998 PROPERTY ACQUISITIONS AND DISPOSITIONS (UNAUDITED)
In December 1997, the Operating Partnership and the Company issued
approximately $14.1 million in the form of 433,362 Operating Partnership units
and 72,564 shares of the Company's Common Stock (based on an agreed per unit and
per share value of $27.896, respectively, which was equal to the average closing
price of the Company's Common Stock for the ten business days preceding the
closing) and paid approximately $200,000 in cash to acquire all of the limited
partnership interests of GRC Airport Associates, a California limited
partnership ("GRCAA"). GRCAA's sole asset consisted of one industrial property
("Skypark") that was subject to a binding sales agreement to an unaffiliated
third party. By virtue of interests held directly or indirectly in GRCAA, Robert
Batinovich received consideration of approximately $2.2 million and GC (as
defined in Note 1) received consideration of approximately $1.7 million for the
GRCAA limited partnership
F-16
<PAGE> 103
GLENBOROUGH PROPERTIES, L.P.,
A CALIFORNIA LIMITED PARTNERSHIP
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
MARCH 31, 1998 (UNAUDITED), AND DECEMBER 31, 1997 (AUDITED) AND 1996 (AUDITED)
interests in the form of Operating Partnership units. Consistent with the
Company's Board of Directors' policy, neither Robert Batinovich nor Andrew
Batinovich voted when the Board of Directors considered and acted to approve
this transaction. In February 1998, the sale of the Skypark property was
completed to an unaffiliated third party for a price of $22 million. This sale
generated a net gain of approximately $139,000 and net proceeds of approximately
$14.1 million. The proceeds from the sale of the property were deposited into a
deferred exchange account and were applied to the acquisition of 400 El Camino
Real (as defined below) on a tax-deferred basis pursuant to Section 1031 of the
Internal Revenue Code. The Operating Partnership has no continuing obligations
or involvement with Skypark. Accordingly, the Operating Partnership recognized
the sale under the full accrual method of accounting.
In January 1998, the Operating Partnership acquired a portfolio of 13
suburban office properties and one office/flex property (the "Windsor
Portfolio") located in eight states. The Operating Partnership acquired the
Windsor Portfolio from Windsor Realty Fund II, L.P., of which Windsor Advisor,
LLC is the general partner and DuPont Pension Fund Investments and Gid/S&S
Limited Partnership are limited partners, and other entities affiliated with
Windsor Realty Fund II, L.P. The Windsor Portfolio properties aggregate
3,383,240 net rentable square feet, located in the eastern and mid-western
United States and are concentrated in suburban Washington, D.C., Chicago,
Atlanta, Boston, Philadelphia, Tampa, Florida and Cary, North Carolina. The
total acquisition cost, including capitalized costs, was approximately $423.2
million, comprised of (i) approximately $99 million in assumption of debt; (ii)
$150.0 million in borrowings under a $150 million loan agreement with Wells
Fargo Bank (the "Interim Loan" as defined in Note 5); and (iii) the balance in
cash, including cash from borrowings under the Acquisition Credit Facility (as
defined in Note 5).
In January 1998, the Operating Partnership sold a multi-family property for
a sales price of $4.95 million. This sale generated a net gain of approximately
$948,000 and net proceeds of approximately $2.1 million. The proceeds from the
sale were deposited into a deferred exchange account and were applied to the
acquisition of 400 El Camino Real (as defined below) on a tax-deferred basis
pursuant to Section 1031 of the Internal Revenue Code. The sale was an all-cash
sale and the Operating Partnership has no continuing obligations or involvement
with this multi-family property. Accordingly, the Operating Partnership
recognized the sale under the full accrual method of accounting.
In February 1998, the Operating Partnership acquired a 161,468 square foot
office complex ("Capitol Center") located in Des Moines, Iowa. The total
acquisition cost, including capitalized costs, was approximately $12.3 million,
comprising: (i) $116,000 in the form of 3,874 Operating Partnership units (based
on an agreed per unit value of $30.00) and (ii) the balance in cash.
In February 1998, the Operating Partnership sold an industrial property to
an unaffiliated third party for $930,000. The sale generated a net gain of
approximately $247,000 and net proceeds of approximately $359,000. The proceeds
from the sale were deposited into a deferred exchange account and were applied
to the acquisition of 400 El Camino Real on a tax-deferred basis pursuant to
Section 1031 of the Internal Revenue Code. The sale was an all-cash sale and the
Operating Partnership has no continuing obligations or involvement with this
industrial property. Accordingly, the Operating Partnership recognized the sale
under the full accrual method of accounting.
In March 1998, the Operating Partnership acquired a 15-story office
property located in San Mateo, California ("400 El Camino Real"), which contains
139,109 square feet and currently houses the Company's corporate headquarters in
approximately 30,000 square feet, from Prudential Insurance Company of America.
The total acquisition cost, including capitalized costs, was approximately $34.7
million and was paid in cash, including cash from borrowings under the
Acquisition Credit Facility.
F-17
<PAGE> 104
GLENBOROUGH PROPERTIES, L.P.,
A CALIFORNIA LIMITED PARTNERSHIP
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
MARCH 31, 1998 (UNAUDITED), AND DECEMBER 31, 1997 (AUDITED) AND 1996 (AUDITED)
In March 1998, the Operating Partnership sold an office/flex property to an
unaffiliated third party for $1,368,000. The sale generated a net gain of
approximately $112,000 and net proceeds of approximately $696,000. The proceeds
from the sale were deposited into a deferred exchange account and will be
applied to a future acquisition of property on a tax-deferred basis pursuant to
Section 1031 of the Internal Revenue Code. The sale was an all-cash sale and the
Operating Partnership has no continuing obligations or involvement with this
property. Accordingly, the Operating Partnership recognized the sale under the
full accrual method of accounting.
In March 1998, the Operating Partnership acquired a portfolio of seven
properties (the "BGK Portfolio") from BGK Development. The BGK Portfolio
properties aggregate 515,445 net rentable square feet, located in Boston,
Massachusetts and Kansas City, Kansas, and consist of four office properties,
two industrial properties and one office/flex property. The total acquisition
cost, including capitalized costs, was approximately $50.2 million, comprised of
(i) approximately $13.3 million in assumption of debt; and (ii) the balance in
cash, including cash from borrowings under the Acquisition Credit Facility.
The Operating Partnership has entered into a definitive agreement to sell
the Shannon Crossing retail property for $9.3 million. The property is currently
undergoing a $6.2 million renovation and expansion. As of the date of this
filing, approximately $1.4 million of the project budget for the renovation and
expansion has been funded. The sale of Shannon Crossing will not be completed
until the first quarter of 1999.
As of March 31, 1998, approximately $4.8 million of escrow deposits for
future acquisitions of properties are included in rental property.
PRO FORMA STATEMENTS OF OPERATIONS
Following are unaudited pro forma statements of operations of the Operating
Partnership for each of the years ended December 31, 1997 and 1996 giving effect
to the 1997 and 1996 securities offerings as discussed in Note 9 and related
property acquisitions and dispositions completed prior to December 31, 1997
(discussed above) as if they had been completed on January 1, 1996 (in
thousands, except for weighted average units and per unit amounts):
<TABLE>
<CAPTION>
YEAR ENDED YEAR ENDED
DECEMBER 31, 1997 DECEMBER 31, 1996
------------------ ------------------
(UNAUDITED) (UNAUDITED)
<S> <C> <C>
REVENUES
Rental Revenue............................................. $ 118,286 $ 111,862
Fees, interest and other income............................ 1,577 812
----------- -----------
Total Revenue.............................................. 119,863 112,674
----------- -----------
OPERATING EXPENSES
Operating expenses......................................... 39,312 36,080
General and administrative................................. 5,241 3,231
Depreciation and amortization.............................. 23,432 21,827
Interest expense........................................... 16,700 15,363
----------- -----------
Total Operating Expenses................................... 84,685 76,501
----------- -----------
Net Income................................................. $ 35,178 $ 36,173
=========== ===========
Net income per unit........................................ $ 1.12 $ 1.15
=========== ===========
Weighted average units outstanding......................... 31,452,950 31,452,950
=========== ===========
</TABLE>
F-18
<PAGE> 105
GLENBOROUGH PROPERTIES, L.P.,
A CALIFORNIA LIMITED PARTNERSHIP
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
MARCH 31, 1998 (UNAUDITED), AND DECEMBER 31, 1997 (AUDITED) AND 1996 (AUDITED)
NOTE 4. MORTGAGE LOANS RECEIVABLE
The Operating Partnership's mortgage loans receivable consist of the
following as of March 31, 1998, and December 31, 1997 and 1996 (dollars in
thousands):
<TABLE>
<CAPTION>
1998 1997 1996
----------- --------- ---------
(UNAUDITED) (AUDITED) (AUDITED)
<S> <C> <C> <C>
Note secured by an office and research complex in Eatontown,
NJ, with interest-only payable monthly at a fixed rate of
8%. This loan was paid off in 1997........................ $ -- $ -- $6,700
Note secured by an industrial property in Los Angeles, CA,
with a fixed interest rate of 9% and a maturity date of
June 2001................................................. 506 507 511
Note secured by an office property in Phoenix, AZ, with a
fixed interest rate of 11% and a maturity date of November
1999. The Operating Partnership is committed to additional
advances totaling $320 as of March 31, 1998, for tenant
improvements and other leasing costs...................... $3,234 $3,185 $2,694
------ ------ ------
Total............................................. $3,740 $3,692 $9,905
====== ====== ======
</TABLE>
NOTE 5. SECURED AND UNSECURED LIABILITIES
The Operating Partnership had the following mortgage loans, bank lines,
unsecured notes and notes payable outstanding as of March 31, 1998, and December
31, 1997 and 1996 (dollars in thousands):
<TABLE>
<CAPTION>
1998 1997 1996
----------- --------- ---------
(UNAUDITED) (AUDITED) (AUDITED)
<S> <C> <C> <C>
Secured $50,000 line of credit with a bank with a variable
interest rate of LIBOR plus 2.375% (8.00% at December 31,
1996), monthly interest only payments and a maturity date
of July 14, 1998, with an option to extend for 10 years.
This line was paid off and replaced by the Acquisition
Credit Facility (discussed below) in December 1997........ $ -- $ -- $21,307
Unsecured $250,000 line of credit with a bank ("Acquisition
Credit Facility") with a variable interest rate ranging
between LIBOR plus 1.10% and LIBOR plus 1.30% (6.79% and
7.07% at March 31, 1998 and December 31, 1997,
respectively), monthly interest only payments and a
maturity date of December 22, 2000, with one option to
extend for 10 years....................................... 50,332 80,160 --
Secured loan with a bank with a fixed interest rate of
7.50%, monthly principal and interest payments of $443 and
a maturity date of October 1, 2022. The loan is secured by
ten properties with an aggregate net carrying value of
$110,858 and $111,372 at March 31, 1998 and December 31,
1997, respectively........................................ 59,583 59,724 --
</TABLE>
F-19
<PAGE> 106
GLENBOROUGH PROPERTIES, L.P.,
A CALIFORNIA LIMITED PARTNERSHIP
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
MARCH 31, 1998 (UNAUDITED), AND DECEMBER 31, 1997 (AUDITED) AND 1996 (AUDITED)
<TABLE>
<CAPTION>
1998 1997 1996
----------- --------- ---------
(UNAUDITED) (AUDITED) (AUDITED)
<S> <C> <C> <C>
Secured loan with an investment bank with a fixed interest
rate of 7.57%, monthly principal and interest payments
(based upon a 25 year amortization) of $149 and a maturity
date of January 1, 2006. The loan is secured by nine
properties with an aggregate net carrying value of
$37,565, $37,711 and $39,298 at March 31, 1998 and
December 31, 1997 and 1996, respectively.................. $ 19,365 $ 19,444 $19,744
Secured loans with various lenders, bearing interest at
fixed rates between 7.25% and 9.25%, with monthly
principal and interest payments ranging between $8 and
$165 and maturing at various dates through April 1, 2012.
These loans are secured by properties with an aggregate
net carrying value of $266,886, $66,353 and $30,441 at
March 31, 1998 and December 31, 1997 and 1996,
respectively.............................................. 129,759 30,519 17,581
Secured loans with various banks bearing interest at
variable rates (ranging between 7.49% and 8.18% at March
31, 1998), monthly principal and interest payments ranging
between $4 and $16 and maturing at various dates through
May 1, 2017. These loans are secured by properties with an
aggregate net carrying value of $5,030, $17,246 and $6,975
at March 31, 1998 and December 31, 1997 and 1996,
respectively.............................................. 2,809 7,806 3,807
Secured loans with various lenders, bearing interest at
fixed rates between 7.25% and 7.85%, with monthly
principal and interest payments ranging between $5 and $55
and maturing at various dates through December 1, 2030.
These loans are secured by Housing and Urban Development
properties with an aggregate net carrying value of
$41,692, $41,862 and $9,491 at March 31, 1998 and December
31, 1997 and 1996, respectively........................... 30,567 30,646 7,332
Unsecured Senior Notes with a fixed interest rate of 7.625%,
interest payable semiannually on March 15 and September
15, commencing September 15, 1998, and a maturity date of
March 15, 2005. See below for further discussion.......... 150,000 -- --
Secured loan with a bank with variable interest rates of
LIBOR plus 2.375% and prime rate plus 0.50%, monthly
interest only payments and a maturity date of July 14,
1998. The loan was paid off in June 1997 upon the sale of
the properties securing the loan.......................... -- -- 6,120
-------- -------- -------
Total............................................. $442,415 $228,299 $75,891
======== ======== =======
</TABLE>
In April 1997, the Operating Partnership entered into a $40 million
unsecured loan with Wells Fargo Bank to fund the acquisition of the CIGNA
Properties (the "CIGNA Acquisition Financing"). The CIGNA Acquisition Financing
had a term of three months (extendible to six months at the Operating
Partnership's option), interest at a variable annual rate equal to 175 basis
points above 30-day LIBOR, was unsecured and was guaranteed by the Operating
Partnership. Required payments under the CIGNA Acquisition Financing were
monthly, interest only.
F-20
<PAGE> 107
GLENBOROUGH PROPERTIES, L.P.,
A CALIFORNIA LIMITED PARTNERSHIP
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
MARCH 31, 1998 (UNAUDITED), AND DECEMBER 31, 1997 (AUDITED) AND 1996 (AUDITED)
In June 1997, Wells Fargo had substantially completed underwriting and due
diligence for a $60 million mortgage loan to the Operating Partnership (the "$60
Million Mortgage") to be secured by the Lennar Properties, the Riverview
Property, the Centerstone Property and five of the CIGNA Properties. In the
interim, Wells Fargo funded a $60 million unsecured "bridge" loan (the "$60
Million Unsecured Bridge Loan"), which was used to (i) repay all principal and
accrued interest under the $40 million CIGNA Acquisition Financing, and (ii)
reduce the outstanding balance under the Line of Credit by approximately $20
million.
The $60 Million Unsecured Bridge Loan was paid-off in July 1997 from the
proceeds of the July 1997 Offering (see Note 9) and was replaced with the $60
Million Mortgage in September 1997. This loan has a 25-year term, bears interest
at a fixed annual rate of 7.5%, and requires monthly payments of principal and
interest. Proceeds from the $60 Million Mortgage were used to fund the
acquisitions of the T. Rowe Price Properties and the Advance Properties.
In September 1997, the Operating Partnership closed a $114 million
unsecured loan (the "$114 Million Interim Unsecured Loan") with Wells Fargo
Bank. This loan had a 90-day term with two 90-day extension options, interest at
a fixed annual rate of 7.5% and required monthly interest-only payments. The
proceeds of this loan were used to fund a portion of the purchase price for the
T. Rowe Price Properties. In October 1997, the Operating Partnership repaid the
$114 Million Interim Unsecured Loan with net proceeds from the October 1997
Offering (see Note 9).
In December 1997, the Operating Partnership replaced its $50 million
secured line of credit with a new $250 million unsecured line of credit (the
"Acquisition Credit Facility") with Wells Fargo Bank. The Acquisition Credit
Facility has a three year term with an option to extend the term for an
additional 10 years and bears interest on a sliding scale ranging from LIBOR
plus 1.1% to LIBOR plus 1.3%, which represents a rate that is lower by at least
0.45% than the rate under the Operating Partnership's previous $50 million
secured line of credit. In connection with the repayment of the $50 million
secured line of credit, the Operating Partnership expensed, as an extraordinary
item, the unamortized deferred costs incurred to obtain the secured line of
credit of $843,000. Draws under the Acquisition Credit Facility were used to
fund acquisitions as discussed in Note 3.
In January 1998, the Operating Partnership closed a $150 million loan
agreement with Wells Fargo Bank (the "Interim Loan"). The Interim Loan had a
term of three months with interest at LIBOR plus 1.75%. The purpose of the
Interim Loan was to fund the acquisition of the Windsor Portfolio as discussed
in Note 3. The Interim Loan was paid off in March 1998 with proceeds from the
$150 million of unsecured Senior Notes as discussed below.
In March 1998, the Operating Partnership issued $150 million of 7 5/8%
unsecured Senior Notes (the "Notes") in an unregistered 144A offering. The Notes
mature on March 15, 2005, unless previously redeemed. Interest on the Notes will
be payable semiannually on March 15 and September 15, commencing September 15,
1998. The Notes may be redeemed at any time at the option of the Operating
Partnership, in whole or in part, at a redemption price equal to the sum of (i)
the principal amount of the Notes being redeemed plus accrued interest to the
redemption date and (ii) the Make-Whole Amount, as defined, if any. The Notes
will be general unsecured and unsubordinated obligations of the Operating
Partnership, and will rank pari passu with all other unsecured and
unsubordinated indebtedness of the Operating Partnership. The Notes will be
subordinated to secured borrowing arrangements that the Operating Partnership
has and from time to time may enter into with various banks and other lenders,
and to the prior claims of each secured mortgage lender to any specific property
which secures any lender's mortgage. As of March 31, 1998, such secured
arrangements and mortgages aggregated approximately $242.1 million.
F-21
<PAGE> 108
GLENBOROUGH PROPERTIES, L.P.,
A CALIFORNIA LIMITED PARTNERSHIP
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
MARCH 31, 1998 (UNAUDITED), AND DECEMBER 31, 1997 (AUDITED) AND 1996 (AUDITED)
The required principal payments on the Operating Partnership's debt for the
next five years and thereafter, as of March 31, 1998 (unaudited), are as follows
(in thousands):
<TABLE>
<CAPTION>
YEAR ENDING
DECEMBER 31,
------------
<S> <C>
1998 (9 months)................................... $ 5,747
1999.............................................. 5,670
2000.............................................. 56,989
2001.............................................. 10,765
2002.............................................. 9,120
Thereafter........................................ 354,124
--------
Total................................... $442,415
========
</TABLE>
NOTE 6. CONSOLIDATION AND LITIGATION COSTS
The consolidation costs included in the Operating Partnership's December
31, 1996 consolidated statement of operations included accounting fees as well
as the costs of mailing and printing the Prospectus/ Consent Solicitation
Statement, any supplements thereto or other documents related to the
Consolidation, the costs of the Information Agent, Investor brochure, telephone
calls, broker-dealer fact sheets, printing, postage, travel, meetings, legal and
other fees related to the solicitation of consents, as well as reimbursement of
costs incurred by brokers and banks in forwarding the Prospectus/Consent
Solicitation Statement to Investors.
The litigation costs included in the Operating Partnership's December 31,
1996 consolidated statement of operations included the legal fees incurred in
connection with defending two class action complaints filed by investors in
certain of the GRT Predecessor Entities as well as an accrual for the amount of
the settlement that the plaintiff's counsel in one case was requesting be
awarded by the court.
NOTE 7. RELATED PARTY TRANSACTIONS
The Operating Partnership pays property management and asset management
fees to the Company. Property management fees range from 3% to 5% of rental
collections on a property by property basis and are disclosed as a component of
property operating expenses in the accompanying statements of operations. Asset
management fees are calculated and paid to the Company at a rate ranging from
0.5% to 1.0% of the estimated fair value of the Operating Partnership's real
estate assets. Asset management fees are disclosed as general and administrative
expenses in the accompanying statements of operations.
Fee and reimbursement income earned by the GRT Predecessor Entities from
related partnerships totaled $2,995,000 for the year ended December 31, 1995,
and consisted of property management fees, asset management fees, reimbursements
and related expenses.
F-22
<PAGE> 109
GLENBOROUGH PROPERTIES, L.P.,
A CALIFORNIA LIMITED PARTNERSHIP
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
MARCH 31, 1998 (UNAUDITED), AND DECEMBER 31, 1997 (AUDITED) AND 1996 (AUDITED)
NOTE 8. PROVISION FOR LOSS ON INVESTMENTS IN REAL ESTATE, REAL ESTATE
PARTNERSHIPS
AND MORTGAGE LOANS RECEIVABLE
The loss provisions recorded during the year ended December 31, 1995 were
as follows:
<TABLE>
<S> <C>
Reduction in the carrying value of the New Jersey note
receivable to the value of collateral..................... $ 863
Reduction in value of the GC investments in real estate
partnerships to estimated net realizable value............ 955
Other....................................................... 58
------
$1,876
======
</TABLE>
NOTE 9. SECURITIES OFFERINGS
1996
In October 1996, the Company completed a public offering of 3,666,000
shares of Common Stock (the "October 1996 Offering"). The 3,666,000 shares were
sold at a per share price of $13.875 for total proceeds of $47,814,000 (net of
6% underwriting fee of $3,052,000). The proceeds from the October 1996 Offering
were contributed to the Operating Partnership in exchange for 3,666,000
Operating Partnership units. The Operating Partnership used the funds to acquire
the TRP Properties (see Note 3) and to repay $24,000,000 of the outstanding
balance under the Operating Partnership's $50 million secured line of credit
with Wells Fargo Bank (see Note 5) which was then available to fund the
acquisition of the Carlsberg Properties (see Note 3).
1997
In March 1997, the Company completed a public offering of 3,500,000 shares
of Common Stock (the "March 1997 Offering"). The 3,500,000 shares were sold at a
per share price of $20.25 for total proceeds of $66,955,000 (net of 6%
underwriting fee of $3,920,000). The proceeds from the March 1997 Offering were
contributed to the Operating Partnership in exchange for 3,500,000 Operating
Partnership units. The Operating Partnership used the funds to acquire the
Scottsdale Hotel and the Lennar, Riverview and Ellis & Lane Properties (see Note
3) and to repay the outstanding balance under the Operating Partnership's Line
of Credit.
In July 1997, the Company completed a public offering of 6,980,000 shares
of Common Stock (the "July 1997 Offering"). The 6,980,000 shares were sold at a
per share price of $22.625 for total proceeds of $149,965,300 (net of
underwriting fees of $7,957,200). The proceeds from the July 1997 Offering were
contributed to the Operating Partnership in exchange for 6,980,000 Operating
Partnership units. The Operating Partnership used the funds to repay the $60
Million Unsecured Bridge Loan and the outstanding balance under the Operating
Partnership's Line of Credit with Wells Fargo (see Note 5). In addition, the
remaining proceeds were used to fund the acquisitions of the T. Rowe Price
Properties and the Advance Properties as discussed in Note 3.
In October 1997, the Company completed a public offering of 11,300,000
shares of Common Stock (the "October 1997 Offering"). The 11,300,000 shares were
sold at a per share price of $25.00 for total proceeds of $268,092,500 (net of
underwriting fees of $14,407,500). The proceeds from the October 1997 Offering
were contributed to the Operating Partnership in exchange for 11,300,000
Operating Partnership units. The Operating Partnership used the funds to repay
the $114 Million Interim Unsecured Loan and the outstanding balance under the
Operating Partnership's Line of Credit with Wells Fargo (see Note 5).
F-23
<PAGE> 110
GLENBOROUGH PROPERTIES, L.P.,
A CALIFORNIA LIMITED PARTNERSHIP
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
MARCH 31, 1998 (UNAUDITED), AND DECEMBER 31, 1997 (AUDITED) AND 1996 (AUDITED)
1998 (unaudited)
In January 1998, the Company completed a public offering of 11,500,000
shares of 7 3/4% Series A Convertible Preferred Stock (the "January 1998
Convertible Preferred Stock Offering"). The 11,500,000 shares were sold at a per
share price of $25.00 for net proceeds of approximately $276 million. The
proceeds from the January 1998 Convertible Preferred Stock Offering were
contributed to the Operating Partnership for which the Company received a
Preferred Partner Interest, which is entitled to a priority distribution
sufficient to pay dividends to the holders of the Company's Series A Convertible
Preferred Stock. A portion of this additional capital was used to repay the
outstanding balance under the Operating Partnership's Acquisition Credit
Facility. The remaining proceeds were used to fund the acquisitions discussed in
Note 3 and for general corporate purposes.
In March 1998, the Operating Partnership issued $150 million of 7 5/8%
unsecured Senior Notes (the "Notes") in an unregistered 144A offering. The Notes
mature on March 15, 2005, unless previously redeemed. Interest on the Notes is
payable semiannually on March 15 and September 15, commencing September 15,
1998. The Operating Partnership used the net proceeds of the offering to repay
the outstanding balance under the Interim Loan.
NOTE 10. COMMITMENTS AND CONTINGENCIES
Environmental Matters. The Operating Partnership follows a policy of
monitoring its properties for the presence of hazardous or toxic substances. The
Operating Partnership is not aware of any environmental liability with respect
to the properties that would have a material adverse effect on the Operating
Partnership's business, assets or results of operations. There can be no
assurance that such a material environmental liability does not exist. The
existence of any such material environmental liability could have an adverse
effect on the Operating Partnership's results of operations and cash flow.
General Uninsured Losses. The Operating Partnership carries comprehensive
liability, fire, flood, extended coverage and rental loss insurance with policy
specifications, limits and deductibles customarily carried for similar
properties. There are, however, certain types of extraordinary losses which may
be either uninsurable, or not economically insurable. Further, certain of the
properties are located in areas that are subject to earthquake activity. Should
a property sustain damage as a result of an earthquake, the Operating
Partnership may incur losses due to insurance deductibles, co-payments on
insured losses or uninsured losses. Should an uninsured loss occur, the
Operating Partnership could lose its investment in, and anticipated profits and
cash flows from, a property.
Litigation. Prior to the completion of the Consolidation, two lawsuits were
filed in 1995 contesting the fairness of the Consolidation, one in California
State court and one in federal court. The complaints in both actions alleged,
among other things, breaches by the defendants of fiduciary duties and
inadequate disclosures. The State court action was settled and, upon appeal, the
settlement was affirmed by the State court on February 17, 1998. The objectors
petitioned the California Supreme Court for review, and the Operating
Partnership filed an answer to the petition. The California Supreme Court has
not yet ruled on the objectors' petition for review. Pursuant to the terms of
the settlement in the State court action, pending appeal, the Operating
Partnership has paid one-third of the $855,000 settlement amount and the
remaining two-thirds is being held in escrow. In the federal action, the court
in December of 1995 deferred all further proceedings pending a ruling in the
State court action. Following the State court decision approving the settlement,
the defendants filed a motion to dismiss the federal court action. Given the
inherent uncertainties of litigation, there can be no assurance that the
ultimate outcomes of these actions will be favorable to the Operating
Partnership.
F-24
<PAGE> 111
GLENBOROUGH PROPERTIES, L.P.,
A CALIFORNIA LIMITED PARTNERSHIP
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
MARCH 31, 1998 (UNAUDITED), AND DECEMBER 31, 1997 (AUDITED) AND 1996 (AUDITED)
NOTE 11. SUBSEQUENT EVENTS (UNAUDITED)
Completed Acquisitions
Eaton & Lauth Portfolio. In April 1998, the Operating Partnership acquired
a portfolio of three office properties and four retail properties aggregating
417,745 square feet and three multi-family properties containing 670 units (the
"Eaton & Lauth Portfolio") from a number of partnerships in which affiliates of
Eaton & Lauth serve as general partners. The total acquisition cost, including
capitalized costs, was approximately $70.0 million, comprising: (i)
approximately $32.0 million of net assumed debt; (ii) approximately $15.9
million of equity which consisted of (a) approximately $3.2 million in the form
of 126,764 shares of the Company's Common Stock (based on an agreed per share
value of $25.00); and (b) approximately $12.7 million in the form of 506,788
Operating Partnership units (based on an agreed per unit value of $25.00); and
(iii) the balance in cash. The cash portion was financed through advances under
the Acquisition Credit Facility. The Eaton & Lauth Portfolio properties are
located in Indiana.
One Pacific Place. In May 1998, the Operating Partnership acquired a
125,507 square foot office building ("One Pacific Place") and an adjacent 87,120
square foot parcel of land from an unaffiliated third party. The total
acquisition cost, including capitalized costs, was approximately $20.1 million
which was paid entirely in cash through advances under the Acquisition Credit
Facility. One Pacific Place is located in Omaha, Nebraska.
Completed Disposition
Sandhill. In April 1998, the Operating Partnership sold the Sandhill
property, an office/flex property, to an unaffiliated third party for $3.6
million. The sale generated a net gain of approximately $466,000 and net
proceeds of approximately $1.6 million. The proceeds from the sale were
deposited into a deferred exchange account and will be applied to a future
acquisition of property on a tax-deferred basis pursuant to Section 1031 of the
Internal Revenue Code. The sale was an all-cash sale and the Operating
Partnership has no continuing obligations or involvement with this property.
Accordingly, the Operating Partnership recognized the sale under the full
accrual method of accounting.
Other Transaction
Effective April 1, 1998, the Company contributed to the Operating
Partnership the majority of its assets, including 100% of its shares of the
non-voting preferred stock of Glenborough Corporation, as well as all of the
Company's tangible personal property including furniture and fixtures, all cash
and investments, and a property management contract. As part of that
transaction, the Company also agreed to suspend for an indefinite period the
asset management fees paid by the Operating Partnership to the Company. In
return, the Operating Partnership canceled certain obligations of the Company to
the Operating Partnership, and issued 2,248,869 units of partnership interest to
the Company. As a result of this transaction, the only assets of the Company
that are not attributable to its interest in the Operating Partnership are (i)
its shares of non-voting preferred stock in Glenborough Hotel Group, and (ii)
its shares of common stock in seven qualified REIT subsidiaries, which produce
dividends that are not material to the Company.
NOTE 12. PENDING ACQUISITIONS AND DISPOSITION (UNAUDITED)
The Operating Partnership has entered into a definitive agreement to
acquire all of the real estate assets of Prudential-Bache/ Equitec Real Estate
Partnership, a California limited partnership (the "Pru-Bache Portfolio") in
which the managing general partner is Prudential-Bache Properties, Inc., and in
which GC and Robert Batinovich have served as co-general partners since March
1994, but do not hold a material equity or
F-25
<PAGE> 112
GLENBOROUGH PROPERTIES, L.P.,
A CALIFORNIA LIMITED PARTNERSHIP
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
MARCH 31, 1998 (UNAUDITED), AND DECEMBER 31, 1997 (AUDITED) AND 1996 (AUDITED)
economic interest. Because of this affiliation, and consistent with the
Company's Board of Directors' policy, neither Robert Batinovich nor Andrew
Batinovich voted when the Board of Directors considered and acted to approve
this acquisition. The total acquisition cost, including capitalized costs, is
expected to be approximately $47.9 million, which is to be paid entirely in
cash. The Pru-Bache Portfolio is comprised of four office buildings aggregating
405,825 square feet and one office/flex property containing 121,645 square feet.
The largest of these properties are in Rockville, Maryland (186,680 square feet)
and Memphis, Tennessee (100,901 square feet), with the remaining properties
located in Sacramento, California and Kirkland, Washington. This acquisition is
subject to a number of contingencies including approval of the acquisition by a
majority vote of the limited partners of Prudential-Bache/Equitec Real Estate
Partnership, satisfactory completion of due diligence and customary closing
conditions. As a result, there can be no assurance that this acquisition will be
completed.
The Operating Partnership has entered into a definitive agreement to
acquire a 263,000 square foot office/flex property, the Covance Property, from a
partnership in which affiliates of Eaton & Lauth serve as general partners. The
total acquisition cost, including capitalized costs, is expected to be
approximately $16.5 million, comprising: (i) approximately $4.4 million of
equity which will consist of: (a) approximately $200,000 in the form of 8,802
shares of common stock of the Company (based on a negotiated per share value of
$25.00); and (b) approximately $4.2 million in the form of 165,865 Operating
Partnership units (based on a negotiated per unit value of $25.00); and (ii) the
balance in cash from borrowings under the Acquisition Credit Facility. The
Covance Property is located in Indianapolis, Indiana. This acquisition is
subject to a number of contingencies including the satisfactory completion of
due diligence and customary closing conditions. As a result, there can be no
assurance that this transaction will be completed.
The Operating Partnership has entered into a definitive agreement to sell
the Shannon Crossing retail property for $9.3 million. The property is currently
undergoing a $6.2 million renovation and expansion. As of the date of this
filing, approximately $1.4 million of the project budget for the renovation and
expansion has been funded. The sale of Shannon Crossing will not be completed
until the first quarter of 1999.
F-26
<PAGE> 113
GLENBOROUGH PROPERTIES, L.P.
SCHEDULE III -- REAL ESTATE AND ACCUMULATED DEPRECIATION
DECEMBER 31, 1997
(IN THOUSANDS)
<TABLE>
<CAPTION>
COLUMN A COLUMN B COLUMN C COLUMN D
COST
CAPITALIZED
(REDUCED)
SUBSEQUENT
INITIAL COST TO TO
PARTNERSHIP(1) ACQUISITION(6)
----------------------- --------------
BUILDINGS
AND
DESCRIPTION ENCUMBRANCES LAND IMPROVEMENTS IMPROVEMENTS
----------- ------------ -------- ------------ --------------
<S> <C> <C> <C> <C>
OFFICE PROPERTIES:
4500 Plaza, UT(8)..................... $ 875 $ 1,192 $ 4,606 $ 667
Warner Village, CA.................... -- 558 2,232 24
Globe Building, WA.................... -- 375 1,501 165
One Professional Square, NE........... -- 285 1,142 112
Vintage Pointe, AZ.................... 2,087 738 2,950 130
Tradewinds Financial, AZ.............. -- 303 1,214 22
Dallidet Center, CA................... -- 676 2,703 11
Hillcrest Office Plaza, CA............ -- 330 1,319 146
Academy Prof. Center, CA.............. -- 467 1,866 107
University Tech Center, CA............ -- 2,011 8,046 450
Montgomery Exec. Center, MD........... -- 1,919 7,676 288
Post Oak Place, TX.................... -- 395 1,579 26
Gatehall, NJ.......................... -- 1,857 7,427 46
Buschwood III, FL..................... -- 1,472 5,890 42
25 Independence Blvd., NJ............. -- 4,535 18,141 60
Morristown Medical Offices, NJ........ -- 517 1,832 6
Frontier Executive Quarters I, NJ..... -- 4,189 33,892 99
Frontier Executive Quarters II, NJ.... -- 629 5,091 15
Bridgewater Exec. Quarters, NJ........ 4,487 2,069 7,337 25
Citibank Park, NV..................... -- 4,611 18,442 107
Temple Terrace, FL.................... -- 1,782 6,949 18
Thousand Oaks, TN..................... -- 10,741 40,355 190
Regency Westpointe, NE (8)............ (5) 530 3,147 834
Centerstone Plaza, CA................. (4) 6,066 24,265 88
<CAPTION>
COLUMN A COLUMN E COLUMN F COLUMN G COLUMN H
GROSS AMOUNT CARRIED AT
DECEMBER 31, 1997
----------------------------------
BUILDINGS (1) LIFE
AND (3)(10) ACCUMULATED DATE DEPRECIATED
DESCRIPTION LAND IMPROVEMENTS TOTAL DEPRECIATION ACQUIRED OVER
----------- -------- ------------ -------- ------------ --------- -----------
<S> <C> <C> <C> <C> <C> <C>
OFFICE PROPERTIES:
4500 Plaza, UT(8)..................... $ 1,123 $ 5,342 $ 6,465 $ 2,629 3/86 1-30 yrs.
Warner Village, CA.................... 558 2,256 2,814 114 10/96 1-30 yrs.
Globe Building, WA.................... 375 1,666 2,041 86 10/96 1-30 yrs.
One Professional Square, NE........... 285 1,254 1,539 67 10/96 1-30 yrs.
Vintage Pointe, AZ.................... 738 3,080 3,818 159 11/96 1-30 yrs.
Tradewinds Financial, AZ.............. 304 1,235 1,539 62 11/96 1-30 yrs.
Dallidet Center, CA................... 677 2,713 3,390 136 11/96 1-30 yrs.
Hillcrest Office Plaza, CA............ 330 1,465 1,795 74 11/96 1-30 yrs.
Academy Prof. Center, CA.............. 481 1,959 2,440 49 4/97 1-30 yrs.
University Tech Center, CA............ 2,086 8,421 10,507 142 6/97 1-30 yrs.
Montgomery Exec. Center, MD........... 1,928 7,955 9,883 135 9/97 1-30 yrs.
Post Oak Place, TX.................... 396 1,604 2,000 27 9/97 1-30 yrs.
Gatehall, NJ.......................... 1,865 7,465 9,330 124 9/97 1-30 yrs.
Buschwood III, FL..................... 1,479 5,925 7,404 99 9/97 1-30 yrs.
25 Independence Blvd., NJ............. 4,547 18,189 22,736 304 9/97 1-30 yrs.
Morristown Medical Offices, NJ........ 518 1,837 2,355 31 9/97 1-30 yrs.
Frontier Executive Quarters I, NJ..... 4,200 33,980 38,180 566 9/97 1-30 yrs.
Frontier Executive Quarters II, NJ.... 631 5,104 5,735 85 9/97 1-30 yrs.
Bridgewater Exec. Quarters, NJ........ 2,075 7,356 9,431 122 9/97 1-30 yrs.
Citibank Park, NV..................... 4,628 18,532 23,160 155 9/97 1-30 yrs.
Temple Terrace, FL.................... 1,786 6,963 8,749 58 12/97 1-30 yrs.
Thousand Oaks, TN..................... 10,741 40,545 51,286 336 12/97 1-30 yrs.
Regency Westpointe, NE (8)............ 530 3,981 4,511 1,491 6/87 5-30 yrs.
Centerstone Plaza, CA................. 6,077 24,342 30,419 407 7/97 1-30 yrs.
</TABLE>
F-27
<PAGE> 114
<TABLE>
<CAPTION>
COLUMN A COLUMN B COLUMN C COLUMN D
COST
CAPITALIZED
(REDUCED)
SUBSEQUENT
INITIAL COST TO TO
PARTNERSHIP(1) ACQUISITION(6)
----------------------- --------------
BUILDINGS
AND
DESCRIPTION ENCUMBRANCES LAND IMPROVEMENTS IMPROVEMENTS
----------- ------------ -------- ------------ --------------
<S> <C> <C> <C> <C>
OFFICE PROPERTIES CONTINUED:
Woodlands Plaza, MO................... (4) $ 1,107 $ 4,426 $ 143
700 South Washington, VA.............. (4) 1,974 7,894 53
Riverview Office Tower, MN............ (4) 4,083 16,333 409
Westford Corporate Center, MA......... (4) 2,078 8,310 68
Bond Street, MI....................... -- 716 2,147 189
University Club Tower, MO............. -- 4,087 14,519 1,472
Windsor Portfolio(7).................. -- -- 13,036 --
-------- -------- -------- -------
OFFICE TOTAL................... 62,292 276,267 6,012
-------- -------- -------- -------
OFFICE/FLEX PROPERTIES:
Park 100 -- Building 42, IN(8)........ -- 712 3,286 (560)
Rancho Bernardo, CA................... -- 518 2,072 55
Hoover Industrial, AZ................. -- 322 1,290 14
Walnut Creek Industrial, TX........... $ 1,407 773 3,093 3
Chatsworth Ind. Park, CA.............. 833 253 1,014 74
Sandhill Industrial Park, CA(9)....... 1,753 563 2,254 104
San Dimas Industrial Ctr., CA(9)...... 591 237 947 49
Glassell Industrial Center, CA........ 1,273 658 2,630 264
Kraemer Industrial Park, CA........... 1,425 384 1,537 90
Magnolia Industrial, AZ............... -- 310 1,241 58
The Business Park, GA................. -- 1,478 5,912 52
Newport Business Center, FL........... -- 651 2,604 31
Oakbrook Corners, GA.................. -- 1,052 4,209 36
Baseline Business Park, AZ............ -- 882 3,527 27
Cypress Creek Business Ctr., FL....... -- 872 3,490 76
Scripps Terrace, CA................... -- 676 2,685 15
Riverview Industrial Park, MN......... -- 837 3,348 19
Winnetka Industrial Center, MN........ -- 1,184 4,737 27
Kent Business Park, WA................ -- 1,206 4,822 46
Valley Business Park, CO.............. -- 1,757 7,027 39
<CAPTION>
COLUMN A COLUMN E COLUMN F COLUMN G COLUMN H
GROSS AMOUNT CARRIED AT
DECEMBER 31, 1997
----------------------------------
BUILDINGS (1) LIFE
AND (3)(10) ACCUMULATED DATE DEPRECIATED
DESCRIPTION LAND IMPROVEMENTS TOTAL DEPRECIATION ACQUIRED OVER
----------- -------- ------------ -------- ------------ --------- -----------
<S> <C> <C> <C> <C> <C> <C>
OFFICE PROPERTIES CONTINUED:
Woodlands Plaza, MO................... $ 1,114 $ 4,562 $ 5,676 $ 183 4/97 1-30 yrs.
700 South Washington, VA.............. 1,981 7,940 9,921 199 4/97 1-30 yrs.
Riverview Office Tower, MN............ 4,095 16,730 20,825 424 4/97 1-30 yrs.
Westford Corporate Center, MA......... 2,091 8,365 10,456 209 4/97 1-30 yrs.
Bond Street, MI....................... 716 2,336 3,052 106 9/96 1-40 yrs.
University Club Tower, MO............. 4,087 15,991 20,078 731 7/96 1-40 yrs.
Windsor Portfolio(7).................. -- 13,036 13,036 -- (7) (7)
-------- -------- -------- -------
OFFICE TOTAL................... 62,442 282,129 344,571 9,310
-------- -------- -------- -------
OFFICE/FLEX PROPERTIES:
Park 100 -- Building 42, IN(8)........ 712 2,726 3,438 643 10/86 5-25 yrs.
Rancho Bernardo, CA................... 518 2,127 2,645 109 10/96 1-30 yrs.
Hoover Industrial, AZ................. 322 1,304 1,626 66 10/96 1-30 yrs.
Walnut Creek Industrial, TX........... 774 3,095 3,869 155 10/96 1-30 yrs.
Chatsworth Ind. Park, CA.............. 264 1,077 1,341 27 4/97 1-30 yrs.
Sandhill Industrial Park, CA(9)....... 584 2,337 2,921 58 4/97 1-30 yrs.
San Dimas Industrial Ctr., CA(9)...... 246 987 1,233 25 4/97 1-30 yrs.
Glassell Industrial Center, CA........ 704 2,848 3,552 71 4/97 1-30 yrs.
Kraemer Industrial Park, CA........... 401 1,610 2,011 40 4/97 1-30 yrs.
Magnolia Industrial, AZ............... 322 1,287 1,609 32 6/97 1-30 yrs.
The Business Park, GA................. 1,485 5,957 7,442 100 9/97 1-30 yrs.
Newport Business Center, FL........... 654 2,632 3,286 44 9/97 1-30 yrs.
Oakbrook Corners, GA.................. 1,057 4,240 5,297 71 9/97 1-30 yrs.
Baseline Business Park, AZ............ 886 3,550 4,436 60 9/97 1-30 yrs.
Cypress Creek Business Ctr., FL....... 876 3,562 4,438 64 9/97 1-30 yrs.
Scripps Terrace, CA................... 678 2,698 3,376 43 9/97 1-30 yrs.
Riverview Industrial Park, MN......... 841 3,363 4,204 56 9/97 1-30 yrs.
Winnetka Industrial Center, MN........ 1,190 4,758 5,948 79 9/97 1-30 yrs.
Kent Business Park, WA................ 1,211 4,863 6,074 82 9/97 1-30 yrs.
Valley Business Park, CO.............. 1,765 7,058 8,823 117 9/97 1-30 yrs.
</TABLE>
F-28
<PAGE> 115
<TABLE>
<CAPTION>
COLUMN A COLUMN B COLUMN C COLUMN D
COST
CAPITALIZED
(REDUCED)
SUBSEQUENT
INITIAL COST TO TO
PARTNERSHIP(1) ACQUISITION(6)
----------------------- --------------
BUILDINGS
AND
DESCRIPTION ENCUMBRANCES LAND IMPROVEMENTS IMPROVEMENTS
----------- ------------ -------- ------------ --------------
<S> <C> <C> <C> <C>
OFFICE/FLEX PROPERTIES CONTINUED:
Tierrasanta Research Park, CA......... -- $ 1,297 $ 5,189 $ 249
Germantown Business Center, MD........ -- 1,438 5,753 19
Fox Hollow Business Quarters, NJ...... -- 1,572 2,358 10
Fairfield Business Quarters, NJ....... $ 2,903 816 3,479 3
Columbia Warehouse, MD................ -- 391 1,565 7
Palms Business Centre North, NV....... -- 2,483 7,067 35
Palms Business Centre South, NV....... -- 4,119 9,610 51
Palms Business Centre III, NV......... -- 3,970 10,207 53
Palms Business Centre IV, NV.......... -- 623 3,272 16
Post Palms, NV........................ -- 2,513 9,453 44
Bryant Lake Business Center, MN....... -- 1,883 7,531 135
ADS Alliance Data Systems, CO......... -- 1,331 3,354 10
Fingerhut Call Center Facility, FL.... -- 1,184 3,282 9
PrimeCo Call Center Facility, FL...... -- 947 3,418 10
Atlantic Tech @ Regency, FL........... -- 1,117 4,302 11
Clark Avenue, PA...................... -- 646 2,584 14
Dominguez Industrial, CA.............. -- 665 2,662 168
Dunn Way Industrial, CA............... -- 400 1,601 166
Monroe Industrial, CA................. $ 733 275 1,101 58
Upland Industrial, CA................. -- 144 576 64
Fisher-Pierce, MA..................... (4) 715 2,860 16
Woodlands Tech Center, MO............. (4) 943 3,773 138
Lake Point Business Park, FL.......... (4) 1,336 5,343 99
-------- -------- -------- -------
OFFICE/FLEX TOTAL.............. 46,133 162,065 1,904
-------- -------- -------- -------
INDUSTRIAL PROPERTIES:
Case Kansas City, KS (8).............. -- 383 3,264 (1,397)
Case Memphis, TN (8).................. -- 305 2,583 (1,106)
Park 100 -- Building 46, IN (8)....... -- -- -- 211
<CAPTION>
COLUMN A COLUMN E COLUMN F COLUMN G COLUMN H
GROSS AMOUNT CARRIED AT
DECEMBER 31, 1997
----------------------------------
BUILDINGS (1) LIFE
AND (3)(10) ACCUMULATED DATE DEPRECIATED
DESCRIPTION LAND IMPROVEMENTS TOTAL DEPRECIATION ACQUIRED OVER
----------- -------- ------------ -------- ------------ --------- -----------
<S> <C> <C> <C> <C> <C> <C>
OFFICE/FLEX PROPERTIES CONTINUED:
Tierrasanta Research Park, CA......... $ 1,303 $ 5,432 $ 6,735 $ 98 9/97 1-30 yrs.
