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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
------------------------
FORM 8-K
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(D) OF THE
SECURITIES EXCHANGE ACT OF 1934
DATE OF REPORT (DATE OF EARLIEST EVENT REPORTED):
NOVEMBER 7, 1997
BURNHAM PACIFIC PROPERTIES, INC.
(Exact name of Registrant as specified in its Charter)
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<S> <C> <C>
MARYLAND 1-9524 33-0204162
(State or Other Jurisdiction (Commission (IRS Employer
of Incorporation) File Number) Identification No.)
610 WEST ASH STREET
SAN DIEGO, CALIFORNIA
(Address of Principal 92101
Executive Offices) (Zip Code)
</TABLE>
(619) 652-4700
(Registrant's telephone number, including area code)
N/A
(Former name, former address and former fiscal year,
if changed since last report)
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ITEM 5. OTHER EVENTS.
GOLDEN STATE PROPERTIES PORTFOLIO TRANSACTIONS
Burnham Pacific Properties, Inc. (the "Company") has recently entered into
definitive agreements relating to the Company's acquisition of a portfolio of
twenty shopping centers (the "Golden State Properties") containing approximately
2.6 million square feet of gross leasable area ("GLA"), all of which are located
in California, and the related financing thereof.
Contribution Agreement
The Company has entered into an Agreement to Contribute dated as of December
5, 1997 (the "Contribution Agreement") with investment funds affiliated with
Blackacre Capital Group, L.P and Highridge Partners (the "Contributors"), which
provides that at the closing thereunder the Contributors will contribute the
Golden State Properties to the Company's recently formed operating partnership
(the "Operating Partnership") in exchange for initial consideration of up to
$314 million. The initial consideration will be determined based upon the net
operating income from leases in place at the date of closing. The consideration
will consist of 2,000,000 Series 1997-A Preferred Limited Partner Units of the
Operating Partnership (the "Preferred Units") issued at an agreed upon price of
$25 per unit and on terms comparable to the Company's newly-designated and
issued Series 1997-A Convertible Preferred Stock, par value $.01 per share (the
"Series A Preferred Stock") and other consideration, consisting primarily of
cash. See "Operating Partnership Formation" and "Designation of Series A
Preferred Stock."
The Company intends to finance the cash portion of the acquisition price of
the Golden State Properties through the privately negotiated sale of $70 million
of Series A Preferred Stock, the borrowing of $150 million in first mortgage
debt collateralized by certain of the Golden State Properties and additional
borrowings under its existing credit facility with Nomura Asset Capital
Corporation (the "Credit Facility"). See "Stock Purchase Agreement" and
"Mortgage Financing."
In addition, the Contributors have the right to receive additional
consideration for additional value resulting from the lease-up of certain
specified portions of the Golden State Properties and construction and lease-up
of certain additional space. The additional consideration, if any, will be based
upon incremental income and will be paid out over an eighteen-month period. The
Contributors have the option of taking the additional consideration in Common
Limited Partner Units of the Operating Partnership ("Common Units") with the
number of such Common Units to be the amount of such additional value divided by
the then fair market value (as determined at the respective times of payment) of
the common stock, par value $.01 per share, of the Company (the "Common Stock")
and the Contributors will have the option of having the Company or the Operating
Partnership immediately redeem such Common Units for cash. Any leases for the
unleased and unbuilt space must adhere to certain standards as to use,
creditworthiness and lease terms, with the Contributors responsible for all
leasing costs and the Company retaining certain approval rights. In no event
will the value of the initial and additional consideration exceed $344 million
in the aggregate.
The Contribution Agreement and related agreements have been approved by the
Board of Directors of the Company and by the Contributors, subject to the
satisfaction of certain conditions to closing thereunder. The closing does not
require action by the stockholders of the Company, but the Company has
undertaken to submit the issuance of Common Stock upon the redemption, exchange
or conversion into Common Stock of the limited partner units of the Operating
Partnership to its 1998 Annual Meeting of Stockholders and to redeem a portion
of the Preferred Units and Series A Preferred Stock for cash in the event that
the holders of a majority of the Common Stock voting on the matter do not
approve the transaction at that or a subsequent special meeting of stockholders.
See "Other Provisions--Mandatory Redemption in Certain Instances." The Company
anticipates closing by year end but there can be no assurance in this regard.
The closing under the Contribution Agreement is subject to the satisfaction of a
number of conditions, some of which are material and beyond the control of the
Company. Accordingly,
1
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there can be no assurance that the transactions contemplated thereby will be
consummated. In the event that either the Company or the Contributors willfully
breach their obligation to close the transactions contemplated by the
Contribution Agreement, the breaching party will be obligated to pay the non-
breaching party a termination fee of $15.0 million.
THE GOLDEN STATE PROPERTIES
The Golden State Properties are as follows:
SAN DIEGO REGION
Menifee Town Center is a 79,128 square foot market center anchored by
Ralph's and Target (not owned). It is located on Antelope Road in the city of
Menifee.
San Marcos Lucky Plaza Center is a 36,151 square foot market center anchored
by Lucky's (not owned). It is located at the intersection of San Marcos
Boulevard and Rancho Santa Fe Road in the city of San Marcos.
LOS ANGELES REGION
Westminster Center is a 365,699 square foot market/drug center anchored by
Lucky's, Thrifty, Home Depot, Edwards Theatres and Hollytron. It is located on
Westminster Boulevard in the city of Westminster.
Bell Gardens Marketplace is a 159,838 square foot market/drug center
anchored by Food 4 Less and Thrifty. It is located at the 710 Freeway and
Florence Avenue in the city of Bell Gardens.
Buena Vista Marketplace is a 90,995 square foot market/drug center anchored
by Ralph's. It is located on Huntington Drive in the city of Duarte.
Ralph's Center is a 66,700 square foot freestanding Ralph's supermarket. It
is located one block south of Artesia Boulevard on Hawthorne Boulevard in
Redondo Beach.
Centerwood Plaza is a 63,144 square foot market/drug center anchored by 32nd
Street Market and Basically a Buck. It is located at the intersection of
Lakewood and Alondra Boulevards in the city of Bellflower.
SAN FRANCISCO REGION
Prospector's Plaza is a 219,112 square foot market/drug center anchored by
Lucky's, Long's Drugs and K-mart. It is located at Highway 49 and Missouri Flat
Road in Placerville.
Santa Rosa Value Center is a 198,528 square foot market/drug center anchored
by Food 4 Less and Home Base. It is located at the Stony Point Road exit to the
Sebastopol Freeway in Santa Rosa.
Fremont Gateway Plaza is a 195,092 square foot market/drug center anchored
by Raley's Family Fitness and Super Saver Cinemas. It is located at the
intersection of Paseo Padre Parkway and Walnut Avenue in Fremont.
Southampton Center is a 162,390 square foot market/drug center anchored by
Raley's. It is located at Interstate 780 and Southampton Road in Benicia.
Silver Creek Plaza is a 134,018 square foot market/drug center anchored by
Safeway, Walgreens and Orchard Supply Hardware (not owned). It is located at the
intersection of East Capitol Expressway and Silver Creek Road in San Jose.
Summer Hills Shopping Center is a 133,614 square foot market/drug center
anchored by Raley's. It is located on Antelope Road, directly off Interstate 80,
in Sacramento.
2
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Shasta Crossroads is a 121,376 square foot market/drug center anchored by
Food 4 Less. It is located on Churn Creek Road in Redding.
Creekside Shopping Center is a 116,215 square foot market/drug center
anchored by Raley's. It is located at Alamo Drive and Nut Tree Drive, adjacent
to Highway 80 in Vacaville.
580 Marketplace is a 101,153 square foot market/drug center anchored by PW
Foods and 24 Hour Nautilus. It is located on Castro Valley Boulevard at Highway
580 in the City of Castro Valley.
Discovery Plaza is a 93,398 square foot market/drug center anchored by Bel
Air Market. It is located on West Camino Avenue in the Natomas area of
Sacramento.
Sunset Center is a 85,266 square foot market/drug center anchored by Lucky's
and Thrifty Drug. It is located on Sunset Avenue in Suisun City.
Hallmark Town Center is a 85,066 square foot market/drug center anchored by
Food 4 Less. It is located on West Cleveland Avenue in the San Joaquin Valley
community of Madera.
Arcade Center is a 76,701 square foot market/drug center anchored by
Raley's. It is located at the intersections of Watt and Whitney Avenues in
Sacramento.
The Company believes that the following characteristics define the Golden
State Properties portfolio:
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SUPERMARKET ANCHORED: All twenty of the centers are anchored by
supermarkets. Supermarkets account for 27.0% of
the total base rents for the properties, with
Ralph's contributing 7.2%, Raley's 7.8% and Food
4 Less 5.5%.
STRONG ANCHOR SALES: Annual supermarket sales in the portfolio
exceeded $458 per square foot for 1996, which
compares favorably to national median supermarket
sales per square foot of approximately $372,
according to the Urban Land Institute.
MATURE LOCATIONS: The Company believes that, with an average age of
over 13 years, the portfolio is located in mature
trade areas, consistent with its strategy of
acquiring properties in "in-fill" locations.
BELOW REPLACEMENT COST: Based upon its experience, the Company believes
that the acquisition price of approximately $127
per square foot is below replacement cost, which
provides competitive pricing and rental income
upside.
BELOW MARKET RENTS: Based upon its experience, the Company believes
the average shop rent of $16.37 per square foot
and the average anchor rent of $8.85 are below
currently prevailing market rates in the regions
where the properties are located.
ROLL OVER OPPORTUNITY: Leases representing approximately 43% of GLA
expire during the next six years which provides
the Company an opportunity to increase rents to
market rates upon renewal or releasing.
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3
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VALUE ENHANCEMENTS: The portfolio presents several value enhancement
opportunities including over 121,000 square feet
in unbuilt space and several anchor tenant
expansion opportunities.
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Stock Purchase Agreement
Pursuant to a Stock Purchase Agreement dated as of December 5, 1997 (the
"Stock Purchase Agreement") among the Company and affiliates of Westbrook Real
Estate Partnership II, L.P., and Westbrook Real Estate Co-Investment Partnership
II, L.P. (together, the "Buyer"), the Company will issue to the Buyer at the
closing thereunder 2,800,000 shares of Series A Preferred Stock at an agreed
upon price of $25 per share for cash. The Series A Preferred Stock has a
dividend yield of 8% and is convertible after a period of approximately one year
into Common Stock at a conversion price per share initially equal to $15.375,
which price represents 107% of the $14.375 base price of the Common Stock at the
time that the principal terms of the Series A Preferred Stock were negotiated.
See "Designation of Series A Preferred Stock." The Company intends to use the
proceeds of the sale to finance, in part, the acquisition of the Golden State
Properties contemplated by the Contribution Agreement. The closing under the
Stock Purchase Agreement is subject to the Company's acquisition of the Golden
State Properties and certain additional conditions; accordingly, there can be no
assurance that the closing will occur or that the transactions contemplated
thereby will be consummated.
Mortgage Financing
Nomura Asset Capital Corporation has committed to fund $150 million in first
mortgage debt collateralized by certain of the Golden State Properties at a
spread of 95 basis points over the treasury bond rates of comparable maturities.
The rates will be fixed prior to closing for the terms of the debt, which the
Company anticipates will range from eight to twelve years. The Company intends
to use the proceeds of this financing to finance, in part, the acquisition of
the Golden State Properties contemplated by the Contribution Agreement.
Notwithstanding the foregoing, there can be no assurance that the Company will
be able to complete successfully this financing.
POWELL PORTFOLIO ACQUISITION
As reported in an earlier Report on Form 8-K on October 29, 1997, the
Company purchased five market/drug centers located in the states of Washington
and New Mexico, comprising 238,909 square feet of Company-owned space (the
"Powell Portfolio") for approximately $23.5 million from the Powell Development
Company of Seattle, Washington ("Powell"). The Company financed the acquisition
through assumption of $4.2 million of existing mortgage debt and additional
borrowings under the Credit Facility. Subsequent to such purchase, the Company
incurred $9.1 million of new mortgage indebtedness secured by two of the
properties. The Powell Portfolio properties are as follows:
Chambers Creek is a 58,179 square-foot shopping center anchored by a
42,000 square-foot Albertson's. The property is located at the intersection
of Steilacoon Boulevard and 87th Avenue SW in Tacoma.
Puget Park is an 92,684 square-foot marketing center anchored by a
41,896 square-foot Albertson's (not owned). It is located at the
intersection of 128th Street SW and 4th Avenue.
Fairwood Square is a 76,040 square-foot market/center anchored by a
43,130 Albertson's (not owned). It is located at the intersection of 140th
Avenue SE and Petrovitsky Road in Renton.
Design Market is an 88,487 square-foot promotional center anchored by
Schoenfeld Interiors and Applegreen Furniture. It is located on 116th Avenue
adjacent to Interstate Highway 405 in Bellevue.
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Silver Plaza is a 52,921 square-foot market/drug center anchored by a
44,376 square-foot Albertson's (not owned). It is located on Rosedale Road
at Highway 180 East in Silver City, New Mexico.
The Company also has the right to acquire up to eight additional centers,
which in the aggregate include approximately 321,000 square feet of space in
Washington, Oregon and New Mexico, for a total of up to $37.8 million. The
purchase of these centers remains subject to completion of due diligence and
completion and leasing of two of the centers which are currently under
construction.
The Company has employed Powell's property management staff to supplement
its internal property management group and has acquired Powell's contract rights
to manage five additional shopping centers owned by others on a fee basis.
MOUNTAINGATE PLAZA
As reported in an earlier Report on Form 8-K on October 15, 1997, the
Company acquired Mountaingate Plaza, a 282,162 square-foot promotional center
anchored by Michael's, Thrifty, Edwards Theatres, TJ Maxx, Bally's Fitness and
Heilig Meyers for a purchase price of $28.7 million. It is located at the
intersection of Los Angeles Boulevard and First Street in Simi Valley,
California. The Company financed the acquisition through the assumption of
approximately $24.8 million of existing mortgage debt and through additional
borrowings under the Credit Facility.
ERNST LEASEHOLD PORTFOLIO ACQUISITION
The Company has signed an agreement dated November 13, 1997 to acquire
leasehold interests in 12 former Ernst Home Improvement Stores in California,
Washington and Utah for approximately $20.2 million. The leaseholds, which
include more than 480,000 square feet of leaseable space, are among those
occupied by the 84-store Ernst Chain that declared Chapter 11 bankruptcy in
1997.
The Company has the right to acquire the leaseholds at each location with a
sublease in place, all leasehold improvements completed and the subtenant paying
rent. The acquisition of each leasehold interest remains subject to certain
contingencies. The Company plans to finance the acquisitions through additional
borrowings under the Credit Facility.
SIMI VALLEY PLAZA ACQUISITION
The Company has entered a contract dated as of November 7, 1997 to acquire
Simi Valley Plaza, a 219,775 square foot promotional center anchored by Edwards
Theaters and Home Base for a total purchase price of approximately $24.5
million. The property is located on Los Angeles Boulevard in Simi Valley,
California. The Company expects initially to acquire a 49% minority interest in
late December 1997 and has the right to acquire the remaining interest by
December 1998. The Company plans to finance the acquisition of its interest
through assumption of its pro rata share of existing mortgage debt of
approximately $16.2 million and the issuance initially of approximately $4.1
million of Common Units for the portion of the property to be acquired in 1997.
MERIDIAN VILLAGE SHOPPING CENTER ACQUISITION
The Company has entered a contract dated as of November 18, 1997 to acquire
Meridian Village Shopping Center, a 206,997 square foot promotional center
anchored by Home Depot, Circuit City and Payless for $20.7 million. The property
is located at the intersection of Telegraph and Guide Meridian Roads in
Bellingham, Washington. The Company plans to finance the acquisition through
additional borrowings under its Credit Facility. The acquisition remains subject
to customary due diligence items and is expected to close in late December.
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DISPOSITION OF PACIFIC WEST OUTLET CENTER
The Company has signed a Purchase Agreement for the sale of its Pacific West
Outlet Center in Gilroy, California, to Horizon Group, Inc., a factory-outlet
center REIT, for approximately $38.5 million. The disposition of the property,
which the Company acquired in 1993, is scheduled to close prior to the end of
1997, and will result in a gain to the Company of approximately $5.4 million.
The net proceeds will be used to pay down indebtedness under the Credit
Facility.
Pacific West Outlet Center consists of approximately 203,412 square feet of
space in Phases I and II of a larger project known as The Outlets at Gilroy,
which also includes approximately 373,900 square feet under Phases III, IV and
V, currently owned by the Buyer.
ADDITIONAL PROPERTY INFORMATION
The following table shows the composition of the Company's portfolio (i) as
of September 30, 1997 and (ii) on a pro forma basis as of November 30, 1997 as
if the Golden State Properties portfolio, the Acquired Powell Properties,
Mountaingate Plaza, Simi Valley Plaza and Meridian Village Shopping Center were
acquired and Pacific West Outlet Center was sold at that date.
TABLE 1
PORTFOLIO COMPOSITION BY GROSS LEASABLE AREA
<TABLE>
<CAPTION>
9/30/97 PRO FORMA(1)
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<S> <C> <C> <C> <C>
BY PROPERTY TYPE:
Retail...................................................... 4,516,614 88.4% 7,835,166 93.0%
Office...................................................... 591,769 11.6% 591,369 7.0%
---------- --------- ---------- ---------
Total....................................................... 5,108,383 100.0% 8,426,535 100.0%
By Region:
San Diego Region............................................ 1,613,772 31.6% 1,737,196 20.6%
Los Angeles Region.......................................... 1,980,762 38.8% 3,222,715 38.3%
San Francisco Region........................................ 1,513,849 29.6% 3,029,263 35.9%
Pacific Northwest Region.................................... -- 0.0% 437,361 5.2%
---------- --------- ---------- ---------
Total....................................................... 5,108,383 100.0% 8,426,535 100.0%
RETAIL PORTFOLIO BY PROPERTY TYPE:
Market/Drug................................................. 2,028,978 44.9% 5,048,816 64.4%
Promotional................................................. 1,876,589 41.5% 2,378,715 30.4%
Entertainment............................................... 80,995 1.8% 80,995 1.0%
Outlet...................................................... 458,480 10.2% 255,068 3.3%
Convenience................................................. 71,572 1.6% 71,572 0.9%
---------- --------- ---------- ---------
Total....................................................... 4,516,614 100.0% 7,835,166 100.0%
</TABLE>
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(1) Includes Mountaingate Plaza and the Acquired Powell Properties, which have
been acquired since September 30, 1997, as well as the Golden State
Properties, Simi Valley Plaza and Meridian Village Shopping Center, and
excludes Pacific West Factory Outlet Center.
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The following table sets forth certain information regarding the Golden
State Properties, the Acquired Powell Properties, Mountaingate Plaza, Simi
Valley Plaza and Meridian Village Shopping Center as of November 30, 1997.
TABLE 2
RECENT AND PENDING ACQUISITIONS
(AS OF NOVEMBER 30, 1997)
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<CAPTION>
COMPANY-OWNED GLA
GLA -----------------------------------------------
--------------------------------- ANNUALIZED
BASE RENT
COMPANY-OWNED OCCUPANCY (1) (2)
TYPE OF --------------------------------- TOTAL ----------------------------------- ----------
PROPERTY CENTER ANCHORS (4) SHOPS TOTAL PROPERTY ANCHORS SHOPS TOTAL ANCHORS
- ----------------------- ------------ ----------- --------- --------- --------- ----------- ----------- --------- ----------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
GOLDEN STATE PROPERTIES
SAN DIEGO REGION
Menifee Town Center Market 45,842 33,286 79,128 79,128 100.0% 94% 98% $ 471,888
MENIFEE
San Marcos Lucky Plaza Market -- 36,151 36,151 36,151 N/A 94% 94% N/A
----------- --------- --------- --------- ----- ----- --------- ----------
SAN MARCOS
SUBTOTAL/WEIGHTED
AVERAGE--SAN DIEGO
REGION 45,842 69,437 115,279 115,279 100.0% 93.9% 96.3% $ 471,888
LOS ANGELES REGION
Westminster Center Market/Drug 262,005 103,694 365,699 365,699 100.0% 72% 92% $3,362,400
WESTMINSTER
Bell Gardens
Marketplace (7) Market/Drug 71,780 88,058 159,838 159,838 100.0% 77% 87% $ 604,728
BELL GARDENS
Buena Vista Marketplace Market/Drug 45,000 45,995 90,995 90,995 100.0% 80% 90% $ 566,556
DUARTE
Ralph's Center Market 66,700 -- 66,700 66,700 100.0% N/A 100.0% $ 960,000
REDONDO BEACH
Centerwood Plaza Market 47,500 15,644 63,144 63,144 100.0% 78% 94.0% $ 148,200
----------- --------- --------- --------- ----- ----- --------- ----------
BELLFLOWER
SUBTOTAL/WEIGHTED
AVERAGE--L.A. REGION 492,985 253,391 746,376 746,376 100.0% 75.4% 91.6% $5,641,884
<CAPTION>
ANNUALIZED BASE RENT/
OCCUPIED SQUARE FOOT (3)
-------------------------------------
PROPERTY SHOPS TOTAL ANCHORS (5) SHOPS (6) TOTAL
- ----------------------- ---------- ---------- ------------- ----------- ---------
<S> <C> <C> <C> <C> <C>
GOLDEN STATE PROPERTIES
SAN DIEGO REGION
Menifee Town Center $ 589,142 $1,061,030 $ 10.29 $ 18.79 $ 13.75
MENIFEE
San Marcos Lucky Plaza $ 701,330 $ 701,330 N/A $ 20.71 $ 20.71
---------- ---------- ------ ----------- ---------
SAN MARCOS
SUBTOTAL/WEIGHTED
AVERAGE--SAN DIEGO
REGION $1,290,472 $1,762,360 $ 10.29 $ 19.79 $ 15.87
LOS ANGELES REGION
Westminster Center $1,436,028 $4,798,428 $ 12.83 $ 19.30 $ 14.26
WESTMINSTER
Bell Gardens
Marketplace (7) $1,316,705 $1,921,433 $ 8.42 $ 19.47 $ 13.78
BELL GARDENS
Buena Vista Marketplace $ 610,780 $1,177,336 $ 12.59 $ 16.60 $ 14.40
DUARTE
Ralph's Center $ N/A $ 960,000 $ 14.39 N/A $ 14.39
REDONDO BEACH
Centerwood Plaza $ 141,972 $ 290,172 $ 3.12 $ 11.69 $ 4.87
---------- ---------- ------ ----------- ---------
BELLFLOWER
SUBTOTAL/WEIGHTED
AVERAGE--L.A. REGION $3,505,485 $9,147,369 $ 11.44 $ 18.36 $ 13.37
</TABLE>
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TABLE 2 (CONTINUED)
RECENT AND PENDING ACQUISITIONS
(AS OF NOVEMBER 30, 1997)
<TABLE>
<CAPTION>
COMPANY-OWNED GLA
GLA -----------------------------------------------
--------------------------------- ANNUALIZED
BASE RENT
COMPANY-OWNED OCCUPANCY (1) (2)
TYPE OF --------------------------------- TOTAL ----------------------------------- ----------
PROPERTY CENTER ANCHORS (4) SHOPS TOTAL PROPERTY ANCHORS SHOPS TOTAL ANCHORS
- ----------------------- ------------ ----------- --------- --------- --------- ----------- ----------- --------- ----------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
GOLDEN STATE PROPERTIES
SAN FRANCISCO REGION
Prospector's Plaza Market/Drug 141,149 77,963 219,112 219,112 100.0% 83% 94% $ 528,810
PLACERVILLE
Santa Rosa Value Center Market/Drug 158,000 40,528 198,528 198,528 100.0% 68% 93% $1,133,484
SANTA ROSA
Fremont Gateway Plaza Market 112,513 82,579 195,092 195,092 100.0% 84% 93% $1,371,071
FREMONT
Southhampton Center Market 60,000 102,390 162,390 162,390 100.0% 83% 90% $ 411,900
BENECIA
Silver Creek Plaza Market/Drug 57,493 76,525 134,018 134,018 100.0% 80% 89% $ 491,280
SAN JOSE
Summerhills Shopping
Center Market 55,826 77,788 133,614 133,614 100.0% 71% 83% $ 248,208
SACRAMENTO
Shasta Crossroads Market 54,239 67,137 121,376 121,376 100.0% 78% 87% $ 406,788
REDDING
Creekside Shopping
Center Market 58,748 57,467 116,215 116,215 100.0% 66% 83% $ 339,252
VACAVILLE
580 Marketplace Market 51,433 49,720 101,153 101,153 100.0% 92% 96% $ 670,500
CASTRO VALLEY
Discovery Plaza (7) Market 40,325 53,073 93,398 93,398 100.0% 90% 94% $ 290,220
SACRAMENTO
Sunset Center Market/Drug 47,115 38,153 85,268 85,268 100.0% 91% 96% $ 254,484
SUISUN CITY
Hallmark Town Center Market 40,320 44,746 85,066 85,066 100.0% 77% 84% $ 302,400
MADERA
Arcade Square Market 19,722 56,979 76,701 76,701 100.0% 82% 87% $ 111,600
----------- --------- --------- --------- ----- ----- --------- ----------
SACRAMENTO
Golden State Properties
Total/Weighted
Average
SUBTOTAL--S.F. REGION 896,883 825,048 1,721,931 1,721,931 100.0% 80.4% 90.6% $6,559,997
<CAPTION>
ANNUALIZED BASE RENT/
OCCUPIED SQUARE FOOT (3)
-------------------------------------
PROPERTY SHOPS TOTAL ANCHORS (5) SHOPS (6) TOTAL
- ----------------------- ---------- ---------- ------------- ----------- ---------
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GOLDEN STATE PROPERTIES
SAN FRANCISCO REGION
Prospector's Plaza $1,036,165 $1,564,975 $ 3.75 $ 16.07 $ 7.61
PLACERVILLE
Santa Rosa Value Center $ 445,657 $1,579,141 $ 7.17 $ 16.25 $ 8.52
SANTA ROSA
Fremont Gateway Plaza $1,174,416 $2,545,487 $ 12.19 $ 16.95 $ 14.00
FREMONT
Southhampton Center $1,460,713 $1,872,613 $ 6.87 $ 17.09 $ 12.87
BENECIA
Silver Creek Plaza $1,003,718 $1,494,998 $ 8.55 $ 16.32 $ 12.57
SAN JOSE
Summerhills Shopping
Center $ 656,232 $ 904,440 $ 4.45 $ 11.85 $ 8.13
SACRAMENTO
Shasta Crossroads $ 824,191 $1,230,979 $ 7.50 $ 15.67 $ 11.52
REDDING
Creekside Shopping
Center $ 523,033 $ 862,285 $ 5.77 $ 13.87 $ 8.94
VACAVILLE
580 Marketplace $ 814,656 $1,485,156 $ 13.04 $ 17.80 $ 15.28
CASTRO VALLEY
Discovery Plaza (7) $ 690,195 $ 980,415 $ 7.20 $ 14.41 $ 11.11
SACRAMENTO
Sunset Center $ 457,039 $ 711,523 $ 5.40 $ 13.18 $ 8.70
SUISUN CITY
Hallmark Town Center $ 436,065 $ 738,465 $ 7.50 $ 12.65 $ 9.87
MADERA
Arcade Square $ 652,002 $ 763,602 $ 5.66 $ 13.96 $ 11.49
---------- ---------- ------ ----------- ---------
SACRAMENTO
Golden State Properties
Total/Weighted
Average
SUBTOTAL--S.F. REGION $10,174,082 $16,734,079 $ 7.31 $ 15.34 $ 10.73
</TABLE>
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TABLE 2 (CONTINUED)
RECENT AND PENDING ACQUISITIONS
(AS OF NOVEMBER 30, 1997)
<TABLE>
<CAPTION>
GLA
----------------------------------
COMPANY-OWNED
TYPE OF ---------------------------------- TOTAL
PROPERTY CENTER ANCHORS (4) SHOPS TOTAL PROPERTY
- ---------------------------------------- ----------- ----------- --------- --------- ---------
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OTHER ACQUISITION PROPERTIES
SAN DIEGO REGION
Silver Plaza Market/Drug -- 8,545 8,545 52,921
----------- --------- --------- ---------
SILVER CITY, NM
SUBTOTAL--S.D. REGION -- 8,545 8,545 52,921
LOS ANGELES REGION
Simi Valley Plaza (8) Promotional 138,884 70,863 209,747 219,775
Mountaingate Plaza Promotional 135,250 146,913 282,163 282,163
----------- --------- --------- ---------
SIMI VALLEY
SUBTOTAL--L.A. REGION 274,134 217,776 491,910 501,938
PACIFIC NORTHWEST REGION
Chambers Creek Market/Drug 42,010 16,169 58,179 58,179
TACOMA
Fairwood Square Market/Drug -- 32,910 32,910 76,040
RENTON
Puget Park Market/Drug -- 50,788 50,788 92,684
SOUTH EVERETT
Meridian Village Promotional 165,568 41,429 206,997 206,977
BELLINGHAM
Design Market Promotional 30,509 57,978 88,487 88,487
----------- --------- --------- ---------
BELLEVUE
SUBTOTAL--PACIFIC N.W. REGION 238,087 199,274 437,361 522,367
TOTAL RECENT AND PENDING ACQUISITIONS 1,947,931 1,573,471 3,521,402 3,660,812
<CAPTION>
COMPANY-OWNED GLA
--------------------------------------------------------------------------------------
ANNUALIZED BASE RENT/
OCCUPIED SQUARE FOOT
OCCUPANCY (1) ANNUALIZED BASE RENT (2) (3)
---------------------- ------------------------------------- -----------------------
PROPERTY ANCHORS SHOPS TOTAL ANCHORS SHOPS TOTAL ANCHORS (5) SHOPS (6)
- ---------------------------------------- ------- ----- ----- ----------- ----------- ----------- ----------- ---------
<S> <C>
OTHER ACQUISITION PROPERTIES
SAN DIEGO REGION
Silver Plaza N/A 100.0% 100.0% $ 0 $ 75,619 $ 75,619 N/A $ 8.85
------- ----- ----- ----------- ----------- ----------- ----------- ---------
SILVER CITY, NM
SUBTOTAL--S.D. REGION 100.0% 100.0% 100.0% $ 0 $ 75,619 $ 75,619 N/A $ 8.85
LOS ANGELES REGION
Simi Valley Plaza (8) 100.0% 92.6% 97.5% $ 1,533,796 $ 929,795 $ 2,463,591 $11.04 $14.17
Mountaingate Plaza 100% 84.2% 91.8% 1,217,851 1,637,201 2,855,052 9.00 13.23
------- ----- ----- ----------- ----------- ----------- ----------- ---------
SIMI VALLEY
SUBTOTAL--L.A. REGION 100.0% 87.0% 94.2% $ 2,751,647 $ 2,566,996 $ 5,318,643 $10.04 $13.56
PACIFIC NORTHWEST REGION
Chambers Creek 100.0% 100.0% 100.0% $ 90,000 $ 186,469 $ 276,469 $ 2.14 $11.53
TACOMA
Fairwood Square N/A 78.1% 78.1% $ 0 $ 421,997 $ 421,997 N/A $16.41
RENTON
Puget Park N/A 100.0% 100.0% $ 0 $ 462,068 $ 462,068 N/A $ 9.10
SOUTH EVERETT
Meridian Village 100.0% 74.3% 94.9% $ 1,523,339 $ 345,351 $ 1,868,690 $ 9.20 $11.22
BELLINGHAM
Design Market 100.0% 100.0% 100.0% $ 333,293 $ 843,469 $ 1,176,762 $10.92 $14.55
------- ----- ----- ----------- ----------- ----------- ----------- ---------
BELLEVUE
SUBTOTAL--PACIFIC N.W. REGION 100.0% 91.0% 95.9% $ 1,946,632 $ 2,259,354 $ 4,205,986 $ 8.18 $12.45
TOTAL RECENT AND PENDING ACQUISITIONS 100.0% 82.5% 92.2% $17,372,048 $19,872,098 $37,244,056 $ 8.92 $15.30
<CAPTION>
PROPERTY TOTAL
- ---------------------------------------- ------
OTHER ACQUISITION PROPERTIES
SAN DIEGO REGION
Silver Plaza $ 8.85
------
SILVER CITY, NM
SUBTOTAL--S.D. REGION $ 8.85
LOS ANGELES REGION
Simi Valley Plaza (8) $12.05
Mountaingate Plaza 11.02
------
SIMI VALLEY
SUBTOTAL--L.A. REGION $11.18
PACIFIC NORTHWEST REGION
Chambers Creek $ 4.75
TACOMA
Fairwood Square $16.41
RENTON
Puget Park $ 9.10
SOUTH EVERETT
Meridian Village $ 9.52
BELLINGHAM
Design Market $13.30
------
BELLEVUE
SUBTOTAL--PACIFIC N.W. REGION $10.03
TOTAL RECENT AND PENDING ACQUISITIONS $11.47
</TABLE>
- ------------------------
(1) Based on occupancy (leases in effect and not in default) as of November 30,
1997. Data reflects occupancy only for those portions of the properties
owned by the Company.
(2) Annualized base rent is calculated by multiplying base rent for November
1997 by twelve.
(3) Calculated by dividing annualized base rent (calculated as described in note
(2) above) by the square footage that the Company or the seller, as the case
may be, had leased at November 30, 1997.
(4) Anchor tenants are defined as all tenants occupying at least 14,000 square
feet.
(5) Calculated by dividing annualized base rent (calculated as described in note
(2) above) for the anchor tenants by the square footage that they had leased
at November 30, 1997.
(6) Calculated by dividing annualized base rent (calculated as described in note
(2) above) for the tenants (excluding anchor tenants) by the square footage
that they had leased at November 30, 1997.
(7) Indicates a property held under ground lease.
(8) Data is for this property as a whole. The Company expects initially to
acquire a 49% minority interst in late December 1997 and has a right to
acquire the remaining interst by December 1998.
9
<PAGE>
The following table sets forth certain information relating to anchor
tenants for the Golden State Properties portfolio, the Powell Portfolio,
Mountaingate Plaza, Simi Valley Plaza and Meridian Village Shopping Center.
Anchor tenants are defined as all tenants occupying at least 14,000 square feet.
TABLE 3
ANCHOR TENANT SUMMARY FOR RECENT AND PENDING ACQUISITIONS
(AS OF NOVEMBER 30, 1997)
<TABLE>
<CAPTION>
ANCHOR TENANTS
----------------------------------
SQUARE LEASE
PROPERTY TYPE OF CENTER NAME FOOTAGE EXPIRATION
- ------------------------------------------ --------------- ---------------------- ---------- ---------------
<S> <C> <C> <C> <C>
GOLDEN STATE PROPERTIES
SAN DIEGO REGION
Menifee Town Center..................... Market Ralph's 45,842 3/31/07
MENIFEE Target 118,000 (Not Owned)
San Marcos Lucky Plaza.................. Market/Drug Lucky's 45,907 (Not Owned)
<CAPTION>
----------
<S> <C> <C> <C> <C>
SAN MARCOS
SAN DIEGO REGION SUBTOTAL............... 209,749
SAN DIEGO REGION SUBTOTAL-- 45,842
COMPANY-OWNED ANCHORS ONLY............
LOS ANGELES REGION
Westminster Center...................... Market/Drug Lucky's Market 50,000 5/31/17
WESTMINSTER Thrifty Drugs 19,300 5/31/16
Home Depot 102,220 1/31/12
Edwards Theatres 35,000 2/28/12
Hollytron 25,000 1/31/12
Office Max (1) 30,485 7/12/07
Bell Gardens Marketplace................ Market/Drug Food 4 Less 52,924 7/1/15
BELLGARDENS Thrifty Drugs 18,856 5/31/10
Buena Vista Marketplace................. Market/Drug Ralph's 45,000 7/31/05
DUARTE
Ralphs Center........................... Market Ralph's 66,700 12/31/12
REDONDO BEACH
Centerwood Plaza........................ Market 32nd Street Market 30,000 5/31/08
BELLFLOWER Basically A Buck 17,500 5/31/08
<CAPTION>
----------
<S> <C> <C> <C> <C>
L.A. REGION SUBTOTAL.................... 492,985
L.A. REGION SUBTOTAL-- 492,985
COMPANY-OWNED ANCHORS ONLY............
</TABLE>
10
<PAGE>
TABLE 3 (CONTINUED)
ANCHOR TENANT SUMMARY FOR RECENT AND PENDING ACQUISITIONS
(AS OF NOVEMBER 30, 1997)
<TABLE>
<CAPTION>
ANCHOR TENANTS
----------------------------------
SQUARE LEASE
PROPERTY TYPE OF CENTER NAME FOOTAGE EXPIRATION
- ------------------------------------------ --------------- ---------------------- ---------- ---------------
<S> <C> <C> <C> <C>
SAN FRANCISCO REGION
Prospector's Plaza...................... Market/Drug Lucky's 29,199 11/30/06
PLACERVILLE Longs Drugs 25,536 2/28/07
K-Mart 86,414 10/31/06
Santa Rosa Value Center................. Market/Drug Food 4 Less 54,600 8/31/05
SANTA ROSA Thrifty 19,600 5/31/09
Home Base 83,800 2/29/08
Fremont Gateway Plaza................... Market Raley's 62,418 12/31/20
FREMONT Family Fitness 26,550 7/31/13
Super Saver Cinemas 23,545 8/30/12
Southhampton Center..................... Market Raley's 60,000 11/30/13
BENECIA
Silver Creek Plaza...................... Market/Drug Safeway 41,493 12/21/98
SAN JOSE Walgreens 16,000 12/31/11
Orchard Supply 50,000 (Not Owned)
Hardware
Summer Hills Shopping Center............ Market Raley's 55,826 11/30/05
SACRAMENTO
Shasta Crossroads....................... Market Food 4 Less 54,239 2/28/10
REDDING
Creekside Shopping Center............... Market Raley's 58,748 11/30/13
VACAVILLE
580 Marketplace......................... Market PW Foods 37,098 6/30/05
CASTRO VALLEY 24 Hour Nautilus 14,335 12/1/02
Discovery Plaza......................... Market Bel Air Market 40,325 3/31/14
SACRAMENTO
Sunset Center........................... Market/Drug Lucky's 29,072 5/31/06
SUISUN CITY Thrifty Drug 18,043 5/31/05
Hallmark Town Center.................... Market Food 4 Less 40,320 8/6/06
MADERA
Arcade Square........................... Market Raley's 19,722 4/1/98
<CAPTION>
----------
<S> <C> <C> <C> <C>
SACRAMENTO
SAN FRANCISCO REGION SUBTOTAL........... 966,380
SAN FRANCISCO REGION SUBTOTAL-- 916,380
COMPANY-OWNED ANCHORS ONLY............
</TABLE>
11
<PAGE>
TABLE 3 (CONTINUED)
ANCHOR TENANT SUMMARY FOR RECENT AND PENDING ACQUISITIONS
(AS OF NOVEMBER 30, 1997)
<TABLE>
<CAPTION>
ANCHOR TENANTS
----------------------------------
SQUARE LEASE
PROPERTY TYPE OF CENTER NAME FOOTAGE EXPIRATION
- ------------------------------------------ --------------- ---------------------- ---------- ---------------
<S> <C> <C> <C> <C>
OTHER ACQUISITION PROPERTIES
SAN DIEGO REGION
Silver Plaza............................ Market/Drug Albertson's 44,376 (Not Owned)
<CAPTION>
----------
<S> <C> <C> <C> <C>
SAN DIEGO REGION SUBTOTAL............... 44,376
SAN DIEGO REGION SUBTOTAL-- 0
COMPANY-OWNED ANCHORS ONLY............
LOS ANGELES REGION
Simi Valley Plaza....................... Promotional Edward's Theatres 34,980 6/30/19
SIMI VALLEY Home Base 103,904 1/31/11
<CAPTION>
----------
<S> <C> <C> <C> <C>
LOS ANGELES REGION SUBTOTAL............. 138,884
LOS ANGELES REGION SUBTOTAL-- 138,884
COMPANY-OWNED ANCHORS ONLY............
PACIFIC NORTHWEST REGION
Chambers Creek.......................... Market/Drug Albertson's 42,010 6/15/18
TACOMA
Fairwood Square......................... Market/Drug Albertson's 43,130 (Not Owned)
RENTON
Puget Park.............................. Market/Drug Albertson's 41,896 (Not Owned)
EVERETT
Meridian Village........................ Promotional Home Depot 105,744 4/14/13
BELLINGHAM Circuit City 36,818 1/31/15
Payless 23,006 7/31/04
Design Market........................... Promotional Schoenfeld Interiors 14,486 9/30/99
BELLEVUE Applegreen Furniture 16,023 6/1/99
<CAPTION>
----------
<S> <C> <C> <C> <C>
PACIFIC NORTHWEST REGION SUBTOTAL....... 323,113
PACIFIC NORTHWEST REGION 238,087
SUBTOTAL--COMPANY-OWNED ANCHORS
ONLY..................................
TOTAL RECENT AND PENDING ACQUISITIONS..... 2,175,487
TOTAL RECENT AND PENDING 1,832,178
ACQUISITIONS--COMPANY-OWNED ANCHORS
ONLY..................................
</TABLE>
- ------------------------
(1) The Office Max lease is in effect but the space leased thereunder is
currently vacant.
12
<PAGE>
The following table lists the top tenants (in terms of annualized base rent)
for the Golden State Properties, based on leases in place as of November 30,
1997. In the aggregate, these top ten tenants account for 38.06% of the
annualized base rent.
TABLE 4
TOP TEN ANCHOR TENANTS FOR GOLDEN STATE PROPERTIES PORTFOLIO
BY PERCENTAGE OF ANNUALIZED BASE RENT
(AS OF NOVEMBER 30, 1997)
<TABLE>
<CAPTION>
NUMBER OF PERCENTAGE OF PERCENTAGE OF
TENANT ANNUALIZED ANNUALIZED LEASED LEASED
TENANT LOCATIONS BASE RENT (1) BASE RENT (1) GLA GLA
- -------------------------------------------- --------------- ------------- ------------- ---------- -------------
<S> <C> <C> <C> <C> <C>
Raley's..................................... 6 $ 2,150,196 7.78% 297,039 12.61%
Ralph's..................................... 3 $ 1,998,444 7.23% 157,542 6.69%
Food 4 Less................................. 4 $ 1,519,416 5.50% 202,083 8.58%
Home Depot.................................. 1 $ 1,259,352 4.56% 102,220 4.34%
Lucky's..................................... 3 $ 934,094 3.38% 108,271 4.60%
Thrifty Drugs............................... 4 $ 682,860 2.47% 75,799 3.22%
Home Base................................... 1 $ 586,644 2.12% 83,800 3.56%
Edwards Theatres............................ 1 $ 504,996 1.83% 35,000 1.49%
PW Foods.................................... 1 $ 479,304 1.73% 37,098 1.58%
Office Max.................................. 1 $ 405,012 1.47% 30,485 1.29%
--
------------- ------ ---------- ------
TOTAL....................................... 25 $ 10,520,318 38.06% 1,129,337 47.95%
TOTAL PORTFOLIO............................. $ 27,643,808 100.00% 2,355,278 100.00%
</TABLE>
- ------------------------
(1) Annualized base rent is calculated by multiplying base rent for November
1997 by twelve.
13
<PAGE>
The following table set forth scheduled lease expirations for leases in
effect as of November 30, 1997 for the Golden State Properties, the Powell
Portfolio, Mountaingate Plaza, Simi Valley Plaza and Meridian Village Shopping
Center. The table assumes that none of the tenants exercise renewal options or
termination rights.
TABLE 5
LEASE EXPIRATIONS FOR RECENT AND PENDING ACQUISITIONS
(AS OF NOVEMBER 30, 1997)
<TABLE>
<CAPTION>
GROSS LEASABLE AREA ANNUALIZED BASE RENT (1)
NUMBER OF ------------------------- ---------------------------------------
LEASES APPROXIMATE PERCENT OF PERCENT OF AVERAGE
EXPIRING GLA TOTAL AMOUNT TOTAL PER SQ FT
--------------- ------------ ----------- ------------- ----------- -----------
<S> <C> <C> <C> <C> <C> <C>
GOLDEN STATE PROPERTIES
ANCHOR TENANT EXPIRATIONS (2)
1997............................ 0 -- 0.00% $ -- 0.00% $ --
1998............................ 2 61,215 2.60% $ 443,520 1.60% $ 7.25
1999............................ 0 -- 0.00% $ -- 0.00% $ --
2000............................ 0 -- 0.00% $ -- 0.00% $ --
2001............................ 0 -- 0.00% $ -- 0.00%
2002............................ 1 14,335 0.61% $ 191,196 0.69% $ 13.34
2003............................ 0 -- 0.00% $ -- 0.00% $ --
2004............................ 0 -- 0.00% $ -- 0.00%
2005............................ 5 210,567 8.94% $ 1,771,668 6.41% $ 8.41
2006............................ 4 185,005 7.85% $ 964,494 3.49% $ 5.21
Thereafter......................... 23 964,588 40.95% $ 9,302,891 33.65% $ 9.64
SHOP TENANT EXPIRATIONS
1997............................ 7 22,319 .95% $ 301,106 1.09% $ 13.49
1998............................ 57 73,698 3.13% $ 1,236,411 4.47% $ 16.78
1999............................ 58 100,661 4.27% $ 1,612,407 5.83% $ 16.02
2000............................ 77 134,649 5.72% $ 2,168,636 7.84% $ 16.11
2001............................ 70 170,539 7.24% $ 2,785,907 10.08% $ 16.34
2002............................ 80 174,084 7.39% $ 2,921,371 10.57% $ 16.78
2003............................ 27 15,836 .67% $ 356,801 1.29% $ 22.53
2004............................ 7 17,011 0.72% $ 227,580 .82% $ 13.38
2005............................ 10 34,770 1.48% $ 517,308 1.87% $ 14.88
2006............................ 10 81,436 3.46% $ 1,302,552 4.71% $ 15.99
Thereafter......................... 53 94,565 4.02% $ 1,539,960 5.57% $ 16.28
TOTAL EXPIRATIONS
1997............................ 7 22,319 .95% $ 301,106 1.09% $ 13.49
1998............................ 59 134,913 5.73% $ 1,679,931 6.08% $ 12.45
1999............................ 58 100,661 4.27% $ 1,612,407 5.83% $ 16.02
2000............................ 77 134,649 5.72% $ 2,168,636 7.84% $ 16.11
2001............................ 70 170,539 7.24% $ 2,785,907 10.08% $ 16.34
2002............................ 81 188,419 8.00% $ 3,112,567 11.26% $ 16.52
2003............................ 27 15,836 .67% $ 356,801 1.29% $ 22.53
2004............................ 7 17,011 .72% $ 227,580 .82% $ 13.38
2005............................ 15 245,337 10.42% $ 2,288,976 8.78% $ 9.33
2006............................ 14 266,441 11.31% $ 2,267,046 9.20% $ 8.51
Thereafter......................... 22 1,059,153 44.97% $ 10,842,851 39.22% $ 10.24
</TABLE>
14
<PAGE>
TABLE 5 (CONTINUED)
LEASE EXPIRATIONS FOR RECENT AND PENDING ACQUISITIONS
(AS OF NOVEMBER 30, 1997)
<TABLE>
<CAPTION>
GROSS LEASABLE AREA ANNUALIZED BASE RENT
NUMBER OF ------------------------- ---------------------------------------
LEASES APPROXIMATE PERCENT OF PERCENT OF AVERAGE
EXPIRING GLA TOTAL AMOUNT TOTAL PER SQ FT
--------------- ------------ ----------- ------------- ----------- -----------
<S> <C> <C> <C> <C> <C> <C>
OTHER ACQUISITION PROPERTIES
ANCHOR TENANT EXPIRATIONS (2)
1997............................ 0 -- 0.00% $ -- 0.00% $ --
1998............................ 0 -- 0.00% $ -- 0.00% $ --
1999............................ 3 47,957 5.54% $ 534,294 5.81% $ 11.14
2000............................ 0 -- 0.00% $ -- 0.00% $ --
2001............................ 0 -- 0.00% $ -- 0.00% $ --
2002............................ 1 24,066 2.78% $ 204,561 2.22% $ 8.50
2003............................ 0 -- 0.00% $ -- 0.00% $ --
2004............................ 1 23,006 2.66% $ 84,384 0.92% $ 3.67
2005............................ 0 -- 0.00% $ -- 0.00% $ --
2006............................ 0 -- 0.00% $ -- 0.00% $ --
Thereafter......................... 7 378,801 43.72% $ 3,855,040 41.91% $ 10.18
SHOP TENANT EXPIRATIONS
1997............................ 3 5,154 0.59% $ 87,932 .96% $ 17.06
1998............................ 26 54,087 6.24% $ 783,022 8.51% $ 14.48
1999............................ 24 64,065 7.39% $ 784,701 8.53% $ 12.25
2000............................ 21 71,897 8.30% $ 698,011 7.59% $ 9.71
2001............................ 19 52,065 6.01% $ 570,515 6.20% $ 10.96
2002............................ 14 48,520 5.60% $ 580,375 6.31% $ 11.96
2003............................ 10 20,492 2.37% $ 390,010 3.36% $ 15.08
2004............................ 7 34,772 4.01% $ 246,310 2.68% $ 7.08
2005............................ 4 20,650 2.38% $ 173,765 1.89% $ 8.41
2006............................ 1 1,600 .18% $ 22,080 .24% $ 13.80
Thereafter......................... 4 19,270 2.22% $ 264,975 2.88% $ 13.75
TOTAL EXPIRATIONS
1997............................ 3 5,154 0.59% $ 87,932 .96% $ 17.06
1998............................ 26 54,087 0.24% $ 783,022 8.51% $ 14.48
1999............................ 27 112,022 12.93% $ 1,318,995 14.34% $ 11.77
2000............................ 21 71,897 8.30% $ 698,011 7.59% $ 9.71
2001............................ 19 52,065 6.01% $ 570,515 8.53% $ 10.96
2002............................ 15 72,586 8.38% $ 784,936 6.20% $ 10.81
2003............................ 10 20,492 2.37% $ 309,010 8.53% $ 15.08
2004............................ 8 57,778 6.67% $ 330,694 3.36% $ 5.72
2005............................ 4 20,650 2.38% $ 173,765 1.89% $ 8.41
2006............................ 1 1,600 0.18% $ 22,080 .24% $ 13.80
Thereafter......................... 11 398,071 45.95% $ 4,120,015 44.79% $ 10.35
</TABLE>
15
<PAGE>
TABLE 5 (CONTINUED)
LEASE EXPIRATIONS FOR RECENT AND PENDING ACQUISITIONS
(AS OF NOVEMBER 30, 1997)
<TABLE>
<CAPTION>
GROSS LEASABLE AREA ANNUALIZED BASE RENT
NUMBER OF ------------------------- ---------------------------------------
LEASES APPROXIMATE PERCENT OF PERCENT OF AVERAGE
EXPIRING GLA TOTAL AMOUNT TOTAL PER SQ FT
--------------- ------------ ----------- ------------- ----------- -----------
<S> <C> <C> <C> <C> <C> <C>
GRAND TOTAL
ANCHOR TENANT EXPIRATIONS (2)
1997............................ 0 -- 0.00% $ -- 0.00% $ --
1998............................ 2 61,215 1.90% $ 443,520 1.20% $ 7.25
1999............................ 3 47,957 1.49% $ 534,294 1.45% $ --
2000............................ 0 -- 0.00% $ -- 0.00% $ --
2001............................ 0 -- 0.00% $ -- 0.00%
2002............................ 2 38,401 1.19% $ 395,757 1.07% $ 10.31
2003............................ 0 -- 0.00% $ -- 0.00% $ --
2004............................ 1 23,006 0.71% $ 84,384 0.23% $ 3.67
2005............................ 5 210,567 6.54% $ 1,771,668 4.81% $ 8.41
2006............................ 4 185,005 5.74% $ 964,494 2.62% $ 5.21
Thereafter......................... 30 1,343,389 41.70% $ 13,157,931 35.71% $ 9.79
SHOP TENANT EXPIRATIONS
1997............................ 10 27,473 0.85% $ 389,038 1.06% $ 14.16
1998............................ 83 127,785 3.97% $ 2,019,433 5.48% $ 15.80
1999............................ 82 164,726 5.11% $ 2,397,112 6.51% $ 14.55
2000............................ 98 206,546 6.41% $ 2,866,647 7.78% $ 13.88
2001............................ 89 222,604 6.91% $ 3,356,422 9.11% $ 15.08
2002............................ 94 222,604 6.91% $ 3,501,746 9.50% $ 15.73
2003............................ 37 36,328 1.13% $ 665,881 1.81% $ 18.33
2004............................ 14 51,783 1.61% $ 473,890 1.29% $ 9.15
2005............................ 14 55,420 1.72% $ 691,073 1.88% $ 12.47
2006............................ 11 83,036 2.58% $ 1,324,632 3.60% $ 15.95
Thereafter......................... 57 113,835 3.53% $ 1,804,935 4.90% $ 15.86
TOTAL EXPIRATIONS
1997............................ 10 27,473 0.85% $ 389,038 1.06% $ 14.16
1998............................ 85 189,000 5.87% $ 2,462,953 6.69% $ 13.03
1999............................ 85 212,683 6.60% $ 2,931,402 7.96% $ 13.78
2000............................ 98 206,546 6.41% $ 2,866,647 7.78% $ 13.88
2001............................ 89 222,604 6.91% $ 3,356,422 9.11% $ 15.08
2002............................ 96 261,005 8.10% $ 3,897,503 10.58% $ 14.93
2003............................ 37 36,328 1.13% $ 665,811 1.81% $ 18.33
2004............................ 15 74,789 2.32% $ 558,274 1.52% $ 7.46
2005............................ 19 265,987 8.26% $ 2,462,741 6.68% $ 9.26
2006............................ 15 268,041 8.32% $ 2,289,126 6.21% $ 8.54
Thereafter......................... 33 1,457,224 45.23% $ 14,962,866 40.61% $ 10.27
</TABLE>
- ------------------------
(1) Annualized base rent is calculated by multiplying base rent for November
1997 by twelve.
(2) Anchor tenants are defined as all tenants occupying at least 14,000 square
feet.
16
<PAGE>
OPERATING PARTNERSHIP FORMATION
On November 14, 1997, the Company formed Burnham Pacific Operating
Partnership, L.P. (the "Operating Partnership") under the Delaware Revised
Uniform Limited Partnership Act. The Company is in the process of transferring
to the Operating Partnership legal or beneficial ownership of substantially all
of the real property and related personal property owned by the Company and its
subsidiaries and of the beneficial interest owned by the Company and its
subsidiaries in any partnership or limited liability company that owns a direct
or indirect interest in real property and related personal property. The Company
intends that the Operating Partnership will be the vehicle through which the
Company will own its current assets, will make its future acquisitions,
including the acquisition of the Golden State Properties, Meridian Village
Shopping Center and its interest in Simi Valley Plaza, and generally conduct its
business. The Company believes that this structure (frequently called an "UPREIT
Structure") enhances the Company's ability to acquire properties from existing
owners on a basis which the Company understands may defer the recognition of
certain federal income taxes to the contributing owners.
The transfer and contribution by the Company of its properties to the
Operating Partnership will have no effect upon the consolidated financial
statements of the Company.
Upon the closing of the acquisition of the Golden State Properties pursuant
to the Contribution Agreement, the Contributors will be admitted as additional
limited partners in the Operating Partnership upon the issuance to them of
2,000,000 Preferred Units. See "Contribution Agreement." The existing owners of
Simi Valley Plaza will receive Common Units as a part of the consideration for
the acquisition of that property.
DESIGNATION OF SERIES A PREFERRED STOCK
Pursuant to the Company's charter, the Company's Board of Directors has
established and designated a series of the Company's authorized preferred stock
consisting of 4,800,000 shares of Series 1997-A Convertible Preferred Stock
("Series A Preferred Stock"). The summary of terms of the Series A Preferred
Stock set forth below does not purport to be complete and is subject to, and
qualified in entirety by, the complete text of the Articles Supplementary to the
Company's charter filed as an exhibit to this Report on Form 8-K, which is
hereby expressly incorporated by reference and made a part hereof.
Stated Value and Liquidation Preference
The Series A Preferred Stock has a stated value of $25 per share ("Stated
Value"), and upon the distribution of assets on the liquidation, dissolution or
winding up of the Company each share of Series A Preferred Stock shall be
entitled to a preferential payment of $25 plus any accrued and unpaid dividend
prior to the payment of any amount with respect to shares of the Company's
Common Stock ("Common Stock").
Conversion Right
Subject to the limitations on conversion described below, each share of
Series A Preferred Stock is convertible into a number of shares of Common Stock
obtained by dividing the $25 stated value of the Series A Preferred Stock by a
conversion price of $15.375, as the same may be adjusted pursuant to
antidilution provisions described in the Articles Supplementary.
Dividends and Distributions
Holders of each share of Series A Preferred Stock will be entitled to
receive out of funds legally available for the payment of dividends, cumulative
quarterly cash dividends equal to the greater of (i) 2.00% (per quarter) of the
$25.00 per share Stated Value, and (ii) the amount of dividends payable on the
number of Shares of Common Stock into which the shares of Series A Preferred
Stock is then convertible. Such cumulative quarterly cash dividends will accrue
daily and will, to the extent not paid in full on the applicable dividend
payment date, together with accruals thereon, accrue at the compounded
17
<PAGE>
quarterly rate of 2.00% from such date until payment is made, whether or not the
Company has earnings or surplus.
Unless and until all accrued dividends on the Series A Preferred Stock
through the most recent preceding dividend payment date have been paid (or are
being paid contemporaneously therewith), with only limited exceptions the
Company may not (i) declare or pay any dividend on, or set aside any funds or
assets for payment or distribution with regard thereto or for redemption or
purchase of, any Common Stock, (ii) authorize, take or cause or permit to be
taken any action as the general partner of the Operating Partnership that will
result in the declaration or payment by the Operating Partnership of any
distribution to its partners (other than distributions made concurrently with
distributions payable to the Company in respect of the Preferred Units to be
owned by the Company, which distributions will be used by the Company to fund
the payment in full of all such accrued dividends).
While any shares of Series A Preferred Stock are outstanding, the Company
may not pay any dividend on any shares of any class or series of stock of the
Company which ranks on a parity with the Series A Preferred Stock as to payment
of dividends unless at least a proportionate payment is made with regard to all
accrued dividends on the Series A Preferred Stock (except, as to any shares of
the Series A Preferred Stock as to which a notice of conversion has been
furnished by the holder thereof, at the effective time of conversion) through
the most recent preceding dividend payment date.
Voting Rights
Holders of shares of Series A Preferred Stock will have the following voting
rights:
Except as set forth below, the holders of shares of Series A Preferred Stock
will have the right to vote on all matters on which the holders of Common Stock
are entitled to vote on an "as converted" basis with holders of shares of the
Common Stock, as though part of the same class as holders of Common Stock. The
holders of shares of Series A Preferred Stock shall not have the right, however,
to vote (and shall not be counted in determining whether a quorum is present for
such purposes) on the issuance of Common Stock upon exchange of all Partnership
Units and conversion of all shares of Series A Preferred Stock into Common
Stock, to be submitted to a vote of the holders of Common Stock at the Company's
1998 annual meeting of stockholders. See "Other Provisions--Mandatory Redemption
in Certain Instances."
While any shares of Series A Preferred Stock are outstanding, the Company
may not, without approval of holders of at least a majority of the outstanding
shares of Series A Preferred Stock voting separately as a class, take any of
several actions described in the Articles Supplementary that would diminish the
rights of the holders of Series A Preferred Stock (including the authorization
or issuance of any class or series of stock that would rank prior to or on a
parity with the Series A Preferred Stock) or that would result in the Company's
transfer of its general partnership interest in the Operating Partnership or a
merger or consolidation of assets which would result in the Common Stock having
a value of less than $15.375 per share, or the termination of the Company's
qualification as a real estate investment trust, or a Change of Control or
certain other actions.
The holders of the Series A Preferred Stock have the right to submit a
recommendation to the Nominating Committee of the Board of Directors for the
election of a director at the 1998 annual meeting of stockholders and each
annual meeting thereafter (until the number of outstanding shares of Series A
Preferred Stock is significantly reduced). In addition, upon the failure of the
Company to pay the full amount of the Series A Preferred Stock preferential
dividend for four consecutive quarters or upon certain other defaults of the
Company in its obligations with respect to the Series A Preferred Stock, the
holders of the Series A Preferred Stock will have the right, as a class, to
elect two additional directors of the Company, until such defaults are cured.
The Company shall act on or with respect to any matter as to which it is
entitled or requested to act in its capacity as a holder of Preferred Units of
the Operating Partnership by voting or otherwise acting with
18
<PAGE>
respect to all such Preferred Units solely in accordance with instructions
received from a majority of the holders of Series A Preferred Stock.
Conversion Into Common Stock
OPTIONAL CONVERSION. On and after December 31, 1998, March 31, 1999, June
30, 1999, and September 30, 1999 (or earlier in the event of a Change of Control
or certain other defined events), each holder of shares of Series A Preferred
Stock will have the right to convert 25% of the shares of Series A Preferred
Stock held of record by the holder into a number of shares of Common Stock equal
to (i) the Stated Value plus the amount, if any, of the per share amount of
outstanding dividends as of the effective time of the conversion, divided by
(ii) the Conversion Price.
MANDATORY CONVERSION. After the fifth anniversary of the date of the first
issuance of shares of Series A Preferred Stock, the Company may give notice of
mandatory conversion of all of the outstanding Series A Preferred Stock if the
value of the Common Stock (both on the day prior to the notice of conversion and
on a value weighted basis over a period of time prior to such date) is greater
than the initial conversion price, and after such notice all such outstanding
shares shall be mandatorily converted into Common Stock as provided in the
Articles Supplementary; except that each holder of Series A Preferred Stock
shall have the right, prior to the date established for such mandatory
conversion, instead to cause the Company to redeem such holder's Series A
Preferred Stock at its Stated Value plus accrued dividends to the redemption
date multiplied by a percentage equal to 105% if the redemption date is prior to
December 31, 2003, decreasing by 1% each year thereafter (but not less than 100%
after December 31, 2007).
ADJUSTMENT OF CONVERSION PRICE. The Articles Supplementary provide for the
adjustment of the initial $15.375 conversion price upon the occurrence of
various events described therein, including among other events, any dividend or
distribution on the Common Stock of Common Stock, or other stock of the Company,
evidences of indebtedness, assets or rights or warrants or other derivative
securities to subscribe for or purchase any securities, any subdivision, split
or reclassification of the Common Stock, any issuance of rights or warrants to
purchase Common Stock to holders of the Common Stock, any issuance or sale of
any equity or debt securities convertible into or exchangeable for Common Stock,
certain issuances and sales of Common Stock and certain reclassifications of,
and changes in, the Common Stock.
DESCRIPTION OF OPERATING PARTNERSHIP UNITS
The following description of certain provisions of the Operating Partnership
Agreement and of the First Amendment thereto, that is expected to be entered
into concurrently with the closing of the acquisition of the Golden State
Properties and the admission of the Contributors as Limited Partners in the
Operating Partnership, is qualified in all respects by the provisions of the
Operating Partnership and of such First Amendment filed as exhibits to this
Report on Form 8-K.
Common Units
The Operating Partnership Agreement provides that, subject to the
preferences of any class or series of partnership interest established by the
general partner, the general partner shall make distributions pro rata to
partners holding Common Units and to the general partner as such in proportion
to their respective partnership interests. The Company will hold as many Common
Units as there are shares of Common Stock of the Company outstanding from time
to time, and contemplates making quarterly distributions to the holders of
Common Units concurrently with and in the same amounts as dividends paid by the
Company on its Common Stock (which amount is currently at the rate of $0.25 per
share payable on the last business day of March, June, September and December
respectively).
In addition, the Operating Partnership Agreement provides that,
approximately one year after the issuance of Common Units (or earlier in the
event of certain extraordinary transactions), the holder of
19
<PAGE>
each Common Unit will have the right to require the Partnership to redeem the
Unit at a redemption price equal to the then market value of a share of Common
Stock. Such redemption will be in cash, except that the Company may assume the
redemption obligation and pay the redemption in the form of registered shares of
its Common Stock.
Preferred Units
By the First Amendment, the Company as general partner of the Operating
Partnership will establish a series of 4,800,000 preferred units designated as
"Series 1997-A Preferred Limited Partnership Units" (the "Preferred Units") and
will issue 2,000,000 Preferred Units to the Contributors of the Golden State
Properties and 2,800,000 Preferred Units to the Company. The economic rights of
holders of Preferred Units, with respect to distributions and upon liquidation,
are identical to the rights of holders of Series A Preferred Stock.
Distributions by the Operating Partnership with respect to Preferred Units held
by the Company will provide the funds to enable the Company to make its
distributions to the holders of the Series A Preferred Stock. Holders of
Preferred Units other than the Company will have the right to exchange their
Preferred Units for a like number of shares of Series A Preferred Stock (upon
which exchange the number of Preferred Units held by the Company will increase
so that the Company will always hold a number of Preferred Units equal to the
number of outstanding shares of Series A Preferred Stock), with such right of
exchange commencing on the earlier of the Stockholder Approval Date described
below or, with respect to Preferred Units not mandatorily redeemed following
failure to obtain the Stockholder Approval, approximately one year after the
first issuance of Preferred Units, or earlier upon the happening of certain
events described in the First Amendment. See "Other Provisions-- Mandatory
Redemption in Certain Instances".
In general, the terms of the First Amendment that define the economic rights
of holders of Preferred Units other than the Company are identical to the
provisions of the Articles Supplementary that define the economic rights of the
holders of Series A Preferred Stock. See "Designation of Series A Preferred
Stock" above.
OTHER PROVISIONS
First Offer Rights, Registration Rights and Waiver of Limit on Ownership
The Contribution Agreement and the Stock Purchase Agreement each provide
that, upon the proposed issuance by the Company of any further equity
securities, the Contributors and the initial holders of the Series A Preferred
Stock shall have the right to purchase a number of such equity securities so as
to maintain their respective proportionate interests in the Company on a fully
diluted basis. Such right shall not apply, however, to certain specified
issuances including the issuance of up to $120 million of Common Stock not later
than June 30, 1997 at a public offering price of not less than $13.75 or after
the holdings of the Contributors and of the initial holders reduces below
specified levels. The Company has also agreed to register the securities held by
the Contributors or the Buyer to facilitate its resale thereof, and to include
within registration statements of the Company shares that the Contributors or
the Buyer may desire to sell on a "tag-along" basis, under certain
circumstances.
Based upon representations of the Contributors and of the Buyer of the
Series A Preferred Stock that no individual would, after applying applicable
attribution rules of the Internal Revenue Code, own more than 9.8% of the Common
Stock or of the value of all of the capital stock of the Company, and on certain
other representations and agreements, the Board of Directors of the Company has
partially waived the "Limits" on ownership by any one person that would
otherwise limit the amount of capital stock of the Company that the Buyer could
own and that would otherwise limit the number of shares of Preferred Stock and
of Common Stock that the holders of Preferred Units may acquire upon the
exchange of their Operating Partnership Units for capital stock of the Company.
20
<PAGE>
Mandatory Redemption in Certain Instances.
Under the rules of the New York Stock Exchange, the Company may not issue
securities convertible into or exchangeable for a number of shares of Common
Stock that is greater than 19.9% of the number of shares of Common Stock that
are outstanding at the time of issuance of such convertible or exchangeable
securities, without the approval by the holders of Common Stock of the Company
of the issuance of such greater number of shares of Common Stock. The aggregate
number of shares of Common Stock potentially issuable upon exchange of all
Partnership Units for shares of Series A Preferred Stock or Common Stock, as the
case may be, and upon the conversion of all shares of Series A Preferred Stock
into Common Stock exceeds 19.9% of the number of shares of Common Stock expected
to be outstanding at the time of the issuance of the Series A Preferred Stock
and of the Preferred Units. Accordingly, the Company will seek the approval of
its stockholders ("Stockholder Approval") at the 1998 annual meeting of
stockholders, to be held not later than May 12, 1998, for the issuance of Common
Stock upon exchange of all Partnership Units and conversion of all shares of
Series A Preferred Stock. If Stockholder Approval is not obtained at such
meeting, or at a subsequent special meeting of stockholders held for such
purpose, the Company will be obligated to redeem, not later than June 30, 1998,
an aggregate number of Preferred Units and shares of Series A Preferred Stock
(other than shares owned by the Company) that will result in the aggregate
number of shares of Common Stock issuable upon the conversion or exchange of
Series A Preferred Stock and Operating Partnership Units after such redemption
not exceeding 19.9% of the number of shares of Common Stock outstanding
immediately prior to the issuance of the Series A Preferred Stock and of the
Preferred Units. Based upon the number of shares of Common Stock outstanding at
November 30, 1997, the Company will be required to redeem an aggregate of
approximately 2,000,000 shares of Series A Preferred Stock and Preferred Units
having an aggregate Stated Value of approximately $50,000,000. Such redemption
will be in cash at the greater of the Stated Value plus accrued dividends (or
accrued distributions) or a price based upon the current Common Stock market
price on an "as converted" basis (the "Mandatory Redemption Price"). To the
extent that the Mandatory Redemption Price is not paid in full by June 30, 1998,
the unpaid portion thereof payable to the holders of Preferred Units shall bear
interest compounded at the lesser of the rate of 1.25% per month and the highest
lawful rate of interest until paid, and the Company shall be responsible to the
holders of the Series A Preferred Stock (but not to the holders of the Preferred
Units) for liquidated damages equal to 150% of the portion of the Mandatory
Redemption Price not paid by such date. The obligation to pay such Mandatory
Redemption Price, or to pay the higher interest on the unpaid portion and/or the
liquidated damage amount, could require the Company to increase its short-term
borrowings even if prevailing market conditions are not favorable for such
borrowings.
ITEM 7. FINANCIAL STATEMENTS AND EXHIBITS.
a) FINANCIAL STATEMENTS
ATTACHMENT I--The Golden State Properties Portfolio combined statement of
revenue and certain expenses for the year ended December 31, 1996 and
related Notes and Independent Auditors' Report, filed in accordance with
Rule 3.14(a)(1) of Regulation S-X.
ATTACHMENT II--Statement of Estimated Taxable Operating Results of the
GOLDEN STATE PROPERTIES PORTFOLIO and Estimated Cash to be Made Available
by Operations of the GOLDEN STATE PROPERTIES PORTFOLIO for a Twelve-Month
Period (unaudited), filed in accordance with Rule 3.14(a)(2) of
Regulation S-X.
ATTACHMENT III--THE POWELL PORTFOLIO Combined Statements of REVENUES AND
DIRECT OPERATING EXPENSES for the years ended December 31, 1996, 1995,
1994 and related Notes and Independent Auditors' Report, filed in
accordance with Rule 3.14(a)(1) of Regulation S-X.
21
<PAGE>
ATTACHMENT IV--Statement of Estimated Taxable Operating Results of the
POWELL PORTFOLIO and Estimated Cash to be Made Available by Operations of
the POWELL PORTFOLIO for a Twelve-Month Period (unaudited), filed in
accordance with Rule 3.14(a)(2) of Regulation S-X.
ATTACHMENT V--MOUNTAINGATE PLAZA Combined Statements of REVENUES AND DIRECT
OPERATING EXPENSES for the years ended December 31, 1996, 1995, 1994 and
related Notes and Independent Auditors' Report, filed in accordance with
Rule 3.14(a)(1) of Regulation S-X.
ATTACHMENT VI--Statement of Estimated Taxable Operating Results of
MOUNTAINGATE PLAZA and Estimated Cash to be Made Available by Operations
of MOUNTAINGATE PLAZA for a Twelve-Month Period (unaudited), filed in
accordance with Rule 3.14(a)(2) of Regulation S-X.
ATTACHMENT VII--SIMI VALLEY PLAZA Combined Statements of REVENUES AND DIRECT
OPERATING EXPENSES for the year ended December 31, 1996 and related Notes
and Independent Auditors' Report, filed in accordance with Rule
3.14(a)(1) of Regulation S-X.
ATTACHMENT VIII--Statement of Estimated Taxable Operating Results of SIMI
VALLEY PLAZA and Estimated Cash to be Made Available by Operations of
SIMI VALLEY PLAZA for a Twelve-Month Period (unaudited), filed in
accordance with Rule 3.14(a)(2) of Regulation S-X.
ATTACHMENT IX--MERIDIAN VILLAGE SHOPPING CENTER Combined Statements of
REVENUES AND DIRECT OPERATING EXPENSES for the year ended December 31,
1996 and related Notes and Independent Auditors' Report, filed in
accordance with Rule 3.14(a)(1) of Regulation S-X.
ATTACHMENT X--Statement of Estimated Taxable Operating Results of MERIDIAN
VILLAGE SHOPPING CENTER and Estimated Cash to be Made Available by
Operations of MERIDIAN VILLAGE SHOPPING CENTER for a Twelve-Month Period
(unaudited), filed in accordance with Rule 3.14(a)(2) of Regulation S-X.
b) PRO FORMA FINANCIAL INFORMATION
ATTACHMENT XI--Burnham Pacific Properties, Inc. Pro Forma Condensed
Consolidated Balance Sheet as of September 30, 1997, Pro Forma Condensed
Consolidated Statements of Income for the nine months ended September 30,
1997, Pro Forma Condensed Consolidated Statement of Income for the year
ended December 31, 1996 and Notes thereto, filed in accordance with
Article 11 of Regulation S-X.
c) EXHIBITS
<TABLE>
<C> <S>
3.1.2 Form of Articles Supplementary relating to Series 1997-A Convertible
Preferred Stock
3.2 Bylaws, as amended, dated November 19, 1997
10.1.1 Agreement of Limited Partnership of Burnham Pacific Operating
Partnership, L.P. dated as of November 14, 1997
10.1.2 Form of description of Rights of Preferred Units and Common Units of
Burnham Pacific Operating Partnership, L.P.
10.2 Agreement to Contribute among Burnham Pacific Properties, Inc.,
Burnham Pacific Operating Partnership, L.P. and the Contributors
and Existing Partners of the Golden State Properties party
thereto, dated as of December 5, 1997.
23.1 Consent of Ernst & Young LLP.
23.2 Consent of Deloitte & Touche LLP.
</TABLE>
22
<PAGE>
SIGNATURE
Pursuant to the requirements of Section 12 of the Securities Exchange Act of
1934, the Registrant has duly caused this registration statement to be signed on
its behalf by the undersigned, thereto duly authorized.
<TABLE>
<S> <C> <C>
BURNHAM PACIFIC PROPERTIES, INC.
Date: December 15, 1997 By: /s/ Daniel B. Platt
------------------------------------
Daniel B. Platt
CHIEF FINANCIAL OFFICER
</TABLE>
23
<PAGE>
ATTACHMENT I
GOLDEN STATE
PROPERTIES PORTFOLIO
COMBINED STATEMENT OF
REVENUE AND CERTAIN EXPENSES
FOR THE YEAR ENDED
DECEMBER 31, 1996 AND
REPORT OF INDEPENDENT AUDITORS
F-1
<PAGE>
REPORT OF INDEPENDENT AUDITORS
To the Board of Directors and Stockholders
Burnham Pacific Properties, Inc.
We have audited the accompanying combined statement of revenue and certain
expenses of the Golden State Properties Portfolio (the "Properties"), for the
year ended December 31, 1996. This combined statement of revenue and certain
expenses is the responsibility of the management of the Properties. Our
responsibility is to express an opinion on the combined statement of revenue and
certain expenses based on our audit.
We conducted our audit in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the combined statement of revenue and certain
expenses is free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statement. 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 audit provides a
reasonable basis for our opinion.
The accompanying combined statement was prepared for the purpose of
complying with the rules and regulations of the Securities and Exchange
Commission as described in Note 1 to the statement and is not intended to be a
complete presentation of the revenues and expenses of the companies.
In our opinion, the combined statement referred to above presents fairly, in
all material respects, the combined revenue and certain expenses as defined
above, of the Golden State Properties Portfolio for the year ended December 31,
1996, in conformity with generally accepted accounting principles.
/s/ Ernst & Young LLP
Newport Beach, California
November 14, 1997
F-2
<PAGE>
GOLDEN STATE PROPERTIES PORTFOLIO
COMBINED STATEMENT OF REVENUE
AND CERTAIN EXPENSES
(IN THOUSANDS)
<TABLE>
<CAPTION>
YEAR ENDED
DECEMBER 31,
1996
------------
<S> <C>
REVENUES:
Rental............................................................................................ $ 27,408
Tenant recoveries................................................................................. 5,994
Other............................................................................................. 123
------------
Total revenue................................................................................... 33,525
------------
CERTAIN EXPENSES:
Rental property operating......................................................................... 4,102
Real estate taxes and insurance................................................................... 3,928
Ground lease...................................................................................... 1,554
------------
Total certain expenses.......................................................................... 9,584
------------
REVENUES IN EXCESS OF CERTAIN EXPENSES.............................................................. $ 23,941
------------
------------
</TABLE>
See accompanying notes.
F-3
<PAGE>
GOLDEN STATE PROPERTIES PORTFOLIO
NOTES TO COMBINED STATEMENT OF REVENUE
AND CERTAIN EXPENSES
FOR THE YEAR ENDED DECEMBER 31, 1996
1. ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
ORGANIZATION
The accompanying combined statement of revenue and certain expenses of the
Golden State Properties Portfolio (the "Properties") reflects the operations of
the shopping centers owned by various entities, all of which are wholly owned by
HPBA, LLC or HPBA II, LLC (the "Companies"), Delaware limited liability
companies. The shopping centers are as follows:
<TABLE>
<S> <C>
Southampton Center Silver Creek Plaza
Buena Vista Marketplace Menifee Town Center
580 Marketplace Arcade Center
Westminster Center Freemont Gateway Plaza
Sunset Center Creekside Shopping Center
Discovery Plaza Summerhill Shopping Center
Prospector's Plaza Hallmark Towne Center
Santa Rosa Value Center Bell Gardens Marketplace
Centerwood Plaza Shasta Crossroads
Ralph's San Marcos Plaza
</TABLE>
BASIS OF PRESENTATION
The accompanying combined statement was prepared to comply with the rules
and regulations of the Securities and Exchange Commission ("SEC") for inclusion
in a filing with the SEC by Burnham Pacific Properties, Inc.
The accompanying combined statement is not a complete presentation of the
actual operations for the period presented as certain expenses that are
dependent on the property owner and the cost basis of the properties have been
excluded. Excluded expenses consist of interest, depreciation and amortization
and certain general and administrative costs. Consequently, the revenues in
excess of certain expenses as presented in the combined statement are not
intended to be a complete presentation of the revenues and expenses of the
Properties nor is it intended to be comparable to their proposed future
operations.
All significant intercompany balances and transactions have been eliminated
upon combination.
REVENUE RECOGNITION
Rental revenue is recognized on a straight-line basis over the terms of the
related leases.
RISKS AND UNCERTAINTIES
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 revenue and expenses during the
reporting period. Actual results could differ from those estimates.
F-4
<PAGE>
GOLDEN STATE PROPERTIES PORTFOLIO
NOTES TO COMBINED STATEMENT OF REVENUE
AND CERTAIN EXPENSES (CONTINUED)
FOR THE YEAR ENDED DECEMBER 31, 1996
2. FUTURE MINIMUM LEASE PAYMENTS
The future minimum lease payments to be received under existing operating
leases as of December 31, 1996 are as follows:
<TABLE>
<CAPTION>
(IN THOUSANDS)
<S> <C>
1997.......................................................................... $ 25,254
1998.......................................................................... 23,890
1999.......................................................................... 21,919
2000.......................................................................... 20,514
2001.......................................................................... 18,179
Thereafter.................................................................... 142,028
--------------
$ 251,784
--------------
--------------
</TABLE>
The above future minimum lease payments do not include specified payments
for tenant reimbursements of operating expenses.
The shopping centers are mostly leased to tenants under lease terms which
generally provide for the tenants to pay their share of certain operating
expenses. These amounts are reported as tenant recoveries in the combined
statement of revenues and certain expenses.
F-5
<PAGE>
ATTACHMENT II
BURNHAM PACIFIC PROPERTIES, INC.
STATEMENT OF ESTIMATED TAXABLE OPERATING
RESULTS OF THE GOLDEN STATE PROPERTIES PORTFOLIO
AND ESTIMATED CASH TO BE MADE AVAILABLE
BY OPERATIONS OF THE GOLDEN STATE PROPERTIES PORTFOLIO
FOR A TWELVE-MONTH PERIOD
(UNAUDITED)
(IN THOUSANDS)
<TABLE>
<S> <C>
REVENUES:
Rents............................................................................ $ 27,531
Reimbursed Expenses.............................................................. 5,994
---------
Total.......................................................................... 33,525
---------
COSTS AND EXPENSES:
Rental Operating Expenses........................................................ 9,584
Depreciation..................................................................... 6,978
---------
Total.......................................................................... 16,562
---------
Estimated Taxable Operating Income................................................. 16,963
Add Back Depreciation.............................................................. 6,978
---------
ESTIMATED CASH TO BE MADE AVAILABLE BY OPERATIONS.................................. $ 23,941
---------
---------
</TABLE>
Note
This statement of estimated taxable operating results and estimated cash to be
made available from operations is an estimate of operating results of the Golden
State Properties Portfolio for a period of twelve months based on information
provided by the seller of the property and by management's independent review of
the leases and other documents and does not purport to reflect actual results
for any period.