Germantown Business Center, MD........ 1,442 5,768 7,210 96 9/97 1-30 yrs.
Fox Hollow Business Quarters, NJ...... 1,576 2,364 3,940 39 9/97 1-30 yrs.
Fairfield Business Quarters, NJ....... 817 3,481 4,298 58 9/97 1-30 yrs.
Columbia Warehouse, MD................ 393 1,570 1,963 13 10/97 1-30 yrs.
Palms Business Centre North, NV....... 2,492 7,093 9,585 59 10/97 1-30 yrs.
Palms Business Centre South, NV....... 4,134 9,646 13,780 80 10/97 1-30 yrs.
Palms Business Centre III, NV......... 3,984 10,246 14,230 85 10/97 1-30 yrs.
Palms Business Centre IV, NV.......... 626 3,285 3,911 27 10/97 1-30 yrs.
Post Palms, NV........................ 2,522 9,488 12,010 79 10/97 1-30 yrs.
Bryant Lake Business Center, MN....... 1,907 7,642 9,549 63 11/97 1-30 yrs.
ADS Alliance Data Systems, CO......... 1,334 3,361 4,695 28 12/97 1-30 yrs.
Fingerhut Call Center Facility, FL.... 1,187 3,288 4,475 27 12/97 1-30 yrs.
PrimeCo Call Center Facility, FL...... 949 3,426 4,375 29 12/97 1-30 yrs.
Atlantic Tech @ Regency, FL........... 1,119 4,311 5,430 36 12/97 1-30 yrs.
Clark Avenue, PA...................... 649 2,595 3,244 43 9/97 1-30 yrs.
Dominguez Industrial, CA.............. 697 2,798 3,495 71 4/97 1-30 yrs.
Dunn Way Industrial, CA............... 427 1,740 2,167 43 4/97 1-30 yrs.
Monroe Industrial, CA................. 282 1,152 1,434 28 4/97 1-30 yrs.
Upland Industrial, CA................. 155 629 784 16 4/97 1-30 yrs.
Fisher-Pierce, MA..................... 718 2,873 3,591 72 4/97 1-30 yrs.
Woodlands Tech Center, MO............. 949 3,905 4,854 105 4/97 1-30 yrs.
Lake Point Business Park, FL.......... 1,344 5,434 6,778 137 4/97 1-30 yrs.
-------- -------- -------- -------
OFFICE/FLEX TOTAL.............. 46,496 163,606 210,102 3,274
-------- -------- -------- -------
INDUSTRIAL PROPERTIES:
Case Kansas City, KS (8).............. 236 2,014 2,250 558 3/84 50 yrs.
Case Memphis, TN (8).................. 187 1,595 1,782 442 3/84 50 yrs.
Park 100 -- Building 46, IN (8)....... -- 211 211 94 10/86 5-25 yrs.
</TABLE>
F-29
<PAGE> 116
<TABLE>
<CAPTION>
COLUMN A COLUMN B COLUMN C COLUMN D
COST
CAPITALIZED
(REDUCED)
SUBSEQUENT
INITIAL COST TO TO
PARTNERSHIP(1) ACQUISITION(6)
----------------------- --------------
BUILDINGS
AND
DESCRIPTION ENCUMBRANCES LAND IMPROVEMENTS IMPROVEMENTS
----------- ------------ -------- ------------ --------------
<S> <C> <C> <C> <C>
INDUSTRIAL PROPERTIES CONTINUED:
Mercantile I, TX...................... -- $ 783 $ 3,133 $ 118
Quaker Industrial, TX................. -- 103 412 40
Pinewood Industrial, TX............... -- 144 577 6
Fifth Street, AZ...................... -- 630 2,522 135
Airport Perimeter Bus. Park, GA....... -- 482 1,928 17
Springdale Commerce Ctr., CA.......... -- 1,025 4,101 23
Atlantic Industrial, GA............... -- 967 3,866 22
Coronado Industrial, CA............... -- 708 2,831 16
Glenn Avenue Business Ctr., IL........ -- 563 2,250 12
Wood Dale Business Center, IL......... -- 601 2,403 13
Burnham Industrial Warehouse, FL...... -- 591 2,366 14
Bonnie Lane Business Center, IL....... -- 735 2,938 16
Jencraft Industrial, NJ............... -- 1,323 4,975 16
Eatontown Industrial, NJ.............. -- 763 1,963 7
E. Anaheim, CA........................ -- 1,474 3,282 18
Fairmont Commerce Center, AZ.......... -- 732 2,928 14
Benicia Industrial Park, CA (8)....... (5) 1,037 4,787 66
Navistar Int'l -- W. Chicago, IL
(8)................................. (5) 1,289 10,941 (4,618)
Navistar Int'l -- Baltimore, MD (8)... (5) 577 4,911 (2,100)
Belshaw Industrial, CA (9)............ 530 103 520 46
Southworth-Milton, MA................. (4) 1,913 7,652 43
Skypark, CA (9)....................... 7,428 3,899 17,802 --
Sea Tac II, WA (2)(8)................. -- 712 1,474 (178)
-------- -------- -------- -------
INDUSTRIAL TOTAL............... 21,842 96,409 (8,546)
-------- -------- -------- -------
RETAIL PROPERTIES:
Auburn North, WA...................... -- 1,099 4,397 162
Piedmont Plaza, FL.................... -- 1,308 5,233 43
River Run Shopping Ctr., FL........... -- 1,422 5,687 41
Goshen Plaza, MD...................... -- 989 3,958 22
<CAPTION>
COLUMN A COLUMN E COLUMN F COLUMN G COLUMN H
GROSS AMOUNT CARRIED AT
DECEMBER 31, 1997
----------------------------------
BUILDINGS (1) LIFE
AND (3)(10) ACCUMULATED DATE DEPRECIATED
DESCRIPTION LAND IMPROVEMENTS TOTAL DEPRECIATION ACQUIRED OVER
----------- -------- ------------ -------- ------------ --------- -----------
<S> <C> <C> <C> <C> <C> <C>
INDUSTRIAL PROPERTIES CONTINUED:
Mercantile I, TX...................... $ 783 $ 3,251 $ 4,034 $ 179 10/96 1-30 yrs.
Quaker Industrial, TX................. 103 452 555 23 10/96 1-30 yrs.
Pinewood Industrial, TX............... 144 583 727 30 10/96 1-30 yrs.
Fifth Street, AZ...................... 654 2,633 3,287 65 6/97 1-30 yrs.
Airport Perimeter Bus. Park, GA....... 484 1,943 2,427 33 9/97 1-30 yrs.
Springdale Commerce Ctr., CA.......... 1,030 4,119 5,149 69 9/97 1-30 yrs.
Atlantic Industrial, GA............... 971 3,884 4,855 65 9/97 1-30 yrs.
Coronado Industrial, CA............... 711 2,844 3,555 47 9/97 1-30 yrs.
Glenn Avenue Business Ctr., IL........ 565 2,260 2,825 38 9/97 1-30 yrs.
Wood Dale Business Center, IL......... 603 2,414 3,017 40 9/97 1-30 yrs.
Burnham Industrial Warehouse, FL...... 594 2,377 2,971 40 9/97 1-30 yrs.
Bonnie Lane Business Center, IL....... 738 2,951 3,689 49 9/97 1-30 yrs.
Jencraft Industrial, NJ............... 1,326 4,988 6,314 83 9/97 1-30 yrs.
Eatontown Industrial, NJ.............. 765 1,968 2,733 33 9/97 1-30 yrs.
E. Anaheim, CA........................ 1,480 3,294 4,774 27 10/97 1-30 yrs.
Fairmont Commerce Center, AZ.......... 735 2,939 3,674 24 10/97 1-30 yrs.
Benicia Industrial Park, CA (8)....... 978 4,912 5,890 1,866 7/86 5-30 yrs.
Navistar Int'l -- W. Chicago, IL
(8)................................. 793 6,819 7,612 1,892 3/84 50 yrs.
Navistar Int'l -- Baltimore, MD (8)... 356 3,032 3,388 839 3/84 50 yrs.
Belshaw Industrial, CA (9)............ 134 535 669 13 4/97 1-30 yrs.
Southworth-Milton, MA................. 1,922 7,686 9,608 192 4/97 1-30 yrs.
Skypark, CA (9)....................... 3,899 17,802 21,701 443 12/97 30 yrs.
Sea Tac II, WA (2)(8)................. 712 1,296 2,008 319 2/86 5-25 yrs.
-------- -------- -------- -------
INDUSTRIAL TOTAL............... 20,903 88,802 109,705 7,503
-------- -------- -------- -------
RETAIL PROPERTIES:
Auburn North, WA...................... 1,099 4,559 5,658 229 10/96 1-30 yrs.
Piedmont Plaza, FL.................... 1,317 5,267 6,584 132 4/97 1-30 yrs.
River Run Shopping Ctr., FL........... 1,428 5,722 7,150 95 9/97 1-30 yrs.
Goshen Plaza, MD...................... 994 3,975 4,969 66 9/97 1-30 yrs.
</TABLE>
F-30
<PAGE> 117
<TABLE>
<CAPTION>
COLUMN A COLUMN B COLUMN C COLUMN D
COST
CAPITALIZED
(REDUCED)
SUBSEQUENT
INITIAL COST TO TO
PARTNERSHIP(1) ACQUISITION(6)
----------------------- --------------
BUILDINGS
AND
DESCRIPTION ENCUMBRANCES LAND IMPROVEMENTS IMPROVEMENTS
----------- ------------ -------- ------------ --------------
<S> <C> <C> <C> <C>
RETAIL PROPERTIES CONTINUED:
Westbrook Commons, IL................. -- $ 3,053 $ 12,213 $ 68
Sonora Plaza, CA...................... $ 4,965 1,945 7,781 18
Shannon Crossing, GA (8).............. (5) 2,488 2,075 360
Westwood Plaza, FL (8)................ (5) 2,599 5,110 563
Park Center, CA (2)(8)................ -- 1,748 3,296 (544)
-------- -------- -------- -------
RETAIL TOTAL................... 16,651 49,750 733
-------- -------- -------- -------
MULTI-FAMILY PROPERTIES:
Summer Breeze, CA (8)(9).............. 2,578 1,857 2,138 217
Sahara Gardens, NV.................... -- 1,871 7,500 215
Sharonridge I & II, NC................ 1,756 518 2,071 24
Wendover Glen, NC..................... 2,497 586 2,346 27
The Oaks, NC.......................... 2,341 662 2,649 31
The Landing on Farmhurst, NC.......... 3,131 826 3,306 39
The Courtyard, NC..................... 1,595 431 1,723 20
Sabal Point I, II & III, NC........... -- 3,650 14,602 169
Willow Glen, NC....................... 2,412 809 3,236 37
Arrowood Crossing I & II, NC.......... 6,504 1,805 7,222 83
The Chase (Commonwealth), NC.......... 3,190 771 3,083 35
The Chase (Monroe), NC................ -- 1,015 4,062 47
Villas de Mission, NV................. 7,220 1,924 7,695 99
Overlook, AZ.......................... (4) 2,259 9,036 104
-------- -------- -------- -------
MULTI-FAMILY TOTAL............. 18,984 70,669 1,147
-------- -------- -------- -------
HOTEL PROPERTIES:
Country Inn by Carlson:
San Antonio, TX..................... -- 784 2,032 99
Country Inn & Suites by Carlson:
Scottsdale, AZ 4,457..... -- 12,059 61
<CAPTION>
COLUMN A COLUMN E COLUMN F COLUMN G COLUMN H
GROSS AMOUNT CARRIED AT
DECEMBER 31, 1997
----------------------------------
BUILDINGS (1) LIFE
AND (3)(10) ACCUMULATED DATE DEPRECIATED
DESCRIPTION LAND IMPROVEMENTS TOTAL DEPRECIATION ACQUIRED OVER
----------- -------- ------------ -------- ------------ --------- -----------
<S> <C> <C> <C> <C> <C> <C>
RETAIL PROPERTIES CONTINUED:
Westbrook Commons, IL................. $ 3,067 $ 12,267 $ 15,334 $ 204 9/97 1-30 yrs.
Sonora Plaza, CA...................... 1,947 7,797 9,744 390 11/96 1-30 yrs.
Shannon Crossing, GA (8).............. 2,488 2,435 4,923 1,581 10/88 3-14 yrs.
Westwood Plaza, FL (8)................ 2,599 5,673 8,272 2,523 1/88 3-23 yrs.
Park Center, CA (2)(8)................ 1,748 2,752 4,500 625 9/86 5-25 yrs.
-------- -------- -------- ------- -----
RETAIL TOTAL................... 16,687 50,447 67,134 5,845
-------- -------- -------- -------
MULTI-FAMILY PROPERTIES:
Summer Breeze, CA (8)(9).............. 1,857 2,355 4,212 407 1/95 3-18 yrs.
Sahara Gardens, NV.................... 1,872 7,714 9,586 385 10/96 1-30 yrs.
Sharonridge I & II, NC................ 542 2,071 2,613 17 12/97 1-30 yrs.
Wendover Glen, NC..................... 613 2,346 2,959 20 12/97 1-30 yrs.
The Oaks, NC.......................... 693 2,649 3,342 22 12/97 1-30 yrs.
The Landing on Farmhurst, NC.......... 865 3,306 4,171 28 12/97 1-30 yrs.
The Courtyard, NC..................... 451 1,723 2,174 14 12/97 1-30 yrs.
Sabal Point I, II & III, NC........... 3,819 14,602 18,421 122 12/97 1-30 yrs.
Willow Glen, NC....................... 846 3,236 4,082 27 12/97 1-30 yrs.
Arrowood Crossing I & II, NC.......... 1,888 7,222 9,110 60 12/97 1-30 yrs.
The Chase (Commonwealth), NC.......... 806 3,083 3,889 26 12/97 1-30 yrs.
The Chase (Monroe), NC................ 1,062 4,062 5,124 34 12/97 1-30 yrs.
Villas de Mission, NV................. 1,924 7,794 9,718 390 10/96 1-30 yrs.
Overlook, AZ.......................... 2,274 9,125 11,399 228 4/97 1-30 yrs.
-------- -------- -------- -------
MULTI-FAMILY TOTAL............. 19,512 71,288 90,800 1,780
-------- -------- -------- -------
HOTEL PROPERTIES:
Country Inn by Carlson:
San Antonio, TX..................... 785 2,130 2,915 126 8/96 3-30 yrs.
Country Inn & Suites by Carlson:
Scottsdale, AZ -- 12,120 12,120 594 2/97 3-30 yrs.
</TABLE>
F-31
<PAGE> 118
<TABLE>
<CAPTION>
COLUMN A COLUMN B COLUMN C COLUMN D
COST
CAPITALIZED
(REDUCED)
SUBSEQUENT
INITIAL COST TO TO
PARTNERSHIP(1) ACQUISITION(6)
----------------------- --------------
BUILDINGS
AND
DESCRIPTION ENCUMBRANCES LAND IMPROVEMENTS IMPROVEMENTS
----------- ------------ -------- ------------ --------------
<S> <C> <C> <C> <C>
HOTEL PROPERTIES CONTINUED:
Country Suites by Carlson:
Arlington, TX (8)................... (5) $ 1,527 $ 5,346 $ 1,336
Irving, TX (2)(8)................... -- 972 3,850 (1,027)
Ontario, CA (8)..................... (5) 1,224 5,576 367
Tucson, AZ (8)...................... (5) 1,048 7,600 1,265
-------- -------- -------- -------
HOTEL TOTAL.................... 5,555 36,463 2,101
-------- -------- -------- -------
COMBINED TOTAL................. $228,299 $171,457 $691,623 $ 3,351
======== ======== ======== =======
<CAPTION>
COLUMN A COLUMN E COLUMN F COLUMN G COLUMN H
GROSS AMOUNT CARRIED AT
DECEMBER 31, 1997
----------------------------------
BUILDINGS (1) LIFE
AND (3)(10) ACCUMULATED DATE DEPRECIATED
DESCRIPTION LAND IMPROVEMENTS TOTAL DEPRECIATION ACQUIRED OVER
----------- -------- ------------ -------- ------------ --------- -----------
<S> <C> <C> <C> <C> <C> <C>
HOTEL PROPERTIES CONTINUED:
Country Suites by Carlson:
Arlington, TX (8)................... $ 1,610 $ 6,599 $ 8,209 $ 3,751 12/86 7-25 yrs.
Irving, TX (2)(8)................... 954 2,841 3,795 798 10/86 5-25 yrs.
Ontario, CA (8)..................... 1,145 6,022 7,167 3,260 11/86 5-30 yrs.
Tucson, AZ (8)...................... 1,093 8,820 9,913 4,972 12/86 7-25 yrs.
-------- -------- -------- -------
HOTEL TOTAL.................... 5,587 38,532 44,119 13,501
-------- -------- -------- -------
COMBINED TOTAL................. $171,627 $694,804 $866,431 $41,213
======== ======== ======== =======
</TABLE>
- ---------------
(1) Initial cost and date acquired by GRT Predecessor Entities, where
applicable.
(2) The Operating Partnership holds a participating first mortgage interest in
the property. In accordance with GAAP, the Operating Partnership is
accounting for the property as though it holds fee title.
(3) The aggregate cost for Federal income tax purposes is $711,995.
(4) Pledged as security for Wells Fargo Bank Secured Loan -- $59,724.
(5) Pledged as security for loan with an investment bank -- $19,444.
(6) Bracketed amounts represent reductions to carrying value in prior years.
(7) Initial Cost represents escrow deposit related to the acquisition of the
Windsor Portfolio which occurred in January 1998 (see Note 3).
(8) Initial Cost represents original book value carried forward from the
financial statements of the GRT Predecessor Entities.
(9) This property was sold in 1998.
(10) In aggregate, approximately $590,400 of real estate has been acquired in
1998.
F-32
<PAGE> 119
GLENBOROUGH PROPERTIES, L.P.
DECEMBER 31, 1997
(IN THOUSANDS)
Reconciliation of gross amount at which real estate was carried for the
years ended December 31:
<TABLE>
<CAPTION>
1997 1996 1995
-------- -------- --------
<S> <C> <C> <C>
Investments in real estate:
Balance at beginning of year.............................. $190,729 $102,451 $ 83,449
Additions during year:
Property acquisitions................................ 687,523 89,653 17,151
Improvements......................................... 2,691 1,572 1,851
Retirements/sales...................................... (14,512) (2,947) --
-------- -------- --------
Balance at end of year.................................... $866,431 $190,729 $102,451
======== ======== ========
Accumulated Depreciation:
Balance at beginning of year.............................. $ 28,784 $ 24,877 $ 19,455
Additions during year:
Depreciation......................................... 14,496 4,305 2,254
Acquisitions......................................... 443 -- 3,168
Retirements/sales...................................... (2,510) (398) --
-------- -------- --------
Balance at end of year.................................... $ 41,213 $ 28,784 $ 24,877
======== ======== ========
</TABLE>
F-33
<PAGE> 120
GLENBOROUGH PROPERTIES, L.P.
SCHEDULE IV -- MORTGAGE LOANS RECEIVABLE, SECURED BY REAL ESTATE
DECEMBER 31, 1997
(IN THOUSANDS)
<TABLE>
<CAPTION>
COLUMN A COLUMN B COLUMN C COLUMN D COLUMN E COLUMN F COLUMN G
DESCRIPTION OF LOAN CURRENT MATURITY PERIODIC FACE CARRYING
AND SECURING PROPERTY INTEREST RATE DATE PAYMENT TERMS PRIOR LIENS AMOUNT AMOUNT
--------------------- ------------- -------- ------------- ----------- -------- --------
<S> <C> <C> <C> <C> <C> <C>
First Mortgage Loan 9% 6/1/01 Monthly interest and None 553 507
Industrial property, principal payments,
Los Angeles, CA based on a thirty year
amortization
First Mortgage Loan 11% 11/19/99 Monthly interest only None 3,850 3,185(1)
Medical building payments commencing
Phoenix, AZ January 1, 1997
Principal due upon
maturity
------ ------
$4,403 $3,692
====== ======
<CAPTION>
COLUMN A COLUMN H
PRINCIPAL AMOUNT
OF LOANS SUBJECT
DESCRIPTION OF LOAN TO DELINQUENT
AND SECURING PROPERTY PRINCIPAL OR INTEREST
--------------------- ---------------------
<S> <C>
First Mortgage Loan None
Industrial property,
Los Angeles, CA
First Mortgage Loan None
Medical building
Phoenix, AZ
</TABLE>
- ---------------
(1) The loan amount is $3,850,000, of which $2,694,000 was initially disbursed
to the borrower and $906,000 was held by the Operating Partnership as
leasing and interest reserves. In 1997, $491,000 of the leasing and interest
reserves were drawn by the borrower.
F-34
<PAGE> 121
GLENBOROUGH PROPERTIES, L.P.
SCHEDULE IV -- MORTGAGE LOANS RECEIVABLE, SECURED BY REAL ESTATE
DECEMBER 31, 1997
(IN THOUSANDS)
The following is a summary of changes in the carrying amount of mortgage
loans for the years ended December 31, 1997, 1996 and 1995 (in thousands):
<TABLE>
<CAPTION>
1997 1996 1995
------- ------ --------
<S> <C> <C> <C>
Balance at beginning of year................................ $ 9,905 $7,465 $ 19,953
Additions during year:
New mortgage loans........................................ 491 2,694 7
Deductions during year:
Loss provision............................................ -- -- (863)
Collections of principal.................................. (6,704) (254) (11,632)
------- ------ --------
Balance at end of year...................................... $ 3,692 $9,905 $ 7,465
======= ====== ========
</TABLE>
F-35
<PAGE> 122
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To the Partners of
GLENBOROUGH PROPERTIES, L.P.,
A CALIFORNIA LIMITED PARTNERSHIP
We have audited the accompanying combined statements of revenues and
certain expenses of the Pru-Bache Portfolio as defined in Note 1, for each of
the three years ended December 31, 1997, 1996 and 1995. These combined financial
statements are the responsibility of the management of the Operating
Partnership. Our responsibility is to express an opinion on these combined
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.
The accompanying combined statements of revenues and certain expenses have
been prepared for the purpose of complying with the rules and regulations of the
Securities and Exchange Commission, as described in Note 1, and are not intended
to be a complete presentation of the revenues and expenses of the Pru-Bache
Portfolio.
In our opinion, the combined financial statements referred to above present
fairly, in all material respects, the revenues and certain expenses of the
Pru-Bache Portfolio for each of the three years ended December 31, 1997, 1996
and 1995, in conformity with generally accepted accounting principles.
ARTHUR ANDERSEN LLP
San Francisco, California
June 5, 1998
F-36
<PAGE> 123
GLENBOROUGH PROPERTIES, L.P.
A CALIFORNIA LIMITED PARTNERSHIP
COMBINED STATEMENTS OF REVENUES AND CERTAIN EXPENSES OF
THE PRU-BACHE PORTFOLIO
FOR THE THREE MONTHS ENDED MARCH 31, 1998 (UNAUDITED)
AND EACH OF THE THREE YEARS ENDED DECEMBER 31, 1997, 1996 AND 1995
(IN THOUSANDS)
<TABLE>
<CAPTION>
THREE MONTHS
ENDED YEAR ENDED DECEMBER 31,
MARCH 31, 1998 --------------------------
(UNAUDITED) 1997 1996 1995
-------------- ------ ------ ------
<S> <C> <C> <C> <C>
REVENUES.......................................... $1,876 $7,138 $6,379 $6,506
CERTAIN EXPENSES
Operating....................................... 446 2,012 2,086 2,107
Real estate taxes............................... 147 511 596 557
------ ------ ------ ------
593 2,523 2,682 2,664
------ ------ ------ ------
REVENUES IN EXCESS OF CERTAIN EXPENSES............ $1,283 $4,615 $3,697 $3,843
====== ====== ====== ======
</TABLE>
The accompanying notes are an integral part of these statements.
F-37
<PAGE> 124
GLENBOROUGH PROPERTIES, LP
A CALIFORNIA LIMITED PARTNERSHIP
NOTES TO COMBINED STATEMENTS OF REVENUES AND CERTAIN EXPENSES OF
THE PRU-BACHE PORTFOLIO
FOR THE THREE MONTHS ENDED MARCH 31, 1998 (UNAUDITED)
AND EACH OF THE THREE YEARS ENDED DECEMBER 31, 1997, 1996 AND 1995
1. BASIS OF PRESENTATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICY
Property Acquired -- The accompanying combined statements of revenues and
certain expenses include the operations (see "Basis of Presentation" below) of
the properties listed below (collectively the "Pru-Bache Portfolio") acquired by
the Operating Partnership from an affiliate:
<TABLE>
<CAPTION>
PROPERTY CITY STATE TYPE
-------- ---- ----- ----
<S> <C> <C> <C>
Gateway Professional Center....................... Sacramento CA Office
Park Plaza........................................ Sacramento CA Office
Montrose Office Park.............................. Rockville MD Office
Poplar Towers..................................... Memphis TN Office
Totem Valley...................................... Kirkland WA Office/Flex
</TABLE>
Basis of Presentation -- The accompanying combined statements of revenues
and certain expenses are not intended to be a complete presentation of the
actual operations of the Pru-Bache Portfolio for the periods presented. Certain
expenses may not be comparable to the expenses expected to be incurred by the
Operating Partnership in the future operations of the Pru-Bache Portfolio,
however, the Operating Partnership is not aware of any material factors relating
to the Pru-Bache Portfolio that would cause the reported financial information
not to be indicative of future operating results. Excluded expenses consist of
property management fees, interest expenses, depreciation and amortization and
other costs not directly related to the future operations of the Pru-Bache
Portfolio.
These combined financial statements have been prepared for the purpose of
complying with certain rules and regulations of the Securities and Exchange
Commission.
Revenue Recognition -- All leases are classified as operating leases.
Rental revenue is recognized as earned over the terms of the leases.
2. LEASING ACTIVITY
The minimum future rental revenues from leases in effect as of October 1,
1997 are as follows (in thousands):
<TABLE>
<CAPTION>
YEAR AMOUNT
---- --------
<S> <C>
1998 (nine months)........................................ $ 5,247
1999...................................................... 5,936
2000...................................................... 4,301
2001...................................................... 2,879
2002...................................................... 1,619
2003...................................................... 740
Thereafter................................................ 4,363
--------
Total........................................... $ 25,089
========
</TABLE>
In addition to minimum rental payments, tenants pay reimbursements for
their pro rata share of specified operating expenses, which amounted to $120
(unaudited) for the three months ended March 31, 1998 and $573, $578 and $699
for the years ended December 31, 1997, 1996 and 1995, respectively. Certain
leases contain leases renewal options.
F-38
<PAGE> 125
=========================================================
NO DEALER, SALESPERSON OR ANY OTHER PERSON HAS BEEN AUTHORIZED TO GIVE ANY
INFORMATION OR TO MAKE ANY REPRESENTATIONS OTHER THAN THOSE CONTAINED IN THIS
PROSPECTUS IN CONNECTION WITH THE EXCHANGE OFFER COVERED BY THIS PROSPECTUS AND,
IF GIVEN OR MADE, SUCH INFORMATION OR REPRESENTATIONS MUST NOT BE RELIED UPON AS
HAVING BEEN AUTHORIZED BY THE OPERATING PARTNERSHIP. NEITHER THE DELIVERY OF
THIS PROSPECTUS NOR ANY SALE MADE HEREUNDER SHALL, UNDER CIRCUMSTANCES, CREATE
ANY IMPLICATION THAT THERE HAS BEEN NO CHANGE IN THE AFFAIRS OF THE OPERATING
PARTNERSHIP SINCE THE DATES AS OF WHICH INFORMATION IS GIVEN IN THIS PROSPECTUS.
THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFER OR SOLICITATION IS NOT AUTHORIZED
OR IN WHICH THE PERSON MAKING SUCH OFFER OR SOLICITATION IS NOT QUALIFIED TO DO
SO OR TO ANY PERSON TO WHOM IT IS UNLAWFUL TO MAKE SUCH OFFER OR SOLICITATION.
------------------------
UNTIL , 1999 (ONE YEAR AFTER THE DATE OF THIS EXCHANGE OFFER)
ALL DEALERS EFFECTING TRANSACTIONS IN THE NEW NOTES, WHETHER OR NOT
PARTICIPATING IN THIS EXCHANGE OFFER, MAY BE REQUIRED TO DELIVER A PROSPECTUS.
ALL TENDERED OLD NOTES, EXECUTED LETTERS OF TRANSMITTAL AND OTHER RELATED
DOCUMENTS SHOULD BE DIRECTED TO THE EXCHANGE AGENT. QUESTIONS AND REQUESTS FOR
ASSISTANCE AND REQUEST FOR ADDITIONAL COPIES OF THE PROSPECTUS, THE LETTER OF
TRANSMITTAL AND OTHER RELATED DOCUMENTS SHOULD BE ADDRESSED TO THE EXCHANGE
AGENT AS FOLLOWS:
THE EXCHANGE AGENT FOR THE EXCHANGE OFFER IS:
FACSIMILE TRANSMISSIONS
(ELIGIBLE INSTITUTIONS ONLY)
------------------------
TO CONFIRM BY TELEPHONE
OR FOR INFORMATION CALL:
------------------------
(ORIGINALS OF ALL DOCUMENTS SUBMITTED BY FACSIMILE SHOULD BE SENT PROMPTLY
BY HAND, OVERNIGHT COURIER, OR REGISTERED OR CERTIFIED MAIL.)
=========================================================
=========================================================
OFFER TO EXCHANGE
ALL OUTSTANDING
7 5/8% SENIOR SUBORDINATED
NOTES DUE 2005
($150,000,000 PRINCIPAL AMOUNT)
FOR
7 5/8% SENIOR SUBORDINATED
NOTES DUE 2005
GLENBOROUGH PROPERTIES, L.P.
---------------------------
PROSPECTUS
---------------------------
DATED , 1998
=========================================================
<PAGE> 126
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 20. INDEMNIFICATION OF DIRECTORS AND OFFICERS
To the extent permitted by law, the Partnership Agreement of the Operating
Partnership provides for indemnification of the Company, as general partner, its
affiliates, officers, directors and guarantors and any other persons that the
Company may designate in its sole and absolute discretion from any loss, damage,
claim or liability (including reasonable attorneys' fees and costs incurred in
defending any action against such person), arising from any claims, demands,
suits or proceedings that relate to the operations of the Operating Partnership.
In addition, the Company, in its capacity as general partner, shall not be
liable for monetary damages to the Operating Partnership or any of the Limited
Partners for losses sustained as a result of errors in judgment or of any act or
omission if the Company acted in good faith.
In addition, the Maryland GCL permits a Maryland Corporation to include in
its charter a provision limiting the liability of its directors and officers to
the corporation and its stockholders for money damages except for (i) actual
receipt of an improper benefit or profit in money, property or services or (ii)
active and deliberate dishonesty established by a final judgment as being
material to the cause of action. The Charter contains such a provision which
limits such liability to the maximum extent permitted by the Maryland GCL.
The Company's Charter authorizes the Company to obligate itself to
indemnify its present and former officers and directors and to pay or reimburse
reasonable expenses for those individuals in advance of the final disposition of
a proceeding to the maximum extent permitted from time to time by the laws of
Maryland. The Bylaws of the Company obligate it to indemnify, and advance
expenses to present, former and proposed directors and officers to the maximum
extent permitted by Maryland law. The Maryland GCL permits a corporation to
indemnify its present and former directors and officers, among others, against
judgments, penalties, fines, settlements and reasonable expenses actually
incurred by them in connection with any proceeding to which they may be made a
party by reason of their service in those or other capacities unless it is
established that (a) the act or omission of the director or officer was material
to the matter giving rise to the proceeding and (i) was committed in bad faith
or (ii) was the result of active and deliberate dishonesty, (b) the director or
officer actually received an improper personal benefit in money, property or
services, or (c) in the case of any criminal proceeding, the director or officer
had a reasonable cause to believe that the act or omission was unlawful.
However, a corporation may not indemnify for an adverse judgment in a suit by or
in the right of the corporation. In addition, the Maryland GCL requires the
Company, as conditions to advancing expenses, to obtain (i) a written
affirmation by the director or officer of his good-faith belief that he has met
the standard of conduct necessary for indemnification by the Company as
authorized by the applicable Bylaws and (ii) a written statement by him or on
his behalf to repay the amount paid or reimbursed by the Company if it shall
ultimately be determined that the standard of conduct was not met. The Bylaws of
the Company also permit the Company to provide indemnification and to advance
expenses to a present or former director or officer who served a predecessor of
the Company in that capacity, and to any employee or agent of the Company, or a
predecessor of the Company. Finally, the Maryland GCL requires a corporation
(unless its charter provides otherwise, which the Company's Charter does not) to
indemnify a director or officer who has been successful on the merits, or
otherwise, in the defense of any proceeding to which he is made a party by
reason of service in that capacity.
The Company has entered into indemnification agreements with each of its
directors and executive officers to provide them with indemnification to the
full extent permitted by the Charter and Bylaws of Company.
The Company has obtained an insurance policy to provide liability coverage
for directors and officers of Company.
II-1
<PAGE> 127
ITEM 21. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
------- -----------
<S> <C>
4.1 Registration Rights Agreements, dated March 23, 1998, among
the Operating Partnership and the Initial Purchasers
4.2 Indenture and first supplement thereto, each dated March 23,
1998 relating to $150,000,000 aggregate principal amount
7 5/8% Senior Notes due 2008 between the Operating
Partnership, the Company and the Trustee, including the Form
of Notes
4.3* Form of Exchange Note
5.1** Opinion of Morrison & Foerster LLP
12.1 Computation of Ratio of Earnings to Fixed Charges and Ratio
of Earnings to Fixed Charges and Preferred Partner Interest
Distributions for the five years ended December 31, 1997 and
the three months ended March 31, 1998
23.1 Consent of Accountants
23.2 Consent of Morrison & Foerster LLP (Included in Exhibit 5.1)
24.1 Powers of Attorney (included in Part II to the Registration
Statement)
25.1* Statement of Eligibility of Trustee on Form T-1
99.1* Form of Letter of Transmittal
</TABLE>
- ---------------
* To be filed by amendment.
** Previously Filed.
ITEM 22. UNDERTAKINGS
(a) The undersigned hereby undertakes that, for purposes of determining any
liability under the Securities Act of 1933, each filing of the registrants'
annual report pursuant to Section 13(a) or Section 15(d) of the Exchange Act of
1934 (and, were applicable, each filing of an employee benefit plan's annual
report pursuant to Section 15(d) of the Exchange Act) that is incorporated by
reference in the Registration Statement shall be deemed to be a new registration
statement relating to the securities offered therein, and the offering of such
securities at that time shall be deemed to be the initial bona fide offering
thereof.
(b) Insofar as indemnification for liabilities arising under the Act may be
permitted to directors, officers and controlling persons of the registrant
pursuant to the provisions described in Item 20 above, or otherwise, the
registrant has been advised that in the opinion of the Commission such
indemnification is against public policy as expressed in the Act and is,
therefore, unenforceable. In the event that a claim for indemnification against
such liabilities (other than the payment by the registrant of expenses incurred
or paid by a director, officer or controlling person of the registrant in the
successful defense of any action, suit or proceeding) is asserted by such
director, officer or controlling person in connection with the securities being
registered, the registrant will, unless in the opinion of its counsel the matter
has been settled by controlling precedent, submit to a court of appropriate
jurisdiction the question whether such indemnification by it is against public
policy as expressed in the Act and will be governed by the final adjudication of
such issue.
(d) The undersigned registrant hereby undertakes to respond to requests for
information that is incorporated by reference into the Prospectus pursuant to
Items 4, 10(b), 11, or 13 of this form, within one business day of receipt of
such request, and to send the incorporated documents by first class mail or
other equally prompt means. This includes information contained in documents
filed subsequent to the effective date of the Registration Statement through the
date of responding to the request.
(e) The undersigned registrant hereby undertakes to supply by means of a
post-effective amendment all information concerning a transaction, and the
company being acquired involved herein, that was not the subject of and included
in the Registration Statement when it became effective.
II-2
<PAGE> 128
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the Operating
Partnership has duly caused this amendment to the Registration Statement to be
signed on its behalf by the undersigned, thereunto duly authorized in the City
of San Mateo, State of California on June 5, 1998.
GLENBOROUGH REALTY TRUST, L.P.
By: GLENBOROUGH REALTY TRUST
INCORPORATED,
its General Partner
By: /s/ ROBERT BATINOVICH*
------------------------------------
Robert Batinovich
Chairman and Chief Executive Officer
Pursuant to the requirements of the Securities Act of 1933, this amendment
to the Registration Statement on Form S-4 has been signed below by the following
persons and in the capacities and on the date indicated. Each person has signed
this amendment to the Registration Statement in their capacity as an officer or
director of the Company in its capacity as the general partner of Glenborough
Properties, L.P.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
--------- ----- ----
<S> <C> <C>
/s/ ROBERT BATINOVICH* Chairman and Chief Executive June 5, 1998
- ----------------------------------------------------- Officer
Robert Batinovich
/s/ ANDREW BATINOVICH* Director, President and Chief June 5, 1998
- ----------------------------------------------------- Operating Officer
Andrew Batinovich
/s/ STEPHEN SAUL* Executive Vice President and June 5, 1998
- ----------------------------------------------------- Chief Financial Officer
Stephen Saul
/s/ TERRI GARNICK* Senior Vice President and Chief June 5, 1998
- ----------------------------------------------------- Accounting Officer
Terri Garnick
Director
- -----------------------------------------------------
Richard C. Blum
/s/ PATRICK FOLEY* Director June 5, 1998
- -----------------------------------------------------
Patrick Foley
Director
- -----------------------------------------------------
Richard A. Magnuson
/s/ LAURA WALLACE* Director June 5, 1998
- -----------------------------------------------------
Laura Wallace
By: /s/ FRANK E. AUSTIN
- -------------------------------------------------
Frank E. Austin
Attorney-in-Fact
</TABLE>
II-3
<PAGE> 129
EXHIBIT INDEX
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
------- -----------
<S> <C>
4.1 Registration Rights Agreements, dated March 23, 1998, among
the Operating Partnership and the Initial Purchasers
4.2 Indenture and first supplement thereto, each dated March 23,
1998 relating to $150,000,000 aggregate principal amount
7 5/8% Senior Notes due 2008 between the Operating
Partnership, the Company and the Trustee, including the Form
of Notes
4.3* Form of Exchange Note
5.1** Opinion of Morrison & Foerster LLP
12.1 Computation of Ratio of Earnings to Fixed Charges and Ratio
of Earnings to Fixed Charges and Preferred Partner Interest
Distributions for the five years ended December 31, 1997 and
the three months ended March 31, 1998
23.1 Consent of Accountants
23.2 Consent of Morrison & Foerster LLP (Included in Exhibit 5.1)
24.1 Powers of Attorney (included in Part II to the Registration
Statement)
25.1* Statement of Eligibility of Trustee on Form T-1
99.1* Form of Letter of Transmittal
</TABLE>
- ---------------
* To be filed by amendment.
** Previously Filed.
<PAGE> 1
EXHIBIT 4.1
================================================================================
REGISTRATION RIGHTS AGREEMENT
DATED AS OF MARCH 23, 1998
BY AND AMONG
GLENBOROUGH PROPERTIES, L.P.
AND
BEAR, STEARNS & CO. INC.,
SALOMON BROTHERS INC
================================================================================
<PAGE> 2
This Registration Rights Agreement (this "Agreement") is made and
entered into as of March 23, 1998 by and among Glenborough Properties, L.P., a
California limited partnership (the "Issuer"), Glenborough Realty Trust
Incorporated, a Maryland corporation (the "Company"), and Bear, Stearns & Co.
Inc. and Salomon Brothers Inc (together, the "Initial Purchasers"), who have
agreed to purchase the Issuer's 7 5/8% Senior Notes due 2005 (the "Initial
Notes") pursuant to the Purchase Agreement (as defined below).
This Agreement is made pursuant to the Purchase Agreement, dated
March 18, 1998 (the "Purchase Agreement"), by and among the Issuer, the Company
and the Initial Purchasers. In order to induce the Initial Purchasers to
purchase the Initial Notes, the Issuer has agreed to provide the registration
rights set forth in this Agreement. The execution and delivery of this Agreement
is a condition to the obligations of the Initial Purchasers set forth in Section
3 of the Purchase Agreement.
The parties hereby agree as follows:
SECTION 1. DEFINITIONS
As used in this Agreement, the following capitalized terms shall
have the following meanings:
Broker-Dealer: Any broker or dealer registered under the Exchange
Act.
Closing Date: The date of this Agreement.
Commission: The Securities and Exchange Commission.
Consummate: An Exchange Offer shall be deemed "Consummated" for
purposes of this Agreement upon the occurrence of (a) the filing and
effectiveness under the Securities Act of the Exchange Offer Registration
Statement relating to the Exchange Notes to be issued in the Exchange Offer, (b)
the maintenance of such Registration Statement as continuously effective and the
keeping of the Exchange Offer open for a period not less than the minimum period
required pursuant to Section 3(b) hereof and (c) the delivery by the Issuer to
the Registrar under the Indenture of the Exchange Notes in the same aggregate
principal amount as the aggregate principal amount of Initial Notes that were
tendered by Holders thereof pursuant to the Exchange Offer.
Damages Payment Date: With respect to the Initial Notes, each
Interest Payment Date.
Effectiveness Target Date: As defined in Section 5.
Exchange Act: The Securities Exchange Act of 1934, as amended.
Exchange Notes: The Issuer's 7 5/8% Notes due 2005 to be issued
pursuant to the Indenture (a) in the Exchange Offer or (b) pursuant to a Shelf
Registration Statement, in each case, in exchange for Initial Notes.
Exchange Offer: The registration by the Issuer under the
Securities Act of the Exchange Notes pursuant to the Exchange Offer Registration
Statement pursuant to which the
1
<PAGE> 3
Issuer offers the Holders of all outstanding Transfer Restricted Securities the
opportunity to exchange all such outstanding Transfer Restricted Securities held
by such Holders for Exchange Notes in an aggregate principal amount equal to the
aggregate principal amount of the Transfer Restricted Securities tendered in
such exchange offer by such Holders.
Exchange Offer Registration Statement: The Registration Statement
relating to the Exchange Offer, including the related Prospectus.
Exempt Resales: The transactions in which the Initial Purchasers
propose to sell the Initial Notes to (a) certain "qualified institutional
buyers," as such term is defined in Rule 144A under the Securities Act, (b) a
limited number of institutional accredited investors," as such term is defined
in Rule 501(a), (2), (3) or (7) under the Securities Act and (c) non-U.S.
persons outside the United States in reliance upon Regulation S under the
Securities Act.
Holders: As defined in Section 2(b) hereof.
Indenture: The Indenture, dated as of March 23, 1998, among the
Issuer, the Company, as general partner of the Issuer, and Chase Trust Company
of California, as trustee (the "Trustee"), as supplemented by the First
Supplemental Indenture, dated as of March 23, 1998, pursuant to which the Notes
are to be issued, as such Indenture is amended or supplemented from time to time
in accordance with the terms thereof.
Interest Payment Date: As defined in the Indenture and the Notes.
NASD: National Association of Securities Dealers, Inc.
Notes: The Initial Notes and the Exchange Notes.
Person: An individual, partnership, corporation, limited
liability company, trust or unincorporated organization, or a government or
agency or political subdivision thereof.
Prospectus: The prospectus included in a Registration Statement,
as amended or supplemented by any prospectus supplement and by all other
amendments thereto, including post-effective amendments, and all material
incorporated by reference into such Prospectus.
Record Holder: With respect to any Damages Payment Date relating
to Notes, each Person who is a Holder of Notes on the record date with respect
to the Interest Payment Date corresponding to such Damages Payment Date.
Registration Default: As defined in Section 5 hereof.
Registration Statement: Any registration statement of the Issuer
relating to (a) an offering of Exchange Notes pursuant to an Exchange Offer or
(b) the registration for resale of Transfer Restricted Securities pursuant to
the Shelf Registration Statement, which is filed pursuant to the provisions of
this Agreement, in each case, including the Prospectus included therein, all
amendments and supplements thereto (including post-effective amendments) and all
exhibits and material incorporated by reference therein.
Securities Act: The Securities Act of 1933, as amended.
2
<PAGE> 4
Shelf Filing Deadline: As defined in Section 4 hereof.
Shelf Registration Statement: As defined in Section 4 hereof.
TIA: The Trust Indenture Act of 1939 (15 U.S.C. Section
77aaa-77bbbb) as in effect on the date of the Indenture.
Transfer Restricted Securities: Each Note, until (a) the date on
which such Note has been exchanged by a person other than a broker-dealer for an
Exchange Note in the Exchange Offer, (b) following the exchange by a
broker-dealer in the Exchange Offer of a Note for an Exchange Note, the date on
which such Exchange Note is sold to a purchaser who receives from such
broker-dealer on or prior to the date of such sale a copy of the prospectus
contained in the Exchange Offer Registration Statement, (c) the date on which
such Note has been effectively registered under the Securities Act and disposed
of in accordance with the Shelf Registration Statement or (d) the date on which
such Notes is distributed to the public pursuant to Rule 144 under the
Securities Act.
Underwritten Registration or Underwritten Offering: A
registration in which securities of the Issuer are sold to an underwriter for
reoffering to the public.
SECTION 2. SECURITIES SUBJECT TO THIS AGREEMENT
(a) Transfer Restricted Securities. The securities entitled to the
benefits of this Agreement are the Transfer Restricted Securities.
(b) Holders of Transfer Restricted Securities. A Person is deemed to be
a holder of Transfer Restricted Securities (each, a "Holder") whenever such
Person owns Transfer Restricted Securities.
SECTION 3. REGISTERED EXCHANGE OFFER
(a) Unless the Exchange Offer shall not be permissible under applicable
law or Commission policy (after the procedures set forth in Section 6(a) below
have been complied with), the Issuer shall (i) cause to be filed with the
Commission as soon as practicable after the Closing Date, but in no event later
than 60 days after the Closing Date, the Exchange Offer Registration Statement,
(ii) use its best efforts to cause such Exchange Offer Registration Statement to
become effective at the earliest possible time, but in no event later than 150
days after the Closing Date, (iii) in connection with the foregoing, file (A)
all pre-effective amendments to such Exchange Offer Registration Statement as
may be necessary in order to cause such Exchange Offer Registration Statement to
become effective, (B) if applicable, a post-effective amendment to such Exchange
Offer Registration Statement pursuant to Rule 430A under the Securities Act and
(C) cause all necessary filings in connection with the registration and
qualification of the Exchange Notes to be made under the Blue Sky laws of such
jurisdictions as are necessary to permit Consummation of the Exchange Offer, and
(iv) upon the effectiveness of such Exchange Offer Registration Statement,
commence and Consummate the Exchange Offer. The Exchange Offer shall be on the
appropriate form permitting registration of the Exchange Notes to be offered in
exchange for the Transfer Restricted Securities and to permit resales of Notes
held by Broker-Dealers as contemplated by Section 3(c) below.
3
<PAGE> 5
(b) The Issuer shall cause the Exchange Offer Registration Statement to
be effective continuously and shall keep the Exchange Offer open for a period of
not less than the minimum period required under applicable federal and state
securities laws to Consummate the Exchange Offer; provided, however, that in no
event shall such period be less than 20 business days. The Issuer shall cause
the Exchange Offer to comply with all applicable federal and state securities
laws. No securities other than the Notes shall be included in the Exchange Offer
Registration Statement. The Issuer shall use its best efforts to cause the
Exchange Offer to be Consummated on the earliest practicable date after the
Exchange Offer Registration Statement has become effective, but in no event
later than 30 business days thereafter.
(c) The Issuer shall include a "Plan of Distribution" section in the
Prospectus contained in the Exchange Offer Registration Statement and indicate
therein that any Broker-Dealer who holds Initial Notes that are Transfer
Restricted Securities and that were acquired for its own account as a result of
market-making activities or other trading activities (other than Transfer
Restricted Securities acquired directly from the Issuer) may exchange such
Initial Notes pursuant to the Exchange Offer; however, such Broker-Dealer may be
deemed to be an "underwriter" within the meaning of the Securities Act and must,
therefore, deliver a prospectus meeting the requirements of the Securities Act
in connection with any resales of the Exchange Notes received by such
Broker-Dealer in the Exchange Offer, which prospectus delivery requirement may
be satisfied by the delivery by such Broker-Dealer of the Prospectus contained
in the Exchange Offer Registration Statement. Such "Plan of Distribution"
section shall also contain all other information with respect to such resales by
Broker-Dealers that the Commission may require in order to permit such resales
pursuant thereto, but such "Plan of Distribution" shall not name any such
Broker-Dealer or disclose the amount of Notes held by any such Broker-Dealer
except to the extent required by the Commission as a result of a change in
policy after the date of this Agreement.
The Issuer shall use its best efforts to keep the Exchange Offer
Registration Statement continuously effective, supplemented and amended as
required by the provisions of Section 6(c) below to the extent necessary to
ensure that it is available for resales of Notes acquired by Broker-Dealers for
their own accounts as a result of market-making activities or other trading
activities, and to ensure that it conforms with the requirements of this
Agreement, the Securities Act and the policies, rules and regulations of the
Commission as announced from time to time, for a period of 180 days from the
date on which the Exchange Offer Registration Statement is declared effective or
such shorter period as will terminate when all Transfer Restricted Securities
covered by such Registration Statement have been sold pursuant thereto.
The Issuer shall provide sufficient copies of the latest version
of such Prospectus to Broker-Dealers promptly upon request at any time during
such one-year period in order to facilitate such resales.
SECTION 4. SHELF REGISTRATION
(a) Shelf Registration. If (i) the Issuer is not required to file an
Exchange Offer Registration Statement or permitted to consummate the Exchange
Offer because the Exchange Offer is not permitted by applicable law or
Commission policy (after the procedures set forth in Section 6(a) below have
been complied with) or (ii) if any Holder of Transfer Restricted Securities
notifies the Issuer on or prior to the 20th business day following the
Consummation of the Exchange Offer (A) that such Holder is prohibited by
applicable law or Commission policy from participating in the Exchange Offer, or
(B) that such Holder may not resell the Exchange Notes acquired by it in the
4
<PAGE> 6
Exchange Offer to the public without delivering a prospectus and that the
Prospectus contained in the Exchange Offer Registration Statement is not
appropriate or available for such resales by such Holder, or (C) that such
Holder is a Broker-Dealer and holds Initial Notes acquired directly from the
Issuer or an affiliate of the Issuer, then the Issuer shall:
(x) Use its best efforts to file a shelf registration
statement with the Commission pursuant to Rule 415 under the Securities
Act, which may be an amendment to the Exchange Offer Registration
Statement (in any event, the "Shelf Registration Statement") on or prior
to the earliest to occur of (1) the 60th day after the date on which the
Issuer determines that it is not required to file the Exchange Offer
Registration Statement and (2) the 60th day after the date on which the
Issuer receives notice from a Holder of Transfer Restricted Securities
as contemplated by clause (ii) above (such earliest date being the
"Shelf Filing Deadline"), which Shelf Registration Statement shall
provide for resales of all Transfer Restricted Securities the Holders of
which shall have provided the information required pursuant to Section
4(b) hereof; and
(y) Cause such Shelf Registration Statement to be declared
effective by the Commission on or prior to the 150th day after the Shelf
Filing Deadline.
The Shelf Registration Statement shall be on Form S-3 or another appropriate
form permitting registration of Transfer Restricted Securities for resale by the
Holders. The Issuer shall use its best efforts to keep such Shelf Registration
Statement continuously effective, supplemented and amended as required by the
provisions of Sections 6(b) and (c) hereof to the extent necessary to ensure
that it is available for resales of Notes by the Holders of Transfer Restricted
Securities entitled to the benefit of this Section 4(a), and to ensure that it
conforms with the requirements of this Agreement, the Securities Act and the
policies, rules and regulations of the Commission as announced from time to
time, until the earliest of (i) the date which is 2 years after the Closing
Date, (ii) the date that all Transfer Restricted Securities covered by the Shelf
Registration Statement have been sold in the manner set forth and as
contemplated in the Shelf Registration Statement or (iii) there ceases to be
outstanding any Transfer Restricted Securities. If the Issuer consummates the
Exchange Offer, upon such consummation its obligation to file the Shelf
Registration Statement pursuant to (a)(i) of this Section 4 shall terminate;
provided, however, that any such consummation shall not relieve the Issuer of
any obligation to file the Shelf Registration Statement pursuant to (a)(ii) of
this Section 4.
(b) Provision by Holders of Certain Information in Connection with the
Shelf Registration Statement. No Holder of Transfer Restricted Securities may
include any of its Transfer Restricted Securities in any Shelf Registration
Statement pursuant to this Agreement unless and until such Holder furnishes to
the Issuer in writing, within 20 business days after receipt of a request
therefor, such information as the Issuer may reasonably request for use in
connection with any Shelf Registration Statement or Prospectus or preliminary
Prospectus included therein. No Holder of Transfer Restricted Securities shall
be entitled to Liquidated Damages pursuant to Section 5 hereof unless and until
such Holder shall have used its best efforts to provide all such reasonably
requested information. Each Holder of Notes as to which any Shelf Registration
Statement is being effected, by its participation in the Shelf Registration
Statement, shall be deemed to agree to furnish promptly to the Issuer all
information required to be disclosed in order to make the information previously
furnished to the Issuer by such Holder not materially misleading.
5
<PAGE> 7
SECTION 5. LIQUIDATED DAMAGES
If (a) any Registration Statement required by this Agreement is
not filed with the Commission on or prior to the date specified for such filing
in this Agreement, (b) any such Registration Statement has not been declared
effective by the Commission on or prior to the date specified for such
effectiveness in this Agreement (the "Effectiveness Target Date"), (c) the
Exchange Offer has not been Consummated within 30 business days after the
Effectiveness Target Date with respect to the Exchange Offer Registration
Statement or (d) any Registration Statement required by this Agreement is filed
and declared effective but shall thereafter cease to be effective or fail to be
usable in connection with resales of Transfer Restricted Securities during the
periods the periods specified in this Agreement without being succeeded
immediately by a post-effective amendment to such Registration Statement that
cures such failure and that is itself immediately declared effective (each such
event referred to in clauses (a) through (d), a "Registration Default"), the
Issuer and the Company hereby jointly and severally agree to pay liquidated
damages to each Holder of Transfer Restricted Securities with respect to the
first 90-day period immediately following the occurrence of the first
Registration Default, in an amount equal to one-half of one percentage point
(0.5%) per annum of the principal amount of Transfer Restricted Securities held
by such Holder. The amount of the liquidated damages shall increase by an
additional one-half of one percent (0.5%) per annum of the principal amount of
Transfer Restricted Securities with respect to each subsequent 90-day period
until all Registration Defaults have been cured, up to a maximum amount of
liquidated damages of two percent (2.0%) per annum of the principal amount of
Transfer Restricted Securities. In no event shall the Issuer or the Company,
either individually or in the aggregate, pay liquidated damages in excess of the
maximum applicable amount set forth above, regardless of whether one or multiple
Registration Defaults exist. All accrued liquidated damages shall be paid on
each Damages Payment Date to Record Holders by wire transfer of immediately
available funds or by federal funds check and to Holders of Certificated
Securities by wire transfers to the accounts specified by them or by mailing
checks to their registered addresses if no such accounts have been specified on
each Damages Payment Date, as provided in the Indenture. Following the cure of
all Registration Defaults relating to any particular Transfer Restricted
Securities, the accrual of liquidated damages with respect to such Transfer
Restricted Securities will cease. A Registration Default under clause (a) above
shall be cured on the date that the applicable Registration Statement is filed
with the SEC; a Registration Default under clause (b) above shall be cured on
the date that the applicable Registration Statement is declared effective by the
SEC; a Registration Default under clause (c) above shall be cured on the date
the Exchange Offer is consummated; and a Registration Default under clause (d)
above shall be cured on the date that the post-effective amendment curing the
deficiency in the Shelf Registration Statement is declared effective.
Notwithstanding anything herein to the contrary, no Registration Default shall
be deemed to have occurred if the Issuer and the Company fail to meet their
obligations hereunder solely due to the Initial Purchasers' failure to resolve
any issues raised by the NASD with respect to the Initial Purchasers'
relationship to the Company or the Issuer in the context of the Exchange Offer
or the Shelf Registration Statement.
All obligations of the Issuer set forth in the preceding
paragraph that are outstanding with respect to any Transfer Restricted Security
at the time such security ceases to be a Transfer Restricted Security shall
survive until such time as all such obligations with respect to such security
shall have been satisfied in full.
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SECTION 6. REGISTRATION PROCEDURES
(a) Exchange Offer Registration Statement. In connection with the
Exchange Offer, the Issuer shall comply with the applicable provisions of
Section 6(c) below, shall use its best efforts to effect such exchange to permit
the sale of Transfer Restricted Securities being sold in accordance with the
intended method or methods of distribution thereof, and shall comply with all of
the following provisions:
i. If in the reasonable opinion of counsel to the Issuer there is
a question as to whether the Exchange Offer is permitted by applicable
law, the Issuer hereby agrees to seek a no-action letter or other
favorable decision from the Commission allowing the Issuer to Consummate
an Exchange Offer for such Initial Notes. The Issuer hereby agrees to
pursue the issuance of such a decision to the Commission staff level but
shall not be required to take commercially unreasonable action to effect
a change of Commission policy. The Issuer hereby agrees, however, to (A)
participate in telephonic conferences with the Commission, (B) deliver
to the Commission staff an analysis prepared by counsel to the Issuer
setting forth the legal bases, if any, upon which such counsel has
concluded that such an Exchange Offer should be permitted and (C)
diligently pursue a resolution (which need not be favorable) by the
Commission staff of such submission.
ii. Prior to effectiveness of the Exchange Offer Registration
Statement, the Issuer shall provide a supplemental letter to the
Commission (A) stating that the Issuer is registering the Exchange Offer
in reliance on the position of the Commission enunciated in Exxon
Capital Holdings Corporation (available May 13, 1988), Morgan Stanley
and Co., Inc. (available June 5, 1991) and, if applicable, any no-action
letter obtained pursuant to clause (i) above and (B) including a
representation that the Issuer has not entered into any arrangement or
understanding with any Person to distribute the Exchange Notes to be
received in the Exchange Offer and that, to the best of the Issuer's
information and belief, each Holder participating in the Exchange Offer
is acquiring the Exchange Notes in its ordinary course of business and
has no arrangement or understanding with any Person to participate in
the distribution of the Exchange Notes received in the Exchange Offer.
(b) Shelf Registration Statement. In connection with the Shelf
Registration Statement, the Issuer shall comply with the applicable provisions
of Section 6(c) below and shall use its best efforts to effect such registration
to permit the sale of the Transfer Restricted Securities being sold in
accordance with the intended method or methods of distribution thereof, and
pursuant thereto the Issuer will as expeditiously as possible prepare and file
with the Commission a Registration Statement relating to the registration on any
appropriate form under the Securities Act, which form shall be available for the
sale of the Transfer Restricted Securities in accordance with the intended
method or methods of distribution thereof.
(c) Representation to Issuer. As a condition to its participation in the
Exchange Offer pursuant to the terms of this Agreement, each Holder of Transfer
Restricted Securities shall furnish, upon the request of the Issuer, prior to
the Consummation thereof, a written representation to the Issuer (which may be
contained in the letter of transmittal contemplated by the Exchange Offer
Registration Statement) to the effect that (A) it is not an affiliate of either
the Issuer or the Company, (B) it is not engaged in, and does not intend to
engage in, and has no arrangement or understanding with any person to
participate in, a distribution of the Exchange Notes to be issued in the
Exchange Offer and (C) it is acquiring the Exchange Notes in its ordinary course
of business. In addition, all
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<PAGE> 9
such Holders of Transfer Restricted Securities shall otherwise cooperate in the
Issuer's preparations for the Exchange Offer. Each Holder shall be deemed to
acknowledge and agree that any Broker-Dealer and any such Holder using the
Exchange Offer to participate in a distribution of the securities to be acquired
in the Exchange Offer (1) could not under Commission policy as in effect on the
date of this Agreement rely on the position of the Commission enunciated in
Morgan Stanley and Co., Inc. (available June 5, 1991) and Exxon Capital Holdings
Corporation (available May 13, 1988), as interpreted in the Commission's letter
to Shearman & Sterling dated July 2, 1993, and similar no-action letters
(including any no-action letter obtained pursuant to clause (i) above), and (2)
must comply with the registration and prospectus delivery requirements of the
Securities Act in connection with a secondary resale transaction and that such a
secondary resale transaction should be covered by an effective registration
statement containing the selling security holder information required by Item
507 or 508, as applicable, of Regulation S-K if the resales are of Exchange
Notes obtained by such Holder in exchange for Initial Notes acquired by such
Holder directly from the Issuer.
(d) General Provisions. In connection with any Registration Statement
and any Prospectus required by this Agreement to permit the sale or resale of
Transfer Restricted Securities (including, without limitation, any Registration
Statement and the related Prospectus required to permit resales of Notes by
Broker-Dealers), the Issuer shall:
i. use its best efforts to keep such Registration Statement
continuously effective and provide all requisite financial statements
for the period specified in Section 3 or 4 hereof, as applicable; upon
the occurrence of any event that would cause any such Registration
Statement or the Prospectus contained therein (A) to contain a material
misstatement or omission or (B) not to be effective and usable for
resale of Transfer Restricted Securities during the period required by
this Agreement, the Issuer shall file promptly an appropriate amendment
to such Registration Statement, in the case of clause (A), correcting
any such misstatement or omission, and, in the case of either clause (A)
or (B), use its best efforts to cause such amendment to be declared
effective and such Registration Statement and the related Prospectus to
become usable for their intended purpose(s) as soon as practicable
thereafter;
ii. prepare and file with the Commission such amendments and
post-effective amendments to the Registration Statement as may be
necessary to keep the Registration Statement effective for the
applicable period set forth in Section 3 or 4 hereof, as applicable, or
such shorter period as will terminate when all Transfer Restricted
Securities covered by such Registration Statement have been sold; cause
the Prospectus to be supplemented by any required Prospectus supplement,
and as so supplemented to be filed pursuant to Rule 424 under the
Securities Act, and to comply fully with the applicable provisions of
Rules 424 and 430A under the Securities Act in a timely manner; and
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 in accordance with the intended method or
methods of distribution by the sellers thereof set forth in such
Registration Statement or supplement to the Prospectus;
iii. advise each Initial Purchaser who is required to deliver a
prospectus in connection with sales or market making activities, the
underwriter(s), if any, and selling Holders (in the case of a Shelf
Registration Statement) promptly and, if requested by such Persons, to
confirm such advice in writing, (A) when the Prospectus or any
Prospectus
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<PAGE> 10
supplement or post-effective amendment has been filed, and, with respect
to any Registration Statement or any post-effective amendment thereto,
when the same has become effective, (B) of any request by the Commission
for amendments to the Registration Statement or amendments or
supplements to the Prospectus or for additional information relating
thereto, (C) of the issuance by the Commission of any stop order
suspending the effectiveness of the Registration Statement under the
Securities Act or of the suspension by any state securities commission
of the qualification of the Transfer Restricted Securities for offering
or sale in any jurisdiction, or the initiation of any proceeding for any
of the preceding purposes, (D) of the existence of any fact or the
happening of any event that makes any statement of a material fact made
in the Registration Statement, the Prospectus, any amendment or
supplement thereto, or any document incorporated by reference therein
untrue, or that requires the making of any additions to or changes in
the Registration Statement in order to make the statements therein not
misleading, or that requires the making of any additions to or changes
in the Prospectus in order to make the statements therein, in light of
the circumstances under which they were made, not misleading. With
respect to the Exchange Offer Registration Statement and the Shelf
Registration Statement, if at any time the Commission shall issue any
stop order suspending the effectiveness of the applicable Registration
Statement, or any state securities commission or other regulatory
authority shall issue an order suspending the qualification or exemption
from qualification of the Transfer Restricted Securities under state
securities or Blue Sky laws, the Issuer shall use its best efforts to
obtain the withdrawal or lifting of such order at the earliest possible
time;
iv. if a Shelf Registration Statement is filed pursuant to
Section 4 hereof, furnish to the Initial Purchasers before filing with
the Commission, copies of any Registration Statement or any Prospectus
included therein or any amendments or supplements to any such
Registration Statement or Prospectus, which documents will be subject to
the review and comment of the Initial Purchasres for a period of at
least five business days, and the Issuer will not file any such
Registration Statement or Prospectus or any amendment or supplement to
any such Registration Statement or Prospectus to which an Initial
Purchaser shall reasonably object within five business days after the
receipt thereof. An Initial Purchaser shall be deemed to have reasonably
objected to such filing if such Registration Statement, amendment,
Prospectus or supplement, as applicable, as proposed to be filed,
contains a material misstatement or omission or fails to comply with the
applicable requirements of the Securities Act;
v. if a Shelf Registration Statement is filed pursuant to Section
4 hereof, promptly prior to the filing of any document that is to be
incorporated by reference into a Registration Statement or Prospectus,
provide copies of such document to the Initial Purchasers, make the
Issuer's and the Company's representatives available for discussion of
such document and other customary due diligence matters, and include
such information in such document prior to the filing thereof as Initial
Purchasers reasonably may request;
vi. if a Shelf Registration Statement is filed pursuant to
Section 4 hereof, make available at reasonable times for inspection by
the selling Holders, any underwriter participating in any disposition
pursuant to such Registration Statement, and any attorney or accountant
retained by such selling Holders or any of the underwriter(s), all
financial and other records, pertinent corporate documents and property
of the Issuer and cause the Issuer's officers, directors and employees
to supply all information reasonably requested by
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<PAGE> 11
any such Holder, underwriter, attorney or accountant in connection with
such Registration Statement subsequent to the filing thereof and prior
to its effectiveness;
vii. if a Shelf Registration Statement is filed pursuant to
Section 4 hereof, if requested by any selling Holders or the
underwriter(s), if any, promptly include in any Registration Statement
or Prospectus, pursuant to a supplement or post-effective amendment if
necessary, such information as such selling Holders and underwriter(s),
if any, may reasonably request to have included therein, including,
without limitation, information relating to the "Plan of Distribution"
of the Transfer Restricted Securities, information with respect to the
principal amount of Transfer Restricted Securities being sold to such
underwriter(s), the purchase price being paid therefor and any other
terms of the offering of the Transfer Restricted Securities to be sold
in such offering; and make all required filings of such Prospectus
supplement or post-effective amendment as soon as practicable after the
Issuer is notified of the matters to be included in such Prospectus
supplement or post-effective amendment;
viii. cause the Transfer Restricted Securities covered by the
Registration Statement to be rated with the appropriate rating agencies,
if so requested by the Holders of a majority in aggregate principal
amount of Notes covered thereby or the underwriter(s), if any;
ix. furnish to each selling Holder and each of the
underwriter(s), if any, without charge, at least one copy of the
Registration Statement, as first filed with the Commission, and of each
amendment thereto, including all documents incorporated by reference
therein and all exhibits (including exhibits incorporated therein by
reference);
x. deliver to each selling Holder and each of the underwriter(s),
if any, without charge, as many copies of the Prospectus (including each
preliminary prospectus) and any amendment or supplement thereto as such
Persons reasonably may request; subject to the last paragraph of this
Section 6(c), the Issuer hereby consents to the use of the Prospectus
and any amendment or supplement thereto by each of the selling Holders
and each of the underwriter(s), if any, in connection with the offering
and the sale of the Transfer Restricted Securities covered by the
Prospectus or any amendment or supplement thereto;
xi. in connection with an underwritten offering of Transfer
Restricted Securities pursuant to a Shelf Registration Statement, enter
into such agreements (including an underwriting agreement), and make
such representations and warranties, and take all such other actions in
connection therewith in order to expedite or facilitate the disposition
of the Transfer Restricted Securities pursuant to any Registration
Statement contemplated by this Agreement, all to such extent as may be
requested by the Initial Purchasers or by any Holder of Transfer
Restricted Securities or underwriter in connection with any sale or
resale pursuant to any Registration Statement contemplated by this
Agreement; and whether or not an underwriting agreement is entered into
and whether or not the registration is an Underwritten Registration, the
Issuer and the Company shall:
(A) furnish to the Initial Purchasers, each selling Holder
and each underwriter, if any, in such substance and scope as they may request
and as are customarily made by issuers to underwriters in primary underwritten
offerings, upon the date of the Consummation of the Exchange Offer and, if
applicable, the effectiveness of the Shelf Registration Statement:
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(1) a certificate of the Company on behalf of
itself and as sole general partner of the Issuer, dated the date of the
Consummation of the Exchange Offer or the date of effectiveness of the Shelf
Registration Statement, as the case may be, signed by the Company's Chairman of
the Board, President or Chief Executive Officer and the Chief Financial Officer,
Controller or Treasurer, confirming, as of the date thereof, the matters set
forth in paragraph (e) of Section 7 of the Purchase Agreement and such other
matters as such parties may reasonably request;
(2) an opinion, dated the date of the Consummation
of the Exchange Offer or the date of effectiveness of the Shelf Registration
Statement, as the case may be, of counsel for the Issuer and the Company,
covering the matters set forth in paragraph (a) of Section 7 of the Purchase
Agreement, other maters of the type customarily covered in opinions of counsel
for an issuer in connection with similar securities offerings and such other
matters as such parties may reasonably request, and in any event including a
statement to the effect that such counsel has participated in conferences with
officers and other representatives of the Issuer and the Company,
representatives of the independent public accountants for the Issuer and the
Company, and the Initial Purchasers and their representatives at which the
contents of the applicable Registration Statement and the related Prospectus and
related matters were discussed and although such counsel is not passing upon and
assumes no responsibility for, the accuracy, completeness or fairness of the
statements contained in such Registration Statement or Prospectus or
incorporated by reference therein, and have not made any independent check or
verification thereof, on the basis of the foregoing, no facts came to such
counsel's attention that would lead such counsel to believe that the applicable
Registration Statement, at the time such Registration Statement or any
post-effective amendment thereto became effective, and, in the case of the
Exchange Offer Registration Statement, as of the date of the Consummation,
(including, in each case, information incorporated by reference therein or
deemed to be a part thereof (except for financial statements and schedules and
other financial or statistical data included in or incorporated by reference
therein, as to which such counsel need make no statement) contained an untrue
statement of a material fact or omitted to state a material fact required to be
stated therein or necessary to make the statements therein not misleading, or
that the Prospectus contained in such Registration Statement, including the
documents incorporated or deemed to be incorporated by reference therein (except
for financial statements and schedules and other financial or statistical data
included or incorporated by reference therein, as to which such counsel need
make no statement), as of its date and, in the case of the opinion dated the
date of the Consummation of the Exchange Offer, as of the date of the
Consummation, contained an untrue statement of a material fact or omitted to
state a material fact necessary in order to make the statements therein, in
light of the circumstances under which they were made, not misleading; and
(3) a customary comfort letter, dated as of the
date of the Consummation of the Exchange Offer or the date of effectiveness of
the Shelf Registration Statement, as the case may be, from the Issuer's and the
Company's independent accountants, in the customary form and covering matters of
the type customarily covered in comfort letters by underwriters in connection
with primary underwritten offerings, and affirming the matters set forth in the
comfort letters delivered pursuant to Section 7(c) of the Purchase Agreement,
without exception;
(B) set forth in full or incorporate by reference in the
underwriting agreement, if any, the indemnification provisions and procedures of
Section 8 hereof (or such other provisions and procedures acceptable to Holders
of a majority in aggregate principal amount of
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Transfer Restricted Securities covered by such Registration Statement) with
respect to all parties to be indemnified pursuant to said Section; and
(C) deliver such other documents and certificates as may
be reasonably requested by such parties to evidence compliance with clause (A)
above and with any customary conditions contained in the underwriting agreement
or other agreement entered into by the Issuer pursuant to this clause (xi), if
any.
If at any time the representations and warranties of the
Issuer and the Company contemplated in clause (A)(1) above cease to be
true and correct, the Issuer or the Company shall so advise the Initial
Purchasers and the underwriter(s), if any, and each selling Holder
promptly and, if requested by such Persons, shall confirm such advice in
writing;
xii. in connection with a public offering of Transfer Restricted
Securities pursuant to a Shelf Registration Statement, prior to any
public offering of Transfer Restricted Securities, cooperate with the
selling Holders, the underwriter(s), if any, and their respective
counsel in connection with the registration and qualification of the
Transfer Restricted Securities under the securities or Blue Sky laws of
such jurisdictions as the selling Holders or underwriter(s) may request
and do any and all other acts or things necessary or advisable to enable
the disposition in such jurisdictions of the Transfer Restricted
Securities covered by the Shelf Registration Statement; provided,
however, that the Issuer shall not be required to register or qualify as
a foreign corporation where it is not now so qualified or to take any
action that would subject it to the service of process in suits or to
taxation, other than as to matters and transactions relating to the
Registration Statement, in any jurisdiction where it is not now so
subject;
xiii. shall issue, upon the request of any Holder of Initial
Notes covered by the Shelf Registration Statement, Exchange Notes,
having an aggregate principal amount equal to the aggregate principal
amount of Initial Notes surrendered to the Issuer by such Holder in
exchange therefor or being sold by such Holder; such Exchange Notes to
be registered in the name of such Holder or in the name of the
purchaser(s) of such Notes, as the case may be; in return, the Initial
Notes held by such Holder shall be surrendered to the Issuer for
cancellation;
xiv. cooperate with the selling Holders and the underwriter(s),
if any, to facilitate the timely preparation and delivery of
certificates representing Transfer Restricted Securities to be sold and
not bearing any restrictive legends; and enable such Transfer Restricted
Securities to be in such denominations and registered in such names as
the Holders or the underwriter(s), if any, may request at least two
business days prior to any sale of Transfer Restricted Securities made
by such underwriter(s);
xv. use its best efforts to cause the Transfer Restricted
Securities covered by the Registration Statement to be registered with
or approved by such other governmental agencies or authorities as may be
necessary to enable the seller or sellers thereof or the underwriter(s),
if any, to consummate the disposition of such Transfer Restricted
Securities, subject to the proviso contained in clause (viii) above;
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xvi. if any fact or event contemplated by clause (c)(iii)(D)
above shall exist or have occurred, prepare a supplement or
post-effective amendment to the Registration Statement or related
Prospectus or any document incorporated therein by reference or file any
other required document so that, as thereafter delivered to the
purchasers of Transfer Restricted Securities, the Prospectus will not
contain an untrue statement of a material fact or omit to state any
material fact necessary to make the statements therein, in light of the
circumstances under which they were made, not misleading;
xvii. provide a CUSIP number for all Transfer Restricted
Securities not later than the effective date of the Registration
Statement and provide the Trustee under the Indenture with printed
certificates for the Transfer Restricted Securities which are in a form
eligible for deposit with the Depositary Trust Company;
xviii. cooperate and assist in any filings required to be made
with the NASD and in the performance of any due diligence investigation
by any underwriter (including any "qualified independent underwriter")
that is required to be retained in accordance with the rules and
regulations of the NASD, and use their reasonable best efforts to cause
such Registration Statement to become effective and approved by such
governmental agencies or authorities as may be necessary to enable the
Holders selling Transfer Restricted Securities to consummate the
disposition of such Transfer Restricted Securities;
xix. otherwise use its best efforts to comply with all applicable
rules and regulations of the Commission, and make generally available to
their security holders, as soon as practicable, a consolidated earnings
statement meeting the requirements of Rule 158 (which need not be
audited) for the twelve-month period (A) commencing at the end of any
fiscal quarter in which Transfer Restricted Securities are sold to
underwriters in a firm or best efforts Underwritten Offering or (B) if
not sold to underwriters in such an offering, beginning with the first
month of the Company's first fiscal quarter commencing after the
effective date of the Registration Statement;
xx. cause the Indenture to be qualified under the TIA not later
than the effective date of the first Registration Statement required by
this Agreement, and, in connection therewith, cooperate with the Trustee
and the Holders of Notes to effect such changes to the Indenture as may
be required for such Indenture to be so qualified in accordance with the
terms of the TIA; and execute and use its best efforts to cause the
Trustee to execute, all documents that may be required to effect such
changes and all other forms and documents required to be filed with the
Commission to enable such Indenture to be so qualified in a timely
manner;
xxi. cause all Transfer Restricted Securities covered by the
Registration Statement to be listed on each securities exchange on which
similar securities issued by the Issuer are then listed if requested by
the Holders of a majority in aggregate principal amount of Initial Notes
or the managing underwriter(s), if any; and
xxii. provide promptly to each Holder upon request each document
filed with the Commission pursuant to the requirements of Section 13 and
Section 15 of the Exchange Act.
Each Holder shall be deemed to agree by acquisition of a Transfer
Restricted Security that, upon receipt of any notice from the Issuer of the
existence of any fact of the kind
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described in Section 6(c)(iii)(D) hereof, such Holder will forthwith discontinue
disposition of Transfer Restricted Securities pursuant to the applicable
Registration Statement until such Holder's receipt of the copies of the
supplemented or amended Prospectus contemplated by Section 6(c)(xvi) hereof, or
until it is advised in writing (the "Advice") by the Issuer that the use of the
Prospectus may be resumed, and has received copies of any additional or
supplemental filings that are incorporated by reference in the Prospectus. If so
directed by the Issuer, each Holder will deliver to the Issuer (at the Issuer's
expense) all copies, other than permanent file copies then in such Holder's
possession, of the Prospectus covering such Transfer Restricted Securities that
was current at the time of receipt of such notice. In the event the Issuer shall
give any such notice, the time period regarding the effectiveness of such
Registration Statement set forth in Section 3 or 4 hereof, as applicable, shall
be extended by the number of days during the period from and including the date
of the giving of such notice pursuant to this paragraph or Section 6(c)(iii)(D)
hereof to and including the date when each selling Holder covered by such
Registration Statement shall have received the copies of the supplemented or
amended Prospectus contemplated by Section 6(c)(xvi) hereof or shall have
received the Advice.
SECTION 7. REGISTRATION EXPENSES
(a) All expenses incident to the Issuer's or the Company's performance
of or compliance with this Agreement will be borne, jointly and severally, by
the Issuer and the Company, regardless or whether a Registration Statement
becomes effective, including without limitation: (i) ALL registration and filing
fees and expenses (including filings made by the Initial Purchasers or any
Holder with the NASD (and, if applicable, the fees and expenses of any
"qualified independent underwriter" and its counsel that may be required by the
rules and regulations of the NASD)); (ii) all fees and expenses of compliance
with federal securities and state Blue Sky or securities laws; (iii) all
expenses of printing (including printing certificates for the Exchange Notes to
be issued in the Exchange Offer and printing of Prospectuses), messenger and
delivery services and telephone; (iv) all fees and disbursements of counsel for
the Issuer, the Company and, subject to Section 7(b) below, the Holders of
Transfer Restricted Securities; (v) all application and filing fees in
connection with listing Notes on a national securities exchange or automated
quotation system pursuant to the requirements hereof; and (vi) all fees and
disbursements of independent certified public accountants of the Issuer and the
Company (including the expenses of any special audit and comfort letters
required by or incident to such performance).
The Issuer and the Company will, in any event, bear their
internal expenses (including, without limitation, all salaries and expenses of
their officers and employees performing legal or accounting duties), the
expenses of any annual audit and the fees and expenses of any Person, including
special experts, retained by the Issuer or the Company.
Nothing contained in this Section 7 shall create an obligation on
the part of the Issuer or the Company to pay or reimburse any Holder for any
underwriting commission or discount attributable to any such Holder's Transfer
Restricted Securities included in any Registration Statement filed in accordance
with the terms of this Agreement, or to guarantee such Holder any profit or
proceeds from the sale of such Securities.
(b) In connection with any Shelf Registration Statement required by this
Agreement, the Issuer and the Company will reimburse the Initial Purchasers and
the Holders of Transfer Restricted Securities being registered pursuant to the
Shelf Registration Statement, as applicable, for the reasonable fees and
disbursements of not more than one counsel, who shall be Latham &
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Watkins or such other counsel as may be chosen by the Holders of a majority in
aggregate principal amount of the Transfer Restricted Securities for whose
benefit such Registration Statement is being prepared.
SECTION 8. INDEMNIFICATION
(a) The Issuer and the Company, jointly and severally, agree to
indemnify and hold harmless (i) each Holder, (ii) each person, if any, who
controls any Holder within the meaning of Section 15 of the Securities Act or
Section 20(a) of the Exchange Act and (iii) the respective officers, directors,
partners, employees, representatives and agents of each Holder or any
controlling person to the fullest extent lawful, from and against any and all
losses, liabilities, claims, damages and expenses whatsoever (including but not
limited to attorneys' fees and any and all expenses whatsoever incurred in
investigating, preparing or defending against any investigation or litigation,
commenced or threatened, or any claim whatsoever, and any and all amounts paid
in settlement of any claim or litigation), joint or several, to which they or
any of them may become subject under the Securities Act, the Exchange Act or
otherwise, insofar as such losses, liabilities, claims, damages or expenses (or
actions in respect thereof) arise out of or are based upon any untrue statement
or alleged untrue statement of a material fact contained in any Registration
Statement or Prospectus, or in any supplement thereto or amendment thereof, or
arise out of or are based upon the omission or alleged omission to state therein
a material fact required to be stated therein or necessary to make the
statements therein, in the light of the circumstances under which they were
made, not misleading; provided, however, that (i) the Issuer and the Company
will not be liable in any such case to the extent, but only to the extent, that
any such loss, liability, claim, damage or expense arises out of or is based
upon any such untrue statement or alleged untrue statement or omission or
alleged omission made therein in reliance upon and in conformity with
information relating to any Holder furnished to the Issuer in writing by on
behalf of such Holder expressly for use therein and (ii) any untrue statement
contained in or omission from a preliminary prospectus if a copy of the
Prospectus (as then amended or supplemented, if the Issuer shall have furnished
to or on behalf of the Holder participating in the distribution relating to the
relevant Registration Statement any amendments or supplements thereto) was not
sent or given by or on behalf of such Holder to the person asserting any such
losses, liabilities, claims, damages or expenses who purchased securities, if
such is required by law at or prior to the written confirmation of the sale of
such securities to such person and the untrue statement contained in or omission
from such preliminary prospectus was corrected in the Prospectus (or the
Prospectus as amended or supplemented). This indemnity agreement will be in
addition to any liability which the Issuer and the Company may otherwise have,
including, under this Agreement.
(b) Each Holder, by its participation in the Exchange Offer or Shelf
Registration Statement, shall be deemed to acknowledge and agree, severally and
not jointly, to indemnify and hold harmless (i) the Issuer and the Company, (ii)
each person, if any, who controls the Issuer and the Company within the meaning
of Section 15 of the Securities Act or Section 20(a) of the Exchange Act and
(iii) the respective officers, directors, advisors, partners, employees
representatives and agents of each of them, against any losses, liabilities,
claims, damages and expenses whatsoever (including but not limited to attorneys'
fees and any and all expenses whatsoever incurred in investigating, preparing or
defending against any investigation or litigation, commenced or threatened, or
any claim whatsoever and any and all amounts paid in settlement of any claim or
litigation), joint or several, to which they or any of them may become subject
under the Securities Act, the Exchange Act or otherwise, insofar as such losses,
liabilities, claims, damages or expenses (or actions in respect thereof) arise
out of or are based upon any untrue statement or alleged untrue
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<PAGE> 17
statement of a material fact contained in any Registration Statement or
Prospectus, or in any amendment thereof or supplement thereto, or arise out of
or are based upon the omission or alleged omission to state therein a material
fact required to be stated therein or necessary to make the statements therein,
in the light of the circumstances under which they were made, not misleading, in
each case to the extent, but only to the extent, that any 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 therein in
reliance upon and in conformity with information relating to any Holder
furnished to the Issuer in writing by or on behalf of such Holder expressly for
use therein; provided, however, that in no case shall any Holder, its directors,
officers or any Person who controls such Holder be liable or responsible for any
amount in excess of the dollar amount of the proceeds received by such Holder
upon the sale of the Notes giving rise to such indemnification obligation. This
indemnity will be in addition to any liability which any Holder may otherwise
have, including under this Agreement.
(c) Promptly after receipt by an indemnified party under subsection (a)
or (b) above of notice of the commencement of any action, such indemnified party
shall, if a claim in respect thereof is to be made against the indemnifying
party under such subsection, notify each party against whom indemnification is
to be sought in writing of the commencement thereof (but the failure so to
notify an indemnifying party shall not relieve it from any liability which it
may have under this Section 8 except to the extent that it has been prejudiced
in any material respect by such failure or from any liability which it may
otherwise have). In case any such action is brought against any indemnified
party, and it notifies an indemnifying party of the commencement thereof, the
indemnifying party will be entitled to participate therein, and to the extent it
may elect by written notice delivered to the indemnified party promptly after
receiving the aforesaid notice from such indemnified party, to assume the
defense thereof with counsel reasonably satisfactory to such indemnified party.
Notwithstanding the foregoing, the indemnified party or parties shall have the
right to employ its or their own counsel in any such case, but the fees and
expenses of such counsel shall be at the expense of such indemnified party or
parties unless (i) the employment of such counsel shall have been authorized in
writing by the indemnifying parties in connection with the defense of such
action, (ii) the indemnifying parties shall not have employed counsel to take
charge of the defense of such action within a reasonable time after notice of
commencement of the action, or (iii) such indemnified party or parties shall
have reasonably concluded that there may be defenses available to it or them
which are different from or additional to those available to one or all of the
indemnifying parties (in which case the indemnifying party or parties shall not
have the right to direct the defense of such action on behalf of the indemnified
party or parties), in any of which events such fees and expenses of counsel
shall be borne by the indemnifying parties; provided, however, that the
indemnifying party under subsection (a) or (b) above shall only be liable for
the legal expenses of one counsel (in addition to any local counsel) for all
indemnified parties in each jurisdiction in which any claim or action is
brought. Anything in this subsection to the contrary notwithstanding, an
indemnifying party shall not be liable for any settlement of any claim or action
effected without its prior written consent; provided, however, that such consent
was not unreasonably withheld.
(d) In order to provide for contribution in circumstances in which the
indemnification provided for this Section 8 is for any reason held to be
unavailable from the Issuer and the Company or is insufficient on the other
hand, shall contribute to the aggregate losses, claims, damages, liabilities and
expenses of the nature contemplated by such indemnification provision (including
any investigation, legal and other expenses incurred in connection with, and any
amount
16
<PAGE> 18
paid in settlement of, any action, suit or proceeding or any claims asserted,
but after deducting in the case of losses, claims, damages, liabilities and
expenses suffered by the Issuer and the Company, any contribution received by
the Issuer and the Company from persons, other than the Holders, who may also be
liable for contribution, including persons who control the Issuer and the
Company within the meaning of Section 15 of the Securities Act or Section 20(a)
of the Exchange Act) to which the Issuer, the Company and such Holder may be
subject, in such proportion as is appropriate to reflect the relative benefits
received by the Issuer and the Company, on one hand, and such Holder, on the
other hand, or if such allocation is not permitted by applicable law or
indemnification is not available as a result of the indemnifying party not
having received notice as provided in this Section 8, in such proportion as is
appropriate to reflect not only the relative benefits referred to above but also
the relative fault of the Issuer and the Company, on the one hand, and such
Holder, on the other hand, 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 received by
the Issuer and the Company, on one hand, and each Holder, on the other hand,
shall be deemed to be in the same proportion as (i) the total proceeds from the
offering of the Notes (net of discounts but before deducting expenses) received
by the Issuer and (ii) the total proceeds received by such Holder upon the sale
of the Notes giving rise to such indemnification obligation. The relative fault
of the Issuer and the Company, on the one hand, and of each Holder, 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 Issuer,
the Company or such Holder and the parties' relative intent, knowledge, access
to information and opportunity to correct or prevent such statement or omission.
The Issuer and the Company agree and the Holders shall be deemed to agree by
their participation in the Exchange Offer or the Shelf Registration Statement
that it would not be just and equitable if contribution pursuant to this Section
8(d) were determined by pro rata allocation or by any other method of allocation
which does not take into account the equitable considerations referred to above.
Notwithstanding the provisions of this Section 8, (i) in no case shall any
Holder, its directors, officers or Person who controls such Holder, be required
to contribute in the aggregate any amount in excess of the dollar amount by
which the proceeds received by such Holder upon the sale of the Notes exceeds
the amount of any damages that such Holder, its directors, officers or any
Person who controls such Holder has otherwise been required to pay by reason of
such untrue or alleged untrue statement or omission or alleged omission and (ii)
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 8(d), (A) each person, if any, who controls any Holder within the
meaning of Section 15 of the Securities Act or Section 20(a) of the Exchange Act
and (B) the respective officers, directors, partners, employees, representatives
and agents of each Holder or any controlling person shall have the same rights
to contribution as such Holder, and each person, if any, who controls the Issuer
and the Company within the meaning of Section 15 of the Securities Act or
Section 20(a) of the Exchange Act shall have the same rights to contribution as
the Issuer and the Company, subject in each case to clauses (i) and (ii) of this
Section 8(d). Any party entitled to contribution will, promptly after receipt of
notice of commencement of any action, suit or proceeding against such party in
respect of which a claim for contribution may be made against another party or
parties under this Section 8(d), notify such party or parties from whom
contribution may be sought, but the failure to so notify such party or parties
shall not relieve the party or parties from whom contribution may be sought from
any obligation it or they may have under this Section 8(d) or otherwise. No
party shall be liable for contribution with respect to any
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<PAGE> 19
action or claim settled without its prior written consent; provided, however,
that such written consent was not unreasonably withheld.
SECTION 9. RULE 144A
Each of the Issuer and the Company hereby agrees with each
Holder, for so long as any Transfer Restricted Securities remain outstanding, to
make available to any Holder or beneficial owner of Transfer Restricted
Securities in connection with any sale thereof and any prospective purchaser of
such Transfer Restricted Securities from such Holder or beneficial owner, the
information required by Rule 144A(d)(4) under the Securities Act in order to
permit resales of such Transfer Restricted Securities pursuant to Rule 144A.
SECTION 10. PARTICIPATION IN UNDERWRITTEN REGISTRATIONS
No Holder may participate in any Underwritten Registration
hereunder unless such Holder (a) agrees to sell such Holder's Transfer
Restricted Securities on the basis provided in any underwriting arrangements
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
required under the terms of such underwriting arrangements.