F-6
<PAGE>
ATTACHMENT III
THE POWELL PORTFOLIO
HISTORICAL STATEMENTS OF REVENUES AND
DIRECT OPERATING EXPENSES FOR THE YEARS
ENDED DECEMBER 31, 1996, 1995 AND 1994
AND INDEPENDENT AUDITORS' REPORT
F-7
<PAGE>
INDEPENDENT AUDITORS' REPORT
To the Board of Directors and Stockholders of
Burnham Pacific Properties, Inc.:
We have audited the accompanying historical statements of revenues and
direct operating expenses of the Powell Portfolio (the "Centers") for the years
ended December 31, 1996, 1995 and 1994. These historical statements are the
responsibility of the Centers' management. Our responsibility is to express an
opinion on these historical 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 audits to obtain
reasonable assurance about whether the historical statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the historical statement. An audit
also includes assessing the accounting principles used and significant estimates
made by management, as well as evaluating the overall presentation of the
historical statement. We believe that our audits provide a reasonable basis for
our opinion.
The accompanying historical statements are prepared for the purpose of
complying with the rules and regulations of the Securities and Exchange
Commission. The statements exclude certain material revenues and expenses,
described in Note 1, and are not intended to be a complete presentation of the
Centers' revenues and expenses.
In our opinion, such historical statements present fairly, in all material
respects, the revenues and direct operating expenses, as described in Note 1, of
the Centers for the years ended December 31, 1996, 1995 and 1994, in conformity
with generally accepted accounting principles.
/s/ Deloitte & Touche LLP
San Diego, California
October 10, 1997
F-8
<PAGE>
THE POWELL PORTFOLIO
HISTORICAL STATEMENTS OF REVENUES
AND DIRECT OPERATING EXPENSES
FOR THE YEARS ENDED DECEMBER 31, 1996, 1995 AND 1994
<TABLE>
<CAPTION>
1996 1995 1994
------------ ------------ ------------
<S> <C> <C> <C>
REVENUES:
Rental revenues....................................................... $ 2,114,285 $ 2,195,283 $ 2,122,623
Common area maintenance revenues...................................... 604,560 649,882 612,423
------------ ------------ ------------
Total revenues...................................................... 2,718,845 2,845,165 2,735,046
------------ ------------ ------------
DIRECT OPERATING EXPENSES:
Property taxes and assessments........................................ 272,972 231,871 239,485
General maintenance and repair........................................ 129,815 111,740 87,875
Management fees....................................................... 113,363 117,230 113,881
Utilities............................................................. 95,685 96,277 98,340
General and administrative............................................ 59,156 83,266 117,490
Parking lot maintenance............................................... 51,294 41,885 51,631
Insurance............................................................. 48,842 41,216 58,706
Landscape maintenance................................................. 36,025 37,483 43,501
------------ ------------ ------------
Total direct operating expenses..................................... 807,152 760,968 810,909
------------ ------------ ------------
EXCESS OF REVENUES OVER DIRECT OPERATING EXPENSES....................... $ 1,911,693 $ 2,084,197 $ 1,924,137
------------ ------------ ------------
------------ ------------ ------------
</TABLE>
See accompanying note to historical statements of revenues and direct operating
expenses.
F-9
<PAGE>
THE POWELL PORTFOLIO
NOTE TO HISTORICAL STATEMENTS OF REVENUES
AND DIRECT OPERATING EXPENSES
FOR THE YEARS ENDED DECEMBER 31, 1996, 1995 AND 1994
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
BASIS OF PRESENTATION--Revenues and direct operating expenses are presented
on the accrual basis of accounting. The accompanying historical statements of
revenues and direct operating expenses relate to the operations of the Powell
Portfolio (the "Centers") and have been prepared for the purpose of complying
with the rules and regulations of the Securities and Exchange Commission. The
Powell Portfolio consists of the following centers:
<TABLE>
<S> <C>
Chambers Creek Tacoma, Washington
Design Market Bellevue, Washington
Fairwood Square Renton, Washington
Puget Park Everett, Washington
Silver Plaza Silver City, New Mexico
</TABLE>
Certain revenues, costs and expenses that are dependent on the ownership,
management and carrying value of the centers have been excluded from the
accompanying historical statements. The excluded revenues consist primarily of
nonoperating revenues related to the centers. The excluded expenses consist
primarily of interest, depreciation and amortization of the centers.
Consequently, the excess of revenues over direct operating expenses as presented
is neither intended to be a complete presentation of the Centers' historical
revenues and expenses nor intended to be comparable to the proposed future
operations of the property.
REVENUE RECOGNITION--Shopping center space is generally leased to retail
tenants under various arrangements which are accounted for as operating leases.
Minimum rents are recognized on an accrual basis as earned, the result of which
does not differ materially from the straight-line basis. Certain leases contain
provisions for percentage rents, which are recorded when earned. Reimbursable
expenses such as common area maintenance, real estate and insurance are
recognized as revenue in the period the applicable costs are accrued.
* * * * * *
F-10
<PAGE>
ATTACHMENT IV
BURNHAM PACIFIC PROPERTIES, INC.
STATEMENT OF ESTIMATED TAXABLE OPERATING
RESULTS OF THE POWELL PORTFOLIO
AND ESTIMATED CASH TO BE MADE AVAILABLE
BY OPERATIONS OF THE POWELL PORTFOLIO
FOR A TWELVE-MONTH PERIOD
(UNAUDITED)
(IN THOUSANDS)
<TABLE>
<S> <C>
REVENUES:
Rents............................................................................. $ 2,114
Reimbursed Expenses............................................................... 605
---------
Total........................................................................... 2,719
---------
COSTS AND EXPENSES:
Rental Operating Expenses......................................................... 807
Depreciation...................................................................... 522
---------
Total........................................................................... 1,329
---------
Estimated Taxable Operating Income.................................................. 1,390
Add Back Depreciation............................................................... 522
---------
ESTIMATED CASH TO BE MADE AVAILABLE BY OPERATIONS................................... $ 1,912
---------
---------
</TABLE>
Note
This statement of estimated taxable operating results and estimated cash to be
made available from operations is an estimate of operating results of the Powell
Portfolio for a period of twelve months based on information provided by the
seller of the property and by management's independent review of the leases and
other documents and does not purport to reflect actual results for any period.
F-11
<PAGE>
ATTACHMENT V
MOUNTAINGATE PLAZA
HISTORICAL STATEMENTS OF REVENUES AND
DIRECT OPERATING EXPENSES FOR THE YEARS
ENDED DECEMBER 31, 1996, 1995 AND 1994
AND INDEPENDENT AUDITORS' REPORT
F-12
<PAGE>
INDEPENDENT AUDITORS' REPORT
To the Board of Directors and Stockholders of
Burnham Pacific Properties, Inc.:
We have audited the accompanying historical statements of revenues and
direct operating expenses of Mountaingate Plaza (the "Center") for the years
ended December 31, 1996, 1995 and 1994. These historical statements are the
responsibility of the Center's management. Our responsibility is to express an
opinion on these historical 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 audits to obtain
reasonable assurance about whether the historical statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the historical statement. An audit
also includes assessing the accounting principles used and significant estimates
made by management, as well as evaluating the overall presentation of the
historical statement. We believe that our audits provide a reasonable basis for
our opinion.
The accompanying historical statements are prepared for the purpose of
complying with the rules and regulations of the Securities and Exchange
Commission. The statements exclude certain material revenues and expenses,
described in Note 1, and are not intended to be a complete presentation of the
Center's revenues and expenses.
In our opinion, such historical statements present fairly, in all material
respects, the revenues and direct operating expenses, as described in Note 1, of
the Center for the years ended December 31, 1996, 1995 and 1994, in conformity
with generally accepted accounting principles.
/s/ Deloitte & Touche LLP
San Diego, California
December 11, 1997
F-13
<PAGE>
MOUNTAINGATE PLAZA
HISTORICAL STATEMENTS OF REVENUES
AND DIRECT OPERATING EXPENSES
FOR THE YEARS ENDED DECEMBER 31, 1996, 1995 AND 1994
<TABLE>
<CAPTION>
1996 1995 1994
------------ ------------ ------------
<S> <C> <C> <C>
REVENUES:
Rental revenues....................................................... $ 3,122,760 $ 2,941,774 $ 3,167,508
Common area maintenance revenues...................................... 850,633 906,021 752,309
------------ ------------ ------------
Total revenues...................................................... 3,973,393 3,847,795 3,919,817
------------ ------------ ------------
DIRECT OPERATING EXPENSES:
Repairs and maintenance............................................... 446,767 354,094 403,089
Property taxes and assessments........................................ 269,766 269,766 269,766
General and administrative............................................ 171,913 109,662 49,409
Insurance............................................................. 124,560 61,727 60,172
Utilities............................................................. 121,615 120,762 109,075
Management fees....................................................... 113,421 106,599 127,923
General operating..................................................... 107,216 83,788 77,980
Gardening and landscaping............................................. 42,241 38,898 90,253
------------ ------------ ------------
Total direct operating expenses..................................... 1,397,499 1,145,296 1,187,667
------------ ------------ ------------
EXCESS OF REVENUES OVER
DIRECT OPERATING EXPENSES............................................. $ 2,575,894 $ 2,702,499 $ 2,732,150
------------ ------------ ------------
------------ ------------ ------------
</TABLE>
See accompanying note to historical statements of revenues and direct operating
expenses.
F-14
<PAGE>
MOUNTAINGATE PLAZA
NOTE TO HISTORICAL STATEMENTS OF REVENUES
AND DIRECT OPERATING EXPENSES
FOR THE YEARS ENDED DECEMBER 31, 1996, 1995 AND 1994
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
BASIS OF PRESENTATION--Revenues and direct operating expenses are presented
on the accrual basis of accounting. The accompanying historical statements of
revenues and direct operating expenses relate to the operations of Mountaingate
Plaza (the "Center") and have been prepared for the purpose of complying with
the rules and regulations of the Securities and Exchange Commission
Certain revenues, costs and expenses that are dependent on the ownership,
management and carrying value of the Center have been excluded from the
accompanying historical statements. The excluded revenues consist primarily of
nonoperating revenues related to the Center. The excluded expenses consist
primarily of interest, depreciation and amortization of the Center.
Consequently, the excess of revenues over direct operating expenses as presented
is neither intended to be a complete presentation of the Center's historical
revenues and expenses nor intended to be comparable to the proposed future
operations of the property.
REVENUE RECOGNITION--Shopping center space is generally leased to retail
tenants under various arrangements which are accounted for as operating leases.
Minimum rents, percentage rents and reimbursable expenses such as common area
maintenance, real estate and insurance are recorded on an accrual basis.
F-15
<PAGE>
ATTACHMENT VI
BURNHAM PACIFIC PROPERTIES, INC.
STATEMENT OF ESTIMATED TAXABLE OPERATING
RESULTS OF MOUNTAINGATE PLAZA
AND ESTIMATED CASH TO BE MADE AVAILABLE
BY OPERATIONS OF MOUNTAINGATE PLAZA
FOR A TWELVE-MONTH PERIOD
(UNAUDITED)
(IN THOUSANDS)
<TABLE>
<S> <C>
REVENUES:
Rents............................................................................. $ 3,123
Reimbursed Expenses............................................................... 851
---------
Total........................................................................... 3,974
---------
COSTS AND EXPENSES:
Rental Operating Expenses......................................................... 1,398
Depreciation...................................................................... 638
---------
Total........................................................................... 2,036
---------
Estimated Taxable Operating Income.................................................. 1,938
Add Back Depreciation............................................................... 638
---------
ESTIMATED CASH TO BE MADE AVAILABLE BY OPERATIONS................................... $ 2,576
---------
---------
</TABLE>
Note
This statement of estimated taxable operating results and estimated cash to be
made available from operations is an estimate of operating results of
Mountaingate Plaza for a period of twelve months based on information provided
by the seller of the property and by management's independent review of the
leases and other documents and does not purport to reflect actual results for
any period.
F-16
<PAGE>
ATTACHMENT VII
SIMI VALLEY PLAZA
HISTORICAL STATEMENT OF REVENUES AND
DIRECT OPERATING EXPENSES FOR THE YEAR
ENDED DECEMBER 31, 1996 AND
INDEPENDENT AUDITORS' REPORT
F-17
<PAGE>
INDEPENDENT AUDITORS' REPORT
To the Board of Directors and Stockholders of
Burnham Pacific Properties, Inc.:
We have audited the accompanying historical statement of revenues and direct
operating expenses of Simi Valley Plaza (the "Center") for the year ended
December 31, 1996. This historical statement is the responsibility of the
Center's management. Our responsibility is to express an opinion on this
historical statement based on our audit.
We conducted our audit in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the historical statement is free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the historical statement. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall presentation of the historical
statement. We believe that our audit provides a reasonable basis for our
opinion.
The accompanying historical statement is prepared for the purpose of
complying with the rules and regulations of the Securities and Exchange
Commission. The statement excludes certain material revenues and expenses,
described in Note 1, and is not intended to be a complete presentation of the
Center's revenues and expenses.
In our opinion, such historical statement presents fairly, in all material
respects, the revenues and direct operating expenses, as described in Note 1, of
the Center for the year ended December 31, 1996, in conformity with generally
accepted accounting principles.
/s/ Deloitte & Touche LLP
San Diego, California
December 12, 1997
F-18
<PAGE>
SIMI VALLEY PLAZA
HISTORICAL STATEMENTS OF REVENUES
AND DIRECT OPERATING EXPENSES
FOR THE YEAR ENDED DECEMBER 31, 1996
<TABLE>
<S> <C>
REVENUES:
Rental revenues............................................................... $2,388,897
Common area maintenance revenues.............................................. 542,491
---------
Total revenues.............................................................. 2,931,388
---------
DIRECT OPERATING EXPENSES:
Property taxes and assessments................................................ 260,923
Insurance..................................................................... 119,003
Utilities..................................................................... 93,649
Repairs and maintenance....................................................... 59,350
Management fees............................................................... 51,371
Security...................................................................... 30,172
Gardening and landscaping..................................................... 29,196
General and administrative.................................................... 10,536
---------
Total direct operating expenses............................................. 654,200
---------
EXCESS OF REVENUES OVER DIRECT
OPERATING EXPENSES............................................................ $2,277,188
---------
---------
</TABLE>
See accompanying note to historical statements of revenues and direct operating
expenses.
F-19
<PAGE>
SIMI VALLEY PLAZA
NOTE TO HISTORICAL STATEMENT OF REVENUES
AND DIRECT OPERATING EXPENSES
FOR THE YEAR ENDED DECEMBER 31, 1996
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
BASIS OF PRESENTATION--Revenues and direct operating expenses are presented
on the accrual basis of accounting. The accompanying historical statement of
revenues and direct operating expenses relates to the operations of Simi Valley
Plaza (the "Center") and has been prepared for the purpose of complying with the
rules and regulations of the Securities and Exchange Commission.
Certain revenues, costs and expenses that are dependent on the ownership,
management and carrying value of the Center have been excluded from the
accompanying historical statement. The excluded revenues consist primarily of
nonoperating revenue related to the Center. The excluded expenses consist
primarily of interest, depreciation and amortization of the Center.
Consequently, the excess of revenues over direct operating expenses as presented
is neither intended to be a complete presentation of the Center's historical
revenues and expenses nor intended to be comparable to the proposed future
operations of the property.
REVENUE RECOGNITION--Shopping center space is generally leased to retail
tenants under various arrangements which are accounted for as operating leases.
Minimum rents are recognized on an accrual basis as earned. Certain leases
contain provisions for percentage rents, which are recorded when earned.
Reimbursable expenses such as common area maintenance, real estate and insurance
are recognized as revenue in the period the applicable costs are accrued.
* * * * * *
F-20
<PAGE>
ATTACHMENT VIII
BURNHAM PACIFIC PROPERTIES, INC.
STATEMENT OF ESTIMATED TAXABLE OPERATING
RESULTS OF SIMI VALLEY PLAZA
AND ESTIMATED CASH TO BE MADE AVAILABLE
BY OPERATIONS OF SIMI VALLEY PLAZA
FOR A TWELVE-MONTH PERIOD
(UNAUDITED)
(IN THOUSANDS)
<TABLE>
<S> <C>
REVENUES:
Rents............................................................................. $ 2,389
Reimbursed Expenses............................................................... 543
---------
Total........................................................................... 2,932
---------
COSTS AND EXPENSES:
Rental Operating Expenses......................................................... 654
Depreciation...................................................................... 544
---------
Total........................................................................... 1,198
---------
Estimated Taxable Operating Income................................................ 1,734
Add Back Depreciation............................................................. 544
---------
ESTIMATED CASH TO BE MADE AVAILABLE BY OPERATIONS................................... $ 2,278
---------
---------
</TABLE>
Note
This statement of estimated taxable operating results and estimated cash to be
made available from operations is an estimate of operating results of Simi
Valley Plaza for a period of twelve months based on information provided by the
seller of the property and by management's independent review of the leases and
other documents and does not purport to reflect actual results for any period.
F-21
<PAGE>
ATTACHMENT IX
MERIDIAN VILLAGE SHOPPING CENTER
HISTORICAL STATEMENT OF REVENUES AND
DIRECT OPERATING EXPENSES FOR THE
YEAR ENDED DECEMBER 31, 1996 AND
INDEPENDENT AUDITORS' REPORT
F-22
<PAGE>
INDEPENDENT AUDITORS' REPORT
To the Board of Directors and Stockholders of
Burnham Pacific Properties, Inc.:
We have audited the accompanying historical statement of revenues and direct
operating expenses of Meridian Village Shopping Center (the "Center") for the
year ended December 31, 1996. This historical statement is the responsibility of
the Center's management. Our responsibility is to express an opinion on this
historical statement based on our audit.
We conducted our audit in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the historical statement is free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the historical statement. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall presentation of the historical
statement. We believe that our audit provides a reasonable basis for our
opinion.
The accompanying historical statement is prepared for the purpose of
complying with the rules and regulations of the Securities and Exchange
Commission. It excludes certain material revenues and expenses, described in
Note 1, and is not intended to be a complete presentation of the Center's
revenues and expenses.
In our opinion, such historical statement presents fairly, in all material
respects, the revenues and direct operating expenses as described in Note 1, of
the Center for the year ended December 31, 1996, in conformity with generally
accepted accounting principles.
/s/ Deloitte & Touche LLP
San Diego, California
December 12, 1997
F-23
<PAGE>
MERIDIAN VILLAGE SHOPPING CENTER
HISTORICAL STATEMENT OF REVENUES
AND DIRECT OPERATING EXPENSES
FOR THE YEAR ENDED DECEMBER 31, 1996
<TABLE>
<S> <C>
REVENUES:
Rental revenues............................................................... $ 834,246
Common area maintenance revenues.............................................. 239,854
---------
Total revenues.............................................................. 1,074,100
---------
DIRECT OPERATING EXPENSES:
Property taxes and assessments................................................ 110,120
Repairs and maintenance....................................................... 81,134
Management fees............................................................... 36,644
Utilities..................................................................... 27,568
General and administrative.................................................... 20,137
Insurance..................................................................... 18,073
Gardening and landscaping..................................................... 11,062
---------
Total direct operating expenses............................................. 304,738
---------
EXCESS OF REVENUES OVER DIRECT OPERATING EXPENSES............................... $ 769,362
---------
---------
</TABLE>
See accompanying note to historical statement of revenues and direct operating
expenses.
F-24
<PAGE>
MERIDIAN VILLAGE SHOPPING CENTER
NOTE TO HISTORICAL STATEMENT OF REVENUES
AND DIRECT OPERATING EXPENSES
YEAR ENDED DECEMBER 31, 1996
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
BASIS OF PRESENTATION--Revenues and direct operating expenses are presented
on the accrual basis of accounting. The accompanying historical statement of
revenue and direct operating expenses relates to the operations of Meridian
Village Shopping Center (the "Center") and was prepared for the purpose of
complying with rules and regulations of the Securities and Exchange Commission.
Certain costs and expenses that are dependent on the ownership, management
and carrying value of the Center have been excluded from the accompanying
historical statement. The excluded expenses consist primarily of interest,
depreciation and amortization of the Center. Consequently, the excess of
revenues over direct operating expenses as presented is neither intended to be a
complete presentation of the Center's historical revenues and expenses nor
intended to be comparable to the proposed future operations of the property.
REVENUE RECOGNITION--Shopping center space is generally leased to retail
tenants under various arrangements which are accounted for as operating leases.
Minimum rents are recognized on an accrual basis as earned, the result of which
does not differ materially from the straight-line basis. Certain leases contain
provisions for percentage rents, which are recorded when earned. Reimbursable
expenses such as common area maintenance, real estate and insurance are
recognized as revenue in the period the applicable costs are accrued.
* * * * * *
F-25
<PAGE>
ATTACHMENT X
BURNHAM PACIFIC PROPERTIES, INC.
STATEMENT OF ESTIMATED TAXABLE OPERATING
RESULTS OF MERIDIAN VILLAGE SHOPPING CENTER
AND ESTIMATED CASH TO BE MADE AVAILABLE
BY OPERATIONS OF MERIDIAN VILLAGE SHOPPING CENTER
FOR A TWELVE-MONTH PERIOD
(UNAUDITED)
(IN THOUSANDS)
<TABLE>
<CAPTION>
REVENUES:
<S> <C>
Rents............................................................................. $ 834
Reimbursed Expenses............................................................... 240
---------
Total........................................................................... 1,074
---------
COSTS AND EXPENSES:
Rental Operating Expenses......................................................... 305
Depreciation...................................................................... 460
---------
Total........................................................................... 765
---------
Estimated Taxable Operating Income................................................ 309
Add Back Depreciation............................................................. 460
---------
ESTIMATED CASH TO BE MADE AVAILABLE BY OPERATIONS................................... $ 769
---------
---------
</TABLE>
Note
This statement of estimated taxable operating results and estimated cash to be
made available from operations is an estimate of operating results of Meridian
Village Shopping Center for a period of twelve months based on information
provided by the seller of the property and by management's independent review of
the leases and other documents and does not purport to reflect actual results
for any period.
F-26
<PAGE>
ATTACHMENT XI
PRO FORMA CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Capitalized terms used herein and not otherwise defined have the respective
meanings ascribed to such terms under "Definitions" at F-32).
The accompanying unaudited pro forma condensed consolidated balance sheet
gives effect to the following transactions as if they had occurred on September
30, 1997: (i) the acquisition of Mountaingate Plaza and the Powell Portfolios
which acquisitions were completed after September 30, 1997; (ii) the pending
acquisitions of the Golden State Properties, Meridian Village Shopping Center
and Simi Valley Plaza; and (iii) the pending sale of the Pacific West Outlet
Center and the application of the estimated proceeds therefrom to repay
indebtedness.
The accompanying unaudited pro forma condensed consolidated statements of
income give effect to the following transactions as if they had occurred on
January 1, 1996: (i) the acquisition of Ladera Shopping Center (which occurred
in July 1996) and Margarita Shopping Center (which occurred in December 1996);
(ii) the consummation of the 1997 Acquisitions; (iii) the redemption of the
Convertible Debentures (which occurred in 1996); (iv) the Common Stock Offering;
(v) the pending acquisition of the Golden State Properties, Meridian Village
Shopping Center and Simi Valley Plaza; (vi) the sale of interests in five
properties (which occurred in 1996); (vii) the pending sale of the Pacific West
Outlet Center and (viii) the sale of a 75% joint venture interest in each of
Ladera and Margarita (in February 1997 and August 1997, respectively).
The pro forma condensed consolidated financial statements are unaudited and
are subject to a number of estimates, assumptions and other uncertainties, and
do not purport to be indicative of the actual financial position or results of
operations that would have occurred had the transactions and events reflected
therein in fact occurred on the dates specified, nor do such financial
statements purport to be indicative of the results of operations or financial
condition that may be achieved in the future.
F-27
<PAGE>
PRO FORMA CONDENSED CONSOLIDATED BALANCE SHEET
AS OF SEPTEMBER 30, 1997
(IN THOUSANDS)
<TABLE>
<CAPTION>
COMPLETED PENDING PENDING
HISTORICAL(1) ACQUISITIONS(2) ACQUISITIONS(3) SALE(4) PRO FORMA
------------ -------------- -------------- ---------- -----------
<S> <C> <C> <C> <C> <C>
ASSETS
Real Estate....................................... $ 571,337 $ 52,200 $ 359,200 $ (35,621) $ 947,116
Less Accumulated Depreciation..................... (55,632) 3,602 (52,030)
------------ ------- -------------- ---------- -----------
Real Estate Net................................... 515,705 52,200 359,200 (32,019) 895,086
------------ ------- -------------- ---------- -----------
Investment in Unconsolidated Subsidiaries......... 4,182 4,182
Cash and Cash Equivalents......................... 9,275 9,275
Receivables Net................................... 7,011 (219) 6,792
Other Assets...................................... 9,801 (182) 9,619
------------ ------- -------------- ---------- -----------
Total........................................... $ 545,974 $ 52,200 $ 359,200 $ (32,420) $ 924,954
------------ ------- -------------- ---------- -----------
------------ ------- -------------- ---------- -----------
LIABILITIES AND STOCKHOLDERS' EQUITY
Liabilities:
Accounts Payable and Other...................... $ 7,796 $ -- $ -- $ (305) $ 7,491
Tenant Security Deposits........................ 1,437 1,437
Notes Payable................................... 142,345 38,119 166,200 346,664
Line of Credit Advances......................... 153,606 14,081 68,900 (37,563) 199,024
------------ ------- -------------- ---------- -----------
Total Liabilities................................. 305,184 52,200 235,100 (37,868) 554,616
------------ ------- -------------- ---------- -----------
Minority Interest................................. 501 -- 54,100 -- 54,601
------------ ------- -------------- ---------- -----------
Convertible Preferred Stock....................... -- -- 70,000 -- 70,000
------------ ------- -------------- ---------- -----------
Stockholders' Equity Common Stock................. 335,758 -- -- -- 335,758
Dividends Paid in Excess of Net Income............ (95,469) 5,448 (90,021)
------------ ------- -------------- ---------- -----------
Total Stockholders' Equity...................... 240,289 -- -- 5,448 245,737
------------ ------- -------------- ---------- -----------
Total........................................... $ 545,974 $ 52,200 $ 359,200 $ (32,420) $ 924,954
------------ ------- -------------- ---------- -----------
------------ ------- -------------- ---------- -----------
</TABLE>
- ------------------------
(1) Reflects the historical condensed consolidated balance sheet of the Company
as of September 30, 1997.
(2) Reflects the acquisitions of Mountaingate Plaza and the Powell Portfolio,
which were acquired by the Company after September 30, 1997, for an
aggregate investment of approximately $52,200,000. The acquisitions were
funded with the assumption of $27,793,000 of mortgage loans and the
incurrence of $10,326,000 in new mortgage loans with the remaining funds
provided under the Company's Credit Facility.
(3) Reflects the pending acquisition of the Golden State Properties, Meridian
Village Shopping Center and Simi Valley Plaza for an aggregate investment of
approximately $359,200,000. Assumes that the acquisitions will be funded
with $4,100,000 of Common Units, $50,000,000 of Preferred Units, $70,000,000
of Series A Preferred Stock, the assumption of $16,200,000 of mortgage debt,
and the incurrence of $150,000,000 of new mortgage debt, with the remaining
funds provided by borrowings under the Company's Credit Facility.
(4) Reflects the application of the estimated net proceeds from the pending sale
of the Pacific West Outlet Center of approximately $37,563,000 to repay
borrowings under the Company's Credit Facility.
F-28
<PAGE>
PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF INCOME
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1997
(DOLLARS IN THOUSANDS, EXCEPT SHARE DATA)
<TABLE>
<CAPTION>
COMMON PENDING
COMPLETED STOCK PENDING REAL ESTATE FINANCING
HISTORICAL(1) ACQUISITIONS(2) OFFERING(3) ACQUISITIONS(4) SALE(5) TRANSACTIONS(6) PRO FORMA
------------ --------------- ----------- --------------- ----------- --------------- ---------
<S> <C> <C> <C> <C> <C> <C> <C>
REVENUES
Rents....................... $ 47,559 $ 10,726 $ -- $ 30,115 $ (3,901) $ (2,035) $ 82,464
Interest.................... 522 7 (9) (26) 494
------------ ------- ----------- ------- ----------- ------- ---------
Total Revenues............ 48,081 10,733 -- 30,115 (3,910) (2,061) 82,958
------------ ------- ----------- ------- ----------- ------- ---------
COSTS AND EXPENSES
Interest.................... 12,827 5,949 (1,754) 16,645 (2,013) (959) 30,695
Rental Operating............ 12,792 2,913 7,970 (1,088) (593) 21,994
General and
Administrative............ 2,279 2,279
Provision for Bad Debt...... 371 371
Depreciation and
Amortization.............. 10,731 1,775 5,987 (299) 18,194
------------ ------- ----------- ------- ----------- ------- ---------
Total Costs and
Expenses................ 39,000 10,637 (1,754) 30,602 (3,101) (1,851) 73,533
------------ ------- ----------- ------- ----------- ------- ---------
Income (loss) From
Operations Before Gain on
Sales of Real Estate,
Distribution to Minority
Interest Holders, Income
From Unconsolidated
Subsidiaries and
Extraordinary Item........ 9,081 96 1,754 (487) (809) (210) 9,425
Gain on Sales of Real
Estate.................... 5,448 5,448
Income from Unconsolidated
Subsidiaries.............. 143 292 435
Distribution to Minority
Interest Holders.......... (33) (3,216) (3,249)
------------ ------- ----------- ------- ----------- ------- ---------
Net Income (loss) before
extraordinary item........ $ 9,191 $ 96 $ 1,754 $ (3,703) $ 4,639 $ 82 $ 12,059
------------ ------- ----------- ------- ----------- ------- ---------
------------ ------- ----------- ------- ----------- ------- ---------
Net Income Per Share........ $ 0.45 $ 0.51
------------ ---------
------------ ---------
Weighted Average Number of
Shares.................... 20,601,118 23,427,675
------------ ---------
------------ ---------
</TABLE>
- ------------------------
(1) Reflects the historical condensed consolidated statement of income of the
Company for the nine months ended September 30, 1997, excluding
extraordinary items.
(2) Reflects the 1997 Acquisitions as if such transactions had occurred on
January 1, 1997. Assumes that the acquisitions were funded with the
assumption of $43,310,000 of mortgage indebtedness, bearing a
weighted-average interest rate of 8.31% and the incurrence of $41,926,000 of
new mortgage indebtedness, bearing a weighted-average interest rate of
7.57%, with the remaining funds provided by borrowings under the Company's
Credit Facility at an assumed interest rate of 7.15% (the weighted average
interest rate on the Company's Credit Facility at November 30, 1997).
Estimated depreciation and amortization expense is based upon the Company's
investments in such properties using asset lives of 30 years.
(3) Reflects the application of the estimated net proceeds from the Common Stock
Offering to repay borrowings under the Credit Facility bearing an assumed
interest rate of 7.15%.
(4) Reflects the Pending Acquisitions of the Golden State Properties, Meridian
Village Shopping Center and Simi Valley Plaza, as if such transactions had
occurred on January 1, 1997. Assumes that the acquisitions will be funded
with $50,000,000 of Preferred Units and $70,000,000 of Series A Preferred
Stock, each yielding 8%, $4,100,000 of Common Units, the assumption of
$16,200,000 of mortgage debt bearing an interest rate of 8.98% and the
incurrence of $150,000,000 of new mortgage debt bearing an interest rate of
6.81% (based upon a spread of .95% above a ten-year Treasury rate of 5.86%),
with the remaining funds provided by borrowings under the Company's Credit
Facility bearing an assumed interest rate of 7.15%. Estimated depreciation
and amortization expense is based upon the Company's investment in such
properties using asset lives of 30 years.
(5) Reflects the application of the estimated net proceeds from the sale of the
Pacific West Outlet Center of approximately $37,563,000 to repay
indebtedness under the Company's Credit Facility bearing an assumed an
interest rate of 7.15%.
(6) Reflects the Company's sale of a 75% joint venture interest in each of
Ladera Shopping Center and Margarita Shopping Center and the application of
the estimated proceeds therefrom to repay indebtedness under the Credit
Facility bearing an assumed interest rate of 7.15%, as if such transactions
had occurred on January 1, 1997. The joint venture interests in Margarita
Shopping Center and Ladera Shopping Center were sold during the first and
third quarters of 1997, respectively.
F-29
<PAGE>
PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF INCOME
FOR THE YEAR ENDED DECEMBER 31, 1996
(DOLLARS IN THOUSANDS, EXCEPT SHARE DATA)
<TABLE>
<CAPTION>
COMPLETED PENDING
COMMON REAL REAL
COMPLETED DEBT STOCK PENDING ESTATE ESTATE
HISTORICAL(1) ACQUISITIONS(2) ADJUSTMENTS(3) OFFERING(4) ACQUISITIONS(5) SALES(6) SALES(7)
------------ --------------- ----------------- ----------- --------------- ----------- -----------
<S> <C> <C> <C> <C> <C> <C> <C>
REVENUES
Rents............... $ 46,864 $ 33,446 $ -- $ -- $ 37,530 $ (4,417) $ (5,312)
Interest............ 450 15
------------ ------- ----- ----------- ------- ----------- -----------
Total Revenues.... 47,314 33,461 -- -- 37,530 (4,417) (5,312)
------------ ------- ----- ----------- ------- ----------- -----------
COSTS AND EXPENSES
Interest............ 10,744 15,437 (347) (5,261) 22,193 (1,288) (2,684)
Rental Operating.... 12,603 9,535 10,543 (1,038) (1,471)
General and
Administrative..... 2,415
Provision for Bad
Debt............... 410
Depreciation and
Amortization....... 11,250 5,519 7,982 (425) (910)
------------ ------- ----- ----------- ------- ----------- -----------
Total Costs and
Expenses........ 37,422 30,491 (347) (5,261) 40,718 (2,751) (5,065)
------------ ------- ----- ----------- ------- ----------- -----------
Income (Loss) From
Operations Before
Gain on Sales of
Real Estate,
Distribution to
Minority Interest
Holders, Income
From Unconsolidated
Subsidiaries and
Extraordinary
Item............... 9,892 2,970 347 5,261 (3,188) (1,666) (247)
Gain on Sales of
Real Estate........ 2,298 5,448
Income from
Unconsolidated
Subsidiaries.......
Distribution to
Minority Interest
Holders............ (35) (2) (4,288)
------------ ------- ----- ----------- ------- ----------- -----------
Net Income (Loss)
before
extraordinary
item............... $ 12,155 $ 2,968 $ 347 $ 5,261 $ (7,476) $ (1,666) $ 5,201
------------ ------- ----- ----------- ------- ----------- -----------
------------ ------- ----- ----------- ------- ----------- -----------
Net Income Per
Share.............. $ 0.71
------------
------------
Weighted Average
Number of
Shares............. 17,084,498
------------
------------
<CAPTION>
FINANCING
TRANSACTIONS(8) PRO FORMA
--------------- ----------
<S> <C> <C>
REVENUES
Rents............... $ (4,377) $ 103,734
Interest............ (19) 446
------- ----------
Total Revenues.... (4,396) 104,180
------- ----------
COSTS AND EXPENSES
Interest............ $ (1,601) 37,193
Rental Operating.... (1,250) 28,922
General and
Administrative..... 2,415
Provision for Bad
Debt............... 410
Depreciation and
Amortization....... (664) 22,752
------- ----------
Total Costs and
Expenses........ (3,515) 91,692
------- ----------
Income (Loss) From
Operations Before
Gain on Sales of
Real Estate,
Distribution to
Minority Interest
Holders, Income
From Unconsolidated
Subsidiaries and
Extraordinary
Item............... $ (881) 12,488
Gain on Sales of
Real Estate........ 7,746
Income from
Unconsolidated
Subsidiaries....... 654 654
Distribution to
Minority Interest
Holders............ (4,325)
------- ----------
Net Income (Loss)
before
extraordinary
item............... $ (227) $ 16,563
------- ----------
------- ----------
Net Income Per
Share.............. $ 0.71
----------
----------
Weighted Average
Number of
Shares............. 23,409,498
----------
----------
</TABLE>
- ------------------------------
(1) Reflects the historical condensed consolidated statement of income of the
Company for the year ended December 31, 1996, excluding extraordinary items.
F-30
<PAGE>
(2) Reflects the acquisition of Ladera Shopping Center (which occurred in July
1996) and Margarita Shopping Center (which occurred in December 1996) and
the 1997 Acquisitions (which were completed after December 31, 1996), as if
such transactions had occurred on January 1, 1996. Assumes that the
acquisitions were funded with the assumption of $43,310,000 of mortgage
indebtedness, bearing a weighted-average interest rate of 8.31% and the
incurrence of $41,926,000 of new mortgage indebtedness, bearing a
weighted-average interest rate of 7.57% with the remaining funds provided by
borrowings under the Company's Credit Facility at an assumed interest rate
of 7.15%. Estimated depreciation and amortization expense is based upon the
Company's investment in such properties using asset lives of 30 years.
(3) Reflects the redemption of $25,700,000 aggregate principal amount of 8.5%
Convertible Debentures, using borrowings under the Company's Credit Facility
bearing an assumed interest rate of 7.15%.
(4) Reflects the application of the estimated net proceeds from the Common Stock
Offering to repay borrowings under the Credit Facility bearing an assumed
interest rate of 7.15%.
(5) Reflects the Pending Acquisitions of the Golden State Properties, Meridian
Village Shopping Center and Simi Valley Plaza, as if such transactions had
occurred on January 1, 1996. Assumes that the acquisitions will be funded
with $50,000,000 of Preferred Units and $70,000,000 of Series A Preferred
Stock, each yielding 8%, $4,100,000 of Common Units, the assumption of
$16,200,000 of mortgage debt bearing an interest rate of 8.98%, and the
incurrence of $150,000,000 of new mortgage debt bearing an interest rate of
6.81% (based upon a spread of .95% above a ten-year Treasury rate of 5.86%),
with the remaining funds provided by borrowings under the Company's Credit
Facility bearing an assumed interest rate of 7.15%. Estimated depreciation
and amortization expense is based upon the Company's investment in such
properties using asset lives of 30 years.
(6) Reflects the elimination of the operations of the Company's interest in five
properties sold during 1996, and the application of the proceeds therefrom
to repay indebtedness under the Credit Facility bearing an interest rate of
7.15%, as if such transactions had occurred on January 1, 1996.
(7) Reflects the application of the estimated proceeds from the sale of the
Pacific West Outlet Center of approximately $37,563,000 to repay
indebtedness under the Company's Credit Facility, bearing an assumed
interest rate of 7.15%.
(8) Reflects the Company's sale of a 75% joint venture interest in each of
Ladera Shopping Center and Margarita Shopping Center, and the application of
the estimated proceeds therefrom to repay indebtedness under the Credit
Facility bearing an assumed interest rate of 7.15%, as if such transactions
had occurred on January 1, 1996. The joint venture interest in Margarita
Shopping Center and Ladera Shopping Center were sold during the first and
third quarters of 1997, respectively.
F-31
<PAGE>
DEFINITIONS
"1997 Acquisitions" means the acquisition by the Company of the Downey
Portfolio on January 31, 1997, Foothill Plaza on February 28, 1997, the
Crenshaw-Imperial Plaza on April 3, 1997, the BRE Portfolio on April 4, 1997,
the Sacramento Portfolio on May 30, 1997, Olympiad Plaza on June 26, 1997,
Mountaingate Plaza on October 15, 1997 and the Powell Portfolio on October 29,
1997.
"BRE Portfolio" means the three retail properties which the Company acquired
from BRE Properties, Inc., a real estate investment trust, on April 4, 1997.
These properties are Fremont Hub, Central Shopping Center and Santa Fe Springs
Plaza.
"Common Stock Offering" reflects an offering of Common Stock the Company
completed in May 1997. In connection with such offering, the Company repaid
borrowings of approximately $73,576,000 with the net proceeds from the sale of
6,325,000 shares of its Common Stock at a price per share of $12.375.
"Credit Facility" means the Company's $205 million Credit Facility with
Nomura Asset Capital Corporation. The Credit Facility is scheduled to mature in
November 1998, with a one-year extension option available. Of the total
facility, $135 million is secured or to be secured by various mortgages and
carries an interest rate equal to the London Inter Bank Offer Rate ("LIBOR")
plus 1.40%, and $70 million is unsecured and carries an interest rate equal to
LIBOR plus 1.50%.
"Downey Portfolio" means the four retail properties in which the Company
acquired interests from an affiliate of Downey Savings & Loan, an institutional
lender, on January 31, 1997. These properties are Valley Central Shopping
Center, Cameron Park Shopping Center, Ontario Village Shopping Center and West
Lancaster Plaza.
"Powell Portfolio" means the five retail properties which the Company
acquired from an unrelated seller, on October 29, 1997. These properties are
Chambers Creek, Design Market, Fairwoods Square, Puget Park and Silver Plaza.
"Sacramento Portfolio" means the two retail properties which the Company
acquired from an unrelated seller, on May 30, 1997. The properties are Stanford
Ranch and Auburn Village.
F-32
<PAGE>
Exhibit 3.1.2
BURNHAM PACIFIC PROPERTIES, INC.
ARTICLES SUPPLEMENTARY
Designating 4,800,000 shares of Preferred Stock
as 4,800,000 shares of
SERIES 1997-A CONVERTIBLE PREFERRED STOCK
Burnham Pacific Properties, Inc., a corporation organized and existing
under the laws of Maryland (the "Corporation"), does hereby certify to the
State Department of Assessments and Taxation of Maryland that:
FIRST: Pursuant to the authority contained in Article VI of the charter
of the Corporation, as amended (the "Charter"), and in accordance with Section
2-208 of the Maryland General Corporation Law, the Board of Directors of the
Corporation at a meeting held on November 19, 1997 duly adopted a resolution
creating a series of the Preferred Stock, par value $.01 per share (the
"Preferred Stock"), designated as Series 1997-A Convertible Preferred Stock, and
having the preferences, conversion and other rights, voting powers,
restrictions, limitations as to dividends and other distributions,
qualifications and terms and conditions of redemption set forth below and
authorizing the issuance of such series of Preferred Stock as set forth below.
Upon any restatement of the Charter, Sections 1 through 12 of this Article FIRST
shall become subsection (6.6) of ARTICLE VI of the Charter, with any necessary
or appropriate changes to the enumeration and lettering of sections and
subsections hereof.
Section 1. Designation and Amount.
Of the 5,000,000 authorized shares of Preferred Stock, 4,800,000
shares are designated Series 1997-A Convertible Preferred Stock (the "Series
1997-A Convertible Preferred Stock").
Section 2. Dividends and Distributions.
(a) Holders of shares of Series 1997-A Convertible Preferred Stock
will be entitled to receive, when, as and if authorized by the Board of
Directors out of funds legally available for the payment of dividends,
cumulative quarterly cash dividends per share (rounded up to the nearest
whole cent) equal to the greater of (i) 2.00% (per quarter) of $25.00 per
share of Series 1997-A Convertible Preferred Stock (such $25.00, the "Stated
Value"), and (ii) the Common Stock Dividend Amount (as hereinafter defined)
per share of Series 1997-A Convertible Preferred Stock, payable in each case
in arrears on the last Business Day (as hereafter defined) of each March,
June, September and December of each year, commencing on the first such day
after the issuance of a share of Series 1997-A Convertible Preferred Stock
(each a "Dividend Payment Date"). The "Common
<PAGE>
Stock Dividend Amount" applicable as of any Dividend Payment Date shall mean
the amount of the product of (i) the dividend payable on (or immediately
preceding, as set forth below) such Dividend Payment Date with respect to
each share of Common Stock, and (ii) the number of shares of Common Stock
into which each share of Series 1997-A Convertible Preferred Stock would be
entitled to be converted, at the Conversion Price then in effect and
otherwise as set forth in these Articles Supplementary (but without giving
effect to the date limitations set forth in the first sentence of Section
5(a) hereof), as of the record date established for such Dividend Payment
Date (determined, for purposes of this computation, to the fourth decimal
place), less the Dividend Catch-Up Amount (as hereinafter defined). The
"Dividend Catch-Up Amount" shall mean an amount per share of Common Stock
equal to the amount by which the regular ($0.25 per share of Common Stock per
quarter, adjusted for splits, share dividends and other similar events, as
such $0.25 per share dividend amount may from time to time be reasonably and
sustainably increased by the Board of Directors by resolution stating that
such increased dividend amount is "regular") aggregate dividends per share of
Common Stock payable on the three most recent dates fixed for payment of
dividends on the Common Stock (excluding the date concurrent with or within
five Business Days preceding such Dividend Payment Date), whether or not
declared, exceed the aggregate dividends per share of Common Stock actually
paid on said three payment dates. Such cumulative quarterly cash dividends
will accrue daily on the basis of a 360-day year of twelve 30-day months, and
will, to the extent not paid in full on a Dividend Payment Date, together
with accruals thereon, accrue at the compounded quarterly rate of 2.00% from
such Dividend Payment Date until payment is made, whether or not the
Corporation has earnings or surplus. The dividend payable to a holder of a
share of Series 1997-A Convertible Preferred Stock on the first Dividend
Payment Date after the share is issued will be the accrued dividend
calculated from the date of issuance to such Dividend Payment Date. If any
Dividend Payment Date is not a Business Day, the dividend due on that
Dividend Payment Date will be paid on the Business Day immediately succeeding
that Dividend Payment Date. Each Dividend Payment Date will be a date which
is the date fixed for payment of dividends with respect to the shares of
Common Stock or is not more than five Business Days after the date fixed for
payment of dividends with respect to the shares of Common Stock. As used
with regard to the Series 1997-A Convertible Preferred Stock, the term
"Business Day" means a day on which both state and federally chartered banks
in New York, New York are required to be open for general banking business;
"Accrued Dividends" means all accrued and due dividends (compounded as
provided above and together with accruals thereon) and all accrued but not
yet due dividends (whether or not declared or authorized); and "Outstanding
Dividends" means all accrued and due dividends (compounded as provided above
and together with accruals thereon) (whether or not declared or authorized)
but excluding all accrued but not yet due dividends.
(b) Each dividend will be payable to holders of record of the
Series 1997-A Convertible Preferred Stock on a date (a "Record Date")
selected by the Board of Directors which is not less than 10 nor more than 45
days before the Dividend Payment Date on which the dividend is to be paid.
No Record Date will precede the close of business on the date the Record Date
is fixed.
(c) Unless and until all Accrued Dividends on the Series 1997-A
Convertible Preferred Stock under Section 2(a) through the most recent
preceding Dividend Payment Date have been paid (or are being paid
contemporaneously therewith), the Corporation may not (i)
2
<PAGE>
declare or pay any dividend, make any distribution (other than a distribution
payable solely in shares of Common Stock), or set aside any funds or assets
for payment or distribution with regard to any Junior Shares (as hereinafter
defined), (ii) redeem or purchase (directly or indirectly, including, without
limitation, through the Operating Partnership (as hereinafter defined) or
Subsidiaries (as hereinafter defined)), or set aside any funds or other
assets for the redemption or purchase of, any Junior Shares (as hereinafter
defined) or (iii) authorize, take or cause or permit to be taken any action
of the general partner of the Operating Partnership, that will result in (A)
the declaration or payment by the Operating Partnership of any distribution
to its partners (other than distributions made concurrently with
distributions payable to the Corporation in respect of its partnership
interest or Preferred Units (as hereinafter defined) in each case that will
be used by the Corporation to fund the payment in full of all such Accrued
Dividends (such distributions to the Corporation in respect of its
partnership interest being referred to as "Authorized LP Distributions" and
such distributions to the Corporation in respect of its Preferred Units being
referred to as "Authorized Preferred Unit Distributions"), or the setting
aside of any funds or assets for payment of any distributions to its partners
(other than those made concurrently with Authorized LP Distributions or
Authorized Preferred Unit Distributions) or (B) the redemption or purchase
(directly or indirectly, including, without limitation, through the Operating
Partnership or Subsidiaries), or the setting aside of any funds or other
assets for the redemption or purchase of any partnership interests in the
Operating Partnership, except for exchange or conversions of partnership
interests in the Operating Partnership in the ordinary course into shares of
(1) Common Stock or (2) pursuant to the Operating Partnership Agreement (as
defined herein), Series 1997-A Convertible Preferred Stock. As used herein,
the term "Junior Shares" means, with regard to the Series 1997-A Convertible
Preferred Stock, all partnership interests in the Operating Partnership other
than those partnership interests held of record and beneficially by the
Corporation, all shares of Common Stock and all shares of any other class or
series of stock of the Corporation to which the shares of Series 1997-A
Convertible Preferred Stock are prior in rank with regard to payment of
dividends or payments upon the liquidation, dissolution or winding-up of the
Corporation; the term "Operating Partnership" means Burnham Pacific Operating
Partnership, L.P., a Delaware limited partnership, or any successor thereto;
the term "Subsidiary" means any Person in which the Company directly or
indirectly owns any equity interest; the term "Person" shall mean an
individual, partnership, corporation, limited liability company, business
trust, joint stock company, trust, unincorporated association, joint venture,
nation or government, any state or other political subdivision thereof and
any entity exercising executive, legislative, judicial, regulatory or
administrative functions of or pertaining to government or other entity of
whatever nature; the term "Preferred Units" means the Series 1997-A Preferred
Units issued pursuant to the Agreement of Limited Partnership, dated as of
November 14, 1997, by and among Burnham Pacific Properties, Inc., as General
Partner and Burnham Pacific L.P., Inc., and Burnham Pacific Properties, Inc.,
as limited partners, as amended by the First Amendment to the Agreement of
Limited Partnership (and exhibits thereto), dated as of December __, 1997 (as
amended from time to time, the "Operating Partnership Agreement").
(d) While any shares of Series 1997-A Convertible Preferred Stock are
outstanding, the Corporation may not pay any dividend, or set aside any funds
for the payment of a dividend, with regard to any shares of any class or series
of stock of the Corporation which
3
<PAGE>
ranks on a parity with Series 1997-A Convertible Preferred Stock as to
payment of dividends unless at least a proportionate payment is made with
regard to all Accrued Dividends on the Series 1997-A Convertible Preferred
Stock (except, as to any shares of the Series 1997-A Convertible Preferred
Stock as to which a notice of conversion has been furnished by the holder
thereof, at the effective time of conversion) under Section 2(a) through the
most recent preceding Dividend Payment Date. A payment of dividends with
regard to the Series 1997-A Convertible Preferred Stock will be proportionate
to a payment of a dividend with regard to another class or series of stock if
the dividend per share of Series 1997-A Convertible Preferred Stock is the
same percentage of the Accrued Dividends (except as aforesaid), under Section
2(a) through the most recent preceding Dividend Payment Date, with regard to
a share of Series 1997-A Convertible Preferred Stock that the dividend paid
with regard to a share of stock of the other class or series is of the
Accrued Dividends (except as aforesaid), under Section 2(a) through the most
recent preceding Dividend Payment Date, with regard to a share of stock of
that other class or series.
(e) Any dividend paid with regard to shares of Series 1997-A
Convertible Preferred Stock will be paid equally with regard to each
outstanding share of Series 1997-A Convertible Preferred Stock, except to the
extent that shares of Series 1997-A Convertible Preferred Stock are
outstanding for differing amounts of time during the relevant dividend period.
Section 3. Voting Rights.
The voting rights of the holders of shares of Series 1997-A
Convertible Preferred Stock will be only the following:
(a) The holders of shares of Series 1997-A Convertible Preferred
Stock will have the right to vote on all matters on which the holders of
Common Stock are entitled to vote on an "as converted" basis with holders of
shares of the Common Stock, as though part of the same class as holders of
Common Stock, with such number of shares of Common Stock deemed held of
record by holders of shares of Series 1997-A Convertible Preferred Stock on
any Record Date as would be the number of shares of Common Stock into which
the shares of Series 1997-A Convertible Preferred Stock held by such holders
would be entitled to be converted on such Record Date. The holders of shares
of Series 1997-A Convertible Preferred Stock shall receive all notices of
meetings of the holders of shares of Common Stock, and all other notices and
correspondence to the holders of shares of Common Stock provided by the
Corporation, and shall be entitled to take such actions, and shall have such
rights, as are set forth herein or are otherwise available to the holders of
shares of Common Stock in the Charter and in the By-laws of the Corporation
as in effect on the date hereof, in each case with the same effect as would
be taken by holders of Series 1997-A Convertible Preferred Stock if deemed to
be holders of such number of shares of Common Stock as determined as
aforesaid. Notwithstanding the provisions of this Section 3(a) and of
Section 3(b) below, the holders of shares of Series 1997-A Convertible
Preferred Stock shall not have the right to vote (and shall not be counted in
determining whether a quorum is present for such purposes) on the matter
provided for in Section 5.7 in the Stock Purchase Agreement (as hereinafter
defined).
4
<PAGE>
(b) While any shares of Series 1997-A Convertible Preferred Stock
are outstanding, the Corporation will not, directly or indirectly, including
through a recapitalization, reorganization, or a merger or consolidation with
any other Person, or otherwise, without approval of holders of at least a
majority of the outstanding shares of Series 1997-A Convertible Preferred
Stock, voting separately as a class, (i) issue any shares of Series 1997-A
Convertible Preferred Stock, except (A) pursuant to that certain Stock
Purchase Agreement dated as of December 5, 1997 (as amended from time to
time, the "Stock Purchase Agreement") by and among the Corporation, the
Operating Partnership, and Westbrook Burnham Holdings, L.L.C., and Westbrook
Burnham Co-Holdings, L.L.C. (together, the "Initial Purchaser") or (B) as to
not more than 2,000,000 shares of Series 1997-A Convertible Preferred Stock,
pursuant to the Operating Partnership Agreement, by and among the
Corporation, HPBA, LLC, and HPBA II, LLC, as in effect on the date hereof and
pertaining to the exchange of Preferred Units for shares of Series 1997-A
Convertible Preferred Stock, (ii) issue any Preferred Units except pursuant
to the Operating Partnership Agreement as in effect on the date hereof; (iii)
increase the number of authorized shares of Series 1997-A Convertible
Preferred Stock; (iv) combine, split or reclassify the outstanding shares of
Series 1997-A Convertible Preferred Stock into a smaller or larger number of
shares; (v) exchange or convert any shares of Series 1997-A Convertible
Preferred Stock for other securities or the right to receive cash, or propose
or require an exchange or conversion other than as provided herein, or
reclassify any shares of Series 1997-A Convertible Preferred Stock, or to
authorize, create, classify, reclassify or issue any class or series of stock
ranking prior to or on a parity with the Series 1997-A Convertible Preferred
Stock either as to dividends or upon liquidation, dissolution or winding-up
of the Corporation or as to the rights of the Series 1997-A Convertible
Preferred Stock; (vi) amend, alter or repeal, or permit to be amended,
altered or repealed, the following provisions of the By-laws of the
Corporation in a manner which would affect adversely the rights and
preferences of the holders of Series 1997-A Convertible Preferred Stock,
including, without limitation, any exception set forth therein applicable to
Series 1997-A Convertible Preferred Stock; Article II, Section 11; Article
III, Sections 2, 5 (last sentence), 9 (last sentence) and 10; Article IV,
Sections 2 (last sentence), 3 (second sentence), 5 (last sentence); and
Article XIV (last sentence); (vii) amend, alter or repeal, or permit to be
amended, altered or repealed, the Operating Partnership Agreement pertaining
to or affecting the terms and conditions of, or the rights or preferences of
the Preferred Units; or (viii) amend, alter or repeal, or permit to be
amended, altered or repealed, any of the provisions of the Charter (including
the terms of the Series 1997-A Convertible Preferred Stock), the By-laws of
the Corporation, the Operating Partnership Agreement, or any organizational
document of any Subsidiary, in such a manner as would affect adversely the
preferences, conversion and other rights, voting powers, restrictions,
limitations as to dividends and other distributions, qualifications and terms
and conditions of redemption of (A) the Series 1997-A Convertible Preferred
Stock (including, without limitation, taking any such action the result of
which could be to alter the manner or rate of exchange of partnership
interests in the Operating Partnership, including, without limitation, the
Preferred Units, for securities of the Corporation as in effect on the date
hereof), or (B) the Common Stock; PROVIDED, HOWEVER, that the increase of
classes of capital stock which have rights superior to those of the class of
Common Stock, as otherwise permitted hereby, shall not be deemed adversely to
affect the Common Stock.
5
<PAGE>
(c) While any shares of Series 1997-A Convertible Preferred Stock
are outstanding, the Corporation will not, directly or indirectly, including
through a recapitalization or a merger or consolidation with any other
Person, or otherwise, without the approval of the holders of not less than a
majority of the outstanding shares of the Series 1997-A Convertible Preferred
Stock, voting separately as a class, propose, authorize, take, or cause to be
taken or allow to occur any of the following actions: (i) the Transfer (as
hereinafter defined) by the Corporation to a Person of the right to exercise
all or a portion of the Corporation's rights as the general partner of the
Operating Partnership, or the Transfer in a single transaction or series of
transactions of all or substantially all of the assets of the Corporation,
the Operating Partnership and the Subsidiaries, considered as a whole,
including for such purpose any Person (but excluding from the applicability
of this clause (i) any Person in which the Corporation or the Operating
Partnership has a direct or indirect minority interest such that a sale,
transfer or assignment is not within the Corporation's or Operating
Partnership's control and a merger or consolidation of the Corporation with
or into a wholly-owned Subsidiary of the Corporation in which the Corporation
Market Capitalization (as hereinafter defined) is unchanged as a result
thereof) owned directly or indirectly by the Corporation to the extent of the
Corporation's attributed interest in such other Person; (ii) any
reorganization or recapitalization of the Corporation, the Operating
Partnership and the Subsidiaries, considered as a whole, in a single
transaction or in more than one transaction, in or as a result of which the
Common Stock Valuation (as hereinafter defined) is not in excess of $15.375;
(iii) any merger or consolidation of the Corporation or the Operating
Partnership with any Person (except a merger or consolidation of the
Corporation with or into a wholly-owned Subsidiary in which the Corporation
Market Capitalization is unchanged) in or as a result of which the Common
Stock Valuation is not in excess of $15.375; (iv) the Corporation's
termination of the election, or the taking of any action by the Corporation
which would cause termination other than by election, of the Corporation as a
real estate investment trust under the Internal Revenue Code of 1986, as
amended; (v) a Change of Control (as defined in Section 4 hereof); or (vi)
the Transfer on or before December 31, 1999, of the Common Stock or units of
the Operating Partnership held directly or indirectly, of record or
beneficially, by either of J. David Martin or Daniel B. Platt, as of the date
of the initial purchase by the Initial Purchaser of shares of Series 1997-A
Convertible Preferred Stock by either such Person ("Individual Ownership").
There shall be excluded from the transactions requiring approval of not less
than a majority of the outstanding shares of Series 1997-A Convertible
Preferred Stock, as set forth in clause (vi) of this Section 3(c), any
Transfer, as to any said Person, which occurs solely and directly as a result
of the death or proceedings in divorce of such Person or which occurs as to
not more than 30% of Individual Ownership as of the date of such initial
purchase, or which occurs on or after December 31, 1998, March 31, 1999, June
30, 1999, and September 30, 1999, as to a further 17.5% of Individual
Ownership released from such restriction at each such date. As used herein,
"Common Stock Valuation" is the value of each share of Common Stock
determined, in connection with any reorganization, recapitalization, merger
or consolidation, absent manifest error, by reference to the opinion of a
nationally-recognized investment bank obtained by the Board of Directors of
the Corporation at the expense of the Corporation for such purpose, unless
the Corporation and the Initial Purchaser otherwise agree. As used herein,
"Corporation Market Capitalization" is the total market equity capitalization
of the Corporation determined by reference to (determined based upon the
Current Market Price, as defined in Section 5(e)(vii)
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hereof) (i) outstanding (assuming for this purpose the exercise of all then
outstanding and exercisable warrants or other rights to acquire Common Stock
issued in the ordinary course of business and the exercise or conversion of
all other then exercisable or convertible Common Stock equivalents not
otherwise referenced below and Preferred Units) shares of Common Stock, (ii)
the number of shares of Common Stock which would be issued on conversion of
outstanding shares of Series 1997-A Convertible Preferred Stock (determined
in accordance with the terms hereof without regard to any timing restrictions
on conversion), and (iii) all partnership and other equity interests in the
Operating Partnership and the other Subsidiaries held by Persons (other than
the Company and the Subsidiaries) (assuming for this purpose the exchange or
conversion of all such third-Person partnership and other equity interests in
the Operating Partnership or other Subsidiaries for shares of Common Stock).
As used herein, "Transfer" means any sale, transfer by operation of law or
otherwise, assignment, disposition or arrangement, whether voluntary or
involuntary, which has the effect, directly or indirectly, of altering the
holding of or causing or permitting another Person to succeed to, any voting
control or economic interest, whether beneficial or of record or both (other
than as a nominee of the transferor), including any arrangement for
collateral purposes only, or which could, with the passage of time or the
occurrence of any event, or both, have such effect.
(d) Upon the occurrence of a Dividend Payment Default (as hereinafter
defined) or of any Voting Rights Default (as hereinafter defined), the number of
members of the entire Board of Directors (as if there were no vacancies or
unfilled newly-created directorships thereon) shall be automatically increased
by two, from not more than 11 to not more than 13, such that the holders of the
Series 1997-A Convertible Preferred Stock, voting as a separate class, shall be
entitled immediately to elect two directors. Thereafter, such right of the
holders of shares of Series 1997-A Convertible Preferred Stock, voting as a
class, so to elect and so at all times have represent such holders two members
of the Board of Directors shall continue without interruption until as provided
below (but subject to reinstatement of such right upon any further Dividend
Payment Default). Such directors shall be referred to as the "Series 1997-A
Directors." At such time when a Payment Dividend Default has been cured and
there exists no Protective Rights Default or Voting Rights Default, then the
right to elect Series 1997-A Directors provided for in this paragraph and the
terms of the incumbent Series 1997-A-elected Directors shall immediately
terminate . The Series 1997-A Directors, shall each sit as he or she may
request on each committee of the Board or on any other group so acting, whether
or not formally constituted as a committee of the Board, but no more than one
such director on each such committee. The election of a Series 1997-A Director
shall be by the affirmative vote of the holders of a plurality of the votes cast
by holders of the shares of Series 1997-A Convertible Preferred Stock, which
vote may be evidenced by a consent to action without a meeting signed by the
holders of such shares or may be obtained at a special meeting of the holders of
Series 1997-A Convertible Preferred Stock held as provided in Section 3(e)
hereof. Any Series 1997-A Director from time to time sitting as a member of the
Board may be removed by the holders of record of not less than a majority of the
outstanding shares of Series 1997-A Convertible Preferred Stock and, if so
removed, a successor individual to serve as a Series 1997-A Director may be
elected by the holders of record of not less than a majority of the outstanding
shares of Series 1997-A Convertible Preferred Stock. At any annual meeting of
the holders of Common Stock at which directors are to be elected, the incumbent
Series 1997-A Directors shall be
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<PAGE>
nominated and, upon the affirmative vote of not less than the holders of a
plurality of shares of Series 1997-A Convertible Preferred Stock, shall be
elected to serve as the Series 1997-A Directors. As used herein, "Dividend
Payment Default" shall mean a failure by the Corporation on any four
consecutive Dividend Payment Dates to pay in full the dividends set forth in
Section 2(a) hereof as intended to be due and payable on such dates such that
there are Outstanding Dividends (whether or not declared) with respect to
such four consecutive Dividend Payment Dates. As used herein, a "Voting
Rights Default" shall mean the failure to observe any of the provisions of
Sections 3(a), 3(b), or 3(c) hereof.
(e) Whenever the holders of shares of Series 1997-A Convertible
Preferred Stock have the right under Section 3(d) to elect a director or
directors or wish to remove a director, but have not done so, the Secretary
of the Corporation will, upon the written request of the holders of record of
at least 15% of the outstanding shares of Series 1997-A Convertible Preferred
Stock, call a special meeting of the holders of Series 1997-A Convertible
Preferred Stock for the purpose of removing and/or electing a director or
directors, as the case may be. The meeting will be held at the earliest
practicable date upon the notice required for annual meetings of the
shareholders of the Corporation (or such shorter notice as is stipulated in
the written requests for such meeting or is otherwise agreed in writing by
the holders of record of the outstanding shares of Series 1997-A Convertible
Preferred Stock before or within 10 days after the meeting) at the place
specified in the request for a meeting, or if there is none, at a place in
New York, New York, designated by the Secretary of the Corporation. If the
meeting has not been called within 2 days after delivery of the written
request to the Secretary of the Corporation, or within 4 days after the
request is mailed by registered mail, addressed to the Secretary of the
Corporation at the Corporation's principal office, the holders of record of
at least 25% of the outstanding shares of Series 1997-A Convertible Preferred
Stock may designate in writing one holder to call and appoint an individual
to chair (who need not be an officer or member of the Board) the meeting at
the expense of the Corporation, and the meeting may be called by that person
upon the notice required for annual meetings (or such shorter notice as
aforesaid). Any holder of shares of Series 1997-A Convertible Preferred
Stock or its representative will have access to the stock ledger of the
Corporation relating to the Series 1997-A Convertible Preferred Stock for the
purpose of causing a meeting of shareholders to be called in accordance with
this Section 3(e). Except as otherwise provided above in Section 3(d) or
this Section 3(e), a director elected in accordance with Section 3(d) and
this Section 3(e) will serve until the next annual meeting of the
shareholders of the Corporation and until his or her successor is elected and
qualified by the holders of Series 1997-A Convertible Preferred Stock, voting
as a class, and qualified. Any action which may be taken by the holders of
shares of Series 1997-A Convertible Preferred Stock at a meeting thereof may
be taken if holders of the required number of shares consent thereto in
writing in accordance with the applicable provisions of the Maryland General
Corporation Law.
(f) The Corporation shall act on or with respect to any matter as
to which it is entitled or requested to act in its capacity as a holder of
Preferred Units by voting or otherwise acting with respect to all such
Preferred Units solely in accordance with instructions received from a
majority of the holders of Series 1997-A Convertible Preferred Shares.
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Section 4. Change of Control; Liquidation.
(a) Upon (i) the Transfer in a single transaction, or series of
transactions, of all or substantially all of the assets of the Corporation,
the Operating Partnership and the Subsidiaries, considered as a whole,
including for such purpose the assets of any Subsidiary (except that with
respect to any such Subsidiary in which the Corporation or the Operating
Partnership has a direct or indirect minority interest such that a sale,
transfer or assignment is not within the Corporation's or Operating
Partnership's control, and is not a part of, or occurring in connection with,
a transaction or series of transactions covered hereby, this provision shall
not apply), (ii) the merger or consolidation of the Corporation or the
Operating Partnership with any other Person (other than a merger of the
Corporation with or into a wholly-owned Subsidiary of in which the
Corporation Market Capitalization is unchanged), (iii) any recapitalization
of the Corporation, the Operating Partnership and the Subsidiaries,
considered as a whole, in a single transaction or a series of transactions,
in an amount or amounts which aggregate 30% or more of Corporation Market
Capitalization, excluding for the purpose hereof the refinancing of any
commercial loans (including loans secured by real estate in amounts and
subject to terms and conditions substantially the same as the commercial
loans of the Corporation on December 5, 1997), or (iv) a Change of Control
(as defined in this Section 4), each holder of the Series 1997-A Convertible
Preferred Stock, may at its option receive, and, if so electing by written
notice to the Corporation to such effect, will be entitled to receive, out of
the assets of the Corporation available for distribution to its stockholders,
whether from capital, surplus or earnings, before any distributions made to
holders of any Junior Shares, an amount per share (the "Change of Control
Preference") equal to the product of (A) the sum of (1) Stated Value plus the
per share amount of Accrued Dividends with regard to the Series 1997-A
Convertible Preferred Stock to the date of final distribution (whether or not
declared) and (2) 5% of the sum of Stated Value and the per share amount of
Outstanding Dividends with regard to the Series 1997-A Convertible Preferred
Stock to the date of final distribution. For the purposes of this Section
4(a), Corporation Market Capitalization shall be calculated on the date of
the first of any transactions in a series for purposes of determining the
percentage thereof represented by all transactions in such series. The
Corporation shall provide proper notice to each holder of record of shares of
Series 1997-A Convertible Preferred Stock of any event of the nature set
forth in clauses (i) through (iv) of this Section 4(a).
(b) In the event of an involuntary liquidation, dissolution or
winding-up of the Corporation as a result of which the assets of the Corporation
are sold to multiple unrelated Persons, and the holders of the Corporation's
equity securities receive solely cash in a distribution upon liquidation, each
holder of the Series 1997-A Convertible Preferred Stock, may at its option
receive, and, if so electing by written notice to the Corporation to such
effect, shall be entitled to receive, out of the assets of the Corporation
available for distribution to its stockholders, whether from capital, surplus or
earnings, before any distributions made to holders of any Junior Shares, an
amount per share equal to the sum of (i) Stated Value plus (ii) the per share
amount of Accrued Dividends with respect to the Series 1997-A Convertible
Preferred Stock to the date of final distribution (whether or not declared). In
the event of any other involuntary or a voluntary liquidation, dissolution or
winding-up of the Corporation, each holder of the Series 1997-A Convertible
Preferred Stock, may at its option receive, and, if so electing
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<PAGE>
by written notice to the Corporation to such effect, shall be entitled to
receive, out of the assets of the Corporation available for distribution to
its stockholders, whether from capital, surplus or earnings, before any
distributions made to holders of any Junior Shares, an amount per share equal
to the sum of (i) Stated Value plus the per share amount of Accrued Dividends
with respect to the Series 1997-A Convertible Preferred Stock to the date of
final distribution (whether or not declared) and (ii) 5% of the sum of Stated
Value and the per share amount of Outstanding Dividends. All amounts payable
under this Section 4(b) shall be payable as a liquidation preference (the
"Liquidation Preference").
(c) Holders of Series 1997-A Convertible Preferred Stock may
further elect, when delivering the written notice to the Corporation with
respect to the election under Section 4(a) or Section 4(b), in lieu of
receiving the Change of Control Preference or the Liquidation Preference, as
the case may be, to receive Common Stock on conversion of Series 1997-A
Convertible Preferred Stock, without regard to the time restriction on
conversion established in Section 5(a) hereof, in the manner and as provided
in Section 5 hereof.
(d) If, upon any liquidation, dissolution or winding-up of the
Corporation, the assets of the Corporation, or proceeds of those assets,
available for distribution to the holders of Series 1997-A Convertible
Preferred Stock and of shares of all other classes or series which are on a
parity as to distributions on liquidation with the Series 1997-A Convertible
Preferred Stock are not sufficient to pay in full the Change of Control
Preference or the Liquidation Preference, as the case may be, to the holders
of the Series 1997-A Convertible Preferred Stock which have not elected to
convert shares of Series 1997-A Convertible Preferred Stock as provided in
Section 4(c) by reference to Section 5 hereof, and any liquidation preference
of all other classes or series which are on a parity as to distributions on
liquidation with the Series 1997-A Convertible Preferred Stock, then the
assets, or the proceeds of those assets, which are available for distribution
to such holders of shares of Series 1997-A Convertible Preferred Stock and of
the shares of all other classes or series which are on a parity as to
distributions on liquidation with Series 1997-A Convertible Preferred Stock
will be distributed to the holders of the Series 1997-A Convertible Preferred
Stock and of the shares of all other classes or series which are on a parity
as to distributions on liquidation with the Series 1997-A Convertible
Preferred Stock ratably in accordance with the respective amounts of the
Liquidation Preference, with respect to shares of the Series 1997-A
Convertible Preferred Stock entitled thereto, and the liquidation preferences
applicable to the shares of other classes or series which are on a parity as
to distributions on liquidation with Series 1997-A Convertible Preferred
Stock, with respect to the shares of any such other class or series entitled
thereto. After payment of the full amount of the Change of Control
Preference or the Liquidation Preference, as the case may be, such holders of
shares of Series 1997-A Convertible Preferred Stock will not be entitled to
any further distribution of assets of the Corporation.
As used herein, a "Change of Control" of the Corporation or the
Operating Partnership shall be deemed to have occurred if any of the following
occur (or in the case of any proposal made by any Person to the Corporation or
the Operating Partnership, if any of the following could occur as a result
thereof): (i) the Corporation takes or fails to take any action such that it
ceases to be required to file reports under Section 13 of the Securities
Exchange Act
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<PAGE>
of 1934, as amended (the "Exchange Act"), or any successor to that Section;
(ii) any "person" (as defined in Sections 13(d) and 14(d) of the Exchange
Act) becomes the "beneficial owner" (as defined in Rule 13d-3 under the
Exchange Act), directly or indirectly, of either (A) 30% or more of the
outstanding shares of Common Stock, or (B) 30% (by right to vote or grant or
withhold any approval) of the outstanding securities of any other class or
classes which individually or together have the power to elect a majority of
the members of the Board; (iii) other than as a result of the death or
disability of one or more of the directors within a three-month period, a
majority of the members of the Board for any period of three consecutive
months are not persons who (A) had been directors of the Corporation for at
least the preceding 24 consecutive months or (B) when they initially were
elected to the Board, (x) were nominated (if they were elected by the
stockholders) or elected (if they were elected by the directors) with the
affirmative concurrence of 66-2/3% of the directors who were Continuing
Directors at the time of the nomination or election by the Board and (y) were
not elected as a result of an actual or threatened solicitation of proxies or
consents by a person other than the Board or an agreement intended to avoid
or settle such a proxy solicitation (the directors described in clauses (A)
and (B) of this clause (iii) being "Continuing Directors"); (iv) the
Corporation or a Subsidiary of the Corporation ceases to be the sole General
Partner of the Operating Partnership or grants or sells to any person, or
consents to any amendment to the agreement of limited partnership of the
Operating Partnership, or the organizational documents of the other
Subsidiaries, which has the effect of transferring, the power to control or
direct the actions of the Operating Partnership or such other Subsidiaries as
if such person (A) is a general partner of the Operating Partnership or (B)
is a limited partner of the Operating Partnership with consent or approval
rights greater than the consent or approval rights held by the limited
partners of the Operating Partnership on the date hereof; or (v) the
Operating Partnership is a party to any entity conversion or any merger or
consolidation in which the Operating Partnership is not surviving entity in
such merger or consolidation or in which the effect is of the nature set
forth in the next preceding clause (iv). Notwithstanding anything to the
contrary herein, the term "Change of Control" shall not include any of the
foregoing events to the extent that they arise in connection with an
underwritten, widely distributed offering or sale to the public of equity
securities.
(e) The Corporation shall give the holders of Series 1997-A
Convertible Preferred Stock no less than 30 days' prior written notice of the
occurrence of any of the events described in Section 4(a) with a description
of the event or events which are occurring and the rights of the holders in
respect thereof.
Section 5. Conversion Into Common Stock.
(a) Optional Conversion. (i) On and after December 31, 1998, March
31, 1999, June 30, 1999, and September 30, 1999 or earlier as provided in
Section 4(c), each holder of shares of Series 1997-A Convertible Preferred Stock
will have the right, at the holder's option, exercised by notice to such effect
(the "Notice of Election to Convert"), to convert 25% of the shares of Series
1997-A Convertible Preferred Stock held of record by the holder into shares of
Common Stock, such that any and all shares of Series 1997-A Convertible
Preferred Stock will be subject to conversion, at the holder's option, on and
after September 30, 1999, and such that each share of Series 1997-A Convertible
Preferred Stock will be entitled to be
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<PAGE>
converted into (A) a number of fully paid and non-assessable shares of Common
Stock (calculated as to each conversion to the nearest 1/100th of a share)
equal to Stated Value plus the amount, if any, of the per share amount of
Outstanding Dividends as of the effective time of the conversion, divided by
the Conversion Price, as hereinafter defined, then in effect, or (B) such
other securities or assets as the holder is entitled to receive in accordance
with Section 5(e). In the event of a merger or consolidation, or in the
occurrence of an event as referenced in Section 4(a) or (b) of these Articles
Supplementary, then and without regard to the aforesaid limitations on the
timing of conversion, each holder of shares of Series 1997-A Convertible
Preferred Stock will have the right, at the holder's option, to exercise as
aforesaid, to convert 100% of the shares of Series 1997-A Convertible
Preferred Stock held of record by the holder into shares of Common Stock,
such that any and all shares of Series 1997-A Convertible Preferred Stock
will be subject to conversion.
(ii) The holder of each share of Series 1997-A Convertible
Preferred Stock to be converted must surrender the certificate representing
that share to the conversion agent for the Series 1997-A Convertible
Preferred Stock appointed by the Corporation (which may be the Corporation
itself), with the Notice of Election to Convert on the back of that
certificate duly completed and signed, at the principal office of the
conversion agent. If the shares issuable on conversion are to be issued in a
name other than the name in which the Series 1997-A Convertible Preferred
Stock is registered, each share surrendered for conversion must be
accompanied by an instrument of transfer, in form reasonably satisfactory to
the Corporation, duly executed by the holder or the holder's duly authorized
attorney and by funds in an amount sufficient to pay any transfer or similar
tax which is required to be paid in connection with the transfer or evidence
that such tax has been paid or is not payable.
(b) Mandatory Conversion. Subject to Section 7 hereof, if, after the
fifth anniversary of the date of the first issuance of shares of Series 1997-A
Convertible Preferred Stock, the Current Market Price and the VWAP (each as
hereinafter defined) of the Common Stock on the Trading Day immediately before
the Notice of Mandatory Conversion and the Trading Day immediately before the
Mandatory Conversion Date referred to below shall be greater than the Initial
Conversion Price (as hereinafter defined), the Corporation shall have the right,
subject to the rights of the holders under Section 3(d), 4 and 7 hereof, to
convert at any time and from time to time not less than all of the outstanding
shares of Series 1997-A Convertible Preferred Stock into a number of shares of
Common Stock as determined in accordance with Section 5(a) of these Articles
Supplementary. In order to elect to effect the mandatory conversion of Series
1997-A Convertible Preferred Stock, subject to the requirements as set forth
above, the Corporation shall issue a notice that all shares of Series 1997-A
Convertible Preferred Stock are to be converted into shares of Common Stock,
setting forth the date of the intended conversion (such notice, the "Notice of
Mandatory Conversion", and such date, the "Mandatory Conversion Date") to all
holders of outstanding shares of Series 1997-A Convertible Preferred Stock on a
date (the "Mandatory Conversion Notice Date") at least 90 but not more than 120
days prior to the Mandatory Conversion Date. The Notice of Mandatory Conversion
shall also specify a record date (the "Mandatory Conversion Record Date")
selected by the Board of Directors which is not less than 20 but not more than
45 days before the Mandatory Conversion Date and the number of shares of Common
Stock into which each share
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<PAGE>
of Series 1997-A Convertible Preferred Stock will be converted. If the
Corporation gives a Notice of Mandatory Conversion, then, provided that the
computation set forth in the Notice of Mandatory Conversion is not clearly
erroneous, the outstanding shares of Series 1997-A Convertible Preferred
Stock will be automatically be converted into shares of Common Stock at the
close of business on the Mandatory Conversion Date regardless of whether the
holders of such shares of Series 1997-A Convertible Preferred Stock actually
surrender the certificates representing their shares of Series 1997-A
Convertible Preferred Stock for conversion and on such date the Corporation
will pay the holders an amount equal to all Accrued Dividends through the
Mandatory Conversion Date in accordance with Section 5(a) hereof. At the
close of business on the Mandatory Conversion Date, (i) the certificates
representing the shares of Series 1997-A Convertible Preferred Stock will
cease to represent anything other than the shares of Common Stock into which
the shares of the Series 1997-A Convertible Preferred Stock were
automatically converted and the right to receive any unpaid Accrued Dividends
as provided herein and (ii) the Corporation shall, at its option (the
exercise of which will be described in the Notice of Mandatory Conversion),
either (A) deliver certificates representing the shares of Common Stock to
which the holders of the Series 1997-A Convertible Preferred Stock are
entitled without requiring the surrender of the certificates which formerly
represented shares of Series 1997-A Convertible Preferred Stock, or (B)
deliver certificates representing the shares of Common Stock to which the
holders of Series 1997-A Convertible Preferred Stock are entitled when the
holder surrenders the certificates representing Series 1997-A Convertible
Preferred Stock issued before the Mandatory Conversion Date and complies with
the other requirements of subparagraph 5(a)(ii) (excluding the completion of
the Notice of Election to Convert). As used with regard to the Series 1997 A
Convertible Preferred Stock, the term "Trading Day" means (A) if the Common
Stock is listed on at least one stock exchange, a day on which there is
trading on the principal stock exchange on which the Common Stock is listed,
(B) if the Common Stock is not listed on a stock exchange, but sale prices of
the Common Stock are reported on an automated quotation system, a day on
which trading is reported on the principal automated quotation system on
which sales of the Common Stock are reported, or (C) if the Common Stock is
not listed on a stock exchange and sale prices of the Common Stock are not
reported on an automated quotation system, a day on which quotations are
reported by National Quotation Bureau Incorporated.
(c) Conversion Procedures. (i) The effective time of the
conversion under Section 5(a) shall be immediately prior to the close of
business on the day when all the conditions in Section 5(a)(ii) have been
satisfied.
(ii) If shares of Series 1997-A Convertible Preferred Stock are
noticed for conversion between the close of business on a dividend payment
Record Date and the opening of business on the corresponding Dividend Payment
Date ("Ex Record Date Shares"), the dividend with respect to those shares will
be payable on the Dividend Payment Date to the holder of record of the Ex Record
Date Shares on the dividend payment Record Date notwithstanding the surrender of
the Ex Record Date Shares for conversion after the dividend payment Record Date
and prior to the Dividend Payment Date. The Corporation will make no payment or
adjustment for Accrued Dividends on Ex Record Date Shares, whether or not in
arrears, or for dividends on the shares of Common Stock issued upon conversion
of the Ex Record Date Shares, other than to make payment to the holder of record
thereof on the Record Date. All Accrued Dividends
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<PAGE>
payable with respect to shares of Series 1997-A Convertible Preferred Stock
noticed for conversion during any period commencing with the close of
business on each Dividend Payment Date and ending with the opening of
business on the next succeeding Record Date will be paid to the holder
converting such shares on the related conversion date. The provisions of
this Section 5(c)(ii) shall not limit the obligation of the Corporation to
issue shares of Common Stock in conversion of shares of Series 1997-A
Convertible Preferred Stock, including Ex Record Date Shares, at Stated Value
plus Outstanding Dividends, as elsewhere provided herein.
(iii) As promptly as practicable after the effective time
for conversion of shares of Series 1997-A Convertible Preferred Stock, the
Corporation will issue and will deliver to the holder at the office of the
holder set forth in the Notice of Election to Convert, or on the holder's
written order, a certificate or certificates representing the number of full
shares of Common Stock issued upon the conversion of the shares of Series
1997-A Convertible Preferred Stock. Any fractional interest in respect of a
share of Common Stock arising upon a conversion will be settled as provided
in Section 5(d).
(iv) Each conversion will be deemed to have been effected at
the effective time provided in Section 5(c)(i) or on the Mandatory Conversion
Date as provided in Section 5(b), as applicable, and the person in whose name
a certificate for shares of Common Stock is to be issued upon a conversion
will be deemed to have become the holder of record of the shares of Common
Stock represented by that certificate at such effective time. All shares of
Common Stock delivered upon conversion of Series 1997-A Convertible Preferred
Stock will upon delivery be duly and validly issued and fully paid and
non-assessable, free of all liens and charges and not subject to any
preemptive rights except such preemptive rights as may exist pursuant to the
Stock Purchase Agreement. The shares of Series 1997-A Convertible Preferred
Stock so converted will no longer be deemed to be outstanding and all rights
of the holder with respect to those shares will immediately terminate, except
the right to receive the shares of Common Stock, and, if applicable, other
securities, cash or other assets to be issued or distributed as a result of
the conversion.
(d) Fractional Shares. No fractional shares of Common Stock will
be issued upon conversion of shares of Series 1997-A Convertible Preferred
Stock. Any fractional interest in a share of Common Stock resulting from
conversion of shares of Series 1997-A Convertible Preferred Stock will be
paid in cash (computed to the nearest cent) based on the Current Market Price
(as defined in Section 5(e)(vii) hereof) of the Common Stock as of the
Trading Date next preceding the date of conversion. If more than one share
of Series 1997-A Convertible Preferred Stock is surrendered for conversion at
substantially the same time by the same holder, the number of full shares of
Common Stock issuable upon the conversion will be computed on the basis of
all the shares of Series 1997-A Convertible Preferred Stock surrendered at
that time by that holder.
(e) Conversion Price. The "Conversion Price" per share of Series
1997-A Convertible Preferred Stock will initially be a price (the "Initial
Conversion Price") equal to $15.375, established as a 7% premium to $14.375
(such $14.375, "Base Price"), and will be further adjusted as follows from
time to time, subject to Section 5(e)(viii), if any of the events described
below occurs:
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(i) If the Corporation (A) pays a dividend or makes a
distribution on its Common Stock in shares of its Common Stock or (B)
subdivides, splits or reclassifies its outstanding Common Stock into a
greater number of shares, the Conversion Price in effect immediately prior to
that event will be reduced so that the holder of a share of Series 1997-A
Convertible Preferred Stock surrendered for conversion after that event will
receive the number of shares of Common Stock which the holder would have
received if the share of Series 1997-A Convertible Preferred Stock had been
converted immediately before the happening of the event (or, if there is more
than one such event, if the share of Series 1997-A Convertible Preferred
Stock had been converted immediately before the first of those events and the
holder had retained all the Common Stock or other securities or assets
received after the conversion). If the Corporation combines its outstanding
Common Stock into a smaller number of shares, the Conversion Price in effect
immediately prior to that event will be increased so that the holder of a
share of Series 1997-A Convertible Preferred Stock surrendered for conversion
after that event will receive the number of shares of Common Stock which the
holder would have received if the shares of Series 1997-A Convertible
Preferred Stock had been converted immediately before the happening of the
event (or, if there is more than one such event, if the share of Series
1997-A Convertible Preferred Stock had been converted immediately before the
first of those events and the holder had retained all the Common Stock or
other securities or assets received after the conversion). An adjustment
made pursuant to this Section 5(e)(i) will become effective immediately after
the Record Date, in the case of a dividend or distribution, and will become
effective immediately after the effective date, in the case of a subdivision,
split, reclassification or combination. If such dividend or distribution is
declared but is not paid or made, the Conversion Price then in effect will be
appropriately readjusted. However, a readjustment of the Conversion Price
will not affect any conversion which takes place before the readjustment.
(ii) If the Corporation issues rights or warrants to the
holders of its Common Stock as a class entitling them to subscribe for or
purchase Common Stock at a price per share less than the lesser of the Base
Price and the Conversion Price then in effect at the Record Date for the
determination of stockholders entitled to receive the rights or warrants,
then the Conversion Price in effect immediately before the issuance of the
rights or warrants will be reduced in accordance with the equation set forth
on EXHIBIT A hereto, which is hereby incorporated by reference herein. The
adjustment provided for in this Section 5(e)(ii) will be made successively
whenever any rights or warrants are issued, and will become effective
immediately after each Record Date. In determining the subscription or
purchase price, as the case may be, there will be taken into account any
consideration received by the Corporation for the rights or warrants, with
the value of that consideration, if other than cash, to be reasonably
determined by the Board of Directors of the Corporation (whose determination,
if made in good faith, will be conclusive). If any rights or warrants which
lead to an adjustment of the Conversion Price expire or terminate without
having been exercised, the Conversion Price then in effect will be
appropriately readjusted. However, a readjustment of the Conversion Price
will not affect any conversion which takes place before the readjustment. In
the event that a transaction may be viewed as causing this Section 5(e)(ii)
to be applicable and Section 5(e)(iv) hereof may also be construed as being
applicable, then Section 5(e)(iv) will be applied and this Section 5(e)(ii)
will not be applied.
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(iii) If the Corporation distributes to the holders of its
Common Stock as a class any shares of stock of the Corporation (other than
Common Stock) or evidences of indebtedness or assets (other than cash
dividends or distributions) or rights or warrants or other derivative
securities (other than those referred to in Section 5(e)(ii) or in Section
5(e)(iv)) to subscribe for or purchase any securities, then, in each such
case, the Conversion Price will be reduced so that it will equal the price
determined by multiplying the Conversion Price in effect immediately prior to
the Record Date for the distribution by a fraction of which the numerator is
the Current Market Price of the Common Stock on the Record Date for the
distribution less the then fair market value (as determined by the Board of
Directors, whose determination, if made in good faith, will be conclusive) of
the stock, evidences of indebtedness, assets, rights or warrants which are
distributed with respect to one share of Common Stock, and of which the
denominator is the Current Market Price of the Common Stock on that Record
Date. Each adjustment will become effective immediately after the Record
Date for the determination of the stockholders entitled to receive the
distribution. If any distribution is declared but not made, or if any rights
or warrants expire or terminate without having been exercised, effective
immediately after the decision is made not to make the distribution or the
rights or warrants expire or terminate, the Conversion Price then in effect
will be appropriately readjusted. However, a readjustment will not affect
any conversion which takes place before the readjustment. In the event that
a transaction may be viewed as causing this Section 5(e)(iii) to be
applicable and Section 5(e)(iv) hereof may also be construed as being
applicable, then Section 5(e)(iv) will be applied and this Section 5(e)(iii)
will not be applied.
(iv) If the Corporation issues or sells (or the Operating
Partnership or any Subsidiary issues or sells) any equity or debt securities
which are convertible, directly or indirectly, into or exchangeable for shares
of Common Stock ("Convertible Securities"), or any rights, options (other than
the issuance or exercise after the date hereof of stock options covering no more
than 1,367.777 shares of Common Stock issued pursuant to currently outstanding
options, subject to appropriate adjustment to the extent that the Corporation
(A) pays a dividend or makes a distribution on its Common Stock in shares of its
Common Stock, (B) subdivides its outstanding Common Stock into a greater number
of shares or (C) combines its outstanding Common Stock into a smaller number of
shares, and other than shares issued to members of the Corporation's Board of
Directors under the Corporation's Stock Options and Incentive Plan as amended to
May 6, 1997 and other than Preferred Units) or warrants to purchase or subscribe
for Common Stock at a conversion, exchange or exercise price per share which is
less than the lesser of the Base Price and the Conversion Price then in effect,
the Corporation will be deemed to have issued or sold, on the date on which the
Convertible Securities, rights, options or warrants are issued, the maximum
number of shares of Common Stock into or for which the Convertible Securities
may then be converted or exchanged or which are then issuable upon the exercise
of the rights, options or warrants immediately prior to the close of business on
the date on which the Convertible Securities, rights, options or warrants are
issued, and the Conversion Price shall be adjusted downward as if it were an
event covered by Section 5(e)(v) hereof (and, if applicable, Section
5(e)(viii)(B) hereof). However, no further adjustment of the Conversion Price
will be made as a result of the actual issuance of shares of Common Stock upon
conversion, exchange or exercise of the Convertible Securities, rights, options
or warrants. If any Convertible Securities, rights, options or warrants to
which this Section applies are
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redeemed, retired or otherwise extinguished or expire without any shares of
Common Stock having been issued upon conversion, exchange or exercise
thereof, effective immediately after the Convertible Securities, rights,
options or warrants expire, the Conversion Price then in effect will be
readjusted to what it would have been if those Convertible Securities,
rights, options or warrants had not been issued. However, a readjustment
will not affect any conversion which takes place before the readjustment.
For the purposes of this Section 5(e)(iv), (x) the price of shares of Common
Stock issued or sold upon conversion or exchange of Convertible Securities or
upon exercise of rights, options or warrants will be (A) the consideration
paid to the Corporation for the Convertible Securities, rights, options or
warrants, plus (B) the consideration paid to the Corporation upon conversion,
exchange or exercise of the Convertible Securities, rights, options or
warrants, with the value of the consideration, if other than cash, to be
determined reasonably by the Board of Directors of the Corporation (whose
determination, if made reasonably and in good faith, will be conclusive) and
(y) any change in the conversion or exchange price of Convertible Securities
or the exercise price of rights, options or warrants will be treated as an
extinguishment, when the change becomes effective, of the Convertible
Securities, rights, options or warrants which had the old conversion,
exchange or exercise price and an immediate issuance of new Convertible
Securities, rights, options or warrants with the new conversion, exchange or
exercise price.
(v) If the Corporation issues or sells any Common Stock
(excluding, however, from the effects of this Section 5(e)(v), (W) Common
Stock purchased in the open-market and resold pursuant to the Corporation's
dividend reinvestment plan, (X) sales of Common Stock by the Corporation at
an offering price to the ultimate purchaser not less than $13.75 per share as
to an aggregate offering price of not more than $120,000,000, provided that
all such sales occur on or before June 30, 1998, and sales of not less than
$60,000,000 of such aggregate amount occur on or before March 31, 1998, (Y)
on conversion or exchange of Convertible Securities, or (Z) on exercise of
rights, options or warrants, to which Section 5(e)(ii), (iii) or (iv)
applies) for a consideration per share less than the lesser of the Base Price
and the Conversion Price then in effect, on the date of the issuance or sale,
upon consummation of the issuance or sale, the Conversion Price in effect
immediately prior to the issuance or sale will be reduced in accordance with
the equation set forth on EXHIBIT A hereto, which is hereby incorporated by
reference herein. In the event of sale of Common Stock which would be in
accordance with clause (X) of the parenthetical above except that the
offering price to the ultimate purchaser is at an offering price of less than
$13.75 or less per share, the reduction of the Conversion Price shall be by
reference to the lower of the Base Price and the Conversion Price then in
effect and not by reference to the $13.75 threshold.
(vi) If there is a reclassification or change of outstanding
shares of Common Stock (other than a change in par value, or as a result of a
subdivision or combination), or a merger or consolidation of the Corporation
with any other entity that results in a reclassification, change, conversion,
exchange or cancellation of outstanding shares of Common Stock, or a sale or
transfer of all or substantially all of the assets of the Corporation, upon any
subsequent conversion of Series 1997-A Convertible Preferred Stock, each holder
of the Series 1997-A Convertible Preferred Stock will be entitled to receive the
kind and amount of securities, cash and other property which the holder would
have received if the holder had converted the
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<PAGE>
shares of Series 1997-A Convertible Preferred Stock into Common Stock
immediately before the first of those events and had retained all the
securities, cash and other assets received as a result of all those events.
In the event that a transaction may be viewed as causing this Section
5(e)(vi) to be applicable and 5(e)(iii) is also applicable, then Section
5(e)(iii) will be applied and this Section 5(e)(vi) will not be applied.
(vii) For the purpose of any computation under this Section
5(e) or otherwise in these Articles Supplementary, the "Current Market Price"
of the Common Stock on any date will be, as of any date of determination, the
average of the volume weighted average price of the Company Common Stock (the
"VWAP") on each of the twenty Trading Days immediately preceding such date,
as the VWAP for each day is reported by a firm of national recognition for
the preparation of such reports proposed either by the Initial Purchaser to
the Company, or by the Company to the Initial Purchaser, and in either case,
approved by the non-proposing party (such approval not to be unreasonably
withheld or delayed); PROVIDED, HOWEVER, that Current Market Price will be
computed based on each of the sixty Trading Days immediately preceding the
determination dates called for in Section 5(b) and Section 9 of these
Articles Supplementary.
(viii) Notwithstanding anything to the contrary herein, (A)
subject to the immediately following clause (B), no adjustment in the
Conversion Price will be required unless the adjustment would require a
change of at least 1.0% in the Conversion Price; PROVIDED, HOWEVER, that any
adjustments which are not made because of this Section 5(e)(viii) will be
carried forward and taken into account in any subsequent adjustment, and (B)
if the Corporation issues or sells any Common Stock or other capital stock,
or any warrants, rights, options or Convertible Securities that would require
adjustment of the Conversion Price hereunder, and the purchase price of such
Common Stock or capital stock sold, or issuable upon exercise or conversion
of such warrants, rights, options or Convertible Securities, as the case may
be, is less than or equal to $11.00, then the Conversion Price shall be equal
to the lesser of (1) the Conversion Price as adjusted pursuant to the
applicable provisions hereof after giving effect to the issuance or sale
giving rise to such readjustment and (2) such purchase price which is less
than or equal to $11.00. All calculations under this Section 5(e) will be
made to the nearest cent or to the nearest one hundredth of a share, as the
case may be.
(ix) If any one of the events in Sections 5(e)(i) through
5(e)(vi) occurs, then the Corporation will mail to the holders of record of the
Series 1997-A Convertible Preferred Stock, at least 15 days before the
applicable date specified below, a notice stating the applicable one of (A) the
date on which a record is to be taken for the purpose of the dividend,
distribution or grant of rights or warrants, or, if no record is to be taken,
the date as of which the holders of Common Stock of record who will be entitled
to the dividend, distribution or rights or warrants will be determined, (B) the
date on which it is expected the Convertible Securities will be issued or the
date on which the change in the conversion, exchange or exercise price of the
Convertible Securities, rights, options or warrants will be effective, (C) the
date on which the Corporation anticipates selling Common Stock for less than the
lesser of the Base Price and the Conversion Price on the date of the sale
(except that no notice need be given of (x) the anticipated date of sale of
Common Stock upon exercise of options or warrants which have been
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<PAGE>
described in a notice to the holders of record of Series 1997-A Convertible
Preferred Stock given at least 15 days before the options or warrants are
exercised or (y) a sale described in Section 5(e)(v)(x)), or (D) the date not
less than 30 days before the date on which the reclassification,
consolidation, merger or share exchange, is expected to become effective, and
the date not less than 30 days before the date as of which it is expected
that holders of record of Common Stock will be entitled to exchange their
shares of Common Stock for securities or other property deliverable upon the
reclassification, consolidation, merger, share exchange, sale, transfer,
dissolution, liquidation or winding-up. Whenever the Conversion Price is
adjusted, the Corporation will promptly send each holder of record of shares
of Series 1997-A Convertible Preferred Stock a notice of the adjustment of
the Conversion Price setting forth the adjusted Conversion Price, the date on
which the adjustment becomes effective, a brief description of the events
which caused the adjustment, and a calculation of the adjustment, all of
which shall be subject to the approval (not to be unreasonably delayed or
withheld) of the Initial Purchaser.
(f) Reservation of Common Stock. (i) The Corporation will at all
times reserve and keep available, free from preemptive rights, out of the
authorized but unissued shares of Common Stock, for the purpose of effecting
conversion of the Series 1997-A Convertible Preferred Stock, the maximum
number of shares of Common Stock which the Corporation would be required to
deliver upon the conversion of all the outstanding shares of Series 1997-A
Convertible Preferred Stock. For the purposes of this Section 5(f)(i), the
number of shares of Common Stock which the Corporation would be required to
deliver upon the conversion of all the outstanding shares of Series 1997-A
Convertible Preferred Stock will be computed as if at the time of the
computation all the outstanding shares of Series 1997-A Convertible Preferred
Stock were held by a single holder.
(ii) Before taking any action that would cause an adjustment
reducing the Conversion Price below the then par value (if any) of the shares
of Common Stock deliverable upon conversion of the Series 1997-A Convertible
Preferred Stock, the Corporation will take all corporate action which may, in
the opinion of its counsel, be necessary in order that the Corporation may
validly and legally issue fully paid and non-assessable shares of Common
Stock at the adjusted Conversion Price.
(iii) The Corporation will cause to be listed the shares of
Common Stock required to be delivered upon conversion of the Series 1997-A
Convertible Preferred Stock, prior to the delivery, upon each national
securities exchange, if any, upon which the outstanding shares of Common
Stock are listed at the time of delivery.
(g) Payment of Certain Taxes. The Corporation will pay any
documentary stamp or similar issue or transfer taxes payable in respect of
the issue or delivery of shares of Common Stock on conversion of Series
1997-A Convertible Preferred Stock; PROVIDED, HOWEVER, that the Corporation
will not be required to pay any tax which may be payable in respect of any
transfer involved in the issue or delivery of shares of Common Stock in a
name other than that of the holder of record of Series 1997-A Convertible
Preferred Stock to be converted and no such issue or delivery will be made
unless and until the person requesting the issue or delivery has paid to the
Corporation the amount of any such tax or has established, to the
satisfaction of the Corporation, that the tax has been paid or is not payable.
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Section 6. Status.
Shares of Series 1997-A Convertible Preferred Stock may only be
issued in accordance with the Stock Purchase Agreement or the Operating
Partnership Agreement. Shares of Series 1997-A Convertible Preferred Stock
converted or redeemed pursuant to the terms hereof shall not be reissued.
Section 7. Optional Redemption After Notice of Mandatory Conversion.
(a) Notwithstanding anything to the contrary contained in Section
5, each holder of Series 1997-A Convertible Preferred Stock will have the
right, exercised at any time after the Mandatory Conversion Notice Date but
prior to the Mandatory Conversion Date, to require the Corporation to redeem
any or all of the number of shares of Series 1997-A Convertible Preferred
Stock specified in the Notice of Mandatory Conversion that are owned of
record by the holder (the number of shares as to which each holder elects
redemption under this clause (a) being referred to as the "Identified
Redemption Shares"), at a redemption price per share (the "Redemption Price")
equal to (i) the sum of (A) Stated Value plus (B) the per share amount of the
sum of all Accrued Dividends with regard to the Series 1997-A Convertible
Preferred Stock (whether or not declared) through the Redemption Date, as
herein defined, times (ii) the percentage determined in accordance with the
following table:
Redemption Date Percentage
- --------------- -----------
December 31, 2002 to December 31, 2003 105%
December 31, 2003 to December 31, 2004 104%
December 31, 2004 to December 31, 2005 103%
December 31, 2005 to December 31, 2006 102%
December 31, 2006 to December 31, 2007 101%
December 31, 2007 and thereafter 100%
(b) In order to exercise a right to require the Corporation to
redeem a holder's Series 1997-A Convertible Preferred Stock, the holder must
deliver a request for redemption with respect to the Identified Redemption
Shares, accompanied by the certificates representing the shares to be
redeemed, to the Corporation at any time prior to the Mandatory Conversion
Date. If a request for redemption is given with regard to shares of Series
1997-A Convertible Preferred Stock, promptly (but in no event more than five
Business Days) after the request for redemption is given to the Corporation,
the Corporation will pay the holder cash equal to the Redemption Price of the
shares. The date of such payment is referred to herein as the "Redemption
Date."
(c) (i) If a request for redemption accompanied by the certificates
representing the shares to be redeemed is delivered to the Corporation, on the
Redemption Date dividends will cease to accrue with regard to the shares of
Series 1997-A Convertible Preferred Stock to be redeemed, and at the close of
business on that date the holders of those shares will cease to be stockholders
with respect to those shares, will have no interest in or claims against
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the Corporation by virtue of such shares (other than as described in clause
(ii) below) and will have no voting or other rights with respect to such
shares.
(ii) The dividend with respect to a share of Series 1997-A
Convertible Preferred Stock which is the subject of a request for redemption
delivered on a day which falls between the close of business on a dividend
payment Record Date and the opening of business on the corresponding Dividend
Payment Date will be payable on the Dividend Payment Date to the holder of
record of the share of Series 1997-A Convertible Preferred Stock on the
dividend payment Record Date notwithstanding the redemption of the share of
Series 1997-A Convertible Preferred Stock after the dividend payment Record
Date and prior to the Dividend Payment Date.
Section 8. Ranking. The shares of Series 1997-A Convertible Preferred
Stock will, with respect to the payment of dividends, the right to redemption
in accordance with Section 7, the right to receive the Change of Control
Preference, the right to receive the Liquidation Preference, and any other
distribution of assets on liquidation, dissolution or winding-up of the
Corporation, rank prior to any other series of Preferred Stock, prior to
Common Stock and prior to any other class or series of stock of the
Corporation.
Section 9. Mandatory Redemption in Certain Instances.
(a) If required under the rules of the New York Stock Exchange to
enable the Initial Purchaser to fully convert all of the shares of Series
1997-A Convertible Preferred Stock contemplated to be purchased by the
Initial Purchaser under the Stock Purchase Agreement, the Corporation shall
seek the approval of its shareholders as to the issuance of the Common Stock
upon conversion of the Series 1997-A Convertible Preferred Stock and any
related matters at the 1998 annual meeting of shareholders, the date of which
the Corporation will use reasonable efforts to advance in time as reasonably
possible and which shall in any event be held on or before May 12, 1998. If
such shareholder approval is not obtained at such meeting, then, the
Corporation may, in its sole discretion, convene a special meeting of
shareholders for such purpose, PROVIDED, that the same shall be called and
held in sufficient time to enable the Corporation to satisfy its obligations
to the Initial Purchaser under this Section 9. In connection with each such
meeting of shareholders, the Corporation will recommend such approval to its
shareholders, and use its best efforts (including, without limitation, the
retention of a soliciting firm for customary services in this regard) to
cause such approval to be granted. In each such case, the Corporation shall
immediately notify the Initial Purchaser as to whether such shareholder
approval has been obtained. If such approval is not obtained, the
Corporation shall, upon no less than ten Business Days prior written notice
and in any event no later than June 30, 1998, redeem such number of shares of
Series 1997-A Convertible Preferred Stock as shall have been agreed upon by
the Initial Purchaser and the Corporation in accordance with Section 5.7 of
the Stock Purchase Agreement (the "Redeemed Shares") at a purchase price per
share, in cash, paid to the Initial Purchaser, in an amount equal to the
greater of (i) the Stated Value plus the per share amount of Accrued
Dividends, if any, and (ii) the aggregate Current Market Price of a number of
shares of Common Stock (calculated to the nearest 1/100th of a share) equal
to the Stated Value plus the per share amount, of Outstanding Dividends, if
any as of the date of such redemption
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(the "Mandatory Redemption Date") divided by the Conversion Price then in
effect, plus Accrued Dividends, if any. (such greater amount, the "Mandatory
Redemption Price").
(b) On the Mandatory Redemption Date, dividends will cease to
accrue with regard to the Redeemed Shares, and at the close of business on
such date the Initial Purchaser will have no interest in or claims against
the Corporation by virtue of such shares and will have no voting or other
rights with respect to such shares.
(c) The Mandatory Redemption Price shall be due and payable in full
on the Mandatory Redemption Date, which shall be no later than June 30, 1998.
In the event that the Corporation fails to deliver to the Initial Purchaser
the Mandatory Redemption Price on or before such date, then the Corporation
shall pay to the Initial Purchaser as liquidated damages an amount per share
of Series 1997-A Convertible Preferred Stock required to have been redeemed,
equal to the greater of (i) 150% of the amount determined under clause (i) of
the definition Mandatory Redemption Price in Section 9(a), less the amount of
dividends actually paid on or prior to June 30, 1998 from the date of
original issuance of such share, on each share of Series 1997-A Convertible
Preferred Stock required to have been redeemed and (ii) the amount determined
under clause (ii) of said definition (in each case the amount of such
liquidated damages to be in lieu of and not in addition to the Mandatory
Redemption Price).
Section 10. Miscellaneous.
(a) Except as otherwise expressly provided herein, whenever a
notice or other communication is required or permitted to be given to holders
of shares of Series 1997-A Convertible Preferred Stock, the notice or other
communication will be deemed properly given if deposited in the United States
mail, postage prepaid, addressed to the persons shown on the books of the
Corporation as the holders of the shares of Series 1997-A Convertible
Preferred Stock at the addresses as they appear on the books of the
Corporation, as of the Record Date or dates determined in accordance with
applicable law and with the Charter and Bylaws, as in effect from time to
time, with a copy sent to each of Westbrook Burnham Holdings, L.L.C. and
Westbrook Burnham Co-Holdings, L.L.C., c/o Westbrook Partners, L.L.C., at 599
Lexington Avenue, Suite 3800, New York, New York 10022 and at 13155 Noel
Road, LB 54, Suite 2300, Dallas, Texas 75240, in each case by documented
overnight delivery service or, to the extent receipt is confirmed, telecopy,
telex or other electronic transmission service.
(b) Shares of Series 1997-A Convertible Preferred Stock will not
have any designations, preferences, conversion or other rights, voting
powers, restrictions, limitations as to dividends and other distributions,
qualifications or terms and conditions of redemption, other than those
specifically set forth herein, in the Charter, and as may be provided under
applicable law.
(c) The headings of the various subdivisions herein are for
convenience only and will not affect the meaning or interpretation of any of
the provisions herein.
(d) The preferences, conversion and other rights, voting powers,
restrictions, limitations as to dividends and other distributions,
qualifications and terms and conditions of redemption of the Series 1997-A
Convertible Preferred Stock may be waived, and any of such provisions of the
Series 1997-A Convertible Preferred Stock may be amended, with the approval
of holders of at least a majority of the outstanding shares of Series 1997-A
Convertible Preferred Stock, voting separately as a class.
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(e) Notwithstanding anything to the contrary contained in Section
2, 3, 4, 5, 7, 8 or 10(d) hereof, each holder of record of Series 1997-A
Convertible Preferred Stock hereby agrees (subject to relinquishment by
Westbrook Real Estate Fund II, L.P. as permitted below) that, in determining
whether any holder of Series 1997-A Convertible Preferred Stock has (i) voted
to remove or elect any director of the Corporation under Section 3, (ii)
approved any action by the Corporation under Section 3, (iii) elected the
Change of Control Preference or the Liquidation Preference, as the case may
be, or shares of Common Stock in lieu of either thereof under Section 4, (iv)
elected to cause the conversion of such holder's Series 1997-A Convertible
Preferred Stock into Common Stock or other assets under Section 5, (v)
elected to receive the Company Redemption Price under Section 7 or (vi)
received any notice of the Corporation required or permitted herein,
Westbrook Real Estate Fund II, L.P., shall have the right to grant or deny
such approvals, make or decline any such elections or receive any such
notices with regard to all shares of the Series 1997-A Convertible Preferred
Stock held of record by such holder, and a notice received by Westbrook Real
Estate Fund II, L.P., and a document executed by Westbrook Real Estate Fund
II, L.P., calling a meeting of shareholders, exercising the right to take
action by written consent without a meeting, exercising voting rights either
together with holders of shares of Common Stock or separately as a class,
including without limitation the granting or denying of approval to any
action by the Corporation, or electing or removing any director, or electing
or declining to the Corporation to effect the conversion as to any shares of
Series 1997-A Convertible Preferred Stock, or electing or declining to the
Corporation to effect the redemption as to any shares of Series 1997-A
Convertible Preferred Stock, shall determine the matter for such holders as
Westbrook Real Estate Fund II, L.P. may indicate. Upon written notice by
Westbrook Real Estate Fund II, L.P. to the Corporation, Westbrook Real Estate
Fund II, L.P. may relinquish such rights and powers over any or all shares of
Series 1997-A Convertible Preferred Stock. The foregoing may, but need not,
be evidenced by execution by each holder of Series 1997-A Convertible
Preferred Stock, other than Westbrook Burnham Holdings, L.L.C., and Westbrook
Burnham Co-Holdings, L.L.C., of a proxy in favor of Westbrook Real Estate
Fund II, L.P.
Section 11. Certain Distributions
In determining whether a distribution that is required to be made in
order for the Corporation to maintain its status as a REIT (other than upon
voluntary or involuntary liquidation), by dividend, redemption or other
acquisition of shares or otherwise, is permitted under the Maryland General
Corporation Law, amounts that would be needed, if the Corporation were to be
dissolved at the time of the distribution, to satisfy the preferential rights
upon dissolution of holders of the Series 1997-A Convertible Preferred Stock
shall not be added to the Corporation's total liabilities; PROVIDED, that to
the extent that any such distribution exceeds the amount that would be
permitted if such amounts were added to the Corporation's total liabilities,
then such excess shall be distributed solely to the holders of the Series
1997-A Convertible Preferred Stock and, PROVIDED FURTHER, to the extent that
any distributions to such holders exceed the amounts otherwise due and
payable hereunder, then the amount of such excess (per share) shall be
applied in reduction of the Stated Value of each share of Series 1997-A
Convertible Preferred Stock in respect of which such distribution is paid.
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Section 12. Severability of Provisions.
Whenever possible, each provision hereof shall be interpreted in a
manner as to be effective and valid under applicable law, but if any
provision hereof is held to be prohibited by or invalid under applicable law,
such provision shall be ineffective only to the extent of such prohibition or
invalidity, without invalidating or otherwise adversely affecting the
remaining provisions hereof. If a court of competent jurisdiction should
determine that a provision hereof would be valid or enforceable if a period
of time were extended or shortened or a particular percentage were increased
or decreased, then such court may make such change as shall be necessary to
render the provision in question effective and valid under applicable law.
SECOND: These Articles Supplementary have been approved by the Board of
Directors in the manner and by the vote required by law.
THIRD: The undersigned acknowledges these Articles Supplementary to be
the act of the Corporation and states as to all manners and facts required to
be verified under the oath that, to the best of his knowledge, information
and belief, these matters and facts are true in all material respects and
such statement is made under penalties for perjury.
IN WITNESS WHEREOF, these Articles Supplementary are executed on behalf
of the Corporation by its President and attested by its Secretary this 15th
day of December, 1997.
BURNHAM PACIFIC PROPERTIES, INC.
By: /s/ J. David Martin
-----------------------
J. David Martin
President
[SEAL]
Attest:
/s/ Nina Galloway
- ------------------------
Name: Nina Galloway
Title: Secretary
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Exhibit 3.2
BURNHAM PACIFIC PROPERTIES, INC.
BYLAWS
(AS AMENDED NOVEMBER 19, 1997)
ARTICLE I
OFFICES
Section 1. PRINCIPAL OFFICE. The principal office of the Burnham
Pacific Properties, Inc., a Maryland corporation (the "Corporation"), shall be
located at such place or places as the Board of Directors may designate.
Section 2. ADDITIONAL OFFICES. The Corporation may have additional
offices at such places as the Board of Directors may from time to time determine
or the business of the Corporation may require.
ARTICLE II
MEETINGS OF STOCKHOLDERS
Section 1. PLACE. Except as may be provided by the Board of Directors
in setting the terms of classified shares pursuant to Section 6.4 of the
Corporation's Articles of Amendment and Restatement, all meetings of
stockholders shall be held at the principal office of the Corporation or at such
other place within the United States as shall be stated in the notice of the
meeting.
Section 2. ANNUAL MEETING. An annual meeting of the stockholders for
the election of directors and the transaction of any business within the powers
of the Corporation shall be held on a date and at the time set by the Board of
Directors during the month of May in each year.
Section 3. SPECIAL MEETINGS. The president, chief executive officer or
Board of Directors may call special meetings of the stockholders. Special
meetings of stockholders shall also be called by the secretary of the
Corporation upon the written request of the holders of shares entitled to cast a
majority of all the votes entitled to be cast at such meeting, except as may
otherwise be provided by the Board of Directors in setting the terms of
classified shares as aforesaid. Such request shall state the purpose of such
meeting and the matters proposed to be acted on at such meeting. The secretary
shall inform such stockholders of the reasonably estimated cost of preparing and
mailing notice of the meeting. Upon payment to the Corporation by such
stockholders of such costs, except as may otherwise be provided by the Board of
Directors in setting the terms of classified shares as aforesaid, the secretary
shall give notice to each stockholder entitled to notice of the meeting.
Section 4. NOTICE. Not less than ten nor more than 90 days before each
meeting of stockholders, the secretary shall give to each stockholder entitled
to vote at such meeting and to each stockholder not entitled to vote who is
entitled to notice of the meeting written or printed notice stating the time and
place of the meeting and, in the case of a special meeting or as otherwise may
be required by any statute, the purpose for which the meeting is called, either
by mail or by presenting it to such stockholder personally or by leaving it at
his residence or usual place of business. If mailed, such notice shall be
deemed to be given when deposited in the United States mail addressed to the
stockholder at his post office address as it appears on the records of the
Corporation, with postage thereon prepaid. The notice to be provided to the
holders of classified shares in the event of a special meeting of such holders
shall be as provided to the secretary by the holders of such classified shares
acting to call such a special meeting.
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Section 5. SCOPE OF NOTICE. Any business of the Corporation may be
transacted at an annual meeting of stockholders without being specifically
designated in the notice, except such business as is required by any statute to
be stated in such notice. No business shall be transacted at a special meeting
of stockholders except as specifically designated in the notice.
Section 6. ORGANIZATION. Except as may otherwise be provided by the
Board of Directors in setting the terms of classified shares as aforesaid, at
every meeting of stockholders, the chairman of the board, if there be one, shall
conduct the meeting or, in the case of vacancy in office or absence of the
chairman of the board, one of the following officers present shall conduct the
meeting in the order stated: the vice chairman of the board, if there be one,
the president, the vice presidents in their order of rank and seniority, or a
chairman chosen by the stockholders entitled to cast a majority of the votes
which all stockholders present in person or by proxy are entitled to cast, shall
act as chairman, and the secretary, or, in his absence, an assistant secretary,
or in the absence of both the secretary and assistant secretaries, a person
appointed by the chairman shall act as secretary.
Section 7. QUORUM. At any meeting of stockholders, the presence in
person or by proxy of stockholders entitled to cast a majority of all the votes
entitled to be cast at such meeting shall constitute a quorum; but this section
shall not affect any requirement under any statute or the charter of the
Corporation for the vote necessary for the adoption of any measure. If,
however, such quorum shall not be present at any meeting of the stockholders,
the stockholders entitled to vote at such meeting, present in person or by
proxy, shall have the power to adjourn the meeting from time to time to a date
not more than 120 days after the original record date without notice other than
announcement at the meeting. At such adjourned meeting at which a quorum shall
be present, any business may be transacted which might have been transacted at
the meeting as originally notified.
Section 8. VOTING. A plurality of all the votes cast at a meeting of
stockholders duly called and at which a quorum is present shall be sufficient to
elect a director. Each share may be voted for as many individuals as there are
directors to be elected and for whose election the share is entitled to be
voted; however, there shall be no cumulative voting and no share may cast more
than one vote for any one individual. A majority of the votes cast at a meeting
of stockholders duly called and at which a quorum is present shall be sufficient
to approve any other matter which may properly come before the meeting, unless
more than a majority of the votes cast is required by statute or by the charter
of the Corporation. Unless otherwise provided in the charter, each outstanding
share, regardless of class, shall be entitled to one vote on each matter
submitted to a vote at a meeting of stockholders.
Section 9. PROXIES. A stockholder may cast the votes entitled to be
cast by the shares of the stock owned of record by him either in person or by
proxy executed in writing by the stockholder or by his duly authorized attorney
in fact. Such proxy shall be filed with the secretary of the Corporation
before or at the time of the meeting. No proxy shall be valid after eleven
months from the date of its execution, unless otherwise provided in the proxy.
Section 10. VOTING OF STOCK BY CERTAIN HOLDERS. Stock of the
Corporation registered in the name of a corporation, partnership, trust, limited
liability company, or other entity, if entitled to be voted, may be voted by the
president or a vice president, a general partner, trustee or member thereof, as
the case may be, or a proxy appointed by any of the foregoing individuals,
unless some other person who has been appointed to vote such stock pursuant to a
bylaw or a resolution of the governing body of such corporation or other entity
or agreement of the partners of a partnership presents a certified copy of such
bylaw, resolution or agreement, in which case such person may vote such stock.
Any director or other fiduciary may vote stock registered in his name as such
fiduciary, either in person or by proxy.
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Shares of stock of the Corporation directly or indirectly owned by it shall
not be voted at any meeting and shall not be counted in determining the total
number of outstanding shares entitled to be voted at any given time, unless they
are held by it in a fiduciary capacity, in which case they may be voted and
shall be counted in determining the total number of outstanding shares at any
given time.
The Board of Directors may adopt by resolution a procedure by which a
stockholder may certify in writing to the Corporation that any shares of stock
registered in the name of the stockholder are held for the account of a
specified person other than the stockholder. The resolution shall set forth the
class of stockholders who may make the certification, the purpose for which the
certification may be made, the form of certification and the information to be
contained in it; if the certification is with respect to a record date or
closing of the stock transfer books, the time after the record date or closing
of the stock transfer books within which the certification must be received by
the Corporation; and any other provisions with respect to the procedure which
the Board of Directors considers necessary or desirable. On receipt of such
certification, the person specified in the certification shall be regarded as,
for the purposes set forth in the certification, the stockholder of record of
the specified stock in place of the stockholder who makes the certification.
Section 11. CONTROL SHARE ACQUISITIONS. Notwithstanding any other
provision of the charter of the Corporation or these Bylaws, Title 3, Subtitle 7
of the Corporations and Associations Article of the Annotated Code of Maryland
(or any successor statute) shall not apply to any acquisition by any person of
shares of stock of the Corporation. Except as may otherwise be provided by the
Board of Directors in setting the terms of classified shares as aforesaid, this
section may be repealed, in whole or in part, at any time, whether before or
after an acquisition of control shares and, upon such repeal, may, to the extent
provided by any successor bylaw, apply to any prior or subsequent control share
acquisition.
Section 12. INSPECTORS. At any meeting of stockholders, the chairman of
the meeting may appoint one or more persons as inspectors for such meeting.
Such inspectors shall ascertain and report the number of shares represented at
the meeting based upon their determination of the validity and effect of
proxies, count all votes, report the results and perform such other acts as are
proper to conduct the election and voting with impartiality and fairness to all
the stockholders.
Each report of an inspector shall be in writing and signed by him or by a
majority of them if there is more than one inspector acting at such meeting. If
there is more than one inspector, the report of a majority shall be the report
of the inspectors. The report of the inspector or inspectors on the number of
shares represented at the meeting and the results of the voting shall be PRIMA
FACIE evidence thereof.
Section 13. NOMINATIONS AND PROPOSALS BY STOCKHOLDERS.
(a) ANNUAL MEETINGS OF STOCKHOLDERS. (1) Except as may otherwise be
provided by the Board of Directors in setting the terms of classified shares as
aforesaid, nominations of persons for election to the Board of Directors and the
proposal of business to be considered by the stockholders may be made at an
annual meeting of stockholders (i) pursuant to the Corporation's notice of
meeting, (ii) by or at the direction of the Board of Directors or (iii) by any
stockholder of the Corporation who was a stockholder of record both at the time
of giving of notice provided for in this Section 13(a) and at the time of the
annual meeting, who is entitled to vote at the meeting and who complied with the
notice procedures set forth in this Section 13(a).
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(2) Except as may otherwise be provided by the Board of
Directors in setting the terms of classified shares as aforesaid, for
nominations or other business to be properly brought before an annual meeting
by a stockholder pursuant to clause (iii) of paragraph (a)(1) of this Section
13, the stockholder must have given timely notice thereof in writing to the
secretary of the Corporation and such other business must otherwise be a
proper matter for action by stockholders. To be timely, a stockholder's
notice shall be delivered to the secretary at the principal executive offices
of the Corporation not later than the close of business on the 60th day nor
earlier than the close of business on the 90th day prior to the first
anniversary of the preceding year's annual meeting; provided however, that in
the event that the date of the annual meeting is advanced by more than 30
days or delayed by more than 60 days from such anniversary date or if the
Corporation has not previously held an annual meeting, notice by the
stockholder to be timely must be so delivered not earlier than the close of
business on the 90th day prior to such annual meeting and not later than the
close of business on the later of the 60th day prior to such annual meeting
or the tenth day following the day on which public announcement of the date
of such meeting is first made by the Corporation. In no event shall the
public announcement of a postponement or adjournment of an annual meeting to
a later date or time commence a new time period for the giving of a
stockholder's notice as described above. Except as may otherwise be provided
by the Board of Directors in setting the terms of classified shares as
aforesaid, such stockholder's notice shall set forth (i) as to each person
whom the stockholder proposes to nominate for election or reelection as a
director all information relating to such person that is required to be
disclosed in solicitations of proxies for election of directors in an
election contest, or is otherwise required, in each case pursuant to
Regulation 14A under the Securities Exchange Act of 1934, as amended (the
"Exchange Act") (including such person's written consent to being named in
the proxy statement as a nominee and to serving as a director if elected);
(ii) as to any other business that the stockholder proposes to bring before
the meeting, a brief description of the business desired to be brought before
the meeting, the reasons for conducting such business at the meeting and any
material interest in such business of such stockholder and of the beneficial
owner, if any, on whose behalf the proposal is made; and (iii) as to the
stockholder giving the notice and the beneficial owner, if any, on whose
behalf the nomination or proposal is made, (x) the name and address of such
stockholder, as they appear on the Corporation's books, and of such
beneficial owner and (y) the number of shares of each class of stock of the
Corporation which are owned beneficially and of record by such stockholder
and such beneficial owner.
(3) Notwithstanding anything in the second sentence of paragraph
(a)(2) of this Section 13 to the contrary, in the event that the number of
directors to be elected to the Board of Directors is increased and there is no
public announcement by the Corporation naming all of the nominees for director
or specifying the size of the increased Board of Directors at least 70 days
prior to the first anniversary of the preceding year's annual meeting, a
stockholder's notice required by this Section 13(a) shall also be considered
timely, but only with respect to nominees for any new positions created by such
increase, if it shall be delivered to the secretary at the principal executive
offices of the Corporation not later than the close of business on the tenth day
following the day on which such public announcement is first made by the
Corporation.
(b) SPECIAL MEETINGS OF STOCKHOLDERS. Except as may be provided by
the Board of Directors in setting the terms of classified shares as aforesaid,
and subject to the last sentence of Article II, Section 4 of these Bylaws, only
such business shall be conducted at a special meeting of stockholders as shall
have been brought before the meeting pursuant to the Corporation's notice of
meeting. Except as may be provided by the Board of Directors in setting the
terms of classified shares as aforesaid, nominations of persons for election to
the Board of Directors may be made at a special meeting of stockholders at which
directors are to be elected (i) pursuant to the Corporation's notice of meeting,
(ii) by or at the direction of the Board of Directors or (iii) provided that the
Board of Directors has determined that directors shall be elected at such
special meeting, by any stockholder of the Corporation who is a stockholder of
record both at the time of giving of notice provided for in this Section 13(b)
and at the time of the special meeting, who is entitled to vote at the meeting
and who complied with the notice procedures set forth in this Section 13(b).
Except as may be provided by the Board of Directors in
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setting the terms of classified shares as aforesaid, in the event the
Corporation calls a special meeting of stockholders for the purpose of
electing one or more directors to the Board of Directors, any such
stockholder may nominate a person or persons (as the case may be) for
election to such position as specified in the Corporation's notice of
meeting, if the stockholder's notice containing the information required by
paragraph (a)(2) of this Section 13 shall be delivered to the secretary at
the principal executive offices of the Corporation not earlier than the close
of business on the 90th day prior to such special meeting and not later than
the close of business on the later of the 60th day prior to such special
meeting or the tenth day following the day on which public announcement is
first made of the date of the special meeting and of the nominees proposed by
the Board of Directors to be elected at such meeting. In no event shall the
public announcement of a postponement or adjournment of a special meeting to
a later date or time commence a new time period for the giving of a
stockholder's notice as described above.
(c) GENERAL. (1) Except as may be provided by the Board of
Directors in setting the terms of classified shares as aforesaid, only such
persons who are nominated in accordance with the procedures set forth in this
Section 13 shall be eligible to serve as directors and only such business
shall be conducted at a meeting of stockholders as shall have been brought
before the meeting in accordance with the procedures set forth in this
Section 13. The chairman of the meeting shall have the power and duty to
determine whether a nomination or any business proposed to be brought before
the meeting was made or proposed, as the case may be, in accordance with the
procedures set forth in this Section 13 and, if any proposed nomination or
business is not in compliance with this Section 13, to declare that such
nomination or proposal shall be disregarded.
(2) For purposes of this Section 13, "public announcement"
shall mean disclosure in a press release reported by the Dow Jones News
Service, Associated Press, Business Wire or comparable business news service
or in a document publicly filed by the Corporation with the Securities and
Exchange Commission pursuant to Section 13, 14 or 15(d) of the Exchange Act.
(3) Notwithstanding the foregoing provisions of this Section
13, a stockholder shall also comply with all applicable requirements of state
law and of the Exchange Act and the rules and regulations thereunder with
respect to the matters set forth in this Section 13. Nothing in this Section
13 shall be deemed to affect any rights of stockholders to request inclusion
of proposals in the Corporation's proxy statement pursuant to Rule 14a-8
under the Exchange Act.
Section 14. VOTING BY BALLOT. Voting on any question or in any
election may be VIVA VOCE unless the presiding officer shall order or any
stockholder shall demand that voting be by ballot.
ARTICLE III
DIRECTORS
Section 1. GENERAL POWERS. The business and affairs of the Corporation
shall be managed under the direction of its Board of Directors.
Section 2. NUMBER, TENURE AND QUALIFICATIONS. At any regular meeting
or at any special meeting called for that purpose, a majority of the entire
Board of Directors may establish, increase or decrease the number of directors,
provided that the number thereof shall never be less than the minimum number
required by the Maryland General Corporation Law, nor more than eleven
(including the director suggested by the holders of Series 1997-A Convertible
Preferred Stock, and subject to an increase in the number of directors to
thirteen in accordance with Section 3(d) and (e) of the Articles Supplementary
relating to the Series 1997-A Convertible Preferred Stock), and further provided
that the tenure of office of a director shall not be affected by any decrease in
the number of directors.
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Section 3. ANNUAL AND REGULAR MEETINGS. An annual meeting of the
Board of Directors shall be held immediately after and at the same place as
the annual meeting of stockholders, no notice other than this Bylaw being
necessary. The Board of Directors may provide, by resolution, the time and
place, either within or without the State of Maryland, for the holding of
regular meetings of the Board of Directors without other notice than such
resolution.
Section 4. SPECIAL MEETINGS. Special meetings of the Board of
Directors may be called by or at the request of the chairman of the board,
president or by a majority of the directors then in office. The person or
persons authorized to call special meetings of the Board of Directors may fix
any place, either within or without the State of Maryland, as the place for
holding any special meeting of the Board of Directors called by them.
Section 5. NOTICE. Notice of any special meeting of the Board of
Directors shall be delivered personally or by telephone, facsimile
transmission, United States mail or courier to each director at his business
or residence address or, if such director has authorized the Corporation to
notify him by electronic mail, by electronic mail at the address provided by
the director to the Corporation. Notice by personal delivery, telephone,
facsimile or electronic transmission shall be given at least two days prior
to the meeting. Notice by mail shall be given at least five days prior to the
meeting and shall be deemed to be given when deposited in the United States
mail properly addressed, with postage thereon prepaid. Telephone notice
shall be deemed to be given when the director is personally given such notice
in a telephone call to which he is a party. Facsimile transmission notice
shall be deemed to be given upon completion of the transmission of the
message to the number given to the Corporation by the director and receipt of
a completed answer-back indicating receipt. Neither the business to be
transacted at, nor the purpose of, any annual, regular or special meeting of
the Board of Directors need be stated in the notice, unless specifically
required by statute or these Bylaws. Notice shall also be timely provided to
persons with rights to attend meetings of the Board of Directors in setting
the terms of classified shares, as aforesaid.
Section 6. QUORUM. A majority of the directors shall constitute a
quorum for transaction of business at any meeting of the Board of Directors,
provided that, if less than a majority of such directors are present at said
meeting, a majority of the directors present may adjourn the meeting from
time to time without further notice, and provided further that if, pursuant
to the charter of the Corporation or these Bylaws, the vote of a majority of
a particular group of directors is required for action, a quorum must also
include a majority of such group. Notwithstanding the foregoing, approval by
the Board of Directors of an "interested director transaction," as set forth
in Section 2-419 of the Maryland General Corporation Law, or any successor
provision thereof, may be obtained by a majority vote of the disinterested
directors, even if such majority is less than a majority of a quorum.
The directors present at a meeting which has been duly called and
convened may continue to transact business until adjournment, notwithstanding
the withdrawal of enough directors to leave less than a quorum.
Section 7. VOTING. The action of the majority of the directors
present at a meeting at which a quorum is present shall be the action of the
Board of Directors, unless the concurrence of a greater proportion is
required for such action by applicable statute.
Section 8. TELEPHONE MEETINGS. Directors may participate in a
meeting by means of a conference telephone or similar communications
equipment if all persons participating in the meeting can hear each other at
the same time. Participation in a meeting by these means shall constitute
presence in person at the meeting.
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Section 9. INFORMAL ACTION BY DIRECTORS. Any action required or
permitted to be taken at any meeting of the Board of Directors may be taken
without a meeting, if a consent in writing to such action is signed by each
director and such written consent or a facsimile transmission thereof
received by the Corporation is filed with the minutes of proceedings of the
Board of Directors. Copies of materials relating to any such consent and to
its solicitation shall, at the time provided to members of the Board of
Directors, be provided to persons with rights to attend meetings of the Board
of Directors as provided by the Board of Directors in setting the terms of
classified shares as aforesaid.
Section 10. VACANCIES. If for any reason any or all the directors
cease to be directors, such event shall not terminate the Corporation or
affect these Bylaws or the powers of the remaining directors hereunder (even
if fewer than three directors remain). Stockholders of the Corporation may
elect a successor to fill a vacancy on the Board of Directors which results
from the removal of any director, subject to any nomination-suggestion or
voting provisions that may exist from time to time regarding directors
elected by one class of stock. Any vacancy on the Board of Directors for any
cause other than an increase in the number of directors or the removal of a
director shall be filled by a majority of the remaining directors, although
such majority is less than a quorum, except as may otherwise be established
by the Board of Directors in setting the terms of classified shares, as
aforesaid. Except as may otherwise be provided by the Board of Directors in
setting the terms of classified shares, as aforesaid, any vacancy in the
number of directors created by an increase in the number of directors may be
filled by a majority vote of the entire Board of Directors. Any individual so
elected as director shall hold office until the next annual meeting of
stockholders and until his successor is elected and qualifies.
Section 11. COMPENSATION. Directors shall not receive any stated
salary for their services as directors but, by resolution of the Board of
Directors, may receive compensation, in the form of money, securities or
other consideration, per year and/or per meeting and/or per visit to real
property or other facilities owned or leased by the Corporation and for any
service or activity they performed or engaged in as directors. Directors may
be reimbursed for expenses of attendance, if any, at each annual, regular or
special meeting of the Board of Directors or of any committee thereof and for
their expenses, if any, in connection with each property visit and any other
service or activity they performed or engaged in as directors; but nothing
herein contained shall be construed to preclude any directors from serving
the Corporation in any other capacity and receiving compensation therefor.
Section 12. LOSS OF DEPOSITS. No director shall be liable for any
loss which may occur by reason of the failure of the bank, trust company,
savings and loan association, or other institution with whom moneys or stock
have been deposited.
Section 13. SURETY BONDS. Unless required by law, no director shall
be obligated to give any bond or surety or other security for the performance
of any of his duties.
Section 14. RELIANCE. Each director, officer, employee and agent of
the Corporation shall, in the performance of his duties with respect to the
Corporation, be fully justified and protected with regard to any act or
failure to act in reliance in good faith upon the books of account or other
records of the Corporation, upon an opinion of counsel or upon reports made
to the Corporation by any of its officers or employees or by any financial or
other advisers, accountants, appraisers or other experts or consultants
selected by the Board of Directors or officers of the Corporation, regardless
of whether such counsel or expert may also be a director.
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Section 15. CERTAIN RIGHTS OF DIRECTORS, OFFICERS, EMPLOYEES AND
AGENTS. The directors shall have no responsibility to devote their full time
to the affairs of the Corporation. Any director or officer, employee or
agent of the Corporation, in his personal capacity or in a capacity as an
affiliate, employee, or agent of any other person, or otherwise, may have
business interests and engage in business activities similar to or in
addition to or in competition with those of or relating to the Corporation.
ARTICLE IV
COMMITTEES
Section 1. NUMBER, TENURE AND QUALIFICATIONS. The Board of Directors
may appoint from among its members an Executive Committee, an Audit
Committee, a Compensation Committee and other committees, composed of one or
more directors, to serve at the pleasure of the Board of Directors.
Section 2. POWERS. The Board of Directors may delegate to committees
appointed under Section 1 of this Article any of the powers of the Board of
Directors, except as prohibited by law. Persons with rights to attend
meetings of the Board of Directors as provided by the Board of Directors in
setting the terms of classified shares, as aforesaid, may attend meetings of
any committee to which the Board of Directors has delegated powers of the
Board of Directors which relate to material transactions, or proposals
thereto, or are otherwise powers which other corporation's board do not
customarily so delegate.
Section 3. MEETINGS. Notice of committee meetings shall be given in
the same manner as notice for special meetings of the Board of Directors.
Notice shall also be timely provided to persons with rights to attend
meetings of such committee as established in the last sentence of Section 2
of this Article IV. A majority of the members of the committee shall
constitute a quorum for the transaction of business at any meeting of the
committee. The act of a majority of the committee members present at a
meeting shall be the act of such committee. The Board of Directors may
designate a chairman of any committee, and such chairman or any two members
of any committee which consists of two or more members may fix the time and
place of its meeting unless the Board shall otherwise provide. In the
absence of any member of any such committee, the members thereof present at
any meeting, whether or not they constitute a quorum, may appoint another
director to act in the place of such absent member. Each committee shall
keep minutes of its proceedings.
Section 4. TELEPHONE MEETINGS. Members (and other permitted
attendees) of a committee of the Board of Directors may participate in a
meeting by means of a conference telephone or similar communications
equipment if all persons participating in the meeting can hear each other at
the same time. Participation in a meeting by these means shall constitute
presence in person at the meeting.
Section 5. INFORMAL ACTION BY COMMITTEES. Any action required or
permitted to be taken at any meeting of a committee of the Board of Directors
may be taken without a meeting, if a consent in writing to such action is
signed by each member of the committee and such written consent or a
facsimile transmission thereof received by the Corporation is filed with the
minutes of proceedings of such committee. Copies of materials relating to
any such consent and to its solicitation shall, at the time provided to
members of the committee, be provided to persons with rights to attend
meetings of such committee, as provided in the last sentence of Section 2 of
this Article IV.
Section 6. VACANCIES. Subject to the provisions hereof, the Board of
Directors shall have the power at any time to change the membership of any
committee, to fill all vacancies, to designate alternate members to replace
any absent or disqualified member or to dissolve any such committee.
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ARTICLE V
OFFICERS
Section 1. GENERAL PROVISIONS. The officers of the Corporation shall
include a chief executive officer, a president, a secretary and a treasurer
and may include a chairman of the board, one or more vice presidents, a chief
operating officer, a chief administrative officer, a chief financial officer,
one or more assistant secretaries and one or more assistant treasurers. In
addition, the Board of Directors may from time to time appoint such other
officers with such titles, powers and duties as they shall deem necessary or
desirable. The officers of the Corporation shall be elected annually by the
Board of Directors at the first meeting of the Board of Directors held after
each annual meeting of stockholders and thereafter as the Board of Directors
may determine, except that the chief executive officer may appoint one or
more vice presidents, assistant secretaries, assistant treasurers or officers
having other titles descriptive of the functions to be performed by such
officers. Each officer shall hold office until his successor is elected and
qualifies or until his death, resignation or removal in the manner
hereinafter provided. Any two or more offices except president and vice
president may be held by the same person. In its discretion, the Board of
Directors may leave unfilled any office except that of president, treasurer
and secretary. Election of an officer or agent shall not of itself create
contract rights between the Corporation and such officer or agent.
Section 2. REMOVAL AND RESIGNATION. Any officer or agent of the
Corporation may be removed by the Board of Directors if in its judgment the
best interests of the Corporation would be served thereby, but such removal
shall be without prejudice to the contract rights, if any, of the person so
removed. Any officer of the Corporation may resign at any time by giving
written notice of his resignation to the Board of Directors, the chairman of
the board, the president or the secretary. Any resignation shall take effect
at any time subsequent to the time specified therein or, if the time when it
shall become effective is not specified therein, immediately upon its
receipt. The acceptance of a resignation shall not be necessary to make it
effective unless otherwise stated in the resignation. Such resignation shall
be without prejudice to the contract rights, if any, of the Corporation.
Section 3. VACANCIES. A vacancy in any office may be filled by the
Board of Directors for the balance of the term.
Section 4. CHIEF EXECUTIVE OFFICER. The Board of Directors may
designate a chief executive officer. In the absence of such designation, the
president shall be the chief executive officer of the Corporation. The chief
executive officer shall have general responsibility for implementation of the
policies of the Corporation, as determined by the Board of Directors, and for
the management of the business and affairs of the Corporation.
Section 5. CHIEF OPERATING OFFICER. The Board of Directors may
designate a chief operating officer. The chief operating officer shall have
the responsibilities and duties as set forth by the Board of Directors or the
chief executive officer.
Section 6. CHIEF ADMINISTRATIVE OFFICER. The Board of Directors may
designate a chief administrative officer. The chief administrative officer
shall have the responsibilities and duties as set forth by the Board of
Directors or the chief executive officer.
Section 7. CHIEF FINANCIAL OFFICER. The Board of Directors may
designate a chief financial officer. The chief financial officer shall have
the responsibilities and duties as set forth by the Board of Directors or the
chief executive officer.
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Section 8. CHAIRMAN OF THE BOARD. The Board of Directors shall
designate a chairman of the board, and if none is so designated, the
president shall serve as the chairman of the board. The chairman of the
board shall preside over the meetings of the Board of Directors and of the
stockholders at which he shall be present. The chairman of the board shall
perform such other duties as may be assigned to him by the Board of Directors.
Section 9. PRESIDENT. The president or chief executive officer, as
the case may be, shall in general supervise and control all of the business
and affairs of the Corporation. He may execute any deed, mortgage, bond,
contract or other instrument, except in cases where the execution thereof
shall be expressly delegated by the Board of Directors or by these Bylaws to
some other officer or agent of the Corporation or shall be required by law to
be otherwise executed; and in general shall perform all duties incident to
the office of president and such other duties as may be prescribed by the
Board of Directors from time to time.
Section 10. VICE PRESIDENTS. In the absence of the president or in
the event of a vacancy in such office, the vice president (or in the event
there be more than one vice president, the vice presidents in the order
designated at the time of their election or, in the absence of any
designation, then in the order of their election) shall perform the duties of
the president and when so acting shall have all the powers of and be subject
to all the restrictions upon the president; and shall perform such other
duties as from time to time may be assigned to him by the president or by the
Board of Directors. The Board of Directors may designate one or more vice
presidents as executive vice president or as vice president for particular
areas of responsibility.
Section 11. SECRETARY. The secretary shall (a) keep the minutes of
the proceedings of the stockholders, the Board of Directors and committees of
the Board of Directors in one or more books provided for that purpose; (b)
see that all notices are duly given in accordance with the provisions of
these Bylaws or as required by law; (c) be custodian of the corporate records
and of the seal of the Corporation; (d) unless a transfer agent has been
appointed with responsibility therefor, keep a register of the post office
address of each stockholder which shall be furnished to the secretary by such
stockholder and have general charge of the share transfer books of the
Corporation; and (e) in general perform such other duties as from time to
time may be assigned to him by the chief executive officer, the president or
by the Board of Directors.
Section 12. TREASURER. The treasurer shall have the custody of the
funds and securities of the Corporation and shall keep full and accurate
accounts of receipts and disbursements in books belonging to the Corporation
and shall deposit all moneys and other valuable effects in the name and to
the credit of the Corporation in such depositories as may be designated by
the Board of Directors. In the absence of a designation of a chief financial
officer by the Board of Directors, the treasurer shall be the chief financial
officer of the Corporation, and in the absence of a designation of a
treasurer by the Board of Directors, the person designated as chief financial
officer by the Board of Directors shall be the treasurer of the Corporation.
The treasurer shall disburse the funds of the Corporation as may be
ordered by the Board of Directors, taking proper vouchers for such
disbursements, and shall render to the president and Board of Directors, at
the regular meetings of the Board of Directors or whenever it may so require,
an account of all his transactions as treasurer and of the financial
condition of the Corporation.
If required by the Board of Directors, the treasurer shall give the
Corporation a bond in such sum and with such surety or sureties as shall be
satisfactory to the Board of Directors for the faithful performance of the
duties of his office and for the restoration to the Corporation, in case of
his death, resignation, retirement or removal from office, of all books,
papers, vouchers, moneys and other property of whatever kind in his
possession or under his control belonging to the Corporation.
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Section 13. ASSISTANT SECRETARIES AND ASSISTANT TREASURERS. The
assistant secretaries and assistant treasurers, in general, shall perform
such duties as shall be assigned to them by the secretary or treasurer,
respectively, or by the president or the Board of Directors. The assistant
treasurers shall, if required by the Board of Directors, give bonds for the
faithful performance of their duties in such sums and with such surety or
sureties as shall be satisfactory to the Board of Directors.
Section 14. OTHER OFFICERS. Officers having titles other than set
forth above shall perform such duties as shall be assigned to them by the
Board of Directors or the officer who appointed them or the officer to whom
they report as established in an organization chart approved by the Board of
Directors or the chief executive officer.
Section 15. SALARIES. The salaries and other compensation of the
officers shall be fixed from time to time by the Board of Directors and no
officer shall be prevented from receiving such salary or other compensation
by reason of the fact that he is also a director.
ARTICLE VI
CONTRACTS, LOANS, CHECKS AND DEPOSITS
Section 1. CONTRACTS. The Board of Directors may authorize any
officer or agent to enter into any contract or to execute and deliver any
instrument in the name of and on behalf of the Corporation and such authority
may be general or confined to specific instances. Any agreement, deed,
mortgage, lease or other document executed by one or more of the directors or
by an authorized person shall be valid and binding upon the Board of
Directors and upon the Corporation when authorized or ratified by action of
the Board of Directors.
Section 2. CHECKS AND DRAFTS. All checks, drafts or other orders for
the payment of money, notes or other evidences of indebtedness issued in the
name of the Corporation shall be signed by such officer or agent of the
Corporation in such manner as shall from time to time be determined by the
Board of Directors.
Section 3. DEPOSITS. All funds of the Corporation not otherwise
employed shall be deposited from time to time to the credit of the
Corporation in such banks, trust companies or other depositories as the Board
of Directors or one or more officers authorized by the Board of Directors may
designate.
ARTICLE VII
STOCK
Section 1. CERTIFICATES. Each stockholder shall be entitled to a
certificate or certificates which shall represent and certify the number of
shares of each class of stock held by him in the Corporation. Each
certificate shall be signed by the chief executive officer, the president or
a vice president and countersigned by the secretary or an assistant secretary
or the treasurer or an assistant treasurer and may be sealed with the seal,
if any, of the Corporation. The signatures may be either manual or
facsimile. Certificates shall be consecutively numbered; and if the
Corporation shall, from time to time, issue several classes of stock, each
class may have its own number series. A certificate is valid and may be
issued whether or not an officer who signed it is still an officer when it is
issued. Each certificate representing shares which are restricted as to
their transferability or voting powers, which are preferred or limited as to
their dividends or as to their allocable portion of the assets upon
liquidation or which are redeemable at the option of the Corporation, shall
have a statement of such restriction, limitation, preference or redemption
provision, or a summary thereof, plainly stated on the certificate. If the
Corporation has authority to issue stock of more than one class, the
certificate shall contain on the face or back
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a full statement or summary of the designations and any preferences,
conversion and other rights, voting powers, restrictions, limitations as to
dividends and other distributions, qualifications and terms and conditions of
redemption of each class of stock and, if the Corporation is authorized to
issue any preferred or special class in series, the differences in the
relative rights and preferences between the shares of each series to the
extent they have been set and the authority of the Board of Directors to set
the relative rights and preferences of subsequent series. In lieu of any
such statement or summary, the certificate may state that the Corporation
will furnish a full statement of such information to any stockholder upon
request and without charge. If any class of stock is restricted by the
Corporation as to transferability, the certificate shall contain a full
statement of the restriction or state that the Corporation will furnish
information about the restrictions to the stockholder on request and without
charge.
Section 2. TRANSFERS. Upon surrender to the Corporation or the
transfer agent of the Corporation of a stock certificate duly endorsed or
accompanied by proper evidence of succession, assignment or authority to
transfer, the Corporation shall issue a new certificate to the person
entitled thereto, cancel the old certificate and record the transaction upon
its books.
The Corporation shall be entitled to treat the holder of record of any
share of stock as the holder in fact thereof and, accordingly, shall not be
bound to recognize any equitable or other claim to or interest in such share
or on the part of any other person, whether or not it shall have express or
other notice thereof, except as otherwise provided by the laws of the State
of Maryland.
Notwithstanding the foregoing, transfers of shares of any class of stock
will be subject in all respects to the charter of the Corporation and all of
the terms and conditions contained therein.
Section 3. REPLACEMENT CERTIFICATE. Any officer designated by the
Board of Directors may direct a new certificate to be issued in place of any
certificate previously issued by the Corporation alleged to have been lost,
stolen or destroyed upon the making of an affidavit of that fact by the
person claiming the certificate to be lost, stolen or destroyed. When
authorizing the issuance of a new certificate, an officer designated by the
Board of Directors may, in his discretion and as a condition precedent to the
issuance thereof, require the owner of such lost, stolen or destroyed
certificate or the owner's legal representative to advertise the same in such
manner as he shall require and/or to give bond, with sufficient surety, to
the Corporation to indemnify it against any loss or claim which may arise as
a result of the issuance of a new certificate.
Section 4. CLOSING OF TRANSFER BOOKS OR FIXING OF RECORD DATE. The
Board of Directors may set, in advance, a record date for the purpose of
determining stockholders entitled to notice of or to vote at any meeting of
stockholders or determining stockholders entitled to receive payment of any
dividend or the allotment of any other rights, or in order to make a
determination of stockholders for any other proper purpose. Such date, in
any case, shall not be prior to the close of business on the day the record
date is fixed and shall be not more than 90 days and, in the case of a
meeting of stockholders, not less than ten days, before the date on which the
meeting or particular action requiring such determination of stockholders of
record is to be held or taken.
In lieu of fixing a record date, the Board of Directors may provide that
the stock transfer books shall be closed for a stated period but not longer
than 20 days. If the stock transfer books are closed for the purpose of
determining stockholders entitled to notice of or to vote at a meeting of
stockholders, such books shall be closed for at least ten days before the
date of such meeting.
If no record date is fixed and the stock transfer books are not closed for
the determination of stockholders, (a) the record date for the determination of
stockholders entitled to notice of or to vote at a meeting of stockholders
12
<PAGE>
shall be at the close of business on the day on which the notice of meeting
is mailed or the 30th day before the meeting, whichever is the closer date to
the meeting; and (b) the record date for the determination of stockholders
entitled to receive payment of a dividend or an allotment of any other rights
shall be the close of business on the day on which the resolution of the
directors, declaring the dividend or allotment of rights, is adopted.
When a determination of stockholders entitled to vote at any meeting of
stockholders has been made as provided in this section, such determination
shall apply to any adjournment thereof, except when (i) the determination has
been made through the closing of the transfer books and the stated period of
closing has expired or (ii) the meeting is adjourned to a date more than 120
days after the record date fixed for the original meeting, in either of which
case a new record date shall be determined as set forth herein.
Section 5. STOCK LEDGER. The Corporation shall maintain at its
principal office or cause to be maintained at the office of its transfer
agent, an original or duplicate share ledger containing the name and address
of each stockholder and the number of shares of each class held by such
stockholder.
Section 6. FRACTIONAL STOCK; ISSUANCE OF UNITS. The Board of
Directors may issue fractional stock or provide for the issuance of scrip,
all on such terms and under such conditions as they may determine.
Notwithstanding any other provision of the charter or these Bylaws, the Board
of Directors may issue units consisting of different securities of the
Corporation. Any security issued in a unit shall have the same
characteristics as any identical securities issued by the Corporation, except
that the Board of Directors may provide that for a specified period
securities of the Corporation issued in such unit may be transferred on the
books of the Corporation only in such unit.
ARTICLE VIII
ACCOUNTING YEAR
The Board of Directors shall have the power, from time to time, to fix
the fiscal year of the Corporation by a duly adopted resolution. In the
absence of a resolution to the contrary, the fiscal year shall be the
calendar year.
ARTICLE IX
DISTRIBUTIONS
Section 1. AUTHORIZATION. Dividends and other distributions upon the
stock of the Corporation may be authorized and declared by the Board of
Directors, subject to the provisions of law and the charter of the
Corporation. Dividends and other distributions may be paid in cash, property
or stock of the Corporation, subject to the provisions of law, the charter
and as otherwise provided by the Board of Directors in setting the terms of
classified shares as aforesaid.
Section 2. CONTINGENCIES. Before payment of any dividends or other
distributions, there may be set aside out of any assets of the Corporation
available for dividends or other distributions such sum or sums as the Board
of Directors may from time to time, in its absolute discretion, think proper
as a reserve fund for contingencies, for equalizing dividends or other
distributions, for repairing or maintaining any property of the Corporation
or for such other purpose as the Board of Directors shall determine to be in
the best interest of the Corporation, and the Board of Directors may modify
or abolish any such reserve in the manner in which it was created.
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ARTICLE X
INVESTMENT POLICY
Subject to the provisions of the charter of the Corporation and as
otherwise provided by the Board of Directors in setting the terms of
classified shares as aforesaid, the Board of Directors may from time to time
adopt, amend, revise or terminate any policy or policies with respect to
investments by the Corporation as it shall deem appropriate in its sole
discretion.
ARTICLE XI
SEAL
Section 1. SEAL. The Board of Directors may authorize the adoption
of a seal by the Corporation. The seal shall contain the name of the
Corporation and the year of its incorporation and the words "Incorporated
Maryland." The Board of Directors may authorize one or more duplicate seals
and provide for the custody thereof. Any document requiring a seal or on
which a seal appears shall be deemed to be duly sealed by or on behalf of the
Corporation notwithstanding that the seal may be the seal of the Predecessor
Corporation (as defined in Article XII).
Section 2. AFFIXING SEAL. Whenever the Corporation is permitted or
required to affix its seal to a document, it shall be sufficient to meet the
requirements of any law, rule or regulation relating to a seal to place the
word "(SEAL)" adjacent to the signature of the person authorized to execute
the document on behalf of the Corporation.
ARTICLE XII
INDEMNIFICATION AND ADVANCE OF EXPENSES
To the maximum extent permitted by Maryland law in effect from time to
time, the Corporation shall indemnify and, without requiring a preliminary
determination of the ultimate entitlement to indemnification, shall pay or
reimburse reasonable expenses in advance of final disposition of a proceeding
to (a) any individual who is a present or former director or officer of the
Corporation or Burnham Pacific Properties, Inc., a California corporation
being or to be merged into this Corporation (the "Predecessor Corporation"),
and who is made a party to the proceeding by reason of his service in that
capacity or (b) any individual who, while a director of the Corporation or
the Predecessor Corporation and at the request of the Corporation or the
Predecessor Corporation, serves or has served another corporation,
partnership, joint venture, trust, employee benefit plan or any other
enterprise as a director, officer, partner or trustee of such corporation,
partnership, joint venture, trust, employee benefit plan or other enterprise
and who is made a party to the proceeding by reason of his service in that
capacity. The Corporation may, with the approval of its Board of Directors,
provide such indemnification and advance for expenses to a person who served
any other predecessor of the Corporation in any of the capacities described
in (a) or (b) above and to any employee or agent of the Corporation or any
other predecessor of the Corporation.
Neither the amendment nor repeal of this Article, nor the adoption or
amendment of any other provision of the Bylaws or charter of the Corporation
inconsistent with this Article, shall apply to or affect in any respect the
applicability of the preceding paragraph with respect to any act or failure
to act which occurred prior to such amendment, repeal or adoption.
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ARTICLE XIII
WAIVER OF NOTICE
Whenever any notice is required to be given pursuant to the charter of
the Corporation or these Bylaws or pursuant to applicable law, a waiver
thereof in writing, signed by the person or persons entitled to such notice,
whether before or after the time stated therein, shall be deemed equivalent
to the giving of such notice. Neither the business to be transacted at nor
the purpose of any meeting need be set forth in the waiver of notice, unless
specifically required by statute. The attendance of any person at any
meeting shall constitute a waiver of notice of such meeting, except where
such person attends a meeting for the express purpose of objecting to the
transaction of any business on the ground that the meeting is not lawfully
called or convened.
ARTICLE XIV
AMENDMENT OF BYLAWS
Except as otherwise provided in this Article XIV, the Board of Directors
shall have the power to adopt, amend or repeal the Bylaws, provided that any
such action may only be taken by the affirmative vote of no less than
two-thirds of all directors at the time. Alternatively, the Bylaws may be
adopted, amended or repealed by the affirmative vote of a majority of the
Board of Directors and of all the votes cast by holders of shares of stock
entitled to vote generally in the election of directors. Notwithstanding the
foregoing, these Bylaws may not be amended except in conformity with the
provisions established by the Board of Directors in setting the terms of
classified shares, as aforesaid.
<PAGE>
EXHIBIT 10.1.1
AGREEMENT OF LIMITED PARTNERSHIP
OF
BURNHAM PACIFIC OPERATING PARTNERSHIP, L.P.
Dated as of November 14, 1997
<PAGE>
Page 2
Table of Contents
ARTICLE I - DEFINED TERMS......................................................1
ARTICLE II - ORGANIZATIONAL MATTERS...........................................14
Section 2.1 Organization...................................................14
Section 2.2 Name...........................................................14
Section 2.3 Registered Office and Agent; Principal Office..................14
Section 2.4 Term...........................................................15
ARTICLE III - PURPOSE.........................................................15
Section 3.1 Purpose and Business...........................................15
Section 3.2 Powers.........................................................15
ARTICLE IV - CAPITAL CONTRIBUTIONS AND ISSUANCES OF PARTNERSHIP INTERESTS.....16
Section 4.1 Capital Contributions of the Partners..........................16
Section 4.2 Issuances of Partnership Interests.............................16
Section 4.3 No Preemptive Rights...........................................18
Section 4.4 Other Contribution Provisions..................................18
Section 4.5 No Interest on Capital.........................................18
ARTICLE V - DISTRIBUTIONS.....................................................18
Section 5.1 Requirement and Characterization of Distributions..............18
Section 5.2 Amounts Withheld...............................................21
Section 5.3 Distributions Upon Liquidation.................................21
Section 5.4 Revisions to Reflect Issuance of Partnership Interests.........21
ARTICLE VI - ALLOCATIONS......................................................21
Section 6.1 Allocations for Capital Account Purposes.......................21
Section 6.2 Revisions to Allocations to Reflect Issuance of Partnership
Interests......................................................22
Section 6.3 Intent of Allocations..........................................23
ARTICLE VII - MANAGEMENT AND OPERATIONS OF BUSINESS...........................23
Section 7.1 Management.....................................................23
Section 7.2 Certificate of Limited Partnership.............................28
Section 7.3 Title to Partnership Assets....................................28
Section 7.4 Reimbursement of the General Partner...........................29
Section 7.5 Additional General Partner Contributions; Outside Activities
of the General Partner; Relationship of REIT Shares To
Partnership Units; Funding Debt................................30
Section 7.6 Transactions with Affiliates...................................33
Section 7.7 Indemnification................................................34
Section 7.8 Liability of the General Partner...............................36
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Section 7.9 Other Matters Concerning the General Partner...................37
Section 7.10 Reliance By Third Parties......................................37
Section 7.11 Restrictions on General Partner's Authority....................38
Section 7.12 Loans By Third Parties.........................................38
ARTICLE VIII - RIGHTS AND OBLIGATIONS OF LIMITED PARTNERS.....................38
Section 8.1 Limitation of Liability........................................38
Section 8.2 Management of Business.........................................39
Section 8.3 Outside Activities of Limited Partners.........................39
Section 8.4 Return of Capital..............................................39
Section 8.5 Rights of Limited Partners Relating to the Partnership.........39
Section 8.6 Redemption Right...............................................41
ARTICLE IX - BOOKS, RECORDS, ACCOUNTING AND REPORTS...........................44
Section 9.1 Records and Accounting.........................................44
Section 9.2 Fiscal Year....................................................44
Section 9.3 Reports........................................................44
ARTICLE X - TAX MATTERS.......................................................45
Section 10.1 Preparation of Tax Returns.....................................45
Section 10.2 Tax Elections..................................................45
Section 10.3 Tax Matters Partner............................................45
Section 10.4 Withholding....................................................46
ARTICLE XI - TRANSFERS AND WITHDRAWALS........................................47
Section 11.1 Transfer.......................................................47
Section 11.2 Transfers of Partnership Interests of General Partner..........48
Section 11.3 Limited Partners' Rights to Transfer...........................48
Section 11.4 Substituted Limited Partner....................................49
Section 11.5 Assignees......................................................50
Section 11.6 General Provisions.............................................50
ARTICLE XII - ADMISSION OF PARTNERS...........................................53
Section 12.1 Admission of a Successor General Partner.......................53
Section 12.2 Admission of Additional Limited Partners.......................53
Section 12.3 Amendment of Agreement and Certificate of Limited
Partnership....................................................54
ARTICLE XIII - DISSOLUTION AND LIQUIDATION....................................54
Section 13.1 Dissolution....................................................54
Section 13.2 Winding Up.....................................................55
Section 13.3 Compliance With Timing Requirements of Regulations.............56
Section 13.4 Deemed Distribution and Recontribution.........................56
Section 13.5 Rights of Limited Partners.....................................57
Section 13.6 Notice of Dissolution..........................................57
Section 13.7 Cancellation of Certificate of Limited Partnership.............57
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Section 13.8 Reasonable Time for Winding Up.................................57
Section 13.9 Waiver of Partition............................................57
Section 13.10 Liability of Liquidator........................................57
ARTICLE XIV - AMENDMENT OF PARTNERSHIP AGREEMENT; MEETINGS....................57
Section 14.1 Amendments.....................................................58
Section 14.2 Meetings of the Partners.......................................59
ARTICLE XV - GENERAL PROVISIONS..............................................60
Section 15.1 Addresses and Notice...........................................60
Section 15.2 Titles and Captions............................................60
Section 15.3 Pronouns and Plurals...........................................61
Section 15.4 Further Action.................................................61
Section 15.5 Binding Effect.................................................61
Section 15.6 Creditors......................................................61
Section 15.7 Waiver.........................................................61
Section 15.8 Counterparts...................................................61
Section 15.9 Applicable Law.................................................61
Section 15.10 Invalidity of Provisions.......................................61
Section 15.11 Power of Attorney..............................................62
Section 15.12 Attorneys' Fees................................................63
Section 15.13 California Venue...............................................63
Section 15.14 Waiver of Jury Trial...........................................63
Section 15.15 Entire Agreement...............................................63
Section 15.16 No Rights as REIT Stockholders.................................63
Section 15.17 Limitation to Preserve REIT Status.............................64
EXHIBIT A - PARTNERS AND PARTNERSHIP INTERESTS...............................A-1
EXHIBIT B - CAPITAL ACCOUNT MAINTENANCE......................................B-1
EXHIBIT C - SPECIAL ALLOCATION RULES.........................................C-1
EXHIBIT D - NOTICE OF REDEMPTION.............................................D-1
EXHIBIT E - VALUE OF CONTRIBUTED PROPERTY....................................E-1
<PAGE>
Page 5
AGREEMENT OF LIMITED PARTNERSHIP
OF
BURNHAM PACIFIC OPERATING PARTNERSHIP, L.P.
THIS AGREEMENT OF LIMITED PARTNERSHIP, dated as of November 14, 1997, is
entered into by and among Burnham Pacific Properties, Inc., a Maryland
corporation, as the General Partner, and the Persons whose names are set forth
on Exhibit A as Limited Partners, together with any other Persons who become
Partners in the Partnership as provided herein.