SECTION 11. SELECTION OF UNDERWRITERS
The Holders of Transfer Restricted Securities covered by a Shelf
Registration Statement who desire to do so may sell such Transfer Restricted
Securities in an Underwritten Offering. In any such Underwritten Offering, the
investment banker or investment bankers and manager or managers that will
administer the offering will be selected by the Holders of a majority in
aggregate principal amount of the Transfer Restricted Securities included in
such offering; provided, that such investment bankers and managers must be
reasonably satisfactory to the Issuer.
SECTION 12. MISCELLANEOUS
(a) would not be adequate compensation for any loss incurred by reason
of a breach by them of the provisions of this Agreement and hereby agree to
waive the defense in any action for specific performance that a remedy at law
would be adequate.
(b) No Inconsistent Agreements. The Issuer and the Company will not, on
or after the date of this Agreement, enter into any agreement with respect to
their respective securities that is inconsistent with the rights granted to the
Holders in this Agreement or otherwise conflicts with the provisions hereof. The
Issuer has not previously entered into any agreement granting any registration
rights with respect to its securities to any Person. 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 Issuer's or the Company's securities
under any agreement in effect on the date hereof.
(c) Adjustments Affecting the Notes. Neither the Issuer nor the Company
will take any action, or permit any change to occur, with respect to the Notes
that would materially and adversely affect the ability of the Holders to
Consummate any Exchange Offer.
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<PAGE> 20
(d) Amendments and Waivers. The provisions of this Agreement may not be
amended, modified or supplemented, and waivers or consents to or departures from
the provisions hereof may not be given unless the Issuer has obtained the
written consent of Holders of a majority of the then outstanding principal
amount of Transfer Restricted Securities. Notwithstanding the foregoing, a
waiver or consent to departure from the provisions hereof that relates
exclusively to the rights of Holders whose securities are being tendered
pursuant to the Exchange Offer and that does not affect directly or indirectly
the rights of other Holders whose securities are not being tendered pursuant to
such Exchange Offer may be given by the Holders of a majority of the outstanding
principal amount of Transfer Restricted Securities being tendered or registered.
(e) telex, telecopier, or air courier guaranteeing overnight delivery:
i. if to a Holder, at the address set forth on the records of the
Registrar under the Indenture, with a copy to the Registrar under the
Indenture; and
ii. if to the Issuer or the Company:
Glenborough Properties, L.P.
or Glenborough Realty Trust Incorporated
400 South El Camino Real, Suite 1100
San Mateo, California 94402
Telecopy No: (650) 343-9690
Attention: General Counsel
With copies to:
Morrison & Foerster L.L.P.
755 Page Mill Road
Palo Alto, California 94304
Telecopy No.: (650) 494-0792
Attention: Justin L. Bastian, Esq.
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 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.
(f) Successors and Assigns. This Agreement shall inure to the benefit of
and be binding upon the successors and assigns of each of the parties, including
without limitation and without the need for an express assignment, subsequent
Holders of Transfer Restricted Securities; provided, however, that this
Agreement shall not inure to the benefit of or be binding upon a successor or
assign of a Holder unless and to the extent such successor or assign acquired
Transfer Restricted Securities from such Holder.
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<PAGE> 21
(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 GOVERNED BY AND CONSTRUED IN
ACCORDANCE WITH THE INTERNAL LAWS OF THE STATE OF NEW YORK, WITHOUT REGARD TO
THE CONFLICT OF LAW RULES THEREOF.
(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) 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. There are no restrictions, promises, warranties or undertakings, other
than those set forth or referred to herein with respect to the registration
rights granted by the Issuer with respect to the Transfer Restricted Securities.
This Agreement supersedes all prior agreements and understandings between the
parties with respect to such subject matter.
[signature page follows]
20
<PAGE> 22
IN WITNESS WHEREOF, the parties have executed this Agreement as of the
date first written above.
GLENBOROUGH PROPERTIES, L.P.
By Glenborough Realty Trust Incorporated
Its General Partner
By:
Name:
Title:
Agreed and Accepted, as of the
date first written above.
BEAR, STEARNS & CO. INC.
By:
-------------------------
Name:
Title:
SALOMON BROTHERS INC
By:
-------------------------
Name:
Title:
<PAGE> 1
EXHIBIT 4.2
GLENBOROUGH PROPERTIES, L.P.,
ISSUER
GLENBOROUGH REALTY TRUST INCORPORATED
GUARANTOR
AND
CHASE MANHATTAN BANK AND TRUST COMPANY,
NATIONAL ASSOCIATION,
TRUSTEE
INDENTURE
DATED AS OF MARCH 23, 1998
DEBT SECURITIES
GUARANTEES
<PAGE> 2
REFERENCE SHEET*
Reference is made to the following provisions of the Trust Indenture Act
of 1939, as amended, which establish certain duties and responsibilities of the
Issuer, the Guarantor and the Trustee which may not be set forth in this
Indenture:
<TABLE>
<CAPTION>
SECTION SUBJECT SECTION SUBJECT
- ------- ------- ------- -------
<S> <C> <C> <C>
310(b) Disqualification of the Trustee 315(b) Notice of default from the
for conflicting interest Trustee to Securityholders
311 Preferential collection of 315(c) Duties of the Trustee in case of
claims of the Trustee as default
creditor of the Issuer
312(a) Periodic filing of information 315(d) Provisions relating to
by the Issuer with Trustee responsibility of the Trustee
312(b) Access of Securityholders to 315(e) Assessment of costs against
information litigating Securityholders in
certain circumstances
313(a) Annual report of the Trustee to 316(a) Directions and waivers by
Securityholders Securityholders in certain
circumstances
313(b) Additional reports of the 316(b) Prohibition of impairment of
Trustee to Securityholders right of Securityholders to
payment
314(a) Reports by the Issuer, including 316(c) Right of the Issuer to set
annual compliance certificate record date for certain purposes
314(c) Evidence of compliance with 317(a) Special powers of the Trustee
conditions precedent
315(a) Duties of the Trustee prior to 318(a) Provisions of Trust Indenture
default Act of 1939 to control in case
of conflict
</TABLE>
- --------
* This reference sheet is not a part of the Indenture.
<PAGE> 3
INDENTURE, dated as of March , 1998, among Glenborough Properties, L.P.,
a limited partnership organized under the laws of California (hereinafter called
the "Issuer"), having its principal office at 400 South El Camino Real, Suite
1100, San Mateo, California 94402-1708, Glenborough Realty Trust Incorporated, a
Maryland corporation, as Guarantor (the "Guarantor" or "General Partner"), and
Chase Manhattan Bank and Trust Company, National Association, as Trustee (the
"Trustee"), having a principal place of business at 101 California Street, Suite
2725, San Francisco, CA 94111.
RECITALS OF THE ISSUER AND THE GUARANTOR
The Issuer deems it necessary to issue from time to time for lawful
purposes debt securities (hereinafter called the "Securities") evidencing its
unsecured 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.
The Guarantor has duly authorized the execution and delivery of this
Indenture to provide for guarantees (the "Guarantee") with respect to Securities
as set forth in the Indenture.
This Indenture is subject to the provisions of the Trust Indenture Act
of 1939, as amended, that are deemed to be incorporated into this Indenture by
such Act, and shall, to the extent applicable, be governed by such provisions.
All things necessary to make this Indenture a valid agreement of the
Issuer and the Guarantor, 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 herein or in one or more indentures supplement
hereto 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, and the terms "cash
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<PAGE> 4
transaction" and "self-liquidating paper", as used in TIA Section 311,
shall have the meanings assigned to them in the rules of the Commission
adopted under the TIA;
(3) all accounting terms not otherwise defined herein have the
meanings assigned to them in accordance with GAAP; and
(4) the words "herein", "hereof" 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.
Certain terms, used principally in Article Three, Article Five,
Article Six and Article Ten, are defined in those Articles.
"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 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.
"Authenticating Agent" means any authenticating agent appointed by the
Trustee pursuant to Section 611.
"Authorized Newspaper" means a newspaper, printed in the English
language or in an official language of the country of publication, customarily
published on each Business Day, whether or not published on Saturdays, Sundays
or holidays, 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 Business Day.
"Bearer Security" means any Security established pursuant to Section 201
which is payable to bearer.
"Board" means the board of directors of the General Partner, the
executive committee or any committee of that board duly authorized to act
hereunder.
2
<PAGE> 5
"Board Resolution" means a copy of a resolution certified by the
Secretary or an Assistant Secretary of the General Partner to have been duly
adopted by the Board 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 particular 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, that is neither a legal
holiday nor a 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.
"Capitalized Leases" means any lease of property by the Issuer or any
Subsidiary as lessee which is reflected on the Issuer's consolidated balance
sheet as a capitalized lease, or which should be so reflected, in accordance
with GAAP.
"CEDEL" means Centrale de Livraison de Valeurs Mobilieres, S.A., or its
successor.
"Commission" means the Securities and Exchange Commission, as from time
to time constituted, created under the Securities Exchange Act of 1934, or, if
at any time after execution of this instrument such Commission is not existing
and performing the duties now assigned to it under the Trust Indenture Act, then
the body performing such duties on such date.
"Common Depository" shall have the meaning specified in Section 304.
"Conversion Event" means the cessation of use of (i) a Foreign Currency
either by the government of the country which issued such currency or for the
settlement of transactions by a central bank or other public institution of or
within the international banking community, (ii) the ECU either within the
European Monetary System or for the settlement of transactions by public
institutions of or within the European Community 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 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 101 California
Street, Suite 2725, San Francisco, CA 94111, Attention: Corporate Trust
Department.
"Coupon" means any interest coupon appertaining to a Bearer Security.
"Debt" of the Issuer or any Subsidiary means, without duplication, any
indebtedness of the Issuer or any Subsidiary, 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 the Issuer or any Subsidiary, (iii)
letters of credit or amounts representing the balance deferred and unpaid of the
purchase price of any property except any such balance that constitutes an
accrued expense or trade payable or (iv) Capitalized Leases, and also includes,
to the extent not otherwise included, any obligation by the Issuer or any
Subsidiary 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
3
<PAGE> 6
of another person (other than the Issuer or any Subsidiary) in respect of
clauses (i) through (v) above.
"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 of America as at the time shall be legal tender
for the payment of public and private debts.
"DTC" means The Depository Trust Company, or any successor thereto.
"ECU" means the European Currency Unit 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.
"Event of Default" has the meaning specified in Article Five.
"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 of America or by any
recognized confederation or association of such governments.
"GAAP" means generally accepted accounting principles as used in the
United States applied on a consistent basis.
"General Partner" and "Guarantor" means Glenborough Realty Trust
Incorporated, a Maryland corporation, as general partner of the Issuer.
"Government Obligations" means securities which are (i) direct
obligations of the United States of America 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 of America 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 of America 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 depository receipt issued by a bank or trust company as custodian with
respect to any such Government Obligation or a specific payment of interest on
or principal of any such Government Obligation held by such custodian for the
account of the holder of a depository receipt, provided that (except as required
by law) such custodian is not authorized to make any
4
<PAGE> 7
deduction from the amount payable to the holder of such depository 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 depository receipt.
"Guarantee" has the meaning stated in the second recital of the
Indenture and, more particularly, means any guarantee of the Issuer's
obligations under the Securities by the Guarantor as may be provided pursuant to
Article 16 of this Indenture.
"Holder" means, in the case of a Registered Security, the Person in
whose name a Security is registered in the Security Register and, in the case of
a 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 particular series of Securities established as
contemplated by Section 301; provided, however, that, if at any time more than
one Person is acting as Trustee under this instrument, "Indenture" shall mean,
with respect to any one or more series of Securities for which any such Person
is Trustee, this instrument as originally executed or as it may from time to
time be supplemented or amended and shall include the terms of the or those
particular series of Securities for which such Person is Trustee established as
contemplated by Section 301, exclusive, however, of any provisions or terms
which relate solely to other series of Securities for which such Person is not
Trustee.
"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, as determined by reference
to a particular index or other measure specified in a supplemental indenture
relating to such Security.
"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 1009,
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 shall have become such pursuant to the
applicable provisions of this Indenture, and thereafter "Issuer" shall mean such
successor.
"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
President or a Vice President, and by the Treasurer, an Assistant Treasurer, the
Secretary or an Assistant Secretary of the General Partner, and delivered to the
Trustee.
5
<PAGE> 8
"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, notice of option to elect
repayment or otherwise.
"Officers' Certificate" means a certificate signed by the President or a
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, if
permitted by the TIA, be counsel for the Issuer or who may be an employee of or
other counsel for the Issuer.
"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 delivered
to the Trustee 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 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 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;
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, upon a declaration of acceleration of the maturity thereof
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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 calculation or in relying upon any such request, demand,
authorization, direction, notice, consent or waiver, only Securities which the
Trustee knows to be so owned shall be so disregarded.
"Paying Agent" means any Person authorized by the Issuer to pay the
principal of (and premium, if any) or interest on any securities or coupons on
behalf of the Issuer.
"Person" means any individual, corporation, partnership, joint venture,
association, joint-stock company, trust, unincorporated organization or
government or any agency or political subdivision thereof.
"Place of Payment", when used with respect to the Securities of any
series, means the place or places where the principal of (and premium, 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.
"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.
"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.
"Registered Security" shall mean any Security established pursuant to
Section 201 which is registered in the Security Register.
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"Regular Record Date" for the interest payable on any Interest Payment
Date on the Registered Securities of any series means the date specified for
that purpose as contemplated by Section 301, whether or not a Business Day.
"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.
"Responsible Officer", when used with respect to the Trustee, means any
trust officer in its Corporate Trust Office or a successor group or any other
officer of the Trustee customarily performing functions similar to those
performed by any of the above designated officers with responsibility for
matters related to this Indenture.
"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 the
meaning stated in the first recital of this Indenture and shall more
particularly mean Securities authenticated and delivered by such Trustee (or its
predecessor as such) 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 Record Date" for the payment of any Defaulted Interest on the
Registered Securities of 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, 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 is due and payable.
"Subsidiary" means a corporation, partnership or limited liability
company, a majority of the outstanding voting stock, partnership interests or
membership interests, as the case may be, of which is owned or controlled,
directly or indirectly, by the Issuer or by one or more other Subsidiaries of
the Issuer. For the purposes of this definition, "voting stock" means stock
having voting power for the election of directors, general partners, managers or
trustees, as the case may be, whether at all times or only so long as no senior
class of stock has such voting power by reason of any contingency.
"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.
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"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 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 Trustee with respect
to Securities of that series.
"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 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.
"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. Upon any application
or request by the Issuer or Guarantor to the Trustee to take any action under
any provision of this Indenture, the Issuer or Guarantor 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 1005) 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
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(4) a statement as to whether, in the opinion of each 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 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 Issuer or the Guarantor
may be based, insofar as it relates to legal matters, upon an Opinion of
Counsel, or a certificate or representations 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 Issuer 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 of the Outstanding Securities of all series or one or more series, as
the case may be, 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 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 conclusive in favor of the
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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 by the affidavit of a witness of such
execution or by a certificate of a notary public or other officer authorized by
law to take acknowledgments of deeds, certifying that the individual signing
such instrument or writing acknowledged to him the execution thereof. Where such
execution is by a signer acting in a capacity other than his individual
capacity, such certificate or affidavit shall also constitute sufficient proof
of his authority. The fact and date of the execution of any such instrument or
writing, or the authority of the Person executing the same, may so be proved in
any other reasonable manner which the Trustee deems sufficient;
(c) The ownership of Registered Securities shall be proved by the
Security Register;
(d) The ownership of Bearer Securities may be proved by the production
of such Bearer Securities or by a certificate executed, as depository, by any
trust company, bank or other depository, wherever situated, if such certificate
shall be deemed by the Trustee to be satisfactory, showing that at the date
therein mentioned such Person had on deposit with such depository, or exhibited
to it, the Bearer Securities therein described; or such facts may be proved by
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 of Bearer Securities may also be proved
in any other manner which the Trustee deems sufficient;
(e) If the Issuer shall solicit from the Holders of 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
entitled to give such request, demand, authorization, direction, notice,
consent, waiver or other Act, but the Issuer shall have no obligation to do so.
Notwithstanding TIA Section 316(c), such record date shall be the record date
specified in or pursuant to such Board Resolution, which shall be a date not
earlier than the date 30 days prior to the first solicitation of Holders
generally in connection therewith and not later than the date such solicitation
is completed. 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 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
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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:
(1) the Trustee by any 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
and specifically referencing this Indenture, or
(2) 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. 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 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 Registered 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.
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 The City
of New York 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 herein or in such
Securities 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.
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Any request, demand, authorization, direction, notice, consent or waiver
required or permitted under the Indenture shall be in the English language,
except that 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.
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 and Guarantor shall bind their successors and
assigns, whether so expressed or not.
SECTION 109. Separability Clause. In case any provision in this
Indenture or in any Security, Guarantee or Coupon 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.
SECTION 110. Benefits of Indenture. Nothing in this Indenture or in the
Securities, Guarantees 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,
Guarantees and Coupons shall be governed by and construed in accordance with the
law of the State of New York. This Indenture is subject to the provisions of the
TIA that are required to be part of this Indenture and shall, to the extent
applicable, be governed by such provisions, which are incorporated herein by
reference.
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 shall not be a Business Day at any Place of
Payment, then (notwithstanding any other provision of this Indenture or any
Security or coupon other than a provision in the Securities of any series which
specifically states that such provision shall apply in lieu hereof), payment of
interest or any Additional Amounts or principal (and premium, if any) or sinking
fund payment need not be made at such Place of Payment on such date, but may be
made 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, provided that interest shall not 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, as the case may
be, to the date of payment.
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ARTICLE TWO
SECURITIES FORMS
SECTION 201. Forms of Securities. The Registered Securities, if any, of
each series and the Bearer Securities and related Coupons, if any, of each
series and the Guarantee, if any, relating to such series shall be in
substantially the form as shall be established in an indenture 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 Guarantees and Coupons, if any) 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 of the Issuer executing
such Securities (or Guarantees or Coupons), as evidenced by their execution of
such Securities or coupons.
SECTION 202. Form of Trustee's Certificate of Authentication. 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.
----------------------------------
Chase Manhattan Bank and Trust Company,
National Association,
as Trustee
By
--------------------------------
Authorized Officer
SECTION 203. Securities Issuable in Global Form. If Securities of a
series are issuable in global form, as specified in and as contemplated by
Section 301, then, notwithstanding clause (8) 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
shall represent the aggregate amount of Outstanding Securities of such series
from time to time endorsed thereon and that the aggregate amount of 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
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amount, of Outstanding Securities represented thereby shall be made by the
Trustee in such manner and upon instructions given by such Person or Persons as
shall be specified therein or in the Issuer Order to be delivered to the Trustee
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 any Security in 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 permanent global Security (i) in the case of a
permanent global Security in registered form, the Holder of such permanent
global Security in registered form or (ii) in the case of a permanent global
Security in bearer form, Euroclear or CEDEL.
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:
(1) the title of the Securities of the series (which shall
distinguish the Securities of such series from all other series of
Securities);
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(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 Section 304, 305, 306, 906, 1107 or
1305);
(3) the date or dates, or the method by which such date or dates
will be determined, on which the principal of the Securities of the
series shall be payable;
(4) 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;
(5) the place or places, if any, other than or in addition to
San Francisco, California, where (i) the principal of (and premium, if
any), interest, if any, on, and Additional Amounts, if any, payable in
respect of, Securities of the series shall be payable, (ii) any
Registered Securities of the series may be surrendered for registration
of transfer, exchange or conversion and (iii) notices or demands to or
upon the Issuer in respect of the Securities of the series and this
Indenture may be served;
(6) 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 Securities of the series may be
redeemed, in whole or in part, at the option of the Issuer, if the
Issuer is to have the option;
(7) the obligation, if any, of the Issuer to redeem, repay or
purchase Securities of the series, pursuant to any sinking fund or
analogous provision or at the option of a Holder thereof upon the
occurrence of specified circumstances or otherwise, 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 Securities of the series shall be redeemed, repaid
or purchased, in whole or in part, pursuant to such obligation and any
provisions in modification of, in addition to or in lieu of any of the
provisions of Articles Eleven, Twelve or Thirteen;
(8) 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 the denomination of
$1,000, the denomination or denominations in which any Bearer Securities
of the series shall be issuable;
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(9) if other than the Trustee, the identity of each Security
Registrar and/or Paying Agent for the series;
(10) the percentage of the principal amount at which Securities
of such series will be issued and, if other than the principal amount
thereof, the portion of the principal amount of Securities of the series
that shall be payable upon declaration of acceleration of the Maturity
thereof pursuant to Section 502 or, if applicable, the portion of the
principal amount of Securities of the series that is convertible in
accordance with the provisions of this Indenture, or the method by which
such portion shall be determined;
(11) if other than Dollars, the Foreign Currency or Currencies
in which payment of the principal of (and premium, if any), interest, if
any, on, and Additional Amounts, if any, on the Securities of the series
shall be payable or in which the Securities of the series shall be
denominated;
(12) whether the amount of payments of principal of (and
premium, 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;
(13) provisions, if any, granting special rights to the Holders
of Securities of the series upon the occurrence of such events as may be
specified;
(14) any deletions from, modifications of or additions to the
Events of Default or covenants of the Issuer set forth in this Indenture
with respect to 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);
(15) whether Securities of such series will be issued 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 depository for such
series;
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(16) 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;
(17) 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 temporary global Security on an Interest Payment
Date will be paid if other than in the manner provided in Section 304;
(18) 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;
(19) 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;
(20) the applicability, if any, of Articles Sixteen and
Seventeen 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 Sixteen and Seventeen;
(21) whether and under what circumstances the Issuer will pay
Additional Amounts as contemplated by Section 1009 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);
(22) the terms and conditions, if any, upon which payment of the
Securities of such series shall be subordinated to other Debt of the
Issuer (including, without limitation, the Debt which ranks senior to
such Securities; restrictions on payments to Holders of such Securities
while a default with respect to such senior Debt is continuing;
restrictions, if any, on payments to the Holders of such Securities
following an Event of Default; and any requirements for Holders of such
Securities to remit certain payments to the holders of such senior
Debt); and
(23) 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 Guarantees and Coupons
appertaining to any Securities of such series shall be substantially identical
except, in the case of Registered
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Securities, as to denominations and except as may otherwise be provided in or
pursuant to the Board Resolution establishing the series (subject to Section
303) 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 certified by the Secretary or an Assistant
Secretary of the Issuer 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. Denominations. The Securities of each series shall be
issuable in such denominations as shall be specified as contemplated by Section
301. With respect to Securities of any series denominated in Dollars, in the
absence of any such provisions, the Registered Securities of such series, 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 of such series, other than Bearer
Securities issued in global form (which may be of any denomination), shall be
issuable in denominations of $1,000 and any integral multiple thereof.
SECTION 303. Execution, Authentication, Delivery and Dating. The
Securities and any Guarantees or Coupons appertaining thereto shall be executed
on behalf of the Issuer by its General Partner, by such General Partner's Chief
Executive Officer, President or one of its Vice Presidents, under such General
Partner's seal reproduced thereon, and attested by its Secretary or one of its
Assistant Secretaries. The signature of any of these officers on the Securities
and Guarantees or Coupons may be manual or facsimile signatures of such
authorized officer and may be imprinted or otherwise reproduced on the
Securities.
Securities, Guarantees or Coupons and agreements relating thereto
bearing the manual or facsimile signatures of individuals who were at any time
the proper officers of the General Partner of the Issuer or the Guarantor as
applicable shall bind the Issuer or the Guarantor, as applicable,
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, Guarantees or Coupons or
related agreements.
At any time and from time to time after the execution and delivery of
this Indenture, the Issuer may deliver Securities of a series, together with any
Guarantee or Coupon appertaining thereto, executed on behalf of 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
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shall have furnished a certificate 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 a 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 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 Securities, the Trustee shall be entitled to receive, and
(subject to TIA Sections 315(a) through 315(d)) shall be fully protected in
relying upon,
(i) an Opinion of Counsel stating that
(a) the form or forms of such Securities and any
Guarantees or Coupons have been established in conformity with the
provisions of this Indenture;
(b) the terms of such Securities and any Guarantees or
Coupons have been established in conformity with the provisions of this
Indenture; and
(c) such Securities, together with any Guarantees or
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 or the Guarantor, as appropriate, 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
(ii) an Officers' Certificate stating that all
conditions precedent provided for in this Indenture relating to the issuance of
the Securities and the Guarantees 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
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the Trustee's own rights, duties, obligations or immunities under the Securities
and this Indenture or otherwise in a manner which is not acceptable to the
Trustee.
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, Guarantee 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 Guarantee or Coupon appertains a
certificate of authentication substantially in the form provided for herein duly
executed by the Trustee by manual signature of an authorized officer, 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 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, 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. In the case of
Securities of any series, 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 non-matured 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
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compliance with the conditions set forth in Section 303. 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 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
depository or common depository (the "Common Depository"), 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 Depository 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 Depository, 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 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 forms 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
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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 Securities 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
a 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.
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 Registered 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 initially appointed "Security
Registrar" for the purpose of registering Registered Securities and transfers of
Registered
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Securities on such Security Register as herein provided. 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, including a Guarantee, if applicable.
Subject to the provisions of this Section 305, at the option of the
Holder, Registered Securities of any series may be exchanged for other
Registered Securities of the same series, of any authorized denomination or
denominations and of a like aggregate principal amount, containing identical
terms and provisions, upon surrender of the Registered Securities to be
exchanged at any such office or agency. Whenever any such Registered Securities
are so surrendered for exchange, the Issuer shall execute, and the Trustee shall
authenticate and deliver, the Registered Securities which the Holder making the
exchange is entitled to receive and, if applicable, the Guarantor shall execute
the accompanying Guarantees. Unless otherwise specified with respect to any
series of Securities as contemplated by Section 301, and as set forth below,
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
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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 and, if applicable, the Guarantor shall execute the
accompanying Guarantees.
Notwithstanding the foregoing, except as otherwise specified as
contemplated in Section 301, any permanent global Security shall be exchangeable
only as provided in this paragraph. If the depository 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 selected 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 depository for the applicable global Security or
Securities or if at any time DTC ceases to be a clearing agency registered under
the Securities Exchange Act of 1934 if so required by applicable law or
regulation, the Issuer shall appoint a successor depository with respect to such
global Security or Securities and provide notice to the Trustee of such
appointment. If (x) a successor depository 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 amount of the applicable
series of Securities represented by such global Security or Securities advise
DTC, with a copy to the Trustee and the Issuer, to cease acting as depository
for such global Security or Securities or (z) the Issuer, in its sole
discretion, determines at any time that all (but not less than all) Outstanding
Securities 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
and advises the Trustee and DTC of such determination, then the Issuer shall
execute, and the Trustee shall authenticate and deliver, definitive Securities
of like series, rank, tenor and terms in a 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 otherwise entitled to exchange such interest for definitive 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 no later than the
earliest date 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 depository as shall be
specified in the Issuer Order with respect thereto to the Trustee;
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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) a Regular Record Date and before the
opening of business at such office or agency on the relevant Interest Payment
Date, or (ii) a Special Record Date and before the opening of business at such
office or agency on the related proposed date for payment of interest or
Defaulted Interest, as the case may be, 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, conversion 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 Section 304, 906, 1107 or 1305 not involving any transfer.
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, 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 a Registered Security to
be redeemed in part, the portion thereof not selected for redemption may be
exchanged for a Registered Security of that series and of like tenor, provided
that such Registered Security shall be simultaneously surrendered for
redemption, or (iii) to issue, register the transfer of or exchange any Security
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which has been surrendered for repayment at the option of the Holder, except
that portion, if any, of such Security which is not to be so repaid.
SECTION 306. Mutilated, Destroyed, Lost and Stolen Securities. If any
mutilated Security or a Security with a mutilated Guarantee or 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 Guarantees or Coupons corresponding to the Guarantees or
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, Guarantee 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 written notice to the Issuer or the Trustee that such
Security, Guarantee 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 Guarantee or Coupon
appertains (with all appurtenant Guarantees or 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 Guarantees or Coupons corresponding to the Guarantees or
Coupons, if any, appertaining to such destroyed, lost or stolen Security or to
the Security to which such destroyed, lost or stolen Guarantee or 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, if any),
any 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 on Bearer Securities
shall be payable only upon presentation and surrender of the Coupons
appertaining thereto.
Every new Security of any series with its coupons, if any, issued
pursuant to this Section in lieu of any mutilated, destroyed, lost or stolen
Security, or in exchange for a Security to which a mutilated, destroyed, lost or
stolen coupon may pertain, shall constitute an original additional contractual
obligation of the Issuer, whether or not the mutilated, destroyed, lost or
stolen Security and its coupons, if any, or the mutilated, 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
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proportionately with any and all other Securities of that series and their
coupons, if any, duly issued hereunder.
The provisions of this Section 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, Guarantees or
Coupons.
SECTION 307. Payment of Interest -- Interest Rights Preserved. Except as
otherwise specified with respect to a series of Securities in accordance with
the provisions of Section 301, interest on 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 Holder's option
upon written notice to the Trustee 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 with a
bank or other depository institution 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 Depository, 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 shall be paid by the Issuer, as provided in clause (1) or (2)
below:
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(1) 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 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 in this clause
provided. Thereupon the Trustee shall fix a Special Record Date for the
payment of such Defaulted Interest which shall not be 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 therefor 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 (2). In case a Bearer
Security of any series is surrendered for transfer or exchange at the
office or agency in a Place of Payment for 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.
(2) 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
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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, if any), and (subject to
Sections 305 and 307) interest on, such Registered Security and for all other
purposes whatsoever, whether or not such Registered Security is 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
payment thereof or on account thereof and for all other purposes whatsoever,
whether or not such Security or Coupon is overdue, and neither the Issuer, the
Trustee nor any agent of the Issuer or the Trustee shall be affected by notice
to the contrary.
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. All
notices and communications to be given to Holders and all payments to be made to
Holders under a Security in global form shall be given or made only to or upon
the order of the registered Holder (which shall be the depository or its
nominee) thereof. The rights of beneficial owners of a Security in global form
shall be exercised only through the depository, subject to the applicable rules
and procedures of the depository.
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 depository, as a Holder, with respect to such
global Security or impair, as between such depository and owners of beneficial
interests in such global Security, the operation of customary practices
governing the exercise of the rights of such depository (or its nominee) as
Holder of such global Security. The Trustee, Issuer, any Paying Agent or the
Security Registrar may rely and shall be fully protected in relying upon
information furnished by any such depository with respect to its members,
participants and any beneficial owners.
SECTION 309. Cancellation. All Securities and coupons surrendered for
payment, redemption, repayment at the option of the Holder, registration of
transfer or exchange for credit against any sinking fund payment shall, if
surrendered to any Person other than the Trustee, be
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deplivered 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. 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
(subject to the record-retention requirements of the Exchange Act) and the
Trustee shall deliver a certificate of such destruction to the Issuer unless by
a 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 of each series 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 1009), and the Trustee, upon receipt of a Issuer
Order, and at the expense of the Issuer, shall execute proper instruments
acknowledging satisfaction and discharge of its Indenture as to such series when
(1) either:
(A) 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 for 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
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discharged from such trust, as provided in Section 1003) have been
delivered to the Trustee for cancellation; or
(B) all Securities of such series and, in the case of
(i) or (ii) below, any Coupons pertaining thereto, not theretofore
delivered to the Trustee for cancellation
(i) have become due and payable, or
(ii) will become due and payable at their Stated
Maturity within one year, or
(iii) 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 (i), (ii) or (iii) above,
has irrevocably deposited or caused to be deposited with
the Trustee as 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, 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;
and
(2) the Issuer has paid or caused to be paid all other sums
payable hereunder by the Issuer; and
(3) 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.
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 the satisfaction and discharge of this Indenture.
SECTION 402. Application of Trust Funds. Subject to the provisions of
the last paragraph of Section 1003, all monies deposited with the Trustee
pursuant to Section 401 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 or through any Paying Agent (but not in any event
including the Issuer acting as its own Paying Agent) as the Trustee may
determine, to the Persons entitled thereto, of the principal (and premium, if
any), and any interest and
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Additional Amounts for whose payment such money has been deposited with or
received by the Trustee. Such money shall be segregated from other funds of the
Trustee.
ARTICLE FIVE
REMEDIES
SECTION 501. Events of Default. Unless otherwise specified as
contemplated by Section 301, "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):
(1) 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, Additional
Amounts or Coupon becomes due and payable, and continuance of such
default for a period of 30 days; or
(2) default in the payment of the principal of (or premium, if
any, on) any Security of that series when it becomes due and payable at
its Maturity; or
(3) default in the deposit of any sinking fund payment, when and
as due by the terms of any Security of that series; or
(4) default in the performance of, 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 whose
performance or whose breach is elsewhere in this Section 501
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 a majority 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
(5) a default under any bond, debenture, note or other evidence
of 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 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 indebtedness now exists or shall hereafter be
created, which default shall constitute a failure to pay an aggregate
principal amount exceeding $10,000,000 of such indebtedness when due and
payable which shall continue after the expiration of any applicable
grace period with respect thereto or shall have resulted in such
indebtedness in an aggregate principal
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amount exceeding $10,000,000 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 Issuer and the Trustee by the
Holders of at least a majority in principal amount of the Outstanding
Securities of that series a written notice specifying such default and
requiring the Company 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
(6) the Issuer or any Significant Subsidiary pursuant to or
within the meaning of any Bankruptcy Law:
(A) commences a voluntary case,
(B) consents to the entry of an order for relief against
it in an involuntary case,
(C) consents to the appointment of a Custodian of it for
all or substantially all of its property, or
(D) makes a general assignment for the benefit of its
creditors; or
(7) a court of competent jurisdiction enters an order or decree
under any Bankruptcy Law that:
(A) is for relief against the Issuer or any Significant
Subsidiary in an involuntary case,
(B) appoints a Custodian of the Issuer or any
Significant Subsidiary or for all or substantially all of either of its
property, or
(C) orders the liquidation of the Issuer or any
Significant Subsidiary and the order or decree remains unstayed and in
effect for 90 days; or
(8) any other Event of Default provided 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 a majority 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
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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 specified
portion thereof 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:
(1) the Issuer has paid or deposited with the Trustee a sum
sufficient to pay in the currency, currency unit or composite currency
in which the Securities of such series are payable (except as otherwise
specified pursuant to Section 301 for the Securities of such series):
(A) all overdue installments of interest and any
Additional Amounts payable in respect of all Outstanding Securities of
that series and any related coupons,
(B) the principal of (and premium, if any, on) any
Outstanding Securities of that series which have become due otherwise
than by such declaration of acceleration and interest thereon at the
rate or rates borne by or provided for in such Securities,
(C) to the extent that payment of such interest 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
(D) 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
(2) all Events of Default with respect to Securities of that
series, other than the nonpayment of the principal of (or premium, if
any) or interest on 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:
(1) default is made in the payment of any installment of
interest or Additional Amounts, if any, on any Securities 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
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(2) default is made in the payment of the principal of (or
premium, 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, if any) and interest and Additional Amounts thereon,
with interest upon any overdue principal (and premium, if any) and, to the
extent that payment of such interest shall be legally enforceable, upon any
overdue installments of interest or Additional Amounts thereon, 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 agent 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 Guarantor or any other obligor upon such Securities or
Guarantees of such series and collect the moneys adjudged or decreed to be
payable in the manner provided by law out of the property of the Issuer or
Guarantor or any other obligor upon such Securities or Guarantees of such
series, 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 Guarantees and 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 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, the Guarantor or any other obligor upon the Securities or the
property of the Issuer, the Guarantor 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 or the Guarantor for the payment of overdue principal
of, premium, if any, or interest on the Securities) shall be entitled and
empowered, by intervention in such proceeding or otherwise:
(i) 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, if any) and interest and Additional Amounts,
if any, owing and unpaid in respect of the Securities or Guarantees and
to file such other papers or documents and to take such other actions
including participating as a member of any committee of creditors
appointed in the matter as may be necessary or advisable in order to
have the claims of the Trustee (including any claim for the reasonable
compensation, expenses,
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disbursements and advances of the Trustee, its agents and counsel) and
of the Holders allowed in such judicial proceeding, and
(ii) 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 Securities of such series, Guarantees and Coupons to make such
payments to the Trustee, and in the event that such payments are made 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, Guarantee or Coupon any plan of reorganization, arrangement,
adjustment or composition affecting the Securities, Guarantees 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, Guarantee or Coupon in any such
proceeding.
SECTION 505. Trustee May Enforce Claims Without Possession of Securities
of Coupons. All rights of action and claims under this Indenture or any of the
Securities, Guarantees or Coupons may be prosecuted and enforced by the Trustee
without the possession of any of the Securities, Guarantees 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 Securities, Guarantees 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 and dates fixed by the Trustee and, in case of the distribution of such
money on account of principal (or premium, if any) and interest and any
Additional Amounts, upon presentation of the Securities, Guarantees or Coupons,
or any thereof, 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 to the Trustee and any
predecessor Trustee under Section 606;
SECOND: To the payment of the amounts then due and unpaid upon
the Securities, Guarantees and Coupons for principal (and premium, 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, Guarantees and
Coupons for principal (and premium, if any), interest and Additional
Amounts, respectively; and
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THIRD: To the payment of the remainder, 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:
(1) such Holder has previously given written notice to the
Trustee of a continuing Event of Default with respect to the Securities
of that series;
(2) the Holders of not less than a majority 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;
(3) such Holder or Holders have offered to the Trustee
reasonable indemnity against the costs, expenses and liabilities to be
incurred in compliance with such request;
(4) the Trustee for 60 days after its receipt of such notice,
request and offer of indemnity has failed to institute any such
proceeding; and
(5) 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 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.
SECTION 508. Unconditional Right of Holders to Receive Principal,
Premium, if any, Interest and Additional Amounts. Notwithstanding any other
provision in this Indenture, the Holder of any Security, Guarantee or Coupon
shall have the right which is absolute and unconditional to receive payment of
the principal of (and premium, if any) and (subject to Sections 305 and 307)
interest on, and any Additional Amounts in respect of, such Security or
Guarantee or payment of such Coupon on the respective due dates expressed in
such Security, Guarantee or Coupon (or, in the case of redemption, on the
Redemption 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, Guarantee 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
Guarantor, 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 position
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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, Guarantees or Coupons in the last paragraph of
Section 306, no right or remedy herein conferred upon or reserved to the Trustee
or to the Holders of Securities, Guarantees 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 nor 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, Guarantee 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 the Holders may be exercised from time to time, and as often as may be
deemed expedient, by the Trustee or by the Holders of Securities, Guarantees 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,
provided that:
(1) such direction shall not be in conflict with any rule of law
or with this Indenture,
(2) the Trustee may take any other action deemed proper by the
Trustee which is not inconsistent with such direction, and
(3) the Trustee need not take any action which might expose it
to personal liability, without the receipt of reasonable indemnity from
Holders requesting such action, 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
(1) in the payment of the principal of (or premium, if any) or
interest on or Additional Amounts payable in respect of any Security of
such series or any related Coupons, or
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(2) 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 waived, 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
acknowledge, and each Holder of any Security by his acceptance thereof shall be
deemed to have acknowledged, 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 an 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 a majority 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, if any) or interest
on any Security on or after the respective Maturities expressed in such Security
(or, in the case of redemption, on or after the Redemption 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, 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, if any) or interest on
or any Additional Amounts or 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 interest of the Holders
of the Securities and Coupons of such series; and provided further that in the
case of any
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default or breach of the character specified in Section 501(4) 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.
SECTION 602. Certain Rights of Trustee.
(1) 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;
(2) 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 Directors may be
sufficiently evidenced by a Board Resolution;
(3) 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 to take 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;
(4) the Trustee may consult with counsel and the 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;
(5) 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 Guarantees or Coupons pursuant to this Indenture, unless such
Holders shall have offered to the Trustee reasonable security or
indemnity against the costs, expenses and liabilities which might be
incurred by it in compliance with such request or direction;
(6) 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, 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;
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(7) the Trustee may execute any of the trusts or powers
hereunder or perform any duties hereunder either directly or by or
through agents or attorneys and the Trustee shall not be responsible for
any misconduct or negligence on the part of any agent or attorney
appointed with due care by it hereunder;
(8) the Trustee shall not be liable for any action taken,
suffered or omitted by it in good faith and reasonably believed by it to
be authorized or within the discretion or rights or powers conferred
upon it by this Indenture; the Trustee shall not be liable in connection
with the performance of its duties hereunder, except for its own
negligence or intentional misconduct, and
(9) the Trustee shall not be deemed to have notice of any Event
of Default or default or other fact or circumstance upon the occurrence
of which it may be required to take action hereunder unless a
Responsible Officer of the Trustee has actual knowledge of such event,
fact or circumstance or unless written notice of any such event is
received by the Trustee at its Corporate Trust Office. In the absence of
such actual knowledge or notice, the Trustee may conclusively assume
that no default has occurred and is continuing under this Indenture.
Except as otherwise expressly provided herein, the Trustee shall not be
bound to ascertain or inquire as to the performance of observance of any
of the terms, conditions, covenants or agreements herein or of any of
the documents executed in connection with the Securities or as to the
existence of an Event of Default thereunder.
(10) The Trustee shall, prior to the occurrence of an Event of
Default and after the curing of all Events of Default which may have
occurred, perform such duties and only such duties as are specifically
set forth in this Indenture and no implied covenants, duties or
obligations shall be read into this Indenture against the Trustee. The
Trustee shall, during the existence of any event of Default (which has
not been cured), exercise such of the rights and powers vested in it by
this Indenture, and use the same degree of care and skill in their
exercise, as a prudent man would exercise or use under the circumstances
in the conduct of his own affairs.
(11) The Trustee shall not be liable for any error of judgment
made by a responsible employee or officer, unless the Trustee shall have
been negligent in ascertaining the pertinent facts, or such responsible
employee or officer was negligent in making such error or such error was
made intentionally.
(12) The permissive Rights of the Trustee to do things
enumerated in this Indenture shall not be construed as a duty unless so
specified herein.
(13) The Trustee shall not be liable with respect to any action
taken or omitted to be taken by it in accordance with the direction of
the Holders of not less than a majority in aggregate principal amount of
any series of Securities issued hereunder at the time Outstanding
relating to the time, method and place of conducting any proceeding for
any remedy available to the Trustee or exercising any trust or power
conferred upon the Trustee under this Indenture with respect to such
series of Securities.
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(14) All indemnifications and releases from liability granted
herein to the Trustee shall extend to the directors, officers, employees
and agents of the Trustee and to the Paying Agent and Registrar. Whether
or not expressly so provided, every provision of this Indenture relating
to the conduct or affecting the liability of the Trustee shall be
subject to the provisions of this Article Six.
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.
SECTION 603. Not Responsible for Recitals or Issuance of Securities. The
recitals contained herein and in the Securities, except the Trustee's
certificate of authorization, the Guarantees and in any Coupons shall be taken
as the statements of the Issuer or the Guarantor, as applicable, and neither the
Trustee nor any Authenticating Agent assumes any responsibility for their
correctness. The Trustee makes no representations as to the validity,
sufficiency or priority of this Indenture or of the Securities, Guarantees 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. Neither the Trustee nor the Authenticating Agent shall be
accountable for the use or application by the Issuer of Securities or the
proceeds thereof.
SECTION 604. May Hold Securities and Guarantees. The Trustee, any Paying
Agent, Security Registrar, Authenticating Agent or any other agent of the
Issuer, in its individual or any other capacity, may become the owner or pledgee
of Securities, Guarantees and Coupons and, subject to TIA Sections 310(b) and
311, may otherwise deal with the Issuer or the Guarantor with the same rights it
would have if it were not Trustee, Paying Agent, Security Registrar,
Authenticating Agent or such other agent.
SECTION 605. Money Held in Trust. 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:
(1) to pay to the Trustee from time to time reasonable
compensation for all services rendered by it hereunder (which
compensation shall not be limited by any provision of law in regard to
the compensation of a trustee of an express trust);
(2) 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 Trustee's negligence or bad faith; and
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(3) to indemnify each of the Trustee and any predecessor Trustee
for, and to hold it harmless against, any loss, liability or expense
(including the reasonable compensation and the expenses and
disbursements of its agents and counsel) 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(6) or (7), 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, if any) or interest on
particular Securities or Coupons under Section 401 or Article Fourteen.
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 (or, in
the case of a corporation included in a bank holding company system, the related
bank holding company shall have) a combined capital and surplus of at least
$50,000,000. If such corporation or holding company publishes reports of
condition at least annually, pursuant to law or the requirements 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 or holding company 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.
(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.
(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 an
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.
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(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, (i) the Issuer by or pursuant to a Board Resolution may
remove the Trustee and appoint a successor Trustee with respect to all
Securities, or (ii) 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 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 reason 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). 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, 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 appointed by the Issuer or Holders of Securities and accepted
appointment in the manner hereinafter provided 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.
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(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, upon 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 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 Trustees 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 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 right, 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
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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.
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 Authentication 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 issued upon 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 instruction 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 certificate 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, except as may
otherwise be provided pursuant to Section 301, shall at all times be a bank or
trust 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
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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 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 service 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:
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This is one of the Securities of the series
designated therein referred to in the within-
mentioned Indenture.
Chase Manhattan Bank and Trust Company, National Association
------------------------------------------------------------
as Trustee
By:______________________________
as Authenticating Agent
By:______________________________
Authorized Officer
ARTICLE SEVEN
HOLDERS' LISTS AND REPORTS BY TRUSTEE AND ISSUER
SECTION 701. Disclosure of Names and Addresses of Holders. Every Holder
of Securities, Guarantees or Coupons, by receiving and holding the same, agrees
with the Issuer and the Trustee that neither the Issuer nor the Trustee nor any
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,
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).