NOW, THEREFORE, in consideration of the mutual covenants set forth herein,
and for other good and valuable consideration, the receipt and sufficiency of
which are hereby acknowledged, the parties hereto hereby agree to form the
Partnership as a limited partnership under the Delaware Revised Uniform Limited
Partnership Act, as amended from time to time, as follows:
ARTICLE I - DEFINED TERMS
The following definitions shall be for all purposes, unless otherwise
clearly indicated to the contrary, applied to the terms used in this Agreement.
"Act" means the Delaware Revised Uniform Limited Partnership Act, as it may
be amended from time to time, and any successor to such statute.
"Additional Limited Partner" means a Person admitted to the Partnership as
a Limited Partner pursuant to Section 12.2 and who is shown as such on the books
and records of the Partnership.
"Adjusted Capital Account" means the Capital Account maintained for each
Partner as of the end of each Partnership Year (i) increased by any amounts
which such Partner is obligated to restore pursuant to any provision of this
Agreement or is deemed to be obligated to restore pursuant to the penultimate
sentences of Regulations Sections 1.704-2(g)(1) and 1.704-2(i)(5); and (ii)
decreased by the items described in Regulations Sections
1.704-1(b)(2)(ii)(d)(4), 1.704-1(b)(2)(ii)(d)(5), and 1.704-1(b)(2)(ii)(d)(6).
The foregoing definition of Adjusted Capital Account is intended to comply with
the provisions of Regulations Section 1.704-1(b)(2)(ii)(d) and shall be
interpreted consistently therewith.
"Adjusted Capital Account Deficit" means, with respect to any Partner, the
deficit balance, if any, in such Partner's Adjusted Capital Account as of the
end of the relevant Partnership Year.
"Adjusted Property" means any property, the Carrying Value of which has
been adjusted pursuant to Exhibit B.
"Adjustment Date" has the meaning set forth in Section 4.2.B.
"Affiliate" means, with respect to any Person, (i) any Person directly or
indirectly controlling, controlled by or under common control with such Person,
(ii) any Person owning or controlling
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ten percent (10%) or more of the outstanding voting interests of such Person,
(iii) any Person of which such Person owns or controls ten percent (10%) or more
of the voting interests or (iv) any officer, director, general partner or
trustee of such Person or any Person referred to in clauses (i), (ii), and (iii)
above. For purposes of this definition, "control," when used with respect to
any Person, means the power to direct the management and policies of such
Person, directly or indirectly, whether through the ownership of voting
securities, by contract or otherwise, and the terms "controlling" and
"controlled" have meanings correlative to the foregoing.
"Agreed Value" means (i) in the case of any Contributed Property, the
704(c) Value of such property as of the time of its contribution to the
Partnership, reduced by any liabilities either assumed by the Partnership upon
such contribution or to which such property is subject when contributed; and
(ii) in the case of any property distributed to a Partner by the Partnership,
the Partnership's Carrying Value of such property at the time such property is
distributed, reduced by any indebtedness either assumed by such Partner upon
such distribution or to which such property is subject at the time of
distribution as determined under Section 752 of the Code and the Regulations.
The aggregate Agreed Value of the Contributed Property contributed or deemed
contributed by each Partner as of the date hereof is set forth in Exhibit E.
"Agreement" means this Agreement of Limited Partnership, as it may be
amended, supplemented or restated from time to time.
"Applicable Contribution Agreement" means a Contribution Agreement whose
terms are binding upon the Partnership and the parties specified therein but not
upon any Limited Partner who is not a party thereto.
"Articles" means the Articles of Incorporation or other organizational
document governing the General Partner, as amended or restated from time to
time.
"Assignee" means a Person to whom one or more Partnership Units have been
transferred in a manner permitted under this Agreement, but who has not become a
Substituted Limited Partner, and who has the rights set forth in Section 11.5.
"Available Cash" means, with respect to any period for which such
calculation is being made:
(a) all cash revenues and funds received by the Partnership from
whatever source (excluding the proceeds of any Capital Contribution) plus
the amount of any reduction (including, without limitation, a reduction
resulting because the General Partner determines such amounts are no longer
necessary) in reserves of the Partnership, which reserves are referred to
in clause (b)(iv) below;
(b) less the sum of the following (except to the extent made with the
proceeds of any Capital Contribution):
(i) all interest, principal and other debt payments made during
such period by the Partnership,
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Page 7
(ii) all cash expenditures (including capital expenditures) made
by the Partnership during such period,
(iii) investments in any entity (including loans made
thereto) to the extent that such investments are permitted under this
Agreement and are not otherwise described in clauses (b)(i) or (ii),
and
(iv) the amount of any increase in reserves established during
such period which the General Partner determines is necessary or
appropriate in its sole and absolute discretion.
Notwithstanding the foregoing, Available Cash shall not include any cash
received or reductions in reserves, or take into account any disbursements made
or reserves established, after commencement of the dissolution and liquidation
of the Partnership.
"Book-Tax Disparities" means, with respect to any item of Contributed
Property or Adjusted Property, as of the date of any determination, the
difference between the Carrying Value of such Contributed Property or Adjusted
Property and the adjusted basis thereof for federal income tax purposes as of
such date. A Partner's share of the Partnership's Book-Tax Disparities in all
of its Contributed Property and Adjusted Property will be reflected by the
difference between such Partner's Capital Account balance as maintained pursuant
to Exhibit B and the hypothetical balance of such Partner's Capital Account
computed as if it had been maintained strictly in accordance with federal income
tax accounting principles.
"BPP Mortgage Debt" has the meaning set forth in Section 7.5.A.
"Business Day" means any day except a Saturday, Sunday or other day on
which commercial banks in either California or New York are authorized or
required by law to close.
"Capital Account" means the Capital Account maintained for a Partner
pursuant to Exhibit B.
"Capital Contribution" means, with respect to any Partner, any cash, cash
equivalents or the Agreed Value of Contributed Property which such Partner
contributes or is deemed to contribute to the Partnership pursuant to Section
4.1 or 4.2.
"Carrying Value" means (i) with respect to a Contributed Property or
Adjusted Property, the 704(c) Value of such property, reduced (but not below
zero) by all Depreciation with respect to such Contributed Property or Adjusted
Property, as the case may be, charged to the Partners' Capital Accounts
following the contribution of or adjustment with respect to such Property; and
(ii) with respect to any other Partnership property, the adjusted basis of such
property for federal income tax purposes, all as of the time of determination.
The Carrying Value of any property shall be adjusted from time to time in
accordance with Exhibit B, and to reflect changes, additions (including capital
improvements thereto) or other adjustments to the Carrying Value for
dispositions and acquisitions of Partnership properties, as deemed appropriate
by the General
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Partner.
"Cash Amount" means an amount of cash equal to the Value on the Valuation
Date of the REIT Shares Amount.
"Certificate" means the Certificate of Limited Partnership relating to the
Partnership filed in the office of the Delaware Secretary of State, as amended
from time to time in accordance with the terms hereof and the Act.
"Class A" has the meaning set forth in Section 5.1.C.
"Class A REIT Portion" has the meaning set forth in Section 5.1.C.
"Class A Unit" means any Partnership Unit that is not specifically
designated by the General Partner as being of another specified class of
Partnership Units.
"Class B" has the meaning set forth in Section 5.1.C.
"Class B REIT Portion" has the meaning set forth in Section 5.1.C.
"Class B Unit" means a Partnership Unit that is specifically designated by
the General Partner as being a Class B Unit.
"Code" means the Internal Revenue Code of 1986, as amended and in effect
from time to time, as interpreted by the applicable regulations thereunder. Any
reference herein to a specific section or sections of the Code shall be deemed
to include a reference to any corresponding provision of future law.
"Consent" means the consent or approval of a proposed action by a Partner
given in accordance with Section 14.2.
"Consent of the Outside Limited Partners" means the Consent of Limited
Partners (excluding for this purpose any Limited Partnership Interests held by
the General Partner, any other Person of which the General Partner owns or
controls more than fifty percent (50%) of the voting interests and any Person
directly or indirectly owning or controlling more than fifty percent (50%) of
the outstanding voting interests of the General Partner) holding Percentage
Interests that are greater than fifty percent (50%) of the aggregate Percentage
Interest of all Limited Partners who are not excluded for the purposes hereof.
"Contributed Property" means each property or other asset contributed to
the Partnership, in such form as may be permitted by the Act (but excluding
cash), contributed or deemed contributed to the Partnership (including deemed
contributions to the Partnership on termination and reconstitution thereof
pursuant to Section 708 of the Code). Once the Carrying Value of a Contributed
Property is adjusted pursuant to Exhibit B, such property shall no longer
constitute a Contributed Property for purposes of Exhibit B, but shall be deemed
an Adjusted Property for
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such purposes.
"Contribution Agreement" means any agreement entered into between the
Partnership or the General Partner on behalf of the Partnership with respect to
the admission of a Limited Partner, Additional Capital Contribution by a Limited
Partner, Capital Contributions by Partners, or the issuance of Partnership Units
or other Partnership Interests pursuant to Article IV, and includes the terms of
any agreement (such as, without limitation, terms pertaining to registration
rights, permission to pledge, waivers of restrictions on transfer, supplemental
redemption rights, debt maintenance obligations, restriction on property
transfers, management participation rights, transactions with contributors and
their affiliates, rights of a contributor to receive property upon exchange of
Units and other specially negotiated provisions, if any) relating to the rights
of a Limited Partner as a result of the contribution of property provided for
therein, which terms are not prohibited by law or by the provisions of this
Agreement or any Contribution Agreement.
"Conversion Factor" means 1.0 unless otherwise indicated, provided that, if
the General Partner Entity (i) declares or pays a dividend on its outstanding
REIT Shares in REIT Shares or makes a distribution to all holders of its
outstanding REIT Shares in REIT Shares; (ii) subdivides its outstanding REIT
Shares; or (iii) combines its outstanding REIT Shares into a smaller number of
REIT Shares, the Conversion Factor shall be adjusted by multiplying the
Conversion Factor by a fraction, the numerator of which shall be the number of
REIT Shares issued and outstanding on the record date for such dividend,
distribution, subdivision or combination (assuming for such purpose that such
dividend, distribution, subdivision or combination has occurred as of such
time), and the denominator of which shall be the actual number of REIT Shares
(determined without the above assumption) issued and outstanding on the record
date for such dividend, distribution, subdivision or combination; and provided
further that if an entity shall cease to be the General Partner Entity (the
"Predecessor Entity") and another entity shall become the General Partner Entity
(the "Successor Entity"), the Conversion Factor shall be adjusted by multiplying
the Conversion Factor by a fraction, the numerator of which is the Value of one
REIT Share of the Predecessor Entity, determined as of the date when the
Successor Entity becomes the General Partner Entity, and the denominator of
which is the Value of one REIT Share of the Successor Entity, determined as of
that same date. (For purposes of the second proviso in the preceding sentence,
if any stockholders of the Predecessor Entity will receive consideration in
connection with the transaction in which the Successor Entity becomes the
General Partner Entity, the numerator in the fraction described above for
determining the adjustment to the Conversion Factor (that is, the Value of one
REIT Share of the Predecessor Entity) shall be the sum of the greatest amount of
cash and the fair market value (as determined in good faith by the General
Partner) of any securities and other consideration that the holder of one REIT
Share in the Predecessor Entity could have received in such transaction
(determined without regard to any provisions governing fractional shares.) Any
adjustment to the Conversion Factor shall become effective immediately after the
effective date of the event retroactive to the record date, if any, for the
event giving rise thereto, it being intended that (x) adjustments to the
Conversion Factor are to be made to avoid unintended dilution or anti-dilution
as a result of transactions in which REIT Shares are issued, redeemed or
exchanged without a corresponding issuance, redemption or exchange of
Partnership Units and (y) if a Specified Redemption Date shall fall between the
record date and the effective date of any event of the type described above,
that the Conversion Factor applicable to such
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Page 10
redemption shall be adjusted to take into account such event.
"Convertible Funding Debt" has the meaning set forth in Section 7.5.F.
"Debt" means, as to any Person, as of any date of determination, (i) all
indebtedness of such Person for borrowed money or for the deferred purchase
price of property or services; (ii) all amounts owed by such Person to banks or
other Persons in respect of reimbursement obligations under letters of credit,
surety bonds and other similar instruments guaranteeing payment or other
performance of obligations by such Person; (iii) all indebtedness for borrowed
money or for the deferred purchase price of property or services secured by any
lien on any property owned by such Person, to the extent attributable to such
Person's interest in such property, even though such Person has not assumed or
become liable for the payment thereof; and (iv) obligations of such Person
incurred in connection with entering into a lease which, in accordance with
generally accepted accounting principles, should be capitalized.
"Deemed Partnership Interest Value" means, as of any date with respect to
any class of Partnership Interests, the Deemed Value of the Partnership Interest
of such class multiplied by the applicable Partner's Percentage Interest of such
class.
"Deemed Value of the Partnership Interest" means, as of any date with
respect to any class of Partnership Interests, (a) if the common stock (or other
comparable equity interests) of the General Partner Entity are Publicly Traded
(i) the total number of shares of stock (or other comparable equity interest) of
the General Partner Entity corresponding to such class of Partnership Interest
(as provided for in Section 4.2.B) issued and outstanding as of the close of
business on such date (excluding any treasury shares) multiplied by the Value of
a share of such stock (or other comparable equity interest) on such date divided
by (ii) the Percentage Interest of the General Partner in such class of
Partnership Interests on such date, and (b) otherwise, the aggregate Value of
such class of Partnership Interests determined as set forth in the fourth and
fifth sentences of the definition of Value.
"Depreciation" means, for each taxable year, an amount equal to the federal
income tax depreciation, amortization, or other cost recovery deduction
allowable with respect to an asset for such year, except that if the Carrying
Value of an asset differs from its adjusted basis for federal income tax
purposes at the beginning of such year or other period, Depreciation shall be an
amount which bears the same ratio to such beginning Carrying Value as the
federal income tax depreciation, amortization, or other cost recovery deduction
for such year bears to such beginning adjusted tax basis; provided, however,
that if the federal income tax depreciation, amortization, or other cost
recovery deduction for such year is zero, Depreciation shall be determined with
reference to such beginning Carrying Value using any reasonable method selected
by the General Partner.
"Distribution Period" has the meaning set forth in Section 5.1.C.
"Effective Date" means the date set forth at the beginning of this
Agreement.
"ERISA" means the Employee Retirement Income Security Act of 1974, as
amended.
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Page 11
"ERISA Plan" means an "employee benefit plan" as that term is defined in 29
U.S.C. Section 1002(3), and which is not exempt from regulation under ERISA by
virtue of 29 U.S.C. Section 1003(b).
"Excess General Partner Payments" has the meaning set forth in Section
15.17 hereof.
"Exchange Act" means the Securities Exchange Act of 1934, as amended.
"Funding Debt" means the incurrence of any Debt by or on behalf of the
General Partner Entity for the purpose of providing funds to the Partnership.
"General Partner" means Burnham Pacific Properties, Inc. in its capacity as
the General Partner of the Partnership or its successor as general partner of
the Partnership.
"General Partner Entity" means the General Partner; provided, however, that
if (i) the common stock (or other comparable equity interests) of the General
Partner are at any time not Publicly Traded and (ii) the common stock (or other
comparable equity interests) of an entity that owns, directly or indirectly,
fifty percent (50%) or more of the common stock (or other comparable equity
interests) of the General Partner are Publicly Traded, the term "General Partner
Entity" shall refer to such entity whose common stock (or other comparable
equity securities) is Publicly Traded. If both requirements set forth in
clauses (i) and (ii) above are not satisfied, then the term "General Partner
Entity" shall mean the General Partner.
"General Partnership Interest" means a Partnership Interest held by a
General Partner that is a general partnership interest. A General Partnership
Interest may be expressed as a number of Partnership Units.
"General Partner Payee" has the meaning set forth in Section 15.17 hereof.
"General Partner Payment" has the meaning set forth in Section 15.17
hereof.
"IRS" means the Internal Revenue Service, which administers the internal
revenue laws of the United States.
"Incapacity" or "Incapacitated" means, (i) as to any individual Partner,
death, total physical disability or entry by a court of competent jurisdiction
adjudicating such Partner incompetent to manage his or her Person or estate;
(ii) as to any corporation which is a Partner, the filing of a certificate of
dissolution, or its equivalent, for the corporation or the revocation of its
charter; (iii) as to any partnership or limited liability company which is a
Partner, the dissolution and commencement of winding up of the partnership or
limited liability company; (iv) as to any estate which is a Partner, the
distribution by the fiduciary of the estate's entire interest in the
Partnership; (v) as to any trustee of a trust which is a Partner, the
termination of the trust (but not the substitution of a new trustee); or (vi) as
to any Partner, the bankruptcy of such Partner. For purposes of this
definition, bankruptcy of a Partner shall be deemed to have occurred when (a)
the
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Page 12
Partner commences a voluntary proceeding seeking liquidation, reorganization or
other relief under any bankruptcy, insolvency or other similar law now or
hereafter in effect; (b) the Partner is adjudged as bankrupt or insolvent, or a
final and nonappealable order for relief under any bankruptcy, insolvency or
similar law now or hereafter in effect has been entered against the Partner; (c)
the Partner executes and delivers a general assignment for the benefit of the
Partner's creditors; (d) the Partner files an answer or other pleading admitting
or failing to contest the material allegations of a petition filed against the
Partner in any proceeding of the nature described in clause (b) above; (e) the
Partner seeks, consents to or acquiesces in the appointment of a trustee,
receiver or liquidator for the Partner or for all or any substantial part of the
Partner's properties; (f) any proceeding seeking liquidation, reorganization or
other relief under any bankruptcy, insolvency or other similar law now or
hereafter in effect has not been dismissed within one hundred twenty (120) days
after the commencement thereof; (g) the appointment without the Partner's
consent or acquiescence of a trustee, receiver or liquidator has not been
vacated or stayed within ninety (90) days of such appointment; or (h) an
appointment referred to in clause (g) which has been stayed and is not vacated
within ninety (90) days after the expiration of any such stay.
"Indemnitee" means (i) any Person made a party to a proceeding by reason of
its status as (A) the General Partner, (B) a Limited Partner, or (C) a trustee,
director or officer of the Partnership, or the General Partner and (ii) such
other Persons (including Affiliates of the General Partner, a Limited Partner or
the Partnership) as the General Partner may designate from time to time (whether
before or after the event giving rise to potential liability), in its sole and
absolute discretion.
"Limited Partner" means any Person (including the General Partner) named as
a Limited Partner in Exhibit A, as such Exhibit may be amended from time to
time, or any Substituted Limited Partner or Additional Limited Partner, in such
Person's capacity as a Limited Partner of the Partnership.
"Limited Partnership Interest" means a Partnership Interest of a Limited
Partner in the Partnership representing a fractional part of the Partnership
Interests of all Limited Partners and includes any and all benefits to which the
holder of such a Partnership Interest may be entitled as provided in this
Agreement, together with all obligations of such Person to comply with the terms
and provisions of this Agreement. A Limited Partnership Interest may be
expressed as a number of Partnership Units.
"Liquidating Event" has the meaning set forth in Section 13.1.
"Liquidator" has the meaning set forth in Section 13.2.A.
"Net Income" means, for any taxable period, the excess, if any, of the
Partnership's items of income and gain as determined for book purposes for such
taxable period over the Partnership's items of loss and deduction as determined
for book purposes for such taxable period. The items included in the
calculation of Net Income shall be determined in accordance with Exhibit B. If
an item of income, gain, loss or deduction that has been included in the initial
computation of Net
<PAGE>
Page 13
Income is subjected to the special allocation rules in Exhibit C, Net Income or
the resulting Net Loss, whichever the case may be, shall be recomputed without
regard to such item.
"Net Loss" means, for any taxable period, the excess, if any, of the
Partnership's items of loss and deduction for such taxable period as determined
for book purposes over the Partnership's items of income and gain for such
taxable period as determined for book purposes. The items included in the
calculation of Net Loss shall be determined in accordance with Exhibit B. If an
item of income, gain, loss or deduction that has been included in the initial
computation of Net Loss is subjected to the special allocation rules in Exhibit
C, Net Loss or the resulting Net Income, whichever the case may be, shall be
recomputed without regard to such item.
"New Securities" means (i) any rights, options, warrants or convertible or
exchangeable securities having the right to subscribe for or purchase common
stock (or other comparable equity interest) of the General Partner, excluding
grants under any Share Option Plan, or (ii) any Debt issued by the General
Partner that provides any of the rights described in clause (i).
"Nonrecourse Built-in Gain" means, with respect to any Contributed
Properties or Adjusted Properties that are subject to a mortgage or negative
pledge securing a Nonrecourse Liability, the amount of any taxable gain that
would be allocated to the Partners pursuant to Section 2.B of Exhibit C if such
properties were disposed of in a taxable transaction in full satisfaction of
such liabilities and for no other consideration.
"Nonrecourse Deductions" has the meaning set forth in Regulations Section
1.704-2(b)(1), and the amount of Nonrecourse Deductions for a Partnership Year
shall be determined in accordance with the rules of Regulations Section
1.704-2(c).
"Nonrecourse Liability" has the meaning set forth in Regulations Section
1.752-1(a)(2).
"Notice of Redemption" means a Notice of Redemption substantially in the
form of Exhibit D or as otherwise provided for in an Applicable Contribution
Agreement.
"Outside Limited Partners" has the meaning set forth in "Consent of the
Outside Limited Partners".
"Partner" means the General Partner or a Limited Partner, and "Partners"
means the General Partner and the Limited Partners.
"Partner Minimum Gain" means an amount, with respect to each Partner
Nonrecourse Debt, equal to the Partnership Minimum Gain that would result if
such Partner Nonrecourse Debt were treated as a Nonrecourse Liability,
determined in accordance with Regulations Section 1.704-2(i)(3).
"Partner Nonrecourse Debt" has the meaning set forth in Regulations Section
1.704-2(b)(4).
"Partner Nonrecourse Deductions" has the meaning set forth in Regulations
Section
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Page 14
1.704-2(i)(2), and the amount of Partner Nonrecourse Deductions with respect to
a Partner Nonrecourse Debt for a Partnership Year shall be determined in
accordance with the rules of Regulations Section 1.704-2(i)(2).
"Partnership" means the limited partnership formed under the Act and
pursuant to this Agreement as it may be amended and/or restated, and any
successor thereto.
"Partnership Interest" means a Limited Partnership Interest or a General
Partnership Interest and includes any and all benefits to which the holder of
such a Partnership Interest may be entitled as provided in this Agreement,
together with all obligations of such Person to comply with the terms and
provisions of this Agreement. A Partnership Interest may be expressed as a
number of Partnership Units.
"Partnership Minimum Gain" has the meaning set forth in Regulations Section
1.704-2(b)(2), and the amount of Partnership Minimum Gain, as well as any net
increase or decrease in Partnership Minimum Gain, for a Partnership Year shall
be determined in accordance with the rules of Regulations Section 1.704-2(d).
"Partnership Record Date" means the record date established by the General
Partner either (i) for the distribution of Available Cash pursuant to Section
5.1 hereof, which record date shall be the same as the record date established
by the General Partner Entity for a distribution to its stockholders of some or
all of its portion of such distribution, or (ii) if applicable, for determining
the Partners entitled to vote on or consent to any proposed action for which the
consent or approval of the Partners is sought pursuant to Section 14.2 hereof.
"Partnership Unit" means a fractional, undivided share of the Partnership
Interests of all Partners issued pursuant to Sections 4.1 and 4.2, and includes
Class A Units, Class B Units and any other classes or series of Partnership
Units established after the date hereof. The ownership of Partnership Units
shall be evidenced by such form of certificate for Units as the General Partner
adopts from time to time unless the General Partner determines that the
Partnership Units shall be uncertificated securities. The number of Partnership
Units outstanding and the Percentage Interests in the Partnership represented by
such Partnership Units are set forth in Exhibit A, as such Exhibit may be
amended from time to time.
"Partnership Year" means the fiscal year of the Partnership, which shall be
the calendar year.
"Percentage Interest" means, as to a Partner holding a class of Partnership
Interests, its interest in such class, determined by dividing the Partnership
Units of such class owned by such Partner by the total number of Partnership
Units of such class then outstanding as specified in Exhibit A, as such exhibit
may be amended from time to time, multiplied by the aggregate Percentage
Interest allocable to such class of Partnership Interests. If the Partnership
shall at any time have outstanding more than one class of Partnership Interests,
the Percentage Interest attributable to each class of Partnership Interests
shall be determined as set forth in Section 4.2.B.
"Person" means a natural person, partnership (whether general or limited),
trust, estate,
<PAGE>
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association, corporation, limited liability company, unincorporated
organization, custodian, nominee or any other individual or entity in its own
or any representative capacity.
"Pledge" means any pledge, hypothecation, grant of security interest or
other transaction in connection with a derivative contract entered into with
respect to a Limited Partner's Interest.
"Predecessor Entity" has the meaning set forth in the definition of
"Conversion Factor" herein.
"Preferred Partnership Units" means Limited Partnership Units or Limited
Partnership Interests issued by the Partnership and designated by the General
Partner in one or more classes, or in one or more series of any such classes,
having distribution and such other rights senior to Limited Partnership Units
and Limited Partnership Interests, as provided in and in accordance with Article
IV hereof.
"Publicly Traded" means listed or admitted to trading on the New York Stock
Exchange, the American Stock Exchange or another national securities exchange or
designated for quotation on the NASDAQ National Market, or any successor to any
of the foregoing.
"Qualified REIT Subsidiary" means any Subsidiary of the General Partner
that is a "qualified REIT subsidiary" within the meaning of Section 856(i) of
the Code.
"Recapture Income" means any gain recognized by the Partnership (computed
without regard to any adjustment required by Section 734 or Section 743 of the
Code) upon the disposition of any property or asset of the Partnership, which
gain is characterized as ordinary income because it represents the recapture of
deductions previously taken with respect to such property or asset.
"Redeeming Partner" has the meaning set forth in Section 8.6.A.
"Redemption Amount" means either the Cash Amount or the REIT Shares Amount,
as determined by the General Partner, in its sole and absolute discretion;
provided that if the REIT Shares are not Publicly Traded at the time a Redeeming
Partner exercises its Redemption Right, the Redemption Amount shall be paid only
in the form of the Cash Amount unless the Redeeming Partner, in its sole and
absolute discretion, consents to payment of the Redemption Amount in the form of
the REIT Shares Amount. A Redeeming Partner shall have no right, without the
General Partner's consent, in its sole and absolute discretion, to receive the
Redemption Amount in the form of the REIT Shares Amount.
"Redemption Right" has the meaning set forth in Section 8.6.A.
"Regulation" or "Regulations" means the Income Tax Regulations promulgated
under the Code, as such regulations may be amended from time to time (including
corresponding provisions of succeeding regulations).
"REIT" means a real estate investment trust under Section 856 of the Code.
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Page 16
"REIT Requirements" has the meaning set forth in Section 5.1.A.
"REIT Share" means a share of the capital stock of the General Partner
Entity. REIT Shares may be issued in one or more classes or series in
accordance with the terms of the Articles (or, if the General Partner is not the
General Partner Entity, the organizational documents of the General Partner
Entity). If there is more than one class or series of REIT Shares, the term
"REIT Shares" shall, as the context requires, be deemed to refer to the class or
series of REIT Shares that correspond to the class or series of Partnership
Interests for which the reference to REIT Shares is made. When used with
reference to Class A Units, the term "REIT Shares" refers to Shares of common
stock (or other comparable equity interest) of the General Partner Entity.
"REIT Shares Amount" means a number of REIT Shares equal to the product of
the number of Partnership Units offered for redemption by a Redeeming Partner
times the Conversion Factor; provided that, if the General Partner Entity issues
to all holders of REIT Shares rights, options, warrants or convertible or
exchangeable securities entitling such holders to subscribe for or purchase REIT
Shares or any other securities or property (collectively, the "rights"), then
the REIT Shares Amount shall also include such rights that a holder of that
number of REIT Shares would be entitled to receive.
"Residual Gain" or "Residual Loss" means any item of gain or loss, as the
case may be, of the Partnership recognized for federal income tax purposes
resulting from a sale, exchange or other disposition of Contributed Property or
Adjusted Property, to the extent such item of gain or loss is not allocated
pursuant to Section 2.B.1(a) or 2.B.2(a) of Exhibit C to eliminate Book-Tax
Disparities.
"Safe Harbor" has the meaning set forth in Section 11.6.F.
"Securities Act" means the Securities Act of 1933, as amended.
"704(c) Value" of any Contributed Property means the fair market value of
such property or other consideration at the time of contribution, as determined
by the General Partner using such reasonable method of valuation as it may
adopt; provided, however, that the 704(c) Value of any property deemed
contributed by the Partnership for federal income tax purposes upon the
termination and reconstitution thereof pursuant to Section 7.08(b)(1)(B) of the
Code shall be determined in accordance with Exhibit B. Subject to Exhibit B,
the General Partner shall, in its sole and absolute discretion, use such method
as is reasonable and appropriate under the Regulations to allocate the aggregate
of the 704(c) Values of Contributed Properties in a single or integrated
transaction among each separate property on a basis proportional to its fair
market value.
"Share Option Plan" means any equity incentive plan of the General Partner,
the Partnership and/or any Affiliate of the Partnership.
"Specified Redemption Date" means the tenth Business Day after receipt by
the General
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Page 17
Partner of a Notice of Redemption; provided that, if the REIT Shares are not
Publicly Traded, the Specified Redemption Date means the thirtieth Business Day
after receipt by the General Partner of a Notice of Redemption.
"Subsidiary" means, with respect to any Person, any corporation, limited
liability company, trust, partnership or joint venture, or other entity of which
a majority of (i) the voting power of the voting equity securities; or (ii) the
outstanding equity interests, is owned, directly or indirectly, by such Person.
"Substituted Limited Partner" means a Person who is admitted as a Limited
Partner to the Partnership pursuant to Section 11.4.
"Successor Entity" has the meaning set forth in the definition of
"Conversion Factor" herein.
"Terminating Capital Transaction" means any sale or other disposition of
all or substantially all of the assets of the Partnership for cash or a related
series of transactions that, taken together, result in the sale or other
disposition of all or substantially all of the assets of the Partnership for
cash.
"Termination Transaction" has the meaning set forth in Section 11.2.B.
"Unrealized Gain" attributable to any item of Partnership property means,
as of any date of determination, the excess, if any, of (i) the fair market
value of such property (as determined under Exhibit B) as of such date; over
(ii) the Carrying Value of such property (prior to any adjustment to be made
pursuant to Exhibit B) as of such date.
"Unrealized Loss" attributable to any item of Partnership property means,
as of any date of determination, the excess, if any, of (i) the Carrying Value
of such property (prior to any adjustment to be made pursuant to Exhibit B) as
of such date, over (ii) the fair market value of such property (as determined
under Exhibit B) as of such date.
"Valuation Date" means the date of receipt by the General Partner of a
Notice of Redemption or, if such date is not a Business Day, the first Business
Day thereafter.
"Value" means, with respect to any outstanding REIT Shares of the General
Partner Entity that are Publicly Traded, the average of the daily market price
for the ten consecutive trading days immediately preceding the date with respect
to which value must be determined. The market price for each such trading day
shall be the closing price, regular way, on such day, or if no such sale takes
place on such day, the average of the closing bid and asked prices on such day.
If the outstanding REIT Shares of the General Partner Entity are Publicly Traded
and the REIT Shares Amount includes rights that a holder of REIT Shares would be
entitled to receive, then the Value of such rights shall be determined by the
General Partner acting in good faith on the basis of such quotations and other
information as it considers, in its reasonable judgment, appropriate. If the
REIT Shares of the General Partner Entity are not Publicly Traded, the Value of
the REIT Shares Amount per Partnership Unit offered for redemption (which will
be the Cash Amount per
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Partnership Unit offered for redemption payable pursuant to Section 8.6.A) means
the amount that a holder of one Partnership Unit would receive if each of the
assets of the Partnership were to be sold for its fair market value on the
Specified Redemption Date, the Partnership were to pay all of its outstanding
liabilities, and the remaining proceeds were to be distributed to the Partners
in accordance with the terms of this Agreement. Such Value shall be determined
by the General Partner, acting in good faith and based upon a commercially
reasonable estimate of the amount that would be realized by the Partnership if
each asset of the Partnership (and each asset of each partnership, limited
liability company, trust, joint venture or other entity in which the Partnership
owns a direct or indirect interest) were sold to an unrelated purchaser in an
arms' length transaction where neither the purchaser nor the seller were under
economic compulsion to enter into the transaction (without regard to any
discount in value as a result of the Partnership's minority interest in any
property or any illiquidity of the Partnership's interest in any property). In
connection with determining the Deemed Value of the Partnership Interest for
purposes of determining the number of additional Partnership Units issuable upon
a Capital Contribution funded by an underwritten public offering or an arm's
length private placement of shares of beneficial interest (or other comparable
equity interest) of the General Partner, the Value of such shares shall be the
public offering or arm's length private placement price per share of such class
of beneficial interest (or other comparable equity interest) sold.
ARTICLE II - ORGANIZATIONAL MATTERS
Section 2.1 Organization. The Partnership is a limited partnership
organized pursuant to the provisions of the Act and upon the terms and
conditions set forth in this Agreement. Except as expressly provided herein to
the contrary, the rights and obligations of the Partners and the administration
and termination of the Partnership shall be governed by the Act. The
Partnership Interest of each Partner shall be personal property for all
purposes.
Section 2.2 Name. The name of the Partnership is Burnham Pacific
Operating Partnership, L.P. The Partnership's business may be conducted under
any other name or names deemed advisable by the General Partner, including the
name of the General Partner or any Affiliate thereof. The words "Limited
Partnership," "L.P.," "Ltd." or similar words or letters shall be included in
the Partnership's name where necessary for the purposes of complying with the
laws of any jurisdiction that so requires. The General Partner in its sole and
absolute discretion may change the name of the Partnership at any time and from
time to time and shall notify the Limited Partners of such change in the next
regular communication to the Limited Partners.
Section 2.3 Registered Office and Agent; Principal Office. The address of
the registered office of the Partnership in the State of Delaware shall be
located at Corporation Trust Center, 1209 Orange Street, Wilmington, County of
New Castle, Delaware 19801, and the registered agent for service of process on
the Partnership in the State of Delaware at such registered office shall be
Corporation Trust Company. The principal office of the Partnership shall be 610
West Ash Street, Suite 1600, San Diego, California 92101, or such other place as
the General Partner may from time to time designate by notice to the Limited
Partners. The Partnership may maintain offices at such other place or places
within or outside the State of Delaware as the General Partner
<PAGE>
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deems advisable.
Section 2.4 Term. The term of the Partnership shall commence on November
14, 1997 and shall continue until December 31, 2095, unless it is dissolved
sooner pursuant to the provisions of Article XIII or as otherwise provided by
law.
ARTICLE III - PURPOSE
Section 3.1 Purpose and Business. The purpose and nature of the business
to be conducted by the Partnership is (i) to conduct any business that may be
lawfully conducted by a limited partnership organized pursuant to the Act;
provided, however, that such business shall be limited to and conducted in such
a manner as to permit the General Partner Entity at all times to be classified
as a REIT, unless the General Partner Entity ceases to qualify or is not
qualified as a REIT for any reason or reasons not related to the business
conducted by the Partnership; (ii) to enter into any corporation, partnership,
joint venture, trust, limited liability company or other similar arrangement to
engage in any of the foregoing or the ownership of interests in any entity
engaged, directly or indirectly, in any of the foregoing; and (iii) to do
anything necessary or incidental to the foregoing. In connection with the
foregoing, the Partners acknowledge that the status of the General Partner
Entity as a REIT inures to the benefit of all the Partners and not solely to the
General Partner Entity or its Affiliates. The General Partner shall also be
empowered to do any and all acts and things necessary or prudent to ensure that
the Partnership will not be classified as a "publicly traded partnership" for
purposes of Section 7704 of the Code, including but not limited to imposing
restrictions on redemptions.
Section 3.2 Powers. The Partnership is empowered to do any and all acts
and things necessary, appropriate, proper, advisable, incidental to or
convenient for the furtherance and accomplishment of the purposes and business
described herein and for the protection and benefit of the Partnership,
including, without limitation, full power and authority, directly or through its
ownership interest in other entities, to enter into, perform and carry out
contracts of any kind, borrow money and issue evidences of indebtedness, whether
or not secured by mortgage, deed of trust, pledge or other lien, acquire, own,
manage, improve and develop real property, and lease, sell, transfer and dispose
of real property; provided, however, that the Partnership shall not take, or
refrain from taking, any action which, in the judgment of the General Partner,
in its sole and absolute discretion, (i) could adversely affect the ability of
the General Partner Entity to continue to qualify as a REIT; (ii) could subject
the General Partner Entity to any additional taxes under Section 857 or Section
4981 of the Code; or (iii) could violate any law or regulation of any
governmental body or agency having jurisdiction over the General Partner or its
securities, unless such action (or inaction) shall have been specifically
consented to by the General Partner in writing.
ARTICLE IV - CAPITAL CONTRIBUTIONS AND ISSUANCES
OF PARTNERSHIP INTERESTS
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Section 4.1 Capital Contributions of the Partners. At the time of the
execution of this Agreement, the Partners shall make or shall have made the
Capital Contributions as set forth in Exhibit A. The Partners shall own
Partnership Units in the amounts set forth in Exhibit A and shall have a
Percentage Interest in the Partnership as set forth in Exhibit A, which
Percentage Interest shall be adjusted in Exhibit A from time to time by the
General Partner to the extent necessary to reflect accurately redemptions,
Capital Contributions, the issuance of additional Partnership Units or similar
events having an effect on a Partner's Percentage Interest. To the extent the
Partnership is acquiring any property by the merger of any other Person into the
Partnership or the contribution of assets by any other Person, Persons who
receive Partnership Interests in exchange for their interests in the Person
merging into or contributing assets to the Partnership shall become Partners and
shall be deemed to have made Capital Contributions as provided in the applicable
merger agreement or Applicable Contribution Agreement and as reflected in
amendments to Exhibit A and Exhibit E. The number of Partnership Units held by
the General Partner equal to one percent (1%) of all outstanding Partnership
Units (as of the Effective Date or such later date as is the first date upon
which property is first contributed to the Partnership) shall be deemed to be
the General Partner Partnership Units and shall be the General Partnership
Interest of the General Partner. All other Partnership Units held by the
General Partner shall be deemed to be Limited Partnership Interests and shall be
held by the General Partner in its capacity as a Limited Partner in the
Partnership. Except as provided in Sections 7.5 and 10.5 hereof or in an
Applicable Contribution Agreement, the Partners shall have no obligation to make
any additional Capital Contributions or provide any additional funding to the
Partnership (whether in the form of loans, repayments of loans or otherwise) and
no Partner shall have any obligation to restore any deficit that may exist in
its Capital Account, either upon a liquidation of the Partnership or otherwise.
Section 4.2 Issuances of Partnership Interests.
A. General. The General Partner is hereby authorized to cause the
Partnership from time to time to issue to Partners (including the General
Partner and its Affiliates) or other Persons (including, without limitation, in
connection with the contribution of property to the Partnership) Partnership
Units or other Partnership Interests in one or more classes, or in one or more
series of any of such classes, with such designations, preferences and relative,
participating, optional or other special rights, powers and duties, including
rights, powers and duties senior to Limited Partnership Interests, all as shall
be determined, subject to applicable Delaware law, by the General Partner in its
sole and absolute discretion, including, without limitation, (i) the allocations
of items of Partnership income, gain, loss, deduction and credit to each such
class or series of Partnership Interests, (ii) the right of each such class or
series of Partnership Interests to share in Partnership distributions and (iii)
the rights of each such class or series of Partnership Interests upon
dissolution and liquidation of the Partnership; provided that, no such
Partnership Units or other Partnership Interests shall be issued to the General
Partner unless either (a) the Partnership Interests are issued in connection
with the grant, award or issuance of REIT Shares or other equity interests in
the General Partner having designations, preferences and other rights such that
the economic interests attributable to such REIT Shares or other equity
interests are substantially similar to the designations, preferences and other
rights (except voting rights) of the Partnership Interests issued to the General
Partner in accordance with this Section 4.2.A or (b) the additional
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Partnership Interests are issued to all Partners holding Partnership Interests
in the same class in proportion to their respective Percentage Interests in such
class. If the Partnership issues Partnership Interests pursuant to this Section
4.2.A, the General Partner shall make such revisions to this Agreement
(including but not limited to the revisions described in Section 5.4, Section
6.2 and Section 8.6) as it deems necessary to reflect the issuance of such
Partnership Interests; and the failure of such revisions to this Agreement to
include all of the provisions of an Applicable Contribution Agreement relating
to the issuance of such Partnership Interest shall not limit the effectiveness
of such Contribution Agreement as between the parties thereto.
B. Percentage Interest Adjustments in the Case of Capital
Contributions for Partnership Units. Upon the acceptance of additional Capital
Contributions in exchange for Partnership Units and if the Partnership shall
have outstanding more than one class of Partnership Interests, the Percentage
Interest related thereto shall be equal to a fraction, the numerator of which is
equal to the amount of cash, if any, plus the Agreed Value of Contributed
Property, if any, contributed with respect to such additional Partnership Units
and the denominator of which is equal to the sum of (i) the Deemed Value of the
Partnership Interests for all outstanding classes (computed as of the Business
Day immediately preceding the date on which the additional Capital Contributions
are made (an "Adjustment Date")) plus (ii) the aggregate amount of additional
Capital Contributions contributed to the Partnership on such Adjustment Date in
respect of such additional Partnership Units. The Percentage Interest of each
other Partner holding Partnership Interests not making a full pro rata Capital
Contribution shall be adjusted to a fraction the numerator of which is equal to
the sum of (i) the Deemed Partnership Interest Value of such Limited Partner
(computed as of the Business Day immediately preceding the Adjustment Date) plus
(ii) the amount of additional Capital Contributions (such amount being equal to
the amount of cash, if any, plus the Agreed Value of Contributed Property, if
any, so contributed), if any, made by such Partner to the Partnership in respect
of such Partnership Interest as of such Adjustment Date and the denominator of
which is equal to the sum of (i) the Deemed Value of the Partnership Interests
of all outstanding classes (computed as of the Business Day immediately
preceding such Adjustment Date) plus (ii) the aggregate amount of the additional
Capital Contributions contributed to the Partnership on such Adjustment Date in
respect of such additional Partnership Interests. For purposes of calculating a
Partner's Percentage Interest pursuant to this Section 4.2.B, cash Capital
Contributions by the General Partner will be deemed to equal the cash
contributed by the General Partner plus (a) in the case of cash contributions
funded by an offering of any equity interests in or other securities of the
General Partner, the offering costs attributable to the cash contributed to the
Partnership, and (b) in the case of Partnership Units issued pursuant to Section
7.5.E, an amount equal to the difference between the Value of the REIT Shares
sold pursuant to any Share Option Plan and the net proceeds of such sale.
C. Classes of Partnership Units. From and after the Effective Date,
subject to Section 4.2.A above, the Partnership shall have two subclasses of
Partnership Units entitled "Class A Units" and "Class B Units." Either Class A
Units or Class B Units, at the election of the General Partner, in its sole and
absolute discretion, may be issued to newly admitted Partners in exchange for
the contribution by such Partners of cash, real estate partnership interests,
stock, notes or other assets or consideration; provided, that any Partnership
Unit that is not specifically designated by the General Partner as being of a
particular class shall be deemed to be a Class A Unit. Each Class
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B Unit shall be converted automatically into a Class A Unit on the day
immediately following the Partnership Record Date for the Distribution Period
(as defined in Section 5.1.C) in which such Class B Unit was issued, without the
requirement for any action by either the Partnership or the Partner holding the
Class B Unit.
At such time as the Partnership has issued Preferred Units, there shall
also be two subclasses of each class or series of Preferred Units designated
"Class A Preferred Units" and "Class B Preferred Units" (or such other
designation as the General Partner may determine) in order to provide for the
respective distributions as between holders of the Units of such class or series
of Preferred Units who have held such Units for less than the full Distribution
Period relating to such class or series in a manner consistent with the
allocation of distributions made pursuant to Section 5.1 hereof among holders of
Limited Partner Units that are not Preferred Partnership Units.
Section 4.3 No Preemptive Rights. Except to the extent expressly granted
by the Partnership pursuant to an Applicable Contribution Agreement, no Person
shall have any preemptive, preferential or other similar right with respect to
(i) additional Capital Contributions or loans to the Partnership; or (ii) the
issuance or sale of any Partnership Units or other Partnership Interests.
Section 4.4 Other Contribution Provisions. If any Partner is admitted to
the Partnership and is given a Capital Account in exchange for services rendered
to the Partnership or to the General Partner on behalf of the Partnership, such
transaction shall be treated by the Partnership and the affected Partner as if
the Partnership had compensated such Partner in cash, and the Partner had
contributed such cash to the capital of the Partnership.
Section 4.5 No Interest on Capital. No Partner shall be entitled to
interest on its Capital Contributions or its Capital Account.
ARTICLE V - DISTRIBUTIONS
Section 5.1 Requirement and Characterization of Distributions.
A. General. Subject to any superior distribution rights of any
Preferred Partnership Units that may be issued pursuant to Article IV, the
General Partner shall distribute at least quarterly an amount equal to one
hundred percent (100%) of Available Cash generated by the Partnership during
such quarter or shorter period to the Partners who are Partners on the
Partnership Record Date with respect to such quarter or shorter period as
provided in Sections 5.1.B, 5.1.C and 5.1.D. Notwithstanding anything to the
contrary contained herein, in no event may a Partner receive a distribution of
Available Cash with respect to a Partnership Unit for a quarter or shorter
period to the extent such Partner is entitled to receive a distribution for such
period with respect to a REIT Share for which such Partnership Unit has been
redeemed or exchanged. Unless otherwise expressly provided for herein or in an
agreement at the time a new class of Partnership Interests is created in
accordance with Article IV hereof, no Partnership Interest shall be entitled to
a distribution in preference to any other Partnership Interest. The General
Partner shall make such reasonable efforts, as determined by it in its sole and
absolute
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discretion and consistent with the qualification of the General Partner Entity
as a REIT, to distribute Available Cash (a) to Limited Partners so as to
preclude any such distribution or portion thereof from being treated as part of
a sale of property of the Partnership by a Limited Partner under Section 707 of
the Code or the Regulations thereunder; provided that, the General Partner and
the Partnership shall not have liability to a Limited Partner under any
circumstances as a result of any distribution to a Limited Partner being so
treated; and (b) to the General Partner in an amount sufficient to enable the
General Partner Entity to pay stockholder dividends that will (1) satisfy the
requirements for qualification as a REIT under the Code and the Regulations (the
"REIT Requirements") thereunder; and (2) avoid any federal income or excise tax
liability for the General Partner Entity; provided, however, that amounts to be
distributed to the General Partner under this clause (b) shall not reduce the
amount distributable to Limited Partners under any provision of this Agreement.
B. Method.
(i) Each holder of Partnership Interests that is entitled to any
preference in distribution shall be entitled to a distribution in
accordance with the rights of any such class of Partnership Interests (and,
within such class, pro rata in proportion to the respective Percentage
Interests on such Partnership Record Date); and
(ii) To the extent there is Available Cash remaining after the
payment of any preference in distribution in accordance with the
foregoing clause (i), with respect to Partnership Interests that are
not entitled to any preference in distribution, pro rata to each such
class in accordance with the terms of such class (and, within each
such class, pro rata in proportion to the respective Percentage
Interests on such Partnership Record Date).
C. Distributions When Class B Units Are Outstanding. If for any
quarter or shorter period with respect to which a distribution is to be made (a
"Distribution Period") Class B Units are outstanding on the Partnership Record
Date for such Distribution Period, the General Partner shall allocate the
Available Cash with respect to such Distribution Period available for
distribution with respect to the Class A Units and Class B Units collectively
between the Partners who are holders of Class A Units ("Class A") and the
Partners who are holders of Class B Units ("Class B") as follows:
(1) Class A shall receive that portion of the Available Cash
(the "Class A REIT Portion") determined by multiplying the amount of
Available Cash by the following fraction:
A x Y
----------------
(A x Y)+(B x X)
(2) Class B shall receive that portion of the Available Cash
(the "Class B REIT Portion") determined by multiplying the amount of
Available Cash by the following fraction:
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B x X
---------------
(A x Y)+(B x X)
(3) For purposes of the foregoing formulas, (i) "A" equals the
number of Class A Units outstanding on the Partnership Record Date for
such Distribution Period; (ii) "B" equals the number of Class B Units
outstanding on the Partnership Record Date for such Distribution
Period; (iii) "Y" equals the number of days in the Distribution
Period; and (iv) "X" equals the number of days in the Distribution
Period for which the Class B Units were issued and outstanding.
The Class A REIT Portion shall be distributed among Partners holding Class
A Units on the Partnership Record Date for the Distribution Period in accordance
with the number of Class A Units held by each Partner on such Partnership Record
Date; provided that, in no event may a Partner receive a distribution of
Available Cash with respect to a Class A Unit if a Partner is entitled to
receive a distribution out of such Available Cash with respect to a REIT Portion
for which such Class A Unit has been redeemed or exchanged. The Class B REIT
Shares shall be distributed among the Partners holding Class B Units on the
Partnership Record Date for the Distribution Period in accordance with the
number of Class B Units held by each Partner on such Partnership Record Date. In
no event shall any Class B Units be entitled to receive any distribution of
Available Cash for any Distribution Period ending prior to the date on which
such Class B Units are issued.
D. Distributions When Class B Units Have Been Issued on Different
Dates. If Class B Units which have been issued on different dates are
outstanding on the Partnership Record Date for any Distribution Period, then the
Class B Units issued on each particular date shall be treated as a separate
series of Partnership Units for purposes of making the allocation of Available
Cash for such Distribution Period among the holders of Partnership Units (and
the formula for making such allocation, and the definitions of variables used
therein, shall be modified accordingly). Thus, for example, if two series of
Class B Units are outstanding on the Partnership Record Date for any
Distribution Period, the allocation formula for each series, "Series B1" and
"Series B2" would be as follows:
(1) Series B1 shall receive that portion of the Available Cash
determined by multiplying the amount of Available Cash by the
following fraction:
B1 x X1
---------------------------
(A x Y)+(B1 x X1)+(B2 x X2)
(2) Series B2 shall receive that portion of the Available Cash
determined by multiplying the amount of Available Cash by the
following fraction:
B2 x X2
---------------------------
(A x Y)+(B1 x X1)+(B2 x X2)
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(3) For purposes of the foregoing formulas the definitions set
forth in Section 5.1.C.3 remain the same except that (i) "B1" equals
the number of Partnership Units in Series B1 outstanding on the
Partnership Record Date for such Distribution Period; (ii) "B2" equals
the number of Partnership Units in Series B2 outstanding on the
Partnership Record Date for such Distribution Period; (iii) "X1"
equals the number of days in the Distribution Period for which the
Partnership Units in Series B1 were issued and outstanding; and (iv)
"X2" equals the number of days in the Distribution Period for which
the Partnership Units in Series B2 were issued and outstanding.
Section 5.2 Amounts Withheld. All amounts withheld pursuant to the Code
or any provisions of any state or local tax law and Section 10.5 with respect to
any allocation, payment or distribution to the General Partner, the Limited
Partners or Assignees shall be treated as amounts distributed to the General
Partner, Limited Partners or Assignees pursuant to Section 5.1 for all purposes
under this Agreement.
Section 5.3 Distributions Upon Liquidation. Proceeds from a Terminating
Capital Transaction shall be distributed to the Partners in accordance with
Section 13.2.
Section 5.4 Revisions to Reflect Issuance of Partnership Interests.
Subject to the terms of Applicable Contribution Agreements, if the Partnership
issues Partnership Interests to the General Partner or any Additional Limited
Partner pursuant to Article IV hereof, the General Partner shall make such
revisions to this Article V and Exhibit A as it reasonably deems necessary to
reflect the issuance of such additional Partnership Interests without the
requirements for any other consents or approvals.
ARTICLE VI - ALLOCATIONS
Section 6.1 Allocations for Capital Account Purposes. For purposes of
maintaining the Capital Accounts and in determining the rights of the Partners
among themselves, the Partnership's items of income, gain, loss and deduction
(computed in accordance with Exhibit B) shall be allocated among the Partners in
each taxable year (or portion thereof) as provided herein below.
A. Net Income. After giving effect to the special allocations set
forth in Section 1 of Exhibit C and subject to the provisions of Section 6.3,
Net Income shall be allocated (i) first, to the General Partner to the extent
that Net Losses previously allocated to the General Partner pursuant to the last
sentence of Section 6.1.B exceed Net Income previously allocated to the General
Partner pursuant to this clause (i) of Section 6.1.A; (ii) second, to the
holders of any Partnership Interests that are entitled to any preference in
distribution in accordance with the rights of any such class of Partnership
Interests until each such Partnership Interest has been allocated, on a
cumulative basis pursuant to this clause (ii), Net Income equal to the amount of
distributions received which are attributable to the preference of such class of
Partnership Interests (and, within such class, pro rata in proportion to the
respective Percentage Interests as of the last day of the period for which such
allocation is being made); and (iii) third, with respect to
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Partnership Interests that are not entitled to any preference in the allocation
of Net Income, pro rata to each such class in accordance with the terms of such
class (and, within such class, pro rata in proportion to the respective
Percentage Interests as of the last day of the period for which such allocation
is being made).
B. Net Losses. After giving effect to the special allocations set
forth in Section 1 of Exhibit C, Net Losses shall be allocated (i) first, to the
holders of any Partnership Interests that are entitled to any preference in
distribution in accordance with the rights of any such class of Partnership
Interests to the extent that any prior allocations of Net Income to such class
of Partnership Interests pursuant to Section 6.1.A(ii) exceed, on a cumulative
basis, distributions with respect to such Partnership Interests pursuant to
clause (i) of Section 5.1.B (and, within such class, pro rata in proportion to
the respective Percentage Interests as of the last day of the period for which
such allocation is being made); and (ii) second, with respect to classes of
Partnership Interests that are not entitled to any preference in distribution,
pro rata to each such class in accordance with the terms of such class (and,
within such class, pro rata in proportion to the respective Percentage Interests
as of the last day of the period for which such allocation is being made);
provided that Net Losses and/or items of deduction (as computed for book
purposes) shall not be allocated to any Limited Partner pursuant to this Section
6.1.B to the extent that such allocation would cause such Limited Partner to
have an Adjusted Capital Account Deficit (or increase any existing Adjusted
Capital Account Deficit) at the end of such taxable year (or portion thereof).
All Net Losses and/or items of deduction (as computed for book purposes) in
excess of the limitations set forth in this Section 6.1.B shall be allocated to
the General Partner.
C. Allocation of Nonrecourse Debt. For purposes of Regulation
Section 1.752-3(a), the Partners agree that Nonrecourse Liabilities of the
Partnership in excess of the sum of (i) the amount of Partnership Minimum Gain
and (ii) the total amount of Nonrecourse Built-in Gain shall be allocated among
the Partners in accordance with their respective Percentage Interests.
D. Recapture Income. Any gain allocated to the Partners upon the
sale or other taxable disposition of any Partnership asset shall, to the extent
possible, after taking into account other required allocations of gain pursuant
to Exhibit C, be characterized as Recapture Income in the same proportions and
to the same extent as such Partners have been allocated any deductions directly
or indirectly giving rise to the treatment of such gains as Recapture Income.
Section 6.2 Revisions to Allocations to Reflect Issuance of Partnership
Interests. If the Partnership issues Partnership Interests to the General
Partner or any Additional Limited Partner pursuant to Article IV hereof, the
General Partner shall make such revisions to this Article VI and Exhibit A as it
deems reasonably necessary to reflect the terms of the issuance of such
Partnership Interests, including making preferential allocations to classes of
Partnership Interests that are entitled thereto. Such revisions shall not
require the consent or approval of any other Partner except as provided in an
Applicable Contribution Agreement.
Section 6.3 Intent of Allocations. The parties intend that the allocation
provisions of Article VI, Exhibit B and Exhibit C hereto shall produce final
Capital Account balances of the Partners that will permit liquidating
distributions that are made in accordance with final Capital Account balances to
be made (after unpaid loans and interest thereon, including those owed to
Partners
<PAGE>
Page 27
have been paid) in a manner identical to the order of priorities set forth in
Section 5.1 hereof. To the extent that the allocation provisions of Article VI,
Exhibit B and Exhibit C would fail to produce such final Capital Account
balances, (I) such provisions shall be amended by the General Partner if and to
the extent necessary to produce such result and (ii) income and loss of the
Partnership, as computed for book purposes, for prior open years (or items of
gross income and deduction of the Partnership, as computed for book purposes,
for such years) shall be reallocated among the Partners to the extent it is not
possible to achieve such result with allocations of items of income (including
gross income) and deduction, as computed for book purposes, for the current year
and future years, as reasonably approved by the General Partner. This Section
6.3 shall control notwithstanding any reallocation or adjustment of taxable
income, taxable loss, or items thereof by the Internal Revenue Service or any
other taxing authority.
ARTICLE VII - MANAGEMENT AND OPERATIONS OF BUSINESS
Section 7.1 Management.
A. Powers of General Partner. Except as otherwise expressly
provided in this Agreement, all management powers over the business and affairs
of the Partnership are and shall be exclusively vested in the General Partner,
and no Limited Partner shall have any right to participate in or exercise
control or management power over the business and affairs of the Partnership.
The General Partner may not be removed by the Limited Partners with or without
cause. In addition to the powers now or hereafter granted a general partner of
a limited partnership under applicable law or which are granted to the General
Partner under any other provision of this Agreement, the General Partner,
subject to Section 7.11, shall have full power and authority to do all things
deemed necessary or desirable by it to conduct the business of the Partnership,
to exercise all powers set forth in Section 3.2 and to effectuate the purposes
set forth in Section 3.1, including, without limitation:
(1) the making of any expenditures, the lending or borrowing of
money (including, without limitation, making prepayments on
loans and borrowing money to permit the Partnership to make
distributions to its Partners in such amounts as will permit
the General Partner Entity (so long as the General Partner
Entity qualifies as a REIT) to avoid the payment of any
federal income tax (including, for this purpose, any excise
tax pursuant to Section 4981 of the Code) and to make
distributions to its stockholders sufficient to permit the
General Partner Entity to maintain REIT status), the
assumption or guarantee of, or other contracting for,
indebtedness and other liabilities, the issuance of
evidences of indebtedness (including the securing of the
same by mortgage, deed of trust or other lien or encumbrance
on the Partnership's assets) and the incurring of any
obligations the General Partner Entity deems necessary for
the conduct of the activities of the Partnership;
<PAGE>
Page 28
(2) the making of tax, regulatory and other filings, or
rendering of periodic or other reports to governmental or
other agencies having jurisdiction over the business or
assets of the Partnership the registration of any class of
securities of the Partnership under the Securities Act, and
the listing of any debt securities of the Partnership on any
exchange;
(3) the acquisition, disposition, mortgage, pledge, encumbrance,
hypothecation or exchange of any or all of the assets of the
Partnership (including the exercise or grant of any
conversion, option, privilege or subscription right or other
right available in connection with any assets at any time
held by the Partnership) or the merger or other combination
of the Partnership with or into another entity on such terms
as the General Partner deems proper;
(4) the use of the assets of the Partnership (including, without
limitation, cash on hand) for any purpose consistent with
the terms of this Agreement and on any terms it sees fit,
including, without limitation, but subject to Section 7.6
hereof, the financing of the conduct of the operations of
the General Partner, the Partnership or any of the
Partnership's Subsidiaries, the lending of funds to other
Persons (including, without limitation, the General Partner,
its Subsidiaries and the Partnership's Subsidiaries) and the
repayment of obligations of the Partnership and its
Subsidiaries and any other Person in which the Partnership
has an equity investment and the making of capital
contributions to its Subsidiaries;
(5) the management, operation, leasing, landscaping, repair,
alteration, demolition or improvement of any real property
or improvements owned by the Partnership or any Subsidiary
of the Partnership or any Person in which the Partnership
has made a direct or indirect equity investment;
(6) the negotiation, execution, and performance of any
contracts, conveyances or other instruments that the General
Partner considers useful or necessary to the conduct of the
Partnership's operations or the implementation of the
General Partner's powers under this Agreement, including
contracting with contractors, developers, consultants,
accountants, legal counsel, other professional advisors and
other agents and the payment of their expenses and
compensation out of the Partnership's assets;
(7) the mortgage, pledge, encumbrance or hypothecation of any
assets of the Partnership, and the use of the assets of the
Partnership (including,
<PAGE>
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without limitation, cash on hand) for any purpose consistent
with the terms of this Agreement and on any terms it sees
fit, including, without limitation, but subject to Section
7.6 hereof, the financing of the conduct or the operations
of the General Partner or the Partnership, the lending of
funds to other Persons (including, without limitation, any
Subsidiaries of the Partnership) and the repayment of
obligations of the Partnership, any of its Subsidiaries and
any other Person in which it has an equity investment;
(8) the distribution of Partnership cash or other Partnership
assets in accordance with this Agreement;
(9) the holding, managing, investing and reinvesting of cash and
other assets of the Partnership;
(10) the collection and receipt of revenues and income of the
Partnership;
(11) the establishment of one or more divisions of the
Partnership, the selection, appointment, designation of
powers, authority and duties and the termination and
dismissal of employees of the Partnership (including,
without limitation, employees having titles such as
"president," "vice president," "secretary" and "treasurer")
and agents, outside attorneys, accountants, consultants and
contractors of the Partnership and the determination of
their compensation and other terms of employment or hiring;
(12) the maintenance of such insurance for the benefit of the
Partnership and the Partners and directors and officers
thereof as it deems necessary or appropriate;
(13) the formation of, or acquisition of an interest (including
non-voting interests in entities controlled by Affiliates of
the Partnership or third parties) in, and the contribution
of property to, any further limited or general partnerships,
joint ventures, limited liability companies or other
relationships that it deems desirable (including, without
limitation, the acquisition of interests in, and the
contributions of funds or property to, or making of loans
to, its Subsidiaries and any other Person in which it has an
equity investment from time to time, or the incurrence of
indebtedness on behalf of such Persons or the guarantee of
the obligations of such Persons); provided that, as long as
the General Partner has determined to continue to qualify as
a REIT, the Partnership may not engage in any such
formation, acquisition or contribution that would cause the
General Partner to fail to qualify as a REIT;
(14) the control of any matters affecting the rights and
obligations of the Partnership, including the settlement,
compromise, submission to
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arbitration or any other form of dispute resolution or
abandonment of any claim, cause of action, liability, debt
or damages due or owing to or from the Partnership, the
commencement or defense of suits, legal proceedings,
administrative proceedings, arbitrations or other forms of
dispute resolution, the representation of the Partnership in
all suits or legal proceedings, administrative proceedings,
arbitration or other forms of dispute resolution, the
incurring of legal expense and the indemnification of any
Person against liabilities and contingencies to the
extent permitted by law;
(15) the determination of the fair market value of any
Partnership property distributed in kind, using such
reasonable method of valuation as the General Partner may
adopt;
(16) the exercise, directly or indirectly, through any
attorney-in-fact acting under a general or limited power of
attorney, of any right, including the right to vote,
appurtenant to any assets or investment held by the
Partnership;
(17) the exercise of any of the powers of the General Partner
enumerated in this Agreement on behalf of or in connection
with any Subsidiary of the Partnership or any other Person
in which the Partnership has a direct or indirect interest,
individually or jointly with any such Subsidiary or other
Person;
(18) the exercise of any of the powers of the General Partner
enumerated in this Agreement on behalf of any Person in
which the Partnership does not have any interest pursuant to
contractual or other arrangements with such Person;
(19) the making, executing and delivering of any and all deeds,
leases, notes, deeds to secure debt, mortgages, deeds of
trust, security agreements, conveyances, contracts,
guarantees, warranties, indemnities, waivers, releases or
other legal instruments or agreements in writing necessary
or appropriate in the judgment of the General Partner for
the accomplishment of any of the powers of the General
Partner enumerated in this Agreement; and
(20) the distribution of cash to acquire Partnership Units held
by a Limited Partner in connection with a Limited Partner's
exercise of its Redemption Right under Section 8.6 or of any
comparable or other redemption or exchange right of any
Partner holding Partnership Interests in one or more classes
or series of Partnership Units regardless of whether such
Partnership Units are senior to Limited Partnership
Interests;
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(21) the issuance, on behalf of the Partnership, of Additional
Partnership Units, as appropriate, in connection with
Capital Contributions by Additional Limited Partners and
Additional Capital Contributions by Partners pursuant to
Article IV and the mailing, executing, delivery and
performance of Contribution Agreements relating thereto; and
(22) the amendment and restatement of Exhibit A and Exhibit E to
reflect accurately at all times the Capital Contributions
and Percentage Interests of the Partners as the same are
adjusted from time to time to the extent necessary to
reflect redemptions, Capital Contributions, the issuance of
Partnership Units, the admission of any Additional Limited
Partner or any Substituted Limited Partner or otherwise,
which amendment and restatement, notwithstanding anything in
this Agreement to the contrary, shall not be deemed an
amendment of this Agreement, as long as the matter or event
being reflected in Exhibit A and Exhibit E otherwise is
authorized by this Agreement.
B. No Approval by Limited Partners. Except as provided in Section
7.11 or in any Applicable Contribution Agreement, each of the Limited Partners
agrees that the General Partner is authorized to execute, deliver and perform
the above-mentioned agreements and transactions on behalf of the Partnership
without any further act, approval or vote of the Partners, notwithstanding any
other provision of this Agreement, the Act or any applicable law, rule or
regulation, to the fullest extent permitted under the Act or other applicable
law, rule or regulation. The execution, delivery or performance by the General
Partner or the Partnership of any agreement authorized or permitted under this
Agreement shall not constitute a breach by the General Partner of any duty that
the General Partner may owe the Partnership or the Limited Partners or any other
Persons under this Agreement or of any duty stated or implied by law or equity.
C. Insurance. At all times from and after the date hereof, the
General Partner may cause the Partnership to obtain and maintain (i) casualty,
liability and other insurance on the properties of the Partnership; (ii)
liability insurance for the Indemnitees hereunder; and (iii) such other
insurance as the General Partner, in its sole and absolute discretion,
determines to be appropriate and reasonable.
D. Working Capital and Other Reserves. At all times from and after
the date hereof, the General Partner may cause the Partnership to establish and
maintain working capital reserves in such amounts as the General Partner, in its
sole and absolute discretion, deems appropriate and reasonable from time to
time, including upon liquidation of the Partnership under Section 13.
E. No Obligations to Consider Tax Consequences of Limited Partners.
In exercising its authority under this Agreement, the General Partner may, but
shall be under no obligation to, take into account the tax consequences to any
Partner (including the General Partner) of any action taken (or not taken) by
it. The General Partner and the Partnership shall not have liability
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to a Limited Partner for monetary damages or otherwise for losses sustained,
liabilities incurred or benefits not derived by such Limited Partner in
connection with such decisions, provided that the General Partner has acted in
good faith and pursuant to its authority under this Agreement. The Limited
Partners expressly acknowledge that the General Partner is acting on behalf of
the Partnership, the General Partner, and the General Partner's stockholders,
collectively
Section 7.2 Certificate of Limited Partnership. The General Partner has
previously filed the Certificate with the Secretary of State of Delaware. To
the extent that such action is determined by the General Partner to be
reasonable and necessary or appropriate, the General Partner shall file
amendments to and restatements of the Certificate and do all the things to
maintain the Partnership as a limited partnership (or a partnership in which the
limited partners have limited liability) under the laws of the State of Delaware
and each other state, the District of Columbia or other jurisdiction in which
the Partnership may elect to do business or own property. Subject to the terms
of Section 8.5.A(4), the General Partner shall not be required, before or after
filing, to deliver or mail a copy of the Certificate or any amendment thereto to
any Limited Partner. The General Partner shall use all reasonable efforts to
cause to be filed such other certificates or documents as may be reasonable and
necessary or appropriate for the formation, continuation, qualification and
operation of a limited partnership (or a partnership in which the limited
partners have limited liability) in the State of Delaware and any other state,
the District of Columbia or other jurisdiction in which the Partnership may
elect to do business or own property.
Section 7.3 Title to Partnership Assets. Title to Partnership assets,
whether real, personal or mixed and whether tangible or intangible, shall be
deemed to be owned by the Partnership as an entity, and no Partners,
individually or collectively, shall have any ownership interest in such
Partnership assets or any portion thereof. Title to any or all of the
Partnership assets may be held in the name of the Partnership, the General
Partner or one or more nominees, as the General Partner may determine, including
Affiliates of the General Partner. The General Partner hereby declares and
warrants that any Partnership assets for which legal title is held in the name
of the General Partner or any nominee or Affiliate of the General Partner shall
be held by the General Partner for the use and benefit of the Partnership in
accordance with the provisions of this Agreement (excluding only assets
permitted to be held by the General Partner pursuant to Section 7.5.A);
provided, however, that the General Partner shall use its best efforts to cause
beneficial and record title to such assets to be vested in the Partnership as
soon as reasonably practicable if failure to so vest such title would have a
material adverse effect on the Partnership or its Partners. All Partnership
assets shall be recorded as the property of the Partnership in its books and
records, irrespective of the name in which legal title to such Partnership
assets is held.
Section 7.4 Reimbursement of the General Partner.
A. No Compensation. Except as provided in this Section 7.4 and
elsewhere in this Agreement (including the provisions of Articles V and VI
regarding distributions, payments and allocations to which it may be entitled),
the General Partner shall not be compensated for its services as general partner
of the Partnership.
B. Responsibility for Partnership Expenses. The Partnership shall
be responsible for and shall pay all expenses relating to the Partnership's
organization, the ownership of its assets and
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its operations. The General Partner shall be reimbursed on a monthly basis, or
such other basis as the General Partner may determine in its sole and absolute
discretion, for all expenses it incurs relating to the ownership and operation
of, or for the benefit of, the Partnership (including, without limitation,
expenses related to the operations of the General Partner and to the management
and administration of any Subsidiaries of the General Partner or the Partnership
or Affiliates of the Partnership, such as auditing expenses and filing fees) but
excluding any portion of expenses reasonably attributable to assets not owned by
or for the benefit of, or to operations not for the benefit of, the Partnership
or Affiliates of the Partnership; provided that, the amount of any such
reimbursement shall be reduced by (i) any interest earned by the General Partner
with respect to bank accounts or other instruments or accounts held by it on
behalf of the Partnership as permitted in Section 7.5.A (which interest is
considered to belong to the Partnership and shall be paid over to the
Partnership to the extent not applied to reimburse the General Partner for
expenses hereunder); and (ii) any amount derived by the General Partner from any
investments permitted in Section 7.5.A. The General Partner shall determine in
good faith the amount of expenses incurred by it related to the ownership and
operation of, or for the benefit of, the Partnership. If certain expenses are
incurred for the benefit of the Partnership and other entities (including the
General Partner), such expenses will be allocated to the Partnership and such
other entities in such a manner as the General Partner in its reasonable
discretion deems fair and reasonable. Such reimbursements shall be in addition
to any reimbursement to the General Partner pursuant to Section 10.3.C and as a
result of indemnification pursuant to Section 7.7. All payments and
reimbursements hereunder shall be characterized for federal income tax purposes
as expenses of the Partnership incurred on its behalf, and not as expenses of
the General Partner.
C. Partnership Interest Issuance Expenses. The General Partner
shall also be reimbursed for all expenses it incurs relating to any issuance of
Partnership Interests, REIT Shares, Debt of the Partnership or the General
Partner or rights, options, warrants or convertible or exchangeable securities
pursuant to Article IV (including, without limitation, all costs, expenses,
damages and other payments resulting from or arising in connection with
litigation related to any of the foregoing), all of which expenses are
considered by the Partners to constitute expenses of, and for the benefit of,
the Partnership except to the extent of any portion of such expenses reasonably
attributable to assets not owned by or for the benefit of, or to operations not
for the benefit of, the Partnership or Affiliates of the Partnership.
D. Purchases of REIT Shares by the General Partner. If the General
Partner exercises its rights under the Articles to purchase REIT Shares or
otherwise elects to purchase from its stockholders REIT Shares in connection
with a share repurchase or similar program or for the purpose of delivering such
REIT Shares to satisfy an obligation under any dividend reinvestment or equity
purchase program adopted by the General Partner, any employee equity purchase
plan adopted by the General Partner or any similar obligation or arrangement
undertaken by the General Partner in the future, the purchase price paid by the
General Partner for those REIT Shares and any other expenses incurred by the
General Partner in connection with such purchase shall be considered expenses of
the Partnership and shall be reimbursable to the General Partner, subject to the
conditions that: (i) if those REIT Shares subsequently are to be sold by the
General Partner, the General Partner shall pay to the Partnership any proceeds
received by the General Partner for those REIT Shares (provided that a transfer
of REIT Shares for Partnership Units
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pursuant to Section 8.6 would not be considered a sale for such purposes);
and (ii) if such REIT Shares are not retransferred by the General Partner
within thirty (30) days after the purchase thereof, the General Partner shall
cause the Partnership to cancel a number of Partnership Units (rounded to the
nearest whole Partnership Unit) held by the General Partner equal to the
product attained by multiplying the number of those REIT Shares by a
fraction, the numerator of which is one and the denominator of which is the
Conversion Factor.
E. Reimbursement not a Distribution. If and to the extent any
reimbursement made pursuant to this Section 7.4 is determined for federal income
tax purposes not to constitute a payment of expenses of the Partnership, the
amount so determined shall constitute a guaranteed payment with respect to
capital within the meaning of Section 707(c) of the Code, shall be treated
consistently therewith by the Partnership and all Partners and shall not be
treated as a distribution for purposes of computing the Partners' Capital
Accounts.
Section 7.5 Additional General Partner Contributions; Outside Activities
of the General Partner; Relationship of REIT Shares To Partnership Units;
Funding Debt.
A. General. Except with respect to assets that are not required to
be part of the General Partner's contribution of assets to the Partnership,
without the Consent of the Outside Limited Partners, the General Partner shall
not, directly or indirectly, enter into or conduct any business other than in
connection with the ownership, acquisition and disposition of Partnership
Interests as a General Partner or Limited Partner and the management of the
business of the Partnership and such activities as are incidental thereto.
Except with respect to assets that are not required to be part of the General
Partner's contribution of assets to the Partnership, without the Consent of the
Outside Limited Partners, the assets of the General Partner shall be limited to
Partnership Interests and permitted debt obligations of the Partnership (as
contemplated by Section 7.5.F), so that REIT Shares and Partnership Units are
completely fungible except as otherwise specifically provided herein; provided
that the General Partner shall be permitted to hold such bank accounts or
similar instruments or accounts in its name as it deems necessary to carry out
its responsibilities and purposes as contemplated under this Agreement and its
organizational documents (provided that accounts held on behalf of the
Partnership to permit the General Partner to carry out its responsibilities
under this Agreement shall be considered to belong to the Partnership and the
interest earned thereon shall, subject to Section 7.4.B, be applied for the
benefit of the Partnership); and provided further that the General Partner shall
be permitted to continue to own and may acquire, directly or through a Qualified
REIT Subsidiary or limited liability company (all of the ownership interest in
which may be held directly by the General Partner), up to a one percent (1%)
interest in any partnership or limited liability company if at least ninety-nine
percent (99%) of the equity interest of the General Partner and of the
Partnership therein is owned, directly or indirectly, by the Partnership (it
being understood that third parties may also own equity interests in such
partnership or limited liability company); and provided further, that the
General Partner may make one or more direct acquisitions of assets, but if and
only if such direct acquisitions have been approved and determined to be in the
best interests of the General Partner, the Partnership and the Partners (taking
into account any adverse tax consequences to the Partners) by a majority of the
board of directors of the General Partner. The General Partner and any of its
Affiliates may acquire Limited Partnership Interests and shall be
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entitled to exercise all rights of a Limited Partner relating to such Limited
Partnership Interests. Notwithstanding anything in this Agreement to the
contrary, the General Partner intends to contribute to the Partnership legal or
beneficial ownership of (a) the entire interest immediately prior to the date of
this Agreement in all real property and related personal property owned directly
by the General Partner or any Subsidiary of the General Partner and (b) at least
99% of the beneficial interest owned by the General Partner and its Subsidiaries
immediately prior to the date of this Agreement in any partnership or limited
liability company (including any so-called "downreit partnership") that owns a
direct or indirect interest in real property and related personal property (and
in connection therewith the Partnership may form one or more Subsidiaries to
which any such 99% interest may be contributed by the Partnership). To the
extent that the terms of mortgage debt secured by real property and related
personal property and interests therein owned by the General Partner, its
Subsidiaries or entities in which they have an ownership interest ("BPP Mortgage
Debt") prohibit, or the consent of any other person is required for, any
contribution of property to the Partnership or its Subsidiaries described in
this Section 7.5, the General Partner shall at all times after the date hereof
use its best efforts to secure the consent of the holders of the BPP Mortgage
Debt (and/or any other person whose consent to such contribution is required) to
such contribution and to cause the entire beneficial interest, and record title
if practicable, to such property to be vested in the Partnership as soon as is
reasonably practicable after the date hereof.
B. Repurchase of REIT Shares. If the General Partner exercises its
rights under the Articles to purchase REIT Shares or otherwise elects to
purchase from its stockholders REIT Shares in connection with a share repurchase
or similar program or for the purpose of delivering such shares to satisfy an
obligation under any dividend reinvestment or share purchase program adopted by
the General Partner, any employee share purchase plan adopted by the General
Partner or any similar obligation or arrangement undertaken by the General
Partner in the future, then the General Partner shall cause the Partnership to
purchase from the General Partner that number of Partnership Units of the
appropriate class equal to the product obtained by multiplying the number of
REIT Shares purchased by the General Partner times a fraction, the numerator of
which is one and the denominator of which is the Conversion Factor, on the same
terms and for the same aggregate price that the General Partner purchased such
REIT Shares.
C. Forfeiture of REIT Shares. If the Partnership or the General
Partner acquires REIT Shares as a result of the forfeiture of such REIT Shares
under a restricted or similar share plan, then the General Partner shall cause
the Partnership to cancel that number of Partnership Units equal to the number
of REIT Shares so acquired, and, if the Partnership acquired such REIT Shares,
it shall transfer such REIT Shares to the General Partner for cancellation.
D. Issuances of REIT Shares. The General Partner shall not grant,
award, or issue any additional REIT Shares (other than REIT Shares issued
pursuant to Section 8.6 hereof or pursuant to a dividend or distribution
(including any share split) of REIT Shares to all of its stockholders), other
equity securities of the General Partner, New Securities or Convertible Funding
Debt unless (i) the General Partner shall cause, pursuant to Section 4.2.A
hereof, the Partnership to issue to the General Partner Partnership Interests or
rights, options, warrants or convertible or exchangeable securities of the
Partnership having designations, preferences and other rights, all such that the
economic interests are substantially the same as those of such additional REIT
Shares, other equity securities, New Securities or Convertible Funding Debt, as
the case may be; and (ii) the General Partner transfers to the Partnership, as
an additional Capital Contribution, the proceeds from the grant, award, or
issuance of such additional REIT Shares, other equity securities, New Securities
or Convertible Funding Debt, as the case may be, or from the exercise of rights
contained in such additional REIT Shares, other equity securities, New
Securities or Convertible Funding Debt, as the case may be. Without limiting
the foregoing, the General Partner is expressly authorized to issue additional
REIT Shares, other equity securities, New Securities or
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Convertible Funding Debt, as the case may be, for less than fair market value,
and the General Partner is expressly authorized, pursuant to Section 4.2.A
hereof, to cause the Partnership to issue to the General Partner corresponding
Partnership Interests, as long as (a) the General Partner concludes in good
faith that such issuance is in the interests of the General Partner and the
Partnership (for example, and not by way of limitation, the issuance of REIT
Shares and corresponding Partnership Units pursuant to a share purchase plan
providing for purchases of REIT Shares, either by employees or stockholders, at
a discount from fair market value or pursuant to employee share options that
have an exercise price that is less than the fair market value of the REIT
Shares, either at the time of issuance or at the time of exercise or as part of
a compensation package to any person rendering services to the General Partner
and the Partnership including without limitation persons serving as directors of
the General Partner); and (b) the General Partner transfers all proceeds from
any such issuance or exercise to the Partnership as an additional Capital
Contribution.
E. Share Option Plan. If at any time or from time to time, the
General Partner sells REIT Shares pursuant to any Share Option Plan, the General
Partner shall transfer the net proceeds of the sale of such REIT Shares to the
Partnership as an additional Capital Contribution in exchange for an amount of
additional Partnership Units equal to the number of REIT Shares so sold divided
by the Conversion Factor.
F. Funding Debt. The General Partner may incur a Funding Debt,
including, without limitation, a Funding Debt that is convertible into REIT
Shares or otherwise constitutes a class of New Securities ("Convertible Funding
Debt"), subject to the condition that the General Partner lend to the
Partnership the net proceeds of such Funding Debt; provided, that Convertible
Funding Debt shall be issued pursuant to Section 7.5.D above; and, provided
further, that the General Partner shall not be obligated to lend the net
proceeds of any Funding Debt to the Partnership in a manner that would be
inconsistent with the General Partner's ability to remain qualified as a REIT.
If the General Partner enters into any Funding Debt, the loan to the Partnership
shall be on comparable terms and conditions, including interest rate, repayment
schedule and costs and expenses, as are applicable with respect to or incurred
in connection with such Funding Debt.
Section 7.6 Transactions with Affiliates.
A. Transfers of Funds. The Partnership may lend or contribute funds
or other assets to its Subsidiaries or other Persons in which it has an equity
investment and such Persons may borrow funds from the Partnership, in each case
subject to the following provisions of this Section 7.6. The foregoing authority
shall not create any right or benefit in favor of any Subsidiary or any other
Person.
B. Transfers of Assets. Except as provided in Section 7.5, the
Partnership may transfer assets to joint ventures, limited liability companies,
partnerships, corporations or other business entities in which it is or thereby
becomes a participant upon such terms and subject to such conditions consistent
with this Agreement and applicable law as the General Partner, in its sole and
absolute discretion, believes are advisable.
C. Transfers of Property. Except as expressly permitted by this
Agreement, neither the General Partner nor any of its
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Affiliates shall sell, transfer or convey any property to, or purchase any
property from, or lend to or borrow from the Partnership, directly or
indirectly, except pursuant to transactions that are determined by the General
Partner in good faith to be fair and reasonable.
D. Transactions with Certain Affiliates. Except as expressly
permitted by this Agreement, the Partnership shall not, directly or indirectly,
sell, transfer or convey any property to, or purchase any property from, or
borrow funds from, or lend funds to, any Partner or any Affiliate of the
Partnership that is not also a Subsidiary of the Partnership, except pursuant to
transactions that are on terms that are determined by the General Partner in
good faith to be fair and reasonable and no less favorable to the Partnership
than would be obtained from an unaffiliated third party.
E. Conflict Avoidance. The General Partner is expressly authorized
to enter into, in the name and on behalf of the Partnership, a right of first
opportunity arrangement and other conflict avoidance agreements with various
Affiliates of the Partnership and the General Partner on such terms as the
General Partner, in its sole and absolute discretion, believes are advisable.
F. Benefit Plans Sponsored by the Partnership. The General Partner
in its sole and absolute discretion and without the approval of the Limited
Partners, may propose and adopt on behalf of the Partnership employee benefit
plans funded by the Partnership for the benefit of employees of the General
Partner, the Partnership, Subsidiaries of the Partnership or any Affiliate of
any of them in respect of services performed, directly or indirectly, for the
benefit of the Partnership, the General Partner, or any Subsidiaries of the
General Partner.
Section 7.7 Indemnification.
A. General. The Partnership shall indemnify each Indemnitee to the
fullest extent provided by the Act from and against any and all losses, claims,
damages, liabilities, joint or several, expenses (including, without limitation,
attorneys fees and other legal fees and expenses), judgments, fines,
settlements, and other amounts arising from or in connection with any and all
claims, demands, actions, suits or proceedings, civil, criminal, administrative
or investigative, incurred by the Indemnitee and relating to the Partnership or
the General Partner or the operation of, or the ownership of property by, any of
them as set forth in this Agreement, in which any such Indemnitee may be
involved, or is threatened to be involved, as a party or otherwise, unless it is
established by a final determination of a court of competent jurisdiction that:
(i) the act or omission of the Indemnitee was material to the matter giving rise
to the proceeding and either was committed in bad faith or was the result of
active and deliberate dishonesty; (ii) the Indemnitee actually received an
improper personal benefit in money, property or services; or (iii) in the case
of any criminal proceeding, the Indemnitee had reasonable cause to believe that
the act or omission was unlawful. Without limitation, the foregoing indemnity
shall extend to any liability of any Indemnitee, pursuant to a loan guaranty
(except a guaranty by a limited partner of nonrecourse indebtedness of the
Partnership or as otherwise provided in any such loan guaranty), contractual
obligation for any indebtedness or other obligation or otherwise, for any
indebtedness of the Partnership or any Subsidiary of the Partnership (including,
without limitation, any indebtedness which the Partnership or any Subsidiary of
the Partnership has assumed or taken subject to), and the General Partner is
hereby authorized and empowered, on behalf of the Partnership, to enter into one
or more indemnity agreements consistent with the provisions of this Section 7.7
in favor
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of any Indemnitee having or potentially having liability for any such
indebtedness. The termination of any proceeding by judgment, order or settlement
does not create a presumption that the Indemnitee did not meet the requisite
standard of conduct set forth in this Section 7.7.A. The termination of any
proceeding by conviction or upon a plea of nolo contendere or its equivalent by
an Indemnitee, or an entry of an order of probation against an Indemnitee prior
to judgment, creates a rebuttable presumption that such Indemnitee acted in a
manner contrary to that specified in this Section 7.7.A with respect to the
subject matter of such proceeding. Any indemnification pursuant to this Section
7.7 shall be made only out of the assets of the Partnership, and any insurance
proceeds from the liability policy covering the General Partners and any
Indemnitee, and neither the General Partner nor any Limited Partner shall have
any obligation to contribute to the capital of the Partnership, or otherwise
provide funds to enable the Partnership to fund its obligations under this
Section 7.7.
B. Advancement of Expenses. Reasonable expenses expected to be
incurred by an Indemnitee shall be paid or reimbursed by the Partnership in
advance of the final disposition of any and all claims, demands, actions, suits
or proceedings, civil, criminal, administrative or investigative made or
threatened against an Indemnitee upon receipt by the Partnership of (i) a
written affirmation by the Indemnitee of the Indemnitee's good faith belief that
the standard of conduct necessary for indemnification by the Partnership as
authorized in this Section 7.7.A has been met; and (ii) a written undertaking by
or on behalf of the Indemnitee to repay the amount if it shall ultimately be
determined that the standard of conduct has not been met.
C. No Limitation of Rights. The indemnification provided by this
Section 7.7 shall be in addition to any other rights to which an Indemnitee or
any other Person may be entitled under any agreement, pursuant to any vote of
the Partners, as a matter of law or otherwise, and shall continue as to an
Indemnitee who has ceased to serve in such capacity unless otherwise provided in
a written agreement pursuant to which such Indemnitee is indemnified.
D. Insurance. The Partnership may, but shall not be obligated to,
purchase and maintain insurance, on behalf of the Indemnitees and such other
Persons as the General Partner shall determine, against any liability that may
be asserted against or expenses that may be incurred by such Person in
connection with the Partnership's activities, regardless of whether the
Partnership would have the power to indemnify such Person against such liability
under the provisions of this Agreement.
E. Benefit Plan Fiduciary. For purposes of this Section 7.7, the
Partnership shall be deemed to have requested an Indemnitee to serve as
fiduciary of an ERISA Plan whenever the performance by it of its duties to the
Partnership also imposes duties on, or otherwise involves services by, it to
such ERISA Plan or participants or beneficiaries of such ERISA Plan. Excise
taxes assessed on an Indemnitee, of for which the Indemnitee is otherwise found
liable, with respect to an ERISA Plan pursuant to applicable law shall
constitute fines within the meaning of this Section 7.7, and actions taken or
omitted by the Indemnitee with respect to an ERISA Plan in the performance of
its duties for a purpose reasonably believed by it to be in the interest of the
participants and beneficiaries of such ERISA Plan shall be deemed to be for a
purpose which is not opposed to the best interests of the Partnership.
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F. No Personal Liability for Limited Partners. In no event may an
Indemnitee subject any of the Partners to personal liability by reason of the
indemnification provisions set forth in this Agreement.
G. Interested Transactions. An Indemnitee shall not be denied
indemnification in whole or in part under this Section 7.7 because the
Indemnitee had an interest in the transaction with respect to which the
indemnification applies if the transaction was otherwise permitted by the terms
of this Agreement.
H. Benefit. The provisions of this Section 7.7 are for the benefit
of the Indemnitees, their employees, officers, directors, trustees, heirs,
successors, assigns and administrators and shall not be deemed to create any
rights for the benefit of any other Persons. Any amendment, modification or
repeal of this Section 7.7, or any provision hereof, shall be prospective only
and shall not in any way affect the limitation on the Partnership's liability to
any Indemnitee under this Section 7.7 as in effect immediately prior to such
amendment, modification or repeal with respect to claims arising from or related
to matters occurring, in whole or in part, prior to such amendment, modification
or repeal, regardless of when such claims may arise or be asserted.
I. Indemnification Payments Not Distributions. If and to the extent
any payments to the General Partner pursuant to this Section 7.7 constitute
gross income to the General Partner (as opposed to the repayment of advances
made on behalf of the Partnership), such amounts shall constitute guaranteed
payments within the meaning of Section 707(c) of the Code, shall be treated
consistently therewith by the Partnership and all Partners, and shall not be
treated as distributions for purposes of computing the Partners' Capital
Accounts.
J. Exception to Indemnification. Notwithstanding anything to the
contrary in this Agreement, the General Partner shall not be entitled to
indemnification hereunder for any loss, claim, damage, liability or expense for
which the General Partner is obligated to indemnify the Partnership under any
other agreement between the General Partner and the Partnership.
Section 7.8 Liability of the General Partner.
A. General. Notwithstanding anything to the contrary set forth in
this Agreement and except as set forth in an Applicable Contribution Agreement,
the General Partner and its officers and directors shall not be liable for
monetary damages to the Partnership, any Partners or any Assignees for losses
sustained, liabilities incurred or benefits not derived as a result of errors in
judgment or mistakes of fact or law or of any act or omission unless the General
Partner acted in bad faith and the act or omission was material to the matter
giving rise to the loss, liability or benefit not derived.
B. No Obligation to Consider Separate Interests of Limited Partners
or REIT Stockholders. The Limited Partners expressly acknowledge that the
General Partner is acting on behalf of the Partnership and the stockholders of
the General Partner collectively, that the General Partner is under no
obligation to consider the separate interests of the Limited Partners
(including, without limitation, the tax consequences to Limited Partners or
Assignees) in deciding whether to
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cause the Partnership to take (or decline to take) any actions, and that, except
as set forth in an Applicable Contribution Agreement, the General Partner shall
not be liable for monetary damages for losses sustained, liabilities incurred or
benefits not derived by Limited Partners in connection with such decisions,
provided that the General Partner has acted in good faith.
C. Actions of Agents. Subject to its obligations and duties as
General Partner set forth in Section 7.1.A, the General Partner may exercise any
of the powers granted to it by this Agreement and perform any of the duties
imposed upon it hereunder either directly or by or through its agents. The
General Partner shall not be responsible for any misconduct or negligence on the
part of any such agent appointed by the General Partner in good faith.
D. Effect of Amendment. Notwithstanding any other provision
contained herein, any amendment, modification or repeal of this Section 7.8 or
any provision hereof shall be prospective only and shall not in any way affect
the limitations on the General Partner's and its officers' and directors'
liability to the Partnership and the Limited Partners under this Section 7.8 as
in effect immediately prior to such amendment, modification or repeal with
respect to claims arising from or relating to matters occurring, in whole or in
part, prior to such amendment, modification or repeal, regardless of when such
claims may arise or be asserted.
Section 7.9 Other Matters Concerning the General Partner.
A. Reliance on Documents. The General Partner may rely and shall be
protected in acting or refraining from acting upon any resolution, certificate,
statement, instrument, opinion, report, notice, request, consent, order, bond,
debenture or other paper or document believed by it in good faith to be genuine
and to have been signed or presented by the proper party or parties.
B. Reliance on Advisors. The General Partner may consult with legal
counsel, accountants, appraisers, management consultants, investment bankers,
architects, engineers, environmental consultants and other consultants and
advisers selected by it, and any act taken or omitted to be taken in reliance
upon the opinion of such Persons as to matters which the General Partner
reasonably believes to be within such Person's professional or expert competence
shall be conclusively presumed to have been done or omitted in good faith and in
accordance with such opinion.
C. Action Through Agents. The General Partner shall have the right,
in respect of any of its powers or obligations hereunder, to act through any of
its duly authorized officers and duly appointed attorneys-in-fact. Each such
attorney shall, to the extent provided by the General Partner in the power of
attorney, have full power and authority to do and perform all and every act and
duty which is permitted or required to be done by the General Partner hereunder.
D. Actions to Maintain REIT Status or Avoid Taxation of the General
Partner Entity. Notwithstanding any other provisions of this Agreement or the
Act, any action of the General Partner on behalf of the Partnership or any
decision of the General Partner to refrain from acting on behalf of the
Partnership undertaken in the good faith belief that such action or omission is
necessary or advisable in order (i) to protect the ability of the General
Partner Entity to continue
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to qualify as a REIT; or (ii) to allow the General Partner Entity to avoid
incurring any liability for taxes under Section 857 or 4981 of the Code, is
expressly authorized under this Agreement and is deemed approved by all of the
Limited Partners.
Section 7.10 Reliance By Third Parties. Notwithstanding anything to the
contrary in this Agreement, any Person dealing with the Partnership shall be
entitled to assume that the General Partner has full power and authority,
without consent or approval of any other Partner or Person, to encumber, sell or
otherwise use in any manner any and all assets of the Partnership, to enter into
any contracts on behalf of the Partnership and to take any and all actions on
behalf of the Partnership, and such Person shall be entitled to deal with the
General Partner as if the General Partner were the Partnership's sole party in
interest, both legally and beneficially. Each Limited Partner hereby waives any
and all defenses or other remedies which may be available against such Person to
contest, negate or disaffirm any action of the General Partner in connection
with any such dealing. In no event shall any Person dealing with the General
Partner or its representatives be obligated to ascertain that the terms of this
Agreement have been complied with or to inquire into the necessity or expedience
of any act or action of the General Partner or its representatives. Each and
every certificate, document or other instrument executed on behalf of the
Partnership by the General Partner or its representatives shall be conclusive
evidence in favor of any and every Person relying thereon or claiming thereunder
that (i) at the time of the execution and delivery of such certificate, document
or instrument, this Agreement was in full force and effect; (ii) the Person
executing and delivering such certificate, document or instrument was duly
authorized and empowered to do so for and on behalf of the Partnership; and
(iii) such certificate, document or instrument was duly executed and delivered
in accordance with the terms and provisions of this Agreement and is binding
upon the Partnership.
Section 7.11 Restrictions on General Partner's Authority.
A. Consent Required. The General Partner may not take any action in
contravention of an express prohibition or limitation of this Agreement without
the written Consent of (i) all Partners adversely affected or (ii) such lower
percentage of the Limited Partnership Interests as may be specifically provided
for under a provision of this Agreement or an Applicable Contribution Agreement.
B. Sale of All Assets of the Partnership. Except as provided in
Article XIII, the General Partner may not, directly or indirectly, cause the
Partnership to sell, exchange, transfer or otherwise dispose of all or
substantially all of the Partnership's assets in a single transaction or a
series of related transactions (including by way of merger (including a
triangular merger), consolidation or other combination with any other Persons)
(i) if such merger, sale or other transaction is in connection with a
Termination Transaction permitted under Section 11.2.B hereof, without the
Consent of the Partners holding at least a majority of the then outstanding
Partnership Units (including any Partnership Units held by the General
Partners), or (ii) otherwise, without the Consent of the Outside Limited
Partners.
Section 7.12 Loans By Third Parties. The Partnership may incur Debt, or
enter into similar credit, guarantee, financing or refinancing arrangements for
any purpose (including, without limitation, in connection with any acquisition
of property) with any Person other than the General
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Partner or an Affiliate of the General Partner upon such terms as the General
Partner determines appropriate.
ARTICLE VIII - RIGHTS AND OBLIGATIONS OF LIMITED PARTNERS
Section 8.1 Limitation of Liability. The Limited Partners shall have no
liability under this Agreement except as expressly provided in this Agreement,
including Section 10.5, or under the Act.
Section 8.2 Management of Business. No Limited Partner or Assignee (other
than the General Partner, any of its Affiliates or any officer, director,
employee, partner, member, agent or trustee of the General Partner, the
Partnership or any of their Affiliates, in their capacity as such) shall take
part in the operation, management or control (within the meaning of the Act) of
the Partnership's business (except as limited rights may be specified in an
Applicable Contribution Agreement), transact any business in the Partnership's
name or have the power to sign documents for or otherwise bind the Partnership.
The transaction of any such business by the General Partner, any of its
Affiliates or any officer, director, employee, partner, member, agent or trustee
of the General Partner, the Partnership or any of their Affiliates, in their
capacity as such, shall not affect, impair or eliminate the limitations on the
liability of the Limited Partners or Assignees under this Agreement.
Section 8.3 Outside Activities of Limited Partners. Subject to Section
7.5 hereof, and subject to any agreements entered into pursuant to Section 7.6.E
hereof and to any other agreements entered into by a Limited Partner or its
Affiliates with the Partnership or any of its Subsidiaries, any Limited Partner
(other than the General Partner) and any officer, director, employee, partner,
member, agent, trustee, Affiliate or Shareholder of any Limited Partner shall be
entitled to and may have business interests and engage in business activities in
addition to those relating to the Partnership, including business interests and
activities, in direct or indirect competition with, the Partnership. Neither
the Partnership nor any Partners shall have any rights by virtue of this
Agreement in any business ventures of any Limited Partner or Assignee. None of
the Limited Partners (other than the General Partner) nor any other Person shall
have any rights by virtue of this Agreement or the Partnership relationship
established hereby in any business ventures of any other Person (other than the
General Partner to the extent expressly provided herein), and such Person shall
have no obligation pursuant to this Agreement to offer any interest in any such
business ventures to the Partnership, any Limited Partner or any such other
Person, even if such opportunity is of a character which, if presented to the
Partnership, any Limited Partner or such other Person, could be taken by such
Person.
Section 8.4 Return of Capital. Except pursuant to the right of redemption
set forth in Section 8.6 or except as may otherwise be provided in an Applicable
Contribution Agreement, no Limited Partner shall be entitled to the withdrawal
or return of its Capital Contribution, except to the extent of distributions
made pursuant to this Agreement or upon termination of the Partnership as
provided herein. No Limited Partner or Assignee shall have priority over any
other Limited Partner or Assignee either as to the return of Capital
Contributions (except as permitted by Section 4.2.A) or, except to the extent
provided by Exhibit C or as permitted by Sections 4.2.A,
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5.1.B(i), 6.1.A(ii) and 6.1.B(i), or otherwise expressly provided in this
Agreement, as to profits, losses, distributions or credits.
Section 8.5 Rights of Limited Partners Relating to the Partnership.
A. General. In addition to the other rights provided by this
Agreement or by the Act, and except as limited by Section 8.5.D, each Limited
Partner shall have the right, for a purpose reasonably related to such Limited
Partner's interest as a limited partner in the Partnership, upon written demand
with a statement of the purpose of such demand and at such Limited Partner's own
expense (including copying and administrative charges as the General Partner may
establish from time to time):
(1) to obtain a copy of the most recent annual and quarterly
reports filed with the Securities and Exchange Commission by
the General Partner Entity pursuant to the Exchange Act;
(2) to obtain a copy of the Partnership's federal, state and
local income tax returns for each Partnership Year;
(3) to obtain a current list of the name and last known
business, residence or mailing address of each Partner;
(4) to obtain a copy of this Agreement and the Certificate and
all amendments thereto, together with executed copies of all
powers of attorney pursuant to which this Agreement, the
Certificate and all amendments thereto have been executed;
and
(5) to obtain true and full information regarding the amount of
cash and a description and statement of any other property
or services contributed by each Partner and which each
Partner has agreed to contribute in the future, and the date
on which each became a Partner.
B. Notice of Conversion Factor. The Partnership shall notify each
Limited Partner upon request of the then current Conversion Factor and any
changes that have been made thereto.
C. Notice of Extraordinary Transaction of the General Partner
Entity. The General Partner Entity shall not make any extraordinary
distributions of cash or property to its stockholders or effect a merger
(including, without limitation, a triangular merger), a sale of all or
substantially all of its assets or any other similar extraordinary transaction
without notifying the Limited Partners of its intention to make such
distribution or effect such merger, sale or other extraordinary transaction at
least twenty (20) Business Days prior to the record date to determine
stockholders eligible to receive such distribution or to vote upon the approval
of such merger, sale or other extraordinary transaction (or, if no such record
date is applicable, at least twenty (20) business days before consummation of
such merger, sale or other extraordinary transaction). This
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provision for such notice shall not be deemed (i) to permit any transaction that
otherwise is prohibited by this Agreement or requires a Consent of the Partners;
or (ii) to require a Consent of the Outside Limited Partners to a transaction
that does not otherwise require Consent under this Agreement. Each Limited
Partner agrees, as a condition to the receipt of the notice pursuant hereto, to
keep confidential the information set forth therein until such time as the
General Partner Entity has made public disclosure thereof and to use such
information during such period of confidentiality solely for purposes of
determining whether to exercise the Redemption Right; provided, however, that a
Limited Partner may disclose such information to its attorney, accountant and/or
financial advisor for purposes of obtaining advice with respect to such exercise
so long as such attorney, accountant and/or financial advisor agrees to receive
and hold such information subject to this confidentiality requirement.
D. Confidentiality. Notwithstanding any other provision of this
Section 8.5, the General Partner may keep confidential from the Limited
Partners, for such period of time as the General Partner determines in its sole
and absolute discretion to be reasonable, any information that (i) the General
Partner reasonably believes to be in the nature of trade secrets or other
information the disclosure of which the General Partner in good faith believes
is not in the best interests of the Partnership or could damage the Partnership
or its business; or (ii) the Partnership is required by law or by agreements
with unaffiliated third parties to keep confidential.
Section 8.6 Redemption Right.
A. General.
(i) Subject to Section 8.6.C, at (A) any time after December 31
of the calendar year next following the calendar year in which a
Partnership Unit is issued to a Limited Partner pursuant to Article IV
hereof (regardless of whether such Partnership Unit is designated upon
issuance as a Class A Unit, a Class B Unit or otherwise), or (B) any
time after such earlier date as the General Partner, in its sole and
absolute discretion, designates with respect to any or all Class A
Units then outstanding, or (C) any time after such other date as may
be provided in an Applicable Contribution Agreement, the holder of a
Partnership Unit (if other than the General Partner or the General
Partner Entity or any Subsidiary of either the General Partner or the
General Partner Entity) shall have the right (the "Redemption Right")
to require the Partnership to redeem such Partnership Unit, with such
redemption to occur on the Specified Redemption Date and at a
redemption price equal to and in the form of the Cash Amount to be
paid by the Partnership. Any such Redemption Right shall be exercised
pursuant to a Notice of Redemption delivered to the Partnership (with
a copy to the General Partner) by the Limited Partner who is
exercising the Redemption Right (the "Redeeming Partner"). A Limited
Partner may exercise the Redemption Right from time to time with
respect to part or all of the Units that it owns, as selected by the
Limited Partner, provided that, except as provided in an Applicable
Contribution Agreement, a Limited Partner may not exercise the
Redemption Right for less than one thousand (1,000) Partnership
Units unless such Redeeming Partner then holds
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less than one thousand (1,000) Partnership Units, in which
event the Redeeming Partner must exercise the Redemption
Right for all of the Partnership Units held by such Redeeming Partner.
(ii) The Redeeming Partner shall have no right with respect to
any Partnership Units so redeemed to receive any distributions paid
after the Specified Redemption Date with respect to such Partnership
Units.
(iii) The Assignee of any Limited Partner may exercise the
rights of such Limited Partner pursuant to this Section 8.6, and such
Limited Partner shall be deemed to have assigned such rights to such
Assignee and shall be bound by the exercise of such rights by such
Limited Partner's Assignee. In connection with any exercise of such
rights by such Assignee on behalf of such Limited Partner, the Cash
Amount shall be paid by the Partnership directly to such Assignee and
not to such Limited Partner.
(iv) If the General Partner provides notice to the Limited
Partners, pursuant to Section 8.5.C hereof, the Redemption Right shall
be exercisable, without regard to whether the Partnership Units have
been outstanding for any specified period, during the period
commencing on the date on which the General Partner provides such
notice and ending on the record date to determine stockholders
eligible to receive such distribution or to vote upon the approval of
such merger, sale or other extraordinary transaction (or, if no such
record date is applicable, at least twenty (20) business days before
the consummation of such merger, sale or other extraordinary
transaction). If this subparagraph (iv) applies, the Specified
Redemption Date is the date on which the Partnership and the General
Partner receive notice of exercise of the Redemption Right, rather
than ten (10) Business Days after receipt of the notice of redemption.
B. General Partner Assumption of Right.
(i) If a Limited Partner has delivered a Notice of Redemption,
the General Partner may, in its sole and absolute discretion (subject
to the limitations on ownership and transfer of REIT Shares set forth
in the Articles), elect to assume directly and satisfy a Redemption
Right by paying to the Redeeming Partner either the Cash Amount or the
REIT Shares Amount, as the General Partner determines in its sole and
absolute discretion (provided that payment of the Redemption Amount in
the form of REIT Shares shall be in REIT Shares registered for resale
under Section 12 of the Exchange Act and listed for trading on the
exchange or national market on which the REIT Shares are Publicly
Traded, and provided further that, if the REIT Shares are not Publicly
Traded at the time a Redeeming Partner exercises its Redemption Right,
the Redemption Amount shall be paid only in the form of the Cash
Amount unless the Redeeming Partner, in its sole and absolute
discretion, consents to payment of the Redemption Amount in the form
of the REIT Shares Amount), on the Specified Redemption Date,
whereupon the
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General Partner shall acquire the Partnership Units offered for
redemption by the Redeeming Partner and shall be treated for all
purposes of this Agreement as the owner of such Partnership Units.
Unless the General Partner, in its sole and absolute discretion, shall
exercise its right to assume directly and satisfy the Redemption
Right, the General Partner shall not have any obligation to the
Redeeming Partner or to the Partnership with respect to the Redeeming
Partner's exercise of the Redemption Right. If the General Partner
shall exercise its right to satisfy the Redemption Right in the manner
described in the first sentence of this Section 8.6B and shall fully
perform its obligations in connection therewith, the Partnership shall
have no right or obligation to pay any amount to the Redeeming Partner
with respect to such Redeeming Partner's exercise of the Redemption
Right, and each of the Redeeming Partner, the Partnership and the
General Partner shall, for federal income tax purposes, treat the
transaction between the General Partner and the Redeeming Partner as a
sale of the Redeeming Partner's Partnership Units to the General
Partner. Nothing contained in this Section 8.6.B shall imply any right
of the General Partner to require any Limited Partner to exercise the
Redemption Right afforded to such Limited Partner pursuant to Section
8.6.A.
(ii) If the General Partner determines to pay the Redeeming
Partner the Redemption Amount in the form of REIT Shares, the total
number of REIT Shares to be paid to the Redeeming Partner in exchange
for the Redeeming Partner's Partnership Units shall be the applicable
REIT Shares Amount. If this amount is not a whole number of REIT
Shares, the Redeeming Partner shall be paid (i) that number of REIT
Shares which equals the nearest whole number less than such amount
plus (ii) an amount of cash which the General Partner determines, in
its reasonable discretion, to represent the fair value of the
remaining fractional REIT Share which would otherwise be payable to
the Redeeming Partner.
(iii) Each Redeeming Partner agrees to execute such documents
as the General Partner may reasonably require in connection with the
issuance of REIT Shares upon exercise of the Redemption Right.
C. Exceptions to Exercise of Redemption Right. Notwithstanding the
provisions of Sections 8.6.A and 8.6.B, a Partner shall not be entitled to
exercise the Redemption Right pursuant to Section 8.6.A if (but only as long as)
the delivery of REIT Shares to such Partner on the Specified Redemption Date (i)
would, based upon the advice of outside counsel, be prohibited under the
Articles or (ii) would, based upon the advice of outside counsel, be prohibited
under applicable federal or state securities laws or regulations (in each case
regardless of whether the General Partner would in fact assume and satisfy the
Redemption Right).
D. No Liens on Partnership Units Delivered for Redemption. Each
Limited Partner covenants and agrees with the General Partner that all
Partnership Units delivered for redemption shall be delivered to the Partnership
or the General Partner, as the case may be, free and clear of all liens, and,
notwithstanding anything contained herein to the contrary, neither the General
Partner nor the Partnership shall be under any obligation to acquire Partnership
Units which are or
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may be subject to any liens. Unless otherwise provided for in an Applicable
Contribution Agreement, each Limited Partner further agrees that, if any state
or local property transfer tax is payable as a result of the transfer of its
Partnership Units to the Partnership or the General Partner, such Limited
Partner shall assume and pay such transfer tax.
E. Additional Partnership Interests. If the Partnership issues
Partnership Interests to any Additional Limited Partner pursuant to Article IV,
the General Partner shall make such revisions to this Section 8.6 as it
reasonably determines are necessary to reflect the issuance of such Partnership
Interests (including setting forth any restrictions on the exercise of the
Redemption Right with respect to such Partnership Interests). The General
Partner may grant redemption rights having terms other than as set forth in this
Section 8.6 as provided in an Applicable Contribution Agreement.
ARTICLE IX - BOOKS, RECORDS, ACCOUNTING AND REPORTS
Section 9.1 Records and Accounting. The General Partner shall keep or
cause to be kept at the principal office of the Partnership those records and
documents required to be maintained by the Act and other books deemed by the
General Partner to be appropriate with respect to the Partnership's business,
including, without limitation, all books and records necessary to provide to the
Limited Partners any information, lists and copies of documents required to be
provided pursuant to Section 9.3. Any records maintained by or on behalf of the
Partnership in the regular course of its business may be kept on, or be in the
form of, punch cards, magnetic tape, photographs, micrographics or any other
information storage device, provided that the records so maintained are
convertible into clearly legible written form within a reasonable period of
time. The books of the Partnership shall be maintained, for financial and tax
reporting purposes, on an accrual basis in accordance with generally accepted
accounting principles, or such other basis as the General Partner deems
necessary or appropriate.
Section 9.2 Fiscal Year. The fiscal year of the Partnership shall be the
calendar year.
Section 9.3 Reports.
A. Annual Reports. As soon as practicable, but in no event later
than the date on which the General Partner Entity mails its annual report to its
stockholders, the General Partner Entity shall cause to be mailed to each
Limited Partner an annual report, as of the close of the most recently ended
Partnership Year, containing financial statements of the Partnership, or of the
General Partner Entity if such statements are prepared solely on a consolidated
basis with the Partnership, for such Partnership Year, presented in accordance
with generally accepted accounting principles, such statements to be audited by
a nationally recognized firm of independent public accountants selected by the
General Partner Entity.
B. Quarterly Reports. If and to the extent that the General Partner
Entity mails quarterly reports to its stockholders, as soon as practicable, but
in no event later than the date on such reports are mailed, the General Partner
Entity shall cause to be mailed to each Limited
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Partner a report containing unaudited financial statements, as of the last day
of such calendar quarter, of the Partnership, or of the General Partner Entity
if such statements are prepared solely on a consolidated basis with the
Partnership, and such other information as may be required by applicable law or
regulation, or as the General Partner determines to be appropriate.
ARTICLE X - TAX MATTERS
Section 10.1 Preparation of Tax Returns. The General Partner shall
arrange for the preparation and timely filing of all returns of Partnership
income, gains, deductions, losses and other items required of the Partnership
for federal and state income tax purposes and shall use all reasonable efforts
to furnish, within ninety (90) days of the close of each taxable year, the tax
information reasonably required by Limited Partners for federal and state income
tax reporting purposes.
Section 10.2 Tax Elections. Except as otherwise provided herein, the
General Partner shall, in its sole and absolute discretion, determine whether to
make any available election pursuant to the Code. The General Partner shall
have the right to seek to revoke any such election (including, without
limitation, the election under Section 754 of the Code) upon the General
Partner's determination in its sole and absolute discretion that such revocation
is in the best interests of the Partners.
Section 10.3 Tax Matters Partner.
A. General. The General Partner shall be the "tax matters partner"
of the Partnership for federal income tax purposes. Pursuant to Section 6230(e)
of the Code, upon receipt of notice from the IRS of the beginning of an
administrative proceeding with respect to the Partnership, the tax matters
partner shall furnish the IRS with the name, address, taxpayer identification
number and profit interest of each of the Limited Partners and any Assignees;
provided, however, that such information is provided to the Partnership by the
Limited Partners.
B. Powers. The tax matters partner is authorized, but not required:
(1) to enter into any settlement with the IRS with respect to
any administrative or judicial proceedings for the
adjustment of Partnership items required to be taken into
account by a Partner for income tax purposes (such
administrative proceedings being referred to as a "tax
audit" and such judicial proceedings being referred to as
"judicial review"), and in the settlement agreement the tax
matters partner may expressly state that such agreement
shall bind all Partners, except that such settlement
agreement shall not bind any Partner (i) who (within the
time prescribed pursuant to the Code and Regulations) files
a statement with the IRS providing that the tax matters
partner shall not have the authority to enter into a
settlement agreement on behalf of such Partner; or (ii) who
is a
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"notice partner" (as defined in Section 6231(a)(8) of the
Code) or a member of a "notice group" (as defined in Section
6223(b)(2) of the Code);
(2) in the event that a notice of a final administrative
adjustment at the Partnership level of any item required to
be taken into account by a Partner for tax purposes (a
"final adjustment") is mailed to the tax matters partner, to
seek judicial review of such final adjustment, including the
filing of a petition for readjustment with the Tax Court or
the filing of a complaint for refund with the United States
Claims Court or the District Court of the United States for
the district in which the Partnership's principal place of
business is located;
(3) to intervene in any action brought by any other Partner for
judicial review of a final adjustment;
(4) to file a request for an administrative adjustment with the
IRS at any time and, if any part of such request is not
allowed by the IRS, to file an appropriate pleading
(petition or complaint) for judicial review with respect to
such request;
(5) to enter into an agreement with the IRS to extend the period
for assessing any tax which is attributable to any item
required to be taken into account by a Partner for tax
purposes, or an item affected by such item; and
(6) to take any other action on behalf of the Partners of the
Partnership in connection with any tax audit or judicial
review proceeding to the extent permitted by applicable law
or regulations.
The taking of any action and the incurring of any expense by the tax
matters partner in connection with any such proceeding, except to the extent
required by law, is a matter in the sole and absolute discretion of the tax
matters partner and the provisions relating to indemnification of the General
Partner set forth in Section 7.7 shall be fully applicable to the tax matters
partner in its capacity as such.
C. Reimbursement. The tax matters partner shall receive no
compensation for its services. All third party costs and expenses incurred by
the tax matters partner in performing its duties as such (including legal and
accounting fees and expenses) shall be borne by the Partnership. Nothing herein
shall be construed to restrict the Partnership from engaging an accounting firm
and/or law firm to assist the tax matters partner in discharging its duties
hereunder, so long as the compensation paid by the Partnership for such services
is reasonable.
Section 10.4 Withholding. Each Limited Partner hereby authorizes the
Partnership to withhold from, or pay on behalf of or with respect to, such
Limited Partner any amount of federal,
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state, local, or foreign taxes that the General Partner determines that the
Partnership is required to withhold or pay with respect to any amount
distributable or allocable to such Limited Partner pursuant to this Agreement,
including, without limitation, any taxes required to be withheld or paid by the
Partnership pursuant to Section 1441, 1442, 1445, or 1446 of the Code. Any
amount paid on behalf of or with respect to a Limited Partner shall constitute a
loan by the Partnership to such Limited Partner, which loan shall be repaid by
such Limited Partner within fifteen (15) days after notice from the General
Partner that such payment must be made unless (i) the Partnership withholds such
payment from a distribution which would otherwise be made to the Limited
Partner; or (ii) the General Partner determines, in its sole and absolute
discretion, that such payment may be satisfied out of the available funds of the
Partnership which would, but for such payment, be distributed to the Limited
Partner. Any amounts withheld pursuant to the foregoing clauses (i) or (ii)
shall be treated as having been distributed to such Limited Partner. Each
Limited Partner hereby unconditionally and irrevocably grants to the Partnership
a security interest in such Limited Partner's Partnership Interest to secure
such Limited Partner's obligation to pay to the Partnership any amounts required
to be paid pursuant to this Section 10.5. If a Limited Partner fails to pay any
amounts owed to the Partnership pursuant to this Section 10.5 when due, the
General Partner may, in its sole and absolute discretion, elect to make the
payment to the Partnership on behalf of such defaulting Limited Partner, and in
such event shall be deemed to have loaned such amount to such defaulting Limited
Partner and shall succeed to all rights and remedies of the Partnership as
against such defaulting Limited Partner (including, without limitation, the
right to receive distributions). Any amounts payable by a Limited Partner
hereunder shall bear interest at the base rate on corporate loans at large
United States money center commercial banks, as published from time to time in
the Wall Street Journal, plus four (4) percentage points (but not higher than
the maximum lawful rate under the laws of the State of California from the date
such amount is due (i.e., fifteen (15) days after demand) until such amount is
paid in full. Each Limited Partner shall take such actions as the Partnership
or the General Partner shall request in order to perfect or enforce the security
interest created hereunder.
ARTICLE XI - TRANSFERS AND WITHDRAWALS
Section 11.1 Transfer.
A. Definition. The term "transfer," when used in this Article XI
with respect to a Partnership Interest or a Partnership Unit, shall be deemed to
refer to a transaction by which the General Partner purports to assign all or
any part of its General Partnership Interest to another Person or by which a
Limited Partner purports to assign all or any part of its Limited Partnership
Interest to another Person, and includes a sale, assignment, gift, pledge,
encumbrance, hypothecation, mortgage, exchange or any other disposition by law
or otherwise. The term "transfer" when used in this Article XI does not include
any redemption or repurchase of Partnership Units by the Partnership from a
Partner or acquisition of Partnership Units from a Limited Partner by the
General Partner pursuant to Section 8.6 or otherwise. No part of the interest
of a Limited Partner shall be subject to the claims of any creditor, any spouse
for alimony or support, or to legal process, and may not be voluntarily or
involuntarily alienated or encumbered except as may be specifically provided for
in this Agreement, in an Applicable
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Contribution Agreement or consented to by the General Partner.
B. General. No Partnership Interest shall be transferred, in whole
or in part, except in accordance with the terms and conditions set forth in this
Article XI or in an Applicable Contribution Agreement. Any transfer or
purported transfer of a Partnership Interest not made in accordance with this
Article XI or in an Applicable Contribution Agreement shall be null and void.
Section 11.2 Transfers of Partnership Interests of General Partner.
A. Except for transfers of Partnership Units to the Partnership as
provided in Section 7.5 or Section 8.6, the General Partner may not transfer any
of its Partnership Interest (including both its General Partnership Interest and
its Limited Partnership Interest) except in connection with a transaction
described in Section 11.2.B or as otherwise expressly permitted under this
Agreement, nor shall the General Partner withdraw as the General Partner except
in connection with a transaction described in Section 11.2.B.
B. The General Partner shall not engage in any merger (including a
triangular merger), consolidation or other combination of the General Partner
with or into another person (other than a combination in which the General
Partner is the surviving entity), sale of all or substantially all of its assets
or any reclassification, recapitalization or change of outstanding REIT Shares
(other than a change in par value, or from par value to no par value, or as a
result of a subdivision or combination as described in the definition of
"Conversion Factor") ("Termination Transaction"), unless the Termination
Transaction has been approved by the Consent of the Partners holding at least a
majority of the then outstanding Partnership Units (including any Partnership
Units held by the General Partner) and in connection with which all Limited
Partners either will receive, or will have the right to elect to receive, for
each Partnership Unit an amount of cash, securities, or other property equal to
the product of the Conversion Factor multiplied by the greatest amount of cash,
securities or other property paid to a holder of REIT Shares corresponding to
such Partnership Unit in consideration of one such REIT Share at any time during
the period from and after the date on which the Termination Transaction is
consummated; provided that, if, in connection with the Termination Transaction,
a purchase, tender or exchange offer shall have been made to and accepted by the
holders of more than fifty percent (50%) of the outstanding REIT Shares, each
holder of Partnership Units shall receive, or shall have the right to elect to
receive without any right of Consent set forth above in this subsection B, the
greatest amount of cash, securities, or other property which such holder would
have received had it exercised the Redemption Right and received REIT Shares in
exchange for its Partnership Units immediately prior to the expiration of such
purchase, tender or exchange offer and had thereupon accepted such purchase,
tender or exchange offer.
Section 11.3 Limited Partners' Rights to Transfer.
A. General. Subject to the provisions of Sections 11.3.C, 11.3.D,
11.3.E, 11.4 and 11.6 and of an Applicable Contribution Agreement, a Limited
Partner (other than the General Partner) may transfer, with or without the
consent of the General Partner, all or any portion of its Partnership Interest,
or any of such Limited Partner's economic rights as a Limited Partner.
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B. Incapacitated Limited Partners. If a Limited Partner is subject
to Incapacity, the executor, administrator, trustee, committee, guardian,
conservator or receiver of such Limited Partner's estate shall have all of the
rights of a Limited Partner, but not more rights than those enjoyed by other
Limited Partners or as provided in an Applicable Contribution Agreement, for the
purpose of settling or managing the estate and such power as the Incapacitated
Limited Partner possessed to transfer all or any part of his or its interest in
the Partnership. The Incapacity of a Limited Partner, in and of itself, shall
not dissolve or terminate the Partnership.
C. No Transfers Violating Securities Laws. The General Partner may
prohibit, subject to the provisions of an Applicable Contribution Agreement, any
transfer by a Limited Partner of its Partnership Units unless it receives a
written opinion of legal counsel (which opinion and consent shall be reasonably
satisfactory to the Partnership) to such Limited Partner that such transfer
would not require filing of a registration statement under the Securities Act or
would not otherwise violate any federal or state securities laws or regulations
applicable to the Partnership or the Partnership Units or at the option of the
Partnership, an opinion of legal counsel to the Partnership to the same effect.
D. No Transfers Affecting the Tax Status of the Partnership. No
transfer by a Limited Partner of its Partnership Units may be made to any Person
if (i) in the opinion of legal counsel for the Partnership, it would result in
the Partnership being treated as an association taxable as a corporation; (ii)
such transfer is effectuated through an "established securities market" or a
"secondary market (or the substantial equivalent thereof)" with the meaning of
Section 7704 of the Code; (iii) such transfer would cause the Partnership to
become, with respect to any ERISA Plan, a "party-in-interest" (as defined in
Section 3(14) of ERISA) or a "disqualified person" (as defined in Section
4975(c) of the Code); (iv) such transfer would, in the opinion of legal counsel
for the Partnership, cause any portion of the assets of the Partnership to
constitute assets of any ERISA Plan pursuant to Department of Labor Regulations
Section 2510.2-101; or (v) such transfer would subject the Partnership to be
regulated under the Investment Company Act of 1940, the Investment Advisors Act
of 1940 or the Employee Retirement Income Security Act of 1974, each as amended.
E. No Transfers to Holders of Nonrecourse Liabilities. No transfer
of any Partnership Units may be made to a lender to the Partnership or any
Person who is related (within the meaning of Section 1.752-4(b) of the
Regulations) to any lender to the Partnership whose loan constitutes a
Nonrecourse Liability, without the consent of the General Partner, in its sole
and absolute discretion; provided that as a condition to such consent the lender
will be required to enter into an arrangement with the Partnership and the
General Partner to redeem for the Cash Amount any Partnership Units in which a
security interest is held simultaneously with the time at which such lender
would be deemed to be a partner in the Partnership for purposes of allocating
liabilities to such lender under Section 752 of the Code.
Section 11.4 Substituted Limited Partner.
A. Consent of General Partner. No Limited Partner shall have the
right to substitute a
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transferee as a Limited Partner in its place other than as provided in an
Applicable Contribution Agreement. The General Partner shall, however, have the
right to consent to the admission of a transferee of the interest of a Limited
Partner pursuant to this Section 11.4 as a Substituted Limited Partner, which
consent may be given or withheld by the General Partner in its sole and absolute
discretion. The General Partner's failure or refusal to permit a transferee of
any such interests to become a Substituted Limited Partner shall not give rise
to any cause of action against the Partnership or any Partner. The General
Partner hereby grants its consent to the admission as a Substituted Limited
Partner to any bona fide financial institution that loans money or otherwise
extends credit to a holder of Units and thereafter becomes the owner of such
Units pursuant to the exercise by such financial institution of its rights under
a Pledge of such Units granted in connection with such loan or extension of
credit.
B. Rights of Substituted Limited Partner. A transferee who has been
admitted as a Substituted Limited Partner in accordance with this Article XI
shall have all the rights and powers and be subject to all the restrictions and
liabilities of a Limited Partner under this Agreement. The admission of any
transferee as a Substituted Limited Partner shall be conditioned upon the
transferee executing and delivering to the Partnership an acceptance of all the
terms and conditions of this Agreement (including, without limitation, the
provisions of Section 15.11) and such other documents or instruments as may be
required to effect the admission.
C. Amendment of Exhibit A. Upon the admission of a Substituted
Limited Partner, the General Partner shall amend Exhibit A to reflect the name,
address, Capital Account, number of Partnership Units, and Percentage Interest
of such Substituted Limited Partner and to eliminate or adjust, if necessary,
the name, address, Capital Account and Percentage Interest and interest of the
predecessor of such Substituted Limited Partner.
Section 11.5 Assignees. If the General Partner, in its sole and absolute
discretion, does not consent to the admission of any permitted transferee under
Section 11.3 as a Substituted Limited Partner, as described in Section 11.4,
such transferee shall be considered an Assignee for purposes of this Agreement.
An Assignee shall be entitled to all the rights of an assignee of a limited
partnership interest under the Act, including the right to receive distributions
from the Partnership and the share of Net Income, Net Losses, gain, loss and
Recapture Income attributable to the Partnership Units assigned to such
transferee, and shall have the rights granted to the Limited Partners under
Section 8.6, but shall not be deemed to be a holder of Partnership Units for any
other purpose under this Agreement, and shall not be entitled to vote such
Partnership Units in any matter presented to the Limited Partners for a vote
(such Partnership Units being deemed to have been voted on such matter in the
same proportion as all other Partnership Units held by Limited Partners are
voted). If any such transferee desires to make a further assignment of any such
Partnership Units, such transferee shall be subject to all the provisions of
this Article XI to the same extent and in the same manner as any Limited Partner
desiring to make an assignment of Partnership Units.
Section 11.6 General Provisions.
A. Withdrawal of Limited Partner. No Limited Partner may withdraw
from the
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Partnership other than as a result of a permitted transfer of all of such
Limited Partner's Partnership Units in accordance with this Article XI or
pursuant to redemption of all of its Partnership Units under Section 8.6.
B. Termination of Status as Limited Partner. Any Limited Partner
who shall transfer all of its Partnership Units in a transfer permitted pursuant
to this Article XI shall cease to be a Limited Partner upon the admission of all
Assignees of such Partnership Units as Substitute Limited Partners. Similarly,
any Limited Partner who shall transfer all of its Partnership Units pursuant to
redemption of all of its Partnership Units under Section 8.6 shall cease to be a
Limited Partner.
C. Timing of Transfers. Transfers pursuant to this Article XI may
only be made on the first day of a fiscal quarter of the Partnership, unless the
General Partner otherwise agrees.
D. Allocations. If any Partnership Interest is transferred during
any quarterly segment of the Partnership's fiscal year in compliance with the
provisions of this Article XI or redeemed or transferred pursuant to Section
8.6, Net Income, Net Losses, each item thereof and all other items attributable
to such interest for such fiscal year shall be divided and allocated between the
transferor Partner and the transferee Partner by taking into account their
varying interests during the fiscal year in accordance with Section 706(d) of
the Code, using the interim closing of the books method (unless the General
Partner, in its sole and absolute discretion, elects to adopt a daily, weekly,
or a monthly proration period, in which event Net Income, Net Losses, each item
thereof and all other items attributable to such interest for such fiscal year
shall be prorated based upon the applicable method selected by the General
Partner). Solely for purposes of making such allocations, each of such items
for the calendar month in which the transfer or redemption occurs shall be
allocated to the Person who is a Partner as of midnight on the last day of said
month. All distributions of Available Cash attributable to any Partnership Unit
with respect to which the Partnership Record Date is before the date of such
transfer, assignment or redemption shall be made to the transferor Partner or
the Redeeming Partner, as the case may be, and, in the case of a transfer or
assignment other than a redemption, all distributions of Available Cash
thereafter attributable to such Partnership Unit shall be made to the transferee
Partner.
E. Additional Restrictions. In addition to any other restrictions
on transfer herein contained, including without limitation the provisions of
this Article XI, in no event may any transfer or assignment of a Partnership
Interest by any Partner (including pursuant to Section 8.6) be made without the
express consent of the General Partner, in its sole and absolute discretion, (i)
to any person or entity who lacks the legal right, power or capacity to own a
Partnership Interest; (ii) in violation of applicable law; (iii) of any
component portion of a Partnership Interest, such as the Capital Account, or
rights to distributions, separate and apart from all other components of a
Partnership Interest; (iv) if in the opinion of legal counsel to the Partnership
such transfer would cause a termination of the Partnership for federal or state
income tax purposes (except as a result of the redemption or exchange for REIT
Shares of all Partnership Units held by all Limited Partners or pursuant to a
transaction expressly permitted under Section 7.11.B or Section 11.2); (v) if in
the opinion of counsel to the Partnership, such transfer would cause the
Partnership to cease to be classified as a partnership for federal income tax
purposes (except as a result of the
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redemption or exchange for REIT Shares of all Partnership Units held by all
Limited Partners or pursuant to a transaction expressly permitted under Section
7.11.B or Section 11.2); (vi) if such transfer would cause the Partnership
Interests of "benefit plan investors" to become "significant," as those terms
are used in Section 7.9.E., or would cause the Partnership to become, with
respect to any employee benefit plan subject to Title I of ERISA, a
"party-in-interest" (as defined in Section 3(14) of ERISA) or a "disqualified
person" (as defined in Section 4975 of the Code); (vii) if such transfer would,
in the opinion of counsel to the Partnership, cause any portion of the assets of
the Partnership to constitute assets of any employee benefit plan pursuant to
Department of Labor Regulations Section 2510.1-101; (viii) if such transfer
requires the registration of such Partnership Interest pursuant to any
applicable federal or state securities laws; (ix) if such transfer is
effectuated through an "established securities market" or a "secondary market"
(or the substantial equivalent thereof) within the meaning of Section 7704 of
the Code or such transfer causes the Partnership to become a "publicly traded
partnership," as such term is defined in Section 469(k)(2) or Section 7704(b) of
the Code (provided that this clause (ix) shall not be the basis for limiting or
restricting in any manner the exercise of the Redemption Right under Section 8.6
unless, and only to the extent that, outside tax counsel provides to the General
Partner an opinion to the effect that, in the absence of such limitation or
restriction, there is a significant risk that the Partnership will be treated as
a "publicly traded partnership" and, by reason thereof, taxable as a
corporation); (x) if such transfer subjects the Partnership to regulation under
the Investment Company Act of 1940, the Investment Advisors Act of 1940 or
ERISA, each as amended; (xi) such transfer could adversely affect the ability of
the General Partner Entity to remain qualified as a REIT; or (xii) if in the
opinion of legal counsel for the transferring Partner (which opinion and counsel
shall be reasonably satisfactory to the Partnership) or legal counsel for the
Partnership, such transfer would adversely affect the ability of the General
Partner Entity to continue to qualify as a REIT or subject the General Partner
Entity to any additional taxes under Section 857 or Section 4981 of the Code.
F. Avoidance of "Publicly Traded Partnership" Status. The General
Partner shall monitor the transfers of interests in the Partnership to determine
(i) if such interests are being traded on an "established securities market" or
a "secondary market (or the substantial equivalent thereof)" within the meaning
of Section 7704 of the Code; and (ii) whether additional transfers of interests
would result in the Partnership being unable to qualify for at least one of the
"safe harbors" set forth in Regulations Section 1.7704-1 (or such other guidance
subsequently published by the IRS setting forth safe harbors under which
interests will not be treated as "readily tradable on a secondary market (or the
substantial equivalent thereof)" within the meaning of Section 7704 of the Code)
(the "Safe Harbors"). The General Partner shall take all steps reasonably
necessary or appropriate to prevent any trading of interests or any recognition
by the Partnership of transfers made on such markets and, except as otherwise
provided herein, to insure that at least one of the Safe Harbors is met;
provided, however, that the foregoing shall not authorize the General Partner to
limit or restrict in any manner the right of any holder of a Partnership Unit to
exercise the Redemption Right in accordance with the terms of Section 8.6
unless, and only to the extent that, outside tax counsel provides to the General
Partner an opinion to the effect that, in the absence of such limitation or
restriction, there is a significant risk that the Partnership will be treated as
a "publicly traded partnership" and, by reason thereof, taxable as a
corporation.
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ARTICLE XII - ADMISSION OF PARTNERS
Section 12.1 Admission of a Successor General Partner. A successor to all
of the General Partner's General Partnership Interest pursuant to Section 11.2
who is proposed to be admitted as a successor General Partner shall be admitted
to the Partnership as the General Partner, effective upon such transfer. Any
such transferee shall carry on the business of the Partnership without
dissolution. In each case, the admission shall be subject to the successor
General Partner executing and delivering to the Partnership an acceptance of all
of the terms and conditions of this Agreement and such other documents or
instruments as may be required to effect the admission. In the case of such
admission on any day other than the first day of a Partnership Year, all items
attributable to the General Partner Interest for such Partnership Year shall be
allocated between the transferring General Partner and such successor as
provided in Section 11.6.D hereof.
Section 12.2 Admission of Additional Limited Partners.
A. General. No Person shall be admitted as an Additional Limited
Partner without the consent of the General Partner, which consent shall be given
or withheld in the General Partner's sole and absolute discretion. A Person who
makes a Capital Contribution to the Partnership in accordance with this
Agreement, including without limitation, under Section 4.1.C, or who exercises
an option to receive Partnership Units shall be admitted to the Partnership as
an Additional Limited Partner only with the consent of the General Partner and
only upon furnishing to the General Partner (i) evidence of acceptance in form
satisfactory to the General Partner of all of the terms and conditions of this
Agreement, including, without limitation, the power of attorney granted in
Section 15.11 and (ii) such other documents or instruments as may be required in
the discretion of the General Partner to effect such Person's admission as an
Additional Limited Partner. The admission of any Person as an Additional
Limited Partner shall become effective on the date upon which the name of such
Person is recorded on the books and records of the Partnership, following the
consent of the General Partner to such admission.
B. Allocations to Additional Limited Partners. If any Additional
Limited Partner is admitted to the Partnership on any day other than the first
day of a Partnership Year, then Net Income, Net Losses, each item thereof and
all other items allocable among Partners and Assignees for such Partnership Year
shall be allocated among such Additional Limited Partner and all other Partners
and Assignees by taking into account their varying interests during the
Partnership Year in accordance with Section 706(d) of the Code, using the
interim closing of the books method (unless the General Partner, in its sole and
absolute discretion, elects to adopt a daily, weekly or monthly proration
method, in which event Net Income, Net Losses, and each item thereof would be
prorated based upon the applicable period selected by the General Partner).
Solely for purposes of making such allocations, each of such items for the
calendar month in which an admission of any Additional Limited Partner occurs
shall be allocated among all of the Partners and Assignees, including such
Additional Limited Partner; provided, however, that the General Partner may
adopt such other conventions relating to Allocations to Additional Limited
Partners as it determines are necessary or appropriate. All distributions of
Available Cash with respect to which the Partnership Record Date is before the
date of such admission shall be made solely to
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Partners and Assignees, other than the Additional Limited Partner, and all
distributions of Available Cash thereafter shall be made to all of the Partners
and Assignees, including such Additional Limited Partner.
Section 12.3 Amendment of Agreement and Certificate of Limited
Partnership. For the admission to the Partnership of any Partner, the General
Partner shall take all steps necessary and appropriate under the Act to amend
the records of the Partnership and, if necessary, to prepare as soon as
practical an amendment of this Agreement (including an amendment of Exhibit A)
and, if required by law, shall prepare and file an amendment to the Certificate
and may for this purpose exercise the power of attorney granted pursuant to
Section 15.11 hereof.
ARTICLE XIII - DISSOLUTION AND LIQUIDATION
Section 13.1 Dissolution. The Partnership shall not be dissolved by the
admission of Substituted Limited Partners or Additional Limited Partners or by
the admission of a successor General Partner in accordance with the terms of
this Agreement. Upon the withdrawal of the General Partner, any successor
General Partner shall continue the business of the Partnership. The Partnership
shall dissolve, and its affairs shall be wound up, only upon the first to occur
of any of the following ("Liquidating Events") :
(i) the expiration of its term as provided in Section 2.4 hereof;
(ii) an event of withdrawal of the General Partner, as defined in the
Act (other than an event of bankruptcy), unless within ninety
(90) days after such event of withdrawal a "majority in interest"
(as defined below) of the remaining Partners Consent in writing
to continue the business of the Partnership and to the
appointment, effective as of the date of withdrawal, of a
successor General Partner;
(iii) through December 31, 2057, an election to dissolve the
Partnership made by the General Partner with the consent of
Limited Partners who hold eighty-five percent (85%) of the
outstanding Units held by Limited Partners (including Units
held by the General Partner);
(iv) an election to dissolve the Partnership made by the General
Partner, in its sole and absolute discretion after December
31, 2057;
(v) entry of a decree of judicial dissolution of the Partnership
pursuant to the provisions of the Act;
(vi) the sale of all or substantially all of the assets and properties
of the Partnership for cash or for marketable securities; or
(vii) a final and non-appealable judgment is entered by a court of
competent jurisdiction ruling that the General Partner is
bankrupt or insolvent, or a final and
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non-appealable order for relief is entered by a court with
appropriate jurisdiction against the General Partner, in
each case under any federal or state bankruptcy or
insolvency laws as now or hereafter in effect, unless prior
to or at the time of the entry of such order or judgment a
"majority in interest" (as defined below) of the remaining
Partners Consent in writing to continue the business of the
Partnership and to the appointment, effective as of a date
prior to the date of such order or judgment, of a substitute
General Partner.
As used herein, a "majority in interest" shall refer to Partners (excluding
the General Partners) who hold more than fifty percent (50%) of the outstanding
Percentage Interests not held by the General Partners.
Section 13.2 Winding Up.
A. General. Upon the occurrence of a Liquidating Event, the
Partnership shall continue solely for the purposes of winding up its affairs in
an orderly manner, liquidating its assets, and satisfying the claims of its
creditors and Partners. No Partner shall take any action that is inconsistent
with, or not necessary to or appropriate for, the winding up of the
Partnership's business and affairs. The General Partner, or, in the event there
is no General Partner, any Person elected by a majority in interest of the
Limited Partners (the General Partner of such other person being referred to
herein as the "Liquidator") shall be responsible for overseeing the winding up
and dissolution of the Partnership and shall take full account of the
Partnership's liabilities and property and the Partnership property shall be
liquidated as promptly as is consistent with obtaining the fair value thereof,
and the proceeds therefrom (which may, to the extent determined by the General
Partner, include equity or other securities of the General Partner or any other
entity) shall be applied and distributed in the following order:
(1) First, to the payment and discharge of all of the
Partnership's debts and liabilities to creditors other than
the Partners;
(2) Second, to the payment and discharge of all of the
Partnership's debts and liabilities to the General Partner;
(3) Third, to the payment and discharge of all of the
Partnership's debts and liabilities to the Limited Partners;
and
(4) The balance, if any, to the Partners in accordance with
their Capital Accounts, after giving effect to all
contributions, distributions, and allocations for all
periods.
The General Partner shall not receive any additional compensation for any
services performed pursuant to this Article XIII.
B. Deferred Liquidation. Notwithstanding the provisions of Section
13.2.A which
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require liquidation of the assets of the Partnership, but subject to the order
of priorities set forth therein, if prior to or upon dissolution of the
Partnership the Liquidator determines that an immediate sale of part or all of
the Partnership's assets would be impractical or would cause undue loss to the
Partners, the Liquidator may, in its sole and absolute discretion, defer for a
reasonable time the liquidation of any assets except those necessary to satisfy
liabilities of the Partnership (including to those Partners as creditors) and/or
distribute to the Partners, in lieu of cash, as tenants in common and in
accordance with the provisions of Section 13.2.A, undivided interests in such
Partnership assets as the Liquidator deems not suitable for liquidation. Any
such distributions in kind shall be made only if, in the good faith judgment of
the Liquidator, such distributions in kind are in the best interest of the
Partners, and shall be subject to such conditions relating to the disposition
and management of such properties as the Liquidator deems reasonable and
equitable and to any agreements governing the operation of such properties at
such time. The Liquidator shall determine the fair market value of any property
distributed in kind using such reasonable method of valuation as it may adopt.
Subject to the provisions of any Applicable Contribution Agreement,
distributions in kind shall be made pro-rata to all Partners in accordance with
their interests with the value of such distributions to be as reasonably
determined by the Liquidator.
Section 13.3 Compliance With Timing Requirements of Regulations. Subject
to Section 13.4, if the Partnership is "liquidated" within the meaning of
Regulations Section 1.704-1(b)(2)(ii)(g), distributions shall be made under this
Article XIII to the General Partner and Limited Partners who have positive
Capital Accounts in compliance with Regulations Section 1.704-1(b)(2)(ii)(b)(2).
If any Partner has a deficit balance in its Capital Account (after giving effect
to all contributions, distributions and allocations for all taxable years,
including the year during which such liquidation occurs), such Partner shall
have no obligation to make any contribution to the capital of the Partnership
with respect to such deficit, and such deficit shall not be considered a debt
owed to the Partnership or to any other Person for any purpose whatsoever. In
the discretion of the Liquidator, a pro rata portion of the distributions that
would otherwise be made to the General Partner and Limited Partners pursuant to
this Article XIII may be: (A) distributed to a trust established for the
benefit of the General Partner and Limited Partners for the purposes of
liquidating Partnership assets, collecting amounts owed to the Partnership and
paying any contingent or unforeseen liabilities or obligations of the
Partnership or of the General Partner arising out of or in connection with the
Partnership (in which case the assets of any such trust shall be distributed to
the General Partner and Limited Partners from time to time, in the reasonable
discretion of the General Partner, in the same proportions as the amount
distributed to such trust by the Partnership would otherwise have been
distributed to the General Partner and Limited Partners pursuant to this
Agreement); or (B) withheld to provide a reasonable reserve for Partnership
liabilities (contingent or otherwise) and to reflect the unrealized portion of
any installment obligations owed to the Partnership, provided that such withheld
amounts shall be distributed to the General Partner and Limited Partners as soon
as practicable.
Section 13.4 Deemed Distribution and Recontribution. Notwithstanding any
other provision of this Article XIII, if the Partnership is considered
"liquidated" within the meaning of Regulations Section 1.704-1(b)(2)(ii)(g) but
no Liquidating Event has occurred, the Partnership's property shall not be
liquidated, the Partnership's liabilities shall not be paid or discharged and
the Partnership's affairs shall not be wound up. Instead, for federal income tax
purposes and for
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purposes of maintaining Capital Accounts pursuant to Exhibit B, the Partnership
shall be deemed to have contributed its assets in kind as provided in the
Regulations under Code Section 708(b)(1)(B).
Section 13.5 Rights of Limited Partners. Except as otherwise provided in
this Agreement, each Limited Partner shall look solely to the assets of the
Partnership for the return of its Capital Contributions and shall have no right
or power to demand or receive property other than cash from the Partnership.
Except as otherwise expressly provided in this Agreement, no Limited Partner
shall have priority over any other Limited Partner as to the return of its
Capital Contributions, distributions, or allocations.
Section 13.6 Notice of Dissolution. In the event a Liquidating Event
occurs or an event occurs that would, but for provisions of an election or
objection by one or more Partners pursuant to Section 13.1, result in a
dissolution of the Partnership, the General Partner shall, within thirty (30)
days thereafter, provide written notice thereof to each of the Partners and to
all other parties with whom the Partnership regularly conducts business (as
determined in the discretion of the General Partner).
Section 13.7 Cancellation of Certificate of Limited Partnership. Upon the
completion of the liquidation of the Partnership's assets as provided in Section
13.2, the Partnership shall be terminated, a certificate of cancellation shall
be filed, and the Certificate and all qualifications of the Partnership as a
foreign limited partnership in jurisdictions other than the State of Delaware
shall be canceled and such other actions as may be necessary to terminate the
Partnership shall be taken.
Section 13.8 Reasonable Time for Winding Up. A reasonable time shall be
allowed for the orderly winding up of the business and affairs of the
Partnership and the liquidation of its assets pursuant to Section 13.2, to
minimize any losses otherwise attendant upon such winding-up, and the provisions
of this Agreement shall remain in effect among the Partners during the period of
liquidation.
Section 13.9 Waiver of Partition. Each Partner hereby waives any right to
partition of the Partnership property.
Section 13.10 Liability of Liquidator. The Liquidator shall be
indemnified and held harmless by the Partnership in the same manner and to the
same degree as an Indemnitee may be indemnified pursuant to Section 7.7.
ARTICLE XIV - AMENDMENT OF PARTNERSHIP AGREEMENT; MEETINGS
Section 14.1 Amendments.
A. General. Amendments to this Agreement may be proposed by the
General Partner or by any Limited Partners holding twenty-five percent (25%) or
more of the Partnership Interests. Following such proposal, the General Partner
shall submit any proposed amendment to the
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Limited Partners. The General Partner shall seek the written vote of the
Partners on the proposed amendment or shall call a meeting to vote thereon and
to transact any other business that it may deem appropriate. For purposes of
obtaining a written vote, the General Partner may require a response within a
reasonable specified time, but not less than fifteen (15) days, and failure to
respond in such time period shall constitute a vote which is consistent with the
General Partner's recommendation with respect to the proposal. Except as
provided in Section 14.1.B, 14.1.C or 14.1.D, a proposed amendment shall be
adopted and be effective as an amendment hereto if it is approved by the General
Partners and it receives the Consent of Partners holding a majority of the
Percentage Interests of the Limited Partners (including Limited Partnership
Interests held by the General Partners).
B. Amendments Not Requiring Limited Partner Approval.
Notwithstanding Section 14.1.A or 14.1.C, the General Partner shall have the
power, without the consent of the Limited Partners, to amend this Agreement as
may be required to facilitate or implement any of the following purposes:
(1) to add to the obligations of the General Partner or
surrender any right or power granted to the General Partner
or any Affiliate of the General Partner for the benefit of
the Limited Partners;
(2) to reflect the admission, substitution, termination, or
withdrawal of Partners in accordance with this Agreement
(which may be effected through the replacement of Exhibit A
and Exhibit E with an amended Exhibit A and Exhibit E);
(3) to set forth and reflect in this Agreement the designations,
rights, powers, duties, and preferences of the holders of
any additional Partnership Interests issued pursuant to
Article IV;
(4) to reflect a change that does not adversely affect the
Limited Partners in any material respect, or to cure any
ambiguity, correct or supplement any provision of this
Agreement not inconsistent with law or with other provisions
of this Agreement, or make other changes with respect to
matters arising under this Agreement that will not be
inconsistent with law or with the provisions of this
Agreement; and
(5) to satisfy any requirements, conditions, or guidelines
contained in any order, directive, opinion, ruling or
regulation of a federal, state or local agency or contained
in federal, state or local law.
The General Partner shall notify the Limited Partners when any action under
this Section 14.1.B is taken in the next regular communication to the Limited
Partners.
C. Amendments Requiring Limited Partner Approval (Excluding General
Partners). Notwithstanding Section 14.1.A and 14.1.B, without the Consent of
the Outside Limited Partners, the General Partner shall not amend Section 4.2.A,
Section 7.1.A (second sentence only), Section
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7.5, Section 7.6, Section 7.8, Section 7.11, Section 11.2, Section 11.3, Section
13.1 (other than Section 13.1(iii) which can be amended only with a Consent of a
majority of each class of Partnership Units (including Partnership Units held by
the General Partner) (treating Class A Units and Class B Units as part of a
single class for this purpose), the last sentence of Section 11.4 (provided that
no such amendment shall in any event adversely affect the rights of any lender
who made a loan or who extended credit and received in connection therewith a
Pledge of Units prior to the date such amendment is adopted unless, and only to
the extent such lender consents thereto), this Section 14.1.C or Section 14.2.
D. Other Amendments Requiring Certain Limited Partner Approval.
Notwithstanding anything in this Section 14.1 to the contrary, this Agreement
shall not be amended with respect to any Partner adversely affected without the
Consent of such Partner adversely affected if such amendment would (i) convert a
Limited Partner's interest in the Partnership into a general partner's interest;
(ii) modify the limited liability of a Limited Partner in a manner adverse to
such Limited Partner; (iii) amend Section 7.11.A; (iv) amend Article V or
Article VI (except as permitted pursuant to Sections 4.2, 5.1.E, 5.4, 6.2 and
14.1(B)(3)); (v) amend Section 8.6 or any defined terms set forth in Article I
that relate to the Redemption Right (except as permitted in Section 8.6.E); or
(vi) amend this Section 14.1.D or override the terms of an Applicable
Contribution Agreement to which such Limited Partner is a party. This Section
14.1.D does not require unanimous consent of all Partners adversely affected
unless the amendment is to be effective against all Partners adversely affected.
Section 14.2 Meetings of the Partners.
A. General. Meetings of the Partners may be called by the General
Partner and shall be called upon the receipt by the General Partner of a written
request by Limited Partners holding twenty-five percent (25%) or more of the
Partnership Interests. The call shall state the nature of the business to be
transacted. Notice of any such meeting shall be given to all Partners not less
than seven (7) days nor more than thirty (30) days prior to the date of such
meeting. Partners may vote in person or by proxy at such meeting. Whenever the
vote or Consent of the Partners is permitted or required under this Agreement,
such vote or Consent may be given at a meeting of the Partners or may be given
in accordance with the procedure prescribed in Section 14.1.A. Except as
otherwise expressly provided in this Agreement, the Consent of holders of a
majority of the Percentage Interests held by Limited Partners (including Limited
Partnership Interests held by the General Partner) shall control.
B. Actions Without a Meeting. Any action required or permitted to
be taken at a meeting of the Partners may be taken without a meeting if a
written consent setting forth the action so taken is signed by a majority of the
Percentage Interests of the Partners (or such other percentage as is expressly
required by this Agreement). Such consent may be in one instrument or in
several instruments, and shall have the same force and effect as a vote of a
majority of the Percentage Interests of the Partners (or such other percentage
as is expressly required by this Agreement). Such consent shall be filed with
the General Partner. An action so taken shall be deemed to have been taken at a
meeting held on the effective date so certified.
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C. Proxy. Each Limited Partner may authorize any Person or Persons
to act for him by proxy on all matters in which a Limited Partner is entitled to
participate, including waiving notice of any meeting, or voting or participating
at a meeting. Every proxy must be signed by the Limited Partner or its
attorney-in-fact. No proxy shall be valid after the expiration of twelve (12)
months from the date thereof unless otherwise provided in the proxy. Every
proxy shall be revocable at the pleasure of the Limited Partner executing it,
such revocation to be effective upon the Partnership's receipt of written notice
thereof.
D. Conduct of Meeting. Each meeting of Partners shall be conducted
by the General Partner or such other Person as the General Partner may appoint
pursuant to such rules for the conduct of the meeting as the General Partner or
such other Person deems appropriate. Without limiting the foregoing, meetings
of Partners may be conducted in the same manner as meetings of the stockholders
of the General Partner and may be held at the same time, and as part of,
meetings of the stockholders of the General Partner.
ARTICLE XV - GENERAL PROVISIONS
Section 15.1 Addresses and Notice. Any notice, demand, request or report
required or permitted to be given or made to a Partner or Assignee under this
Agreement shall be in writing and shall be deemed given or made when delivered
in person or when sent by first class United States mail or by other means of
written communication to the Partner or Assignee at the address set forth in
Exhibit A or such other address as the Partners shall notify the General Partner
in writing. The time to respond to any notice, demand, request or report shall
commence to run on the date of delivery at such addresses (or attempted delivery
if delivery is refused during normal business hours).
Section 15.2 Titles and Captions. All article or section titles or
captions in this Agreement are for convenience only. They shall not be deemed
part of this Agreement and in no way define, limit, extend or describe the scope
or intent of any provisions hereof. Except as specifically provided otherwise,
references to "Articles," "Sections" and "Exhibits" are to Articles, Sections
and Exhibits of this Agreement.
Section 15.3 Pronouns and Plurals. Whenever the context may require, any
pronoun used in this Agreement shall include the corresponding masculine,
feminine or neuter forms, and the singular form of nouns, pronouns and verbs
shall include the plural and vice versa.
Section 15.4 Further Action. The parties shall execute and deliver all
documents, provide all information and take or refrain from taking action as may
be reasonably necessary or appropriate to achieve the purposes of this
Agreement.
Section 15.5 Binding Effect. This Agreement shall be binding upon and
inure to the benefit of the parties hereto and their heirs, executors,
administrators, successors, legal representatives and permitted assigns.
Section 15.6 Creditors. Other than as expressly set forth herein with
regard to any
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Indemnitee, none of the provisions of this Agreement shall be for the benefit
of, or shall be enforceable by, any creditor of the Partnership.
Section 15.7 Waiver. No failure by any party to insist upon the strict
performance of any covenant, duty, agreement or condition of this Agreement or
to exercise any right or remedy consequent upon a breach thereof shall
constitute waiver of any such breach or any other covenant, duty, agreement or
condition.
Section 15.8 Counterparts. This Agreement may be executed in
counterparts, all of which together shall constitute one agreement binding on
all of the parties hereto, notwithstanding that all such parties are not
signatories to the original or the same counterpart. Each party shall become
bound by this Agreement immediately upon affixing its signature hereto.
Section 15.9 Applicable Law. This Agreement shall be construed and
enforced in accordance with and governed by the laws of the State of Delaware,
without regard to the principles of conflicts of law.
Section 15.10 Invalidity of Provisions. If any provision of this
Agreement shall to any extent be held void or unenforceable (as to duration,
scope, activity, subject or otherwise) by a court of competent jurisdiction,
such provision shall be deemed to be modified so as to constitute a provision
conforming as nearly as possible to the original provision while still remaining
valid and enforceable. In such event, the remainder of this Agreement (or the
application of such provision to persons or circumstances other than those in
respect of which it is deemed to be void or unenforceable) shall not be affected
thereby. Each other provision of this Agreement, unless specifically
conditioned upon the voided aspect of such provision, shall remain valid and
enforceable to the fullest extent permitted by law; any other provisions of this
Agreement that are specifically conditioned on the voided aspect of such invalid
provision shall also be deemed to be modified so as to constitute a provision
conforming as nearly as possible to the original provision while still remaining
valid and enforceable to the fullest extent permitted by law.
Section 15.11 Power of Attorney.
A. General. Each Limited Partner and each Assignee who accepts
Partnership Units (or any rights, benefits or privileges associated therewith)
is deemed to irrevocably constitute and appoint the General Partner, any
Liquidator and authorized officers and attorneys-in-fact of each, and each of
those acting singly, in each case with full power of substitution, as its true
and lawful agent and attorney-in-fact, with full power and authority in its
name, place and stead to:
(1) execute, swear to, acknowledge, deliver, file and record in
the appropriate public offices (a) all certificates,
documents and other instruments (including, without
limitation, this Agreement and the Certificate and all
amendments or restatements thereof) that the General Partner
or any Liquidator deems appropriate or necessary to form,
qualify or continue the existence or qualification of the
Partnership as a limited partnership (or a partnership in
which the limited
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partners have limited liability) in the State of Delaware
and in all other jurisdictions in which the Partnership may
conduct business or own property, (b) all instruments that
the General Partner or any Liquidator reasonably deems
appropriate or necessary to reflect any amendment, change,
modification or restatement of this Agreement in accordance
with its terms, (c) all conveyances and other instruments or
documents that the General Partner or any Liquidator deems
appropriate or necessary to reflect the dissolution and
liquidation of the Partnership pursuant to the terms of this
Agreement, including, without limitation, a certificate of
cancellation, (d) all instruments relating to the admission,
withdrawal, removal or substitution of any Partner pursuant
to, or other events described in, Article XI, XII or XIII
hereof or the Capital Contribution of any Partner to the
extent permitted by this Agreement, and (e) all
certificates, documents and other instruments relating to
the determination of the rights, preferences and privileges
of Partnership Interests; and
(2) execute, swear to, acknowledge and file all ballots,
consents, approvals, waivers, certificates and other
instruments appropriate or necessary, in the sole and
absolute discretion of the General Partner or any
Liquidator, to make, evidence, give, confirm or ratify any
vote, consent, approval, agreement or other action which is
made or given by the Partners hereunder or is consistent
with the terms of this Agreement or appropriate or
necessary, in the reasonable discretion of the General
Partner or any Liquidator, to effectuate the terms or intent
of this Agreement.
Nothing contained in this Section 15.11 shall be construed as authorizing
the General Partner or any Liquidator to amend this Agreement except in
accordance with Article XIV hereof or as may be otherwise expressly provided for
in this Agreement.
B. Irrevocable Nature. The foregoing power of attorney is hereby
declared to be irrevocable and a power coupled with an interest, in recognition
of the fact that each of the Partners will be relying upon the power of the
General Partner or any Liquidator to act as contemplated by this Agreement in
any filing or other action by it on behalf of the Partnership, and it shall
survive and not be affected by the subsequent Incapacity of any Limited Partner
or Assignee and the transfer of all or any portion of such Limited Partner's or
Assignee's Partnership Units and shall extend to such Limited Partner's or
Assignee's heirs, successors, assigns and personal representatives. Each such
Limited Partner or Assignee hereby agrees to be bound by any representation made
by the General Partner or any Liquidator, acting in good faith pursuant to such
power of attorney; and each such Limited Partner or Assignee hereby waives any
and all defenses which may be available to contest, negate or disaffirm the
action of the General Partner or any Liquidator, taken in good faith under such
power of attorney. Each Limited Partner or Assignee shall execute and deliver
to the General Partner or the Liquidator, within fifteen (15)
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days after receipt of the General Partner's or Liquidator's request therefor,
such further designation, powers of attorney and other instruments as the
General Partner or the Liquidator, as the case may be, deems necessary to
effectuate this Agreement and the purposes of the Partnership.
Section 15.12 Attorneys' Fees. In any dispute among the Partners
concerning the Partnership or this Agreement, the prevailing Partner(s) shall be
entitled to recover its reasonable attorneys' fees and costs (including
litigation and collection costs) from the non-prevailing party(ies).
Section 15.13 California Venue. The United States District Courts for
California and any Superior Court in California shall be the exclusive
appropriate venues to litigate questions of interpretation under this Agreement
or the rights of the parties hereunder.
Section 15.14 Waiver of Jury Trial. Each of the parties hereto hereby
waives any and all rights to a trial by jury with respect to any dispute among
the Partners or their Affiliates or among a Partner (or its Affiliates) and the
Partnership concerning this Agreement.
Section 15.15 Entire Agreement. This Agreement contains the entire
understanding and agreement among the Partners with respect to the subject
matter hereof and supersedes any prior written oral understandings or agreements
among them with respect thereto.
Section 15.16 No Rights as REIT Stockholders. Nothing contained in this
Agreement shall be construed as conferring upon the holders of the Partnership
Units any rights whatsoever as stockholders of the General Partner, including,
without limitation, any right to receive dividends or other distributions made
to stockholders of the General Partner or to vote or to consent or receive
notice as stockholders in respect to any meeting of stockholders for the
election of Directors of the General Partner or any other matter.
Section 15.17 Limitation to Preserve REIT Status. To the extent (i) that
any amount paid or credited to the General Partner or any of its officers,
directors, trustees, employees or agents (a "General Partner Payee") pursuant to
Section 7.4 or Section 7.7 would constitute gross income to the General Partner
for purposes of Section 856(c)(2) or 856(c)(3) of the Code (a "General Partner
Payment") and (ii) such General Partner Payment in any fiscal year would cause
the General Partner to lose its status as a real estate investment for federal
income tax purposes, then, notwithstanding any other provision of this
Agreement, such portion of such General Partner Payment ("Excess General Partner
Payments") shall not be paid or payable to such General Partner Payee (and to
the extent previously paid to such General Partner Payee, shall be repaid by
such General Partner Payee upon receipt of notice of such excess General Partner
Payment from the Partnership); provided, however, that Excess General Partner
Payments may be made if the General Partner, as a condition precedent, obtains
an opinion of tax counsel that the receipt thereof would not adversely affect
the General Partner's ability to qualify as a REIT. To the extent General
Partner Payments may not be made in a year due to the foregoing limitations,
such General Partner Payments shall carry over and be treated as arising in the
following year, provided, however, that such amounts shall not carry over for
more than five years, and if not paid within such five year period, shall
expire; provided further, that (i) as General Partner Payments
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are made, such payments shall be applied first to pay carry over amounts
outstanding, if any, and (ii) with respect to carry over amounts for more than
one Partnership Year, such payments shall be applied to the earliest Partnership
Year first.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of
the date first written above.
[Signature pages to follow]
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GENERAL PARTNER:
Burnham Pacific Properties, Inc.
By:___________________________________
Name:_________________________________
Title:________________________________
LIMITED PARTNERS:
Burnham Pacific L.P., Inc.
By:___________________________________
Name:_________________________________
Title:________________________________
Burnham Pacific Properties, Inc.
By:__________________________________
Name:________________________________
Title:_______________________________
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EXHIBIT A
PARTNERS AND PARTNERSHIP INTERESTS
Name and Address of Class A Agreed Initial Capital Percentage
Partner Units Class B Units Account Interest
- ------------------ ------- ------- ------ -------- -----------
GENERAL PARTNER:
Burnham Pacific Properties, Inc. 1%
LIMITED PARTNERS:
Burnham Pacific Properties, Inc. 98%
Burnham Pacific L.P., Inc. 1%
TOTAL 100%
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EXHIBIT B
CAPITAL ACCOUNT MAINTENANCE
1. Capital Accounts of the Partners
A. The Partnership shall maintain for each Partner a separate
Capital Account in accordance with the rules of Regulations Section
l.704-l(b)(2)(iv). Such Capital Account shall be increased by (i) the amount of
all Capital Contributions and any other deemed contributions made by such
Partner to the Partnership pursuant to this Agreement and (ii) all items of
Partnership income and gain (including income and gain exempt from tax) computed
in accordance with Section 1.B hereof and allocated to such Partner pursuant to
Section 6.1 of the Agreement and Exhibit C thereof, and decreased by (x) the
amount of cash or Agreed Value of all actual and deemed distributions of cash or
property made to such Partner pursuant to this Agreement and (y) all items of
Partnership deduction and loss computed in accordance with Section 1.B hereof
and allocated to such Partner pursuant to Section 6.1 of the Agreement and
Exhibit C thereof.