SECTION 702. Reports by Trustee. Within 60 days after June 15 of each
year commencing with the first June 15 after the issuance of Securities pursuant
to this Indenture, the Trustee shall transmit by mail to all Holders of
Securities as provided in TIA Section 313(c) a brief report dated as of such
June 15, if required by TIA Section 313(a).
SECTION 703. Reports by Issuer and the Guarantor. The Issuer and the
Guarantor will:
(1) file with the Trustee, within 15 days after the Issuer or
the Guarantor 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 prescribed) which the
Issuer or the Guarantor may be required to file with the Commission
pursuant to Section 13 or Section 15(d) of the Securities Exchange Act
of 1934; or, if the Issuer or the Guarantor is not required to file
information, documents or reports pursuant to either of such Sections,
then it will 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 Securities Exchange Act of 1934 in respect of a security
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listed and registered on a national securities exchange as may be
prescribed from time to time in such rules and regulations;
(2) 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 and the Guarantor with the conditions and
covenants of this Indenture as may be required from time to time by such
rules and regulations; and
(3) transmit by mail to the Holders of Securities, within 30
days after the filing hereof 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
and the Guarantor pursuant to paragraphs (1) and (2) of this section as
may be required by rules and regulations prescribed from time to time by
the Commission.
SECTION 704. Issuer to Furnish to Trustee Names and Addresses of Holders
The Issuer will furnish or cause to be furnished to the Trustee:
(a) semi-annually, not later than 25 days after the Regular Record Date
for interest for 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, semi-annually,
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, 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. Consolidation and Merger of Issuer and Sale, Lease 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 in any such case, (i) either
the Issuer shall be the continuing Person, or the successor (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 shall expressly assume the due
and punctual payment of the principal of (and premium, if any) and any interest
(including all Additional Amounts, if any, payable pursuant to Section 1009) on
all of the Securities according to their tenor and the due and punctual
performance and observance of all of the covenants and conditions of this
Indenture and to be performed by the Issuer by supplemental indenture and (ii)
immediately after giving effect to such transaction and treating any
indebtedness which becomes an obligation of the
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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 an
Event of Default, shall have occurred and be continuing.
SECTION 802. Rights and Duties of Successor Person. In case of any such
consolidation, merger, sale, lease or conveyance and upon any such assumption by
the successor Person, such successor Person 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 Person, except in the event of a lease,
shall be relieved of any further obligation under this Indenture and the
Securities. Such successor Person thereupon may cause to be signed, and may
issue either in its own name or in the name of the Issuer, any and 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
Person, 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 Person 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 of the Issuer's obligation under
this Indenture by any successor Person (through a supplemental indenture hereto
in accordance with Section 901), complies with the provisions of this Article
and that all conditions precedent herein provided for relating to such
transaction have been complied with.
ARTICLE NINE
AMENDMENTS AND SUPPLEMENTAL INDENTURES
SECTION 901. Amendments and Supplemental Indentures Without Consent of
Holders. Without the consent of any Holders of Securities or coupons, the
Issuer, when authorized by or pursuant to the partnership agreement of the
Issuer and Board Resolution of the General Partner, the Guarantor and the
Trustee, at any time and from time to time, may amend this Indenture or enter
into one or more indentures supplemental hereto, for any of the following
purposes:
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(1) to evidence the succession of another Person to the Issuer
or the Guarantor and the assumption by any such successor of the
covenants of the Issuer or the Guarantor herein and in the Securities or
Guarantees contained; or
(2) to add to the covenants of the Issuer or the Guarantor 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 the Guarantor; or
(3) 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 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 that or those series of Securities to which such additional
Events of Default apply to waive such default; or
(4) to add to or change any of the provisions of this Indenture
to provide that Bearer Securities may be registerable as to principal,
to change or eliminate any restrictions on the payment of principal of
or any premium or interest on 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
(5) 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
(6) to secure the Securities or Guarantees; or
(7) to establish the form or terms of Securities of any series
and any related Guarantees or Coupons as permitted by Sections 202 and
301, including the provisions and procedures relating to Securities
convertible into Common Stock or Preferred Stock of the General Partner;
or
(8) 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
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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
(9) 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 Guarantees or Coupons in any
material respect; or
(10) 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
Guarantees or Coupons or any other series of Securities in any material
respect.
SECTION 902. Amendments and 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 of any series, by Act of said
Holders delivered to the Issuer and the Trustee, the Issuer and the Guarantor,
when authorized by or pursuant to a Board Resolution, and the Trustee may amend
this Indenture, 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, as it relates to such series or of
modifying in any manner the rights of the Holders of Securities of such series
and any related Guarantees or Coupons under this Indenture; provided, however,
that no such supplemental indenture shall, without the consent of the Holder of
each Outstanding Security affected thereby:
(1) change the Stated Maturity of the principal of (or premium,
if any, on) or any installment of principal of or interest on, 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 1009 (except as contemplated by Section 801(i) and permitted by
Section 901(1)), 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 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, any Security or any
premium or the interest thereon is payable, or impair the right to
institute suit for the enforcement of any such payment on or after the
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
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(2) 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
requirement of Section 1504 for quorum or voting, or
(3) modify any of the provisions of this Section, Section 513 or
Section 1010, 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.
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. In 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 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 and
that all conditions precedent for any supplemental indenture have been
satisfied. 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 a
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 shall conform to the requirements of
the Trust Indenture Act as then in effect.
SECTION 906. Reference in Securities to Supplemental Indentures.
Securities of any series authenticated and delivered after the execution of a
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
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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.
ARTICLE TEN
COVENANTS
SECTION 1001. Payment of Principal, Premium, 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, 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, and 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 Bearer Securities on or before Maturity, other
than Additional Amounts, if any, payable as provided in Section 1009 in respect
of principal of (or premium, 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 or
conversion, 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 City of San Francisco or in the City of New York, an office
or agency where any Registered Securities of that series may be presented or
surrendered for payment or conversion, where any Registered 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 or conversion 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 1009) or conversion; provided, however, that if the
Securities of that series are listed on the Luxembourg Stock Exchange or an
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
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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 thereto, 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 Guarantees or Coupons may be
presented and surrendered for payment (including payment of any Additional
Amounts payable on Bearer Securities of that series pursuant to Section 1009) or
conversion at the offices specified in the Security 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 Chase
Manhattan Bank and Trust Company, National Association, with an address at 101
California Street, Suite 2725, San Francisco, California 94111, 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 the Securities of a series are payable in
Dollars, payment of principal and any premium and interest on any Bearer
Security (including any Additional Amounts Payable on Securities of such series
pursuant to Section 1009) shall be made at the office of the Issuer's Paying
Agent in the City of San Francisco or in the City of New York, 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 such purpose by the Issuer in accordance with this
Indenture, is illegal or effectively precluded by exchange controls or other
similar restrictions.
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 designation; provided, however, that no such designation 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 City of San Francisco, and initially
appoints Chase Manhattan Bank and Trust Company, National Association, with an
address at 101 California Street, Suite 2725, San Francisco, California 94111,
as Paying Agent in such city and as its agent to receive all such presentations,
surrenders, notices and demands.
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Unless otherwise specified with respect to any Securities pursuant to
Section 302, 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 this 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, by no later than 12 noon
Eastern Standard Time on the day prior to each due date of the principal of (and
premium, if any), or interest on or Additional Amounts in respect of, any of the
Securities of that series, segregate and holder 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, 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, on or before each due date of
the principal of (and premium, 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, if any) or interest or Additional Amount, 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, if any) or interest on Securities 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, if any) or interest; and
(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,
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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 terms 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, if any) or interest on,
or any Additional Amounts in respect of, any Security of any series and
remaining unclaimed for two years after such principal (and premium, if any),
interest or Additional Amounts has 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, if any) or interest on, or any Additional Amounts in
respect of, such 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. Existence. Subject to Article Eight, the Issuer and the
General Partner will do or cause to be done all things necessary to preserve and
keep in full force and effect its existence, rights (partnership and statutory)
and franchises; provided, however, that each of the Issuer and the General
Partner shall not be required to preserve any right or franchise if the Board
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 1005. Statement as to Compliance. The Issuer will deliver to the
Trustee, within 120 days after the end of each fiscal year, a brief certificate
from the principal executive officer, principal financial officer or principal
accounting officer of the General Partner as to his or her knowledge of the
Issuer's compliance with all conditions and covenants under this Indenture and
in the event of any noncompliance, specifying such noncompliance and the nature
and status thereof. For purposes of this Section 1005, such compliance shall be
determined without regard to any period of grace or requirement of notice under
this Indenture.
SECTION 1006. Maintenance of Properties. Each of the Issuer and the
General Partner shall 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, all as in the 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,
notwithstanding anything herein to the contrary, the Issuer or the General
Partner, as the case may be, and its Subsidiaries may sell or otherwise dispose
of any of their properties for value in the ordinary course of business.
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SECTION 1007. Insurance. The Issuer shall cause each of its properties
and each of the properties of its Subsidiaries which are of an insurable nature
to be insured against loss of damage with insurers of recognized responsibility,
in commercially reasonable amounts and types.
SECTION 1008. Payment of Taxes and Other Claims. Each of the Issuer and
the General Partner shall pay or discharge or cause to be paid or discharged,
before the same shall become delinquent (i) all taxes, assessments and
governmental charges levied or imposed upon the Issuer or any Subsidiary or upon
the income, profits or property of the Issuer or any Subsidiary, and (ii) all
lawful claims for labor, materials and supplies which, if unpaid, might by law
become a lien upon property of the Issuer or any Subsidiary; provided, however,
notwithstanding anything herein to the contrary, the Issuer or the General
Partner shall not be required to pay or discharge or cause to be paid or
discharged any tax, assessment, charge or claim whose amount or applicability is
being contested in good faith.
SECTION 1009. 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 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(l), 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 statement 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 (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
20 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 will furnish the
Trustee and the Issuer's principal Paying Agent or Paying Agents, if other than
the Trustee, with an Officers' Certificate instructing the Trustee and such
Paying Agent or Paying Agents whether such payment of principal of and 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. In the event that the Trustee or any Paying Agent, as the
case may be, shall not so receive the above-mentioned certificate, then the
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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
and premium 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 premium 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 1010. Waiver of Certain Covenants. The Issuer may omit in any
particular instance to comply with any term, provision or condition set forth in
Sections 1006 through 1008, 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, 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 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. 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 all or
less than all of the Securities of any series, the Issuer shall, at least 45
days prior to the giving of the notice of redemption contemplated in Section
1104 (unless a shorter notice shall be satisfactory to the Trustee in its sole
discretion), 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 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 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
not previously called for redemption, by such method as the
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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 or 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 and may be further specified in an
indenture supplemental hereto, 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, but 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 a Holder receives the notice.
All notices of redemption shall state:
(1) the Redemption Date,
(2) the Redemption Price, accrued interest to the Redemption
Date payable as provided in Section 1106, if any, and Additional
Amounts, if any,
(3) 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,
(4) 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 charge, a new Security or Securities of authorized
denominations for the principal amount thereof remaining unredeemed,
(5) 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
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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,
(6) 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, or for conversion,
(7) that the redemption is for a sinking fund, if such is the
case,
(8) 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 Redemption Date 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,
(9) if Bearer Securities of any series are to be redeemed and
any Registered Securities of any 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, and
(10) the CUSIP number of such Security, if any.
(11) 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.
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. Neither the Issuer nor the Trustee shall have any
responsibility for any defect in the CUSIP number that appears on any Security,
check, advice of payment or redemption notice, and any such document may contain
a statement to the effect that CUSIP numbers have been assigned by an
independent service for convenience or reference and that neither the Issuer nor
the Trustee shall be liable for any inaccuracy in such numbers.
SECTION 1105. Deposit of Redemption Price. On or prior to 12:00 noon
Eastern Standard Time on the date 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
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shall be an Interest Payment Date) accrued interest on, 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, such
Security shall be paid by the Issuer at the Redemption Price, together with
accrued interest, 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 proved further
that, except as otherwise provided with respect to Securities convertible into
Common Stock or Preferred Stock of the General Partner, 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 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 a Security called for redemption shall not be so paid upon surrender
thereof for redemption, the principal (and premium, 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 or of
Article Twelve) shall be surrendered at a Place of Payment therefor (with, if
the Issuer or the Trustee so requires, due
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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 charge and at
the expense of the Issuer, a new Security or Securities of the same series, of
any authorized denomination specified by such Holder in aggregate principal
amount equal to and in exchange for the unredeemed portion of the principal of
the Security 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.
SECTION 1202. Satisfaction of Sinking Fund Payments 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 previously called for redemption)
together in the case of any Bearer Securities of such series with any 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, as provided for
by 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, or 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
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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 thereto 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 on but by no later than 12:00 noon Eastern
Standard Time or the 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 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 (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.
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 any 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, facsimile transmission or a letter from a member of a national
securities exchange, or the National Association of Securities Dealers, Inc.
("NASD"),
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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 denomination for Securities
of such series, shall be stated in a writing accompanying such Security. 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 Recipient 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 as 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
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
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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 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 a series under
Section 1402 or (b) covenant defeasance of the Securities of 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 delivered to the
Trustee, 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 a series,
the Issuer and the Guarantor 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 coupons appertaining thereto and this
Indenture
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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 to 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, if any) and
interest, if any, on such Securities and any coupons appertaining thereto when
such payments are due, (B) the Issuer's obligations with respect to such
Securities under Sections 305, 306, 606, 1002 and 1003 and with respect to the
payment of Additional Amounts, if any, on such Securities as contemplated by
Section 1009, (C) the rights, powers, trusts, duties and immunities of the
Trustee hereunder and (D) this Article Fourteen. 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 a
series, the Issuer shall be released from its obligations under Sections 1006
through 1008 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
Sections 1006 through 1008 or such other 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 any 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(4) or
501(8) 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 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 hereto are then specified as
payable at Stated Maturity) which through the scheduled payment of
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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, if any) and interest, if any, on such Securities and any
coupons appertaining thereto, or (2) a combination of currency, currencies or
currency units in an amount, sufficient, 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 (and premium, 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 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.
(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 as expressed in the Officers' Certificate contemplated in subsection
(f) below.
(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 or, insofar as Sections 501(6) and 501(7) are concerned as
expressed in the Officers' Certificate contemplated in subsection (f) below, 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 or Federal income tax purposes as a result of such
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 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 containing the representations in
subsections (b) and (c) of this Section 1404
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and 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 and an Opinion of Counsel to the effect that either (i) as a
result of a deposit pursuant to subsection (a) above and the related exercise of
the Issuer's option under Section 1402 or Section 1403 (as the case may be),
registration is not required under the Investment Company Act of 1940, as
amended, by the Issuer, with respect to the trust funds representing such
deposit or by the Trustee for such trust funds or (ii) all necessary
registrations under said Act have been effected.
(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) 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 if any) and interest on 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, 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 currency or
currency unit in 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, if any), and interest, if
any, on 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 based on the applicable market exchange rate for such
currency or currency unit published in the Wall Street Journal on the second
Business Day prior to each payment date, or, with respect to a Conversion Event,
in effect for such currency or currency unit (as nearly as feasible) at the time
of the Conversion Event. Any fees or other charges incurred by the Trustee or
otherwise imposed in connection with such conversion shall be borne by the
Holders thereof and may be deducted by the Trustee from amounts otherwise due
such Holders.
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The Issuer shall pay and indemnify the Trustee against any tax, fee or
other charge imposed on or assessed against the Government Obligations deposited
pursuant to Section 1404 or the principal and interest received in respect
thereof other than any such tax, fee or other charge which bylaw is for the
account of the Holders of such Outstanding Securities and any Coupons
appertaining thereto.
Anything in this Article to the contrary notwithstanding, 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 San Francisco, California, 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
the Holders of at least twenty-five percent (25%) 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 mailing 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 San Francisco, California, New York, New York, or in London for such
meeting and may call such meeting for such purposes by waiving notice thereof as
provided in subsection (a) of this Section.
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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 determined by the
chairman of the meeting prior to the adjournment of such meeting. In the absence
of a quorum at 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 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 adjourned 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 Holders of a
majority in principal amount of the outstanding Securities of that series;
provided, however, that, except as limited by the provisions of 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 such
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.
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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:
(i) there shall be no minimum quorum requirement for such
meeting; and
(ii) 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 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 having the nature 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 or
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 called 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.
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(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 so adjourned without further notice.
SECTION 1506. Counting Votes and Recording Action of Meeting. 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 reserved 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.
ARTICLE SIXTEEN
THE GUARANTEE
SECTION 1601. Applicability of Article; Guarantee. If, pursuant to
Section 301, provision is made for the Guarantee of the Securities by the
Guarantor, then the provisions of this Article Sixteen and Article Seventeen (if
applicable) (with such modifications thereto as may be specified pursuant to
Section 301 with respect to any Securities), shall be applicable to such
Securities, Guarantees and any Coupons appertaining thereto, and the Issuer may
at its option by Board Resolution delivered to the Trustee, at any time, with
respect to such Securities, Guarantees and any Coupons appertaining thereto,
elect to have this Article Sixteen and Article Seventeen (if applicable) be
applied to such Securities, Guarantees and any Coupons appertaining thereto. The
Guarantor hereby unconditionally guarantees to the Holders from time to time of
the Securities (a) the full and prompt payment of the principal of and any
premium, if any, on any Security when and as the same shall become due, whether
at the maturity thereof, by acceleration, redemption or otherwise and (b) the
full and prompt payment of any interest on any Security when and as the same
shall become due and payable. Each payment by the Guarantor with respect to any
Security shall be paid in the currency or currency unit specified in this
Indenture or the related resolution of the Board of Directors of the Company or
supplemental indenture for payments on such Security. Each and every default in
the payment of the principal of or interest or any premium on any Security shall
give rise to a separate cause of action hereunder, and separate suits may be
brought hereunder as each cause of action arises. The
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obligations of the Guarantor hereunder shall be evidenced by Guarantees
accompanying the Securities issued hereunder.
The obligations of the Guarantor hereunder shall be absolute and
unconditional and shall remain in full force and effect until the entire
principal and interest and any premium on the Securities shall have been paid or
provided for in accordance with the provisions of this Indenture, and such
obligations shall not be affected, modified or impaired upon the happening from
time to time of any event, including without limitation any of the following,
whether or not with notice to, or the consent of, the Guarantor:
(a) the failure to give notice to the Guarantor of the occurrence of an
Event of Default;
(b) the waiver, surrender, compromise, settlement, release or
termination of the payment, performance or observance by the Issuer or the
Guarantor of any or all of the obligations, covenants or agreements of either of
them contained in this Indenture or the Securities;
(c) the acceleration, extension or any other changes in the time for
payment of any principal of or interest or any premium on any Security or for
any other payment under this Indenture or of the time for performance of any
other obligations, covenants or agreements under or arising out of this
Indenture or the Securities;
(d) the modification or amendment (whether material or otherwise) of any
obligation, covenant or agreement set forth in this Indenture or the Securities;
(e) the taking or the omission of any of the actions referred to in this
Indenture and in any of the actions under the Securities;
(f) any failure, omission or delay on the part of the Trustee to
enforce, assert or exercise any right, power or remedy conferred on the Trustee
in this Indenture, or any other act or acts on the part of the Trustee or any of
the Holders from time to time of the Securities or of any interest coupons
appertaining thereto;
(g) the voluntary or involuntary liquidation, dissolution, sale or other
disposition of all or substantially all the assets, marshaling of assets and
liabilities, receivership, insolvency, bankruptcy, assignment for the benefit of
creditors, reorganization, arrangement, composition with creditors or
readjustment of, or other similar proceedings affecting the Guarantor or the
Issuer or any of the assets of any of them, or any allegation or contest of the
validity of the Guarantee in any such proceeding;
(h) to the extent permitted by law, the release or discharge by
operation of law of the Guarantor from the performance or observance of any
obligation, covenant or agreement contained in this Indenture;
(i) to the extent permitted by law, the release or discharge by
operation of law of the Issuer from the performance or observance of any
obligation, covenant or agreement contained in this Indenture;
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(j) the default or failure of the Issuer or the Trustee fully to perform
any of its obligations set forth in this Indenture or the Securities;
(k) the invalidity, irregularity or unenforceability of this Indenture
or the Securities or any part of any thereof;
(l) any judicial or governmental action affecting the Issuer or any
Securities or consent or indulgence granted by the Issuer by the Holders or by
the Trustee; or
(m) the recovery of any judgment against the Issuer or any action to
enforce the same or any other circumstance which might constitute a legal or
equitable discharge of a surety or guarantor.
SECTION 1602. Proceedings Against the Guarantor. In the event of a
default in the payment of principal of or any premium on any Security when and
as the same shall become due, whether at the Stated Maturity thereof, by
acceleration, call for redemption or otherwise, or in the event of a default in
any sinking fund payment, or in the event of a default in the payment of any
interest on any Security when and as the same shall become due, the Trustee
shall have the right to proceed first and directly against the Guarantor under
this Indenture without first proceeding against the Issuer or exhausting any
other remedies which it may have and without resorting to any other security
held by the Trustee.
The Trustee shall have the right, power and authority to do all things
it deems necessary or otherwise advisable to enforce the provisions of this
Indenture relating to the Guarantee and protect the interests of the Holders of
the Securities or coupons appertaining thereto and, in the event of a default in
payment of the principal of or any premium on any Security when and as the same
shall become due, whether at the Stated Maturity thereof, by acceleration, call
for redemption or otherwise, or in the event of a default in the payment of any
interest on any Security when and as the same shall become due, the Trustee may
institute or appear in such appropriate judicial proceedings as the Trustee
shall deem most effectual to protect and enforce any of its rights and the
rights of the Holders of Securities, whether for the specific enforcement of any
covenant or agreement in this Indenture relating to the Guarantee or in aid of
the exercise of any power granted herein, or to enforce any other proper remedy.
Without limiting the generality of the foregoing, in the event of a default in
payment of the principal of or interest or any premium on any Security when due,
the Trustee 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 Guarantor and collect the moneys
adjudged or decreed to be payable in the manner provided by law out of the
property of the Guarantor, wherever situated.
SECTION 1603. Guarantee for Benefit of Holders of Securities. The
Guarantee contained in this Indenture is entered into by the Guarantor for the
benefit of the Holders from time to time of the Securities and of any Coupons
appertaining thereto. Such provisions shall not be deemed to create any right
in, or to be in whole or in part for the benefit of any Person other than, the
Trustee, the Guarantor, the Holders from time to time of the Securities and of
any Coupons appertaining thereto, and their permitted successors and assigns.
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ARTICLE SEVENTEEN
SUBORDINATION OF GUARANTEE
SECTION 1701. Applicability of Article; Subordination. If, pursuant to
Section 301, provision is made for the Guarantee of the Securities pursuant to
Article Sixteen, then the provisions of this Article Seventeen (with such
modifications thereto as may be specified pursuant to Section 301 with respect
to any Securities), shall be applicable to such Securities, Guarantees and any
Coupons appertaining thereto. Notwithstanding anything to the contrary in this
Indenture or the Securities of any series, or any Coupons appertaining thereto,
the Guarantor, for itself, its successors and assigns, covenants and agrees and
each Holder of the Securities of any series by his acceptance thereof likewise
covenants and agrees that all payments in respect of the Guarantee shall be
junior and subordinate and subject in right of payment to all Guarantor Senior
Debt as provided in this Article Seventeen.
As used in this Article Seventeen, "Guarantor Senior Debt" shall mean
(a) all indebtedness of the Guarantor and its Subsidiaries, including the
Issuer, for money borrowed (including purchase-money obligations with an
original maturity in excess of one year) or evidenced by debentures, notes or
other corporate debt securities or similar instruments issued by the Guarantor;
(b) indebtedness or obligations of the Guarantor and its Subsidiaries, including
the Issuer, constituting a guarantee of indebtedness of or an obligation of
others of the type referred to in (a) above; or (c) any modification, extension,
renewal or refunding of any of the indebtedness or obligations referred to in
(a) or (b) above, unless, in the case of any particular indebtedness or
obligation, modification, extension, renewal or refunding, under the express
provisions of the instrument creating or evidencing the same, or pursuant to
which the same is outstanding, such indebtedness or other obligation or such
modification, extension, renewal or refunding thereof is not superior in right
of payment to the Guarantee.
SECTION 1702. Default on Guarantor Senior Debt. Unless and until all
Guarantor Senior Debt shall have been paid in full in accordance with its terms,
the Guarantor will not, and will not permit any of its Subsidiaries to, directly
or indirectly, make or agree to make any payment or prepayment (in cash or
property, by set-off or otherwise), direct or indirect, in respect of the
Guarantee (or any indebtedness subordinated to the Guarantee), and no such
payment shall be due or payable or shall be accepted by any Holder of
Securities, if an event of default with respect to any Guarantor Senior Debt (as
defined in any agreement pursuant to which Guarantor Senior Debt shall have been
issued) shall have occurred and be continuing or if such action would constitute
an event of default on the part of the Guarantor in respect of any Guarantor
Senior Debt or any instrument or agreement relating thereto and such event of
default shall be continuing.
SECTION 1703. Insolvency, etc. In the event of (i) any insolvency or
bankruptcy proceeding, or any receivership, liquidation or other similar
proceeding in connection therewith, relative to the Guarantor or its property,
or (ii) any proceeding for voluntary liquidation, dissolution or other
winding-up of the Guarantor, whether or not involving insolvency or bankruptcy,
or (iii) any assignment for the benefit of creditors, or (iv) any distribution,
division,
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marshaling or application of any of the properties or assets of the Guarantor or
the proceeds thereof, to creditors, voluntary or involuntary, and whether or not
involving legal proceedings, then in any such event: (a) all Guarantor Senior
Debt shall first be paid in full before any payment or distribution of any
character, whether in cash, securities or other property, shall be made by the
Guarantor in respect of the Guarantee;
(b) any payment or distribution of any character, whether in cash,
securities or other property, which would otherwise (but for the terms thereof)
be payable or deliverable by the Guarantor in respect of the Guarantee
(including any payment or distribution in respect of the Guarantee by reason of
any other indebtedness of the Guarantor being subordinated to the Guarantee),
shall be paid or delivered directly to the holders of Guarantor Senior Debt at
the time outstanding (or their respective representatives), or to the trustee or
trustees under any indenture under which any instruments evidencing any of such
Guarantor Senior Debt may have been issued, ratably, according to the respective
aggregate amounts remaining unpaid thereon, until all Guarantor Senior Debt
shall have been paid in full (but subject to the power of a court of competent
jurisdiction to make other equitable provision reflecting the rights of the
Guarantor Senior Debt and the holders thereof with respect to the Securities by
lawful plan of reorganization under applicable bankruptcy law), and the Holders
of the Securities at the time outstanding irrevocably authorize, empower and
direct all receivers, trustees, liquidators, conservators and others having
authority in the premises to effect all such payments and deliveries;
(c) the Holders of the Securities at the time outstanding irrevocably
authorize and empower (without imposing any obligation on) each holder of
Guarantor Senior Debt at the time outstanding and such holder's representatives
to demand, sue for, collect and receive such holder's ratable share of all such
payments and distributions and to receipt therefor, and to file and prove all
claims therefor and take all such other action (including the right to vote such
Guarantor Senior Debt holder's ratable share of the Securities) in the name of
the Holders of the Securities or otherwise, as such Guarantor Senior Debt holder
or such holder's representatives may determine to be necessary or appropriate
for the enforcement of this Section 1703; and
(d) the Holders of the Securities shall execute and deliver to each
holder of Guarantor Senior Debt and such holder's representatives all such
further instruments confirming the above authorization, and all such powers of
attorney, proofs of claim, assignments of claim and other instruments, and shall
take all such other action as may be requested by such holder or such holder's
representatives, in order to enable such holder to enforce all claims upon or in
respect of such holder's ratable share of the Securities.
SECTION 1704. Payments and Distributions Received. If any payment or
distribution of any character (whether in cash, securities, or other property)
or any security shall be received by the Trustee or any holder of any of the
Securities in contravention of any of the terms hereof and before all Guarantor
Senior Debt shall have been paid in full, such payment or distribution or
security shall be held in trust for the benefit of, and shall be paid over or
delivered and
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transferred to, the holders of the Guarantor Senior Debt at the time outstanding
(or their respective representatives), or to the trustee or trustees under any
indenture under which any instruments evidencing any of such Guarantor Senior
Debt may have been issued, for application to the payment of all Guarantor
Senior Debt remaining unpaid, ratably according to the respective aggregate
amounts remaining unpaid thereof, to the extent necessary to pay all such
Guarantor Senior Debt in full. In the event of the failure of the Trustee
(pursuant to Section 1703) or any holder of any of the Securities to endorse or
assign any such payment, distribution or security, each holder of Guarantor
Senior Debt and each holder's representative is hereby irrevocably authorized to
endorse or assign the same.
SECTION 1705. Excess Guarantor Senior Debt Payment, Subrogation, etc. If
cash, securities or other property otherwise payable or deliverable to the
holders of the Securities shall have been applied, pursuant to Section 1703 or
1703, to the payment of Guarantor Senior Debt in full, then in such case, the
Holders of the Securities (a) shall be entitled to receive from the holders of
the Guarantor Senior Debt at the time outstanding any payments or distributions
received by such holders of Guarantor Senior Debt in excess of the amount
sufficient to pay all Guarantor Senior Debt in full, and (b) shall be subrogated
to any rights of the holders of Guarantor Senior Debt to receive all further
payments or distributions applicable to the Guarantor Senior Debt, until all
amounts due and payable in respect of the Guarantee shall have been paid in
full. No such payments or distributions received by the Holders of the
Securities, by reason of such subrogation, of cash, securities or other
property, which otherwise would be paid or distributed to the holders of the
Guarantor Senior Debt, shall, as between the Guarantor and its creditors (other
than the holders of the Guarantor Senior Debt), on the one hand, and the Holders
of the Securities, on the other hand be deemed to be a payment by the Guarantor
to or on account of the Guarantee.
SECTION 1706. No Security. So long as any of the Guarantor Senior Debt
shall not have been paid in full, the Guarantor shall not, and shall not permit
any of its Subsidiaries to, give and the Holders of the Securities shall not
demand, accept or receive any security, direct or indirect, for the Guarantor's
obligation in respect of the Guarantee.
SECTION 1707. Obligations Not Impaired. Nothing contained in this
Article Seventeen or elsewhere in this Indenture or in the Securities is
intended to or shall impair, as between the Guarantor and the Holder of any
Securities, the obligation of the Guarantor in respect of the Guarantee, which
is absolute and unconditional, in accordance with Article Sixteen, or is
intended to or shall affect the relative rights of the Holders of the Securities
and creditors of the Guarantee other than the holders of the Guarantor Senior
Debt, or is intended to or shall prevent the Trustee or the Holder of any
Securities from exercising all rights, powers and remedies otherwise provided
herein or permitted by applicable law, all subject to the rights, if any, of the
holders of Guarantor Senior Debt under this Article Seventeen to receive such,
securities or other property otherwise payable or deliverable to the Holders of
the Securities in respect of the Guarantee. Upon any distribution of assets of
the Guarantor referred to in this Article Seventeen, the Trustee, subject to the
provisions of Section 602, and the Holders of the Securities shall be entitled
to rely upon any order or decree made by any court of competent jurisdiction in
which such dissolution, winding-up, liquidation or reorganization proceedings
are pending, or a
79
<PAGE> 82
certificate of the liquidating trustee or agent or other person making any
distribution to the Trustee or to the Holders of the Securities, for the purpose
of ascertaining the persons entitled to participate in such distribution, the
holders of the Guarantor Senior Debt and other indebtedness of the Guarantor,
the amount thereof or payable thereon, the amount or amounts paid or distributed
thereon and all other facts pertinent thereto or to this Article Seventeen.
SECTION 1708. Subordinated Not Affected, etc. The terms of this Article
Seventeen, the subordination effected hereby and the rights of the present or
future holders of the Guarantor Senior Debt, shall not be affected by (a) any
instrument of or addition or supplement to any Guarantor Senior Debt or any
instrument or agreement relating thereto, (b) any exercise or nonexercise of any
right, power or remedy under or in respect of any Guarantor Senior Debt or any
instrument or agreement relating thereto, (c) any sale, exchange, release or
other transaction affecting all or any part of the property at any time pledged
or mortgaged to secure, or however securing, Guarantor Senior Debt, (d) any
waiver, consent, release, indulgence, extension, renewal, modification, delay,
noncompliance or other action, inaction or omission, in respect of any Guarantor
Senior Debt or this Indenture or any instrument or agreement relating thereto,
(e) any act or failure to act on the part of the Guarantor, or (f) any act or
failure to act, in good faith, by any such holder, whether or not any Holder of
any Securities shall have had notice or knowledge of any of the foregoing.
SECTION 1709. Changes, Waivers, etc. Neither this Article Seventeen nor
any terms hereof may be changed or waived except with the prior written consent
of the holders of all of the Guarantor Senior Debt at the time outstanding.
Neither the Securities nor any term thereof may be changed, waived or canceled
in any manner that would have any adverse effect upon the rights of the holders
of the Guarantor Senior Debt at the time outstanding.
SECTION 1710. Payment in Full of Guarantor Senior Debt. For all purposes
of this Article Seventeen, Guarantor Senior Debt shall not be deemed to have
been paid in full unless (a) the holders thereof (or their duly authorized
representatives) shall have received cash or readily marketable securities,
taken at their then market value, equal to the amount of Guarantor Senior Debt
at the time outstanding, or (b) other equitable provisions have been effected by
action of a court of competent jurisdiction or agreement among the holders of
Guarantor Senior Debt.
SECTION 1711. Trustee Entitled to Assume Payments Not Prohibited in
Absence of Notice. The Trustee shall not at any time be charged with knowledge
of the existence of any facts that would prohibit the making of any payment of
moneys to or by the Trustee, unless and until the Trustee shall have received
written notice thereof from the Guarantor or from one or more holders of the
Guarantor Senior Debt or from any trustee therefor; and, prior to the receipt of
any such written notice, the Trustee, subject to the provisions of Article Six,
shall be entitled to assume that no such facts exist.
SECTION 1712. Application by Trustee of Moneys Deposited with It.
Anything in this Indenture to the contrary notwithstanding, any deposit of
moneys by the Guarantor with the Trustee or any payment agent (whether or not in
trust) for payment in respect of the Guarantee
80
<PAGE> 83
shall be subject to the provisions of this Article Seventeen except that, if
prior to the Business Date on which by the terms of this Indenture any such
moneys may become payable for any purpose the Trustee shall not have received
with respect to such moneys the notice provided for in Section 1711, then,
anything herein contained to the contrary notwithstanding, the Trustee shall
have full power and authority to receive such moneys and to apply the same to
the purpose for which they were received, and shall not be affected by any
notice to the contrary which may be received by it on or after such date.
SECTION 1713. Securityholders Authorize Trustee to Effectuate
Subordination of Guarantee. Each Holder of the Securities by his acceptance
thereof authorizes and expressly directs the Trustee on his behalf to take such
action as may be necessary or appropriate to effectuate the subordination
provided in this Article Seventeen and appoints the Trustee his attorney-in-fact
for such purpose, including taking action on behalf of the Holders of the
Securities, when required, as specified in Section 1704 and including, in the
event of any dissolution, winding-up, liquidation or reorganization of the
Guarantor (whether in bankruptcy, insolvency or receivership proceedings or upon
an assignment for the benefit of creditors or otherwise) tending towards
liquidation of the business and assets of the Guarantor, the immediate filing of
a claim for amounts due and payable in respect of the Guarantee in the form
required in such proceedings and causing such claim to be approved. If the
Trustee does not file a proper claim or proof of debt in the form required in
such proceeding prior to 30 days before the expiration of the time to file such
claim or claims, then the holder or holders of Guarantor Senior Debt are hereby
authorized to and have the right to file and are hereby authorized to file an
appropriate claim for and on behalf of the Holders of such Securities.
SECTION 1714. Right of Trustee to Hold Guarantor Senior Debt. The
Trustee shall be entitled to all of the rights set forth in this Article
Seventeen in respect of any Guarantor Senior Debt at any time held by it to the
same extent as any other holder of Guarantor Senior Debt, and nothing in Article
Six or elsewhere in this Indenture shall be construed to deprive the Trustee of
any of its rights as such holder.
This Indenture may be executed in any number of counterparts, each of
which when so executed shall be deemed to be an original, but all such
counterparts shall together constitute but one and the same instrument.
81
<PAGE> 84
IN WITNESS WHEREOF, the parties hereto have caused this Indenture to be
duly executed, and the corporate seal of the Guarantor to be hereunto affixed
and attested, as of the day and year first above written.
GLENBOROUGH PROPERTIES, L.P.
By: Glenborough Realty Trust Incorporated, as General
Partner
By:________________________
Name: Stephen R. Saul
Title: Executive Vice President and
Chief Financial Officer
(Seal)
Attest:
By:________________________
Name: Frank E. Austin
Title: Secretary
GLENBOROUGH REALTY TRUST INCORPORATED
By:_________________________
Name: Stephen R. Saul
Title: Executive Vice President and
Chief Financial Officer
(Seal)
Attest:
By:________________________
Name: Frank E. Austin
Title: Secretary
CHASE MANHATTAN BANK AND TRUST COMPANY,
NATIONAL ASSOCIATION,
as Trustee
By:________________________
Name:
Title:
Attest:
- ---------------------------
Title:
82
<PAGE> 85
STATE OF )
COUNTY OF ) ss.:
On the ______ day of _____________________, 1998, before me
personally came _____________________ to me known, who, being by me duly sworn,
did depose and say that he is the __________________ of Glenborough Realty Trust
Incorporated, one of the entities described in and which executed the above
instrument; that he knows the corporate seal of said corporation; that the seal
affixed to the said instrument is such corporation seal; that it was so affixed
by authority of the corporation, and that he signed his name thereto by like
authority.
---------------------------------
83
<PAGE> 86
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
(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
2.165-12(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 United States
financial institutions hereby agrees, on its own behalf or through its agent,
that you may advise Glenborough Properties, L.P., or its agent that such
financial institutions will comply with the requirements of Section
165(j)(3)(A), (B) or (C) of the United States Internal Revenue Code of 1986, as
amended, and the regulations thereunder), or (iii) are owned by United States or
foreign financial institution for purposes of resale during the restricted
period (as defined in United States Treasury Regulations Section
1.163-5(c)(1)(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 you promptly by facsimile 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 your 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.
1
<PAGE> 87
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 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:
2
<PAGE> 88
EXHIBIT A-2
FORM OF CERTIFICATE TO BE GIVEN BY EUROCLEAR AND
CEDEL S.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 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 thereof
(and in either case (a) or (b), each 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 option 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.
i
<PAGE> 89
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.
Date: ___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 S.A.)
ii
<PAGE> 90
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
RECITALS OF THE ISSUER AND THE GUARANTOR.....................................................1
ARTICLE ONE DEFINITIONS AND OTHER PROVISIONS OF GENERAL APPLICATION..........................1
SECTION 101. Definitions..............................................................1
SECTION 102. Compliance Certificates and Opinions.....................................9
SECTION 103. Form of Documents Delivered to Trustee...................................10
SECTION 104. Acts of Holders..........................................................10
SECTION 105. Notices, etc., to Trustee and Issuer.....................................12
SECTION 106. Notice to Holders; Waiver................................................12
SECTION 107. Effect of Headings and Table of Contents.................................13
SECTION 108. Successors and Assigns...................................................13
SECTION 109. Separability Clause......................................................13
SECTION 110. Benefits of Indenture....................................................13
SECTION 111. Governing Law............................................................13
SECTION 112. Legal Holidays...........................................................13
ARTICLE TWO SECURITIES FORMS.................................................................14
SECTION 201. Forms of Securities......................................................14
SECTION 202. Form of Trustee's Certificate of Authentication..........................14
SECTION 203. Securities Issuable in Global Form.......................................14
ARTICLE THREE THE SECURITIES.................................................................15
SECTION 301. Amount Unlimited; Issuable in Series.....................................15
SECTION 302. Denominations............................................................19
</TABLE>
iii
<PAGE> 91
TABLE OF CONTENTS (CONT.D)
<TABLE>
<CAPTION>
PAGE
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<S> <C>
SECTION 303. Execution, Authentication, Delivery and Dating...........................19
SECTION 304. Temporary Securities.....................................................21
SECTION 305. Registration, Registration of Transfer and Exchange......................23
SECTION 306. Mutilated, Destroyed, Lost and Stolen Securities.........................27
SECTION 307. Payment of Interest -- Interest Rights Preserved.........................28
SECTION 308. Persons Deemed Owners....................................................30
SECTION 309. Cancellation.............................................................30
SECTION 310. Computation of Interest..................................................31
ARTICLE FOUR SATISFACTION AND DISCHARGE......................................................31
SECTION 401. Satisfaction and Discharge of Indenture..................................31
SECTION 402. Application of Trust Funds...............................................32
ARTICLE FIVE REMEDIES........................................................................33
SECTION 501. Events of Default........................................................33
SECTION 502. Acceleration of Maturity; Rescission and Annulment.......................34
SECTION 503. Collection of Indebtedness and Suits for Enforcement by Trustee..........35
SECTION 504. Trustee May File Proofs of Claim.........................................36
SECTION 506. Trustee May Enforce Claims Without Possession of Securities of Coupons...37
SECTION 506. Application of Money Collected...........................................37
SECTION 507. Limitation on Suits......................................................38
SECTION 508. Unconditional Right of Holders to Receive Principal, Premium, if any,
Interest and Additional Amount..........................................38
SECTION 509. Restoration of Rights and Remedies.......................................38
SECTION 510. Rights and Remedies Cumulative...........................................39
</TABLE>
ii
<PAGE> 92
TABLE OF CONTENTS (CONT.D)
<TABLE>
<CAPTION>
PAGE
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<S> <C>
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..................................40
SECTION 515. Undertaking for Costs....................................................40
ARTICLE SIX THE TRUSTEE......................................................................40
SECTION 601. Notice of Defaults.......................................................40
SECTION 602. Certain Rights of Trustee................................................41
SECTION 603. Not Responsible for Recitals or Issuance of Securities...................43
SECTION 604. May Hold Securities and Guarantees.......................................43
SECTION 605. Money Held in Trust......................................................43
SECTION 606. Compensation and Reimbursement...........................................43
SECTION 607. Corporate Trustee Required; Eligibility; Conflicting Interests...........44
SECTION 608. Resignation and Removal; Appointment of Successor........................44
SECTION 609. Acceptance of Appointment by Successor...................................46
SECTION 610. Merger, Conversion, Consolidation or Succession to Business..............47
SECTION 611. Appointment of Authentication Agent......................................47
ARTICLE SEVEN HOLDERS' LISTS AND REPORTS BY TRUSTEE AND ISSUER...............................49
SECTION 701. Disclosure of Names and Addresses of Holders.............................49
SECTION 702. Reports by Trustee.......................................................49
SECTION 703. Reports by Issuer and the Guarantor......................................49
SECTION 704. Issuer to Furnish to Trustee Names and Addresses of Holders..............50
</TABLE>
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<PAGE> 93
TABLE OF CONTENTS (CONT.D)
<TABLE>
<CAPTION>
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<S> <C>
ARTICLE EIGHT CONSOLIDATION, MERGER, SALE, LEASE OR CONVEYANCE...............................50
SECTION 801. Consolidation and Merger of Issuer and Sale, Lease and Conveyance
Permitted Subject to Certain Conditions.................................50
SECTION 802. Rights and Duties of Successor Person....................................51
SECTION 803. Officers' Certificate and Opinion of Counsel.............................51
ARTICLE NINE AMENDMENTS AND SUPPLEMENTAL INDENTURES..........................................51
SECTION 901. Amendments and Supplemental Indentures Without Consent of Holders........51
SECTION 902. Amendments and Supplemental Indentures with Consent of Holders...........53
SECTION 903. Execution of Supplemental Indentures.....................................54
SECTION 904. Effect of Supplemental Indentures........................................54
SECTION 905. Conformity with Trust Indenture Act......................................54
SECTION 906. Reference in Securities to Supplemental Indentures.......................54
ARTICLE TEN COVENANTS........................................................................55
SECTION 1001. Payment of Principal, Premium, if any, Interest and Additional Amounts...55
SECTION 1002. Maintenance of Office or Agency..........................................55
SECTION 1003. Money for Securities Payments to Be Held in Trust........................57
SECTION 1004. Existence................................................................58
SECTION 1005. Statement as to Compliance...............................................58
SECTION 1006. Maintenance of Properties................................................58
SECTION 1007. Insurance................................................................59
SECTION 1008. Payment of Taxes and Other Claims........................................59
SECTION 1009. Additional Amounts.......................................................59
</TABLE>
iv
<PAGE> 94
TABLE OF CONTENTS (CONT.D)
<TABLE>
<CAPTION>
PAGE
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<S> <C>
SECTION 1010. Waiver of Certain Covenants..............................................60
ARTICLE ELEVEN REDEMPTION OF SECURITIES......................................................60
SECTION 1101. Applicability of Article.................................................60
SECTION 1102. Election to Redeem; Notice to Trustee....................................60
SECTION 1103. Selection by Trustee of Securities to Be Redeemed........................60
SECTION 1104. Notice of Redemption.....................................................61
SECTION 1105. Deposit of Redemption Price..............................................62
SECTION 1106. Securities Payable on Redemption Date....................................63
SECTION 1107. Securities Redeemed in Part..............................................63
ARTICLE TWELVE SINKING FUNDS.................................................................64
SECTION 1201. Applicability of Article.................................................64
SECTION 1202. Satisfaction of Sinking Fund Payments with Securities....................64
SECTION 1203. Redemption of Securities for Sinking Fund................................64
ARTICLE THIRTEEN REPAYMENT AT THE OPTION OF HOLDERS..........................................65
SECTION 1301. Applicability of Article.................................................65
SECTION 1302. Repayment of Securities..................................................65
SECTION 1303. Exercise of Option.......................................................66
SECTION 1304. When Securities Presented for Recipient Become Due and Payable...........67
SECTION 1305. Securities Repaid in Part................................................67
ARTICLE FOURTEEN DEFEASANCE AND COVENANT DEFEASANCE..........................................67
SECTION 1401. Applicability of Article; Issuer's Option to Effect Defeasance or
Covenant Defeasance....................................................67
SECTION 1402. Defeasance and Discharge.................................................67
</TABLE>
v
<PAGE> 95
TABLE OF CONTENTS (CONT.D)
<TABLE>
<CAPTION>
PAGE
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<S> <C>
SECTION 1403. Covenant Defeasance......................................................68
SECTION 1404. Conditions to Defeasance or Covenant Defeasance..........................68
SECTION 1405. Deposited Money and Government Obligations to Be Held in Trust;
Other Miscellaneous Provisions..........................................70
ARTICLE FIFTEEN MEETINGS OF HOLDERS OF SECURITIES............................................71
SECTION 1501. Purposes for Which Meetings May Be Called................................71
SECTION 1502. Call, Notice and Place of Meetings.......................................71
SECTION 1503. Persons Entitled to Vote at Meetings.....................................72
SECTION 1504. Quorum; Action...........................................................72
SECTION 1505. Determination of Voting Rights; Conduct and Adjournment of Meetings......73
SECTION 1506. Counting Votes and Recording Action of Meeting...........................74
ARTICLE SIXTEEN THE GUARANTEE................................................................74
SECTION 1601. Applicability of Article; Guarantee......................................74
SECTION 1602. Proceedings Against the Guarantor........................................76
SECTION 1603. Guarantee for Benefit of Holders of Securities...........................76
ARTICLE SEVENTEEN SUBORDINATION OF GUARANTEE.................................................77
SECTION 1701. Applicability of Article; Subordination..................................77
SECTION 1702. Default on Guarantor Senior Debt.........................................77
SECTION 1703. Insolvency, etc..........................................................77
SECTION 1704. Payments and Distributions Received......................................78
SECTION 1705. Excess Guarantor Senior Debt Payment, Subrogation, etc...................79
SECTION 1706. No Security..............................................................79
SECTION 1707. Obligations Not Impaired.................................................79
</TABLE>
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TABLE OF CONTENTS (CONT.D)
<TABLE>
<CAPTION>
PAGE
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<S> <C>
SECTION 1708. Subordinated Not Affected, etc...........................................80
SECTION 1709. Changes, Waivers, etc....................................................80
SECTION 1710. Payment in Full of Guarantor Senior Debt.................................80
SECTION 1711. Trustee Entitled to Assume Payments Not Prohibited in Absence of Notice..80
SECTION 1712. Application by Trustee of Moneys Deposited with It.......................80
SECTION 1713. Securityholders Authorize Trustee to Effectuate Subordination of
Guarantee...............................................................81
SECTION 1714. Right of Trustee to Hold Guarantor Senior Debt...........................81
EXHIBIT A-1..................................................................................1
EXHIBIT A-2..................................................................................I
</TABLE>
vii
<PAGE> 97
FIRST SUPPLEMENTAL INDENTURE
FIRST SUPPLEMENTAL INDENTURE, dated as of March 23, 1998 (this "First
Supplemental Indenture"), among Glenborough Realty Trust Incorporated, a
corporation organized under the laws of Maryland (the "General Partner"),
Glenborough Properties L.P., a limited partnership organized under the laws of
California (the "Issuer"), and Chase Manhattan Bank and Trust Company, National
Association, as Trustee (the "Trustee").
W I T N E S S E T H:
WHEREAS, the Issuer, the General Partner and the Trustee executed and
delivered an Indenture, dated as of March 23, 1998 (the "Indenture"), to provide
for the issuance by the Issuer from time to time of debt securities evidencing
its unsecured indebtedness;
WHEREAS, pursuant to Board Resolution, the Issuer has authorized the
issuance of $150,000,000 of its 7 5/8% Series A Senior Notes Due 2005 (the
"Series A 2005 Notes") and $150,000,000 of its 7 5/8% Series B Senior Notes Due
2005 (the "Series B 2005 Notes," and together with the Series A 2005 Notes, the
"2005 Notes");
WHEREAS, the Issuer, the General Partner and certain other parties named
on the signature page thereof entered into a Registration Rights Agreement (as
such agreement may be amended, modified or supplemented from time to time, the
"Registration Rights Agreement") which contemplates (i) the registration with
the Securities and Exchange Commission ("the "Commission") of the issuance of
the Series B 2005 Notes and (ii) the consummation of an Exchange Offer (defined
below) whereby the Series A 2005 Notes may be exchanged for Series B 2005 Notes;
and
WHEREAS, the Issuer desires to establish the terms of the 2005 Notes in
accordance with Section 301 of the Indenture and to establish the form of the
2005 Notes in accordance with Section 201 of the Indenture.
ARTICLE I
TERMS
SECTION 101. TERMS OF 2005 NOTES. The following terms relating to the 2005 Notes
are hereby established:
(1) The Series A 2005 Notes shall constitute a series of Securities
having the title "7 5/8% Series A Senior Notes Due 2005." The Series B 2005
Notes shall constitute a series of Securities having the title "7 5/8% Series B
Senior Notes Due 2005."
(2) The aggregate principal amount of the Series A 2005 Notes that may
be authenticated and delivered under the Indenture (except for Series A 2005
Notes authenticated and delivered upon registration of transfer of, or in
exchange for, or in lieu of, other Series A 2005 Notes pursuant to Sections 304,
305, 306, 906, 1107 or 1305 of the Indenture) shall be up to $150,000,000. The
aggregate principal amount of the Series B 2005 Notes that may be
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authenticated and delivered under the Indenture (except for Series B 2005 Notes
authenticated and delivered upon registration of transfer of or in exchange for
or in lieu of, other Series B 2005 Notes pursuant to Sections 304, 305, 306,
906, 1107 or 1305 of the Indenture) shall be up to $150,000,000.
(3) The entire outstanding principal of the 2005 Notes shall be payable
on March 15, 2005 (the "Stated Maturity Date").
(4) The rate at which the 2005 Notes shall bear interest shall be 7
5/8%; with respect to the Series A 2005 Notes, the date from which interest
shall accrue shall be March 23, 1998; with respect to the Series B 2005 Notes,
the date from which interest shall accrue shall be the date on which interest
was most recently paid on the Series A 2005 Notes, or if there has been no
Interest Payment Date relating to the Series A 2005 Notes prior to the issuance
of the Series B 2005 Notes, the date from which interest shall accrue shall be
March 23, 1998; the Interest Payment Dates for the 2005 Notes on which interest
will be payable shall be March 15 and September 15 in each year, beginning
September 15, 1998; the Regular Record Dates for the interest payable on the
2005 Notes on any Interest Payment Date shall be March 1 with respect to the
March 15 Interest Payment Date and September 1 with respect to the September 15
Interest Payment Date; and the basis upon which interest shall be calculated
shall be that of a 360-day year consisting of twelve 30-day months.
(5) The place where the principal of, Liquidated Damages, if any, with
respect to and interest on the 2005 Notes shall be payable and 2005 Notes may be
surrendered for the registration of transfer or exchange shall be the Corporate
Trust Office of the Trustee which, as of this writing, is located at 101
California Street, Suite 2725, San Francisco, California 94111, also with an
address at c/o The Chase Manhattan Bank, 55 Water Street, Room 234, North
Building, New York, New York 10041. The place where notices or demands to or
upon the Issuer in respect of the 2005 Notes and the Indenture may be served
shall be the Corporate Trust Office of the Trustee.
(6)
(A) The 2005 Notes may be redeemed at any time at the option of
the Issuer, in whole or from time to time in part, at a redemption price (the
"Redemption Price") equal to the sum of (i) the principal amount of the 2005
Notes (or portion thereof) being redeemed plus accrued interest and Liquidated
Damages (as defined below), if any, thereon to the redemption date and (ii) the
Make-Whole Amount (as defined below), if any, with respect to such 2005 Notes
(or portion thereof).
If notice has been given as provided in the Indenture and funds
for the redemption of any 2005 Notes (or any portion thereof) called for
redemption shall have been made available on the redemption date
referred to in such notice, such 2005 Notes (or any portion thereof)
will cease to bear interest on the date fixed for such redemption
specified in such notice and the only right of the Holders of the 2005
Notes will be to receive payment of the Redemption Price.
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Notice of any redemption of any 2005 Notes (or any portion
thereof) will be given to Holders at their addresses, as shown in the
security register for the 2005 Notes, 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 2005 Notes held by such Holder to be redeemed. On the
third Business Day preceding the date notice of redemption is given, the
Issuer will notify the Trustee of the Redemption Price and the Trustee
may rely and shall be fully protected in acting upon the determination
of the Issuer as to such Price.
The Issuer will notify the Trustee at least 45 days prior to
giving notice of redemption (or such shorter period as is satisfactory
to the Trustee) of the aggregate principal amount of such 2005 Notes to
be redeemed and their redemption date. If less than all the 2005 Notes
are to be redeemed at the option of the Issuer, the Trustee shall
select, in such manner as it shall deem fair and appropriate, such 2005
Notes to be redeemed in whole or in part.
In the event of redemption of the 2005 Notes in part only, a new
2005 Note for the amount of the unredeemed portion thereof shall be
issued in the name of the Holder thereto, upon cancellation thereof.
(B) As used herein:
"Liquidated Damages" means all liquidated damages then owing
pursuant to Section 5 of the Registration Rights Agreement. References
in the Indenture to "premium" shall include a reference to "Liquidated
Damages, if any."
"Make-Whole Amount" means, in connection with any optional
redemption or accelerated payment of any 2005 Notes, 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
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 or accelerated payment
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 such notice of redemption is given
or declaration of acceleration is made) from the respective dates on
which such principal and interest would have been payable if such
redemption or accelerated payment had not been made, over (ii) the
aggregate principal amount of the 2005 Notes being redeemed or paid.
"Reinvestment Rate" means .25% plus the arithmetic mean of the
yields under the respective 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
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each of such relevant periods to the nearest month. For the purpose 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.
"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 establishes 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.
(7) The 2005 Notes shall not be redeemable at the option of any Holder
thereof, upon the occurrence of any particular circumstances or otherwise. The
2005 Notes will not have the benefit of any sinking fund.
(8) The 2005 Notes shall be issuable in denominations of $150,000 and
any integral multiples of $1,000 in excess thereof.
(9) The Trustee shall also be the Security Registrar and Paying Agent.
(10) The entire outstanding principal amount plus the Make-Whole Amount
of the 2005 Notes and Liquidated Damages, if any, shall be payable upon
declaration of acceleration of the maturity thereof pursuant to Section 502 of
the Indenture.
(11) Payments of the principal of, Liquidated Damages, if any, with
respect to and interest on the 2005 Notes shall be made in U.S. Dollars, and the
2005 Notes shall be denominated in U.S. Dollars.
(12) The 2005 Notes will be payable on the Stated Maturity Date in an
amount equal to the principal amount thereof, Liquidated Damages, if any, plus
any unpaid interest accrued to the Stated Maturity Date.
(13) The Holders of the 2005 Notes shall have no special rights in
addition to those provided in the Indenture upon the occurrence of any
particular events except those rights arising from the Registration Rights
Agreement.
(14) (A) With respect to the 2005 Notes, "Event of Default" shall refer
to such events described in Section 102 hereof which Section shall replace
Section 501 of the Indenture.
(B) There shall be the following additions to the covenants set
forth in the Indenture with respect to the 2005 Notes, which shall be effective
only for so long as any of the 2005 Notes are Outstanding.
Default Interest. The Issuer shall pay interest (including
post-petition interest in any proceeding under any Bankruptcy Law) on
overdue principal and premium, if any, from time to time on demand at a
rate that is 1% per annum in excess of the rate then in effect; it shall
pay interest (including post-petition interest in any proceeding under
any Bankruptcy Law) on overdue installments of interest and Liquidated
Damages (without
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regard to any applicable grace periods) from time to time on demand at
the same rate to the extent lawful.
Liquidated Damages. The Company shall pay all Liquidated
Damages, if any, in the same manner, on the dates and in the amounts set
forth in the Registration Rights Agreement.
Limitations On Incurrence of Debt. The Issuer will not, and will
not permit any Subsidiary to, incur any Debt, other than inter-company
debt representing Debt to which the only parties are the General
Partner, the Issuer and any of their Subsidiaries (but only so long as
such Debt is held solely by any of the General Partner, the Issuer and
any Subsidiary) that is subordinate in right of payment to the 2005
Notes, if, immediately after giving effect to the incurrence of such
additional Debt and the application of the net proceeds thereof, 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 (without duplication) of (i) Total Assets
of the Issuer and its Subsidiaries as of the end of the most recently
completed fiscal quarter of the Issuer for which financial information
is available prior to the incurrence of such additional Debt and (ii)
the purchase price or cost of any real estate assets or mortgages
receivable acquired or developed, and the amount of any securities
offering proceeds or asset sale proceeds received (to the extent that
such proceeds were not used to acquire real estate assets or mortgages
receivable, to develop real estate assets or to reduce Debt) by the
Issuer or any Subsidiary since the end of such fiscal quarter, including
those proceeds obtained in connection with the incurrence of such
additional Debt (such increase, together with the Total Assets, is
referred to as "Adjusted Total Assets").
In addition to the foregoing limitation on the incurrence of
Debt, the Issuer will not, and will not permit any Subsidiary to, incur
any Debt if the ratio of Consolidated Income Available for Debt Service
to the Annual Service Charge on all Debt outstanding immediately after
the incurrence of such additional Debt for the four consecutive fiscal
quarters most recently ended prior to the date on which such additional
Debt is to be incurred shall have been less than 1.5 to 1, 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 and the application of the net proceeds therefrom,
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 incurred, repaid or retired at the beginning of such period (except
that, in making such computation, 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) the income earned on any
increase in Adjusted Total Assets since the end of such four-quarter
period had been earned, on an annualized basis, during such period and
(iv) in the case of any 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 acquisition or
disposition or any related repayment of Debt had occurred as of the
first day of such period with the appropriate adjustments with respect
to such acquisition or disposition being included in such pro forma
calculation.
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In addition to the foregoing limitations on the incurrence of
Debt, the Issuer will not, and will not permit any Subsidiary to, incur
any Debt secured by any mortgage, lien, charge, pledge, encumbrance or
security interest of any kind upon any of the property of the Issuer or
any Subsidiary ("Secured Debt"), whether owned at the date of the
Indenture or thereafter acquired, if, immediately after giving effect to
the incurrence of such additional Secured Debt, the aggregate principal
amount of all outstanding Secured Debt is greater than 40% of Adjusted
Total Assets.
For purposes of the foregoing provisions regarding the limitation
on the incurrence of Debt, Debt shall be deemed to be "incurred" by the
Issuer or a Subsidiary whenever the Issuer and its Subsidiary shall
create, assume, guarantee or otherwise become liable in respect thereof.
In addition, the amount of Debt issued at a price that is less than the
principal amount thereof shall be equal to the amount of the liability
in respect thereof determined in accordance with GAAP.
Maintenance of Total Unencumbered Assets. The Issuer is required
to maintain Total Unencumbered Assets of not less than 150% of the
aggregate outstanding principal amount of all outstanding Unsecured
Debt.
As used herein:
"Annual Service Charge" for any period means the aggregate
interest expense for such period in respect of, and the amortization
during such period of any original issue discount of, Debt of the Issuer
and its Subsidiaries and the amount of dividends which are payable
during such period in respect of any Disqualified Stock.
"Capital Stock" means, with respect to any Person, any capital
stock (including preferred stock), shares, interests, participations or
other ownership interests (however designated) of such Person and any
rights (other than debt securities convertible into or exchangeable for
corporate stock), warrants or options to purchase any thereof.
"Consolidated Income Available For Debt Service" for any period
means Consolidated Net Income plus amounts which have been deducted, and
minus amounts which have been added, for the following (without
duplication): (a) interest on Debt of the Issuer and its Subsidiaries,
(b) provision for taxes of the Issuer and its Subsidiaries based on
income, (c) amortization of Debt discount, (d) provisions for gains and
losses on properties, (e) depreciation and amortization on properties,
(f) the effect of any non-cash charge resulting from a change in
accounting principles in determining Consolidated Net Income for such
period and (g) amortization of deferred charges.
"Consolidated Net Income" for any period means the amount of
consolidated net income (or loss) of the Issuer and its Subsidiaries for
such period determined on a consolidated basis in accordance with GAAP.
"Debt" of the Issuer or any Subsidiary means any indebtedness of
the Issuer or such Subsidiary, as applicable, 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
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existing on property owned by the Issuer or such Subsidiary, (iii) the
reimbursement obligations, contingent or otherwise, in connection with
any letters of credit actually issued or amounts representing the
balance that constitutes an accrued expense or trade payable or (iv) any
lease of property by the Issuer or such Subsidiary as lessee which is
reflected in the Issuer's consolidated balance sheet as a capitalized
lease in accordance with generally accepted accounting principles, 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 the Issuer's consolidated balance sheet in accordance
with generally accepted accounting principles, and also includes, to the
extent not otherwise included, any obligation by the Issuer or such
Subsidiary 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 the Issuer or
any Subsidiary).
"Disqualified Stock" means, with respect to any Person, any
Capital Stock of such Person which by the terms of such Capital Stock
(or by the terms of any security into which it is convertible or for
which it is exchangeable or exercisable), upon the happening of any
event or otherwise (i) matures or is mandatorily redeemable, pursuant to
a sinking fund obligation or otherwise (other than Capital Stock which
is redeemable solely in exchange for common stock), (ii) is convertible
into or exchangeable or exercisable for Debt or Disqualified Stock or
(iii) is redeemable at the option of the holder thereof, in whole or in
part (other than Capital Stock which is redeemable solely in exchange
for Capital Stock which is not Disqualified Stock or the redemption
price of which may, at the option of such Person, be paid in Capital
Stock which is not Disqualified Stock), in each case on or prior to the
Maturity Date of the Notes. For purposes of this definition, it is
expressly understood that the partnership units in the Issuer and shares
of perpetual preferred stock of the General Partner (which do not
possess any of the features of clauses (i), (ii) or (iii) above) shall
not constitute Disqualified Stock.
"GAAP" means generally accepted accounting principles set forth
in the opinions and pronouncements of the Accounting Principles Board of
the American Institute of Certified Public Accountants and statements
and pronouncements of the Financial Accounting Standards Board or in
such other statements by such other entity as have been approved by a
significant segment of the accounting profession, which are in effect
from time to time.
"Subsidiary" means a corporation, partnership or limited
liability company, a majority of the outstanding voting stock,
partnership interests or membership interests, as the case may be, of
which is owned or controlled, directly or indirectly, by the Issuer or
by one or more other Subsidiaries of the Issuer. For the purposes of
this definition, "voting stock" means stock having the voting power for
the election of directors, general partners, managers or trustees, as
the case may be, whether at all times or only so long as no senior class
of stock has such voting power by reason of any contingency.
"Total Assets" as of any date means the sum of (i) Undepreciated
Real Estate Assets and (ii) all other assets of the Issuer and its
Subsidiaries on a consolidated basis
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determined in accordance with GAAP (but excluding intangibles and
accounts receivable).
"Total Unencumbered Assets" means the sum of (i) those
Undepreciated Real Estate Assets which have not been pledged, mortgaged
or otherwise encumbered by the owner thereof to secure Debt, excluding
infrastructure assessment bonds, and (ii) all other assets of the Issuer
and its Subsidiaries determined in accordance with GAAP (but excluding
intangibles and accounts receivable) which have not been pledged,
mortgaged or otherwise encumbered by the owner thereof to secure Debt.
"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.
"Unsecured Debt" means Debt which is not secured by any mortgage,
lien, charge, pledge, encumbrance or security interest of any kind upon
any of the properties of the Issuer or any Subsidiary.
(C) The Trustee shall not be obligated to monitor or confirm, on
a continuing basis or otherwise, the Issuer's compliance with the covenants
contained in this subsection or with respect to reports or other documents filed
under the Indenture; provided, however, that nothing herein shall relieve the
Trustee of any obligations to monitor the Issuer's timely delivery of all
reports and certificates required under Sections 703 and 1005 of the Indenture
and to fulfill its obligations under Article Six of the Indenture.
(15) Upon the consummation of the Exchange Offer or the effectiveness of
the Shelf Registration Statement, as the case may be, whether or not required by
the rules and regulations of the Commission, so long as any 2005 Notes are
outstanding, the Operating Partnership will furnish to the Holders of 2005 Notes
(i) all quarterly and annual financial information that would be required to be
contained in a filing with the Commission on Forms 10-Q and 10-K if the
Operating Partnership were required to file such Forms, including a
"Management's Discussion and Analysis of Financial Condition and Results of
Operations" that describes the financial condition and results of operations of
the Operating Partnership and its consolidated Subsidiaries and, with respect to
the annual information only, a report thereon by the Operating Partnership's
certified independent accountants and (ii) all current reports that would be
required to be filed with the Commission on Form 8-K if the Operating
Partnership were required to file such reports. In addition, whether or not
required by the rules and regulations of the Commission, the Operating
Partnership will file a copy of all such information and reports with the
Commission for public availability (unless the Commission will not accept such a
filing) and make such information available to securities analysts and
prospective investors upon request. In addition, the Operating Partnership will
agree that, for so long as 2005 Notes remain outstanding, it will furnish to the
Holders and to securities analysts and prospective investors, upon their
request, the information to be delivered pursuant to Rule 144A(d)(4) under the
Securities Act.
(16) The 2005 Notes shall be issuable only as Registered Securities in
permanent global form (without coupons). Beneficial owners of interests in the
permanent global 2005
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Notes may exchange such interests for 2005 Notes of like tenor or any authorized
form and denomination only in the manner provided in Section 305 of the
Indenture and Article II of this Supplemental Indenture. DTC shall be the
depository with respect to the permanent global 2005 Notes.
(17) The 2005 Notes shall not be issuable as Bearer Securities.
(18) Interest on any 2005 Note shall be payable only to the Person in
whose name that 2005 Note (or one or more predecessor 2005 Notes thereof) is
registered at the close of business on the Regular Record Date for such
interest.
(19) Sections 1402 and 1403 of the Indenture shall be applicable to the
2005 Notes.
(20) The 2005 Notes shall not be issuable in definitive form except
under the circumstances described in Section 201 hereof.
(21) Articles Sixteen and Seventeen of the Indenture shall not be
applicable to the 2005 Notes.
(22) The Issuer shall not pay Additional Amounts with respect to the
2005 Notes as contemplated by Section 1009 of the Indenture.
(23) The 2005 Notes shall not be subordinated to any other debt of the
Issuer, and shall constitute senior unsecured obligations of the Issuer.
(24) For all purposes, the Series A 2005 Notes and the Series B 2005
Notes shall be treated as one series of notes under the Indenture.
SECTION 102. EVENTS OF DEFAULT.
(1) The following events are "Events of Default":
(A) default for 30 days in the payment of any interest on the
2005 Notes;
(B) default in the payment of any principal of, premium, if any,
or any Make-Whole Amount on, or Liquidated Damages, if any, with respect to, any
2005 Notes when due;
(C) default in the performance of any other covenant or warranty
of the Issuer or the General Partner contained in the Indenture with respect to
the 2005 Notes, continued for 60 days after written notice as provided in
Section 501(4) of the Indenture;
(D) default under any bond, debenture, note, indenture or
instrument under which there may be issued or by which there may be secured or
evidenced any indebtedness for money borrowed (except for nonrecourse mortgage
indebtedness which individually or in the aggregate does not exceed $20,000,000)
by the Issuer or the General Partner (or by any Subsidiary, the repayment of
which the Issuer or the General Partner has guaranteed or for which the Issuer
or the General Partner is directly responsible or liable as obligor or
guarantor), having an aggregate principal amount outstanding of at least
$10,000,000, whether such indebtedness
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now exists or shall hereafter be created, which default shall have resulted in
such indebtedness 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 written notice to the Issuer or
the General Partner, as the case may be, as provided in Section 501(5) of the
Indenture;
(E) the entry by a court of competent jurisdiction of one or more
judgments, orders or decrees against the Issuer or any Subsidiary in an
aggregate amount (excluding amounts covered by insurance) in excess of
$10,000,000 and such judgments, orders or decrees remain undischarged, unstayed
and unsatisfied in an aggregate amount (excluding amounts covered by insurance)
in excess of $10,000,000 for a period of 30 consecutive days; and
(F) the Issuer or any Significant Subsidiary pursuant to or
within the meaning of any Bankruptcy Law:.
(i) commences a voluntary case,
(ii) consents to the entry of an order for relief
against it in an involuntary case,
(iii) consents to the appointment of a Custodian of it
for all or substantially all of its property, or
(iv) makes a general assignment for the benefit of its
creditors; or
(v) a court of competent jurisdiction enters an order or
decree under any Bankruptcy Law that:
(vi) is for relief against the Issuer or any Significant
Subsidiary in an involuntary case,
(vii) appoints a Custodian of the Issuer or any
Significant Subsidiary or for all or substantially all of either
of its property, or
(viii) orders the liquidation of the Issuer or any
Significant Subsidiary and the order or decree remains unstayed
and in effect for 90 days.
As used in this Section 102, 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. If an Event of Default specified in
clause (F) or (G) above relating to the Issuer or the General Partner or any
Significant Subsidiary occurs, the principal amount of, Liquidated Damages, if
any, and the Make-Whole Amount, on all outstanding 2005 Notes shall become
automatically due and payable without any declaration or other act on the part
of the Trustee or of the Holders.
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SECTION 103. FORM OF 2005 NOTES.
(1) The form of the 2005 Note is attached hereto as Exhibit A-1 and
Exhibit A-2.
(2) Legends. The following legends shall appear on the face of all
Global Notes (defined below) issued under this First Supplemental Indenture.
(A) "Private Placement Legend"
(i) Except as permitted by subparagraph (ii) below, each
Global Note (and all Notes issued in exchange therefor or
substitution thereof) shall bear a legend in substantially the
following form:
"THE SECURITY (OR ITS PREDECESSOR) EVIDENCED HEREBY WAS ORIGINALLY
ISSUED IN A TRANSACTION EXEMPT FROM REGISTRATION UNDER SECTION 5 OF THE
UNITED STATES SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES ACT"),
AND THE SECURITY EVIDENCED HEREBY MAY NOT BE OFFERED, SOLD, OR OTHERWISE
TRANSFERRED IN THE ABSENCE OF SUCH REGISTRATION OR AN APPLICABLE
EXEMPTION THEREFROM. EACH PURCHASER OF THE SECURITY EVIDENCED HEREBY IS
HEREBY NOTIFIED THAT THE SELLER MAY BE RELYING ON THE EXEMPTION FROM THE
PROVISIONS OF SECTION 5 OF THE SECURITIES ACT PROVIDED BY RULE 144A
THEREUNDER. THE HOLDER OF THE SECURITY EVIDENCED HEREBY AGREES FOR THE
BENEFIT OF THE ISSUER THAT (A) SUCH SECURITY MAY BE RESOLD, PLEDGED OR
OTHERWISE TRANSFERRED, ONLY (1) TO THE ISSUER, (2) PURSUANT TO A
REGISTRATION STATEMENT WHICH HAS BEEN DECLARED EFFECTIVE UNDER THE
SECURITIES ACT, (3) TO A PERSON IT REASONABLY BELIEVES IS A "QUALIFIED
INSTITUTIONAL BUYER" AS DEFINED IN RULE 144A IN A TRANSACTION MEETING
THE REQUIREMENTS OF RULE 144A, (4) PURSUANT TO OFFERS AND SALES TO
NON-U.S. PERSONS THAT OCCUR OUTSIDE THE UNITED STATES IN A TRANSACTION
MEETING THE REQUIREMENTS OF RULE 904 OF REGULATION S UNDER THE
SECURITIES ACT, (5) TO AN INSTITUTIONAL "ACCREDITED INVESTOR" (AS
DEFINED IN RULE 501 (A)(1), (2), (3) OR (7) OF REGULATION D UNDER THE
SECURITIES ACT (AN "IAI") THAT, PRIOR TO SUCH TRANSFER, FURNISHES TO THE
TRUSTEE A SIGNED LETTER CONTAINING CERTAIN REPRESENTATIONS AND
AGREEMENTS RELATING TO THE TRANSFER OF THIS SECURITY (THE FORM OF WHICH
LETTER CAN BE OBTAINED FROM THE TRUSTEE OR TRANSFER AGENT) OR (6)
PURSUANT TO ANY OTHER AVAILABLE EXEMPTION FROM THE REGISTRATION
REQUIREMENTS UNDER THE SECURITIES ACT (AND BASED ON AN OPINION OF
COUNSEL IF THE ISSUER SO REQUESTS), SUBJECT IN EACH OF THE FOREGOING
CASES TO APPLICABLE SECURITIES LAWS OF ANY STATE OF THE UNITED STATES OR
ANY
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OTHER APPLICABLE JURISDICTION AND (B) THE HOLDER WILL, AND EACH
SUBSEQUENT HOLDER IS REQUIRED TO NOTIFY ANY PURCHASER FROM IT OF THE
SECURITY EVIDENCED HEREBY OF THE RESALE RESTRICTIONS SET FORTH IN (A)
ABOVE."
(ii) Notwithstanding the foregoing, any Unrestricted
Global Note (defined below) issued in the Exchange Offer (and
all Notes issued in exchange therefor or substitution thereof)
shall not bear the Private Placement Legend.
(B) "Global Note Legend." Each Global Note shall bear a legend in
substantially the following form:
"THIS GLOBAL NOTE IS HELD BY THE DEPOSITARY (AS DEFINED IN THE INDENTURE
GOVERNING THIS NOTE) OR ITS NOMINEE IN CUSTODY FOR THE BENEFIT OF THE
BENEFICIAL OWNERS HEREOF, AND IS NOT TRANSFERABLE TO ANY PERSON UNDER
ANY CIRCUMSTANCES EXCEPT THAT (I) THE TRUSTEE MAY MAKE SUCH NOTATIONS
HEREON AS MAY BE REQUIRED PURSUANT TO SECTION 305 OF THE INDENTURE, (II)
THIS GLOBAL NOTE MAY BE EXCHANGED IN WHOLE BUT NOT IN PART PURSUANT TO
SECTION 305 OF THE INDENTURE, (III) THIS GLOBAL NOTE MAY BE DELIVERED TO
THE TRUSTEE FOR CANCELLATION PURSUANT TO SECTION 309 OF THE INDENTURE
AND (IV) THIS GLOBAL NOTE MAY BE TRANSFERRED TO A SUCCESSOR DEPOSITARY
WITH THE PRIOR WRITTEN CONSENT OF THE COMPANY."
(C) "Regulation S Temporary Global Note Legend." The Regulation S
Temporary Global Note (defined below) shall bear a legend in substantially the
following form:
"THE RIGHTS ATTACHING TO THIS REGULATION S TEMPORARY GLOBAL NOTE, AND
THE CONDITIONS AND PROCEDURES GOVERNING ITS EXCHANGE FOR CERTIFICATED
NOTES, ARE AS SPECIFIED IN THE INDENTURE (AS DEFINED HEREIN). NEITHER
THE HOLDER NOR THE BENEFICIAL OWNERS OF THIS REGULATION S TEMPORARY
GLOBAL NOTE SHALL BE ENTITLED TO RECEIVE PAYMENT OF INTEREST HEREON."
ARTICLE II
TRANSFER AND EXCHANGE
SECTION 201. GENERAL
(1) Transfer and Exchange of Global Notes. A Global Note may not be
transferred as a whole except by the Depositary to a nominee of the Depositary,
by a nominee of the Depositary to the Depositary or to another nominee of the
Depositary, or by the Depositary or any such nominee to a successor Depositary
or a nominee of such successor Depositary. All Global Notes will be exchanged by
the Issuer for Definitive Notes if (i) the Issuer delivers to the
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Trustee notice from the Depositary that it is unwilling or unable to continue to
act as Depositary or that it is no longer a clearing agency registered under the
Exchange Act and, in either case, a successor Depositary is not appointed by the
Issuer within 120 days after the date of such notice from the Depositary or (ii)
the Issuer in its sole discretion determines that the Global Notes (in whole but
not in part) should be exchanged for Definitive Notes and delivers a written
notice to such effect to the Trustee; provided that in no event shall the
Regulation S Temporary Global Note be exchanged by the Issuer for Definitive
Notes prior to (x) the expiration of the Restricted Period (defined below) and
(y) the receipt by the Registrar of any certificates required pursuant to Rule
903 under the Securities Act, it being understood that the Registrar shall have
no duty or obligation to verify that any such certificate received by it
complies with the requirements of such rule. Global Notes also may be exchanged
or replaced, in whole or in part, as provided in Sections 306 and 309 of the
Indenture.
(2) Transfer and Exchange of Beneficial Interests in the Global Notes.
The transfer and exchange of beneficial interests in the Global Notes shall be
effected through the Depositary, in accordance with the provisions of the
Indenture and the Supplemental Indenture and the Applicable Procedures (defined
below). Beneficial interests in the Restricted Global Notes shall be subject to
restrictions on transfer comparable to those set forth herein to the extent
required by the Securities Act. Transfers of beneficial interests in the Global
Notes also shall require compliance with either subparagraph (A) or (B) below,
as applicable, as well as one or more of the other following subparagraphs as
applicable:
(A) Transfer of Beneficial Interests in the Same Global Note.
Beneficial interests in any Restricted Global Note may be transferred to Persons
who take delivery thereof in the form of a beneficial interest in the same
Restricted Global Note in accordance with the transfer restrictions set forth in
the Private Placement Legend; provided, however, that prior to the expiration of
the Restricted Period transfers of beneficial interests in the Regulation S
Temporary Global Note may not be made to a U.S. Person or for the account or
benefit of a U.S. Person (other than an Initial Purchaser). Beneficial interests
in any Unrestricted Global Note may be transferred only to Persons who take
delivery thereof in the form of a beneficial interest in an Unrestricted Global
Note. No written orders or instructions shall be required to be delivered to the
Registrar to effect the transfers described in this Section 201(2)(A).
(B) All Other Transfers and Exchanges of Beneficial Interests in
Global Notes. In connection with all transfers and exchanges of beneficial
interests (other than a transfer of a beneficial interest in a Global Note to a
Person who takes delivery thereof in the form of a beneficial interest in the
same Global Note), the transferor of such beneficial interest must deliver to
the Registrar either (A) (1) a written order from a Participant (defined below)
or an Indirect Participant (defined below) given to the Depositary in accordance
with the Applicable Procedures directing the Depositary to credit or cause to be
credited a beneficial interest in another Global Note in an amount equal to the
beneficial interest to be transferred or exchanged and (2) instructions given in
accordance with the Applicable Procedures containing information regarding the
Participant account to be credited with such increase or (B) (1) a written order
from a Participant or an Indirect Participant given to the Depositary in
accordance with the Applicable Procedures directing the Depositary to cause to
be issued a Definitive Note in an amount equal to the beneficial interest to be
transferred or exchanged and (2) instructions given by the Depositary to the
Registrar containing information regarding the Person in whose
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name such Definitive Note shall be registered to effect the transfer or exchange
referred to in (1) above; provided that in no event shall Definitive Notes be
issued upon the transfer or exchange of beneficial interests in the Regulation S
Temporary Global Note prior to (x) the expiration of the Restricted Period and
(y) the receipt by the Registrar of any certificates required pursuant to Rule
903 under the Securities Act, it being understood that the Registrar shall have
no duty or obligation to verify that any such certificate received by it
complies with the requirements of such rule. Upon an Exchange Offer by the
Company in accordance with Section 202 hereof, the requirements of this Section
201(2)(B) shall be deemed to have been satisfied upon receipt by the Registrar
of the instructions contained in the Letter of Transmittal (defined below)
delivered by the Holder of such beneficial interests in the Restricted Global
Notes. Upon satisfaction of all of the requirements for transfer or exchange of
beneficial interests in Global Notes contained in this Supplemental Indenture,
the Notes and otherwise applicable under the Securities Act, the Trustee shall
adjust the principal amount of the relevant Global Note(s) pursuant to Section
201(6) hereof.
(C) Transfer of Beneficial Interests to Another Restricted Global
Note. A beneficial interest in any Restricted Global Note may be transferred to
a Person who takes delivery thereof in the form of a beneficial interest in
another Restricted Global Note if the transfer complies with the requirements of
clause (B) above and the Registrar receives the following:
(i) if the transferee will take delivery in the form of
a beneficial interest in the 144A Global Note (defined below),
then the transferor must deliver a certificate in the form of
Exhibit B hereto, including the certifications in item (1)
thereof; and
(ii) if the transferee will take delivery in the form of
a beneficial interest in the Regulation S Temporary Global Note
or the Regulation S Global Note, then the transferor must
deliver a certificate in the form of Exhibit B hereto, including
the certifications in item (2) thereof.
(iii) if the transferee will take delivery in the form
of a beneficial interest in the IAI Global Note, then the
transferor must deliver (x) a certificate in the form of Exhibit
B hereto, including the certifications and certificates and
Opinion Counsel required by item (3) thereof, if applicable.
(D) Transfer and Exchange of Beneficial Interests in a Restricted
Global Note for Beneficial Interests in the Unrestricted Global Note. A
beneficial interest in any Restricted Global Note may be exchanged by any holder
thereof for a beneficial interest in an Unrestricted Global Note or transferred
to a Person who takes delivery thereof in the form of a beneficial interest in
an Unrestricted Global Note if the exchange or transfer complies with the
requirements of clause (B) above and:
(i) such exchange or transfer is effected pursuant to
the Exchange Offer in accordance with the Registration Rights
Agreement and the holder of the beneficial interest to be
transferred, in the case of an exchange, or the transferee, in
the case of a transfer, is not (1) a broker-dealer, (2) a Person
participating in the
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distribution of the Exchange Notes or (3) a Person who is an
affiliate (as defined in Rule 144) of the Company;
(ii) any such transfer is effected pursuant to the Shelf
Registration Statement in accordance with the Registration
Rights Agreement;
(iii) any such transfer is effected by a Restricted
Broker-Dealer pursuant to the Exchange Offer Registration
Statement in accordance with the Registration Rights Agreement;
or
(iv) the Registrar receives the following:
(a) if the holder of such beneficial interest in
a Restricted Global Note proposes to exchange such
beneficial interest for a beneficial interest in an
Unrestricted Global Note, a certificate from such holder
in the form of Exhibit C hereto, including the
certifications in item (1)(a) thereof;
(b) if the holder of such beneficial interest in
a Restricted Global Note proposes to transfer such
beneficial interest to a Person who shall take delivery
thereof in the form of a beneficial interest in an
Unrestricted Global Note, a certificate from such holder
in the form of Exhibit B hereto, including the
certifications in item (4) thereof; and
(c) in each such case set forth in this
subparagraph (iv), an Opinion of Counsel in form
reasonably acceptable to the Issuer to the effect that
such exchange or transfer is in compliance with the
Securities Act and that the restrictions on transfer
contained herein and in the Private Placement Legend are
not required in order to maintain compliance with the
Securities Act.
If any such transfer is effected pursuant to subparagraph (ii) or
(iv) above at a time when an Unrestricted Global Note has not yet been
issued, the Company shall issue and, upon receipt of an authentication
order in accordance with Section 202 of the Indenture, the Trustee shall
authenticate one or more Unrestricted Global Notes in an aggregate
principal amount equal to the principal amount of beneficial interests
transferred pursuant to subparagraph (ii) or (iv) above.
Beneficial interests in an Unrestricted Global Note cannot be
exchanged for, or transferred to Persons who take delivery thereof in
the form of, a beneficial interest in a Restricted Global Note.
(3) Transfer or Exchange of Beneficial Interests for Definitive Notes.
(A) If any holder of a beneficial interest in a Restricted Global
Note proposes to exchange such beneficial interest for a Definitive Note or to
transfer such beneficial interest to a Person who takes delivery thereof in the
form of a Definitive Note, then, upon receipt by the Registrar of the following
documentation:
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(i) if the holder of such beneficial interest in a
Restricted Global Note proposes to exchange such beneficial
interest for a Definitive Note, a certificate from such holder
in the form of Exhibit C hereto, including the certifications in
item (2)(a) thereof;
(ii) if such beneficial interest is being transferred to
a QIB in accordance with Rule 144A under the Securities Act, a
certificate to the effect set forth in Exhibit B hereto,
including the certifications in item (1) thereof;
(iii) if such beneficial interest is being transferred
to a Non-U.S. Person in an offshore transaction in accordance
with Rule 903 or Rule 904 under the Securities Act, a
certificate to the effect set forth in Exhibit B hereto,
including the certifications in item (2) thereof;
(iv) if such beneficial interest is being transferred
pursuant to an exemption from the registration requirements of
the Securities Act in accordance with Rule 144 under the
Securities Act, a certificate to the effect set forth in Exhibit
B hereto, including the certifications in item (3)(a) thereof;
(v) if such beneficial interest is being transferred to
an Institutional Accredited Investor in reliance on an exemption
from the registration requirements of the Securities Act other
than those listed in subparagraphs (ii) through (iv) above, a
certificate to the effect set forth in Exhibit B hereto,
including the certifications, certificates and Opinion of
Counsel required by item (3) thereof, if applicable;
(vi) if such beneficial interest is being transferred to
the Issuer or any of its Subsidiaries, a certificate to the
effect set forth in Exhibit B hereto, including the
certifications in item (3)(b) thereof; or
(vii) if such beneficial interest is being transferred
pursuant to an effective registration statement under the
Securities Act, a certificate to the effect set forth in Exhibit
B hereto, including the certifications in item (3)(c) thereof,
the Trustee shall cause the aggregate principal amount of the applicable
Global Note to be reduced accordingly pursuant to Section 201(6) hereof,
and the Issuer shall execute and the Trustee shall authenticate and
deliver to the Person designated in the instructions a Definitive Note
in the appropriate principal amount. Any Definitive Note issued in
exchange for a beneficial interest in a Restricted Global Note pursuant
to this Section 201(3) shall be registered in such name or names and in
such authorized denomination or denominations as the holder of such
beneficial interest shall instruct the Registrar through instructions
from the Depositary and the Participant or Indirect Participant. The
Trustee shall deliver such Definitive Notes to the Persons in whose
names such Notes are so registered. Any Definitive Note issued in
exchange for a beneficial interest in a Restricted Global Note pursuant
to this Section 201(3)(A) shall bear the Private Placement Legend and
shall be subject to all restrictions on transfer contained therein.
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(B) Notwithstanding Sections 201(3)(A)(i) and (iii) hereof, a
beneficial interest in the Regulation S Temporary Global Note may not be (A)
exchanged for a Definitive Note prior to (x) the expiration of the Restricted
Period and (y) the receipt by the Registrar of any certificates required
pursuant to Rule 903(c)(3)(B) under the Securities Act or (B) transferred to a
Person who takes delivery thereof in the form of a Definitive Note prior to the
conditions set forth in clause (i) above or unless the transfer is pursuant to
an exemption from the registration requirements of the Securities Act other than
Rule 903 or Rule 904.
(C) Notwithstanding Section 201(3)(A) hereof, a holder of a
beneficial interest in a Restricted Global Note may exchange such beneficial
interest for an Unrestricted Definitive Note or may transfer such beneficial
interest to a Person who takes delivery thereof in the form of an Unrestricted
Definitive Note only if:
(i) such exchange or transfer is effected pursuant to
the Exchange Offer in accordance with the Registration Rights
Agreement and the holder of such beneficial interest, in the
case of an exchange, or the transferee, in the case of a
transfer, is not (1) a broker-dealer, (2) a Person participating
in the distribution of the Exchange Notes or (3) a Person who is
an affiliate (as defined in Rule 144) of the Company;
(ii) any such transfer is effected pursuant to the Shelf
Registration Statement in accordance with the Registration
Rights Agreement;
(iii) any such transfer is effected by a Restricted
Broker-Dealer pursuant to the Exchange Offer Registration
Statement in accordance with the Registration Rights Agreement;
or
(iv) the Registrar receives the following:
(v) if the holder of such beneficial interest in a
Restricted Global Note proposes to exchange such beneficial
interest for a Definitive Note that does not bear the Private
Placement Legend, a certificate from such holder in the form of
Exhibit C hereto, including the certifications in item (1)(b)
thereof;
(vi) if the holder of such beneficial interest in a
Restricted Global Note proposes to transfer such beneficial
interest to a Person who shall take delivery thereof in the form
of a Definitive Note that does not bear the Private Placement
Legend, a certificate from such holder in the form of Exhibit B
hereto, including the certifications in item (4) thereof; and
(vii) in each such case set forth in this subparagraph
(iv), an Opinion of Counsel in form reasonably acceptable to the
Issuer, to the effect that such exchange or transfer is in
compliance with the Securities Act and that the restrictions on
transfer contained herein and in the Private Placement Legend
are not required in order to maintain compliance with the
Securities Act.
(viii) If any holder of a beneficial interest in an
Unrestricted Global Note proposes to exchange such beneficial
interest for a Definitive Note or to transfer
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such beneficial interest to a Person who takes delivery thereof
in the form of a Definitive Note, then, upon satisfaction of the
conditions set forth in Section 201(2)(C) hereof, the Trustee
shall cause the aggregate principal amount of the applicable
Global Note to be reduced accordingly pursuant to Section 201(6)
hereof, and the Issuer shall execute and the Trustee shall
authenticate and deliver to the Person designated in the
instructions a Definitive Note in the appropriate principal
amount. Any Definitive Note issued in exchange for a beneficial
interest pursuant to this Section 201(3)(D) shall be registered
in such name or names and in such authorized denomination or
denominations as the holder of such beneficial interest shall
instruct the Registrar through instructions from the Depositary
and the Participant or Indirect Participant. The Trustee shall
deliver such Definitive Notes to the Persons in whose names such
Notes are so registered. Any Definitive Note issued in exchange
for a beneficial interest pursuant to this section 201(3)(D)
shall not bear the Private Placement Legend. A beneficial
interest in an Unrestricted Global Note cannot be exchanged for
a Definitive Note bearing the Private Placement Legend or
transferred to a Person who takes delivery thereof in the form
of a Definitive Note bearing the Private Placement Legend.