B. For purposes of computing Net Income and Net Loss and the amount
of any other item of income, gain, deduction or loss to be reflected in the
Partners' Capital Accounts, unless otherwise specified in this Agreement, the
determination, recognition and classification of any such item shall be the same
as its determination, recognition and classification for federal income tax
purposes determined in accordance with Section 703(a) of the Code (for this
purpose all items of income, gain, loss or deduction required to be stated
separately pursuant to Section 703(a) (1) of the Code shall be included in
taxable income or loss), with the following adjustments:
(1) Except as otherwise provided in Regulations Section
1.704-1(b)(2)(iv)(m), the computation of all items of income, gain, loss and
deduction shall be made without regard to any election under Section 754 of the
Code which may be made by the Partnership, provided that the amounts of any
adjustments to the adjusted bases of the assets of the Partnership made pursuant
to Section 734 of the Code as a result of the distribution of property by the
Partnership to a Partner (to the extent that such adjustments have not
previously been reflected in the Partners' Capital Accounts) shall be reflected
in the Capital Accounts of the Partners in the manner and subject to the
limitations prescribed in Regulations Section l.704-1(b)(2)(iv) (m)(4).
(2) The computation of all items of income, gain, and deduction
shall be made without regard to the fact that items described in Sections
705(a)(l)(B) or 705(a)(2)(B) of the Code (or that are treated as such
expenditures pursuant to Regulations Section 1.704-1(b)(2)(iv)(i)) are not
includable in gross income or are neither currently deductible nor capitalized
for federal income tax purposes.
(3) Any income, gain or loss attributable to the taxable
disposition of any Partnership property shall be determined as if the adjusted
basis of such property as of such date of disposition were equal in amount to
the Partnership's Carrying Value with respect to such property as of such date.
(4) In lieu of the depreciation, amortization, and other cost
recovery deductions
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taken into account in computing such taxable income or loss, there shall be
taken into account Depreciation for such fiscal year.
(5) In the event the Carrying Value of any Partnership Asset is
adjusted pursuant to Section 1.D hereof, the amount of any such adjustment shall
be taken into account as gain or loss from the disposition of such asset.
(6) Any items specially allocated under Section 2 of Exhibit C
hereof shall not be taken into account.
C. Generally, a transferee (including any Assignee) of a Partnership Unit
shall succeed to a pro rata portion of the Capital Account of the transferor;
provided, however, that, if the transfer causes a termination of the Partnership
under Section 708(b)(l)(B) of the Code, the Partnership's properties shall be
deemed, solely for federal income tax purposes, to have been contributed to a
new partnership as required by Regulations under Section 708(b) of the Code. In
such event, the Carrying Values of the Partnership properties shall be adjusted
immediately prior to such deemed distribution pursuant to Section 1.D(2) hereof.
The Capital Accounts of such reconstituted Partnership shall be maintained in
accordance with the principles of this Exhibit B.
D. (1) Consistent with the provisions of Regulations Section
1.704-1(b)(2)(iv)(f), and as provided in Section 1.D(2), the Carrying Values of
all Partnership assets shall be adjusted upward or downward to reflect any
Unrealized Gain or Unrealized Loss attributable to such Partnership property, as
of the times of the adjustments provided in Section 1.D(2) hereof, as if such
Unrealized Gain or Unrealized Loss had been recognized on an actual sale of each
such property and allocated pursuant to Section 6.1 of the Agreement.
(2) Such adjustments shall be made as of the following times:
(a) immediately prior to the acquisition of an additional interest in the
Partnership by any new or existing Partner in exchange for more than a de
minimis Capital Contribution; (b) immediately prior to the distribution by the
Partnership to a Partner of more than a de minimis amount of property as
consideration for an interest in the Partnership; and (c) immediately prior to
the liquidation of the Partnership within the meaning of Regulations Section
1.704-l(b)(2)(ii)(g), provided however that adjustments pursuant to clauses (a)
and (b) above shall be made only if the General Partner determines that such
adjustments are necessary or appropriate to reflect the relative economic
interests of the Partners in the Partnership.
(3) In accordance with Regulations Section 1.704-
l(b)(2)(iv)(e), the Carrying Value of Partnership assets distributed in kind
shall be adjusted upward or downward to reflect any Unrealized Gain or
Unrealized Loss attributable to such Partnership property, as of the time any
such asset is distributed.
(4) In determining Unrealized Gain or Unrealized Loss for
purposes of this Exhibit B, the aggregate cash amount and fair market value of
all Partnership assets (including cash or cash equivalents) shall be determined
by the General Partner using such reasonable method of valuation as it may
adopt, or in the case of a liquidating distribution pursuant to Article XIII of
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the Agreement, shall be determined and allocated by the Liquidator using such
reasonable methods of valuation as it may adopt. The General Partner, or the
Liquidator, as the case may be, shall allocate such aggregate fair market value
among the assets of the Partnership in such manner as it determines in its
reasonable discretion to arrive at a fair market value for individual properties
and shall make no distribution in kind other than pro rata among all Partners in
accordance with their interests unless otherwise provided in an Applicable
Contribution Agreement.
E. The provisions of the Agreement (including this Exhibit B and the
other Exhibits to the Agreement) relating to the maintenance of Capital Accounts
are intended to comply with Regulations Section 1.704-1(b), and shall be
interpreted and applied in a manner consistent with such Regulations. In the
event the General Partner shall determine that it is prudent to modify the
manner in which the Capital Accounts, or any debits or credits thereto
(including, without limitation, debits or credits relating to liabilities which
are secured by contributed or distributed property or which are assumed by the
Partnership, the General Partner, or the Limited Partners) are computed in order
to comply with such Regulations, the General Partner may make such modification
without regard to Article XIV of the Agreement, provided that it is not likely
to have a material effect on the amounts distributable to any Person pursuant to
Article XIII of the Agreement upon the dissolution of the Partnership. The
General Partner also shall (i) make any adjustments that are necessary or
appropriate to maintain equality between the Capital Accounts of the Partners
and the amount of Partnership capital reflected on the Partnership's balance
sheet, as computed for book purposes, in accordance with Regulations Section
l.704-l(b)(2)(iv)(q), and (ii) make any appropriate modifications in the event
unanticipated events might otherwise cause this Agreement not to comply with
Regulations Section l.704-1(b).
2. No Interest. No interest shall be paid by the Partnership on Capital
Contributions or on balances in Partners' Capital Accounts.
3. No Withdrawal. No Partner shall be entitled to withdraw any part of
its Capital Contribution or Capital Account or to receive any distribution from
the Partnership, except as provided in Articles IV, V, VII and XIII of the
Agreement.
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EXHIBIT C
SPECIAL ALLOCATION RULES
1. Special Allocation Rules. Notwithstanding any other provision of the
Agreement or this Exhibit C, the following special allocations shall be made in
the following order:
A. Minimum Gain Chargeback. Notwithstanding the provisions of
Section 6.1 of the Agreement or any other provisions of this Exhibit C, if there
is a net decrease in Partnership Minimum Gain during any Partnership Year, each
Partner shall be specially allocated items of Partnership income and gain for
such year (and, if necessary, subsequent years) in an amount equal to such
Partner's Share of the net decrease in Partnership Minimum Gain, as determined
under Regulations Section 1.704-2(g). Allocations pursuant to the previous
sentence shall be made in proportion to the respective amounts required to be
allocated to each Partner pursuant thereto. The items to be so allocated shall
be determined in accordance with Regulations Section 1.704-2(f)(6). This
Section 1.A is intended to comply with the minimum gain chargeback requirements
in Regulations Section 1.704-2(f) and for purposes of this Section 1.A only,
each Partner's Adjusted Capital Account Deficit shall be determined prior to any
other allocations pursuant to Section 6.1 of this Agreement with respect to such
Partnership Year and without regard to any decrease in Partner Minimum Gain
during such Partnership Year.
B. Partner Minimum Gain Chargeback. Notwithstanding any other
provision of Section 6.1 of this Agreement or any other provisions of this
Exhibit C (except Section 1.A hereof), if there is a net decrease in Partner
Minimum Gain attributable to a Partner Nonrecourse Debt during any Partnership
Year, each Partner who has a share of the Partner Minimum Gain attributable to
such Partner Nonrecourse Debt, determined in accordance with Regulations Section
1.704-2(i)(5), shall be specially allocated items of Partnership income and gain
for such year (and, if necessary, subsequent years) in an amount equal to such
Partner's share of the net decrease in Partner Minimum Gain attributable to such
Partner Nonrecourse Debt, determined in accordance with Regulations Section
1.704-2(i)(5). Allocations pursuant to the previous sentence shall be made in
proportion to the respective amounts required to be allocated to each General
Partner and Limited Partner pursuant thereto. The items to be so allocated
shall be determined in accordance with Regulations Section 1.704-2(i)(4). This
Section 1.B is intended to comply with the minimum gain chargeback requirement
in such Section of the Regulations and shall be interpreted consistently
therewith. Solely for purposes of this Section 1.B, each Partner's Adjusted
Capital Account Deficit shall be determined prior to any other allocations
pursuant to Section 6.1 of the Agreement or this Exhibit with respect to such
Partnership Year, other than allocations pursuant to Section 1.A hereof.
C. Qualified Income Offset. In the event any Partner unexpectedly
receives any adjustments, allocations or distributions described in Regulations
Sections 1.704-l(b)(2)(ii)(d)(4), l.704-1(b)(2)(ii)(d)(5), or 1.704-
l(b)(2)(ii)(d)(6), and after giving effect to the allocations required under
Sections 1.A and 1.B hereof with respect to such Partnership Year, such Partner
has an Adjusted Capital Account Deficit, items of Partnership income and gain
(consisting of a pro rata portion of each item of Partnership income, including
gross income and gain for the Partnership
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Year) shall be specifically allocated to such Partner in an amount and manner
sufficient to eliminate, to the extent required by the Regulations, its Adjusted
Capital Account Deficit created by such adjustments, allocations or
distributions as quickly as possible. This Section 1.C is intended to
constitute a "qualified income offset" under Regulations Section
1.704-1(b)(2)(ii)(d) and shall be interpreted consistently therewith.
D. Gross Income Allocation. In the event that any Partner would
have an Adjusted Capital Account Deficit at the end of any Partnership Year
(after tentatively taking into account allocations to be made under the
preceding paragraphs hereof with respect to such Partnership Year), each such
Partner shall be specially allocated items of Partnership income and gain
(consisting of a pro rata portion of each item of Partnership income, including
gross income and gain for such Partnership Year or, if insufficient, future
Partnership Years) in an amount and manner sufficient to prevent or eliminate,
to the extent required by the Regulations, its Adjusted Capital Account Deficit.
E. Nonrecourse Deductions. Nonrecourse Deductions for any
Partnership Year shall be allocated to the Partners in accordance with their
respective Percentage Interests. If the General Partner determines in its good
faith discretion that the Partnership's Nonrecourse Deductions must be allocated
in a different ratio to satisfy the safe harbor requirements of the Regulations
promulgated under Section 704(b) of the Code, the General Partner is authorized,
upon notice to the Limited Partners, to revise the prescribed ratio for such
Partnership Year to the numerically closest ratio which would satisfy such
requirements.
F. Partner Nonrecourse Deductions. Any Partner Nonrecourse
Deductions for any Partnership Year shall be specially allocated to the Partner
who bears the economic risk of loss with respect to the Partner Nonrecourse Debt
to which such Partner Nonrecourse Deductions are attributable in accordance with
Regulations Sections 1.704-2(b)(4) and 1.704-2(i).
G. Code Section 754 Adjustments. To the extent an adjustment to the
adjusted tax basis of any Partnership asset pursuant to Section 734(b) or 743(b)
of the Code is required, pursuant to Regulations Section 1.704-l(b)(2)(iv)(m),
to be taken into account in determining Capital Accounts, the amount of such
adjustment to the Capital Accounts shall be treated as an item of gain (if the
adjustment increases the basis of the asset) or loss (if the adjustment
decreases such basis), and such item of gain or loss shall be specially
allocated to the Partners in a manner consistent with the manner in which their
Capital Accounts are required to be adjusted pursuant to such Section of the
Regulations.
2. Allocations for Tax Purposes.
A. Except as otherwise provided in this Section 2, for federal
income tax purposes, each item of income, gain, loss and deduction shall be
allocated among the Partners in the same manner as its correlative item of
"book" income, gain, loss or deduction is allocated pursuant to Sections 6.1 and
6.3 of the Agreement and Section 1 of this Exhibit C.
B. In an attempt to eliminate Book-Tax Disparities attributable to a
Contributed
<PAGE>
Page 75
Property or Adjusted Property, items of income, gain, loss, and deduction shall
be allocated for federal income tax purposes among the Partners as follows:
(1) (a) In the case of a Contributed Property, such items
attributable thereto shall be allocated among the Partners consistent with the
principles of Section 704(c) of the Code to take into account the variation
between the 704(c) Value of such property and its adjusted basis at the time of
contribution (taking into account Section 2.C of this Exhibit C); and
(b) any item of Residual Gain or Residual Loss attributable
to a Contributed Property shall be allocated among the Partners in the same
manner as its correlative item of "book" gain or loss is allocated pursuant to
Section 6.1 of the Agreement and Section 1 of this Exhibit C.
(2) (a) In the case of an Adjusted Property, such items shall
(i) first, be allocated among the Partners in a manner
consistent with the principles of Section 704(c) of the Code to take into
account the Unrealized Gain or Unrealized Loss attributable to such property and
the allocations thereof pursuant to Exhibit B;
(ii) second, in the event such property was originally
a Contributed Property, be allocated among the Partners in a manner consistent
with Section 2.B(1) of this Exhibit C; and
(b) any item of Residual Gain or Residual Loss attributable
to an Adjusted Property shall be allocated among the Partners in the same manner
its correlative item of "book" gain or loss is allocated pursuant to Section 6.1
of the Agreement and Section 1 of this Exhibit C.
(3) all other items of income, gain, loss and deduction shall be
allocated among the Partners the same manner as their correlative item of "book"
gain or loss is allocated pursuant to Section 6.1 of the Agreement and Section 1
of this Exhibit C.
C. To the extent Regulations promulgated pursuant to Section 704(c)
of the Code permit a Partnership to utilize alternative methods to eliminate the
disparities between the Carrying Value of property and its adjusted basis, the
General Partner shall, subject to the terms of any Applicable Contribution
Agreement, have the authority to elect the method to be used by the Partnership
and such election shall be binding on all Partners; provided, however, that the
Section 704(c) method to be used by the Partnership in connection with the
transfer of assets to the Partnership by the General Partner shall be the
traditional method with curative allocations limited solely to allocations of
gain and ordinary income recapture recognized by the Partnership upon the sale
of such assets to the extent allocations of depreciation (as computed for tax
purposes) with respect to such assets to the other Partners have been limited by
the "ceiling rule," as described in Regulations Section 1.704-3(c)(iii)(B).
<PAGE>
Page 76
EXHIBIT D
NOTICE OF REDEMPTION
The undersigned hereby irrevocably (i) redeems _________ Common/Preferred
[select one] Partnership Units in Burnham Pacific Operating Partnership, L.P. in
accordance with the terms of the Agreement of Limited Partnership of Burnham
Pacific Operating Partnership, L.P., as amended, and the Redemption Right
referred to therein, (ii) surrenders such Partnership Units and all right, title
and interest therein and (iii) directs that the Cash Amount or REIT Shares
Amount (as determined by the General Partner) deliverable upon exercise of the
Redemption Right be delivered to the address specified below, and if REIT Shares
are to be delivered, such REIT Shares be registered or placed in the name(s) and
at the address(es) specified below. The undersigned hereby represents,
warrants, and certifies that the undersigned (a) has marketable and unencumbered
title to such Partnership Units, free and clear of the rights of or interests of
any other person or entity, (b) has the full right, power and authority to
redeem and surrender such Partnership Units as provided herein and (c) has
obtained the consent or approval of all persons or entities, if any, having the
right to consent to or approve such redemption and surrender.
Dated:_________________ Name of Limited Partner:
Signature of Limited Partner)
(Street Address)
(City) (State) (Zip Code)
Signature Guaranteed by:
IF SHARES ARE TO BE ISSUED, ISSUE TO:
Name:
Please insert social security or identifying number:
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Page 77
EXHIBIT E
VALUE OF CONTRIBUTED PROPERTY
Underlying Property 704(c) Value Agreed Value
<PAGE>
EXHIBIT 10.1.2
RIGHTS OF PREFERRED UNITS
AND COMMON UNITS
Terms of Series 1997-A Preferred Units and Common Units of
Burnham Pacific Operating Partnership, L.P. (the "Operating Partnership")
Section 1. Designation and Amount.
Pursuant to Section 4.2.A. of the Agreement of Limited Partnership
of the Operating Partnership (the "Partnership Agreement"), the General
Partner of the Operating Partnership (the "General Partner") has designated
4,800,000 units of Limited Partnership Interest as Series 1997-A Preferred
Units (the "Series 1997-A Preferred Units"), which units shall have the
preferences, exchange, redemption and other rights, and voting powers,
restrictions, limitations as to distributions, qualifications and terms and
conditions of redemption as set forth below. All other Units of Limited
Partnership Interest shall constitute "Common Units" or "Units" that shall
collectively have all of their rights of the Limited Partners of the
Operating Partnership except for those that are expressly granted to the
Series 1997-A Preferred Units in this Exhibit C.
Section 2. Distributions.
(a) Holders of Series 1997-A Preferred Units will be entitled to
receive, when, as and if authorized by the General Partner out of funds
legally available for the payment of distributions, cumulative quarterly cash
distributions (rounded up to the nearest whole cent) equal to the greater of
(i) 2.00% (per quarter) of $25.00 per Series 1997-A Preferred Unit (such
$25.00, the "Stated Value"), and (ii) the per unit Common Stock Dividend
Amount (as hereinafter defined) for each Series 1997-A Preferred Unit,
payable in each case in arrears on the last Business Day (as hereinafter
defined) of each of March, June, September and December of each year,
commencing on the first such day after the first issuance of Series 1997-A
Preferred Units (each a "Distribution Payment Date"). The "Common Stock
Dividend Amount" applicable as of any Distribution Payment Date shall mean
the amount which is the product of (i) the dividend payable on such Dividend
Payment Date with respect to each share of Common Stock, par value $.01 per
share (the "Corporation Common Stock"), of Burnham Pacific Properties, Inc.
(the "Corporation"), and (ii) the number of shares of Corporation Common
Stock for which each Series 1997-A Preferred Unit may, at the option of the
Corporation, be exchanged, at the Common Exchange Rate (as hereinafter
defined) then in effect and otherwise as set forth herein as of the record
date established for such Distribution Payment Date (determined, for purposes
of this computation,
<PAGE>
to the fourth decimal place); PROVIDED, HOWEVER, that the Common Stock
Dividend Amount shall be adjusted as to any Distribution Payment Date only
when and to the extent that the average amount of the dividends payable on or
most closely to such Distribution Payment Date and the three next preceding
Distribution Payment Dates exceeds the amount of the regular dividend ($.25
per share of Common Stock per quarter (as adjusted for splits, share
dividends and other similar events), as the same may from time to time be
reasonably and sustainably increased by the Board of Directors by resolution
stating that such increased dividend is "regular". Such cumulative quarterly
cash distributions will accrue daily on the basis of a 360-day year of twelve
30-day months, and will, to the extent not paid in full on a Distribution
Payment Date, together with accruals thereon at the compounded quarterly at a
rate of 2.00% from such Distribution Payment Date until payment is made,
whether or not the Operating Partnership has earnings or surplus. The
distribution payable to the holder of each Series 1997-A Preferred Unit on
the first Distribution Payment Date after such unit is issued will be the
Accrued Distributions thereon calculated from the date of issuance to such
Distribution Payment Date. If any Distribution Payment Date is not a
Business Day, the distribution due on that Distribution Payment Date will be
paid on the first Business Day immediately succeeding that Distribution
Payment Date. Each Distribution Payment Date will be on a date which is the
date fixed for payment of dividends with respect to the shares of Corporation
Common Stock or is not more than five Business Days after the date fixed for
payment of dividends with respect to the shares of Corporation Common Stock.
As used with regard to the Series 1997-A Preferred Units, the term "Dividend
Payment Amount" means, as to any quarter ending on a Distribution Payment
Date, the cash dividend amount declared and paid with respect to such quarter
on each share of Corporation Common Stock; "Business Day" means a day on
which both state and federally chartered banks in New York, New York are
required to be open for general banking business; "Accrued Distributions"
means all accrued and due distributions together with all accrued but not yet
due distributions (compounded as provided above and together with accruals
thereon) (whether or not declared or authorized); and "Outstanding
Distributions" means all accrued and due distributions (compounded as
provided above together with accruals thereon) (whether or not declared or
authorized) but excluding all accrued but not yet due distributions.
(b) Each distribution will be payable to holders of record of
Series 1997-A Preferred Units on a date (a "Record Date") selected by the
General Partner which is not less than 10 nor more than 45 days before the
Distribution Payment Date on which the distribution is to be paid. No Record
Date will precede the close of business on the date the Record Date is fixed.
(c) Unless and until all Accrued Distributions on the Series 1997-A
Preferred Units under Section 2(a) through the most recent preceding
Distribution Payment Date have been paid (or are being paid contemporaneously
therewith), the Operating Partnership may not (i) declare or pay any
distribution (other than a distribution payable solely in Common Units), or
set aside any funds or assets for payment or distribution with regard to any
Junior Units (as hereinafter defined), (ii) redeem or purchase or set aside
any funds or
2
<PAGE>
other assets for the redemption or purchase of any Junior Units or (iii)
authorize, take or cause or permit to be taken any action that will result in
(A) the declaration or payment by the Operating Partnership of any
distribution to its partners, or the setting aside of any funds or assets for
payment of any distributions to its partners, or (B) the redemption or
purchase, or the setting aside of any funds or other assets for the
redemption or purchase of, any partnership interests in the Operating
Partnership, except as otherwise set forth herein. As used herein, the term
"Junior Units" means, with regard to the Series 1997-A Preferred Units, all
partnership interests in the Operating Partnership to which the Series 1997-A
Preferred Units are prior in rank with regard to payment of distributions or
payments upon the liquidation, dissolution or winding-up of the Operating
Partnership; the term "Person" shall mean an individual, partnership,
corporation, limited liability company, business trust, joint stock company,
trust, unincorporated association, joint venture, nation or government, any
state or other political subdivision thereof and any entity exercising
executive, legislative, judicial, regulatory or administrative functions of
or pertaining to government or other entity of whatever nature.
(d) While any Series 1997-A Preferred Units are outstanding, the
Operating Partnership may not pay any distribution, or set aside any funds
for the payment of a distribution, with regard to any units of any class or
series of the Operating Partnership which rank on a parity with the Series
1997-A Preferred Units as to payment of distributions unless at least a
proportionate payment is made with regard to all Accrued Distributions on the
Series 1997-A Preferred Units (except, as to any Series 1997-A Preferred
Units as to which a Notice of Redemption (as hereinafter defined) has been
furnished by the holder thereof, at the effective time of redemption) under
Section 2(a) through the most recent preceding Distribution Payment Date. A
payment of distributions with regard to the Series 1997-A Preferred Units
will be proportionate to a payment of a distribution with regard to another
class or series of units of partnership interest if the distribution per
Series 1997-A Preferred Units is the same percentage of the Accrued
Distributions (except as aforesaid) under Section 2(a) through the most
recent preceding Distribution Payment Date, with regard to a Series 1997-A
Preferred Unit that the distribution paid with regard to a unit of the other
class or series of partnership interest is of the Accrued Distributions
(except as aforesaid) under Section 2(a) through the most recent preceding
Distribution Payment Date, with regard to a unit of that other class or
series of partnership interest.
(e) Any distribution paid with regard to Series 1997-A Preferred
Units will be paid equally with regard to each outstanding Series 1997-A
Preferred Unit, except to the extent that Series 1997-A Preferred Units are
outstanding for differing amounts of time during the relevant distribution
period.
Section 3. Voting Rights.
3
<PAGE>
The voting rights of the holders of Series 1997-A Preferred Units
will be only the following:
(a) The holders of Series 1997-A Preferred Units will have the
right to vote on any matters on which the holders of Common Units are
entitled to vote on an "as converted" basis with holders of Common Units, as
though part of the same class as holders of Common Units, with such number
of Common Units deemed held of record by holders of Series 1997-A Preferred
Units on any Record Date as would be the number of Common Units into which
the Series 1997-A Preferred Units held by such holders would be entitled to
be exchanged on such Record Date (such number to be based upon the Common
Exchange Rate). The holders of Series 1997-A Preferred Units shall receive
notice of any meetings of the holders of Common Units, and all other notices
and correspondence to the holders of Common Units provided by the Operating
Partnership, and shall be entitled to take such actions, and shall have such
rights, as are set forth herein or are otherwise available to the holders of
Common Units as set forth in the Operating Partnership Agreement as are in
effect on the date hereof, in each case with the same effect as would be
taken by holders of Series 1997-A Preferred Units if deemed to be holders of
such number of Common Units determined as aforesaid.
(b) While any Series 1997-A Preferred Units are outstanding, the
Operating Partnership will not, directly or indirectly, including through a
recapitalization or a merger or consolidation with any other Person, or
otherwise, without approval of holders of at least a majority of the
outstanding Series 1997-A Preferred Units, voting separately as a class, (i)
issue in excess of 4,800,000 Series 1997-A Preferred Units; (ii) increase the
number of authorized Series 1997-A Preferred Units; (iii) combine, split or
reclassify the outstanding Series 1997-A Preferred Units into a smaller or
larger number of units; (iv) exchange any Series 1997-A Preferred Units for
other securities or the right to receive cash, or propose or require an
exchange other than as provided herein, or reclassify any Series 1997-A
Preferred Units, or authorize, create, classify, reclassify or issue any
class or series of units ranking prior to or on a parity with the Series
1997-A Preferred Units either as to distributions or upon liquidation,
dissolution or winding-up of the Operating Partnership or as to the rights of
the Series 1997-A Preferred Units set forth in this Section 3; (v) amend,
alter or repeal, or permit to be amended, altered or repealed, any provision
of this First Amendment in a manner which would affect adversely the rights
and preferences of the holders of Series 1997-A Preferred Units.
(c) While any Series 1997-A Preferred Units are outstanding, the
Operating Partnership will not, directly or indirectly, including through a
recapitalization or a merger or consolidation with any other Person, or
otherwise, without the approval of the holders of not less than a majority of
the outstanding Series 1997-A Preferred Units, voting separately as a class,
propose, authorize, take, or cause to be taken or allow to occur any of the
following actions: (i) the Transfer (as hereinafter defined) to a Person in
a single transaction or series of
4
<PAGE>
transactions of all or substantially all of the assets of the Operating
Partnership, including for such purpose to any Person (but excluding from the
applicability of this clause (i) any Person in which the Operating
Partnership has a direct or indirect minority interest such that a sale,
transfer or assignment is not within Operating Partnership's control or a
merger or consolidation of the Operating Partnership with or into a
wholly-owned subsidiary of the Operating Partnership, in which the Operating
Partnership Capitalization (as hereinafter defined) is unchanged as a result
thereof) owned directly or indirectly by the Operating Partnership to the
extent of the Operating Partnership's attributed interest in such other
Person; (ii) any reorganization or recapitalization of the Operating
Partnership in a single transaction or in more than one transaction, in or as
a result of which the Common Unit Valuation (as hereinafter defined) is not
in excess of $15.375; (iii) any merger or consolidation of the Operating
Partnership with any Person (except a merger or consolidation of the
Operating Partnership with or into a wholly owned subsidiary in which the
Operating Partnership Capitalization (as hereinafter defined) is unchanged)
in or as a result of which the Common Unit Valuation is not in excess of
$15.375; or (iv) a Change of Control (as defined in Section 4 hereof). As
used herein, "Common Unit Valuation" is the value of each Common Unit
determined, in connection with any reorganization, merger or consolidation,
absent manifest error, by reference to the opinion of a nationally-recognized
investment bank obtained by the Board of Directors of the Corporation at the
expense of the Operating Partnership for such purpose unless the Operating
Partnership and the holders of a majority in interest or the Series 1997-A
Preferred Units (exclusive of the Corporation) otherwise agree or, if no such
opinion is provided, by reference to Operating Partnership Capitalization and
assuming in each such case for the purposes of such determination that the
number of units is as assumed in the definition of Operating Partnership
Capitalization. As used herein, "Operating Partnership Capitalization" is
the total market equity capitalization of the Operating Partnership
determined by reference to (i) outstanding (assuming for this purpose the
exercise of all then outstanding and exercisable warrants or other rights to
acquire Common Units issued in the ordinary course of business and the
exercise or conversion of all other then exercisable or convertible Common
Unit equivalents not otherwise referenced below and Series 1997-A Preferred
Units) Common Units and (ii) the number of Common Units which would be issued
on Mandatory Exchange of outstanding Series 1997-A Preferred Units
(determined in accordance with Section 5(b)). As used herein, "Transfer"
means any sale, transfer by operation of law or otherwise, assignment,
disposition or arrangement, whether voluntary or involuntary, which has the
effect, directly or indirectly, of altering the holding of or causing or
permitting another Person to succeed to, any voting control or economic
interest, whether beneficial or of record or both (other than as a nominee of
the transferor), including any arrangement for collateral purposes only, or
which could, with the passage of time or the occurrence of any event, or
both, have such effect.
(d) With respect to any matter to be approved by holders of the
Series 1997-A Preferred Units, the General Partner will act in accordance
with Section 3(f) of the Articles Supplementary of the General Partner with
respect to any Series 1997-A Preferred Units held by the General Partner.
5
<PAGE>
Section 4. Change of Control; Liquidation.
(a) Upon the occurrence of any event (a "Change of Control Event")
which would permit the holders of Corporation Preferred Stock to receive a
Change of Control Preference as defined in Section 4(a) of the Articles
Supplementary of the Corporation as presently in effect, each holder of
Series 1997-A Preferred Units may, at its option, receive, and, if so
electing by written notice to the Operating Partnership to such effect, will
be entitled to receive, out of the assets of the Operating Partnership
available for distribution to its partners, whether from capital, surplus or
earnings, before any distributions made to holders of any Junior Units, an
amount per unit (the "Change of Control Preference") equal to the product of
(A) the sum of (1) Stated Value plus the per unit amount of Accrued
Distributions with regard to such Series 1997-A Preferred Unit to the date of
final distribution and (2) 5% of the sum of Stated Value and the per unit
amount of Outstanding Distributions with regard to such Series 1997-A
Preferred Unit to the date of final distribution. The Operating Partnership
shall provide proper notice to each holder of record of Series 1997-A
Preferred Units of any Change of Control Event.
(b) In the event of an involuntary liquidation, dissolution or
winding-up of the Operating Partnership, as a result of which the assets of
the Operating Partnership are sold to multiple unrelated Persons, and the
holders of the Operating Partnership's equity securities receive solely cash
in a distribution upon liquidation, each holder of Series 1997-A Preferred
Units, may at its option receive, and, if so electing by written notice to
the Operating Partnership to such effect, shall be entitled to receive, out
of the assets of the Operating Partnership available for distribution to its
partners, whether from capital, surplus or earnings, before any distributions
made to holders of any Junior Units, an amount per unit equal to the sum of
(i) Stated Value plus (ii) the per unit amount of Outstanding Distributions
with respect to such Series 1997-A Preferred Unit to the date of final
distribution. In the event of any other involuntary or a voluntary
liquidation, dissolution or winding-up of the Operating Partnership, each
holder of Series 1997-A Preferred Units may, at its option, receive, and, if
so electing by written notice to the Operating Partnership to such effect,
shall be entitled to receive, out of the assets of the Operating Partnership
available for distribution to its partners, whether from capital, surplus or
earnings, before any distributions made to holders of any Junior Units, an
amount per unit equal to the sum of (i) Stated Value plus (ii) the per unit
amount of Accrued Distributions with respect to such Series 1997-A Preferred
Unit to the date of final distribution plus (iii) 5% of the sum of the Stated
Value and the per unit amount of Outstanding Distributions. All amounts
payable under this Section 4(b) shall be payable as a liquidation preference
(the "Liquidation Preference").
(c) Holders of Series 1997-A Preferred Units other than the
Corporation as General Partner may further elect, when delivering the written
notice to the Operating Partnership with respect to the election under
Section 4(a) or Section 4(b), in lieu of receiving
6
<PAGE>
the Change of Control Preference or the Liquidation Preference, as the case
may be, to receive Corporation Preferred Stock or Common Units upon the
redemption or exchange of Series 1997-A Preferred Units, without regard to
any time restriction on exchange established in Section 5(a) hereof (but
subject to the limitations in Section 5(g) hereof), in the manner and as
provided in Section 5 hereof.
(d) If, upon any liquidation, dissolution or winding-up of the
Operating Partnership, the assets of the Operating Partnership, or proceeds
of those assets, available for distribution to the holders of Series 1997-A
Preferred Units and of units of all other classes or series which are on a
parity as to distributions on liquidation with the Series 1997-A Preferred
Units are not sufficient to pay in full the Change of Control Preference or
the Liquidation Preference, as the case may be, to the holders of Series
1997-A Preferred Units which have not elected to redeem Series 1997-A
Preferred Units as provided in Section 4(c) by reference to Section 5 hereof,
and any liquidation preference of all other classes or series of units of
Partnership Interests which are on a parity as to distributions on
liquidation with the Series 1997-A Preferred Units, then the assets, or the
proceeds of those assets, which are available for distribution to such
holders of Series 1997-A Preferred Units and of the units of all other
classes or series which are on a parity as to distributions on liquidation
with Series 1997-A Preferred Units, will be distributed to the holders of
Series 1997-A Preferred Units, and of the units of all other classes or
series which are on a parity as to distributions on liquidation with the
Series 1997-A Preferred Units, ratably in accordance with the respective
amounts of the Liquidation Preference, with respect to the Series 1997-A
Preferred Units entitled thereto, and the liquidation preferences applicable
to the units of other classes or series which are on a parity as to
distributions on liquidation with the Series 1997-A Preferred Units, with
respect to the units of any such other class or series entitled thereto.
After payment of the full amount of the Change of Control Preference or the
Liquidation Preference, as the case may be, such holders of Series 1997-A
Preferred Units will not be entitled to any further distribution of assets of
the Operating Partnership and will not be entitled to redeem their Series
1997-A Preferred Units as provided in Section 5 hereof.
As used herein, a "Change of Control" of the Operating Partnership
shall be deemed to have occurred upon a Change of Control of the Corporation
(as defined in the Articles Supplementary of the Corporation as currently in
effect).
Section 5. Redemption and Exchange.
(a) Optional Redemption. Except as otherwise set forth in clause
(iii) below, each holder of Series 1997-A Preferred Units (other than the
General Partner) shall have the right (the "Redemption Right") to require the
Operating Partnership to redeem such Units at a redemption price equal to and
in the form of the Cash Amount (as hereinafter defined) to be paid by the
Operating Partnership. Any such Redemption Right shall be exercised pursuant
to a Notice of Redemption (a "Notice of Redemption") delivered to the
Operating Partnership (with a copy to the General Partner) by the holder of
such Series 1997-
7
<PAGE>
A Preferred Unit who is exercising the Redemption Right (the "Redeeming
Holder"). A holder may exercise the Redemption Right from time to time with
respect to part or all of the Series 1997-A Preferred Units that it owns, as
selected by the holder, provided, that a holder may not exercise the
Redemption Right for less than one thousand (1,000) Series 1997-A Preferred
Units unless such holder then holds less than one thousand (1,000) Series
1997-A Preferred Units, in which event the Redeeming Holder must exercise the
Redemption Right for all of its Series 1997-A Preferred Units. "Specified
Redemption Date" means the tenth business day after receipt by the General
Partner of a Notice of Redemption; provided that if Corporation Common Stock
is not then publicly traded, Specified Redemption Date means the thirtieth
business day after receipt by the General Partner of a Notice of Redemption.
"Cash Amount" shall mean (i) an amount of cash per Series 1997-A Preferred
Unit equal to the greater of (x) the Liquidation Preference per Series 1997-A
Preferred Unit and (y) an amount of cash equal to the product of the Common
Exchange Rate and the Current Market Price (as hereinafter defined). "Common
Exchange Rate" means that number of shares of Corporation Common Stock into
which a share of Corporation Preferred Stock is then convertible, pursuant to
the Articles Supplementary of the Corporation in effect on the date hereof.
"Current Market Price" as of any date of determination will be the average of
the volume weighted average price per share of the Corporation Common Stock
(the "VWAP") on each of the twenty Trading Days (as hereinafter defined),
immediately preceding such date as the VWAP for each day is reported by a
nationally-recognized market quotation or information service that is
selected by the Corporation and approved by a majority in interest of the
holders of the Series 1997-A Preferred Units (exclusive of the units held by
the Corporation) which approval will not be unreasonably withheld. As used
herein, the term "Trading Day" means (A) if the Corporation Common Stock is
listed on at least one stock exchange, a day on which there is trading on the
principal stock exchange on the Corporation Common Stock is listed, (B) if
the Corporation Common Stock is not listed on a stock exchange, but sale
prices of the Corporation Common Stock are reported on an automated quotation
system a day on which trading is reported on the principal automated
quotation system on which sales of the Corporation Common Stock are reported,
(C) if the Corporation Common Stock is not listed on a stock exchange and
sale prices of the Corporation Common Stock are not reported on an automated
quotation system, a day on which quotations are reported by National
Quotation Bureau Incorporated, or (D) if the Corporation Common Stock is not
so listed and sale prices are not so reported, any day other than a Saturday,
a Sunday or a bank holiday in New York, New York.
(A) The Redeeming Holder shall have no right to receive any
distributions paid after the Specified Redemption Date with respect to any
Series 1997-A Preferred Units so redeemed.
(B) The assignee of any holder may exercise the rights
(subject to applicable limitations) of such holder pursuant to this Section
5, and such holder shall be deemed to have assigned such rights to such
assignee and shall be bound by the exercise of such rights by such holder's
assignee. In connection with any exercise of such
8
<PAGE>
rights by such assignee on behalf of such holder, the applicable Cash Amount
shall be paid by the Operating Partnership directly to such assignee and not
to such holder.
(C) At any time within five business days of receipt by the
General Partner of a written request of a holder of a Series 1997-A Preferred
Unit, the General Partner shall provide such holder with written notice of
the Common Exchange Rate.
(ii) General Partner Assumption of Right.
(A) If a Redeeming Holder has delivered a Notice of
Redemption, the General Partner may, in its sole and absolute discretion,
elect to assume directly and satisfy a Redemption Right (a) by paying to the
Redeeming Holder the Cash Amount or (b) issuing a number of fully paid and
non-assessable shares of Corporation Preferred Stock such that each Series
1997-A Preferred Unit will be entitled to be exchanged for one share of
Corporation Preferred Stock. Unless the General Partner, in its sole and
absolute discretion, shall exercise its right to assume directly and satisfy
the Redemption Right, the General Partner shall not have any obligation to
the Redeeming Holder or to the Operating Partnership with respect to the
Redeeming Holder's exercise of the Redemption Right. If the General Partner
shall exercise its right to satisfy the Redemption Right in the manner
described in the first sentence of this Section 5(a)(ii)(A) and shall fully
perform its obligations in connection therewith, the Operating Partnership
shall have no obligation to pay any amount to the Redeeming Holder with
respect to such Redeeming Holder's exercise of the Redemption Right, and each
of the Redeeming Holder, the Operating Partnership and the General Partner
shall, for federal income tax purposes, treat the transaction between the
General Partner and the Redeeming Holder as a sale of the Redeeming Holder's
Series 1997-A Preferred Units to the General Partner. Nothing contained in
this Section 5(a)(ii)(A) shall imply any right of the General Partner to
require any holder of Series 1997-A Preferred Units to exercise the
Redemption Right afforded to such holder pursuant to Section 5(a)(i).
(B) Each Redeeming Holder agrees to execute such documents as
the General Partner may reasonably require in connection with any issuance of
such shares of Corporation Preferred Stock upon exercise of the Redemption
Right.
(iii) Exceptions to Exercise of Redemption Right.
Notwithstanding the provisions of Sections 5(a)(i) and 5(a)(ii), a holder of
Series 1997-A Preferred Units shall not be entitled to exercise the
Redemption Right pursuant to Section 5(a)(i) if (but only as long as) the
delivery of shares of Corporation Preferred Stock to such holder on the
Specified Redemption Date (A) (i) would, based upon the advice of outside
counsel, be prohibited under the charter of the Corporation (ii) would be
prohibited under Section 5(g) hereof or (iii) would, based upon the advice of
outside counsel, be prohibited under applicable federal or state securities
laws or regulations (in each case regardless of whether the General Partner
would in fact assume and satisfy the Redemption Right) and (B) if, (x) the
holder is Blackacre
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Capital Group, L.P. ("Blackacre") or any affiliate of Blackacre, and (y)
Blackacre will at the time of redemption hold Corporation Preferred Stock that
is convertible into more than 9.8% of the Corporation Common Stock, such entity
does not provide the Corporation with a representation letter substantially in
the form attached hereto as Schedule 1.
(iv) No Liens on Series 1997-A Preferred Units Delivered for
Redemption. Each Redeeming Holder covenants and agrees with the General
Partner that all Series 1997-A Preferred Units delivered for redemption shall
be delivered to the Operating Partnership or the General Partner, as the case
may be, free and clear of all liens, and, notwithstanding anything contained
herein to the contrary, neither the General Partner nor the Operating
Partnership shall be under any obligation to redeem Series 1997-A Preferred
Units which are or may be subject to any liens.
(b) Mandatory' Exchange. Subject to Section 7 hereof, in the event
that the Corporation gives a Notice of Mandatory Conversion (as defined in
the Articles Supplementary of the Corporation relating to the right and
preferences of the Corporation Preferred Stock as in effect on the date of
the First Amendment) to holders of Corporation Preferred Stock, the Operating
Partnership shall have the right to exchange on the Mandatory Conversion Date
(as defined in such Articles Supplementary) not less than all of the
outstanding Series 1997-A Preferred Units into a number of fully paid and
non-assessable Common Units such that each Series 1997-A Preferred Unit will
be entitled to be exchanged for a number of Common Units equal to the Common
Exchange Rate (assuming, for such purpose that a Common Unit is equivalent to
a share of Common Stock). In order to elect to effect the mandatory exchange
(the "Mandatory Exchange") of Series 1997-A Preferred Units, the Operating
Partnership shall issue a notice that all Series 1997-A Preferred Units are
to be exchanged, setting forth the date of the intended exchange (such
notice, the "Notice of Mandatory Exchange," and such date, the "Mandatory
Exchange Date") to all holders of outstanding Series 1997-A Preferred Units
on a date (the "Mandatory Exchange Notice Date") at least 90 but not more
than 120 days prior to the Mandatory Exchange Date. The Notice of Mandatory
Exchange shall also specify a record date (the "Mandatory Exchange Record
Date") selected by the Board of Directors of the General Partner which is not
less than 20 but not more than 45 days before the Mandatory Exchange Date and
the number of Common Units for which each Series 1997-A Preferred Unit will
be exchanged. If the Operating Partnership gives a Notice of Mandatory
Exchange, then, provided that the computation set forth in the Notice of
Mandatory Exchange is not clearly erroneous, the outstanding Series 1997-A
Preferred Units will be automatically exchanged for Common Units at the close
of business on the Mandatory Exchange Date and on such date the Operating
Partnership will pay holders of the Series 1997-A Preferred Units an amount
equal to all Accrued Distributions thereon through the Mandatory Exchange
Date. At the close of business on the Mandatory Exchange Date, the General
Partner shall cause appropriate amendments to the Partnership Agreement to be
made to reflect the Mandatory Exchange and shall deliver to the holders of
the Series 1997-A Preferred Units a counterpart of the Partnership Agreement
to reflect the issuances of such Common Units to such holders. Any
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<PAGE>
Common Units issued pursuant to a Mandatory Exchange shall be immediately
redeemable at any time thereafter, at the option of the holder thereof, in
accordance with the redemption provisions of the Partnership Agreement.
(c) Redemption and Exchange Procedures.
(i) If Series 1997-A Preferred Units are noticed for
redemption or exchange between the close of business on a distribution
payment Record Date and the opening of business on the corresponding
Distribution Payment Date ("Ex Record Date Units"), the distribution with
respect to those units will be payable on the Distribution Payment Date to
the holder of record of the Ex Record Date Units on the distribution payment
Record Date notwithstanding the surrender of the Ex Record Date Units for
redemption or exchange after the distribution payment Record Date and prior
to the Distribution Payment Date. The Operating Partnership will make no
payment or adjustment for Accrued Distributions on Ex Record Date Units,
whether or not in arrears, or for distributions on the Common Units or shares
of Corporation Preferred Stock issued upon redemption or exchange of the Ex
Record Date Units, other than to make payment to the holder of record thereof
on the Record Date. All Accrued Distributions payable with respect to Series
1997-A Preferred Units noticed for exchange during any period commencing with
the close of business on each Distribution Payment Date and ending with the
opening of business on the next succeeding Record Date will be paid to the
holder redeeming or exchanging such units on the related redemption or
exchange date.
(ii) As promptly as practicable after a Specified Redemption
Date, or the Mandatory Exchange Date, as the case may be, the Operating
Partnership will issue and will deliver to the holder at the office of the
holder set forth in the Notice of Election to Exchange, or on the holder's
written order, a certificate or certificates representing the number of whole
shares of Corporation Preferred Stock or a fully executed counterpart of an
amendment to the Partnership Agreement reflecting the number of Common Units
issued upon exchange of the Series 1997-A Preferred Units.
(iii) Each redemption or exchange will be deemed to have been
effected at the Specified Redemption Date or on the Mandatory Exchange Date,
as applicable, and the person in whose name a certificate for shares of
Corporation Preferred Stock, if any, or to whom a fully executed counterpart
of an amendment to the Partnership Agreement reflecting the ownership of
Common Units, if any, is to be issued upon a redemption or exchange, will be
deemed to have become the holder of record of the shares of Corporation
Preferred Stock or the Common Units represented by that certificate or
amendment, as the case may be, at such effective time. All shares of
Corporation Preferred Stock and all Common Units delivered upon redemption or
exchange of Series 1997-A Preferred Units will upon delivery be duly and
validly issued and fully paid and non-assessable, free of all liens and
charges and not subject to any preemptive rights except such preemptive
rights as may exist with respect to the Corporation Preferred Stock under the
Articles Supplementary of the
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<PAGE>
Corporation relating thereto. The Series 1997-A Preferred Units so redeemed
or exchanged will no longer be deemed to be outstanding and all rights of the
holder with respect to those shares will immediately terminate, except the
right to receive the shares of Corporation Preferred Stock or the Common
Units to be issued or distributed as a result of the redemption or exchange
and except that such Series 1997-A Preferred Units that are redeemed or
exchanged for Corporation Preferred Stock shall become the property of the
General Partner in order to reflect the shares of Corporation Preferred Stock
issued in exchange therefor.
(d) Reclassification of Common Units. If there is a
reclassification or change of outstanding Common Units or a merger or
consolidation of the Operating Partnership with any other entity that results
in a reclassification, change, conversion, exchange or cancellation of the
outstanding Common Units, or a sale or transfer of all or substantially all
of the assets of the Operating Partnership, upon any subsequent redemption or
exchange of Series 1997-A Preferred Units, each holder of Series 1997-A
Preferred Units will be entitled to receive the kind and amount of
securities, cash and other property which the holder would have received if a
Mandatory Exchange had occurred immediately before the first of those events
and had retained all the securities, cash and other assets received as a
result of all those events. In the event that a transaction may be viewed as
causing this Section 5(d) to be applicable and create a change in the Common
Exchange Rate, then the change in the Common Exchange Rate will be applicable
and this provision will be applicable.
(e) Reservation of Corporation Preferred Stock and Corporation
Common Stock. The General Partner will at all times reserve and keep
available, free from preemptive rights, out of the authorized but unissued
shares of Corporation Preferred Stock, for the purpose of effecting the
redemption of the Series 1997-A Preferred Units (and the subsequent
conversion of Corporation Preferred Stock into Corporation Common Stock), the
maximum number of shares of Corporation Preferred Stock and Corporation
Common Stock which the General Partner would be required to deliver upon the
redemption of all the outstanding Series 1997-A Preferred Units for
Corporation Preferred Stock and the subsequent conversion of such Corporation
Preferred Stock into Corporation Common Stock. For the purposes of this
Section 5(f), the number of shares of Corporation Preferred Stock or
Corporation Common Stock which the General Partner would be required to
deliver upon the redemption of all outstanding shares of Corporation
Preferred Stock were held by a single holder.
(f) Payment of Certain Taxes. The Operating Partnership will pay
any documentary stamp or similar issue or transfer taxes payable in respect
of the issue or delivery of shares of Corporation Preferred Stock or Common
Units upon the redemption or exchange of the Series 1997-A Preferred Units;
PROVIDED, HOWEVER, that the Operating Partnership will not be required to pay
any tax which may be payable in respect of any transfer involved in the issue
or delivery of shares of Corporation Preferred Stock or of Common Units in a
name other than that of the holder of record of Series 1997-A Preferred Units
to be exchanged and no such issue or delivery will be made unless and until
the person
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<PAGE>
requesting the issue or delivery has paid to the Operating Partnership the
amount of any such tax or has established, to the satisfaction of the
Operating Partnership, that the tax has been paid or is not payable.
(g) Notwithstanding anything to the contrary contained herein, the
Series 1997-A Preferred Units will not be redeemable in exchange for shares
of Corporation Preferred Stock, whether upon exercise of rights by the
holders of the Series 1997-A Preferred Units, the Operating Partnership, the
Corporation or otherwise, unless and until the approval by a majority of
votes cast by the holders, in person or by proxy, of the shares of capital
stock of the Corporation entitled to vote thereon is obtained, at a duly
called and held annual or special meeting of the stockholders of the
Corporation at which a quorum is present, with respect to the redemption into
Corporation Preferred Stock pursuant to the charter of the Corporation;
provided, however, that the restriction contained in this Section 5(g) shall
not apply if a redemption of the Series 1997-A Preferred Units and
Corporation Preferred Stock issued pursuant to the Preferred Stock Purchase
Agreement (as defined below) for cash pursuant to the Contribution Agreement
(as defined below) and the Preferred Stock Purchase Agreement has been
effected such that the remaining outstanding Series 1997-A Preferred Units
and Common Units issued pursuant to the Contribution Agreement together with
the outstanding shares of Corporation Preferred Stock issued pursuant to the
Stock Purchase Agreement do not, on an "as redeemed" or an "as converted"
basis exceed 19.9% of the number of shares of Corporation Common Stock
outstanding immediately prior to closing under the Contribution Agreement by
and among the Corporation, the Operating Partnership and each of the
Contributors listed on Exhibit A-1 thereto (the "Contribution Agreement").
For purposes of this Section 5(g), the term "Preferred Stock Purchase
Agreement" shall mean the Stock Purchase Agreement by and among Westbrook
Burnham Holding, L.C.C., Westbrook Burnham Co-holdings, L.L.C., Burnham
Pacific Properties, Inc. and Burnham Pacific Operating Partnership, L.P.
dated as of December 5, 1997.
Section 6. Status.
So long as any Series 1997-A Preferred Units are outstanding and
held by persons other than the General Partner, the Series 1997-A Preferred
Units may only be issued pursuant to the Contribution Agreement.
Section 7. Redemption After Notice of Mandatory Exchange.
(a) Notwithstanding anything to the contrary contained in Section
5, each holder of Series 1997-A Preferred Units prior to a Mandatory Exchange
Date will have the right, exercisable at any time after the Mandatory
Exchange Notice Date but prior to the Mandatory Exchange Date, to require the
Operating Partnership to redeem any or all of the number of Series 1997-A
Preferred Units specified in the Notice of Mandatory Exchange that are owned
of record by the holder (the number of units as to which each holder elects
redemption under this clause (a) being referred to as the "Identified
Redemption Units"), at a
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<PAGE>
redemption price per share (the "Redemption Price") equal to (i) the sum of
(A) Stated Value plus (B) the per unit amount of the sum of all Accrued
Distributions with regard to the Series 1997-A Preferred Units (whether or
not declared) through the Redemption Date (as hereinafter defined) times (ii)
the percentage determined in accordance with the following table:
Redemption Date Percentage
--------------- ----------
December 31, 2002 to December 31, 2003 105%
December 31, 2003 to December 31, 2004 104%
December 31, 2004 to December 31, 2005 103%
December 31, 2005 to December 31, 2006 102%
December 31, 2006 to December 31, 2007 101%
December 31, 2007 and thereafter 100%
(b) In order to exercise a right to require the Operating
Partnership to redeem a holder's Series 1997-A Preferred Units under this
Section 7, the holder must deliver a request for redemption with respect to
the Identified Redemption Units to the Operating Partnership at any time
prior to the Mandatory Exchange Date. If such a request for redemption is
given with regard to Series 1997-A Preferred Units, promptly (but in no event
more than five Business Days) after the request for redemption is given to
the Operating Partnership, the Operating Partnership will pay the holder cash
equal to the Redemption Price of the units. The date of such payment is
referred to in this Section 7 as the "Redemption Date."
(c) (i) If a request for redemption is delivered to the Operating
Partnership, on the Redemption Date distributions will cease to accrue with
regard to the Series 1997-A Preferred Units to be redeemed, and at the close
of business on that date the holders of those units will cease to be partners
in the Operating Partnership with respect to those units, will have no
interest in or claims against the Operating Partnership by virtue of such
units (other than as described in clause (ii) below) and will have no voting
or other rights with respect to such units.
(ii) The distribution with respect to a Series 1997-A Preferred Unit
which is the subject of a request for redemption under this Section 7
delivered on a day which falls between the close of business on a Record Date
for the payment of such distribution and the opening of business on the
corresponding Distribution Payment Date will be payable on the Distribution
Payment Date to the holder of record of the Series 1997-A Preferred Unit on
the Record Date for the payment of such distribution notwithstanding the
redemption of the Series 1997-A Preferred Unit after the Record Date for the
payment of such distribution and prior to the Distribution Payment Date.
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<PAGE>
Section 8. Ranking. The Series 1997-A Preferred Units shall, with
respect to the payment of distributions, the right to redemption, the right
to receive the Change of Control Preference, the right to receive the
Liquidation Preference and any other assets on liquidation, dissolution or
winding up of the Operating Partnership, rank senior to any other class or
series of partnership interest of the Operating Partnership.
Section 9. Mandatory Redemption in Certain Instances.
(a) If required under the rules of the New York Stock Exchange to enable
(i) the Initial Purchaser (as defined in the Articles Supplementary) to fully
convert all of the shares of Series 1997-A Convertible Preferred Stock
contemplated to be purchased by the Initial Purchaser under the Stock
Purchase Agreement and (ii) the holders of Series 1997-A Preferred Units and
Units to fully convert all of the Series 1997-A Preferred Units and Common
Units contemplated to be issued under the Contribution Agreement, the
Corporation shall seek the approval of its shareholders as to the issuance of
the Common Stock upon conversion of the Series 1997-A Convertible Preferred
Stock, the Series 1997-A Preferred Units and Common Units and any related
matters at the 1998 annual meeting of shareholders, the date of which the
Corporation will use reasonable efforts to advance in time as reasonably
possible and which shall in any event be held on or before May 12, 1998. If
such shareholder approval is not obtained at such meeting, then the
Corporation may, at its sole discretion convene a special meeting of
shareholders for such purpose, PROVIDED, that the same shall be called and
held in sufficient time to enable the Corporation to satisfy its obligations
to such holders under this Section 9. In connection with each such meeting
of shareholders, the Corporation will recommend such approval of its
shareholders, and use its best efforts (including, without limitation, the
retention of a soliciting firm for customary services in this regard) to
cause such approval to be granted. In each such case, the Corporation shall
immediately notify the holders of the Series 1997-A Preferred Units and
Common Units issued under the Contribution Agreement as to whether such
shareholder approval has been obtained. If such approval is not obtained,
the Corporation shall, upon no less than ten Business Days prior written
notice and in any event no later than June 30, 1998, redeem such number of
shares of 1997-A Preferred Units issued under the Contribution Agreement as
shall be agreed upon by the holders thereof and the Corporation in accordance
with Section 4.20 of the Contribution Agreement (the "Redeemed Units") at a
purchase price per share, in cash, paid to the holders thereof, in an amount
equal to the greater of (i) the Stated Value plus the per share amount of
Accrued Dividends (as defined in the Articles Supplementary), if any, and
(ii) the aggregate Current Market Price of a number of shares of Common Stock
(calculated to the nearest 1/100th of a share) equal to the Stated Value plus
the per share amount, if any, of Accrued Dividends as of the date of such
redemption (the "Mandatory Redemption Date") divided by the Conversion Price
then in effect (such greater amount, the "Mandatory Redemption Price").
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<PAGE>
(b) On the Mandatory Redemption Date, dividends will cease to accrue
with regard to the Redeemed Units, and at the close of business on such date
the holders of Series 1997-A Preferred Units and Common Units issued under
the Contribution Agreement will have no interest in or claims against the
Corporation by virtue of such Redeemed Units and will have no voting or other
rights with respect to such Redeemed Units.
(c) The Mandatory Redemption Price shall be due and payable in full on
the Mandatory Redemption Date, which shall be no later than June 30, 1998.
In the event that the Corporation fails to deliver to the holders of Series
1997-A Preferred Units and Common Units issued under the Contribution
Agreement the Mandatory Redemption Price on or before such date, then the
Mandatory Redemption Price shall accrue interest on the principal amount
thereof and unpaid interest thereon, in each case at a rate equal to the
lesser of 1.25% per month and the highest lawful rate of interest, compounded
until such time as the Corporation pays to the holders of Series 1997-A
Preferred Units and Common Units issued under the Contribution Agreement all
amounts due under this Section 9.
Section 10 Miscellaneous.
(a) Except as otherwise expressly provided herein, whenever a notice or
other communication is required or permitted to be given to holders of
Preferred Units, the notice or other communication will be deemed properly
given if deposited in the United States mail, postage prepaid, addressed to
the persons shown on the books of the Operating Partnership as the holders of
the Series 1997-A Preferred Units at the addresses as they appear on the
books of the Operating Partnership, as of the Record Date or dates determined
in accordance with applicable law and with the Partnership Agreement, as in
effect from time to time, with a copy sent to Blackacre Capital Group, L.P.,
450 Park Avenue, New York, New York 10022 Attention: Ronald J. Kravit in each
case by documented overnight delivery service or, to the extent receipt is
confirmed, telecopy, telex or other electronic transmission service.
(b) Series 1997-A Preferred Units will not have any designations,
preferences, conversion or other rights, voting powers, restrictions,
limitations as to distributions and other distributions, qualifications or
terms and conditions of redemption, other than those specifically set forth
herein, in the Partnership Agreement, and as may be provided under applicable
law.
(c) The headings of the various subdivisions herein are for convenience
only and will not affect the meaning or interpretation of any of the
provisions herein.
(d) The preferences, conversion and other rights, voting powers,
restrictions, limitations as to distributions and other distributions,
qualifications and terms and conditions of redemption of the Series 1997-A
Preferred Units may be waived, and any of
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<PAGE>
such provisions of the Series 1997-A Preferred Units may be amended, with the
approval of holders of at least a majority of the outstanding Series 1997-A
Preferred Units (exclusive of any Series 1997-A Preferred Units held by the
Corporation and its affiliates), voting separately as a class.
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<PAGE>
Section 11 Severability of Provisions.
Whenever possible, each provision hereof shall be interpreted in a
manner as to be effective and valid under applicable law, but if any
provision hereof is held to be prohibited by or invalid under applicable law,
such provision shall be ineffective only to the extent of such prohibition or
invalidity, without invalidating or otherwise adversely affecting the
remaining provisions hereof. If a court of competent jurisdiction should
determine that a provision hereof would be valid or enforceable if a period
of time were extended or shortened or a particular percentage were increased
or decreased, then such court may make such change as shall be necessary to
render the provision in question effective and valid under applicable law.
18
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Schedule 1
----------
19
<PAGE>
EXHIBIT 10.2
AGREEMENT TO CONTRIBUTE
AMONG
BURNHAM PACIFIC PROPERTIES, INC.,
BURNHAM PACIFIC OPERATING PARTNERSHIP, L.P.
AND
EACH OF THE CONTRIBUTORS AND EXISTING PARTNERS
LISTED ON EXHIBIT A-1 TO THIS AGREEMENT
<PAGE>
TABLE OF CONTENTS
DEFINITIONS
ARTICLE 1
CONTRIBUTION OF PROPERTY AND CAPITAL
1.1 Contribution of Interests and Determination of Equity Value
1.2 Components and Allocation of Contribution Consideration; Calculation of
Units and
Preferred Units; Cash Reimbursement Component
1.3 Capital Contribution of the General Partner
1.4 Limited Partners in the Operating Partnership
ARTICLE 2
CERTAIN COVENANTS AND CONDITIONS TO CLOSING
2.1 Certain Covenants and Conditions to BPP's and the Operating
Partnership's Obligations
2.2 Conditions to the Obligations of the Contributors
ARTICLE 3
REPRESENTATIONS AND WARRANTIES; CERTAIN COVENANTS
3.1 Representations and Warranties of the Contributors; Certain Covenants
of the Contributors
3.2 Representations and Warranties of BPP
ARTICLE 4
MAINTENANCE AND OPERATION OF THE PROPERTY; CERTAIN COVENANTS
4.1 Maintenance and Operation
4.2 Insurance
4.3 Personal Property
4.4 Leasing
4.5 Operating Agreements
4.6 Damage or Destruction; Condemnation
4.7 Tests and Inspections
4.8 Mortgage Debt
4.9 Disposition of Properties
4.10 Availability of Records
4.11 Ongoing Capital and Tenant Improvement Work
4.12 A. Title
4.13 Payoff Letters/ Discharges on Mortgage Debt
4.14 Cooperation Regarding Closing Conditions
4.15 Articles Supplementary
4.16 [Intentionally Omitted]
4.17 Conduct of the Business
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4.18 Intentionally Omitted
4.19 Notification of Certain Matters
4.20 Approval of Company Shareholders
4.21 REIT Status
4.22 Payments
4.23 First Offer Rights
4.24 Board of Directors
4.25 Retained Property
4.26 Post-Closing Delivery of Schedules and Exhibits
4.27 Operating Partnership Preferred Units
4.28 Company Rent Roll
4.29 Changes to Existing Partners and Allocation of Contribution
Consideration
4.30 Westbrook Registration Rights Agreement
4.31 REOC Status
4.32 80% Ownership Condition
4.33 Board of Directors Resolutions
ARTICLE 5
CLOSING ADJUSTMENTS
5.1 Taxes, Assessments and Utilities
5.2 Rent
5.3 Common Area Reimbursement Adjustment
5.4 Payments on Permitted Exceptions
5.5 Operating Agreement Payments and Other Expenses
5.6 Partners' Consents
5.7 Post Closing Audit
5.8 Survival
ARTICLE 6
DEFAULTS AND REMEDIES
6.1 Breakup Fee
6.2 Deposit
6.3 Breakup Damages Amount as Liquidated Damages
ARTICLE 7
INDEMNIFICATION
7.1 By the Contributors and Existing Partners
7.2 By the Operating Partnership and BPP
7.3 Indemnification Procedure
7.4 Cooperation in Defense
7.5 Survival
7.6 Interest
7.7 Exclusivity
7.8 Mutual Pursuit of Claims
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ARTICLE 8
TERMINATION
8.1 Termination
8.2 Effect of Termination
ARTICLE 9
MISCELLANEOUS
9.1 Brokers
9.2 Marketing
9.3 Entire Agreement; No Amendment
9.4 Certain Expenses
9.5 Notices
9.6 No Assignment
9.7 Governing Law; Waiver of Jury Trial
9.8 Multiple Counterparts
9.9 Further Assurances
9.10 Miscellaneous
9.11 Invalid Provisions
9.12 Confidentiality; Publicity
9.13 Time of Essence
9.14 Authorized Representatives
9.15 Conflict
9.16 Applicable Contribution Agreement
9.17 Schedules
Exhibit A-1
Schedule OF CONTRIBUTORS
AND EXISTING PARTNERS
Exhibit A-2
LIST OF PROPERTIES
Exhibit A-3
ORGANIZATIONAL CHART
Exhibit A-4
EXISTING PARTNER OWNERSHIP
SHARE RE: ADDITIONAL CONSIDERATION
Exhibit B
[Intentionally Deleted]
Exhibit C
ARTICLES SUPPLEMENTARY
iii
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Exhibit D
[INTENTIONALLY OMITTED]
Exhibit E
[INTENTIONALLY OMITTED]
Exhibit F
MORTGAGE DEBT
Exhibit G
LIST OF COMPANY PROPERTIES
WHERE NEW COMPANY TITLE
POLICIES WILL BE OBTAINED
Exhibit H-1
OPERATING PARTNERSHIP AGREEMENT
Exhibit H-2
OPERATING PARTNERSHIP AMENDMENT
Exhibit I
LIST OF CONTRIBUTORS' PERSONAL
PROPERTY RELATING TO THE
PROPERTIES
Exhibit J
PROSPECTIVE SUBSCRIBER
QUESTIONNAIRE
Exhibit K
LEGAL DESCRIPTION OF LAND
Exhibit L
REGISTRATION RIGHTS AGREEMENT
Exhibit M
STABILIZED LEASING PLAN
Exhibit N
CONTRIBUTORS' RENT ROLL
Exhibit O
INVESTOR REPRESENTATIONS
AND WARRANTIES
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Exhibit P
TITLE OBJECTIONS
Exhibit Q
FORM OF PAYMENT ESTOPPEL
Exhibit R
FORM OF CONTRIBUTORS' PAYMENT ESTOPPEL
Exhibit S
LIST OF EXISTING PARTNERS
Exhibit T
FORM OF MASTER LEASE
Exhibit U
LIST OF TENANT'S WITH OPTIONS TO PURCHASE
Exhibit V
FORM OF GROUND LESSOR ESTOPPEL
Exhibit W
FORM OF TENANT ESTOPPEL
Exhibit X
FORM OF REA ESTOPPEL
Exhibit Y-1
FORM OF DEED
Exhibit Y-2
FORM OF BILL OF SALE
AND ASSIGNMENT
Exhibit Z
FORM OF ASSIGNMENT
OF LEASES
Exhibit AA
FORM OF POST-CLOSING
LEASING AGREEMENT
Exhibit BB
FORM OF REDEMPTION
NOTICE
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Exhibit CC
AMENDED COMPANY BYLAWS
Exhibit DD
[INTENTIONALLY OMITTED]
Exhibit EE-1
DESCRIPTION OF RETAINED
PROPERTIES: REDONDO BEACH
Exhibit EE-2
DESCRIPTION OF RETAINED
PROPERTIES: WESTMINSTER
vi
<PAGE>
AGREEMENT TO CONTRIBUTE
This AGREEMENT TO CONTRIBUTE (this "Agreement") is entered into as of
this 5th day of December, 1997, by the entities listed as Contributors and
the entities and individuals listed as Existing Partners on Exhibit A-1
attached hereto, each having an address of c/o Highridge Partners, Inc., 300
Continental Boulevard, Suite 360, El Segundo, California 90245 (each a
"Contributor" and, collectively, the "Contributors"), Burnham Pacific
Properties, Inc., a Maryland corporation, having an address of 610 West Ash
Street, Suite 1600, San Diego, California 92112-1551 ("BPP" or the "Company")
and Burnham Pacific Operating Partnership, L.P., a Delaware limited
partnership having an address of 610 West Ash Street, Suite 1600, San Diego,
California 92112-1551 (the "Operating Partnership").
RECITALS
WHEREAS, each Contributor owns the Property (as defined below) set forth
opposite such Contributor's name on Exhibit A-2.
WHEREAS, BPP has formed Burnham Pacific Operating Partnership, L.P., a
Delaware limited partnership (the "Operating Partnership") having BPP as its
general partner and BPP and a wholly-owned subsidiary of BPP as its sole
limited partners;
WHEREAS, the Contributors wish to contribute all of the Properties,
subject to the Mortgage Debt (as defined below) to the Operating Partnership
in exchange for a combination of (i) cash reimbursements, (ii) units of
limited partner interest in the Operating Partnership (the "Operating
Partnership Units" or "Units") and (iii) units of preferred limited partner
interest in the Operating Partnership (the "Operating Partnership Preferred
Units" or "Preferred Units");
WHEREAS upon Closing, the Operating Partnership will accept contribution
of the Properties from the Contributors, and the Operating Partnership will
issue to the Existing Partners (as defined below) (who will, subject to
Section 1.4 of this Agreement, then automatically be admitted as partners of
the Operating Partnership) the Contribution Consideration (as defined below)
in respect of such contributions, as more fully set forth below;
WHEREAS, BPP, the Operating Partnership, the Contributors and the
Existing Partners also desire that, contemporaneously with the admission of
the Existing Partners as limited partners of the Operating Partnership, BPP,
the Operating Partnership and such Existing Partners shall enter into a
registration rights agreement and an amendment to the agreement of limited
partnership of the Operating Partnership in each case as provided below; and
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WHEREAS, each of the parties hereto has been advised by the other
parties and acknowledges that the parties hereto would not be entering into
this Agreement without the representations, warranties and covenants which
are being made and agreed to herein by each party hereto and that each party
is entering into this Agreement in reliance on such representations,
warranties and other covenants.
NOW, THEREFORE, for good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, and in reliance on all
representations, warranties and covenants made by each of the parties hereto,
the Contributors, BPP and the Operating Partnership hereby agree as follows:
DEFINITIONS
The following terms as used in this Agreement will have the meanings
attributed to them as set forth below unless the context clearly requires
another meaning. The terms set forth below do not constitute all defined
terms set forth in this Agreement. Such other defined terms shall have the
meanings ascribed to them elsewhere in this Agreement.
"Access Agreement" shall mean that certain Access Agreement between the
Contributors and BPP, dated as of November 20, 1997.
"Accountants" has the meaning set forth in Section 4.10.
"Accredited Investor" means a person who qualifies as an "accredited"
investor as defined in relevant securities Laws, including, without
limitation, under Rule 501 of the Securities Act.
"Action" shall mean any claim, suit, litigation, labor dispute,
arbitration, condemnation proceeding, investigation or other action or
proceeding.
"Additional Consideration" has the meaning set forth in Section 1.6.
"Additional Equity Value" has the meaning set forth in Section 1.6.
"Additional NOI Lease Expenses" has the meaning set forth in Section 1.6.
"Additional NOI Lease Income" has the meaning set forth in Section 1.6.
"Additional Valuation Date" has the meaning set forth in Section 1.6.
"ADA" has the meaning set forth in Section 3.2(j)(ii).
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"Affiliate" shall mean any entity in which the Person in question owns
directly or indirectly more than fifty percent (50%) of any class of
securities or interest issued by such entity or any entity controlling,
controlled by or under common control with the Person in question.
"Agreement" shall mean this Agreement to Contribute, as it may be
amended from time to time.
"Amended Company By-Laws" shall mean the amended by-laws of BPP
substantially in the form attached hereto as Exhibit CC.
"Anchor Tenant" shall mean any tenant identified as an Anchor Tenant on
the Stabilized Leasing Plan attached to this Agreement as Exhibit M.
"Annual Valuation Period" has the meaning set forth in Section
3.2(q)(vii).
"Annualized Rental Payments" shall have the meaning set forth in Section
1.6.
"Applicable Contribution Agreement" has the meaning set forth in Section
9.16.
"Articles Supplementary" means the articles supplementary to the Company
Charter to be filed with the Maryland State Department of Taxation prior to
or at Closing which sets forth the rights, privileges and preferences of the
Preferred Stock, in the form attached hereto as Exhibit C.
"Assigned Contracts" means all Contracts other than Contracts with an
Affiliate of any Contributor.
"Authority" shall mean a governmental body or agency having jurisdiction
over BPP, the Operating Partnership, a Contributor, an Existing Partner or a
Property, as applicable.
"Authorized Representatives" has the meaning set forth in Section 9.14.
"Benefit Arrangements" has the meaning set forth in Section 3.2(l)(vi).
"Blue Sky Laws" has the meaning set forth in Section 3.2(b)(vi)(G).
"BPP" has the meaning set forth in the Introductory Paragraph of this
Agreement.
"BPP Indemnified Parties" shall mean BPP, the Operating Partnership and
their respective subsidiaries, Affiliates, officers, directors, stockholders,
employees, representatives and agents.
"BPP Notice" has the meaning set forth in Section 4.23.
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"Breakup Damages Amount" has the meaning set forth in Section 6.1.
"BSMC" shall mean Blackacre SMC Holdings, L.P., a Delaware limited
partnership.
"BSMC II" shall mean Blackacre SMC II Holdings, LLC, a Delaware limited
liability company.
"Business Day" means any weekday that is not an official holiday in the
State of California.
"California REIT" has the meaning set forth in Section 3.2(q).
"Capital Expenditures Budget and Schedule" has the meaning set forth in
Section 3.2(j)(viii).
"Cash Reimbursement Component" has the meaning set forth in Section 1.1.
"CERCLA" has the meaning set forth in Section 3.2(o).
"Closing" and "Closing Date" have the meaning set forth in Section 1.5.
"Code" shall mean the Internal Revenue Code of 1986, as in effect from
time to time, and applicable rules and regulations thereunder. Any reference
herein to a specific section or sections of the Code shall be deemed to
include a reference to any corresponding provision of future law.
"Commission" shall mean the Securities and Exchange Commission.
"Commitment" has the meaning set forth in Section 3.2(g).
"Common Stock" shall mean shares of BPP's common stock, par value $.01
per share.
"Company" shall have the meaning set forth in the introductory paragraph
of this Agreement.
"Company Charter" shall mean the Articles of Amendment and Restatement
of BPP and any amendment or supplement thereto, as in effect on the date
hereof.
"Company Excess Stock" has the meaning set forth in Section 3.2(c).
"Company Leases" shall mean all retail property leases relating to the
Company Properties.
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"Company Permitted Exceptions" has the meaning set forth in Section
3.2(j)(i).
"Company Permitted Liens" shall mean (i) Liens (other than liens imposed
under ERISA) for Taxes or other assessments or charges of Authorities that
are not yet delinquent or that are being contested in good faith by
appropriate proceedings, in each case, with respect to which adequate
reserves or other appropriate provisions are being maintained by BPP or its
Subsidiaries to the extent required by GAAP, (ii) statutory Liens of
landlords, carriers, warehousemen, mechanics, materialmen and other Liens
imposed by law and created in the ordinary course of business for amounts not
yet overdue or which are being contested in good faith by appropriate
proceedings, in each case, with respect to which adequate reserves or other
appropriate provisions are being maintained by the Company or its
Subsidiaries to the extent required by GAAP, (iii) the Company Leases, (iv)
easements, rights-of-way, covenants and restrictions which are customary and
typical for office or commercial properties similar to the Company Properties
and which do not (x) interfere materially with the ordinary conduct of any
Company Property or the business of BPP and its Subsidiaries as a whole or
(y) detract materially from the value or usefulness of the Company Property
to which they apply, (v) the Liens which were granted by BPP or any of its
Subsidiaries to lenders pursuant to financings in existence on the date
hereof which are described in the Company Reports or Schedule 3.2(j)(xii) or
which otherwise provide for the financing of the Company Properties in the
ordinary course of business of BPP or any Subsidiary, as applicable.
"Company Plans" has the meaning set forth in Section 3.2(l)(i).
"Company Properties" has the meaning set forth in Section 3.2(j)(i).
"Company Registration Statement" has the meaning set forth in Section
3.2(e)(i).
"Company Rent Roll" shall have the meaning set forth in Section
3.2(j)(v).
"Company Reports" has the meaning set forth in Section 3.2(e)(i).
"Consents" has the meaning set forth in Section 3.1(b).
"Contracts" shall mean, subject to the terms of this definition below,
all contracts, undertakings, commitments, agreements, obligations, guarantees
and warranties as of the date of this Agreement (i) relating to a Property,
and (ii) to which a Contributor is a party or by which a Contributor or a
Property is bound. "Contracts" includes, without limitation, utility
contracts, management contracts, maintenance and service contracts, parking
contracts, employment contracts, equipment leases and brokerage and leasing
agreements, but excludes the Leases (as defined below) and the documents
evidencing, governing or securing the Mortgage Debt.
"Contract Rent" has the meaning set forth in Section 1.7.
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"Contribution Agreement" has the meaning set forth in Section 9.16.
"Contribution Consideration" shall mean the consideration of Units,
Preferred Units and the Cash Reimbursement Component to the Existing Partners
which reflect the payment of the Equity Value pursuant to Article I hereof.
"Contributor" has the meaning set forth in the Introductory Paragraph of
this Agreement.
"Contributors Estoppel" has the meaning set forth in Section 2.1(h).
"Contributors Ground Lessor Estoppel" has the meaning set forth in
Section 2.1(g).
"Contributors REA Estoppel" has the meaning set forth in Section 2.1(i).
"Controlled Group Liability" has the meaning set forth in Section
3.2(l)(vi).
"Current Market Price" shall mean, as of any date of determination, the
average of the volume weighted average price per share of the Common Stock
(the "VWAP") on each of the twenty Trading Days (as defined below)
immediately preceding such date, as the VWAP for each day is reported for a
nationally-recognized market quotation or information service that is
selected by BPP and approved by the holders of a majority in interest of the
Preferred Units (exclusive of the units held by BPP) which approval will not
be unreasonably withheld.
"Debt Instruments" shall mean all notes, mortgages, deeds of trust or
similar instruments which evidence or secure any indebtedness owing to BPP or
any subsidiary.
"Deposit" has the meaning set forth in Section 6.2.
"Development Budget and Schedule" has the meaning set forth in Section
3.2(j)(ix).
"Development Properties" has the meaning set forth in Section 3.2(j)(ix).
"DLJ" has the meaning set forth in Section 9.1.
"DLJ Fee" shall mean a fee of $4,009,530 that will be paid to DLJ by the
Operating Partnership as provided in Section 9.1.
"Effective NOI" has the meaning set forth in Section 1.1.
"Employee Benefit Plans" has the meaning set forth in Section 3.2(1)(vi).
"Employees" has the meaning set forth in Section 3.2(1)(vi).
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"Environmental Claim" shall mean any claim, investigation or written
notice by any person alleging potential liability (including potential
liability for investigatory costs, cleanup costs, governmental response
costs, natural resources damages, property damages, loss of value,
consequential damages, personal injuries or fatalities, or penalties) of BPP,
the Operating Partnership or its Subsidiaries arising out of, based on or
resulting from (A) the presence, generation, transportation, management,
recycling, reuse, treatment, use, storage, disposal or release of materials
of environmental concern or the threatened release of materials of
environmental concern at any location, or (B) activities or conditions upon
which any violation, or alleged violation of, or liability or alleged
liability under, any Environmental Law.
"Environmental Laws" shall mean federal, state, local, and municipal
laws, ordinances, principles of common law, rules, by-laws, orders,
governmental policies, statutes and regulations relating to the condition,
pollution or protection of the environment or of flora or fauna or their
habitat or of human (including employee and worker) health and safety, or to
the cleanup or restoration of the environment, including, but not limited to,
any laws relating to (A) generation, treatment, storage, disposal,
management, recycling, reuse or transportation of chemicals, materials,
wastes, emissions or discharges or protection of the environment from the
same, (B) exposure of persons to, or release or threat of release of,
Hazardous Wastes or Hazardous Substances, and (C) the safety and health of
workers and employees.
"Equity Value" has the meaning set forth in Section 1.1.
"Exchange Act" shall mean the Securities Exchange Act of 1934, as in
effect from time to time, and applicable rules and regulations thereunder.
Any reference herein to specific section or sections of the Exchange Act
shall be deemed to include a reference to any corresponding provision of
future law.
"Exercise Restriction" has the meaning set forth in Section 4.23.
"Existing Partners" means with respect to a Contributor the direct or
indirect partners or members of such Contributor which will be issued the
Contribution Consideration, Additional Equity Value and Additional
Consideration pursuant to this Agreement, as set forth in Exhibit A-1 hereto.
"Federal Clean Water Act" has the meaning set forth in Section 3.2(o).
"Final Fiscal Year" has the meaning set forth in Section 4.10(h).
"Foreign Person" has the meaning set forth in Section 3.2(r).
"GAAP" has the meaning set forth in Section 3.2(e)(ii).
"Ground Leases" has the meaning set forth in Section 3.1(dd).
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"Ground Lessor Estoppels" has the meaning set forth in Section 2.1.
"GSF" shall mean GSF Associates, L.L.C., a Delaware limited liability
company.
"GSF II" shall mean GSF II Associates, L.L.C., a Delaware limited
liability company.
"Hazardous Substances" and "Hazardous Wastes" have the meanings set
forth in Section 3.1(o).
"Holders" shall have the meaning set forth in Section 4.23(a).
"HPBA" shall mean HPBA, LLC, a Delaware limited liability company.
"HPBA II" shall mean HPBA II, LLC, a Delaware limited liability company.
"HQ Space" has the meaning set forth in Section 3.2(j)(i).
"HSR Act" means the Hart-Scott-Rodino Antitrust Improvements Act of 1976.
"Identified Space" has the meaning set forth in Section 1.6.
"Incentive Plan" has the meaning set forth in Section 3.2(c)(i).
"Indemnitee" has the meaning set forth in Section 7.3(a).
"Indemnitor" has the meaning set forth in Section 7.3(a).
"Inherited Properties" has the meaning set forth in Section 3.2(k).
"Insurance Policies" has the meaning set forth in Section 3.2(o).
"Intangibles" shall mean all intangible property owned or used by any
Contributor in connection with the ownership, use, operation or development
of any Property, including, without limitation: (i) any right the Contributor
may have to use the name currently used with respect to such Property and any
other trade name by which such Property is known, (ii) the Assigned
Contracts, (iii) the Leases, all guaranties of the Leases, all security
deposits under the Leases (unless BPP elects instead to have them credited to
the Operating Partnership at Closing), all other security, if any, under the
Leases and any rent prepaid under the Leases, (iv) all Licenses and any
warranties, guaranties and other rights relating to the ownership, use,
operation or development of the Property to the extent transferrable
(collectively, the "Other Rights").
"Investment Company Act" shall mean the Investment Company Act of 1940,
as in effect from time to time, and applicable rules and regulations
thereunder. Any reference herein to a
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specific section or sections of the Investment Company Act shall be deemed to
include a reference to any corresponding provision of future law.
"Last Revaluation Month" has the meaning set forth in Section 1.6.
"Law" or "Laws" has the meaning set forth in Section 3.1(e).
"Leases" has the meaning set forth in Section 3.1(c).
"Licenses" has the meaning set forth in Section 3.1(e).
"Liens" shall mean all liens, mortgages, deeds of trust, deeds to secure
debt, security interests, pledges, claims, charges, easements and other
encumbrances on an asset of any nature whatsoever.
"Loss" or "Losses" shall mean any and all claims, losses, damages,
costs, liabilities, obligations, causes of action and expenses, including,
without limitation, reasonable attorney's fees and disbursements of a party.
In no event shall a Loss include a party's incidental or consequential
damages.
"Major Tenants" shall mean a tenant leasing 10,000 square feet or more
of space.
"Master Lease" has the meaning set forth in Section 1.7.
"Material Company Lease" has the meaning set forth in Section 3.2(j)(v).
"Mortgage Debt" means the mortgage loans secured by one or more of the
Properties, which mortgage loans, including the current holder thereof, the
original principal amount and the estimated outstanding balance thereof as of
the date of this Agreement (including any accrued interest), are set forth in
Exhibit F attached to this Agreement.
"New Company Title Policies" means the new ALTA owner's title insurance
policies or date-down endorsements to existing owner's title insurance
policies, in the case of new policies, in an amount equal to the fair market
value of the applicable Company Property and including customary owner's
endorsements, in each case dated as of the Closing Date, obtained or to be
obtained by BPP or the Operating Partnership with respect to those Company
Properties where (i) there is no existing owner's title insurance policy or
(ii) the existing owner's title insurance policy is more than one (1) year
old. A schedule of those Company Properties where New Company Title Policies
have been or will be obtained is attached to this Agreement as Exhibit G.
Such policies or endorsements shall show title to the applicable Company
Property vested in the applicable entitle described on such Schedule
3.2(j)(i) with respect thereto or in the Operating Partnership, subject to no
liens or encumbrances other than (a) Permitted Liens, (b) those matters shown
on Schedule B-1 of the Old Company Title Policies, and (c) those additional
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encumbrances (excluding monetary Liens other than those listed on Schedule
3.2(j)(xii)) which do not materially affect the value or utility of the
applicable Company Property, and which would be acceptable to institutional
life insurance companies and commercial bank mortgage lenders in a similar
context.
"Nomination Rights" has the meaning set forth in Section 4.24.
"Notice" has the meaning set forth in Section 7.3(a).
"NYSE" shall mean the New York Stock Exchange, Inc.
"Offered Securities" has the meaning set forth in Section 4.23(b).
"Ongoing Improvements Work" has the meaning set forth in Section 4.11.
"Operating Partnership" has the meaning set forth in the Recitals.
"Operating Partnership Agreement" shall mean the Agreement of Limited
Partnership of the Operating Partnership, a copy of which is attached hereto
as Exhibit H-1.
"Operating Partnership Amendment" shall mean the First Amendment to
Agreement of Limited Partnership of the Operating Partnership, dated as of
the Closing Date, to be executed and delivered by BPP, Burnham Pacific
Properties L.P., Inc., the Contributors, HPBA, HPBA II, GSF, GSF II and the
Existing Partners as of the Closing, to admit the Existing Partners as
limited partners and to issue Units and Preferred Units to the Existing
Partners in the form attached to this Agreement as Exhibit H-2.
"Operating Partnership Units" or "Units" has the meaning set forth in
the Recitals. The terms and conditions of the Preferred Units are as set
forth in the Operating Partnership Amendment.
"Operating Partnership Preferred Units" or "Preferred Units" has the
meaning set forth in the Recitals.
"Other Company Properties" has the meaning set forth in Section
3.2(j)(i).
"Other Company Title Policies" means the owner's title insurance
policies naming BPP or, if applicable, a Subsidiary as insured, the date of
which policy or the date of the most recent date-down endorsement to such
policy is not more than one (1) year prior to the date of this Agreement.
"Payment Estoppel" has the meaning set forth in Section 1.6.
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"Pension Plans" has the meaning set forth in Section 3.2(l)(vi).
"Permitted Exceptions" means, with respect to a Property, (i) all
matters listed as exceptions in the Preliminary Report (including, without
limitation, all standard preprinted exceptions in a CLTA form of owner's
title insurance policy other than exceptions relating to so-called creditors'
rights, mechanics' liens or parties in possession other than tenants under
the Leases set forth in the Rent Roll and other than delinquent real estate
taxes) with respect to such Property and including any mortgage lien
encumbering such Property which secures any portion of the Mortgage Debt and
matters shown on any survey of such Property provided by the Contributors or
otherwise obtained by BPP or the Operating Partnership, in each case prior to
the date hereof except, in each case, with respect to the title objections
specifically identified to be cured or otherwise satisfied by the
Contributors in the attached Exhibit P, (ii) all title matters reflecting
the existence or terms of Leases shown on the Rent Roll, (iii) all matters
whether or not of record, to the extent caused by BPP or the Operating
Partnership or their agents, representatives or contractors, (iv) zoning,
building, fire, health, environmental and pollution control laws and other
land use laws, ordinances, rules and regulations, (v) all other easements,
covenants, rights-of-way or other restrictions consented to in writing by BPP
or the Operating Partnership, (vi) prohibition against the interference with
the natural and unobstructed flow of any applicable brook currently crossing
the Property or other riparian rights existing as of the date hereof, and
(vii) inchoate mechanics' carriers', workers', and other like liens arising
or incurred in the ordinary course of business which are not yet delinquent
and which, in any event, shall not be listed as exceptions in the Title
Policy. In addition, with respect to the Properties shown on Exhibit A-2 as
leaseholds, the provisions of the ground leases with respect to such
Properties whereby a Contributor holds a leasehold interest in each such
Property.
"Person" shall mean any individual, corporation, partnership, joint
venture, association, joint-stock company, business trust, limited liability
company, trust, unincorporated organization or government or a political
subdivision, agency or instrumentality thereof or other entity or
organization of any kind.
"Personal Property" shall mean all tangible personal property owned by
any Contributor and located on or in or used in connection with the Real
Property as of the date of this Agreement or the Closing Date, including,
without limitation, all equipment, building systems and appliances relating
to the Real Property and other items listed in Exhibit I hereto.
"Post-Closing Audit" has the meaning set forth in Section 5.7.
"Post-Closing Leasing Agreement" has the meaning set forth in Section
2.1(q)(xiii).
"Preferred Stock" means the Series 1997-A Convertible Preferred Stock of
BPP to be issued pursuant to the Preferred Stock Purchase Agreement
consistent with and upon the effectiveness of the Articles Supplementary.
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"Preferred Stock Purchase Agreement" shall mean the Preferred Stock
Purchase Agreement, dated as of the date hereof, by and between BPP and
Westbrook Partners, L.L.C.
"Preferred Stock Termination Event" has the meaning set forth in Section
1.2.
"Preliminary Report" means the extended coverage preliminary title
report on the Real Property and the commitment to issue the Title Policy
obtained by the Contributors from the Title Company and delivered to BPP,
together with all documents referred to in such preliminary title report.
"Projects" has the meaning set forth in Section 3.2(j)(ix).
"Property" shall mean, each of the shopping center properties listed on
Exhibit A-2 attached to this Agreement including the applicable Real Property
and all Personal Property and Intangibles related thereto, and "Properties"
shall mean all such shopping center properties collectively, including all of
the Real Property, Personal Property and Intangibles.
"Property Condition Reports" has the meaning set forth in Section
3.2(j)(ix).
"Prospective Subscriber Questionnaire" shall mean the questionnaire in
the form attached hereto as Exhibit J.
"Proxy Statement" has the meaning set forth in Section 3.2(t).
"Qualified New Lease" has the meaning set forth in Section 1.6.
"Qualified Replacement Lease" has the meaning set forth in Section 1.6.
"RCRA" has the meaning set forth in Section 3.4(i).
"REA Estoppels" shall have the meaning set forth in Section 2.1(i).
"Real Property" shall mean the land described in Exhibit K hereto with
respect to each Property (the "Land"), together with all rights, licenses,
privileges and easements appurtenant thereto, including, without limitation,
all minerals, oil, gas and other hydrocarbon substances on and under and that
may be produced from the Land, as well as all development rights, land use
entitlements and rights in off-site facilities and amenities servicing the
Land or any improvements located thereon, including, without limitation, air
rights, water, water rights and riparian rights relating to the Land and any
rights-of-way or other appurtenances used in connection with the beneficial
use and enjoyment of the Land and all of each Contributor's right, title and
interest in and to all roads, easements, rights of way, strips or gores and
alleys adjoining or servicing the Land (collectively, the "Appurtenances")
and all improvements and fixtures which are affixed to the Land or the
Appurtenances or which are otherwise integral to the
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occupancy of the Land or the operation of the buildings, structures or other
improvements thereon (other than trade fixtures of tenants which by the terms
of the applicable Leases are owned by such tenants and may be removed by such
tenants upon the expiration of such Leases) including, without limitation,
the building(s) located on the Land and all fixtures and equipment used in
connection with the operation or occupancy of the Land, such improvements or
the Appurtenances, including, without limitation, heating and air
conditioning systems and facilities used to provide any services on the Land
or the Appurtenances or for the improvements, and all parking and related
facilities and amenities (collectively, the "Improvements"); subject,
however, to the Permitted Exceptions.
"Reallocation Amount" has the meaning set forth in Section 1.4.
"Reference Rate" has the meaning set forth in Section 7.6.
"Registration Rights Agreement" shall mean the Registration Rights
Agreement to be entered into between the Existing Partners and BPP in the
form attached hereto as Exhibit L.
"Regulatory Filings" has the meaning set forth in Section 3.2(b)(vi)(G).
"REIT" shall mean a real estate investment trust withing the meaning of
Section 856 of the Code.
"Rejection Notice" has the meaning set forth in Section 1.6.
"Related Agreements" means, collectively, all documents to be executed
and delivered in connection with this Agreement, including, without
limitation, the Operating Partnership Amendment, the Post-Closing Leasing
Agreement, the Master Leases, if any, the Registration Rights Agreement and
all other documents referred to in Section 2.1(q).
"REOC Qualification Date" has the meaning set forth in Section
3.2(q)(ii).
"Rent Roll" has the meaning set forth in Section 3.1(i).
"Retained Properties" has the meaning set forth in Section 4.25.
"Rights Exercise Notice" has the meaning set forth in 4.23.
"Securities Act" shall mean the Securities Act of 1933, as in effect
from time to time, and applicable rules and regulations thereunder. Any
reference herein to a specific section or sections of the Securities Act
shall be deemed to include a reference to any corresponding provision of
future law.
"Schedule of Members" has the meaning set forth in Section 1.4.
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"Spillover Amount" has the meaning set forth in Section 1.6.
"Stabilized Leasing Plan" means the Stabilized Leasing Plan for each
Property attached to this Agreement as Exhibit M.
"Subsidiaries" shall mean with respect to BPP and the Operating
Partnership, any corporation, partnership, limited liability company, joint
venture, business trust or other entity, of which BPP or the Operating
Partnership, directly or indirectly, owns or controls 50% or more of the
securities or other interests entitled to vote in the election of directors
or others performing similar functions with respect to such corporation or
other organization, or to otherwise control such corporation, partnership,
limited liability company, joint venture, business trust or other entity.
"Tax" means any federal, state, local, or foreign income, gross
receipts, license, payroll, employment, excise, severance, stamp, occupation,
premium, windfall profits, environmental (including taxes under Code Section
59A), customs duties, capital stock, franchise, profits, withholding, social
security (or similar), unemployment, disability, real property, personal
property, sales, use, transfer, registration, value added, alternative or
add-on minimum, estimated, or other tax of any kind whatsoever, including any
interest, penalty, or addition thereto, whether disputed or not. The term
"Tax" also includes any amounts payable pursuant to any tax sharing agreement
to which any relevant entity is liable as a successor or pursuant to contract.
"Tax Return" means any return, declaration, report, claim for refund, or
information return or statement relating to Taxes, including any schedule or
attachment thereto, and including any amendment thereof.
"Tenancy Leases" has the meaning set forth in Section 3.2(j).
"Tenant Estoppels" shall have the meaning set forth in Section 2.1(h).
"Title Company" means Fidelity National Title Insurance Company.
"Title Policy" has the meaning set forth in Section 2.1(b).
"Trading Day" shall mean (A) if the Common Stock is listed on at least
one stock exchange, a day on which there is trading on the principal stock
exchange on the Common Stock is listed, (B) if the Common Stock is not listed
on a stock exchange, but sale prices of the Common Stock are reported on an
automated quotation system a day on which trading is reported on the
principal automated quotation system on which sales of the Common Stock are
reported, (C) if the Common Stock is not listed on a stock exchange and sale
prices of the Common Stock are not reported on an automated quotation system,
a day on which quotations are reported by National Quotation Bureau
Incorporated, or (D) if the Common Stock is not so
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listed and sale prices are not so reported, any day other than a Saturday, a
Sunday or a bank holiday in New York, New York.
"Unit Distribution" has the meaning set forth in Section 1.4.
"UPREIT Transaction" shall mean the transactions pursuant to which (i)
BPP and its Subsidiaries transfer legal or beneficial ownership of (a) all
real property and related personal property owned by BPP or any Subsidiary
of BPP directly and (b) at least 99% of the beneficial interest owned by BPP
and/or BPP's Subsidiaries in any partnership or limited liability company
that owns a direct or indirect interest in real property and related personal
property (in each case as provided in Section 7.5 of the Operating
Partnership Agreement) to the Operating Partnership in exchange for a general
partner interest and a limited partner interest therein and (ii) a
wholly-owned corporate subsidiary of BPP will contribute cash in the amount
of $1,000 to the Operating Partnership in exchange for a limited partner
interest therein. Notwithstanding the foregoing, it shall not be a
requirement of the UPREIT Transaction that there be transferred to the
Operating Partnership any real property and related personal property or
interests therein owned by so-called "downREIT partnerships" in which the
general partner is BPP or an Affiliate of BPP and the limited partners are
third parties or any real property and related personal property or interest
therein required by the terms of mortgage debt thereon to be held in a single
purpose bankruptcy remote subsidiary of BPP; provided, however, that BPP
shall have the right to cause legal or beneficial ownership of any such real
property and related personal property or interest therein to be so
contributed to the Operating Partnership or a Subsidiary of the Operating
Partnership as part of the UPREIT Transaction or thereafter.
"Valuation" has the meaning set forth in Section 1.1.
"Voting Stock" has the meaning set forth in Section 3.2(b)(ii).
"Warranties" has the meaning set forth in Section 3.1(a)(v).
"Welfare Plans" has the meaning set forth in Section 3.2(l).
"Westbrook" has the meaning set forth in Section 7.8.
ARTICLE 1
CONTRIBUTION OF PROPERTY AND CAPITAL
1.1 Contribution of Interests and Determination of Equity Value. In
consideration of the agreement of BPP and the Operating Partnership to pay
the Contribution Consideration, Additional Equity Value and Additional
Consideration to the Existing Partners as set forth below, the Contributors
agree to contribute and convey the Properties to the Operating Partnership on
the Closing Date, subject only to the Permitted Exceptions, including the
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mortgage liens securing the Mortgage Debt. In consideration of such
contribution and conveyance and in reliance on the representations and
warranties of the Contributors contained in or made pursuant to the terms of
this Agreement, BPP agrees to cause the Operating Partnership to issue at
Closing the Units and the Preferred Units and to pay the cash reimbursement
component of the consideration (the "Cash Reimbursement Component") to the
Existing Partners, as more particularly provided below.
Except as set forth in Section 1.6, the total value of the Units,
Preferred Units and Cash Reimbursement Component to be issued or paid to the
Existing Partners in exchange for the contribution of the Properties to the
Operating Partnership, calculated as provided below, shall be equal to the
following (the "Equity Value"): the Valuation (as defined below), minus
$4,010,000, minus all unpaid principal of and accrued interest and other
charges and amounts outstanding on the Mortgage Debt as of the Closing Date,
minus any prorations described in Article 5 and any other closing adjustments
or costs which are the responsibility of the Contributors, plus any
prorations described in Article 5 and any other adjustments to be credited as
of the Closing Date to the Contributors. "Valuation" means the aggregate
Effective NOI (as defined below) for all of the Properties as of the Closing
Date divided by 0.09, but in no event more than $314,000,000. "Effective
NOI" means with respect to each Property (i) the Annualized Rental Payments
from Leases in full force and effect relating to such Property set forth on
the updated Rent Roll delivered at Closing and from Master Leases in full
force and effect relating to such Property at Closing, plus (ii) the
"other/percentage" rent revenues of $615,000 as set forth on Schedule 1.1(a),
less (iii) the Operating Expenses set forth in Schedule 3 to Exhibit M for
such Property, less (iv), and an amount equal to 2.0% of the aggregate amount
determined pursuant to clauses (i) and (ii) above. Based on the Annualized
Rental Payments from Leases from the Properties set forth on the Rent Roll
attached to this Agreement as Exhibit N, other operating revenues from the
Properties as set forth in Schedule 1.1(a), and the expected execution and
delivery of Master Leases relating to the underlying Leases identified for
Master Leases on Schedule 1.1(b), the parties agree that the Valuation
(taking into account such expected Master Leases) as of the date of this
Agreement is $294,779,250, which Valuation shall be recalculated as of the
Closing Date to take into account the difference between such revenue amounts
as of the Closing Date over such revenue amounts as of the date of this
Agreement. The parties agree that the Valuation shall be as of the date five
(5) days prior to the Closing Date (but proration and other adjustments
provided for herein shall be as of the Closing Date).
1.2 Components and Allocation of Contribution Consideration;
Calculation of Units and Preferred Units; Cash Reimbursement Component. The
Equity Value pursuant to Section 1.1 shall be paid to the Existing Partners
as follows:
(a) first, except as otherwise provided below in the event there
is a Preferred Stock Termination Event, $50,000,000 of the Equity Value shall
be paid by issuing to the Existing Partners 2,000,000 Preferred Units at an
agreed upon price of $25.00 per Preferred Unit;
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(b) second, an amount up to 20% of the Valuation shall be paid in
cash and shall represent the Cash Reimbursement Component; and
(c) the balance of the Equity Value, if any, shall be paid by
issuing to the Existing Partners Units at an agreed upon price of $14.375 per
Unit.
Each Existing Partner shall be entitled to receive upon Closing the
percentage of each component of the Contribution Consideration to be set
forth for such Existing Partner in a supplement to Exhibit A-1 which the
Contributors hereby covenant to deliver to BPP at least two (2) Business Days
prior to the Closing Date and upon which supplement BPP and the Operating
Partnership may conclusively rely. For the purposes of valuing the
consideration paid in Units and Preferred Units, each Unit shall be deemed to
have a value of $14.375 and each Preferred Unit shall be deemed to have a
value of $25.00. The Cash Reimbursement Component shall be paid by the
Operating Partnership at Closing to the Existing Partners by wire transfer in
immediately available funds pursuant to wiring instructions provided to BPP
by the Contributors, upon which BPP and the Operating Partnership may
conclusively rely. Each Contributor has represented to the Operating
Partnership that the portion of the Cash Reimbursement Component being
received by it constitutes a reimbursement for capital expenditures incurred
by it within the two-year period preceding the contribution of Property being
made by it to the Operating Partnership, and each Contributor and, solely in
reliance on such representation by the Contributors, the Operating
Partnership agree to report to the Internal Revenue Service (pursuant to
Treasury Regulation Section 1.707-8) the payment of the Cash Reimbursement
Component to each Contributor as a reimbursement of preformation expenditures
that qualifies for the exception described in Treasury Regulation Section
1.707-4(d). Notwithstanding anything to the contrary contained in this
Agreement, in the event the Preferred Stock Purchase Agreement terminates
without a closing or the Closing hereunder occurs prior to the closing under
the Preferred Stock Purchase Agreement (a "Preferred Stock Termination
Event"), then no Preferred Units shall be issued pursuant to this Agreement
but instead the entire Equity Value shall be paid as follows: (i) first, an
amount equal to 20% of the Valuation shall be paid in cash and shall
represent the Cash Reimbursement Component; and (ii) second, the balance of
the Equity Value shall be paid by issuing to the Existing Partners Units at
an agreed upon price $14.375 per Unit. In the event a Preferred Stock
Termination Event occurs, all Units issued to any Existing Partner shall be
redeemable by the holder of such Unit for cash (in the amount set forth in
the Operating Partnership Agreement) by such holder giving written notice of
such redemption to the Operating Partnership within two (2) Business Days
after the Closing Date. If such notice is given, such redemption shall occur
within two (2) Business Days after delivery of such notice to the Operating
Partnership. If the Operating Partnership fails to satisfy its redemption
obligation pursuant to this Section 1.2, the Operating Partnership shall pay
to the Existing Partners making such redemption request interest on the
redemption price at an annual rate of 15% (based on the actual number of days
elapsed from the date of the redemption request until the Units are redeemed
in accordance with this Agreement and the Operating Partnership Agreement)
less distributions paid on such Units from the date of such redemption
request (but in no event shall such amount be a negative number). If such
holder fails to give such redemption notice within
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such two Business Day period, then such Unit shall be subject to such
restrictions on redemption as may be set forth in the Operating Partnership
Agreement.
1.3 Capital Contribution of the General Partner. Upon Closing, BPP
shall contribute to the Operating Partnership as a capital contribution such
amounts as may be required to pay the Cash Reimbursement Component and to
fund closing costs and other items for the account of the Operating
Partnership, pursuant to the terms of this Agreement.
1.4 Limited Partners in the Operating Partnership.
(a) Exhibit A-1 attached hereto (sometimes referred to herein as
the "Schedule of Members") sets forth, subject to Section 4.29, the
Contributors and Existing Partners which own, directly or indirectly through
intermediaries, the beneficial interests in such Contributor and, upon the
supplemental delivery of Exhibit A-1 pursuant to Section 1.2, an allocation
of the Equity Value among the Existing Partners. Such allocations shall be
made by the Contributors on the basis of the Existing Partners' pro rata
beneficial interest in the Contributors on a fully diluted basis (following
the buy out by the applicable Contributor of the interest of any beneficial
partner or member in the Contributors who is not an Accredited Investor).
Neither BPP nor the Operating Partnership shall have any liability or
responsibility in any way with the Schedule of Members or the allocations
described above and shall be entitled to rely on the Schedule of Members in
full and without inquiry. An Existing Partner will be entitled to receive
the Contribution Consideration and be admitted as a limited partner in the
Operating Partnership in accordance with the terms of the Limited Partnership
Agreement upon Closing (each admittance a "Unit Distribution") only if such
Existing Partner (i) agrees to be bound by and comply with the terms of the
Operating Partnership Agreement, (ii) makes such investment and other
representations and warranties as are set forth in Exhibit O hereto, (iii) is
an Accredited Investor and (iv) delivers a Prospective Subscriber
Questionnaire indicating that such Existing Partner is an Accredited
Investor. Each Contributor will distribute the Units, Preferred Units, Cash
Reimbursement Component, and rights to receive any Additional Equity Value
and Additional Consideration that it will be transferred from the Operating
Partnership in consideration of the contribution of the Properties to HPBA
Inc., HPBA II, Inc., HPBA and HPBA II, and each of HPBA Inc. and HPBA II Inc.
intend to thereupon distribute the portion of such Contribution Consideration
and such rights received by it to HPBA and HPBA II, respectively, each of
HPBA and HPBA II intend to thereupon distribute such Contribution
Consideration and such rights to its members (GSF and BSMC or its Affiliate
that is then a member of HPBA with respect to HPBA, and GSF II and BSMC II or
its Affiliate that is then a member of HPBA II with respect to HPBA II), and
each of GSF and GSF II intend to thereupon distribute such Contribution
Consideration and such rights to its members (with the Existing Partners
consisting of BSMC and BSMC II, (or their Affiliate that is then a member of
HPBA and/or HPBA II) and the members of GSF and GSF II); all of the foregoing
to occur immediately upon each Contributor's contribution to the Operating
Partnership of the Properties owned by it on the Closing Date. For
convenience, the parties to this Agreement are transferring the Contribution
Consideration and such rights directly to such Existing Partners and
admitting such Existing Partners as Limited
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Partners of the Operating Partnership pursuant to the Operating Partnership
Agreement and the Operating Partnership Amendment; PROVIDED, HOWEVER, that
(x) such direct transfer of the Contribution Consideration and such rights to
the Existing Partners shall be treated for all purposes as the transfer of
such Contribution Consideration and such rights first by the Operating
Partnership to the Contributors, then a distribution thereof by the
Contributors to HPBA Inc., HPBA II Inc., HPBA and HPBA II immediately
thereafter, then a distribution thereof by HPBA Inc. and HPBA II Inc. to HPBA
and HPBA II, respectively, and by HPBA and HPBA II to GSF, GSF II, BSMC and
BSMC II (or their Affiliate who is then a member of HPBA and/or HPBA II)
immediately thereafter, then a distribution thereof by GSF and GSF II
respectively to their members, and (y) upon Closing, each Existing Partner
shall succeed to the rights of the Contributors under this Agreement with
respect to such Contribution Consideration and such rights received from the
Contributors for all purposes as if such Existing Partner were a party to
this Agreement.
(b) Each Existing Partner shall have the right to pledge and
hypothecate (including, without limitation, entering into equity swaps and
hedging transactions) his/her/its Units and/or Preferred Units at any time on
such terms as may be approved by such Existing Partner in its sole discretion
and in connection therewith, the Operating Partnership agrees to admit any
pledgee of such Units as a limited partner in the event such pledgee
exercises its rights as a secured party in respect of such Units subject,
however, to the provisions of the Operating Partnership Agreement and
Operating Partnership Amendment applicable to the admission of a limited
partner including, without limitation, the execution by such pledgee of a
counterpart signature page to the Operating Partnership Agreement, as
amended, agreeing to be bound by the provisions of the Operating Partnership
Agreement, as amended, and if requested by the Operating Partnership delivery
of a Prospective Subscriber Questionnaire executed by such pledgee which
indicates that such pledgee is an Accredited Investor.
(c) Reallocation Amount. The Contributors shall, notwithstanding
anything in this Agreement to the contrary, have the right at any time prior
to the transfer of the Contribution Consideration to the Existing Partners to
specify a portion of the Cash Reimbursement Component thereof (the
"Reallocation Amount") that shall be paid by the Operating Partnership to
HPBA and HPBA II (instead of paying all of the Cash Reimbursement Component
to the Existing Partners) so as to fund expenses of HPBA, HPBA II, HPBA Inc.,
HPBA II Inc. and the Contributors. Notwithstanding Section 1.4(a), the
Reallocation Amount (if any) shall be deemed for all purposes to have been
paid to the Contributors, thereupon distributed by them to HPBA Inc., HPBA II
Inc., HPBA and HPBA II (in proportion to their respective shares of the
entire Cash Reimbursement Component otherwise payable to them), and the
portion thereof deemed distributed to HPBA Inc. and HPBA II Inc. thereupon
being distributed from HPBA Inc. and HPBA II Inc. to HPBA and HPBA, II
respectively (in lieu of further distributions thereof being deemed to have
occurred from HPBA and HPBA II to the members of HPBA and HPBA II).
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1.5 Closing Date. Unless this Agreement is sooner terminated pursuant to
its terms, the closing of the transaction contemplated by this Agreement (the
"Closing") shall take place on the December 19, 1997 (which date may be extended
by either the Contributors or BPP to December 30, 1997 in the event all
conditions to Closing have not been satisfied by such date); provided, however,
if the condition set forth in Section 2.2(w) is not satisfied and if the
Contributors waive the condition set forth in Section 2.2(w), such date shall be
extended to February 28, 1998, or in each case such other date as the parties
mutually agree in writing. The Closing shall occur in the offices of Battle
Fowler, LLP, 75 East 55th Street, New York, New York 10022 at 10:00 a.m. (New
York City time) on the Closing Date, unless otherwise agreed in writing by the
Contributors and BPP. The Closing shall occur pursuant to closing escrow
arrangements reasonably agreed to among BPP, the Operating Partnership and the
Contributors or, if they do not agree, pursuant to a so-called "New York Style"
closing.
1.6 Additional Consideration. In addition to the Equity Value, the
Operating Partnership shall issue to the Existing Partners in the proportion set
forth on Exhibit A-3 (upon which BPP and the Operating Partnership may
conclusively rely) (i) Additional Equity Value ("Additional Equity Value") and
(ii) other additional consideration ("Additional Consideration"), in Units as
set forth below.
(a) Calculation of Additional Equity Value. If the Valuation
determined as of the Closing Date was less than $314,000,000, then as of the
last day of each full calendar month following the Closing Date the Valuation
and the Equity Value shall be recalculated in accordance with the provisions of
Section 1.1 by adding any Additional NOI Lease Income (as defined below) as of
such date to Effective NOI and dividing such sum by .09 and then recalculating
the Valuation and Equity Value based on such result.. If at the end of any
month the Valuation (calculated by adding the aggregate amount of Additional NOI
Lease Income generated to date to Effective NOI, and dividing such sum by .09)
is equal to or more than $314,000,000 (such month is the "Last Revaluation
Month"), then the Valuation and Equity Value shall not thereafter be
recalculated pursuant to this Section 1.6(a). Any increase in the Equity Value
resulting from any such recalculation, less amounts previously paid to the
Contributors as Additional Equity Value pursuant to this Section 1.6(a), shall
be paid to the Existing Partners in accordance with the provisions of Section
1.6(c). Notwithstanding the foregoing, if the recalculated Valuation as of the
last day of the Last Revaluation Month is more than $314,000,000, then the
amount of Additional NOI Lease Income included in the calculation which caused
the recalculated Valuation to exceed $314,000,000 (the amount of such Additional
NOI Lease Income is the "Spillover Amount") shall not be included in the
recalculation of Equity Value for the Last Revaluation Month with the effect
that in no event will the Additional Equity Value payable pursuant to this
Section 1.6(a) exceed an amount based on a recalculated Valuation of
$314,000,000. The Spillover Amount shall be added to the calculation as
Additional Consideration pursuant to Section 1.6(b).
Except as provided in Section 1.6(h) and Section 1.6(j), in no event shall
any amounts become payable pursuant to this Section 1.6(a) after June 30, 1999.
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(b) Additional Consideration. If the Valuation determined pursuant
to Section 1.1, as adjusted pursuant to Section 1.6(a), equals or exceeds an
aggregate amount of $314,000,000 (without regard to the $314,000,000 limitation
set forth in such Sections), then on each of (i) December 31, 1998 (but only if
the recalculated Valuation pursuant to Section 1.6(a) equals or exceeds
$314,000,000 prior to December 31, 1998), (ii) June 30, 1999, and (iii) if
applicable, any date for payment of Additional Consideration pursuant to Section
1.6(h) (each an "Additional Valuation Date"), the Contributors shall be entitled
to the payment of Additional Consideration in an amount equal to the Additional
NOI Lease Income (as defined below) as of such Additional Valuation Date divided
by .09. The Operating Partnership shall pay any Additional Consideration
payable pursuant to this Section 1.6(b) in accordance with the provisions of
Section 1.6(c).
For purposes of this Section 1.6, the following capitalized terms
shall have the meanings set forth below:
"Additional NOI Lease Income" means the sum of the following:
(i) Annualized Rental Payments (as defined below) for the Identified Space
attributable to Qualified New Leases and Qualified Replacement Leases (but in
each case only such Qualified New Leases and Qualified Replacement Leases that
are included in the calculation of Annualized Rent Payments as set forth below
in the definition of such term) and Master Leases, in each case to the extent
not previously taken into account in determining Additional Equity Value or
Additional Consideration; provided, however, that with respect to Qualified
Replacement Leases (or Master Leases with respect to Qualified Replacement
Leases), only the amount by which such Annualized Rental Payments attributable
to such leases exceed the Annualized Rental Payments included in the calculation
of the Valuation at Closing shall be taken into account in determining
Additional NOI Lease Income, plus (ii) the Spillover Amount (if any) (allocated
among the Properties as designated by the Contributors, upon which allocation
BPP and the Operating Partnership may conclusively rely); provided, however,
that the Spillover Amount shall be included in Additional NOI Lease Income only
on the December 31, 1998 Additional Valuation Date unless the only Additional
Valuation Date is June 30, 1999 (other than any Additional Valuation Date which
may be applicable pursuant to Section 1.6(h)), in which event the Spillover
Amount shall be included with respect to such June 30, 1999 Additional Valuation
Date, less (iii) an amount equal to 2.0% of aggregate payments required to be
made under Qualified New Leases, Qualified Replacement Leases and Master Leases
set forth in clause (i) above as an adjustment for management fees, less (iv)
$0.10 per rentable square foot of premises leased pursuant to any Qualified New
Leases included in clause (i) above (without double counting any such space) and
less (v) $0.10 per rentable square foot of premises leased pursuant to any
Leases included in the calculation of Effective NOI at Closing and any Qualified
New Leases taken into account in the calculation of Additional Equity Value
pursuant to Section 1.6(a); provided, however, that the $0.10 per rentable
square foot deduction set forth in this clause (v) shall be deducted on the
December 31, 1998 Additional Valuation Date (and on any later Additional
Valuation Date only to the extent such amount was not previously fully deducted
in calculating Additional NOI Lease Income on an earlier Additional Valuation
Date with the
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effect that such amount is deducted only once); provided, further, the
deductions set forth in clause (iv) and (v) shall not be taken into account in
the calculation of Valuation and Equity Value pursuant to Section 1.6(a).
"Annualized Rental Payments" means with respect to any Lease (in
connection with the calculation of Effective NOI, the Valuation and the Equity
Value at Closing only) or with respect to any Qualified New Lease, Qualified
Replacement Lease or Master Lease, all amounts payable under such lease to the
Property owner during the month in which determination is made (including,
without limitation, base rent, estimated common area maintenance and other
expense reimbursements determined as set forth in the Lease, and other recurring
fees and charges, but excluding percentage rent) multiplied by 12; provided,
however, that amounts payable under a Qualified New Lease or Qualified
Replacement Lease shall be included in the calculation of Annualized Rental
Payments only to the extent that the Operating Partnership has received a
Payment Estoppel (as defined below) with respect to such lease and the tenant
thereunder has actually made the first payment of the rent confirmed as
currently payable in such Payment Estoppel. For purposes of the calculation of
Annualized Rental Payments, (i) common area maintenance and expense
reimbursements shall be included based on the estimated amounts due under such
lease without regard to year-end adjustments, (ii) if common area maintenance
and other expense reimbursement amounts are paid on other than a monthly basis,
such payments shall be appropriately adjusted to reflect the pro rata amount
that would have required to have been paid during the applicable month and
(iv) if the amount of estimated payments for common area maintenance and other
expense reimbursement amounts are not specified in such lease but the lease
requires the tenant to pay its pro rata share thereof, the monthly amount shall
be calculated as the applicable share (expressed as a decimal fraction) of such
expenses that are the responsibility of the tenant times the annual Budgeted
Expenses for the applicable Property as set forth in Schedule 3 to Exhibit M
hereto (Operating Expenses) that are the subject to the reimbursement obligation
of the tenant, with the result being divided by 12.
"Identified Space" means only the leasable space in the
Properties identified for Qualified New Leases or Qualified Replacement Leases
in Schedule 2 to Exhibit M attached hereto.
"Master Lease" has the meaning set forth in Section 1.7.
"Payment Estoppel" means an original estoppel certificate with
respect to a Qualified New Lease or a Qualified Replacement Lease, that
satisfies the following criteria: the Estoppel Certificate is executed by the
tenant thereunder substantially in the form attached as Exhibit Q or by the
Contributors in the form attached as Exhibit R, in each case which confirms the
amount of rent then payable under such lease and the acceptance by the tenant of
the space demised under the Qualified New Lease or Qualified Replacement Lease
(subject only to customary reservations of rights typically included in estoppel
certificates at similar properties); provided, however, if (i) the Estoppel
Certificate is executed by a national or regional credit tenant in a form
substantially similar to the standard form of estoppel signed by those tenants
at
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similar properties or (ii) the estoppel certificate signed by the tenant and it
is in substantially the same form as the estoppel certificate previously signed
by such tenant at the Property (a copy of which has previously been delivered by
Contributors to BPP), then, in either such case, such Estoppel Certificate shall
be deemed to satisfy the requirement for a Payment Estoppel. Any estoppel
certificate delivered by the Contributors shall constitute a continuing
representation and warranty of the Contributors with respect to the matters set
forth therein which shall survive the Closing until replaced by a Payment
Estoppel certificate from the applicable tenant as provided for in this
definition.
"Qualified New Lease" means a Lease that satisfies the following
conditions: (i) the income relating to such Lease was not included in the
calculation of Valuation under Section 1.1, (ii) the Lease relates to all or any
part of the Identified Space identified on Schedule 2 to Exhibit M for Qualified
New Leases, and (iii) the Lease satisfies the requirements for leasing such
space as set forth in the Stabilized Leasing Plan on Schedule 1 to Exhibit M.
"Qualified Replacement Lease" means the replacement of a Lease
identified for Qualified Replacement Leases in Schedule 2 to Exhibit M to this
Agreement which satisfies the requirements for leasing such space as set forth
in Schedule 1 to Exhibit M.
(c) Payments of Additional Equity Value and Additional Consideration.
As soon as practicable after (i) the end of each month with respect to which the
Valuation and Equity Value are recalculated pursuant to Section 1.6(a) and (ii)
each Additional Valuation Date, the Contributors shall deliver to the Operating
Partnership a written notice setting forth in reasonable detail the amount of
Additional Equity Value (calculated in accordance with Section 1.6(a)) or
Additional Consideration (calculated in accordance with Section 1.6(b)) which
the Contributors have determined they are entitled to as of such date and the
method by which such determination was made. Within ten (10) Business Days
after receipt of such notice, the Operating Partnership shall deliver to the
Contributors a written notice setting forth whether the Operating Partnership
concurs with or disputes the Contributors' determination of the Additional
Equity Value or Additional Consideration, as applicable, and, to the extent
there is a dispute, the basis for such dispute set forth in reasonable detail
and, within five (5) Business (in the case of Additional Equity Value) or ten
(10) Business Days (in the case of Additional Consideration) Days thereafter,
the Operating Partnership shall pay to the Existing Partners such amount of the
Additional Equity Value or Additional Consideration, as applicable, which is not
subject to dispute.
(d) Dispute Resolution. In the event of a dispute as to the amount
of Additional Equity Value or Additional Consideration payable, the Contributors
and the Operating Partnership shall direct the San Francisco, California office
of Arthur Andersen LLP (or its successor) to calculate the Additional Equity
Value or the Additional Consideration payable pursuant to the terms of Section
1.6(a) or Section 1.6(b), as applicable. In the event Arthur Andersen LLP
cannot accept this engagement, it shall designate another nationally recognized
accounting firm to calculate the amount of Additional Equity Value or Additional
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Consideration that is payable. Each of the Operating Partnership, on the one
hand, and the Contributors, on the other hand, shall have the right to submit a
single package of information to the accounting firm calculating the Additional
Equity Value or Additional Consideration within five (5) Business Days after the
appointment of such accounting firm, and shall also simultaneously submit a copy
of such package to the other party. Each of the Operating Partnership and the
Contributors shall bear equally the fees and expenses of the accounting firm
making such determination and BPP, the Operating Partnership and the
Contributors shall provide such accounting firm with such releases and
indemnities as they may request in connection with their engagement for this
purpose. Such accounting firm shall be instructed to provide its written
calculation of the Additional Equity Value or Additional Consideration, as
applicable, within ten (10) Business Days after its appointment. The amount of
the disputed Additional Equity Value or Additional Consideration determined to
be payable by the accounting firm selected pursuant to this Section 1.6(d) shall
be binding on and shall be nonappealable by the Contributors and the Operating
Partnership and BPP. Within ten (10) Business Days after such determination,
the Operating Partnership shall pay to the Existing Partners the amount
determined to be owed, if any, with interest accruing on such amount from the
date on which such amount should have been paid pursuant to Section 1.6(a) or
Section 1.6(b), at a variable interest rate equal to the prime commercial
interest rate publicly announced by Bank of America at its Los Angeles office
plus two percent (2%).
(e) Tenant Improvements and Leasing Commissions. The Contributors
shall be responsible for the performance and prompt payment of the cost of all
tenant improvements (including all architect, engineering and related
construction fees and expenses) and all leasing commissions, brokerage fees and
similar amounts or reimbursements for any of the foregoing relating to any
Qualified New Lease or Qualified Replacement Lease (collectively, "Additional
NOI Lease Expenses") in accordance with the provisions of the Post-Closing
Leasing Agreement. Notwithstanding the foregoing, the Contributors shall have
the right to elect in their sole and absolute discretion not to lease any of the
space included in the Identified Space, in which event the Contributors shall
not have any liability with respect to any additional NOI Lease Expenses
relating to such space.
(f) Procedures for Approving Qualified New Leases and Qualified
Replacement Leases. Each potential Qualifying New Lease and potential Qualified
Replacement Lease must be submitted to the Operating Partnership in final form,
signed by the tenant, but with the effectiveness thereof conditioned upon and
subject to execution by the Operating Partnership. If such use requires a
permit from any governmental authority, then the tenant shall have acknowledged
in such Lease or otherwise in writing that such Lease is subject to its receipt
of such permit. Within five (5) Business Days after receipt of such proposed
Qualified New Lease or Qualified Replacement Lease and additional required
information, BPP, on behalf of the Operating Partnership, shall inform the
Contributors of any additional information it reasonably requires in order to
determine whether such proposed Lease satisfies the requirements for a
Qualifying New Lease or a Qualified Replacement Lease, as applicable. Within
five (5) Business Days after receipt of such additional requested information
(or within ten (10) Business
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Days after receipt of the proposed Qualified New Lease or Qualified Replacement
Lease if no such additional information has been requested as set forth above),
the Operating Partnership shall either (i) execute such Lease and return it to
the Contributors (whereupon it shall automatically become a Qualified New Lease
or Qualified Replacement Lease) or (ii) reject such Lease by providing a written
notice to the Contributors (a "Rejection Notice") specifying in reasonable
detail the terms of such Lease that vary from the requirements set forth on
Schedule 1 of Exhibit M. The Operating Partnership agrees that it will sign all
potential Qualifying New Leases or Qualified Replacement Leases submitted by the
Contributors that satisfy the requirements set forth on Schedule 1 to Exhibit M.
If the Operating Partnership rejects a potential Qualifying New Lease or
Qualified Replacement Lease, the Contributors shall have the option of
(i) revising such Lease so that it satisfies all of the objections set forth in
the Rejection Notice and resubmitting such Lease to the Operating Partnership
for execution (which Lease shall then be signed by BPP on behalf of the
Operating Partnership within three (3) Business Days after receipt) or
(ii) conditionally entering into a new proposed Qualifying New Lease or
Qualifying Replacement Lease for such space and resubmitting such Lease to BPP
for approval in a manner consistent with the procedures set forth above.
Notwithstanding the foregoing, nothing herein shall constitute a waiver of the
Contributors' right to submit a potential Qualifying New Lease or Qualified
Replacement Lease to arbitration to determine if it should constitute a
Qualifying New Lease or Qualified Replacement Lease under this Agreement as set
forth below.
In the event the Operating Partnership and the Contributors disagree as to
whether a potential Qualifying New Lease or Qualified Replacement Lease
satisfies the requirements set forth in Schedule 1 to Exhibit M, and such
dispute is subsequently resolved in favor of the Contributors pursuant to
arbitration as set forth below, then the terms of such potential Qualifying New
Lease or Qualified Replacement Lease at the time submitted to the Operating
Partnership shall be deemed to constitute a Qualified New Lease or Qualified
Replacement Lease whether or not such proposed Lease is actually executed and
delivered by the Operating Partnership. Any arbitration conducted pursuant to
the provisions of this Section 1.6(f) shall be conducted in San Francisco,
California by an arbitrator mutually agreed to by the Contributors and the
Operating Partnership, or, if they cannot agree, by recognized independent
arbitrators each with not less than 10 years' experience arbitrating commercial
real estate disputes, one chosen by the Contributors, one chosen by the
Operating Partnership and the third selected by the two arbitrators so chosen,
provided that if either the Contributors or the Operating Partnership fail to
appoint an arbitrator within ten (10) days after receipt of written notice by
the other party to the effect that it has appointed an arbitrator, then the
arbitration shall be conducted by the arbitrator selected by the party giving
notice. Such arbitrators' sole determination shall be whether or not a proposed
Qualifying New Lease or Qualified Replacement Lease satisfies the standards for
such Leases as set forth in Schedule 1 to Exhibit M (New Tenant Standards), and
the arbitrators shall be instructed to render such determination within ten (10)
Business Days after their appointment. All costs of each arbitrator hereunder
shall be borne by the non-prevailing party. Any determination reached pursuant
to the foregoing procedure shall be final and binding on the parties absent
fraud. Any arbitration under this Section 1.6(d) is subject to the California
Arbitration Act.
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(g) Additional Consideration Units. Any Unit issued pursuant to this
Section 1.6 shall be redeemable by the holder of such Unit for cash by such
holder giving written notice of such redemption to the Operating Partnership
within two (2) Business Days after the issuance thereof. If such holder fails
to give such redemption notice within such two Business Day period, then such
Unit shall be subject to such restrictions on redemption as may be set forth in
the Operating Partnership Agreement, the Operating Partnership Amendment or any
document executed pursuant thereof with respect to other Units, as applicable.
If such notice is given, BPP and the Operating Partnership shall satisfy such
redemption request within two (2) Business Days after delivery of such notice to
the Operating Partnership. For purposes of valuing the Additional
Consideration, the Units issued in respect thereto shall be deemed to have value
equal to the average closing price of BPP's Common Stock on the NYSE for the
twenty (20) trading days ending with and including the trading day immediately
preceding the day on which such Additional Consideration is determined. For
purposes of determining the Additional Equity Value, the Units issued in respect
thereof shall be deemed to have a value of $14.375. If the Operating
Partnership does not redeem the Units as provided above, the Operating
Partnership shall pay to the holders of such Units (i) interest on the value of
the Units as determined above at an annual rate of interest equal to 15%, based
on actual days elapsed from the date notice was given by the holder of such
Units until the date the Units are redeemed in accordance with this Agreement,
less (ii) any dividends paid by BPP on such Units from the date of such notice
until the date of such redemption of the Units.
(h) Casualty and Condemnation Events. If between the Closing Date
and June 30, 1999 any of the Identified Space with respect to which no
Additional Equity Value or Additional Consideration has previously been paid
pursuant to a Qualified New Lease, Qualified Replacement Lease or Master Lease
becomes unfit for occupancy as a result of a casualty or condemnation event,
then the Operating Partnership shall have the option either (a) to extend both
the June 30, 1999 outside date for payment of the Additional Equity Value set
forth in Section 1.6(a) and the June 30, 1999 Additional Valuation Date with
respect to such unfit premises until the date on which such space is restored
and rendered fit for occupancy (subject to completion of customary tenant
improvements) plus a period of time equal to the number of days such space
remained unfit for occupancy as a result of such casualty or condemnation event
prior to and including June 30, 1999, or (b) to pay to the Existing Partners (as
set forth on Exhibit S) an amount equal to the Additional Equity Value or
Additional Consideration, as applicable, which would be payable if such unfit
Identified Space was leased pursuant to a Qualified New Lease or Qualified
Replacement Lease, as applicable, in each case at 75% of the rent set forth for
such space in the Stabilized Leasing Plan. The Operating Partnership shall
provide notice to the Contributors within twelve months of the date of such
casualty or condemnation event of its good faith determination as to whether it
will or will not restore the damaged Identified Space. If the Operating
Partnership elects not to restore, then the Operating Partnership shall pay to
the Existing Partners at the time of such notice an amount equal to the product
of (A) the total net casualty insurance proceeds or net condemnation award
proceeds (or payments from a governmental authority in lieu thereof) received
(or which will be received) by the Operating Partnership as a result of such
casualty or condemnation event and (B) a fraction, the numerator
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of which is the rentable area in square feet of the Identified Space rendered
unfit by such casualty or condemnation event and the denominator of which is the
total rentable area in square feet of the premises in the applicable Property
rendered unfit by such casualty or condemnation event, in satisfaction of its
obligation to pay the Additional Equity Value or Additional Consideration, as
applicable, with respect to such damaged Identified Space. Notwithstanding the
foregoing, if after giving such notice that it will not restore such damaged
Identified Space, the Operating Partnership does so restore such space and make
it fit for occupancy at any time within twenty-four (24) months after giving
such notice to the Contributors, then Contributors' rights to lease such
restored Identified Space pursuant to a Qualified New Lease, Qualified
Replacement Lease, or Master Lease shall be resurrected, the June 30, 1999
Additional Valuation Date shall be extended as set forth in clause (a) of the
first sentence of this Section 1.6(h) and the Contributors shall be entitled to
Additional Equity Value or Additional Consideration as applicable, with respect
thereto in accordance with the provisions of this Section 1.6, less the amount
of any insurance proceeds or condemnation award proceeds paid to Contributors as
set forth above. If the Operating Partnership has not paid the Existing
Partners pursuant to clause (b) in the first sentence of this Section 1.6(h) and
has elected to restore the damaged Identified Space as set forth above, but such
damaged space has not been restored and rendered fit for occupancy (subject to
completion of customary tenant improvements) within twenty-four (24) months
after the date of the casualty or condemnation event, then the Operating
Partnership shall pay to the Contributors, the amount set forth in such clause
(b) above. Notwithstanding anything to the contrary set forth herein, if in
restoring the damage caused by casualty or a condemnation event, the Operating
Partnership reconfigures the Property such that any of the unfit Identified
Space is no longer rentable space, then the Operating Partnership shall pay to
the Contributors the amount set forth in clause (b) in the first sentence of
this Section 1.6(h) with respect to such Identified Space.
(i) Example of Calculation of Additional Equity Value and Additional
Consideration. An example of the calculation of Additional Equity Value and
Additional Consideration is set forth in Schedule 1.6(i).
(j) Extension of Additional Valuation Dates. If the Closing occurs
after December 31, 1997 because the condition set forth in Section 2.2(w) is not
satisfied, each of the December 31, 1998 and June 30, 1999 Additional Valuation
Dates will each be extended for an additional 60 days.
1.7 Master Leases. To the extent that a tenant under a Lease, Qualified
New Lease or Qualified Replacement Lease is not obligated to pay full base rent
and full estimated common area maintenance and other expense reimbursements
(collectively, the "Contract Rent") as of the date the calculation of Effective
NOI (for the purposes of determining Equity Value at Closing) or Additional NOI
Lease Income (for the purposes of determining Additional Equity Value or
Additional Consideration) is made, then the Contributors shall have the right to
enter into a master lease (each, a "Master Lease") for the premises demised
pursuant to such Lease, Qualified New Lease or Qualified Replacement Lease with
the Operating Partnership for a term equal to
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the remaining term of such Lease, Qualified New Lease or Qualified Replacement
Lease, as applicable, in the form attached to this Agreement as Exhibit T. The
Contributors shall pay rent to the Operating Partnership during the term of such
Master Lease equal to the Contract Rent under such Qualified New Lease or
Qualified Replacement Lease less any rent (including common area maintenance and
other estimated expense reimbursements) either (i) actually paid to the
Operating Partnership by the underlying tenant under such Lease, Qualified New
Lease or Qualified Replacement Lease or (ii) as to which the underlying tenant
has delivered to the Operating Partnership a Payment Estoppel and has actually
made the first payment of rent to the Operating Partnership. Such Master Lease
shall automatically terminate at such time as (x) there is delivered to the
Operating Partnership a Payment Estoppel relating to the Contract Rent then
payable under the Qualifying New Lease or Qualifying Replacement Lease, and
(y) the tenant has actually made the first payment of rent as specified in its
lease to the Operating Partnership thereunder.
1.8 Maximum Consideration. In no event shall the sum of (i) the Valuation
as determined pursuant to Section 1.1 or as recalculated pursuant to
Section 1.6(a) and (ii) the Additional Consideration determined pursuant to
Section 1.6(b) exceed $344,000,000.
ARTICLE 2
CERTAIN COVENANTS AND CONDITIONS TO CLOSING
2.1 Certain Covenants and Conditions to BPP's and the Operating
Partnership's Obligations. The obligation of BPP and the Operating Partnership
to consummate the transactions contemplated hereunder shall be subject to the
satisfaction or waiver by BPP and the Operating Partnership of each of the
conditions set forth below and the performance by the Contributors of their
obligations set forth below and elsewhere in this Agreement, in each case on or
before the Closing Date unless provided otherwise.
(a) [Intentionally Omitted]
(b) Title Insurance. The Contributors shall cause to be issued to
the Operating Partnership at Closing with respect to each Property at the
Contributors' expense an original CLTA policy of title insurance (Form B, rev.
10/17/70 issued by the Title Company in the amount of the Valuation with respect
to such Property dated as of the Closing Date, insuring fee simple title to the
Real Property in the Operating Partnership, subject only to the Permitted
Exceptions (other than those relating to the Mortgage Debt provided that the
Operating Partnership causes the Mortgage Debt to be paid on the closing Date in
accordance with Section 4.13) and providing full coverage against mechanic's and
materialman's liens and parties in possession other than tenants under Leases as
tenants only except for the tenants with options as set forth in Exhibit U, and
the Title Company shall be prepared and willing to upgrade such
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policy to ALTA coverage upon payment of the applicable increase in premium
therefor by the Operating Partnership. (Such title insurance policy is the
"Title Policy.")
(c) [Intentionally Omitted]
(d) UCC Search. The Contributors shall provide to BPP the results of
a UCC Search from the office of the Secretary of State of California and the
state of formation of each the Contributors, with no individual result dated
earlier than thirty (30) days prior to the Closing Date, showing any and all
filings against the Contributors with respect to the Personal Property and the
Intangibles, and shall remove and release from the public records all such
filings effective as of the Closing Date with respect to the Personal Property
and the Intangibles except for filings made in connection with the Mortgage Debt
and naming the mortgagee thereunder as secured party.
(e) [Intentionally Omitted]
(f) Prospective Subscriber Questionnaire. On or before the Closing
Date, each Existing Partner shall have delivered to BPP a prospective subscriber
questionnaire in the form attached hereto as Exhibit J (each, a "Prospective
Subscriber Questionnaire") showing that each Existing Partner is an Accredited
Investor.
(g) Ground Lessor Estoppels. The Contributors shall have delivered
to BPP and the Operating Partnership two (2) separate estoppel certificates (the
"Ground Lessor Estoppels"), from each ground lessor for each Property which is
shown as a leasehold on Exhibit A-2, dated no earlier than forty (40) days
before the Closing Date, in the two (2) separate forms attached to this
Agreement as Exhibit V prior to the date of this Agreement, which Ground Lessor
Estoppels do not (i) allege the existence of any material default or any
material unperformed obligation by the applicable Contributor or predecessor
ground lessee under such ground lease which has not been waived or cured to the
ground lessor's satisfaction or (ii) recite any material fact which contradicts
the representations and warranties of the Contributors in this Agreement. Each
Ground Lessor Estoppel shall be addressed to BPP and the Operating Partnership.
Notwithstanding the foregoing, if the Contributors are unable despite reasonable
efforts to obtain a Ground Lessor Estoppel, BPP and the Operating Partnership
shall have the right to require Contributors to substitute its estoppel
certificate (a "Contributors Ground Lessor Estoppel") addressing each of the
factual matters which would have been addressed in the applicable Ground Lessor
Estoppel, which Contributors Ground Lessor Estoppel shall constitute a
continuing representation and warranty of the Contributors with respect to the
matters set forth in such Contributors Ground Lessor Estoppel which shall
survive the Closing until replaced by an actual Ground Lessor Estoppel from the
ground lessor which is the subject matter thereof and which does not contradict
the Contributors Ground Lessor Estoppel in any material respect.
(h) Tenant Estoppels. Except as otherwise provided below, the
Contributors shall have delivered to BPP and the Operating Partnership estoppel
certificates (the "Tenant
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Estoppels") from each tenant under each Lease, dated no earlier than forty (40)
days before the Closing Date, except as otherwise provided below in
substantially the form attached to this Agreement as Exhibit W (or, if such
tenant is a national or regional credit tenant, the form of estoppel customarily
signed by such tenants at similar properties or, if an estoppel certificate was
previously delivered to the Contributors and a reaffirmation and update thereof
is obtained and delivered to BPP) or otherwise acceptable to BPP in its
reasonable discretion, which Tenant Estoppels do not (i) allege the existence of
any material default or any material unperformed obligation by the landlord
under the Lease, (ii) recite any material fact which contradicts the Rent Roll,
or (iii) disclose the existence of any fixed rent, additional rent or other
material charges payable by the tenant which are delinquent by more than thirty
(30) Business Days, in each case which is not disclosed in the Rent Roll or in
Schedule 2.1(h)(i) attached to this Agreement. Notwithstanding the foregoing,
if the Contributors are unable despite reasonable efforts to obtain a Tenant
Estoppel, the Contributors shall substitute an estoppel certificate executed by
each Contributor (a "Contributors Estoppel") addressing each of the factual
matters addressed in Schedule 2.1(h)(i) for tenants who fail to deliver a Tenant
Estoppel. The Contributors shall request and use all reasonable efforts to
obtain a Tenant Estoppel from each tenant under a Lease, which reasonable
efforts shall continue after the Closing to the extent a Tenant Estoppel is not
obtained as of the Closing. Any Contributors Estoppel shall constitute a
continuing representation and warranty of the Contributors with respect to the
matters set forth in such Contributors Estoppel which shall survive the Closing
until replaced by an actual Tenant Estoppel from the tenant which is the subject
matter thereof and which does not contradict the estoppel certificate of the
Contributors. To the extent a tenant is actually paying the rent specified in
the Rent Roll set forth in Exhibit N without protest or an express reservation
of rights, and related common area maintenance and real estate taxes and other
expense reimbursements, the Contributors Estoppel shall be deemed to no longer
address such rent, common area maintenance and real estate taxes and other
expense reimbursements payable by the tenant, and the Contributors shall have no
further liability in respect of the estoppel with respect to such amounts
payable. Notwithstanding anything to the contrary set forth above, (i) to the
extent that a Contributor has agreed with an anchor tenant upon a form of Tenant
Estoppel which differs from the form attached to this Agreement as Exhibit W and
such alternative form has been provided to BPP prior to the date of this
Agreement, a Tenant Estoppel from the applicable anchor tenant in such
agreed-upon form shall be deemed to be acceptable in form to BPP and (ii) to the
extent a Lease specifies a form of tenant estoppel certificate, a Tenant
Estoppel from the applicable tenant in such specified form shall be deemed to be
acceptable in form to BPP. All Tenant Estoppels shall be addressed to BPP and
the Operating Partnership.
(i) Reciprocal Easement Estoppels. The Contributors shall have
delivered to BPP and the Operating Partnership estoppel certificates (the "REA
Estoppels") from all parties under any reciprocal easement agreements or
covenants, conditions and restrictions affecting the Property, dated no earlier
than forty (40) days before the Closing Date, in substantially the form attached
to this Agreement as Exhibit X, or, if an estoppel certificate was previously
delivered to the Contributors, a certificate reaffirming and updating such
estoppel certificate shall be acceptable or otherwise acceptable to BPP in its
reasonable discretion, which Estoppels do not (i)
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allege the existence of any material default by the Contributor (or its
predecessor in interest) or any material unperformed obligation by any
Contributor (or its predecessor in interest), (ii) recite any material fact
which contradicts the representations and warranties of the Contributors in this
Agreement or (iii) disclose the existence of any other material adverse fact or
circumstance not disclosed in this Agreement or the materials delivered by the
Contributors to BPP prior to the date of this Agreement. Notwithstanding the
foregoing, if the Contributors are unable despite reasonable efforts to obtain a
REA Estoppel, the Contributors shall have the right to substitute its own
estoppel certificate (a "Contributors REA Estoppel") addressing each of the
factual matters which would have been addressed in the applicable REA Estoppel,
which Contributors REA Estoppel shall constitute a continuing representation and
warranty of the Contributors with respect to the matters set forth in such
Contributors REA Estoppel which shall survive the Closing until replaced by an
actual REA Estoppel from the applicable parties and which does not contradict
the Contributors REA Estoppel.
(j) Accuracy of Representations and Warranties. The representations
and warranties of the Contributors contained herein shall be true and correct in
all respects on and as of the date hereof, and shall be true and correct in all
respects on and as of the Closing Date, with the same effect as though such
representations and warranties have been made on and as of the Closing Date
(except for representations and warranties that speak of a specific date or time
other than the date of this Agreement, which need only be true and correct in
all respects as of such date or time) other than in all such cases, such
failures to be true and correct as would not in the aggregate reasonably be
expected to have a material adverse effect on the financial condition or results
of operations of the Properties taken as a whole or the ability of the
Contributors to fully perform their material obligations under this Agreement;
provided, however, that nothing contained in this sentence shall be deemed to
limit BPP's or the Operating Partnership's rights and remedies with respect to a
breach of any such representation and warranty as provided in this Agreement.
The Contributors shall have delivered to BPP and the Operating Partnership a
certificate of the appropriate corporate officers or the general partners of the
Contributors, dated the Closing Date, to such effect.
(k) Opinion of Counsel. The opinions of (i) Battle Fowler LLP,
counsel to the Contributors, and (ii) Pircher, Nichols & Meeks, special
California counsel to the Contributors, in each case in form and substance
reasonably satisfactory to the Company.
(l) No Injunction. There shall not be in effect any order, decree or
injunction of a court or agency of competent jurisdiction which enjoins or
prohibits consummation of the transactions contemplated by this Agreement.
(m) [Intentionally Omitted]
(n) Absence of Material Change and Default; Compliance by
Contributors. Since the date of this Agreement, there shall not have been any
material adverse change in the condition, financial or otherwise, of the
Properties (taken as a whole), and the Contributors shall
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so certify at Closing. The Contributors shall have complied in all material
respects with all of its material obligations hereunder.
(o) HSR Act. Any waiting period applicable to the consummation of
the transactions contemplated hereby under the HSR Act shall have expired or
been terminated, and no action shall have been instituted by the United States
Department of Justice or the United States Federal Trade Commission challenging
or seeking to enjoin the consummation of the transactions contemplated hereby,
which action shall not have been withdrawn or terminated, or BPP, the Operating
Partnership and the Contributors shall have mutually concluded that no filing
under the HSR Act is required with respect to the transactions contemplated
hereby
(p) Proceedings. All partnership and other proceedings to be taken
by the Contributors and the beneficial owners of the Contributors in connection
with the transactions contemplated hereby and all documents incident thereto
shall be reasonably satisfactory in form and substance to BPP and the Operating
Partnership, and BPP and the Operating Partnership shall have received all such
counterpart originals or certified or other copies of such documents as they may
reasonably request.
(q) Delivery of Contributor Documents. At the Closing, the
Contributors shall execute and deliver to BPP or the Operating Partnership, as
applicable, through customary escrow arrangements the following, in form and
substance as set forth below or as otherwise reasonably satisfactory to BPP and
the Operating Partnership:
(i) Deed. California grant deed, executed by the
applicable Contributor, in recordable form (and otherwise in the form attached
to this Agreement as Exhibit Y-1) conveying the Real Property to the Operating
Partnership free and clear of all liens, claims and encumbrances, except for the
Permitted Exceptions;
(ii) Bill of Sale and Assignment. A bill of sale
and assignment in the form attached to this Agreement as Exhibit Y-2,
executed by the applicable Contributor, assigning, conveying and warranting
to the Operating Partnership title to the Personal Property, free and clear
of all encumbrances, except for the Permitted Exceptions, together with any
original certificates of title applicable thereto if in Contributor's
possession or control;
(iii) [Intentionally Omitted]
(iv) [Intentionally Omitted]
(v) Assignment of Leases. An assignment and
assumption agreement in the form attached to this Agreement as Exhibit Z,
executed by the Contributors, whereby the applicable Contributor assigns the
Contributor's right, title and interest in and to the Leases (including,
without limitation, all security deposits and/or other deposits thereunder
not previously applied in accordance with the terms of the applicable Leases
and reflected on the
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Rent Roll attached hereto as Exhibit N all of which interest in the security
deposits shall be delivered to the Operating Partnership) and the Operating
Partnership assumes the obligations accruing thereunder from and after the
Closing Date;
(vi) Operating Partnership Amendment. A
signature page to the Operating Partnership Amendment dated as of the Closing
Date, duly executed by each Existing Partner;
(vii) Entity Transfer Certificate(s). Entity
transfer certification confirming that no Contributor is a "foreign person" as
defined in Section 1445(f)(3) of the Code;
(viii) Original Documents and Files. To the extent
not previously delivered to BPP and to the extent such items are in the
Contributors' possession or control, originals of any of the Contracts, Leases
and the Licenses;
(ix) Updated Rent Roll. An updated Rent Roll for
the Properties dated no later than five (5) Business Days prior to Closing,
which updated Rent Roll will be used to identify all Leases of space at the
Property for purposes of this Agreement as of the Closing Date (except for
Leases as to which the Contributors have knowledge are no longer in full
force and effect as of the Closing Date) and shall reflect no material
adverse changes from the Rent Roll attached hereto as Exhibit N. The
Contributors shall deliver a certificate dated as of Closing Date certifying
that such updated Rent Roll is true, complete and correct in all material
respects (including, without limitation, the amount of unapplied security
deposits and, to the knowledge of the Contributors, a description of all
uncured material nonmonetary defaults of Major Tenants and delinquencies of
base rent of more than thirty (30) days;
(x) Title Insurance. The Title Policy or a
fully effective marked up commitment for each Property;
(xi) Opinion of Counsel. The opinion(s) of
counsel to the Contributors required pursuant to Section 2.1(k);
(xii) Master Leases. The Master Leases, if
applicable (including any Master Leases entered into after the date of this
Agreement in accordance with the provisions of this Agreement);
(xiii) Post-Closing Leasing Agreement. The
Post-Closing Leasing Agreement between the Contributors and the Operating
Partnership substantially in the form of Exhibit AA attached to this Agreement
(the "Post-Closing Leasing Agreement");
(xiv) Contributors' Closing Certificate. The
certificate to be delivered by the Contributors pursuant to Section 2.1(j).
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(xv) Other. Such other documents, instruments,
consents, authorizations or approvals as may be reasonably required by, and
reasonably satisfactory to, BPP, its counsel or the Title Company and that
may be reasonably required to consummate the transactions that are the subject
of this Agreement and the Related Agreements and to otherwise give effect to the
agreements of the parties hereto, including, without limitation, as required
under this Section; provided that notice thereof and the form thereof are
delivered by BPP to the Contributors at least five (5) Business Days prior to
the Closing Date.
(r) BPP Stock Price. During the 20 trading days ending with and
including the trading date immediately preceding the Closing Date, the average
closing price per share of BPP's Common Stock on the New York Stock Exchange is
equal or more than $12.93.
(s) Execution of Operating Partnership Amendment, Registration Rights
Agreement and Other Related Agreements. The Existing Partners and BPP and/or
the Operating Partnership, as applicable, shall have executed the Registration
Rights Agreement, the Operating Partnership Amendment and the other Related
Agreements, and such agreements shall be in full force and effect.
(t) Waiver of Restrictions on Redemption. A certificate signed by an
appropriate officer of the general partner or manager of each of the
Contributors stating that the Contributors confirm that all conditions precedent
under the Operating Partnership Agreement and this Agreement to the immediate
redemptions of Units issued pursuant to Section 1.2 or Section 1.6(g) hereof
(including, without limitation, the conditions described in Sections 8(c) and
11.6(f) of the Operating Partnership Agreement) have occurred, other than the
requirement that the affected Existing Partner give timely to the Operating
Partnership the notice of redemption described in either such Section. The form
of the notice to be given for such redemption is attached hereto as Exhibit BB.
2.2 Conditions to the Obligations of the Contributors. The
obligation of the Contributors to consummate the transactions contemplated
under this Agreement is subject to the satisfaction or waiver by the
Contributors, on or before the Closing Date, of each of the conditions set
forth below.
(a) Accuracy of Representations and Warranties; Closing Certificate
of BPP and the Operating Partnership. The representations and warranties of BPP
and the Operating Partnership hereunder shall be true and correct in all
respects on and as of the date hereof, and shall be true and correct in all
respects on and as of the Closing Date, with the same effect as though such
representations and warranties had been made on and as of the Closing Date
(except for representations and warranties that speak as of a specific date or
time other than the date of this Agreement which need only be true and correct
as of such date or time) other than, in all such cases, such failures to be true
and correct as would not in the aggregate reasonably be expected to have a
material adverse effect on the financial conditions of BPP and the Operating
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Partnership taken as a whole or the ability of BPP and the Operating Partnership
to fully perform their material obligations under this Agreement; provided,
however, that nothing contained in this sentence shall be deemed to limit the
Contributors' rights and remedies with respect to a breach of any such
representation and warranty as provided in this Agreement. BPP and the
Operating Partnership shall have delivered to the Contributors a certificate of
the appropriate officer of BPP or general partner of the Operating Partnership,
dated the Closing Date, to such effect.
(b) No Injunction. There shall not be in effect any order, decree or
injunction of a court or agency of competent jurisdiction which enjoins or
prohibits consummation of the transactions contemplated hereby and there shall
be no pending Actions with respect to this Agreement or the transactions
contemplated by this Agreement.
(c) Execution of Operating Partnership Agreement, Operating
Partnership Amendment, Registration Rights Agreement and Other Related
Agreements. The Operating Partnership Agreement shall have been executed and
delivered and be in full force and effect, and shall not have been amended
(other than pursuant to the Operating Partnership Amendment). The Existing
Partners and BPP and/or the Operating Partnership, as applicable, shall have
executed and delivered the Registration Rights Agreement, the Operating
Partnership Amendment and the other Related Agreements and such agreements shall
be in full force and effect.
(d) Effectiveness of Articles Supplementary. The Articles
Supplementary to BPP's charter attached as Exhibit C hereto shall have been duly
adopted by BPP and shall have been duly filed with the State Department of
Assessments and Taxation of the State of Maryland and shall be in full force and
effect. The Contributors shall have received a certified copy of the Articles
Supplementary, as filed with the State Department of Assessments and Taxation of
the State of Maryland.
(e) Exemption from Ownership Restrictions; Board Resolutions. BPP's
Board of Directors' resolutions pertaining to (i) this Agreement, and the
procedures, findings and transactions contemplated hereby, and (ii) the
exemption of Blackacre Capital Group, L.P. and its Affiliates (collectively,
"Blackacre") from the ownership restrictions under Section 7.2.1(a)(i)(1) of
the Company Charter based upon the representations and agreements of Blackacre
previously delivered to BPP, shall have been duly approved and adopted by BPP's
Board of Directors, and BPP's corporate secretary shall have placed the record
of such action in such records and shall be in form and substance satisfactory
to the Contributors. The resolutions of BPP's Board of Directors relating to
the exemption of the Existing Partners from such ownership restrictions shall
not be amended, modified, rescinded or revoked without the prior consent of the
Existing Partners.
(f) HSR Act. Any waiting period applicable to the consummation of
the transactions contemplated hereby under the HSR Act shall have expired or
been terminated, and
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no action shall have been instituted by the United States Department of Justice
or the United States Federal Trade Commission challenging or seeking to enjoin
the consummation of the transactions contemplated hereby, which action shall not
have been withdrawn or terminated, or BPP, the Operating Partnership and the
Contributors shall have reasonably mutually concluded that no filing under the
HSR Act is required with respect to the transactions contemplated hereby and
counsel to BPP and the Operating Partnership shall have rendered its opinion to
such effect.
(g) BPP Consents. BPP and the Operating Partnership shall have
obtained in writing the consents set forth in Schedule 2.2(g) and no approval of
the NYSE shall be necessary with respect to the authorization, issuance or
conversion (subject to obtaining the approval of the holders of Common Stock
referred to in Section 4.20) of Preferred Units which shall not have been
obtained.
(h) Contributor Consents. The Contributors shall have obtained in
writing the consents identified in Schedule 3.1(b).
(i) Contribution of Properties by BPP to Operating Partnership. BPP
and the Operating Partnership shall have completed the UPREIT Transaction to the
extent that the Operating Partnership and its Subsidiaries have legal or
beneficial ownership of at least 60% by value of the assets owned by BPP (other
than its interest in the Operating Partnership) and its Subsidiaries (including
the Operating Partnership) immediately prior to the effective time of the
Closing. In addition, the UPREIT Transaction shall then be proceeding to the
extent required by Section 7.5 of the Operating Partnership Agreement.
(j) Proceedings. All corporate and other proceedings to be taken by
BPP and the Operating Partnership in connection with the transactions
contemplated hereby and all documents incident thereto shall be reasonably
satisfactory in form and substance to the Contributors and the Contributors
shall have received all such counterpart originals or certified or other copies
of such documents as they may reasonably request.
(k) REIT Status. BPP shall have elected to be taxed as a REIT in its
most recent federal income tax return, and shall be in compliance with all
applicable laws, rules and regulations, including the Code, necessary to permit
it to be taxed as a REIT. BPP shall not have taken any action or have failed to
take any action which would reasonably be expected to, alone or in conjunction
with any other factors, result in the loss of its status as a REIT for federal
income tax purposes.
(l) Authority. BPP shall have delivered to the Contributors evidence
of its and its officer's authority to execute and deliver this Agreement and all
Related Agreements (including on behalf of the Operating Partnership) and to
consummate the transactions which are the subject of this Agreement and to
perform its and the Operating Partnership's obligations hereunder and under the
Related Agreements.
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(m) Absence of Material Change and Default. Since the date of this
Agreement (i) there shall not have been any material adverse change in the
financial condition of BPP and the Operating Partnership (taken together), (ii)
BPP and the Operating Partnership shall have complied in all material respects
with all of their material obligations hereunder, and (iii) BPP and the
Operating Partnership shall so certify (in form reasonably acceptable to the
Contributors) at Closing that the above conditions are true as of the Closing
Date.
(n) BPP Stock Price. During the 20 trading days ending with and
including the trading date immediately preceding the Closing Date, the average
closing price per share of BPP's Common Stock on the New York Stock Exchange is
equal or more than $12.93.
(o) Opinion of Counsel. The opinions of (i) Goodwin, Procter & Hoar
LLP, counsel to BPP and the Operating Partnership, (ii) Loeb & Loeb LLP, special
counsel to the BPP and the Operating Partnership, and (iii) Ballard, Spahr,
Andrews & Ingersoll, special Maryland counsel to BPP shall have been received,
in each case in form and substance reasonably satisfactory to the Contributors.
(p) Waiver of Restrictions on Redemptions. A certificate signed by
an appropriate officer of BPP and the Operating Partnership stating that (i)
such parties confirm that all conditions precedent under the Operating
Partnership Agreement and this Agreement to the redemptions of Preferred Units
and Common Units pursuant to Section 1.2 hereof (including, without limitation,
the conditions described in Sections 8(c) and 11.6(f) of the Operating
Partnership Agreement) have occurred other than the requirement that the
affected Existing Partner give timely to the Operating Partnership the notice of
redemption described in either such Section. The form of the notice to be given
for such redemption is attached hereto as Exhibit BB.
(q) Amended Company By-laws. The amendment to the Company By-laws in
the form attached as Exhibit CC (the "Amended Company By-laws") shall have been
approved by BPP's Board of Directors, all as required or permitted by and in
accordance with the Company Charter, duly filed if any filing thereof shall be
required by any Authority or NYSE, and shall be in full force and effect.
(r) Discharge of Mortgage Debt. If required pursuant to Section
4.13, BPP and the Operating Partnership shall have satisfied the Mortgage Debt
in full.
(s) NYSE Matters. BPP shall have received written advice from the
NYSE to the effect that the transactions contemplated herein and in the Related
Agreements will not result in the de-listing of the Common Stock.
(t) DLJ Fee. BPP or the Operating Partnership shall have paid to DLJ
in full, the DLJ Fee.
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(u) New Company Title Policies. BPP shall have obtained the New
Company Title Policies for the Company Properties set forth on Exhibit G.
(v) Company Rent Roll. The Contributors shall have received the
Company Rent Roll, as updated, to a date not more than five Business Days prior
to the Closing Date in conformity with Section 3.2(j)(i).
(w) Preferred Stock Purchase Agreement. The purchase of the
Preferred Stock contemplated by the Preferred Stock Purchase Agreement shall
have been consummated.
(x) Accountants. BPP shall have caused to be supplied to the
Contributors a letter, satisfactory to the Contributors in scope, form and
substance, as to the financial statement matters referenced in Section 3.2(e) of
this Agreement.
(y) Schedule 3.2(c)(ii). The Contributors shall have received
Schedule 3.2(c)(ii), as updated to the Closing Date such that it is true,
correct and complete as of the Closing Date, as provided in Section 2.2(z) of
this Agreement.
ARTICLE 3
REPRESENTATIONS AND WARRANTIES; CERTAIN COVENANTS
3.1 Representations and Warranties of the Contributors; Certain Covenants
of the Contributors. Each Contributor hereby represents and warrants to BPP and
the Operating Partnership as of the date of this Agreement and makes certain
covenants as follows:
(a) Existence and Power. Each Contributor is a
validly existing limited liability company under the laws of the State of
Delaware. Each Contributor and its managers has all power and authority to
enter into this Agreement and all other documents to be executed and delivered
in connection with the transactions that are the subject of this Agreement,
including, without limitation, all Related Agreements, to the extent they are
to be executed by the Contributors, and to enter into and deliver and to perform
its obligations hereunder and under the Operating Partnership Amendment and the
other Related Agreements executed by the Contributors. BSMC is a validly
existing limited partnership under the laws of the State of Delaware. BSMC II,
GSF and GSF II are each validly existing limited liability companies under the
laws of the State of Delaware. The Existing Partner, MJL Associates, A
California Limited Partnership, is a validly existing limited partnership under
the laws of the State of California. Each of BSMC, BSMC II, GSF, GSF II and
MJL Associates has all power and authority to enter into, deliver and perform
its obligations under the Operating Partnership Amendment and the other Related
Agreements to which it is a party. The names of all Existing Partners which
will receive Units or Preferred Units pursuant to this Agreement, are set
forth on Exhibit A-1 attached hereto and the supplement to such Exhibit A-1
to be delivered pursuant to Section 1.2 will set
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forth the allocations thereof among such Existing Partners. Attached to this
Agreement as Exhibit A-3 to is an accurate and complete organizational chart of
each Contributor showing the ultimate beneficial owners of such Contributor and
all intermediate entity owners of such Contributor as at the date hereof (which
may be changed prior to Closing pursuant to Section 4.29).
(b) Authorization; No Contravention; Consents. The
execution and delivery of this Agreement, the Operating Partnership
Amendment, the Registration Rights Agreement and the other Related Agreements
executed by the Contributors and/or the Existing Partners and the performance
of their respective obligations under all of the foregoing has been duly
authorized by all requisite organizational action, including, without
limitation, by obtaining, to the extent required, the consent of all
applicable Existing Partners and the consent of all partners or members of
each Existing Partner which is a partnership or limited liability company.
This Agreement, the Operating Partnership Agreement, the Registration Rights
Agreement and the other Related Agreements executed by the Contributors
and/or the Existing Partners will constitute the valid, legal and binding
obligations of the Contributors or the Existing Partners, as applicable.
None of this Agreement, the Operating Partnership Agreement, the Registration
Rights Agreement or the other Related Agreements executed by the Contributors
or the Existing Partners will violate any term of any agreement, order or
decree to which it is a party or by which the Contributors or the Existing
Partners are bound or to which any Property is subject. Except as set forth
on Schedule 3.1(b), no consent of any lender, partner, member, shareholder,
beneficiary, tenant, creditor, investor, Authority or other Person which has
not been obtained is required in order for the Contributors to enter into
this Agreement and consummate the transactions contemplated herein or in
order for the Existing Partners to enter into any Related Agreement to which
it is a party and to consummate the transactions contemplated therein.
Except as set forth on Schedule 3.1(b), the Contributors have obtained all
other authorizations, consents, approvals and waivers from each of the
Existing Partners and from third parties (collectively, the "Consents"),
including, without limitation, Authorities, necessary to enable it to
transfer the Properties to the Operating Partnership in accordance with the
terms of this agreement and all other Agreements by which the Contributors,
or any Property is bound or to which the Contributors or the Property is
subject and to enable it to perform all of its obligations under this
Agreement and the Related Agreements.