(ix) Transfer and Exchange of Definitive Notes for
Beneficial Interests.
(x) If any Holder of a Restricted Definitive Note
proposes to exchange such Note for a beneficial interest in a
Restricted Global Note or to transfer such Definitive Notes to a
Person who takes delivery thereof in the form of a beneficial
interest in a Restricted Global Note, then, upon receipt by the
Registrar of the following documentation:
(xi) if the Holder of such Restricted Definitive Note
proposes to exchange such Note for a beneficial interest in a
Restricted Global Note, a certificate from such Holder in the
form of Exhibit C hereto, including the certifications in item
(2)(b) thereof;
(xii) if such Definitive Note is being transferred to a
QIB in accordance with Rule 144A under the Securities Act, a
certificate to the effect set forth in Exhibit B hereto,
including the certifications in item (1) thereof;
(xiii) if such Definitive Note is being transferred to a
Non-U.S. Person in an offshore transaction in accordance with
Rule 903 or Rule 904 under the Securities Act, a certificate to
the effect set forth in Exhibit B hereto, including the
certifications in item (2) thereof;
(xiv) if such Definitive Note is being transferred
pursuant to an exemption from the registration requirements of
the Securities Act in accordance with Rule 144 under the
Securities Act, a certificate to the effect set forth in Exhibit
B hereto, including the certifications in item (3)(a) thereof;
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(xv) if such Definitive Note is being transferred to an
Institutional Accredited Investor in reliance on an exemption
from the registration requirements of the Securities Act other
than those listed in subparagraphs (B) through (D) above, a
certificate to the effect set forth in Exhibit B hereto,
including the certifications, certificates and Opinion of
Counsel required by item (3) thereof, if applicable;
(xvi) if such Definitive Note is being transferred to
the Issuer or any of its Subsidiaries, a certificate to the
effect set forth in Exhibit B hereto, including the
certifications in item (3)(b) thereof; or
(xvii) if such Definitive Note is being transferred
pursuant to an effective registration statement under the
Securities Act, a certificate to the effect set forth in Exhibit
B hereto, including the certifications in item (3)(c) thereof,
the Trustee shall cancel the Definitive Note, increase or cause
to be increased the aggregate principal amount of, in the case
of clause (i) above, the appropriate Restricted Global Note, in
the case of clause (ii) above, the 144A Global Note, in the case
of clause (iii) above, and the Regulation S Global Note and in
all other cases, the IAI Global Note.
(D) A Holder of a Restricted Definitive Note may exchange such
Note for a beneficial interest in an Unrestricted Global Note or transfer such
Restricted Definitive Note to a Person who takes delivery thereof in the form of
a beneficial interest in an Unrestricted Global Note only if:
(i) such exchange or transfer is effected pursuant to
the Exchange Offer in accordance with the Registration Rights
Agreement and the Holder, in the case of an exchange, or the
transferee, in the case of a transfer, is not (1) a
broker-dealer, (2) a Person participating in the distribution of
the Exchange Notes or (3) a Person who is an affiliate (as
defined in Rule 144) of the Company;
(ii) any such transfer is effected pursuant to the Shelf
Registration Statement in accordance with the Registration
Rights Agreement;
(iii) any such transfer is effected by a Restricted
Broker-Dealer pursuant to the Exchange Offer Registration
Statement in accordance with the Registration Rights Agreement;
or
(iv) the Registrar receives the following:
(a) if the Holder of such Definitive Notes
proposes to exchange such Notes for a beneficial
interest in the Unrestricted Global Note, a certificate
from such Holder in the form of Exhibit C hereto,
including the certifications in item (1)(c) thereof;
(b) if the Holder of such Definitive Notes
proposes to transfer such Notes to a Person who shall
take delivery thereof in the form of a beneficial
interest in the Unrestricted Global Note, a certificate
from
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such Holder in the form of Exhibit B hereto, including
the certifications in item (4) thereof; and
(c) in each such case set forth in this
subparagraph (iv), an Opinion of Counsel in form
reasonably acceptable to the Company to the effect that
such exchange or transfer is in compliance with the
Securities Act, that the restrictions on transfer
contained herein and in the Private Placement Legend are
not required in order to maintain compliance with the
Securities Act, and such Definitive Notes are being
exchanged or transferred in compliance with any
applicable blue sky securities laws of any State of the
United States.
Upon satisfaction of the conditions of any of the subparagraphs in this
Section 201(4)(B), the Trustee shall cancel the Definitive Notes and
increase or cause to be increased the aggregate principal amount of the
Unrestricted Global Note.
(E) A Holder of an Unrestricted Definitive Note may exchange such
Note for a beneficial interest in an Unrestricted Global Note or transfer such
Definitive Notes to a Person who takes delivery thereof in the form of a
beneficial interest in an Unrestricted Global Note at any time. Upon receipt of
a request for such an exchange or transfer, the Trustee shall cancel the
applicable Unrestricted Definitive Note and increase or cause to be increased
the aggregate principal amount of one of the Unrestricted Global Notes.
If any such exchange or transfer from a Definitive Note to a beneficial
interest is effected pursuant to subparagraphs (B)(ii), (B)(iv) or (C) above at
a time when an Unrestricted Global Note has not yet been issued, the Company
shall issue and, upon receipt of an authentication order in accordance with
Section 202 of the Indenture, the Trustee shall authenticate one or more
Unrestricted Global Notes in an aggregate principal amount equal to the
principal amount of beneficial interests transferred pursuant to subparagraphs
(B)(ii), (B)(iv) or (C) above.
(4) Transfer and Exchange of Definitive Notes for Definitive Notes. Upon
request by a Holder of Definitive Notes and such Holder's compliance with the
provisions of this Section 201(5), the Registrar shall register the transfer or
exchange of Definitive Notes. Prior to such registration of transfer or
exchange, the requesting Holder shall present or surrender to the Registrar the
Definitive Notes duly endorsed or accompanied by a written instruction of
transfer in form satisfactory to the Registrar duly executed by such Holder or
by his attorney, duly authorized in writing. In addition, the requesting Holder
shall provide any additional certifications, documents and information, as
applicable, pursuant to the provisions of this Section 201(5).
(A) Restricted Definitive Notes may be transferred to and
registered in the name of Persons who take delivery thereof if the Registrar
receives the following:
(i) if the transfer will be made pursuant to Rule 144A
under the Securities Act, then the transferor must deliver a
certificate in the form of Exhibit B hereto, including the
certifications in item (1) thereof;
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(ii) if the transfer will be made pursuant to Rule 903
or Rule 904, then the transferor must deliver a certificate in
the form of Exhibit B hereto, including the certifications in
item (2) thereof; and
(iii) if the transfer will be made pursuant to any other
exemption from the registration requirements of the Securities
Act, then the transferor must deliver (x) a certificate in the
form of Exhibit B hereto, including the certifications,
certificates and Opinion of Counsel required by item (3)
thereof, if applicable.
(B) Any Restricted Definitive Note may be exchanged by the Holder
thereof for an Unrestricted Definitive Note or transferred to a Person or
Persons who take delivery thereof in the form of an Unrestricted Definitive Note
if:
(i) such exchange or transfer is effected pursuant to
the Exchange Offer in accordance with the Registration Rights
Agreement and the Holder, in the case of an exchange, or the
transferee, in the case of a transfer, is not (1) a
broker-dealer, (2) a Person participating in the distribution of
the Exchange Notes or (3) a Person who is an affiliate (as
defined in Rule 144) of the Company;
(ii) any such transfer is effected pursuant to the Shelf
Registration Statement in accordance with the Registration
Rights Agreement;
(iii) any such transfer is effected by a Restricted
Broker-Dealer pursuant to the Exchange Offer Registration
Statement in accordance with the Registration Rights Agreement;
or
(iv) the Registrar receives the following:
(a) if the Holder of such Restricted Definitive
Notes proposes to exchange such Notes for an
Unrestricted Definitive Note, a certificate from such
Holder in the form of Exhibit C hereto, including the
certifications in item (1)(d) thereof;
(b) if the Holder of such Restricted Definitive
Notes proposes to transfer such Notes to a Person who
shall take delivery thereof in the form of an
Unrestricted Definitive Note, a certificate from such
Holder in the form of Exhibit B hereto, including the
certifications in item (4) thereof; and
(c) in each such case set forth in this
subparagraph (iv), an Opinion of Counsel in form
reasonably acceptable to the Issuer to the effect that
such exchange or transfer is in compliance with the
Securities Act, that the restrictions on transfer
contained herein and in the Private Placement Legend are
not required in order to maintain compliance with the
Securities Act, and such Restricted Definitive Note is
being exchanged or transferred in compliance with any
applicable blue sky securities laws of any State of the
United States.
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(C) A Holder of Unrestricted Definitive Notes may transfer such
Notes to a Person who takes delivery thereof in the form of an Unrestricted
Definitive Note. Upon receipt of a request for such a transfer, the Registrar
shall register the Unrestricted Definitive Notes pursuant to the instructions
from the Holder thereof. Unrestricted Definitive Notes cannot be exchanged for
or transferred to Persons who take delivery thereof in the form of a Restricted
Definitive Note.
(6) Cancellation and/or Adjustment of Global Notes. At such time as all
beneficial interests in a particular Global Note have been exchanged for
Definitive Notes or a particular Global Note has been redeemed, repurchased or
canceled in whole and not in part, each such Global Note shall be returned to or
retained and canceled by the Trustee in accordance with Section 309 of the
Indenture. At any time prior to such cancellation, if any beneficial interest in
a Global Note is exchanged for or transferred to a Person who will take delivery
thereof in the form of a beneficial interest in another Global Note or for
Definitive Notes, the principal amount of Notes represented by such Global Note
shall be reduced accordingly and an endorsement shall be made on such Global
Note, by the Trustee or by the Depositary at the direction of the Trustee, to
reflect such reduction; and if the beneficial interest is being exchanged for or
transferred to a Person who will take delivery thereof in the form of a
beneficial interest in another Global Note, such other Global Note shall be
increased accordingly and an endorsement shall be made on such Global Note, by
the Trustee or by the Depositary at the direction of the Trustee, to reflect
such increase.
SECTION 202. THE EXCHANGE OFFER.
(1) Upon the occurrence of the Exchange Offer in accordance with the
Registration Rights Agreement, the Issuer shall issue and, upon receipt of an
Issue Order, Opinion of Counsel, and Officers' Certificate in accordance with
Section 303 of the Indenture, the Trustee shall authenticate one or more
Unrestricted Global Notes in an aggregate principal amount equal to the
principal amount of the beneficial interests in the Restricted Global Notes
tendered for acceptance by persons that are not (x) broker-dealers, (y) Persons
participating in the distribution of the Exchange Notes or (z) Persons who are
affiliates (as defined in Rule 144 promulgated under the Securities Act of 1933,
as amended) of the Issuer and accepted for exchange in the Exchange Offer.
Concurrent with the issuance of such Unrestricted Global Notes, the Trustee
shall cause the aggregate principal amount of the applicable Restricted Global
Notes to be reduced accordingly.
(2) Prior to the issuance of any Exchange Notes in the Exchange Offer,
upon the Trustee's request, the Trustee shall receive an opinion from counsel
for the Issuer with respect to the following: the Series B Notes have been duly
authorized, executed and authenticated in accordance with the provisions of the
Indenture and delivered in exchange for the Series A Notes in accordance with
the Indenture and the Exchange Offer and are entitled to the benefits of the
Indenture and will be valid and binding obligations of the Issuer, enforceable
in accordance with their terms.
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As used herein:
"144A Global Note" means the global note in the form of Exhibit A-1
hereto bearing the Global Note Legend and the Private Placement Legend and
deposited with and registered in the name of the Depositary or its nominee that
will be issued in a denomination equal to the outstanding principal amount of
the Notes sold in reliance on Rule 144A.
"Applicable Procedures" means, with respect to any transfer or exchange
of or for beneficial interests in any Global Note, the rules and procedures of
the Depositary, Euroclear and Cedel that apply to such transfer or exchange.
"Definitive Note" means a certificated Note registered in the name of
the Holder thereof and issued in accordance with Section 2.06 hereof, in the
form of Exhibit A-1 hereto except that such Note shall not bear the Global Note
Legend and shall not have the "Schedule of Exchanges of Interests in the Global
Note" attached thereto.
"Exchange Notes" means the Series B 2005 Notes issued in the Exchange
Offer pursuant to the Registration Rights Agreement.
"Exchange Offer" has the meaning set forth in the Registration Rights
Agreement.
"Exchange Offer Registration Statement" has the meaning set forth in the
Registration Rights Agreement.
"Global Note Legend" means the legend set forth in Section 2.06(g)(ii),
which is required to be placed on all Global Notes issued under this Indenture.
"Global Notes" means, individually and collectively, each of the
Restricted Global Notes and the Unrestricted Global Notes, in the form of
Exhibits A-1 and A-2 hereto.
"IAI Global Note" means the Global Note in the form of Exhibit A-1
hereto bearing the Global Note Legend and the Private Placement Legend and
deposited with or on behalf of and registered in the name of the Depositary or
its nominee that will be issued in a denomination equal to the outstanding
principal amount of the Notes sold to Institutional Accredited Investors.
"Indirect Participant" means a Person who holds a beneficial interest in
a Global Note through a Participant.
"Institutional Accredited Investor" means an institution that is an
"accredited investor" as defined in Rule 501(a)(1), (2), (3) or (7) under the
Securities Act.
"Letter of Transmittal" means the letter of transmittal to be prepared
by the Company and sent to all Holders of the Notes for use by such Holders in
connection with the Exchange Offer.
"Non-U.S. Person" means a person who is not a U.S. Person.
23
<PAGE> 120
"Participant" means, with respect to DTC, Euroclear or Cedel, a Person
who has an account with DTC, Euroclear or Cedel, respectively (and, with respect
to DTC, shall include Euroclear and Cedel).
"Private Placement Legend" means the legend set forth in Section
2.06(g)(i) to be placed on all Notes issued under this Indenture except where
otherwise permitted by the provisions of this Indenture.
"QIB" means a "qualified institutional buyer" as defined in Rule 144A.
"Regulation S Permanent Global Note" means a permanent global Note in
the form of Exhibit A-1 hereto bearing the Global Note Legend and the Private
Placement Legend and deposited with or on behalf of and registered in the name
of the Depositary or its nominee, issued in a denomination equal to the
outstanding principal amount of the Regulation S Temporary Global Note upon
expiration of the Restricted Period.
"Regulation S Temporary Global Note" means a temporary Global Note in
the Form of Exhibit A-2 hereto bearing the Global Note Legend and the Private
Placement Legend and deposited with or on behalf of and registered in the name
of the Depositary or its nominee, issued in a denomination equal to the
outstanding principal amount of the 2005 Notes initially sold in reliance on
Rule 903 of Regulation S promulgated under the Securities Act.
"Restricted Broker-Dealer" has the meaning set forth in the Registration
Rights Agreement.
"Restricted Definitive Note" means a Definitive Note bearing the Private
Placement Legend.
"Restricted Global Note" means a Global Note representing the Series A
2005 Notes bearing the Private Placement Legend.
"Rule 144" means Rule 144 promulgated under the Securities Act.
"Rule 144A" means Rule 144A promulgated under the Securities Act.
"Shelf Registration Statement" means the Shelf Registration Statement as
defined in the Registration Rights Agreement.
"Unrestricted Definitive Note" means one or more Definitive Notes that
do not bear and are not required to bear the Private Placement Legend.
"Unrestricted Global Note" means a permanent Global Note in the form of
Exhibit A-1 attached hereto that bears the Global Note Legend and that has the
"Schedule of Exchanges of Interests in the Global Note" attached thereto, that
is deposited with or on behalf of and registered in the name of the Depositary,
representing the Series B 2005 Notes that do not bear the Private Placement
Legend.
24
<PAGE> 121
ARTICLE III
MISCELLANEOUS
SECTION 301. DEFINITIONS. Capitalized terms used but not defined in this First
Supplemental Indenture shall have the meanings ascribed thereto
in the Indenture.
SECTION 302. CONFIRMATION OF INDENTURE. The Indenture, as heretofore
supplemented and amended by this First Supplemental Indenture, is
in all respects ratified and confirmed, and the Indenture, this
First Supplemental Indenture and all indentures supplemental
thereto shall be read, taken and construed as one and the same
instrument.
SECTION 303. CONCERNING THE TRUSTEE. The Trustee assumes no duties,
responsibilities or liabilities by reason of this First
Supplemental Indenture other than as set forth in the Indenture
and, in carrying out its responsibilities hereunder, shall have
all of the rights, protections and immunities which it possesses
under the Indenture.
SECTION 304. GOVERNING LAW. This First Supplemental Indenture, the Indenture
and the Securities shall be governed by and construed in
accordance with the law of the State of New York without giving
effect to any provisions thereof relating to conflicts of law.
SECTIO 305. SEPARABILITY. In case any provision in this First Supplemental
Indenture shall for any reason be held to be invalid, illegal or
unenforceable, the validity, legality and enforceability of the
remaining provisions shall not in any way be affected or impaired
thereby.
SECTION 306. COUNTERPARTS. This First Supplemental Indenture may be
executed in any number of counterparts each of which shall be an
original, but such counterparts shall together constitute but one
and the same instrument.
25
<PAGE> 122
IN WITNESS WHEREOF, the parties hereto have caused this First
Supplemental Indenture to be duly executed, and the corporate seal of the
General Partner to be hereunto affixed and attested, as of the day and year
first above written.
GLENBOROUGH PROPERTIES, L.P.
By: Glenborough Realty Trust Incorporated, as
General Partner
By:
-----------------------------------------
Name: Stephen R. Saul
Title: Executive Vice President
and Chief Financial Officer
(seal)
Attest:
By:
-----------------------------------------
Name: Frank E. Austin
Title: Secretary
GLENBOROUGH REALTY TRUST INCORPORATED
By:
-----------------------------------------
Name: Stephen R. Saul
Title: Executive Vice President
and Chief Financial Officer
(seal)
Attest:
By:
-----------------------------------------
Name: Frank E. Austin
Title: Secretary
CHASE MANHATTAN BANK AND
TRUST COMPANY, NATIONAL
ASSOCIATION, as Trustee
By:
-----------------------------------------
Name:
Title:
Attest:
By:
-----------------------------------------
Name:
Title:
<PAGE> 123
STATE OF )
COUNTY OF ) ss.:
On the ______ day of _______________, 1998, before me personally came
________________ to me known, who, being by me duly sworn, did depose and say
that he is the ____________________ of Glenborough Realty Trust Incorporated,
one of the entities described in and which executed the above instrument; that
he knows the corporate seal of said corporation; that the seal affixed to the
said instrument is such corporate seal; that it was so affixed by authority of
the corporation, and that he signed his name thereto by like authority.
- -------------------------------
<PAGE> 124
EXHIBIT A-1
(Face of Note)
================================================================================
CUSIP/CINS
% [Series A] [Series B] Senior Notes due 2005
No. 1 $
GLENBOROUGH PROPERTIES, L.P.
promises to pay to Cede & Co.
or registered assigns,
the principal sum of $
on March 2005
Interest Payment Dates: March 15 and September 15
Record Dates: March 1 and September 1
================================================================================
A-1-1
<PAGE> 125
IN WITNESS WHEREOF, the Issuer has caused this instrument to be duly
executed under the corporate seal of its General Partner this _____ day of
March, 1998.
GLENBOROUGH PROPERTIES, L.P.
By: Glenborough Realty Trust
Incorporated, as General Partner
By:
----------------------------------
Name:
Title:
(seal)
Attest:
By:
----------------------------------
Name:
Title:
This is one of the Notes
referred to in the
within-mentioned Indenture:
Chase Manhattan Bank and Trust Company,
National Association, as Trustee
By:
-----------------------------------
Authorized Signatory
A-1-2
<PAGE> 126
(Back of Note)
================================================================================
_____% [Series A] [Series B] Senior Notes due 2005
THIS GLOBAL NOTE IS HELD BY THE DEPOSITARY (AS DEFINED IN THE INDENTURE
GOVERNING THIS NOTE) OR ITS NOMINEE IN CUSTODY FOR THE BENEFIT OF THE BENEFICIAL
OWNERS HEREOF, AND IS NOT TRANSFERABLE TO ANY PERSON UNDER ANY CIRCUMSTANCES
EXCEPT THAT (I) THE TRUSTEE MAY MAKE SUCH NOTATIONS HEREON AS MAY BE REQUIRED
PURSUANT TO SECTION 305 OF THE INDENTURE, (II) THIS GLOBAL NOTE MAY BE EXCHANGED
IN WHOLE BUT NOT IN PART PURSUANT TO SECTION 305 OF THE INDENTURE, (III) THIS
GLOBAL NOTE MAY BE DELIVERED TO THE TRUSTEE FOR CANCELLATION PURSUANT TO SECTION
309 OF THE INDENTURE AND (IV) THIS GLOBAL NOTE MAY BE TRANSFERRED TO A SUCCESSOR
DEPOSITARY WITH THE PRIOR WRITTEN CONSENT OF THE ISSUER.
UNLESS AND UNTIL IT IS EXCHANGED IN WHOLE OR IN PART FOR NOTES IN DEFINITIVE
FORM, THIS NOTE MAY NOT BE TRANSFERRED EXCEPT AS A WHOLE BY THE DEPOSITARY TO A
NOMINEE OF THE DEPOSITARY OR BY A NOMINEE OF THE DEPOSITARY TO THE DEPOSITARY OR
ANOTHER NOMINEE OF THE DEPOSITARY OR BY THE DEPOSITARY OR ANY SUCH NOMINEE TO A
SUCCESSOR DEPOSITARY OR A NOMINEE OF SUCH SUCCESSOR DEPOSITARY. UNLESS THIS
CERTIFICATE IS PRESENTED BY AN AUTHORIZED REPRESENTATIVE OF THE DEPOSITORY TRUST
COMPANY (55 WATER STREET, NEW YORK, NEW YORK) ("DTC"), TO THE COMPANY OR ITS
AGENT FOR REGISTRATION OF TRANSFER, EXCHANGE OR PAYMENT, AND ANY CERTIFICATE
ISSUED IS REGISTERED IN THE NAME OF CEDE & CO. OR SUCH OTHER NAME AS MAY BE
REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF DTC (AND ANY PAYMENT IS MADE TO
CEDE & CO. OR SUCH OTHER ENTITY AS MAY BE 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.
THE SECURITY (OR ITS PREDECESSOR) EVIDENCED HEREBY WAS ORIGINALLY ISSUED IN A
TRANSACTION EXEMPT FROM REGISTRATION UNDER SECTION 5 OF THE UNITED STATES
SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES ACT"), AND THE SECURITY
EVIDENCED HEREBY MAY NOT BE OFFERED, SOLD, OR OTHERWISE TRANSFERRED IN THE
ABSENCE OF SUCH REGISTRATION OR AN APPLICABLE EXEMPTION THEREFROM. EACH
PURCHASER OF THE SECURITY EVIDENCED HEREBY IS HEREBY NOTIFIED THAT THE SELLER
MAY BE RELYING ON THE EXEMPTION FROM THE PROVISIONS OF SECTION 5 OF THE
SECURITIES ACT PROVIDED BY RULE 144A THEREUNDER. THE HOLDER OF THE SECURITY
EVIDENCED HEREBY AGREES FOR THE BENEFIT OF THE ISSUER THAT (A) SUCH SECURITY MAY
BE RESOLD, PLEDGED OR OTHERWISE TRANSFERRED, ONLY (1) TO THE ISSUER, (2)
PURSUANT TO A REGISTRATION STATEMENT WHICH HAS BEEN DECLARED EFFECTIVE UNDER THE
SECURITIES ACT, (3) TO A PERSON IT REASONABLY BELIEVES IS A "QUALIFIED
INSTITUTIONAL BUYER" AS DEFINED IN RULE 144A IN A TRANSACTION MEETING THE
REQUIREMENTS OF RULE 144A, (4) PURSUANT TO OFFERS AND SALES TO NON-U.S. PERSONS
THAT OCCUR OUTSIDE THE UNITED STATES IN A TRANSACTION MEETING THE REQUIREMENTS
OF RULE 904 OF REGULATION S UNDER THE SECURITIES ACT, (5) TO AN INSTITUTIONAL
"ACCREDITED INVESTOR" (AS DEFINED IN RULE 501 (A)(1), (2), (3) OR (7) OF
REGULATION D UNDER THE SECURITIES ACT (AN "IAI") THAT, PRIOR TO SUCH TRANSFER,
FURNISHES TO THE TRUSTEE A SIGNED LETTER CONTAINING CERTAIN
A-1-3
<PAGE> 127
REPRESENTATIONS AND AGREEMENTS RELATING TO THE TRANSFER OF THIS SECURITY (THE
FORM OF WHICH LETTER CAN BE OBTAINED FROM THE TRUSTEE OR TRANSFER AGENT) OR (6)
PURSUANT TO ANY OTHER AVAILABLE EXEMPTION FROM THE REGISTRATION REQUIREMENTS
UNDER THE SECURITIES ACT (AND BASED ON AN OPINION OF COUNSEL IF THE ISSUER SO
REQUESTS ), SUBJECT IN EACH OF THE FOREGOING CASES TO APPLICABLE SECURITIES LAWS
OF ANY STATE OF THE UNITED STATES OR ANY OTHER APPLICABLE JURISDICTION AND (B)
THE HOLDER WILL, AND EACH SUBSEQUENT HOLDER IS REQUIRED TO NOTIFY ANY PURCHASER
FROM IT OF THE SECURITY EVIDENCED HEREBY OF THE RESALE RESTRICTIONS SET FORTH IN
(A) ABOVE.
A-1-4
<PAGE> 128
Capitalized terms used herein shall have the meanings assigned to them in the
Indenture referred to below unless otherwise indicated.
1. INTEREST. Glenborough Properties, L.P., a California limited
partnership (the "Issuer"), promises to pay interest on the principal amount of
this Note at % per annum from the date hereof until maturity and shall pay the
Liquidated Damages, if any, payable pursuant to Section 5 of the Registration
Rights Agreement. Interest on the Notes will accrue at the rate of % per annum
and Liquidated Damages, if any, will be payable semi-annually in arrears on
March 15 and September 15 of each year, commencing on September 15, 1998, to
holders of record on the immediately preceding March 1 and September 1. Interest
on the Notes will accrue from the most recent date to which interest has been
paid or, if no interest has been paid, from the date of original issuance. The
Issuer shall pay interest (including post-petition interest in any proceeding
under any Bankruptcy Law) on overdue principal and premium, if any, from time to
time on demand at a rate that is 1% per annum in excess of the rate then in
effect; it shall pay interest (including post-petition interest in any
proceeding under any Bankruptcy Law) on overdue installments of interest and
Liquidated Damages (without regard to any applicable grace periods) from time to
time on demand at the same rate to the extent lawful. Interest will be computed
on the basis of a 360-day year comprised of twelve 30-day months.
2. METHOD OF PAYMENT. Principal, premium, if any, Liquidated Damages, if
any, and interest on the Notes will be payable at the office or agency of the
Issuer maintained for such purpose or, at the option of the Issuer, payment may
be made by check mailed to holders of the Notes at their respective addresses
set forth in the register of holders; provided that all payments with respect to
Notes the Holders of which have given wire transfer instructions to the Issuer
will be required to be made by wire transfer of immediately available funds to
the accounts specified by the Holders thereof. Until otherwise designated by the
Issuer, the Issuer's office or agency will be the office of the Trustee
maintained for such purpose in the Borough of Manhattan, The City of New York,
which currently is c/o The Chase Manhattan Bank, 55 Water Street, Room 234, and
at the Trustee's Corporate Trust Office at 101 California Street, Suite 2725,
San Francisco, California 94111. Such payment shall be in such coin or currency
of the United States of America as at the time of payment is legal tender for
payment of public and private debts.
3. PAYING AGENT AND REGISTRAR. Initially, Chase Manhattan Bank and Trust
Company, National Association, the Trustee under the Indenture, will act as
Paying Agent and Registrar. The Issuer may change any Paying Agent or Registrar
without notice to any Holder. The Issuer's general partner, Glenborough Realty
Trust Incorporated, a Maryland corporation (the "General Partner"), the Issuer
or any of their respective wholly owned subsidiaries may act in any such
capacity.
4. INDENTURE. The Issuer issued the Notes under an Indenture dated as of
March , 1998 and the First Supplemental Indenture thereto of even date
(collectively, the "Indenture"), each between the Issuer, the General Partner
and the Trustee. The terms of the Notes include those stated in the Indenture
and those made part of the Indenture by reference to the Trust Indenture Act of
1939, as amended (15 U.S. Code SectionSection 77aaa-77bbbb). The Notes are
subject to all such terms, and Holders are referred to the Indenture and such
Act for a statement of such terms. To the extent any provision of this Note
conflicts with the express provisions of the Indenture, the provisions of the
Indenture shall govern and be controlling. The Notes are obligations of the
Issuer limited to $150.0 million in aggregate principal amount plus amounts, if
any, issued to pay Liquidated Damages on outstanding Notes as set forth in
paragraph 2 hereof.
A-1-5
<PAGE> 129
5. OPTIONAL REDEMPTION.
(a) The Notes may be redeemed at any time at the option of the
Issuer, in whole or from time to time in part, at a redemption price (the
"Redemption Price") equal to the sum of (i) the principal amount of the Notes
(or portion thereof) being redeemed plus accrued interest thereon and Liquidated
Damages, if any, to the redemption date and (ii) the Make-Whole Amount, if any,
with respect to the Notes (or portion thereof).
(b) If notice has been given and funds for the redemption of any
Notes (or any portion thereof) called for redemption shall have been made
available on the redemption date referred to in such notice, such Notes (or any
portion thereof) will cease to bear interest on the date fixed for such
redemption specified in such notice and the only right of the Holders of such
Notes will be to receive payment of the Redemption Price.
6. MANDATORY REDEMPTION. The Issuer shall not be required to make
mandatory redemption payments with respect to the Notes.
7. NOTICE OF REDEMPTION.
(a) Notice of any redemption of any Notes (or any portion
thereof) will be given to Holders at their addresses, as shown in the Note
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 Notes held by such Holder to be
redeemed.
(b) The Issuer will notify the Trustee at least 45 days prior to
giving notice of redemption (or such shorter period as is satisfactory to the
Trustee) of the aggregate principal amount of such Notes to be redeemed and
their redemption date. If less than all of the Notes are to be redeemed at the
option of the Issuer, the Trustee shall select, in such manner as it shall deem
fair and appropriate, such Notes to be redeemed in whole or in part.
8. DENOMINATIONS, TRANSFER, EXCHANGE. The Notes are in registered form
without coupons in minimum denominations of $150,000 and integral multiples of
$1,000 in excess thereof. A holder of Notes may transfer or exchange Notes in
accordance with the Indenture. The Trustee may require a holder, among other
things, to furnish appropriate endorsements and transfer documents and the
Issuer may require a holder to pay any taxes and fees required by law or
permitted by the Indenture. The Issuer is not required to transfer or exchange
any Note selected for redemption. Also, the Issuer is not required to transfer
or exchange any Note for a period of 15 days before a selection of Notes to be
redeemed.
9. PERSONS DEEMED OWNERS. The registered Holder of a Note will be
treated as the owner of it for all purposes.
10. EVENTS OF DEFAULT, NOTICE AND WAIVER.
(a) The following events are "Events of Default": (i) default for
30 days in the payment of any interest or Liquidated Damages, if any, on the
Notes; (ii) default in the payment of any principal of, premium, if any, or any
Make-Whole Amount on any Notes when due; (iii) default in the performance of any
other covenant or warranty of the Issuer or the General Partner contained in the
Indenture with respect to the Notes, continued for 60 days after written notice
as provided in the Indenture; (iv) default under any bond, debenture, note,
indenture or instrument under which there may be
A-1-6
<PAGE> 130
issued or by which there may be secured or evidenced any indebtedness for money
borrowed (except for nonrecourse mortgage indebtedness which individually or in
the aggregate does not exceed $20,000,000) by the Issuer or the General Partner
(or by any Subsidiary, the repayment of which the Issuer or the General Partner
has guaranteed or for which the Issuer or the General Partner is directly
responsible or liable as obligor or guarantor), having an aggregate principal
amount outstanding of at least $10,000,000, whether such indebtedness now exists
or shall hereafter be created, which default shall have resulted in such
indebtedness 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 written notice to the Issuer or the General
Partner, as the case may be, as provided in the Indenture; (v) the entry by a
court of competent jurisdiction of one or more judgments, orders or decrees
against the Issuer or any Subsidiary in an aggregate amount (excluding amounts
covered by insurance) in excess of $10,000,000 and such judgments, orders or
decrees remain undischarged, unstayed and unsatisfied in an aggregate amount
(excluding amounts covered by insurance) in excess of $10,000,000 for a period
of 30 consecutive days; and (vi) certain events of bankruptcy, insolvency or
reorganization, or court appointment of a receiver, liquidator or trustee of the
Issuer or the General Partner or any Significant Subsidiary. The term
"Significant Subsidiary" has the meaning ascribed to such term in Regulation S-X
promulgated under the Securities Act. If an Event of Default specified in clause
(vi) above relating to the Issuer or the General Partner or any Significant
Subsidiary occurs, the principal amount of, and the Make-Whole Amount, on all
outstanding Notes shall become automatically due and payable without any
declaration or other act on the part of the Trustee or of the Holders.
(b) If an Event of Default occurs and is continuing, then in
every such case the Trustee or the Holders of not less than a majority in
principal amount of the then outstanding Notes may declare the principal amount
of all of the Notes to be due and payable immediately by written notice thereof
to the General Partner and the Issuer (and to the Trustee if given by the
Holders). However, any time after such a declaration of acceleration with
respect to the Notes has been made, but before a judgment or decree for payment
of the money due has been obtained by the Trustee, the Holders of not less then
a majority in principal amount of outstanding Notes may rescind and annul such
declaration and its consequences if (a) the Issuer shall have paid or deposited
with the Trustee all required payments of the principal of, premium, if any, and
interest on the Notes plus certain fees, expenses, disbursements and advances of
the Trustee and (b) all Events of Default, other than the nonpayment of
accelerated principal or interest with respect to the Notes have been cured or
waived as provided in the Indenture. The Indenture also provides that the
Holders of not less than a majority in principal amount of the outstanding Notes
may waive any past default with respect to such series and its consequences,
except a default (x) in the payment of the principal, premium, if any, or
interest on the Notes or (y) in respect of a covenant or provision contained in
the Indenture that cannot be modified or amended without the consent
of the Holder of each outstanding Note affected thereby.
(c) The Trustee is required under the Indenture to give notice to
the Holders of Notes within 90 days of a default under the Indenture; provided,
however, that the Trustee may withhold from the Holders of the Notes notice of
any default (except a default in the payment of the principal, premium, if any,
Liquidated Damages, if any, or interest on the Notes) if the Responsible
Officers of the Trustee consider such withholding to be in the interest of such
Holders.
(d) The Indenture provides that no Holders of the Notes may
institute any proceedings, judicial or otherwise, with respect to the Indenture
or for any remedy thereunder, except in the case of failure of the Trustee, for
60 days, to act after it has received a written request to institute proceedings
in respect of an Event of Default from the Holders of not less than a majority
in principal amount of the outstanding Notes, as well as an offer of reasonable
indemnity. This provision does not prevent, however, any Holder of Notes from
instituting suit for the enforcement of payment of the
A-1-7
<PAGE> 131
principal, premium, if any, Liquidated Damages, if any, and interest on such
Notes at the respective due date thereof.
(e) Subject to provisions in the Indenture relating to its duties
in case of default, the Trustee is under no obligation to exercise any of its
rights or powers under the Indenture at the request or direction of any Holders
of Notes then outstanding under the Indenture, unless such Holders shall have
offered to the Trustee reasonable security or indemnity. The Holders of not less
than a majority in principal amount of the outstanding Notes 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 of exercising any trust or power
conferred upon the Trustee. However, the Trustee may refuse to follow any
direction which is in conflict with any law or the Indenture, which may involve
the Trustee in personal liability or which may be unduly prejudicial to the
Holders of Notes not joining therein.
(f) Within 120 days after the close of each fiscal year, the
Issuer and the General Partner will deliver to the Trustee a certificate, signed
by one of several specified officers of the General Partner, stating whether or
not such officer has knowledge of any default under the Indenture and, if so,
specifying each such default and the nature and status thereof.
11. MODIFICATION OF THE INDENTURE.
(a) Modifications and amendments of provisions of the Indenture
may be made only with consent of the Holders of not less than a majority in
principal amount of the outstanding Notes; provided, however, that no such
modification or amendment may, without the consent of the Holder of each such
Notes affected thereby, (i) change the Maturity Date of the principal, premium,
if any, Liquidated Damages, if any, or interest on any such Notes; (ii) reduce
the principal amount of, or the rate or amount of interest on, or any premium
payable on redemption of, any such Notes, or adversely affect any right of
repayment of the Holder of any such Note; (iii) change the Place of Payment, or
the coin or currency, for payment of principal of, premium, if any, or interest
on any such Note; (iv) impair the right to institute suit for the enforcement of
any payment on or with respect to any such Note on or after the Maturity Date
thereof; (v) reduce the above-stated percentage of outstanding Notes necessary
to modify or amend the Indenture, to waive compliance with certain provisions
thereof or certain defaults and consequences thereunder or to reduce the quorum
or voting requirements set forth in the Indenture; or (vi) modify any of the
foregoing provisions or any of the provisions relating to the waiver of certain
past defaults or certain covenants, except to increase the required percentage
to effect such action or to provide that certain other provisions may not be
modified or waived without the consent of the Holder of such Note.
(b) The Holders of not less than a majority in principal amount
of outstanding Notes have the right to waive compliance by the Issuer or the
General Partner with certain covenants in the Indenture relating to such series.
(c) Modifications and amendments of the Indenture may be made by
the Issuer and the General Partner and the Trustee without the consent of any
Holder of Notes for any of the following purposes: (i) to evidence the
succession of another Person to the Issuer as obligor under the Indenture; (ii)
to add to the covenants of the Issuer and the General Partner for the benefit of
the Holders of the Notes or to surrender any right or power conferred upon the
Issuer or the General Partner in the Indenture; (iii) to add Events of Default
for the benefit of the Holders of the Notes; (iv) to add or change any
provisions of the Indenture to facilitate the issuance of the Notes in bearer
form, or to permit or facilitate the issuance of the Notes in uncertificated
form, provided that such action shall not adversely affect the interests of the
Holders of the Notes in any material respect; (v) to secure the Notes; (vi) to
provide for the acceptance of appointment by a successor Trustee or facilitate
the administration of the trust under the
A-1-8
<PAGE> 132
Indenture by more than one Trustee; (vii) to cure any ambiguity, defect or
inconsistency in the Indenture, provided that such action shall not adversely
affect the interests of Holders of the Notes in any material respect; and (viii)
to supplement any of the provisions of the Indenture to the extent necessary to
permit or facilitate defeasance and discharge of any series of such Notes,
provided that such action shall not adversely affect the interests of the
Holders of the Notes in any material respect.
12. RESTRICTIVE COVENANTS. The Indenture imposes certain limitations on
the ability of the Issuer or its subsidiaries to, among other things, incur
additional Debt, incur additional Secured Debt, merge or consolidate with any
other Person and sell, lease, transfer or otherwise dispose of all or
substantially all of its assets. The limitations are subject to a number of
important qualifications and exceptions. The Issuer will annually report to the
Trustee on compliance with such limitations.
13. ADDITIONAL RIGHTS OF HOLDERS OF RESTRICTED GLOBAL NOTES. In addition
to the rights provided to Holders of Notes under the Indenture, Holders of
Restricted Global Notes shall have all the rights set forth in the Registration
Rights Agreement.
14. ADDITIONAL INFORMATION. Anyone who receives this Note may obtain a
copy of the Indenture and/or the Registration Rights Agreement without charge by
writing to Glenborough Properties, L.P., 400 South El Camino Real, Suite 1100,
San Mateo, California 94402-1708, Attention: General Counsel.
15. TRUSTEE DEALINGS WITH ISSUER OR GENERAL PARTNER. The Trustee, in its
individual or any other capacity, may make loans to, accept deposits from, and
perform services for the General Partner, the Issuer or their Affiliates, and
may otherwise deal with the General Partner, the Issuer or their Affiliates, as
if it were not the Trustee.
16. NO RECOURSE AGAINST OTHERS. A director, officer, employee,
incorporator or stockholder, of the General Partner, as such, shall not have any
liability for any obligations of the General Partner or the Issuer under the
Indenture or the Notes or for any claim based on, in respect of, or by reason
of, such obligations or their creation. Each Holder by accepting a Note waives
and releases all such liability. The waiver and release are part of the
consideration for the issuance of the Notes.
17. AUTHENTICATION. This Note shall not be valid until authenticated by
the manual signature of the Trustee or an authenticating agent.
18. ABBREVIATIONS. Customary abbreviations may be used in the name of a
Holder or an assignee, such as: TEN COM (= tenants in common), TEN ENT (=
tenants by the entireties), JT TEN (= joint tenants with right of survivorship
and not as tenants in common), CUST (= Custodian), and U/G/M/A (= Uniform Gifts
to Minors Act).
19. CUSIP NUMBERS. Pursuant to a recommendation promulgated by the
Committee on Uniform Security Identification Procedures, the Issuer has caused
CUSIP numbers to be printed on the Notes and the Trustee may use CUSIP numbers
in notices of redemption as a convenience to Holders. No representation is made
as to the accuracy of such numbers either as printed on the Notes or as
contained in any notice of redemption and reliance may be placed only on the
other identification numbers placed thereon.
A-1-9
<PAGE> 133
ASSIGNMENT FORM
To assign this Note, fill in the form below: (I) or (we) assign
and transfer this Note to
- --------------------------------------------------------------------------------
(Insert assignee's soc. sec. or tax I.D. no.)
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
(Print or type assignee's name, address and zip code)
and irrevocably appoint________________________________________________________
to transfer this Note on the books of the Issuer. The agent may substitute
another to act for him.
- --------------------------------------------------------------------------------
Date:________________________
Your Signature: ______________________________
(Sign exactly as your name appears on the face
of this Note)
Signature Guarantee:
Signature(s) must be guaranteed by an
eligible guarantor institution (banks, stock
brokers, savings and loan associations and
credit unions with membership in an approved
signature guarantee medallion program)
pursuant to Securities and Exchange
Commission Rule 17 Ad-15.
A-1-10
<PAGE> 134
SCHEDULE OF EXCHANGES OF INTERESTS IN THE GLOBAL NOTE
The following exchanges of a part of this Global Note for an interest in
another Global Note, or exchanges of a part of another Global Note for an
interest in this Global Note, have been made:
<TABLE>
<CAPTION>
Amount of Principal Amount Signature of
Amount of decrease increase in of this Global Note authorized
Date of in Principal Amount Principal Amount following such signatory of
Exchange of this Global Note of this Global Note decrease (or increase) Trustee or Note Custodian
- -------- ------------------- ------------------- ---------------------- -------------------------
<S> <C> <C> <C> <C>
</TABLE>
A-1-11
<PAGE> 135
EXHIBIT A-2
(Face of Regulation S Temporary Global Note)
================================================================================
CUSIP/CINS
% [Series A] [Series B] Senior Notes due 2005
No. 1 $
GLENBOROUGH PROPERTIES, L.P.
promises to pay to Cede & Co.
or registered assigns,
the principal sum of $
on March , 2005
Interest Payment Dates: March 15 and September 15
Record Dates: March 1 and September 1
================================================================================
A-2-1
<PAGE> 136
IN WITNESS WHEREOF, the Issuer has caused this instrument to be
duly executed under the corporate seal of its General Partner this _____
day of March, 1998.
GLENBOROUGH PROPERTIES, L.P.
By: Glenborough Realty Trust
Incorporated, as General Partner
By: ___________________________
Name:
Title:
(seal)
Attest:
By: ___________________________
Name:
Title:
This is one of the Notes
referred to in the within-mentioned
Indenture:
Chase Manhattan Bank and Trust Company,
National Association, as Trustee
By:__________________________________
Authorized Signatory
A-2-2
<PAGE> 137
(Back of Regulation S Temporary Global Note)
_____% [Series A] [Series B] Senior Notes due 2005
THE RIGHTS ATTACHING TO THIS REGULATION S TEMPORARY GLOBAL NOTE, AND THE
CONDITIONS AND PROCEDURES GOVERNING ITS EXCHANGE FOR CERTIFICATED NOTES, ARE AS
SPECIFIED IN THE INDENTURE (AS DEFINED HEREIN). NEITHER THE HOLDER NOR THE
BENEFICIAL OWNERS OF THIS REGULATION S TEMPORARY GLOBAL NOTE SHALL BE ENTITLED
TO RECEIVE PAYMENT OF INTEREST HEREON.
THIS GLOBAL NOTE IS HELD BY THE DEPOSITARY (AS DEFINED IN THE INDENTURE
GOVERNING THIS NOTE) OR ITS NOMINEE IN CUSTODY FOR THE BENEFIT OF THE BENEFICIAL
OWNERS HEREOF, AND IS NOT TRANSFERABLE TO ANY PERSON UNDER ANY CIRCUMSTANCES
EXCEPT THAT (I) THE TRUSTEE MAY MAKE SUCH NOTATIONS HEREON AS MAY BE REQUIRED
PURSUANT TO SECTION 305 OF THE INDENTURE, (II) THIS GLOBAL NOTE MAY BE EXCHANGED
IN WHOLE BUT NOT IN PART PURSUANT TO SECTION 305 OF THE INDENTURE, (III) THIS
GLOBAL NOTE MAY BE DELIVERED TO THE TRUSTEE FOR CANCELLATION PURSUANT TO SECTION
309 OF THE INDENTURE AND (IV) THIS GLOBAL NOTE MAY BE TRANSFERRED TO A SUCCESSOR
DEPOSITARY WITH THE PRIOR WRITTEN CONSENT OF THE ISSUER.
UNLESS AND UNTIL IT IS EXCHANGED IN WHOLE OR IN PART FOR NOTES IN DEFINITIVE
FORM, THIS NOTE MAY NOT BE TRANSFERRED EXCEPT AS A WHOLE BY THE DEPOSITARY TO A
NOMINEE OF THE DEPOSITARY OR BY A NOMINEE OF THE DEPOSITARY TO THE DEPOSITARY OR
ANOTHER NOMINEE OF THE DEPOSITARY OR BY THE DEPOSITARY OR ANY SUCH NOMINEE TO A
SUCCESSOR DEPOSITARY OR A NOMINEE OF SUCH SUCCESSOR DEPOSITARY. UNLESS THIS
CERTIFICATE IS PRESENTED BY AN AUTHORIZED REPRESENTATIVE OF THE DEPOSITORY TRUST
COMPANY (55 WATER STREET, NEW YORK, NEW YORK) ("DTC"), TO THE COMPANY OR ITS
AGENT FOR REGISTRATION OF TRANSFER, EXCHANGE OR PAYMENT, AND ANY CERTIFICATE
ISSUED IS REGISTERED IN THE NAME OF CEDE & CO. OR SUCH OTHER NAME AS MAY BE
REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF DTC (AND ANY PAYMENT IS MADE TO
CEDE & CO. OR SUCH OTHER ENTITY AS MAY BE 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.
THE SECURITY (OR ITS PREDECESSOR) EVIDENCED HEREBY WAS ORIGINALLY ISSUED IN A
TRANSACTION EXEMPT FROM REGISTRATION UNDER SECTION 5 OF THE UNITED STATES
SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES ACT"), AND THE SECURITY
EVIDENCED HEREBY MAY NOT BE OFFERED, SOLD, OR OTHERWISE TRANSFERRED IN THE
ABSENCE OF SUCH REGISTRATION OR AN APPLICABLE EXEMPTION THEREFROM. EACH
PURCHASER OF THE SECURITY EVIDENCED HEREBY IS HEREBY NOTIFIED THAT THE SELLER
MAY BE RELYING ON THE EXEMPTION FROM THE PROVISIONS OF SECTION 5 OF THE
SECURITIES ACT PROVIDED BY RULE 144A THEREUNDER. THE HOLDER OF THE SECURITY
EVIDENCED HEREBY AGREES FOR THE BENEFIT OF THE ISSUER THAT (A) SUCH SECURITY MAY
BE RESOLD, PLEDGED OR OTHERWISE TRANSFERRED, ONLY (1) TO THE ISSUER, (2)
PURSUANT TO A REGISTRATION STATEMENT WHICH HAS BEEN DECLARED EFFECTIVE UNDER THE
SECURITIES ACT, (3) TO A PERSON IT REASONABLY BELIEVES IS A "QUALIFIED
INSTITUTIONAL BUYER" AS DEFINED IN RULE 144A IN A TRANSACTION MEETING THE
REQUIREMENTS OF RULE 144A, (4) PURSUANT TO OFFERS AND SALES TO NON-U.S. PERSONS
THAT OCCUR OUTSIDE THE UNITED STATES IN A TRANSACTION MEETING THE
A-2-3
<PAGE> 138
REQUIREMENTS OF RULE 904 OF REGULATION S UNDER THE SECURITIES ACT, (5) TO AN
INSTITUTIONAL "ACCREDITED INVESTOR" (AS DEFINED IN RULE 501 (A)(1), (2), (3) OR
(7) OF REGULATION D UNDER THE SECURITIES ACT (AN "IAI") THAT, PRIOR TO SUCH
TRANSFER, FURNISHES TO THE TRUSTEE A SIGNED LETTER CONTAINING CERTAIN
REPRESENTATIONS AND AGREEMENTS RELATING TO THE TRANSFER OF THIS SECURITY (THE
FORM OF WHICH LETTER CAN BE OBTAINED FROM THE TRUSTEE OR TRANSFER AGENT) OR (6)
PURSUANT TO ANY OTHER AVAILABLE EXEMPTION FROM THE REGISTRATION REQUIREMENTS
UNDER THE SECURITIES ACT (AND BASED ON AN OPINION OF COUNSEL IF THE ISSUER SO
REQUESTS ), SUBJECT IN EACH OF THE FOREGOING CASES TO APPLICABLE SECURITIES LAWS
OF ANY STATE OF THE UNITED STATES OR ANY OTHER APPLICABLE JURISDICTION AND (B)
THE HOLDER WILL, AND EACH SUBSEQUENT HOLDER IS REQUIRED TO NOTIFY ANY PURCHASER
FROM IT OF THE SECURITY EVIDENCED HEREBY OF THE RESALE RESTRICTIONS SET FORTH IN
(A) ABOVE.
A-2-4
<PAGE> 139
Capitalized terms used herein shall have the meanings assigned to them in the
Indenture referred to below unless otherwise indicated.
1. INTEREST. Glenborough Properties, L.P., a California limited
partnership (the "Issuer"), promises to pay interest on the principal amount of
this Note at % per annum from the date hereof until maturity and shall pay the
Liquidated Damages, if any, payable pursuant to Section 5 of the Registration
Rights Agreement. Interest on the Notes will accrue at the rate of % per annum
and Liquidated Damages, if any, will be payable semi-annually in arrears on
March 15 and September 15 of each year, commencing on September 15, 1998, to
holders of record on the immediately preceding March 1 and September 1. Interest
on the Notes will accrue from the most recent date to which interest has been
paid or, if no interest has been paid, from the date of original issuance. The
Issuer shall pay interest (including post-petition interest in any proceeding
under any Bankruptcy Law) on overdue principal and premium, if any, from time to
time on demand at a rate that is 1% per annum in excess of the rate then in
effect; it shall pay interest (including post-petition interest in any
proceeding under any Bankruptcy Law) on overdue installments of interest and
Liquidated Damages (without regard to any applicable grace periods) from time to
time on demand at the same rate to the extent lawful. Interest will be computed
on the basis of a 360-day year comprised of twelve 30-day months.
2. METHOD OF PAYMENT. Principal, premium, if any, Liquidated Damages, if
any, and interest on the Notes will be payable at the office or agency of the
Issuer maintained for such purpose or, at the option of the Issuer, payment may
be made by check mailed to holders of the Notes at their respective addresses
set forth in the register of holders; provided that all payments with respect to
Notes the Holders of which have given wire transfer instructions to the Issuer
will be required to be made by wire transfer of immediately available funds to
the accounts specified by the Holders thereof. Until otherwise designated by the
Issuer, the Issuer's office or agency will be the office of the Trustee
maintained for such purpose in the Borough of Manhattan, The City of New York,
which currently is c/o The Chase Manhattan Bank, 55 Water Street, Room 234, and
at the Trustee's Corporate Trust Office at 101 California Street, Suite 2725,
San Francisco, California 94111. Such payment shall be in such coin or currency
of the United States of America as at the time of payment is legal tender for
payment of public and private debts.
3. PAYING AGENT AND REGISTRAR. Initially, Chase Manhattan Bank and Trust
Company, National Association, the Trustee under the Indenture, will act as
Paying Agent and Registrar. The Issuer may change any Paying Agent or Registrar
without notice to any Holder. The Issuer's general partner, Glenborough Realty
Trust Incorporated, a Maryland corporation (the "General Partner"), the Issuer
or any of their respective wholly owned subsidiaries may act in any such
capacity.
4. INDENTURE. The Issuer issued the Notes under an Indenture dated as of
March, 1998 and the First Supplemental Indenture thereto of even date
(collectively, the "Indenture"), each between the Issuer, the General Partner
and the Trustee. The terms of the Notes include those stated in the Indenture
and those made part of the Indenture by reference to the Trust Indenture Act of
1939, as amended (15 U.S. Code Sections 77aaa-77bbbb). The Notes are subject to
all such terms, and Holders are referred to the Indenture and such Act for a
statement of such terms. To the extent any provision of this Note conflicts with
the express provisions of the Indenture, the provisions of the Indenture shall
govern and be controlling. The Notes are obligations of the Issuer limited to
$150.0 million in aggregate principal amount plus amounts, if any, issued to pay
Liquidated Damages on outstanding Notes as set forth in paragraph 2 hereof.
A-2-5
<PAGE> 140
5. OPTIONAL REDEMPTION.
(a) The Notes may be redeemed at any time at the option of the
Issuer, in whole or from time to time in part, at a redemption price (the
"Redemption Price") equal to the sum of (i) the principal amount of the Notes
(or portion thereof) being redeemed plus accrued interest thereon and Liquidated
Damages, if any, to the redemption date and (ii) the Make-Whole Amount, if any,
with respect to the Notes (or portion thereof).
(b) If notice has been given and funds for the redemption of any
Notes (or any portion thereof) called for redemption shall have been made
available on the redemption date referred to in such notice, such Notes (or any
portion thereof) will cease to bear interest on the date fixed for such
redemption specified in such notice and the only right of the Holders of such
Notes will be to receive payment of the Redemption Price.
6. MANDATORY REDEMPTION. The Issuer shall not be required to make
mandatory redemption payments with respect to the Notes.
7. NOTICE OF REDEMPTION.
(a) Notice of any redemption of any Notes (or any portion
thereof) will be given to Holders at their addresses, as shown in the Note
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 Notes held by such Holder to be
redeemed.
(b) The Issuer will notify the Trustee at least 45 days prior to
giving notice of redemption (or such shorter period as is satisfactory to the
Trustee) of the aggregate principal amount of such Notes to be redeemed and
their redemption date. If less than all of the Notes are to be redeemed at the
option of the Issuer, the Trustee shall select, in such manner as it shall deem
fair and appropriate, such Notes to be redeemed in whole or in part.
8. DENOMINATIONS, TRANSFER, EXCHANGE. The Notes are in registered form
without coupons in minimum denominations of $150,000 and integral multiples of
$1,000 in excess thereof. A holder of Notes may transfer or exchange Notes in
accordance with the Indenture. The Trustee may require a holder, among other
things, to furnish appropriate endorsements and transfer documents and the
Issuer may require a holder to pay any taxes and fees required by law or
permitted by the Indenture. The Issuer is not required to transfer or exchange
any Note selected for redemption. Also, the Issuer is not required to transfer
or exchange any Note for a period of 15 days before a selection of Notes to be
redeemed.
9. PERSONS DEEMED OWNERS. The registered Holder of a Note will be
treated as the owner of it for all purposes.
10. EVENTS OF DEFAULT, NOTICE AND WAIVER.
(a) The following events are "Events of Default": (i) default for
30 days in the payment of any interest or Liquidated Damages, if any, on the
Notes; (ii) default in the payment of any principal of, premium, if any, or any
Make-Whole Amount on any Notes when due; (iii) default in the performance of any
other covenant or warranty of the Issuer or the General Partner contained in the
Indenture with respect to the Notes, continued for 60 days after written notice
as provided in the Indenture; (iv) default under any bond, debenture, note,
indenture or instrument under which there may be issued or by which there may be
secured or evidenced any indebtedness for money borrowed (except for
A-2-6
<PAGE> 141
nonrecourse mortgage indebtedness which individually or in the aggregate does
not exceed $20,000,000) by the Issuer or the General Partner (or by any
Subsidiary, the repayment of which the Issuer or the General Partner has
guaranteed or for which the Issuer or the General Partner is directly
responsible or liable as obligor or guarantor), having an aggregate principal
amount outstanding of at least $10,000,000, whether such indebtedness now exists
or shall hereafter be created, which default shall have resulted in such
indebtedness 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 written notice to the Issuer or the General
Partner, as the case may be, as provided in the Indenture; (v) the entry by a
court of competent jurisdiction of one or more judgments, orders or decrees
against the Issuer or any Subsidiary in an aggregate amount (excluding amounts
covered by insurance) in excess of $10,000,000 and such judgments, orders or
decrees remain undischarged, unstayed and unsatisfied in an aggregate amount
(excluding amounts covered by insurance) in excess of $10,000,000 for a period
of 30 consecutive days; and (vi) certain events of bankruptcy, insolvency or
reorganization, or court appointment of a receiver, liquidator or trustee of the
Issuer or the General Partner or any Significant Subsidiary. The term
"Significant Subsidiary" has the meaning ascribed to such term in Regulation S-X
promulgated under the Securities Act. If an Event of Default specified in clause
(vi) above relating to the Issuer or the General Partner or any Significant
Subsidiary occurs, the principal amount of, and the Make-Whole Amount, on all
outstanding Notes shall become automatically due and payable without any
declaration or other act on the part of the Trustee or of the Holders.
(b) If an Event of Default occurs and is continuing, then in
every such case the Trustee or the Holders of not less than a majority in
principal amount of the then outstanding Notes may declare the principal amount
of all of the Notes to be due and payable immediately by written notice thereof
to the General Partner and the Issuer (and to the Trustee if given by the
Holders). However, any time after such a declaration of acceleration with
respect to the Notes has been made, but before a judgment or decree for payment
of the money due has been obtained by the Trustee, the Holders of not less then
a majority in principal amount of outstanding Notes may rescind and annul such
declaration and its consequences if (a) the Issuer shall have paid or deposited
with the Trustee all required payments of the principal of, premium, if any, and
interest on the Notes plus certain fees, expenses, disbursements and advances of
the Trustee and (b) all Events of Default, other than the nonpayment of
accelerated principal or interest with respect to the Notes have been cured or
waived as provided in the Indenture. The Indenture also provides that the
Holders of not less than a majority in principal amount of the outstanding Notes
may waive any past default with respect to such series and its consequences,
except a default (x) in the payment of the principal, premium, if any, or
interest on the Notes or (y) in respect of a covenant or provision contained in
the Indenture that cannot be modified or amended without the consent of the
Holder of each outstanding Note affected thereby.
(c) The Trustee is required under the Indenture to give notice to
the Holders of Notes within 90 days of a default under the Indenture; provided,
however, that the Trustee may withhold from the Holders of the Notes notice of
any default (except a default in the payment of the principal, premium, if any,
Liquidated Damages, if any, or interest on the Notes) if the Responsible
Officers of the Trustee consider such withholding to be in the interest of such
Holders.
(d) The Indenture provides that no Holders of the Notes may
institute any proceedings, judicial or otherwise, with respect to the Indenture
or for any remedy thereunder, except in the case of failure of the Trustee, for
60 days, to act after it has received a written request to institute proceedings
in respect of an Event of Default from the Holders of not less than a majority
in principal amount of the outstanding Notes, as well as an offer of reasonable
indemnity. This provision does not prevent, however, any Holder of Notes from
instituting suit for the enforcement of payment of the
A-2-7
<PAGE> 142
principal, premium, if any, Liquidated Damages, if any, and interest on such
Notes at the respective due date thereof.
(e) Subject to provisions in the Indenture relating to its duties
in case of default, the Trustee is under no obligation to exercise any of its
rights or powers under the Indenture at the request or direction of any Holders
of Notes then outstanding under the Indenture, unless such Holders shall have
offered to the Trustee reasonable security or indemnity. The Holders of not less
than a majority in principal amount of the outstanding Notes 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 of exercising any trust or power
conferred upon the Trustee. However, the Trustee may refuse to follow any
direction which is in conflict with any law or the Indenture, which may involve
the Trustee in personal liability or which may be unduly prejudicial to the
Holders of Notes not joining therein.
(f) Within 120 days after the close of each fiscal year, the
Issuer and the General Partner will deliver to the Trustee a certificate, signed
by one of several specified officers of the General Partner, stating whether or
not such officer has knowledge of any default under the Indenture and, if so,
specifying each such default and the nature and status thereof.
11. MODIFICATION OF THE INDENTURE.
(a) Modifications and amendments of provisions of the Indenture
may be made only with consent of the Holders of not less than a majority in
principal amount of the outstanding Notes; provided, however, that no such
modification or amendment may, without the consent of the Holder of each such
Notes affected thereby, (i) change the Maturity Date of the principal, premium,
if any, Liquidated Damages, if any, or interest on any such Notes; (ii) reduce
the principal amount of, or the rate or amount of interest on, or any premium
payable on redemption of, any such Notes, or adversely affect any right of
repayment of the Holder of any such Note; (iii) change the Place of Payment, or
the coin or currency, for payment of principal of, premium, if any, or interest
on any such Note; (iv) impair the right to institute suit for the enforcement of
any payment on or with respect to any such Note on or after the Maturity Date
thereof; (v) reduce the above-stated percentage of outstanding Notes necessary
to modify or amend the Indenture, to waive compliance with certain provisions
thereof or certain defaults and consequences thereunder or to reduce the quorum
or voting requirements set forth in the Indenture; or (vi) modify any of the
foregoing provisions or any of the provisions relating to the waiver of certain
past defaults or certain covenants, except to increase the required percentage
to effect such action or to provide that certain other provisions may not be
modified or waived without the consent of the Holder of such Note.
(b) The Holders of not less than a majority in principal amount
of outstanding Notes have the right to waive compliance by the Issuer or the
General Partner with certain covenants in the Indenture relating to such series.
(c) Modifications and amendments of the Indenture may be made by
the Issuer and the General Partner and the Trustee without the consent of any
Holder of Notes for any of the following purposes: (i) to evidence the
succession of another Person to the Issuer as obligor under the Indenture; (ii)
to add to the covenants of the Issuer and the General Partner for the benefit of
the Holders of the Notes or to surrender any right or power conferred upon the
Issuer or the General Partner in the Indenture; (iii) to add Events of Default
for the benefit of the Holders of the Notes; (iv) to add or change any
provisions of the Indenture to facilitate the issuance of the Notes in bearer
form, or to permit or facilitate the issuance of the Notes in uncertificated
form, provided that such action shall not adversely affect the interests of the
Holders of the Notes in any material respect; (v) to secure the Notes; (vi) to
provide for the acceptance of appointment by a successor Trustee or facilitate
the administration of the trust under the
A-2-8
<PAGE> 143
Indenture by more than one Trustee; (vii) to cure any ambiguity, defect or
inconsistency in the Indenture, provided that such action shall not adversely
affect the interests of Holders of the Notes in any material respect; and (viii)
to supplement any of the provisions of the Indenture to the extent necessary to
permit or facilitate defeasance and discharge of any series of such Notes,
provided that such action shall not adversely affect the interests of the
Holders of the Notes in any material respect.
12. RESTRICTIVE COVENANTS. The Indenture imposes certain limitations on
the ability of the Issuer or its subsidiaries to, among other things, incur
additional Debt, incur additional Secured Debt, merge or consolidate with any
other Person and sell, lease, transfer or otherwise dispose of all or
substantially all of its assets. The limitations are subject to a number of
important qualifications and exceptions. The Issuer will annually report to the
Trustee on compliance with such limitations.
13. ADDITIONAL RIGHTS OF HOLDERS OF RESTRICTED GLOBAL NOTES. In addition
to the rights provided to Holders of Notes under the Indenture, Holders of
Restricted Global Notes shall have all the rights set forth in the Registration
Rights Agreement.
14. ADDITIONAL INFORMATION. Anyone who receives this Note may obtain a
copy of the Indenture and/or Registration Rights Agreement without charge by
writing to Glenborough Properties, L.P., 400 South El Camino Real, Suite 1100,
San Mateo, California 94402-1708, Attention: General Counsel.
15. TRUSTEE DEALINGS WITH ISSUER OR GENERAL PARTNER. The Trustee, in its
individual or any other capacity, may make loans to, accept deposits from, and
perform services for the General Partner, the Issuer or their Affiliates, and
may otherwise deal with the General Partner, the Issuer or their Affiliates, as
if it were not the Trustee.
16. NO RECOURSE AGAINST OTHERS. A director, officer, employee,
incorporator or stockholder, of the General Partner, as such, shall not have any
liability for any obligations of the General Partner or the Issuer under the
Indenture or the Notes or for any claim based on, in respect of, or by reason
of, such obligations or their creation. Each Holder by accepting a Note waives
and releases all such liability. The waiver and release are part of the
consideration for the issuance of the Notes.
17. AUTHENTICATION. This Note shall not be valid until authenticated by
the manual signature of the Trustee or an authenticating agent.
18. ABBREVIATIONS. Customary abbreviations may be used in the name of a
Holder or an assignee, such as: TEN COM (= tenants in common), TEN ENT (=
tenants by the entireties), JT TEN (= joint tenants with right of survivorship
and not as tenants in common), CUST (= Custodian), and U/G/M/A (= Uniform Gifts
to Minors Act).
19. CUSIP NUMBERS. Pursuant to a recommendation promulgated by the
Committee on Uniform Security Identification Procedures, the Issuer has caused
CUSIP numbers to be printed on the Notes and the Trustee may use CUSIP numbers
in notices of redemption as a convenience to Holders. No representation is made
as to the accuracy of such numbers either as printed on the Notes or as
contained in any notice of redemption and reliance may be placed only on the
other identification numbers placed thereon.
A-2-9
<PAGE> 144
20. ASSIGNMENT FORM
To assign this Note, fill in the form below: (I) or (we) assign and
transfer this Note to
- --------------------------------------------------------------------------------
(Insert assignee's soc. sec. or tax I.D. no.)
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
(Print or type assignee's name, address and zip code)
and irrevocably appoint________________________________________________________
to transfer this Note on the books of the Issuer. The agent may substitute
another to act for him.
- --------------------------------------------------------------------------------
Date:___________________
Your Signature:_______________________________
(Sign exactly as your name appears on the face
of this Note)
Signature Guarantee:_________________________
Signature(s) must be guaranteed by an
eligible guarantor institution (banks, stock
brokers, savings and loan associations and
credit unions with membership in an approved
signature guarantee medallion program)
pursuant to Securities and Exchange
Commission Rule 17 Ad-15.
A-2-10
<PAGE> 145
SCHEDULE OF EXCHANGES OF INTERESTS IN THE GLOBAL NOTE
The following exchanges of a part of this Global Note for an interest in
another Global Note, or exchanges of a part of another Global Note for an
interest in this Global Note, have been made:
<TABLE>
<CAPTION>
Amount of Principal Amount Signature of
Amount of decrease increase in of this Global Note authorized
Date of in Principal Amount Principal Amount following such signatory of
Exchange of this Global Note of this Global Note decrease (or increase) Trustee or Note Custodian
- -------- ------------------- ------------------- ---------------------- -------------------------
<S> <C> <C> <C> <C>
</TABLE>
A-2-11
<PAGE> 146
EXHIBIT B
FORM OF CERTIFICATE OF TRANSFER
Glenborough Properties, L.P.
400 South El Camino Real
Suite 1100
San Mateo, California 94402-1708
[Registrar address block]
Re: % Senior Notes due 2005 of
Glenborough Properties, L.P.
Reference is hereby made to the Indenture, dated as of March , 1998 (as
supplemented by the First Supplemental Indenture thereto, dated March , 1998
(the "First Supplemental Indenture"), the "Indenture"), among Glenborough
Properties, L.P. as issuer (the "Issuer"), Glenborough Realty Trust
Incorporated, as Guarantor, and Chase Manhattan Bank and Trust Company, National
Association, as trustee. Capitalized terms used but not defined herein shall
have the meanings given to them in the Indenture.
______________, (the "Transferor") owns and proposes to transfer the
Note[s] or interest in such Note[s] specified in Annex A hereto, in the
principal amount of $___________ in such Note[s] or interests (the "Transfer"),
to __________ (the "Transferee"), as further specified in Annex A hereto. In
connection with the Transfer, the Transferor hereby certifies that:
[CHECK ALL THAT APPLY]
1. [ ] CHECK IF TRANSFEREE WILL TAKE DELIVERY OF A BENEFICIAL INTEREST IN THE
144A GLOBAL NOTE OR A DEFINITIVE NOTE PURSUANT TO RULE 144A. The Transfer is
being effected pursuant to and in accordance with Rule 144A under the United
States Securities Act of 1933, as amended (the "Securities Act"), and,
accordingly, the Transferor hereby further certifies that the beneficial
interest or Definitive Note is being transferred to a Person that the Transferor
reasonably believed and believes is purchasing the beneficial interest or
Definitive Note for its own account, or for one or more accounts with respect to
which such Person exercises sole investment discretion, and such Person and each
such account is a "qualified institutional buyer" within the meaning of Rule
144A in a transaction meeting the requirements of Rule 144A and such Transfer is
in compliance with any applicable blue sky securities laws of any state of the
United States. Upon consummation of the proposed Transfer in accordance with the
terms of the Indenture, the transferred beneficial interest or Definitive Note
will be subject to the restrictions on transfer enumerated in the Private
Placement Legend printed on the 144A Global Note and/or the Definitive Note and
in the Indenture and the Securities Act.
2. [ ] CHECK IF TRANSFEREE WILL TAKE DELIVERY OF A BENEFICIAL INTEREST IN THE
REGULATION S TEMPORARY GLOBAL NOTE, THE REGULATION S GLOBAL NOTE OR A DEFINITIVE
NOTE PURSUANT TO REGULATION S. The Transfer is being effected pursuant to and in
accordance with Rule 903 or Rule 904 under the Securities Act and, accordingly,
the Transferor hereby further certifies that (i) the Transfer is not being made
to a person in the United States and (x) at the time the buy order
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<PAGE> 147
was originated, the Transferee was outside the United States or such Transferor
and any Person acting on its behalf reasonably believed and believes that the
Transferee was outside the United States or (y) the transaction was executed in,
on or through the facilities of a designated offshore securities market and
neither such Transferor nor any Person acting on its behalf knows that the
transaction was prearranged with a buyer in the United States, (ii) no directed
selling efforts have been made in contravention of the requirements of Rule
903(b) or Rule 904(b) of Regulation S under the Securities Act, (iii) the
transaction is not part of a plan or scheme to evade the registration
requirements of the Securities Act, and (iv) if the proposed transfer is being
made prior to the expiration of the Restricted Period, the transfer is not being
made to a U.S. Person or for the account or benefit of a U.S. Person (other than
an Initial Purchaser). Upon consummation of the proposed transfer in accordance
with the terms of the Indenture, the transferred beneficial interest or
Definitive Note will be subject to the restrictions on Transfer enumerated in
the Private Placement Legend printed on the Regulation S Global Note, the
Regulation S Temporary Global Note and/or the Definitive Note and in the
Indenture and the Securities Act.
3. [ ] CHECK AND COMPLETE IF TRANSFEREE WILL TAKE DELIVERY OF A BENEFICIAL
INTEREST IN THE IAI GLOBAL NOTE OR A DEFINITIVE NOTE PURSUANT TO ANY PROVISION
OF THE SECURITIES ACT OTHER THAN RULE 144A OR REGULATION S. The Transfer is
being effected in compliance with the transfer restrictions applicable to
beneficial interests in Restricted Global Notes and Restricted Definitive Notes
and pursuant to and in accordance with the Securities Act and any applicable
blue sky securities laws of any state of the United States, and accordingly the
Transferor hereby further certifies that (check one):
(a) [ ] such Transfer is being effected pursuant to and in accordance
with Rule 144 under the Securities Act; or
(b) [ ] such Transfer is being effected to the Issuer or a subsidiary
thereof; or
(c) [ ] such Transfer is being effected pursuant to an effective
registration statement under the Securities Act and in compliance with the
prospectus delivery requirements of the Securities Act; or
(d) [ ] such Transfer is being effected to an Institutional Accredited
Investor and pursuant to an exemption from the registration requirements of the
Securities Act other than Rule 144A, Rule 144 or Rule 904, and the Transferor
hereby further certifies that the Transfer complies with the transfer
restrictions applicable to beneficial interests in a Restricted Global Note or
Restricted Definitive Notes and the requirements of the exemption claimed, which
certification is supported by (1) a certificate executed by the Transferee in
the form of Exhibit D to the First Supplemental Indenture and (2) an Opinion of
Counsel provided by the Transferor or the Transferee (a copy of which the
Transferor has attached to this certification), to the effect that such Transfer
is in compliance with the Securities Act. Upon consummation of the proposed
transfer in accordance with the terms of the Indenture, the transferred
beneficial interest or Definitive Note will be subject to the restrictions on
transfer enumerated in the Private Placement Legend printed on the IAI Global
Note and/or the Definitive Notes and in the Indenture and the Securities Act.
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<PAGE> 148
4. [ ] CHECK IF TRANSFEREE WILL TAKE DELIVERY OF A BENEFICIAL INTEREST IN AN
UNRESTRICTED GLOBAL NOTE OR OF AN UNRESTRICTED DEFINITIVE NOTE.
(a) [ ] CHECK IF TRANSFER IS PURSUANT TO RULE 144. (i) The Transfer is
being effected pursuant to and in accordance with Rule 144 under the Securities
Act and in compliance with the transfer restrictions contained in the Indenture
and any applicable blue sky securities laws of any state of the United States
and (ii) the restrictions on transfer contained in the Indenture and the Private
Placement Legend are not required in order to maintain compliance with the
Securities Act. Upon consummation of the proposed Transfer in accordance with
the terms of the Indenture, the transferred beneficial interest or Definitive
Note will no longer be subject to the restrictions on transfer enumerated in the
Private Placement Legend printed on the Restricted Global Notes, on Restricted
Definitive Notes and in the Indenture.
(b) [ ] CHECK IF TRANSFER IS PURSUANT TO REGULATION S. (i) The Transfer
is being effected pursuant to and in accordance with Rule 903 or Rule 904 under
the Securities Act and in compliance with the transfer restrictions contained in
the Indenture and any applicable blue sky securities laws of any state of the
United States and (ii) the restrictions on transfer contained in the Indenture
and the Private Placement Legend are not required in order to maintain
compliance with the Securities Act. Upon consummation of the proposed Transfer
in accordance with the terms of the Indenture, the transferred beneficial
interest or Definitive Note will no longer be subject to the restrictions on
transfer enumerated in the Private Placement Legend printed on the Restricted
Global Notes, on Restricted Definitive Notes and in the Indenture.
(c) [ ] CHECK IF TRANSFER IS PURSUANT TO OTHER EXEMPTION. (i) The
Transfer is being effected pursuant to and in compliance with an exemption from
the registration requirements of the Securities Act other than Rule 144, Rule
903 or Rule 904 and in compliance with the transfer restrictions contained in
the Indenture and any applicable blue sky securities laws of any State of the
United States and (ii) the restrictions on transfer contained in the Indenture
and the Private Placement Legend are not required in order to maintain
compliance with the Securities Act. Upon consummation of the proposed Transfer
in accordance with the terms of the Indenture, the transferred beneficial
interest or Definitive Note will not be subject to the restrictions on transfer
enumerated in the Private Placement Legend printed on the Restricted Global
Notes or Restricted Definitive Notes and in the Indenture.
This certificate and the statements contained herein are made for your
benefit and the benefit of the Issuer.
-------------------------------
[Insert Name of Transferor]
By:____________________________
Name:
Title:
Dated: _____________________, ______
B-3
<PAGE> 149
ANNEX A TO CERTIFICATE OF TRANSFER
1. The Transferor owns and proposes to transfer the following:
[CHECK ONE OF (a) OR (b)]
(a) [ ] a beneficial interest in the:
(i) [ ] 144A Global Note (CUSIP _____ ), or
(ii) [ ] Regulation S Global Note (CUSIP _____ ), or
(iii) [ ] IAI Global Note (CUSIP _____ ); or
(b) [ ] a Restricted Definitive Note.
2. After the Transfer the Transferee will hold:
[CHECK ONE]
(a) [ ] a beneficial interest in the:
(i) [ ] 144A Global Note (CUSIP _____ ), or
(ii) [ ] Regulation S Global Note (CUSIP _____ ), or
(iii) [ ] IAI Global Note (CUSIP _____ ); or
(iv) [ ] Unrestricted Global Note (CUSIP _____ ); or
(b) [ ] a Restricted Definitive Note; or
(c) [ ] an Unrestricted Definitive Note,
in accordance with the terms of the Indenture.
B-4
<PAGE> 150
EXHIBIT C
FORM OF CERTIFICATE OF EXCHANGE
Glenborough Properties, L.P.
400 South El Camino Real
Suite 1100
San Mateo, California 94402-1708
[Registrar address block]
Re: % Senior Notes due 2005 of
Glenborough Properties, L.P.
(CUSIP_____)
Reference is hereby made to the Indenture, dated as of March , 1997 (as
supplemented by the First Supplemental Indenture, the "Indenture"), among
Glenborough Properties, L.P. as issuer (the "Issuer"), Glenborough Realty Trust
Incorporated, as Guarantor and Chase Manhattan Bank and Trust Company, National
Association, as trustee. Capitalized terms used but not defined herein shall
have the meanings given to them in the Indenture.
_______________ , (the "Owner") owns and proposes to exchange the
Note[s] or interest in such Note[s] specified herein, in the principal amount of
$____________ in such Note[s] or interests (the "Exchange"). In connection with
the Exchange, the Owner hereby certifies that:
1. EXCHANGE OF RESTRICTED DEFINITIVE NOTES OR BENEFICIAL INTERESTS IN A
RESTRICTED GLOBAL NOTE FOR UNRESTRICTED DEFINITIVE NOTES OR BENEFICIAL INTERESTS
IN AN UNRESTRICTED GLOBAL NOTE
(a) [ ] CHECK IF EXCHANGE IS FROM BENEFICIAL INTEREST IN A RESTRICTED
GLOBAL NOTE TO BENEFICIAL INTEREST IN AN UNRESTRICTED GLOBAL NOTE. In connection
with the Exchange of the Owner's beneficial interest in a Restricted Global Note
for a beneficial interest in an Unrestricted Global Note in an equal principal
amount, the Owner hereby certifies (i) the beneficial interest is being acquired
for the Owner's own account without transfer, (ii) such Exchange has been
effected in compliance with the transfer restrictions applicable to the Global
Notes and pursuant to and in accordance with the United States Securities Act of
1933, as amended (the "Securities Act"), (iii) the restrictions on transfer
contained in the Indenture and the Private Placement Legend are not required in
order to maintain compliance with the Securities Act and (iv) the beneficial
interest in an Unrestricted Global Note is being acquired in compliance with any
applicable blue sky securities laws of any state of the United States.
(b) [ ] CHECK IF EXCHANGE IS FROM BENEFICIAL INTEREST IN A RESTRICTED
GLOBAL NOTE TO UNRESTRICTED DEFINITIVE NOTE. In connection with the Exchange of
the Owner's beneficial interest in a Restricted Global Note for an Unrestricted
Definitive Note, the Owner hereby certifies (i) the Definitive Note is being
acquired for the Owner's own account without transfer,
C-1
<PAGE> 151
(ii) such Exchange has been effected in compliance with the transfer
restrictions applicable to the Restricted Global Notes and pursuant to and in
accordance with the Securities Act, (iii) the restrictions on transfer contained
in the Indenture and the Private Placement Legend are not required in order to
maintain compliance with the Securities Act and (iv) the Definitive Note is
being acquired in compliance with any applicable blue sky securities laws of any
state of the United States.
(c) [ ] CHECK IF EXCHANGE IS FROM RESTRICTED DEFINITIVE NOTE TO
BENEFICIAL INTEREST IN AN UNRESTRICTED GLOBAL NOTE. In connection with the
Owner's Exchange of a Restricted Definitive Note for a beneficial interest in an
Unrestricted Global Note, the Owner hereby certifies (i) the beneficial interest
is being acquired for the Owner's own account without transfer, (ii) such
Exchange has been effected in compliance with the transfer restrictions
applicable to Restricted Definitive Notes and pursuant to and in accordance with
the Securities Act, (iii) the restrictions on transfer contained in the
Indenture and the Private Placement Legend are not required in order to maintain
compliance with the Securities Act and (iv) the beneficial interest is being
acquired in compliance with any applicable blue sky securities laws of any state
of the United States.
(d) [ ] CHECK IF EXCHANGE IS FROM RESTRICTED DEFINITIVE NOTE TO
UNRESTRICTED DEFINITIVE NOTE. In connection with the Owner's Exchange of a
Restricted Definitive Note for an Unrestricted Definitive Note, the Owner hereby
certifies (i) the Unrestricted Definitive Note is being acquired for the Owner's
own account without transfer, (ii) such Exchange has been effected in compliance
with the transfer restrictions applicable to Restricted Definitive Notes and
pursuant to and in accordance with the Securities Act, (iii) the restrictions on
transfer contained in the Indenture and the Private Placement Legend are not
required in order to maintain compliance with the Securities Act and (iv) the
Unrestricted Definitive Note is being acquired in compliance with any applicable
blue sky securities laws of any state of the United States.
2. EXCHANGE OF RESTRICTED DEFINITIVE NOTES OR BENEFICIAL INTERESTS IN
RESTRICTED GLOBAL NOTES FOR RESTRICTED DEFINITIVE NOTES OR BENEFICIAL INTERESTS
IN RESTRICTED GLOBAL NOTES
(a) [ ] CHECK IF EXCHANGE IS FROM BENEFICIAL INTEREST IN A RESTRICTED
GLOBAL NOTE TO RESTRICTED DEFINITIVE NOTE. In connection with the Exchange of
the Owner's beneficial interest in a Restricted Global Note for a Restricted
Definitive Note with an equal principal amount, the Owner hereby certifies that
the Restricted Definitive Note is being acquired for the Owner's own account
without transfer. Upon consummation of the proposed Exchange in accordance with
the terms of the Indenture, the Restricted Definitive Note issued will continue
to be subject to the restrictions on transfer enumerated in the Private
Placement Legend printed on the Restricted Definitive Note and in the Indenture
and the Securities Act.
(b) [ ] CHECK IF EXCHANGE IS FROM RESTRICTED DEFINITIVE NOTE TO
BENEFICIAL INTEREST IN A RESTRICTED GLOBAL NOTE. In connection with the Exchange
of the Owner's Restricted Definitive Note for a beneficial interest in the
[CHECK ONE]: [ ] 144A Global Note, [ ] Regulation S Global Note, [ ] IAI Global
Note with an equal principal amount, the Owner hereby certifies (i) the
beneficial interest is being acquired for the Owner's own account without
transfer and (ii) such Exchange has been effected in compliance with the
transfer restrictions applicable to the Restricted Global Notes and pursuant to
and in accordance with the Securities
C-2
<PAGE> 152
Act, and in compliance with any applicable blue sky securities laws of any state
of the United States. Upon consummation of the proposed Exchange in accordance
with the terms of the Indenture, the beneficial interest issued will be subject
to the restrictions on transfer enumerated in the Private Placement Legend
printed on the relevant Restricted Global Note and in the Indenture and the
Securities Act.
This certificate and the statements contained herein are made for your
benefit and the benefit of the Issuer.
------------------------------------
[Insert Name of Owner]
By:__________________________________
Name:
Title:
Dated:_____________________,______
C-3
<PAGE> 153
EXHIBIT D
FORM OF CERTIFICATE FROM
ACQUIRING INSTITUTIONAL ACCREDITED INVESTOR
Glenborough Properties, L.P.
400 South El Camino Real, Suite 1100
San Mateo, California 94402-1708
[Registrar address block]
Re: % Senior Notes due 2005 of
Glenborough Properties, L.P.
Reference is hereby made to the Indenture, dated as of March 23, 1998
(as supplemented by the First Supplemental Indenture, the "Indenture"), among
Glenborough Properties, L.P., as issuer (the "Issuer"), Glenborough Realty Trust
Incorporated, as Guarantor, and Chase Manhattan Bank and Trust Company, National
Association, as trustee. Capitalized terms used but not defined herein shall
have the meanings given to them in the Indenture.
In connection with our proposed purchase of $____________ aggregate
principal amount of:
(a) [ ] a beneficial interest in a Global Note, or
(b) [ ] a Definitive Note,
we confirm that:
1. We understand that any subsequent transfer of the Notes or any
interest therein is subject to certain restrictions and conditions set forth in
the Indenture and the undersigned agrees to be bound by, and not to resell,
pledge or otherwise transfer the Notes or any interest therein except in
compliance with, such restrictions and conditions and the United States
Securities Act of 1933, as amended (the "Securities Act").
2. We understand that the offer and sale of the Notes have not been
registered under the Securities Act, and that the Notes and any interest therein
may not be offered or sold except as permitted in the following sentence. We
agree, on our own behalf and on behalf of any accounts for which we are acting
as hereinafter stated, that if we should sell the Notes or any interest therein,
we will do so only (A) to the Issuer or any subsidiary thereof, (B) in
accordance with Rule 144A under the Securities Act to a "qualified institutional
buyer" (as defined therein), (C) to an institutional "accredited investor" (as
defined below) that, prior to such transfer, furnishes (or has furnished on its
behalf by a U.S. broker-dealer) to you and to the Company a signed letter
substantially in the form of this letter and an Opinion of Counsel in form
reasonably acceptable to the Company to the effect that such transfer is in
compliance with the Securities Act, (D) outside the United States in accordance
with Rule 904 of Regulation S under the Securities Act, (E) pursuant to the
provisions of Rule 144 under the Securities Act or (F) pursuant to an effective
registration statement under the Securities Act, and we further agree to
D-1
<PAGE> 154
provide to any person purchasing the Definitive Note or beneficial interest in a
Global Note from us in a transaction meeting the requirements of clauses (A)
through (E) of this paragraph a notice advising such purchaser that resales
thereof are restricted as stated herein.
3. We understand that, on any proposed resale of the Notes or beneficial
interest therein, we will be required to furnish to you and the Issuer such
certifications, legal opinions and other information as you and the Issuer may
reasonably require to confirm that the proposed sale complies with the foregoing
restrictions. We further understand that the Notes purchased by us will bear a
legend to the foregoing effect. We further understand that any subsequent
transfer by us of the Notes or beneficial interest therein acquired by us must
be effected through one of the Placement Agents.
4. We are an institutional "accredited investor" (as defined in Rule
501(a)(1), (2), (3) or (7) of Regulation D under the Securities Act) and have
such knowledge and experience in financial and business matters as to be capable
of evaluating the merits and risks of our investment in the Notes, and we and
any accounts for which we are acting are each able to bear the economic risk of
our or its investment.
5. We are acquiring the Notes or beneficial interest therein purchased
by us for our own account or for one or more accounts (each of which is an
institutional "accredited investor") as to each of which we exercise sole
investment discretion.
You and the Issuer are entitled to rely upon this letter and are
irrevocably authorized to produce this letter or a copy hereof to any interested
party in any administrative or legal proceedings or official inquiry with
respect to the matters covered hereby.
------------------------------------
[Insert Name of Accredited Investor]
By:__________________________________
Name:
Title:
Dated: _____________________, ______
D-2
<PAGE> 1
Exhibit 12.1
GLENBOROUGH PROPERTIES, L.P.
COMPUTATION OF RATIO OF EARNINGS TO FIXED CHARGES
AND RATIO OF EARNINGS TO FIXED CHARGES AND PREFERRED
PARTNER INTEREST DISTRIBUTIONS FOR THE FIVE YEARS
ENDED DECEMBER 31, 1997 AND THE THREE MONTHS
ENDED MARCH 31, 1998
<TABLE>
<CAPTION>
----------------------------------------------------------------------------
GRT Predecessor Entities Combined The Operating Partnership
Twelve months ended December 31
----------------------------------------------------------------------------
Three Months
1993 1994 1995 1996 1997 3/31/98
---- ---- ---- ---- ---- ------------
<S> <C> <C> <C> <C> <C> <C>
EARNINGS, AS DEFINED
Net Income (loss) $4,418 $1,580 $ 524 $(3,679) $14,396 $ 7,168
Extraordinary items (2,274) -- -- 7,423 843 --
Federal & state income taxes 24 176 357 -- -- --
Minority interest 5 43 -- -- -- --
Fixed charges 1,301 1,140 2,129 3,913 9,668 9,173
----- ----- ----- ----- ------ -----
$3,474 $2,939 $3,010 $7,657 $24,907 $16,341
===== ===== ===== ===== ====== ======
Interest expense $1,301 $1,140 $2,129 $3,913 $9,668 $ 9,173
----- ----- ----- ----- ----- ------
FIXED CHARGES, AS DEFINED $1,301 $1,140 $2,129 $3,913 $9,668 $ 9,173
===== ====== ===== ===== ===== ======
RATIO OF EARNINGS TO
FIXED CHARGES 2.67 2.58 1.41 1.96 2.58 1.78
===== ====== ===== ===== ===== ======
Preferred Partner Interest
Distributions -- -- -- -- -- 3,910
----- ----- ----- ----- ----- ------
FIXED CHARGES AND PREFERRED
PARTNER INTEREST DISTRIBUTIONS,
AS DEFINED $1,301 $1,140 $2,129 $3,913 $9,668 $13,083
===== ====== ===== ===== ===== ======
RATIO OF EARNINGS TO FIXED
CHARGES AND PREFERRED
PARTNER INTEREST DISTRIBUTIONS,
AS DEFINED 2.67 2.58 1.41 1.96 2.58 1.25
===== ====== ===== ===== ===== ======
</TABLE>
<PAGE> 1
EXHIBIT 23.1
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
As independent public accountants, we hereby consent to the use of our report
dated January 21, 1998 included in this registration statement on the financial
statements of Glenborough Properties, L.P. as of and for the years ended
December 31, 1997 and 1996 and of the GRT Predecessor Entities for the year
ended December 31, 1995 and to all references to our Firm included in this
registration statement (File No. 333-08806).
We also consent to the incorporation by reference in this registration
statement of our reports dated January 21, 1998 on the financial statements as
of and for the years ended December 31, 1997 and 1996 for Glenborough Realty
Trust Incorporated, for the year ended December 31, 1995 for the GRT
Predecessor Entities and for the years ended December 31, 1997 and 1996 for
Glenborough Hotel Group, included in Glenborough Realty Trust Incorporated's
Form 10-K for the year ended December 31, 1997.
We also consent to the incorporation by reference in this registration
statement of our reports dated May 15, 1998 and May 12, 1998, on the combined
statements of revenues and certain expenses of the Eaton & Lauth Portfolio and
the BGK Portfolio, respectively, for the year ended December 31, 1997, included
in Glenborough Realty Trust Incorporated's Current Report on Form 8-K/A filed
with the Securities and Exchange Commission on May 15, 1998.
/s/ ARTHUR ANDERSEN LLP
San Francisco, California
June 5, 1998