(c) Descriptive Information; Diligence. To the
Contributor's knowledge, all documents delivered by or on behalf of the
Contributors to BPP, including, without limitation, all leases, tenancy and
occupancy agreements (including, without limitation, all amendments,
modifications, agreements, records, substantive correspondence and other
documents affecting in any way a right to occupy any portion of the Land or
the Improvements) affecting the Properties (collectively, the "Leases"), are
true, correct and complete copies of all such documents in the Contributors'
possession or control. To the Contributor's knowledge, the documents
described in the immediately preceding sentence have not been amended or
modified by any oral agreements.
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(d) Defaults. The Contributors are not in monetary default, and
the Contributors have no knowledge of any material nonmonetary default, under
any of the documents, recorded or unrecorded, encumbering or affecting any
Property, including without limitation, the Licenses, the Leases and the
Contracts, any documents referred to in the Preliminary Report or any
documents or instruments executed in connection with all or any of the
foregoing.
(e) Compliance with Law. Except as set forth in Schedule
3.1(e)(i), no Contributor has knowledge that all or any portion of any
Property violates any law, rule, regulation, ordinance, code or
interpretation of any Authority (collectively, "Laws") (including, without
limitation, those relating to zoning and the requirements of Title III of the
Americans with Disabilities Act of 1990 (42 U.S.C. 12181, et seq.) and The
Provisions Governing Public Accommodations and Services Operated by Private
Entities), or any requirement of any insurer or board of fire underwriters or
similar entity. No Contributor has knowledge of any special assessment
proceedings affecting any Property except as set forth on Schedule 3.1(e)(ii)
or of any such assessment other than those listed in the Preliminary Report.
To the Contributors' knowledge, all licenses, permits, approvals, variances,
easements and rights of way, including, without limitation, proof of
dedication and authorizations all Authorities having jurisdiction over each
Property (collectively, the "Licenses") required for the ownership, use or
operation of such Property as presently used and operated or otherwise have
been validly issued and are in full force and effect, and no Contributor has
knowledge of any Action relating to the revocation or modification of any
such License. To the extent required under applicable Laws and, to the
knowledge of the Contributors, valid and final certificates of occupancy (or
equivalent) have been issued for each space in the Improvements at each
Property and no space has been leased in violation of any such certificates.
To the Contributors' knowledge, each of the Licenses required for the
ownership, use or operation of each Property as presently operated shall
remain in full force and effect following the contribution of the Interests
pursuant to this Agreement. To the Contributors' knowledge, each Property is
currently zoned for the buildings, businesses and parking included in such
Property and the Contributors have no knowledge of any pending or proposed
change in the zoning classification of such Property. Except as to normal
payments reflected in the financial statements provided to BPP for prior
periods that would be expected to reoccur in subsequent periods (which
subsequent payments may be in different amounts), to the Contributor's
knowledge no payments are owing to or on behalf of any Authority or are
anticipated to be payable to or on behalf of any Authority pursuant to the
Licenses required for the ownership, use or operation of the Property as
presently operated. Except as set forth on Schedule 3.1(e)(ii), the
Contributors have no knowledge of any betterment or special assessments
pending or contemplated with respect to any Property.
(f) Certain Title Matters. To the Contributor's knowledge, (i)
the Real Property is free of all liens and encumbrances except as disclosed
in the Preliminary Report, (ii) all of the easements, covenants or
restrictions affecting each Property are set forth in the Preliminary Report,
(iii) no Property is in violation in
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any material respect of any of the easements, covenants or restrictions
affecting such Property and no other party is in violation in any material
respect of any such easements, covenants or restrictions, (iv) no Property is
subject to any covenant or restriction that materially impairs the utility of
any portion of the Property for its intended purpose or the ability to operate
the Property as currently operated, (v) except as may be shown on any survey
obtained by BPP, there are no encroachments of any of the Improvements at any
Property onto adjoining land nor any encroachments onto the Land at any Property
of existing improvements located on any adjoining land, and (vi) except as may
be reflected in the Preliminary Report and the Leases, each Property is not
dependent upon any adjacent property in order to be used for its current
purposes, for access, parking, utilities or any other matter except in
circumstances where there is an adequate, legally enforceable and insurable
permanent easement providing the Property with the required rights of use of the
adjacent property.
(g) Personal Property. The list of personal property for each
Property attached hereto as Schedule 3.1(g), is in all material respects an
accurate and complete list of all Personal Property.
(h) Leases. The Rent Roll lists all Leases for any portion of
each Property or otherwise affecting each Property, and is accurate and
complete in all material respects as of the date of the Rent Roll. The
copies of the Leases which have been delivered or made available to BPP are
true and complete, constitute all outstanding Leases and include all
subleases known to the Contributors relating to each Property. True,
complete and correct copies of all Leases in effect on the date of this
Agreement have been delivered or made available to BPP and the Contributors
shall promptly provide true, complete and correct copies of any Leases
entered into after the date of this Agreement to BPP. Each Lease (i) is in
full force and effect with respect to the applicable Contributor, and, to the
Contributors' knowledge, the applicable tenant; and (ii) constitutes the
entire agreement between the applicable Contributor and such tenant with
respect to the applicable Property and includes any other agreements between
such parties related in any way to such Property. To the Contributors'
knowledge, no Contributor is in default in the performance of any material
obligation under any of the Leases (or any agreements incorporated therein by
reference) and the Contributors have no knowledge of any circumstances which,
with the passage of time or the giving of notice, or both, would constitute
an event of default by landlord under any of the Leases. To the
Contributors' knowledge, no tenant is in monetary default under its Lease for
more than thirty (30) days in payment of base rent and the Contributors have
no knowledge of any material non-monetary default of Major Tenants. Except
as indicated in the Rent Roll, (x) no advance rent or other payment has been
made with respect to any Lease except rental for the current month, (y) there
is no free rent or other concession with respect to any Lease and (z) there
is no obligation under the Lease for the refunding of a security deposit.
Except as otherwise expressly set forth in the Rent Roll or as set forth on
Schedule 3.1(h), to the Contributors' knowledge (and without any duty to
investigate) there are no actions, voluntary or involuntary, pending against
any tenant under any bankruptcy or insolvency laws.
(i) Rent Roll. Attached hereto as Exhibit N is the rent roll
(including the attachments thereto, the "Rent Roll") which is true, complete
and correct as of the date thereof in
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all material respects. The Rent Roll attached as Exhibit N shall be updated to
a date not more than five (5) Business Days prior to the Closing Date.
(j) Options. Except as shown on the Rent Roll or Schedule 3.1(j),
or in any of the Leases with tenants other than Major Tenants, no Contributor
has granted to any Person any option or right of first refusal or first
opportunity to acquire any interest in any Property or any portion thereof,
and the Contributors have no knowledge that any other Person has granted any
such option or right of first refusal or first opportunity to acquire which
remains in force and effect.
(k) Contracts. True, complete and correct copies of the
Contracts have been provided to BPP. To the Contributors' knowledge, the
Contracts are in full force and effect. There shall be no agreements or
other obligations or liabilities with respect to all or any portion of any
Property entered into by the Contributors or, to the Contributors' knowledge,
entered into by any other Persons that are binding on the Operating
Partnership or any Property following Closing, other than the Leases, the
Assigned Contracts, the Permitted Exceptions, the Licenses required for the
ownership, use or operation of the Property and other documents executed in
connection with the foregoing.
(l) Access. To the Contributor's knowledge, (i) each Property
has direct physical access to and from adjoining physically open public
streets and the Contributors have obtained all Licenses required from all
Authorities having jurisdiction over such Property, including, without
limitation, proof of dedication required from all Authorities having
jurisdiction over the Property, or from private parties, if any, required to
assure unrestricted vehicular and pedestrian ingress and egress to and from
such Property to public ways as currently operated, and (ii) all such rights
of ingress and egress to such Property including, without limitation, the
driveway entrances and exits to such Property, are permanent and there are no
existing facts or conditions that present a risk of termination of the
present rights of ingress and egress to such Property.
(m) Utilities. To the Contributor's knowledge, all water, sewer,
gas, electric, telephone and drainage facilities and all other utilities
required by Law or necessary for the use and operation of each Property as
currently operated (i) either enter the applicable Land through adjoining
public streets, or, if they enter through adjoining private lands, do so in
accordance with existing, valid, irrevocable and insurable easements running
to the benefit of the owner of such Property; (ii) are connected pursuant to
valid Licenses, if required; (iii) are currently in good working order; and
(iv) in the reasonable opinion of the Contributors are adequate to service
the Property as presently operated. The Contributors have not entered into
any contract with respect such utilities to pay any amounts in excess of the
nondiscriminatory metered charges therefor.
(n) Intentionally Omitted.
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(o) Hazardous Substances. Except as disclosed on Schedule
3.1(o), the Contributors have not generated, stored, released, discharged or
disposed of, nor to the Contributors' knowledge used or handled Hazardous
Substances or Hazardous Wastes (as those terms are defined below) at, upon or
from any Property in violation of any Law or in connection with which
remedial action would be prudent or required under any Law. To the
Contributors' knowledge and except as set forth in any environmental report
provided by the Contributors to BPP or otherwise obtained by BPP, in each
case fifteen (15) days after the date of this Agreement, and except as
expressly disclosed on Schedule 3.1(o) attached hereto, no Hazardous
Substances or Hazardous Wastes are or have been generated, stored, released,
located, discharged or disposed of, used or handled from, at or upon any
Property, and no Hazardous Substance or Hazardous Waste is or has been
located on any Property, except for cleaning and maintenance supplies used in
connection with properties similar to the Properties and except for materials
sold in the retail Properties which are customarily sold in comparable retail
properties, in each case which have been used, stored and sold, as
applicable, in compliance with all applicable Laws. As used in this
Agreement, the terms "Hazardous Substances" and "Hazardous Wastes" shall have
the meanings set forth in the Comprehensive Environmental Response,
Compensation and Liability Act, 42 U.S.C. Sections 1251 et seq, as amended,
and the regulations thereunder (collectively, "CERCLA"), Solid Waste Disposal
Act, 42 U.S.C. Sections 6901 et seq., as amended, including amendments under
Resource Conservation and Recovery Act, and the regulations thereunder
(collectively, "RCRA"), and Federal Water Pollution Control Act, 33 U.S.C.
Sections 1251 et seq., as amended, and regulations thereunder (collectively,
"the Federal Clean Water Act"), and the regulations thereunder, and such
terms shall also include asbestos, petroleum products, radon, radioactive
materials, lead paint, UFFI and any other regulated substances under any Law.
To the Contributors' knowledge and except as set forth in any environmental
report provided by the Contributors to BPP or otherwise obtained by BPP, in
each case within fifteen (15) days after the date of this Agreement, and
except as expressly disclosed on Schedule 3.1(o) attached hereto, no
Hazardous Substances or Hazardous Wastes other than materials customarily
used in such types of properties in compliance with Environmental Laws are
located on property adjacent to any Property. Except as disclosed in the
environmental report(s) delivered to BPP pursuant to Section 3.1(z)(xiv)
hereof or in any report obtained by BPP fifteen (15) days after, neither the
Contributors, nor any Contributor has received written notice of, or has
knowledge of, any notice from any Authority concerning the removal, treatment
or management of any Hazardous Substances or Hazardous Wastes. BPP and the
Operating Partnership hereby waive any claim against the Contributors under
CERCLA and RCRA and any comparable state laws, entitling BPP and the
Operating Partnership to bring a claim against the Contributors.
(p) Physical Condition. To the Contributors' knowledge and
except as set forth in any engineering or similar report provided by the
Contributors to BPP or otherwise obtained by BPP, in each case prior to the
date of this Agreement, the Improvements do not contain any structural
defects or material defects in the plumbing, HVAC, electrical distribution,
gas distribution, water or sewer building systems.
(q) [Intentionally Omitted.]
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(r) Non-Foreign Person. No Contributor or Existing Partner is a
"foreign person" as defined in Section 1445(f)(3) of the Code. No
Contributor or Existing Partner is subject to withholding under Section 26131
of the California Revenue and Taxation Code.
(s) Independent Unit. Except for matters included in the
Permitted Exceptions and as set forth in the Leases, to the Contributors'
knowledge each Property forms an independent unit which does not need to rely
on any facilities other than the facilities of public utility companies and
water or sewer departments or districts, located on any property not included
in such Property (i) to fulfill any requirement of any License or applicable
Law or (ii) for furnishing essential building systems or utilities,
including, without limitation, electrical, plumbing, mechanical, telephone,
cable television and heating, ventilating and air conditioning systems. To
the Contributors' knowledge, no building, other improvement or other land not
included in such Property relies on any portion of such Property to fulfill
any requirement of any License or applicable Law or the furnishing to such
building or improvement of any essential building system or utility.
(t) Disclosure. To the Contributors' knowledge, the
representations and warranties and the statements and information contained
in this Agreement, in the Exhibits and Schedules hereto and in all of the
materials delivered by the Contributors to BPP and its counsel, accountants,
appraisers and consultants pursuant to this Agreement or in connection with
the due diligence investigations conducted by or on behalf of BPP in
connection with this Agreement do not contain any untrue statement of a
material fact and, when taken together, do not omit to state a material fact
required to be stated therein or necessary in order to make such
representations, warranties, statements or information not misleading in
light of the circumstances under which they were made.
(u) Accredited Investors. Each of the Existing Partners is an
Accredited Investor.
(v) Financial Statements. All operating statements delivered to
BPP by the Contributors were prepared by or on behalf of the Contributors in
the ordinary course of business and accurately set forth in all material
respects the results of the operation of each Property for the periods
covered, except that such financial statements are unaudited, were not
prepared in accordance with GAAP and do not contain traditional footnotes
found in GAAP type reporting. Since the date of the most recent internally
prepared operating statements provided to BPP, there has been no material
adverse change in the condition, financial or otherwise, of the Properties
taken as a whole.
(w) Pending Actions; Labor Disputes. There is no existing or, to
the Contributor's knowledge, threatened Action of any kind involving any
Contributor or any Property or which, if determined adversely to it or its
assets, including, without limitation, any Property would materially
interfere with the ability of the Contributors to execute or deliver, or
perform each of its obligations under, this Agreement, the Operating
Partnership Agreement, the
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Registration Rights Agreement or the other Related Agreements executed by it or
have a material adverse effect on the financial position, operations, business
or prospects of the Contributors or their assets, including, without limitation,
any Property or the use, occupancy, operation or value of any Property. To the
best of the Contributors' knowledge, there are no complaints of unfair labor
practices pending with respect to any Person which currently have a material
adverse effect on any Property.
(x) Tax Consequences. The Contributors acknowledge that neither
BPP, the Operating Partnership nor any Affiliate shall assume any
responsibility for the Contributors' or the Existing Partners' federal or
state tax consequences of the transactions contemplated by this Agreement,
the Operating Partnership Agreement and the other Related Agreements to the
Contributors or the Existing Partners, other than to agree to report the
transactions for federal and state tax purposes consistently with the manner
agreed to by BPP and the Contributors, and with respect to representations
and warranties made by the Operating Partnership and BPP to the Contributors
in this Agreement relating to tax matters. BPP acknowledges that the
Existing Partners desire that the transaction will be reported for federal
and state income tax purposes as to such Existing Partners as a non-taxable
transaction.
(y) Insurance. The Contributors currently have in place the
public liability casualty and other insurance coverage with respect to each
Property set forth in Exhibit DD, and each of such insurance policies is in full
force and effect and all premiums due and payable thereunder have been fully
paid when due. Upon request, the Contributors will deliver or make available to
BPP all copies of all insurance policies and arrangements with respect to the
Property.
(z) Additional Deliveries The Contributors have delivered or
made available to BPP the following with respect to each Property:
(i) copies of all title policies and copies of any and all
existing and proposed easements, covenants, restrictions, agreements or other
documents known to the Contributors which affect or may in the future affect
title to the Property and which are not disclosed by the Preliminary Report;
(ii) the most current version of any existing survey(s) of the
Real Property in the possession or control of the Contributors;
(iii) copies of the property tax bills and assessments for
each Property for the three (3) most recent years, and evidence of payment
thereof, except that with respect to any period prior to a Contributor's
ownership of a Property, only to the extent such documents are in the possession
or control of the Contributors;
(iv) to the knowledge of the Contributors, all presently
effective warranties or guaranties from any contractors, subcontractors,
suppliers, servicemen or
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materialmen in connection with the Property in the possession or control of the
Contributors, including, without limitation, any construction, renovation,
repairs or alterations of any Improvements, any Personal Property or any tenant
improvements (collectively, the "Warranties");
(v) to the knowledge of the Contributors, a Schedule setting
forth a list of all of the Contracts relating to the Property, together with
copies of all of such Contracts. If requested in writing by BPP, the
Contributors shall on the Closing Date give notice to the applicable supplier or
service provider to terminate any Contract specified by BPP in such request to
be terminated. All Contracts with an Affiliate of a Contributor shall be
terminated by the Contributors effective as of the Closing Date unless otherwise
requested by BPP;
(vi) except as set forth in Schedule 3.1(z)(vi) or which are
included in the Permitted Exceptions there is no currently pending or, to the
Contributors' knowledge, threatened (in writing) (i) rezoning, condemnation or
eminent domain proceedings with respect to any Properties other than road
widenings or changes of grade of roads which would not have a material adverse
effect on the applicable Property's value or operations, (ii) change in the
assessed valuation of any Property which would have a material adverse effect on
the applicable Property's value, (iii) special assessment against any Property,
or (iv) so-called "impact fee" or any agreement with any Authority to hereafter
pay for sewer extension, oversizing utilities, lighting or like expenses or
charges for work or services by such Authority except as set forth in
Schedule 4.11 or any capital expenditure budget and except as reflected in the
current operating statements for the Properties, all of which have previously
been delivered or made available to BPP;
(vii) to the knowledge of the Contributors and to the extent
in the possession or control of the Contributors, soil reports, site plans (with
dimensions), seismographic reports, traffic reports, demographic information,
landscape plans, structural calculations, floor plans (identifying tenant and
vacancy locations), certified copies of the as-built plans and specifications,
architect's certificates certifying the square footage of the Improvements, all
items pertaining to any remodeling or renovation of the Property, construction
contracts, existing inspection reports with respect to pest control, other
reports or documents of significance to the Property, copies of the zoning
description applicable to the Property, and copies of final certificates of
occupancy (or equivalent) for all improvements at the Property;
(viii) a complete inventory of all material Personal Property
used at or in connection with the Property;
(ix) all income and expense statements and year-end financial
statements and monthly operating statements and year-to-date statements for the
period of the applicable Contributor's period of ownership and, to the extent in
the possession or control of any Contributor and to the Contributor's knowledge,
the three (3) most recent calendar years prior to Closing (audited, if in any
Contributor's possession or control).
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(x) (A) copies of the operating and capital budgets for the
Property for 1997 and 1998, (B) a comparison of actual to budgeted results for
the current year and an explanation of significant variances, (C) a list of all
capital expenditures for the Property for the period of the applicable
Contributor's ownership and, if within such Contributor's possession or control
and to the knowledge of the Contributors, up to one (1) year and, to the extent
in the possession or control of any Contributor, the three (3) most recent
calendar years, (D) an aged receivables report indicated as part of the Rent
Roll.
(xi) (A) copies of all existing and pending Leases and to the
knowledge of the Contributors all lease files (including, without limitation,
all guarantees, subleases and assignments) and tenant correspondence, (B) copies
of all outstanding executed or pending letters of intent with prospective
tenants, (C) a current leasing status report from the leasing broker(s), (D) a
copy of the current standard lease form, (E) the "Rent Roll"; and (F)to the
extent in the Contributors' possession or control and to the knowledge of
Contributors, copies of the most recent financial statements and credit reports
or other credit information, if any, on any tenant and of any guarantors of any
Leases.
xii) to the knowledge of the Contributors, copies of all
Licenses;
(xiii) (A) a schedule setting forth all Actions (i) pending or
to the Contributors' knowledge threatened against any Contributor or any manager
of a Contributor which relates to a Property, or a Property, which (y) question
or could reasonably be expected to question the validity or legality of the
transaction contemplated hereunder or under the Related Agreements or (z) affect
or could reasonably be expected to affect the Property in any adverse way, and
(B) copies of all notices of any violations of any Law received by or otherwise
in the possession or control of the Contributors relating to the Property.
(xiv) To the extent in the possession or control of the
Contributors and to the knowledge of the Contributors, all environmental audits
and reports and building inspection reports (including, without limitation,
regarding foundation, walls, roofs, floors, supports and mechanical systems such
as HVAC to the extent available) and reports regarding the compliance of the
Property with the requirements of the Americans with Disabilities Act of 1990
(42 U.S.C. 12181, et seq.).
To the extent received by or made available to BPP, each of BPP and
the Operating Partnership has reviewed each of the foregoing materials and has
conducted such diligence with respect to the Properties as it has deemed
appropriate, and each of BPP and the Operating Partnership expressly
acknowledges that is has no right to terminate this Agreement based on the
results of its diligence on the Properties. However, nothing contained in this
Agreement shall be deemed to limit BPP's right to require information and
continue to perform due diligence pursuant to the terms of this Agreement after
the date hereof.
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(aa) Blue Sky Cooperation. The Contributors and each Existing
Partner shall cooperate and do all acts as may be reasonably required or
requested by BPP with regard to the fulfillment of any requirement under
applicable state securities law to qualify the Units and the Preferred Units for
distribution pursuant to this Agreement, including but not limited to the making
of any and all representations or undertakings required by applicable state
securities law or state securities regulators in connection with a Unit
Distribution.
(bb) Ownership of All Beneficial Interests. Each Contributor
represents that the Existing Partners listed in Exhibit A-1 with respect to such
Contributor own, directly or indirectly through intermediaries, in the aggregate
all of the beneficial interests in such Contributor.
(cc) Reciprocal Easement Agreements. To the Contributor's
knowledge, all reciprocal easement agreements referenced as Permitted Exceptions
or otherwise with respect to which any Property is subject are in full force and
effect, without default in any material respect by any party thereto.
(dd) Ground Leases. The Contributors have provided or made
available to BPP accurate and complete copies of the ground leases underlying
the leasehold Properties referenced in Exhibit A-2, including all amendments and
modifications thereto (collectively, the "Ground Leases"). Each of the Ground
Leases is valid, binding and in full force and effect as against the applicable
Contributor, and, to the Contributor's knowledge, against any other party
thereto. Except for the Mortgage Debt with respect to such Ground Leases listed
in Exhibit F and except for tenants under the Leases and matters set forth in
the Permitted Exceptions, none of the Ground Leases is subject to any pledge,
lien, assignment, license or other agreement granting to any third party any
interest therein or any right to use or occupancy of any premises leased
thereunder. Except as set forth in Schedule 3.1(dd), there is no pending or, to
the Contributor's knowledge, threatened (in writing) proceeding which is
reasonably likely to interfere with the quiet enjoyment of the tenant under any
Ground Lease. No payments under any Ground Lease are delinquent, and no notice
of default thereunder has been sent or received by any of the Contributors which
has not been cured or waived prior to the date hereof, and to the knowledge of
the Contributors there does not exist under any of the Ground Leases any other
material default by a Contributor or any event which, merely with notice or
lapse of time or both, would constitute such a default by a Contributor.
(ee) Representations and Warranties of BPP and the Operating
Partnership. To the Contributors' knowledge, as of the date of this Agreement
the representations, warranties and statements of BPP and the Operating
Partnership in this Agreement and the information contained in this Agreement
and the Exhibits and Schedules hereto delivered by BPP and the Operating
Partnership to the Contributors do not contain any untrue statement of a
material fact and do not otherwise constitute a breach by BPP and the Operating
Partnership under this Agreement.
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For purposes of this Section the term "to the Contributor's
knowledge" or words of similar import shall mean the actual knowledge (as
opposed to imputed or constructive knowledge) of Messrs. John S. Long, Mark
H. Cassidy and Jack L. Mahoney and Steven Berlinger who are all of the
individuals who are directors and executive officers of the general partners
of the Contributors who know or should know the matters referenced herein,
without duty of further inquiry, and also includes any matter of which BPP
informs the Contributors in writing prior to the date hereof or to which the
Contributors acknowledge or agree in writing to BPP. Except for the
representations and warranties of the Contributors set forth in this
Agreement and as may be set forth in any of the closing documents delivered
by the Contributors pursuant to Section 2.1(q), the Properties are being
contributed to Operating Partnership in their "as is" condition without any
express or implied warranty whatsoever from the Contributors.
3.2 Representations and Warranties of BPP. BPP and the Operating
Partnership jointly and severally represent and warrant to the Contributors and
the Existing Partners as of the date of this Agreement and make certain
covenants as follows:
(a) Organization and Qualification, Subsidiaries.
(i) BPP is a corporation duly incorporated, validly existing and
in good standing under the laws of the State of Maryland. BPP has all requisite
corporate power and authority to own, operate, lease and encumber its properties
and conduct the business in which it is engaged or proposes to engage through
the Operating Partnership and to enter into this Agreement, the Operating
Partnership Agreement and those other Related Agreements to which it is a party,
and to perform its obligations hereunder and thereunder and to consummate the
UPREIT Transaction.
(ii) The Operating Partnership is a limited partnership duly
organized, validly existing and in good standing under the laws of the State of
Delaware. The Operating Partnership has all requisite partnership power and
authority to own, operate, lease and encumber its properties and conduct the
business in which it engages or proposes to engage and to enter into this
Agreement and each of the Related Agreements to which it is a party, and to
perform its obligations hereunder and thereunder.
(iii) Each of the Subsidiaries of BPP (other than the
Operating Partnership) is a corporation, partnership or limited liability
company duly organized, validly existing and in good standing under the laws of
the jurisdiction of its incorporation or organization, and has the corporate,
partnership or limited liability company power and authority to own its
properties and carry on its business as it is now being conducted.
(iv) Each of BPP, the Operating Partnership and the Subsidiaries
is duly qualified to do business and in good standing in each jurisdiction in
which the ownership of its property or the conduct of its business requires such
qualification, except as set forth in Schedule 3.2 (a)(iv).
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(v) Schedule 3.2(a)(v) sets forth the name of each Subsidiary of
BPP or the Operating Partnership (whether owned directly or indirectly through
one or more intermediaries). All of the outstanding shares of capital stock of,
or other equity interest in, each of the Subsidiaries owned by BPP or the
Operating Partnership are duly authorized, validly issued, fully paid and
nonassessable, and are owned, directly or indirectly, by BPP or the Operating
Partnership free and clear of all Liens, except as set forth in Schedule
3.2(a)(v). The following information for each Subsidiary is set forth in
Schedule 3.2(a)(v)(A), if applicable: (A) its name and jurisdiction of
incorporation or organization, (B) the type of and interest held by BPP or
Operating Partnership in the Subsidiary and, in the case of Subsidiaries, the
partnership agreement or other organizational documents of the Subsidiary, and
(C) any loans from BPP or the Operating Partnership to, or priority payments due
to BPP or the Operating Partnership from, the Subsidiary, and the rate of return
thereon. Except as set forth in Schedule 3.2(a)(v), there are no existing
options, warrants, calls, subscriptions, convertible securities or other rights,
agreements or commitments which obligate BPP or any of the Subsidiaries to
issue, transfer or sell any shares of capital stock or equity interests in any
of the Subsidiaries.
(b) Authority Relative to Agreements; Board of Approval; No
Conflicts; No Defaults, Required Filings and Consents.
(i) The execution, delivery and performance of this Agreement,
the Operating Partnership Agreement and the Related Agreements, the issuance of
the Units and Preferred Units in accordance herewith and the Operating
Partnership Amendment, the issuance and delivery of (A) shares of Preferred
Stock or Units upon redemption of the Preferred Units in accordance with the
provisions of the Operating Partnership Amendment, and (B) shares of Common
Stock upon the redemption of Units in accordance with the Operating Partnership
Agreement, and the filing with the Maryland Department of Assessments and
Taxation of the Articles Supplementary, have been duly and validly authorized by
all necessary corporate action on the part of BPP and all necessary partnership
action on the part of the Operating Partnership. This Agreement, the Operating
Partnership Agreement and the Related Agreements have been duly executed and
delivered by each of BPP and the Operating Partnership constitute the valid and
legally binding obligations of each of BPP and the Operating Partnership,
enforceable against each of BPP and the Operating Partnership in accordance with
its terms, subject to applicable bankruptcy, insolvency, moratorium or other
similar laws relating to creditors' rights and general principles of equity.
Upon the issuance of shares of Preferred Stock pursuant to a redemption of
Preferred Units for Preferred Stock, the Articles Supplementary will constitute
a valid and legally binding obligation of BPP, enforceable against BPP in
accordance with its terms, subject to applicable bankruptcy, insolvency,
moratorium or other similar laws relating to creditors' rights or general
principles of equity.
(ii) The Units and Preferred Units to be issued pursuant to this
Agreement have been duly authorized for issuance by all necessary partnership
action on the part of the Operating Partnership, and when issued by the
Operating Partnership will be duly and validly issued, fully paid and
nonassessable. When issued and delivered against payment
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therefor as provided herein, the Existing Partners will receive good title to
such Units and Preferred Units, free and clear of all Liens, security interests,
pledges, charges, encumbrances, shareholders' agreements and voting trusts or
claim or rights of interest of any nature whatsoever, subject to any rights of
the Contributors or the Existing Partners hereunder and under the Registration
Rights Agreement, and except for those resulting from any action taken by the
Contributors or the Existing Partners. A sufficient number of shares of
Preferred Stock or Common Stock to be issued by BPP upon the redemption of the
Preferred Units or Units (as the case may be) issued pursuant to this Agreement
have been duly reserved by BPP out of its authorized shares of Common Stock and
Preferred Stock for issuance pursuant to duly adopted resolutions. The shares
of Common Stock and Preferred Stock issuable upon redemption of the Units and
Preferred Units in accordance with the provisions of the Operating Partnership
Amendment will, upon issuance upon such redemption, (A) be duly and validly
issued, fully paid and nonassessable, and (B) will be shares of "Voting Stock"
(as defined in the Company Charter).
(iii) BPP's Board of Directors has authorized the creation
and issuance of the Preferred Stock. At the Closing, the Articles Supplementary
will have been duly authorized, and filed with the State Department of
Assessments and Taxation of the State of Maryland such that no further actions
are required for the due and valid issuance of Preferred Stock in accordance
herewith and therewith.
(iv) The issue and sale of Preferred Units or Units hereunder
will not give any stockholder in BPP or any limited partner in the Operating
Partnership the right to demand payment for shares or partnership interests (as
the case may be) under applicable law or give rise to any preemptive or similar
rights.
(v) The UPREIT Transaction has been duly authorized by all
necessary corporate action on the part of BPP and all necessary partnership or
limited liability company action on the part of the Operating Partnership or any
Subsidiary except those Subsidiaries listed as downREIT partnerships on Schedule
3.2(b)(v).
(vi) Except as contemplated hereby, neither the execution and
delivery by BPP and the Operating Partnership of this Agreement, the Operating
Partnership Agreement and the Related Agreements nor the consummation by BPP,
the Operating Partnership or any Subsidiary of the transactions contemplated
hereby, including the UPREIT Transaction, in accordance with the terms hereof,
will:
(A) conflict with or result in a breach of any provisions
of the Company Charter or by-laws of BPP;
(B) conflict with or result in a breach of any provisions
of the Operating Partnership Agreement or the Operating Partnership Amendment;
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(C) except as set forth in Schedule 3.2(b)(vi)(C), result
in a breach or violation of, a default under, or the triggering of any right,
payment or other obligation pursuant to, or accelerate vesting under, any of BPP
stock option plans or Operating Partnership unit option plans or similar
compensation plans or any grant or award made under any of the foregoing;
(D) violate or conflict with any regulation, rule, order,
or administrative position of the NYSE, or any other national securities
exchange on which the Common Stock is listed;
(E) except as set forth in Schedule 3.2(b)(vi)(E), violate
or conflict with any statute, regulation, judgment, order, writ, decree or
injunction applicable to BPP, the Operating Partnership or any Subsidiary;
(F) except as set forth in Schedule 3.2(b)(vi)(F), violate
or conflict with or result in a breach of any provision of, or constitute a
default (or any event which, with notice or lapse of time or both, would
constitute a default) under, or result in the termination or in a right of
termination or cancellation of, or accelerate the performance required by, or
result in the creation of any Lien upon any of the properties of BPP or its
Subsidiaries under, or result in being declared void, voidable or without
further binding effect, any of the terms, conditions or provisions of any note,
bond, mortgage, indenture, deed of trust or any license, franchise, permit,
lease, contract, agreement or other instrument, commitment or obligation to
which BPP or its Subsidiaries is a party, or by which BPP or its Subsidiaries or
any of their properties is bound or affected;
(G) except as set forth in Schedule 3.2(b)(vi)(G), require
any consent, approval or authorization of, or declaration, filing or
registration with, any Authority, other than any filings required under the
Securities Act of 1933, the Exchange Act, the HSR Act , state securities laws
("Blue Sky Laws") (collectively, the "Regulatory Filings"), and any filings
required to be made with the Office of the Maryland Department of Taxation and
Assessments and the NYSE or any other national securities exchange on which the
Common Stock is listed; or
(H) conflict with or result in a breach of any provision of
the organizational documents of any Subsidiary.
(c) Capital Stock and Units.
(i) The authorized capital stock of BPP on the date hereof
consists of 75,000,000 shares of Common Stock, and 5,000,000 shares of preferred
stock, of which 4,800,000 shall be designated Preferred Stock upon the filing of
the Articles Supplementary, and 20,000,000 shares of excess stock of the Company
(the "Company Excess Stock"), par value $0.01 per share. As of September 30,
1997, there were 23,432,852 shares of Common Stock issued and outstanding, no
shares of such preferred stock issued and outstanding and no shares of
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Company Excess Stock issued and outstanding, and as of the date of this
Agreement, there is no change except for an immaterial change in the number of
shares of Company Stock outstanding. All such issued and outstanding shares of
Common Stock are duly authorized, validly issued, fully paid, nonassessable and
free of preemptive rights. In addition, as of the date of this Agreement, BPP
has reserved out of its authorized shares of Common Stock shares of Common Stock
sufficient for issuance upon redemption or conversion, as applicable, of the
shares of Preferred Stock, the Units and the Preferred Units issued pursuant to
this Agreement and the Preferred Stock Purchase Agreement. BPP has no
outstanding bonds, debentures, notes or other obligations the holders of which
have the right to vote (or which are convertible into or exercisable for
securities the holders of which have the right to vote) with the stockholders of
BPP on any matter. Except for the options awarded and the Company's Stock
Option and Incentive Plan as amended on May 6, 1997 (the "Incentive Plan"),
there are no existing options, warrants, calls, subscriptions, convertible
securities, or other rights, agreements or commitments which obligate BPP to
issue, transfer or sell any shares of capital stock or other equity interests of
BPP except with respect to certain "put" rights as disclosed in Schedule
3.2(a)(v) and with respect to the right to receive Units as Additional
Consideration as provided in this Agreement. The consummation of the
transactions contemplated in this Agreement will not give rise to any preemptive
rights or antidilution rights exercisable by any holder of Company Stock except
for any such rights which have been waived.
(ii) Schedule 3.2(c)(ii) will set forth the number of Units and
Preferred Units which will be outstanding immediately after the Closing (after
giving effect to the transactions contemplated hereby and by the Preferred Stock
Purchase Agreement). The Units set forth on such Schedule will equal the sum
of: (A) a number of Units to be held by BPP not in excess of the number of
shares of Common Stock then outstanding, (B) the number of Units then
outstanding and issued to the Existing Partners hereunder, (C) a number of
Preferred Units equal to that number of shares of Preferred Stock then
outstanding and issued to Westbrook under the Preferred Stock Purchase
Agreement, (D) that number of Preferred Units equal to the number of Preferred
Units then outstanding and issued to the Existing Partners hereunder, (E) the
number of Units then held by other contributors of property to down REIT
Subsidiaries of BPP or the Operating Partnership which have exchanged Units in
such down REIT subsidiaries for Units, which number shall be set forth in
Schedule 3.2(c)(ii), and (F) that number of Units then held by other
contributors of property to downREIT partnership Subsidiaries of BPP or to the
Operating Partnership, which number shall be set forth in Schedule 3.2(c)(ii).
All such Units will be validly issued, fully paid and, in the case of limited
partnership units, nonassessable. Immediately after the Closing (after giving
effect to the transactions contemplated hereby and by the Preferred Stock
Purchase Agreement) (i) BPP will own the number of Units referred to in clause
(A) of the first sentence of this Section 3.2(c)(ii), and 2,800,000 Preferred
Units referred to in clause (C) of the first sentence of this Section
3.2(c)(ii). Except as aforesaid, there will be no other Units issued or
outstanding and no class of units, or any other form of general or limited
partnership interest, of the Operating Partnership issued or outstanding
immediately after the Closing (after giving effect to the transactions
contemplated hereby and by the Preferred Stock Purchase Agreement). Except as
set forth in the first sentence of this Section 3.2(c)(ii) or in
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Schedule 3.2(c)(ii), as of the Closing Date the Operating Partnership will not
have issued or granted securities convertible into interests in the Operating
Partnership, and will not be a party to any outstanding commitments of any kind
relating to, or any agreements or understandings with respect to, interests in
the Operating Partnership, whether issued or unissued, except for contribution
agreements entered into for the acquisition of properties by the Operating
Partnership. The Preferred Units that will be owned by BPP from and after the
Closing will have the same distribution and liquidation preferences with respect
to the Operating Partnership as the Preferred Stock has with respect to BPP,
which distributions shall be applied by BPP exclusively to satisfy the rights of
the holders of Preferred Stock.
(iii) Except as set forth on Schedule 3.2(c)(iii) and except
for interests in the Subsidiaries of BPP and the Operating Partnership, none of
BPP or any of its Subsidiaries owns directly or indirectly any interest or
investment (whether equity or debt) in any corporation, partnership, joint
venture, business, trust or entity (other than investments in short-term
investment securities).
(d) Pending Actions. There is no existing or, to BPP's knowledge,
threatened Action of any kind involving BPP, its Affiliates, any of its assets
or the operation of any of the foregoing, which, if determined adversely to BPP,
its Affiliates or its assets, would have a material adverse effect on the
consolidated financial position, stockholders' equity, results of operations,
business or prospects of BPP or its assets or which would interfere with BPP's
ability to execute or deliver, or perform its obligations under this Agreement,
the Registration Rights Agreement or any of the Related Agreements executed by
it or the Operating Partnership.
(e) SEC and Other Documents, Financial Statements; Undisclosed
Liabilities.
(i) BPP has delivered or made available to the Contributors, or
there are commercially available to BPP in the ordinary course, all annual,
quarterly or current reports of BPP filed with the Commission under the Exchange
Act, and in connection with BPP's registration statement bearing number
333-31591, and all exhibits, amendments and supplements thereto (collectively,
the "Company Registration Statement"), and each registration statement, report,
proxy statement or information statement and all exhibits thereto prepared by it
or relating to its properties in each case (except the Company Registration
Statement, since January 1,1994 (except as to the Company Registration Statement
as to which the applicable date shall be the effective date thereof), which are
set forth in Schedule 3.2(e)(i), each in the form (including exhibits and any
amendments thereto) filed with the Commission (collectively, the "Company
Reports"). The Company Reports were filed with the Commission in a timely
manner and constitute all forms, reports and documents required to be filed by
BPP under the Securities Act, the Exchange Act and the rules and regulations
promulgated thereunder. As of their respective dates, the Company Reports (i)
complied as to form in all material respects with the applicable requirements of
the Securities Act, the Exchange Act and the rules and regulations promulgated
thereunder and (ii) did not contain any untrue statement of a material fact or
omit to state a material fact required to be stated therein or necessary to make
the statements made therein, in
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the light of the circumstances under which they were made, not misleading;
PROVIDED, HOWEVER, that as to the compliance of the Company Reports with the
requirements of the Securities Act, the Exchange Act and the rules and
regulations promulgated thereunder, insofar as such representation is made as to
matters of form established in the Securities Act, the Exchange Act and the
rules and regulations promulgated hereunder, and assuming that such Company
Reports were prepared under the direction of and with the advice of independent
counsel and auditors to BPP, it is a representation made to BPP's knowledge.
There is no unresolved violation or position asserted by any Authority with
respect to any of the Company Reports.
(ii) Except as set forth in Schedule 3.2(e)(ii), each of the
balance sheets included in or incorporated by reference into the Company Reports
(including the related notes and Schedules) fairly presented the financial
position of the entity or entities to which it relates as of its date and each
of the statements of operations, stockholders' equity (deficit) and cash flows
included in or incorporated by reference into the Company Reports (including any
related notes and Schedules) fairly presented the results of operations,
retained earnings or cash flows, as the case may be, of the entity or entities
to which it relates for the periods set forth therein, in each case in
accordance with United States generally accepted accounting principles ("GAAP")
consistently applied during the periods involved except as may be noted therein
and except, in, the case of the unaudited statements, normal recurring year-end
adjustments.
(iii) Except as and to the extent set forth in the Company
Reports or any Schedule or Exhibit hereto, none of BPP, the Operating
Partnership or any of the Subsidiaries has any Liabilities.
(f) Litigation, Compliance With Law.
(i) Except as disclosed in Schedule 3.2(f)(i), there are no
Actions pending or, to BPP's knowledge, threatened against BPP, the Operating
Partnership or any of the Subsidiaries which question the validity hereof or any
action taken or to be taken in connection herewith (including, without
limitation, the UPREIT Transaction), and there are no continuing orders,
injunctions or decrees of any Authority to which BPP, the Operating Partnership
or any of its Subsidiaries is a party or by which any of its properties or
assets are bound.
(ii) To BPP's knowledge, none of BPP, the Operating Partnership
or its Subsidiaries is in violation of any statute, rule, regulation, order,
writ, decree or injunction of any Authority or any body having jurisdiction over
them or any of their respective properties, except as set forth in Schedule
3.2(f)(ii), provided, however, that this Section 3.2(f)(ii) shall not apply to
facts or matters otherwise set forth in (or by reference in) Sections 3.2(j) and
3.2(k) as to which Sections 3.2(j) and 3.2(k) shall apply.
(g) Absence of Certain Changes or Events. Except as disclosed in the
Company Reports filed with the Commission prior to the date hereof, as
contemplated by any of the Related Agreements or in Schedule 3.2(g) since
September 30, 1997, BPP, the Operating
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Partnership and each of its Subsidiaries have conducted their business only in
the ordinary course of such business and have not acquired any real estate or
entered into any financing arrangements in connection therewith or conducted
their business, other than in each case, in the ordinary course of business, and
there has not been (A) any change, circumstance or event that would reasonably
be expected to result in an adverse effect on the business, operations or
condition (financial or otherwise) of BPP, the Operating Partnership and the
Subsidiaries, considered as a whole, (B) any declaration, setting aside or
payment of any dividend or other distribution with respect to the Common Stock,
except for dividends in the ordinary course of business consistent with past
practice or otherwise, (C) any commitment, contractual obligation, borrowing,
capital expenditure or transaction (each, a "Commitment") entered into by the
Company, the Operating Partnership or any of the Subsidiaries other than in the
ordinary course of business or (D) any change in the Company's accounting
principles, practices or methods other than as required by changes in GAAP and
related accounting practices or procedures. Except as set forth in Schedule
3.2(g), BPP is not now contemplating entering into any Commitment which, had it
occurred on or before the date hereof, would be required to be disclosed in the
Company Reports or in Schedule 3.2(g).
(h) Tax Matters; REIT and Partnership Status.
(i) BPP, the Operating Partnership and each of the Subsidiaries
has timely filed with the appropriate taxing authority all Tax Returns required
to be filed by it or has timely requested extensions and any such request has
been granted and has not expired. Each such Tax Return is complete and accurate
in all respects. All Taxes shown as owed by BPP, the Operating Partnership or
any of the Subsidiaries on any Tax Return have been paid or accrued, except for
Taxes being contested in good faith and for which adequate reserves have been
taken, in the reasonable opinion of BPP. BPP, the Operating Partnership and
each of the Subsidiaries has properly accrued all Taxes for such periods
subsequent to the periods covered by such Tax Returns as required by GAAP.
Except as set forth in Schedule 3.2(h)(i), none of BPP, the Operating
Partnership and any of the Subsidiaries has executed or filed with the IRS or
any other taxing authority any agreement now in effect extending the period for
assessment or collection of any Tax. Except as set forth in Schedule 3.2(h)(i),
none of BPP or any of the Subsidiaries is a party to any pending action or
proceedings by any taxing authority for assessment or collection of any Tax, and
no claim for assessment or collection of any Tax has been asserted against it.
True and complete copies of all federal, state and local income and franchise
Tax Returns, or any extensions applicable thereto, filed by BPP and each of the
Subsidiaries for the taxable years 1994 to the present and all communications
relating thereto, have been delivered to the Contributors or have been made
available for inspection by their representatives. Except as set forth in
Schedule 3.2(h)(i), no claim has been made by an authority in a jurisdiction
where BPP, the Operating Partnership or any of the Subsidiaries does not file
Tax Returns that it is or may be subject to taxation by that jurisdiction.
Except as set forth in Schedule 3.2(h)(i), there is no dispute or claim
concerning any Tax liability of BPP, the Operating Partnership or any of the
Subsidiaries claimed or raised by any taxing authority in writing. As of the
date hereof, BPP is a "domestically-controlled" REIT within the meaning of Code
Section 897(h)(4)(B). Except as set
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forth in Schedule 3.2(h)(i), to BPP's knowledge no person or entity which would
be treated as an "individual" for purposes of Section 542(a)(2) of the Code (as
modified by Section 856(h) of the Code) owns or would be considered to own
(taking into account the ownership attribution rules under Section 544 of the
Code, as modified by Section 856(h) of the Code) in excess of 9.8% of the value
of the outstanding equity interest in BPP. BPP is not a "Pension-Held REIT"
within the meaning of Section 856(h)(3)(D) of the Code.
(ii) BPP (A) intends in its federal income tax return for the tax
year ended December 31, 1997 and for the tax year that will end on December 31,
1998 to elect to be taxed as a REIT and has complied (or will comply) with all
applicable provisions of the Code relating to a REIT, (B) has operated, and
intends to continue to operate, in such a manner as to qualify as a REIT for
each of its taxable years, (C) has not taken or omitted to take any action which
would reasonably be expected to result in a challenge to its status as a REIT,
and no such challenge is pending or to BPP's knowledge, threatened, and (D) will
not be rendered unable to qualify as a REIT for federal income tax purposes as a
consequence of the transactions contemplated hereby, including, without
limitation, any exchange of Preferred Units by any holders thereof by BPP for
Preferred Stock or Common Stock, or both.
(iii) Any amount or other entitlement that could be received
(whether in cash or property or the vesting of property) as a result of any of
the transactions contemplated hereby by any employee, officer, or director of
BPP or the Operating Partnership or any of their Affiliates who is a
"disqualified individual" (as such term is defined in proposed Treasury
Regulation Section 1.28OG-1) under any employment, severance or termination
agreement, other compensation arrangement or plan currently in effect would not
be characterized as an "excess parachute payment" (as such term is defined in
Section 28OG(b)(1) of the Code).
(iv) The disallowance of a deduction under Section 162(m) of the
Code for employee remuneration will not apply to any amount paid or payable by
BPP, the Operating Partnership or any of the Subsidiaries under any contract,
stock plan, program, arrangement or understanding currently in effect.
(v) BPP was eligible to and did validly elect to be taxed as a
REIT for federal income tax purposes for calendar year 1987 and all subsequent
taxable periods. The Operating Partnership is and each Subsidiary of BPP
organized as a partnership (and any other Subsidiary that files Tax Returns as a
partnership for federal income tax purposes) was, in the case of each
Subsidiary, and continues to be classified as a partnership for federal income
tax purposes.
(i) Compliance with Agreements; Liens.
(i) Neither BPP, the Operating Partnership nor any of the
Subsidiaries is in default under or in violation of any provision of the Company
Charter, the by-laws of BPP
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or the Operating Partnership Agreement (or equivalent documents), except as set
forth in Schedule 3.2(i)(i).
(ii) BPP, the Operating Partnership and each of the Subsidiaries
have filed all material reports, registrations and statements, together with any
amendments required to be made with respect thereto, that they were required to
file with any Authority and all other material reports and statements required
to be filed by them, and have paid all fees or assessments due and payable in
connection therewith, except as set forth in Schedule 3.2(i)(ii). There is no
unresolved violation asserted by any regulatory agency, nor has BPP or the
Operating Partnership received notice from any regulatory agency with respect to
any report or statement relating to an examination of BPP, the Operating
Partnership or any of the Subsidiaries.
(iii) The Company Reports describe all material agreements
(other than agreements relating to or contemplated by this Agreement and other
than agreements entered into the ordinary course of business relating to Company
Leases, indebtedness of BPP, commitments with respect thereto, the acquisition
or development or construction of, additions or expansions to, or management or
leasing services for commercial buildings or other real properties) which are
currently in effect and under which BPP, the Operating Partnership or any
Subsidiaries currently has, or expects to incur any obligation. Schedule
3.2(i)(iii) sets forth a complete and accurate list of all material agreements
(other than those listed in the parenthetical above) entered into by BPP, the
Operating Partnership or any Subsidiary as of the date hereof which are not
listed in the Company Reports or any other Schedule or Exhibit hereto, including
material Debt Instruments and except for agreements providing for the
transactions contemplated by this Agreement, the Preferred Stock Purchase
Agreement and the Related Agreements. True and complete copies of each
agreement set forth on Schedule 3.2(i)(iii) have been delivered or made
available to the Contributors.
(iv) Subject to the provisions of Section 3.2(j), which as to
facts or matters otherwise set forth therein (or by reference therein) such
Section 3.2(j) shall be applicable and this Section 3.2(i)(iv) shall not be
applicable, each agreement and instrument of BPP (other than those related to
the matters addressed in Section 3.2(j) and 3.2(k), which are addressed in such
Sections) is in full force and effect as against BPP, the Operating Partnership
and, as against the other parties thereto, no payments, if any, thereunder are
delinquent, and no notice of default thereunder has been sent or received by the
Company or any of its Subsidiaries and there does not exist under any agreement
of BPP, the Operating Partnership or its Subsidiaries any default, and no event
has occurred which, with notice or lapse of time or both, would constitute such
a default by BPP or any Subsidiary.
(v) Schedule 3.2(i)(v) sets forth a true, complete and correct
list of all Liens which could materially adversely affect the value of BPP or
the Company Properties other than those described in the Company Reports and
Liens under credit agreements providing for the financing of the Company
Properties and entered into by BPP or its subsidiaries in the
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ordinary course of business, Company Permitted Exceptions relating to Company
Properties and items (i) through (iv) in the definition of Company Permitted
Liens.
(j) Properties.
(i) Title Matters. Schedule 3.2(j)(i) sets forth as of the date
of this Agreement a complete and accurate list and the location of all real
property directly or indirectly owned, all or in part, by BPP, the Operating
Partnership or any of the Subsidiaries or as to which BPP or its Subsidiaries
has a leasehold interest (collectively, and together with the land thereunder,
all buildings, structures and other improvements and fixtures (other than trade
fixtures owned by tenants under the terms of the Company Leases (as defined
below)) located on or under such land, and all easements, rights and other
appurtenances to such land, (the "Company Properties"), other than the office
space leased by the Company from which the Company operates its business which
is listed separately on Schedule 3.2(j)(i) as HQ Space (the "HQ Space"). As of
the date of this Agreement, BPP or, in the case of Company Properties owned by
Subsidiaries, the Subsidiary indicated on Schedule 3.2(j)(i), owns good and
marketable fee simple title (or, if so indicated in Schedule 3.2(j)(i),
leasehold title) to each of the Company Properties, and such title is (i) in the
case of those Company Properties with respect to which New Company Title
Policies will be issued, to BPP's knowledge, free and clear of any Liens, title,
defects, restrictions or covenants, or reservation of interests in title, except
for (A) Company Permitted Liens, (B) zoning, building, fire, health,
environmental and pollution control laws and other land use laws, ordinances,
rules and regulations applicable to the Company Properties, (C) all matters,
whether or not of record, to the extent caused by the Contributors or their
agents, representatives or contractors, and (D) all other matters listed as
exceptions on Schedule (B-1) of the New Company Title Policies or shown on any
survey of the Company Properties listed on Schedule 3.2(j)(i) or obtained by the
Contributors, and (ii) in the case of all other Company Properties (the "Other
Company Properties"), to the Company's knowledge, free and clear any liens,
title defects, restrictions or covenants or reservation of interests in title,
except for (A) Company Permitted Liens, (B) zoning, building, fire, health,
environmental and pollution control laws and other land use laws, ordinances,
rules and regulations applicable to the Company Properties, (C) all matters
whether or not of record, to the extent caused by the Contributors or their
agents, representatives or contractors, and (D) all other matters listed as
exceptions in Schedule (B-1) of the existing title policies (lender's or
owner's) provided to or made available to the Contributors prior to the date of
this Agreement and issued with respect to the Other Company Properties (the
"Other Company Title Policies") or shown on any survey of the Company Properties
listed on Schedule 3.2(j)(i) or obtained by the Contributors (items (i) (A)
through (D) and (ii)(A) through (D) are collectively referred to as the "Company
Permitted Exceptions"). BPP and the Operating Partnership also represent and
warrant that, with respect to the Other Company Properties, they have not
voluntarily created any liens or encumbrances not listed as exceptions to title
to the Company Properties since the date of the Other Company Title Policies
other than items which constitute Permitted Liens. None of the Company
Permitted Exceptions interferes with, impairs, or is violated by the existence
of any building or other structure or improvement which constitutes a part of,
or the present use,
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occupancy or operation (or, if currently under rehabilitation or development,
such rehabilitation or development) of the Company Properties in any material
respect taken as a whole. Except as shown or described in any of the Company
Permitted Exceptions, or any survey listed on Schedule 3.2(j)(i) or obtained by
the Contributors, no material improvements constituting a part of any Company
Property encroach on real property not constituting a part of such Company
Property or an abutting Company Property unless there is a valid easement for
the benefit of BPP with respect thereto, with customary duration and terms for
institutional quality shopping centers, of a type generally acceptable to
institutional lenders, nor, except as so described or disclosed, are there other
material adverse matters (which, in the case of Company Properties with respect
to which there is a survey listed on Schedule 3.2(j)(i) has arisen since the
date thereof, or at any time in the case of all other Company Properties) that
would be disclosed by a current ALTA survey. To BPP's knowledge and except as
may be shown or indicated in any of the Company Permitted Exceptions, all
parcels of land included in each Company Property that purport to be contiguous
are contiguous and are not separated by strips, gaps or gores. All applicable
premiums with respect to the title policies regarding the Company Properties
have been paid and to the knowledge of BPP such policies are in full force and
effect. Except as set forth in Schedule 3.2(j)(i), there is no material
outstanding claim, nor, to BPP's knowledge, has any claim been made by BPP or
its Subsidiaries, or by any other party, that would reduce the stated coverage
under any such policy. True and complete copies of all such policies and the
surveys listed on Schedule 3.2(j)(i) of each of the Company Properties in the
possession or control of BPP have been made available by BPP to the Contributors
or to their representatives, and as of the date of this Agreement neither BPP
nor any of the Subsidiaries has any more recent policies or surveys for the
Company Properties.
(ii) A. Permitting and Compliance with Laws; Uninsured Damage
from Casualty; Property Condition. Except as set forth in Schedule 3.2(j)(ii)
and except with respect to the Development Properties, to BPP's knowledge there
has been obtained and is in full force and effect (i) any material currently
required certificate, permit or license (including certificates of occupancy (or
equivalent) for tenant space) from any Authority having jurisdiction over any
Company Property and (ii) any agreement, easement or other right which is
necessary to permit the lawful use, occupancy or operation of the existing
buildings, structures or other improvements which constitute a part of any of
the Company Properties as currently used, occupied or operated or which are
necessary to permit the lawful use and operation of any current utility service
to any Company Property or of any currently utilized driveways, roads or other
currently utilized means of egress and ingress to and from any of the Company
Properties and there is not pending, or to BPP's knowledge, threatened (in
writing) Action against BPP for the cancellation or material adverse
modification of any of same. To BPP's knowledge (provided, however, that with
respect to the Properties listed on Schedule 3.2(j)(ii)(A), such representation
shall be absolute, and shall not be qualified by knowledge, with respect to uses
allowed under zoning laws ), each Company Property is in material compliance
(compliance being deemed to include for such purposes pre-existing lawful zoning
nonconformities) with each federal, state or municipal law, ordinance, order,
regulation or requirement, including any applicable zoning law or building code,
or any insurance requirements applicable to any Company Property. Except
as
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set forth in Schedule 3.2(j)(ii)(A), neither BPP nor the Subsidiaries have
received notice, of any violation of the Americans with Disabilities Act (the
"ADA") from any Authority or any notice from any other Person as to a material
violation of the ADA which BPP believes, in good faith, is valid, in each case
which have not been cured (or settled, with no further payments or performance
due from BPP or any Subsidiary, in the case of private matters. Except as set
forth in Schedule 3.2(j)(ii)(A), there is no uninsured current physical damage
to any Company Property from casualty in excess of $100,000. Except for repairs
identified in the Capital Expenditure Budget and Schedule and as set forth in
the Company Reports or the Property Condition Reports (as defined below), to the
Company's knowledge each Company Property other than a Development Property
(i) is in good or better operating condition and repair and is structurally
sound, and (ii) consists of sufficient land, parking areas, driveways and other
improvements and lawful means of access and utility service and capacity to
permit the use thereof in the manner and for the purposes to which it is
presently devoted (or, in the case of the Development Property and except as
noted in Section 3.2(j)(ix) or Schedule 3.2(j)(ix), for the development and
operation thereon of the applicable Project), except, in each such case, to the
extent that failure to meet such standards would not materially and adversely
affect the use or occupancy of the Company Properties. BPP has made available
to the Contributors or to its representative true and complete copies of the
most recent existing third party engineering and other third party property
condition reports relating to the condition of any Company Property prepared for
BPP or otherwise in BPP's or any Subsidiary's possession, and all other such
reports in BPP's or any Subsidiary's possession that sets forth material adverse
facts with respect to the condition of any Company Property (collectively, the
"Property Condition Reports").
B. Condemnation and Other Property-Related Actions. Except as set forth
in Schedule 3.2(j)(ii)(B) the Company Reports or which are included in the
Company Permitted Exceptions there is no currently pending or, to BPP's
knowledge, threatened (in writing) (i) rezoning, condemnation or eminent domain
proceedings with respect to any Company Properties other than road widenings or
changes of grade of roads which would not have a material adverse effect on the
applicable Company Property's value or operations, (ii) change in the assessed
valuation of any Company Property which would have a material adverse effect on
the applicable Company Property's value, (iii) special assessment against any
Company Property, or (iv) so-called "impact fee" or any agreement with any
Authority to hereafter pay for sewer extension, oversizing utilities, lighting
or like expenses or charges for work or services by such Authority except as set
forth in the Capital Expenditure Budget and Schedule or any Development Budget
and Schedule and except as reflected in the current operating statements for the
Company Properties, all of which have previously been delivered or made
available to the Contributors.
(iii) Independent Unit. Except for matters included in the
Company Permitted Exceptions, each of the Company Properties is an independent
unit which does not rely on any facilities, other than the facilities of public
utility companies and water and sewer departments or districts, which are
connected to the Company Properties through valid and customary easements, if
necessary or appropriate, located on any property not included in such Company
Property to fulfill any municipal or governmental requirements or for the
furnishing to
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such Company Property of any essential building systems or utilities, or access
or parking other than facilities the benefit of which inures to the Company
Properties pursuant to one or more valid easements, or facilities which are
located on or abutting Company Properties pursuant to one or more valid
easements and are sufficient to serve more than one property adequately and
lawfully. Each of the Company Properties other than the Development Properties
is served by adequate water and sanitary systems and other utilities currently
used in the operation of such Company Property, and each of the Company
Properties has lawful access to public roads, in all cases sufficient for the
current use and occupancy of each Company Property. To BPP's knowledge and
except as may be shown or described in any of the Company Permitted Exceptions,
no material portion of any building improvements included in any Company
Property lies in any area designated by the U.S. Army Corps of Engineers or
other Authority as a special flood hazard area unless BPP or the applicable
Subsidiary maintains all required flood insurance with respect thereto.
(iv) [Intentionally Omitted].
(v) Leasing Matters. Attached hereto as Schedule 3.2(j)(v) is a
rent roll covering each Company Property (the "Company Rent Roll") which the
Company Rent Roll is true, complete and correct as of October 31, 1997 in all
material respects. The Company Rent Roll attached as Schedule 3.2(j)(v) shall
be updated to a date not more than five (5) Business Days prior to the Closing,
and it shall be a condition to the Contributors' obligation to close that such
updated rent roll shall not show any material variations from the attached
Company Rent Roll other than variations in the ordinary course of the BPP's and
its Subsidiaries business, which variations from the version of the Rent Roll
attached hereto as Schedule 3.2(j)(vi) do not have a material adverse effect on
the Company Properties. As of the date thereof, the Rent Roll lists all Company
Leases for any portion of each Company Property or otherwise affecting each
Company Property, and is accurate and complete in all material respects as of
the date of the Company Rent Roll. The copies of the Company Leases which have
been delivered or made available to the Contributors are true, correct and
complete, and constitute all outstanding Company Leases known to BPP relating to
each Company Property. BPP shall promptly provide true, complete and correct
copies of any Company Leases entered into after the date of this Agreement to
the Contributors. Each Company Lease (i) is in full force and effect with
respect to BPP or the applicable Subsidiary, and, to BPP's knowledge, the
applicable tenant; and (ii) constitutes the entire agreement between BPP and the
applicable Subsidiary and such tenant with respect to the applicable Company
Property and includes any other agreements between such parties related in any
way to such Property. Except as set forth on the Company Rent Roll, Schedule
3.2(j)(v), or the Capital Expenditure Budget and Schedule, all tenant
improvements and other improvements required to be furnished, constructed or
installed or paid for by BPP or a Subsidiary as landlord under each Company
Lease (and to BPP's knowledge, by any predecessor landlord under such Company
Lease) has been fully performed and has been fully paid or will be fully
performed and paid on or before the Closing Date except as otherwise expressly
indicated on the Company Rent Roll, Schedule 3.2(j)(v) or the Capital
Expenditure Budget and Schedule. To BPP's knowledge, neither BPP nor any
Subsidiary is in default in the performance of any
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material obligation under any of the Company Leases (or any agreements
incorporated therein by reference) and BPP has no knowledge of any circumstances
which, with the passage of time or the giving of notice, or both, would
constitute an event of default by landlord under any of the Company Leases.
Except as set forth on the Rent Rolls or Schedule 3.2(j)(v), to BPP's knowledge,
no tenant is in monetary default beyond 30 days or material nonmonetary default
under its Company Lease. Except as indicated in the Company Rent Roll or
Schedule 3.2(j)(v), (x) no advance rent or other payment has been made with
respect to any Company Lease except rental for the current month other than
security deposits in the ordinary course, (y) no tenant which is currently
paying rent, or which is reflected in BPP's balance sheets, financial
statements, other operating statements or Company Reports as paying rent, is
entitled to any unexpired free rent period or other unexpired concession under
its Company Lease and (z) there is no obligation under the Company Lease for the
refunding of a security deposit. Except as otherwise expressly set forth in the
Company Rent Roll or as set forth on Schedule 3.2(j)(v), to BPP's knowledge
there are no actions, voluntary or involuntary, pending against any tenant under
any bankruptcy or insolvency laws. Except as shown on the Company Rent Roll, on
Schedule 3.2(j)(v), or in any of the Company Leases and except for certain
rights of first refusal which are set forth in the sections of the partnership
agreements referenced in Schedule 3.2(a)(v) and which relate to partnerships in
which BPP and the Subsidiaries collectively, directly or indirectly, own less
than a 100% interest, neither BPP nor any Subsidiary has granted to any Person
(including, without limitation, tenants under Company Leases) or any option or
right of first refusal, first offer or first opportunity or comparable right to
acquire any interest in any Company Property or any portion thereof, and BPP has
no knowledge that any other Person has granted any such option or right of first
refusal or first opportunity to acquire which remains in force and effect. In
addition, and without limiting the generality of the foregoing, with respect to
each Company Lease for premises larger than 10,000 square feet of rentable space
(collectively, the "Material Company Leases"), except as set forth in
Exhibit 3.2(j)(vi) or in the Company Rent Rolls, (i) no tenant under any
Material Company Lease is more than 30 days in arrears in the payment of base
rent, and (ii) no tenant under any of the Material Company Leases has any
options, rights of first offer, rights of first refusal or first opportunity or
comparable rights to purchase any portion of any Company Property. None of the
Material Company Leases and none of the rents or other amounts payable
thereunder has been assigned, pledged or encumbered except in connection with
financing secured by the applicable Company Property which is described in
Section 3.2(j)(xii). Other than the tenants identified in the Company Rent
Rolls, licensees and month to month and other tenants with lease terms of less
than six (6) months or with respect to whom BPP or its Subsidiaries have the
right to terminate such occupancy rights upon no more than sixty days notice,
contractors pursuant to contracts entered into in the ordinary course, and
parties to easement agreements which constitute Company Permitted Exceptions, no
third party has any right to occupy or use any portion of any Company Property.
Except as otherwise set forth on Schedule 3.2(j)(v), the Capital Expenditure
Budget and Schedule includes all outstanding material tenant improvement and
similar material work required to be made by the lessor under each of the
Material Company Leases. There are no outstanding material brokerage
commissions or similar amounts payable in respect of any of the
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Company leases other than amounts being paid in the ordinary course or which are
being diligently protested in good faith.
(vi) Material Commitments. Schedule 3.2(j)(vi) sets forth a
complete and accurate list of all material contracts, options, commitments,
letters of intent or similar written understandings made or entered into by BPP
or any of the Subsidiaries as of the date hereof (x) to enter into any Material
Company Lease, (y) to sell, mortgage, pledge, hypothecate any Company Property
or to otherwise enter into a material transaction in respect of the ownership or
financing of any Company Property, or (z) to purchase or acquire an option,
right of first refusal or similar right in respect of any real property, which,
in any such case, has not yet been reduced to a written lease or contract, and
sets forth with respect to each such commitment, letter of intent or other
understanding the principal business terms thereof, excluding however, in each
case such commitments, letters of intent or similar written understandings which
do not bind any party thereto. BPP has previously delivered or made available
to the Contributors a true and complete copy of each such commitment, letter of
intent or other understanding.
(vii) Options, Rights of First Refusal and Other Property
Related Contracts. Except as set forth in the Company Reports or
Schedule 3.2(j)(vii), none of BPP or any of its Subsidiaries has any outstanding
options or rights of first refusal or has entered into any outstanding contracts
with others for the purchase by BPP, the Operating Partnership or any Subsidiary
of any real property (other than easements related to any Company Property).
(viii) Capital Expenditure Budgets and Schedules. Attached to
this Agreement as Schedule 3.2(j)(viii) sets forth BPP's or any Subsidiary's
capital expenditure budget and Schedule for each Company Property (the "Capital
Expenditure Budget and Schedule"), which describes the material capital
expenditures which BPP or any Subsidiary has budgeted for such Company Property
for the calendar year 1998, excluding, however (except as otherwise provided in
Section 3.2(j)(v)), any tenant improvements required to be made under any
Company Lease. The Capital Expenditure Budget and Schedule for each Company
Property represents the good faith business judgment of BPP as to all known
reasonably foreseeable maintenance and capital expenditure items for such
Company Property.
(ix) Development Properties. Schedule 3.2(j)(ix) contains a list
of each Company Property, or property which BPP has under a letter of intent or
option, which consists of or includes material amounts of underdeveloped land or
which is intended to be or is in the process of being substantially redeveloped
or rehabilitated (collectively, the "Development Properties"), a brief
description of the development or rehabilitation intended by the Company or any
Subsidiary to be carried out or completed thereon (collectively, the
"Projects"), any budget and development or rehabilitation Schedule therefor
prepared by or for BPP or any Subsidiary (collectively, the "Development Budget
and Schedule"), if BPP or a Subsidiary does not own such Development Property, a
description of BPP's contract rights with respect thereto, the status of zoning
approvals and building permits for such Project, the status of design and major
construction contracts, and if such Project is under development, the
approximate percentage of
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completion and any known material impediments to completion and opening for
operation. In the case of each Project the development of which has commenced,
the costs and expenses incurred in connection with such Project and the progress
thereof are, except as set forth in Schedule 3.2(j)(ix), consistent and in
compliance in all material respects with all aspects of the Development Budget
and Schedule applicable thereto. BPP has made available to the Contributors or
to their representative all feasibility studies, soil tests, due diligence
reports and other studies, tests or reports performed by or for BPP, or
otherwise in the possession of BPP, and all material architectural, engineering
and general construction contracts which relate to the Development Properties or
the Projects. Neither BPP nor any Subsidiary is in material default under any
development agreement, disposition agreement, disposition and development
agreement or comparable agreement affecting any of the Company Properties, and
all such agreements are in full force and effect or similar agreement with any
Authority with respect to the Development Properties.
(x) Ground Leases and HQ Leases. BPP has provided or made
available to the Contributors accurate and complete copies of the leases for the
HQ Space and the ground leases underlying the leased Company Properties
referenced in Schedule 3.2(j)(i), if any, including all amendments and other
modifications thereto (collectively, the "Tenancy Leases"). Each of the Tenancy
Leases is valid, binding and in full force and effect as against BPP or the
applicable Subsidiary and, to BPP's knowledge, against the other party thereto.
Except as indicated in the Company Reports or Schedule 3.2(j)(xii) or any other
Schedule or Exhibit to this Agreement and except for tenants under the Company
Leases and matters set forth in the Company Permitted Exceptions, none of the
Tenancy Leases is subject to any pledge, lien, assignment, license or other
agreement granting to any third party any interest therein or any right to the
use or occupancy of any premises leased thereunder. Except as set forth in the
Company Reports or Schedule 3.2(f)(i), there is no pending or, to BPP's
knowledge, threatened (in writing) proceeding which is reasonably likely to
interfere with the quiet enjoyment of the tenant under any of the Tenancy
Leases. No payments under any Tenancy Lease are delinquent and no notice of
default thereunder has been sent or received by BPP or any of its Subsidiaries
which has not been cured or waived prior to the date hereof, and to the
knowledge of BPP, there does not exist under any of the Tenancy Leases any
default by BPP or any Subsidiary or any event which merely with notice or lapse
of time or both, would constitute such a default by BPP.
(xi) Reciprocal Easement Agreements. To BPP's knowledge, all
reciprocal easement agreements referenced as Company Permitted Exceptions or
otherwise necessary for the operation of any Company Property or with respect to
which any Company Property is subject are in full force and effect, without
default in any material respect by any party thereto.
(xii) Company Mortgage and Other Debt. Schedule 3.2(j)(xii)
accurately describes and summarizes the approximate amount, term, interest rate,
payment terms, prepayment restrictions and restrictions on transfer that would
be applicable to the transactions contemplated by the Preferred Stock Purchase
Agreement and this Agreement of all mortgage
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debt encumbering the Company Properties and all other indebtedness for borrowed
money of BPP and the Operating Partnership. There are no material defaults
thereunder by BPP or any of its Subsidiaries except as indicated on said
Schedule 3.2(j)(xii).
(k) Environmental Matters. Except as disclosed on Schedule 3.2(k),
BPP and its Subsidiaries have not generated, stored, released, discharged or
disposed of, nor the knowledge of BPP or its Subsidiaries, used or handled
Hazardous Substances or Hazardous Wastes at, upon or from any Property in
violation of any law regulation or directive, or in connection with which
remedial action would be prudent or required under any federal, state or local
law, regulation or directive. To BPP's knowledge and except as set forth in any
environmental report provided by BPP and its Subsidiaries to the Contributors
including those listed in Schedule 3.2(k), or otherwise provided to or obtained
by the Contributors, in each case prior to the date that is fifteen (15) days
after this Agreement, and except as expressly disclosed on Schedule 3.2(k)
attached hereto, no Hazardous Substances or Hazardous Wastes are or have been
generated, stored, released, located, discharged or disposed of, used or handled
from, at or upon any property, and no Hazardous Substance or Hazardous Substance
or Hazardous Waste is or has been located on any Property, except for cleaning
and maintenance supplies customarily used in connection with properties similar
to the Company Properties and except for materials sold in the retail Company
Properties which are customarily sold in comparable retail properties, in each
case which have been used, stored and sold, as applicable, in compliance with
all applicable laws, regulations and directives. To BPP's knowledge and except
as set forth in any environmental report provided by BPP and its Subsidiaries to
the Contributors or otherwise obtained by the Contributors, in each case prior
to the date of this Agreement, and except as expressly disclosed on Schedule
3.2(k) attached hereto, no Hazardous Substances or Hazardous Wastes other than
materials customarily used in such types of properties in compliance with
Environmental Laws are located on property adjacent to any Company Property.
Except as disclosed in the environmental report(s) delivered to the Contributors
hereunder or in any report obtained by the Contributors, in each case prior to
the date that is fifteen (15) days after this Agreement, neither BPP nor its
Subsidiaries has received written notice or, or has knowledge of, any notice
from any agency, authority or court concerning the removal, treatment or
management of any Hazardous Substances or Hazardous Wastes. For the Properties
listed in Schedule 3.2(k)(i) (the "Inherited Properties"), the facts and
circumstances on which an Environmental Claim related to a Property is based
shall be deemed to have been "known" to BPP for purposes of the representations
and warranties made under this Section 3.2(k) if (i) the Environmental Claim
results in liability of $1,000,000 or more for an individual Environmental
Claim, or $5,000,000 or more in the aggregate for any Environmental Claims
hereunder that individually may result in liability of less than $1,000,000, and
(ii) the facts or circumstances would have been detected or discovered if BPP
and its Subsidiaries had conducted an environmental assessment for the Property
or Properties in accordance with the ASTM Standard Practice for Environmental
Site Assessments: Phase I Environmental Assessment Process, E 1527-97 (the "ASTM
Standard"), on the Property. For purposes of the Agreement, the Phase I reports
listed in Schedule 3.2(k) are deemed to be reports of environmental assessments
conducted in accordance with the ASTM Standard.
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(l) Employees and Employee Benefit Plans. (i) The Company Reports and
Schedule 3.2(l)(i) together set forth a complete and accurate list of all
Employee Benefit Plans and all material Benefit Arrangements which affect
Employees of BPP or any of its Subsidiaries (the "Company Plans"). With respect
to each Company Plan, (i) BPP and each of its Subsidiaries is in compliance in
all material respects with the terms of each Company Plan and with the
requirements prescribed by all applicable statutes, orders or governmental rules
or regulations, (ii) BPP and each of its Subsidiaries has contributed to each
Pension Plan included in the Company Plans not less than the amounts accrued for
such plan for all plan periods for which payment is due, and (iii) none of BPP
or any of its Subsidiaries has any funding commitment or other liabilities
except as reserved for in the financial statements in or incorporated by
reference into the Company Reports, or, in the case of clauses (i) through
(iii), as is set forth in Schedule 3.2(l)(i).
(ii) Other than in connection with the proposed substitution of
the Operating Partnership as the employer and paymaster of the employees of the
Company on or about January 1, 1998 or as set forth on Schedule 3.2(e)(i), none
of BPP or any of its Subsidiaries has made any commitment to establish any new
Employee Benefit Plan, to modify any Employee Benefit Plan, or to increase
benefits or compensation of Employees of BPP or any of its Subsidiaries (except
for normal increases in compensation consistent with past practices), and no
intention to do so has been communicated to Employees of BPP or any of its
Subsidiaries.
(iii) There are no pending or to BPP's knowledge, threatened
claims against or otherwise involving any of the Company Plans or any
fiduciaries thereof with respect to their duties to the Company Plans and no
suit, action or other litigation (excluding claims for benefits incurred in the
ordinary course of the Company Plan activities) has been brought against or with
respect to any such Company Plans.
(iv) Neither BPP, the Operating Partnership or any entity under
"common control" with BPP or the Operating Partnership within the meaning of
Section 4001 of ERISA has contributed to, or been required to contribute to, any
"multiemployer plan" (as defined in Section 3(37) and 4001(a)(3) of ERISA).
(v) Other than Company's Plans, BPP and its Subsidiaries do not
maintain or contribute to any plan or arrangement which provides or has any
liability to provide life insurance, medical or other employee welfare benefits
to any Employee or former Employee upon his retirement or termination of
employment and BPP and its Subsidiaries have never represented, promised or
contracted (whether in oral or written form) to any employee or former employee
that such benefits would be provided.
(vi) For purposes hereof, "Employee Benefit Plans" means each and
all "employee benefit plans" as defined in Section 3(3) of ERISA maintained or
contributed to by a party hereto or in which a party hereto participates or
participated and which provides benefits to Employees, including (i) any such
plans that are "employee welfare benefit plans" as defined in
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Section 3(l) of ERISA, including retiree medical and life insurance plans
("Welfare Plans"), and (ii) any such plans that constitute "employee pension
benefit plans" as defined in Section 3(2) of ERISA ("Pension Plans"). "Benefit
Arrangements" means life and health insurance, hospitalization, savings, bonus,
deferred compensation, incentive compensation, holiday, vacation, severance pay,
sick pay, sick leave, disability, tuition refund, service award, Company car,
scholarship, relocation, patent award, fringe benefit, individual employment,
consultancy or severance contracts and other polices or practices of a party
hereto providing employee or executive compensation or benefits to Employees,
other than Employee Benefit Plans. "Employees" mean all current employees,
former employees and retired employees of a party hereto or any of its
Subsidiaries, including employees on disability, layoff or leave status.
"Controlled Group Liability" means any and all liabilities under (i) Title IV of
ERISA, (ii) Section 302 of ERISA, (iii) Sections 412 and 4971 of the Code, (iv)
the continuation coverage requirements of Section 601 et seq, of ERISA and
Section 4980B of the Code, other than such liabilities that arise solely out of,
or relate solely to, the Plans.
(vii) With respect to each plan that is subject to Title IV
or Section 302 of ERISA or Section 412 or 4971 of the Code: (i) there does not
exist any accumulated funding deficiency within the meaning of Section 412 of
the Code or Section 302 of ERISA, whether or not waived, (ii) the fair market
value of the assets of such plan equals or exceeds the actuarial present value
of all accrued benefits under plan (whether or not vested), on a termination
basis, (iii) no reportable event within the meaning of Section 4043(c) of ERISA
has occurred, and the consummation of the transactions contemplated by this
agreement will not result in the occurrence of any such reportable event, and
(iv) all premiums to the Pension Benefit Guaranty Corporation have been timely
paid in full.
(viii) There does not now exist, nor to BPP's knowledge, do
any circumstances exist that could result in, any Controlled Group liability
that would be a liability of BPP following the Buyer's (as such term is defined
in the Preferred Stock Purchase Agreement) purchase of Preferred Stock under the
Preferred Stock Purchase Agreement. Without limiting the generality of the
foregoing, neither BPP nor any ERISA Affiliate has engaged in any transaction
described in Section 4069 or Section 4204 of ERISA.
(ix) Neither the execution and delivery of this Agreement nor the
consummation of the transactions contemplated hereby will (either alone or in
conjunction with any other event) result in, cause the accelerated vesting or
delivery of, or increase the amount or value of, any payment or benefit to any
employee of BPP.
(m) Labor Matters. Except as set forth in Schedule 3.2(m), none of
BPP or any of its Subsidiaries is a party to, or bound by, any collective
bargaining agreement, contract or other agreement or understanding with a labor
union or labor union organization. Except for the matters set forth in Schedule
3.2(m), there is no unfair labor practice or labor arbitration proceeding
pending or, to BPP's knowledge, threatened against BPP or any of its
Subsidiaries. To BPP's knowledge, there are no organizational efforts with
respect to the formation of a
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collective bargaining unit presently being made or threatened involving
employees of BPP or any of its Subsidiaries.
(n) Affiliate Transactions. Schedule 3.2(n) sets
forth a complete and accurate list of (i) all relationships and transactions,
series of related transactions or currently proposed transactions or series
of related transactions entered into by BPP or any of its Subsidiaries since
December 31, 1995, which are of the type required to be disclosed by BPP
pursuant to Item 404 of Regulation S-K of the Securities Act, the Exchange
Act and the rules and regulations promulgated thereunder and (ii) all
agreements, arrangements or policies of BPP and/or the Subsidiaries of BPP
(including the Operating Partnership) concerning transactions with Affiliates
or other conflicts of interest. Each agreement, arrangement or policy
described in clause (ii) hereof and set forth in Schedule 3.2(n) is in full
force and effect, and BPP, each of its Subsidiaries, and the other parties
thereto are in compliance therewith, or such compliance has been waived by
BPP's Board of Directors as set forth in Schedule 3.2(n). A true and
complete copy of all agreements or contracts relating to any such transaction
has been made available for inspection by the Contributors. Schedule 3.2(n)
sets forth an accounting of such transactions regarding participatory
interests, the allocation of overhead and expenses thereunder, and all other
matters material to each of such agreements or contracts.
(o) Insurance. BPP and the Operating Partnership
maintain insurance policies covering the assets, business, equipment,
properties, operations and employees of BPP and each of its Subsidiaries
(collectively, the "Insurance Policies") which are of a type and in amounts
customarily carried by Persons of similar size and resources as of BPP
conducting businesses similar to those of BPP and the Operating Partnership.
There is no material claim by BPP or any of its Subsidiaries pending under
any of the material Insurance Policies as to which coverage has been
questioned, denied or disputed by the underwriters of such policies.
(p) Brokers or Finders. Except as provided
in Section 9.1, no agent, broker, investment banker or other firm or person,
including any of the foregoing that is an Affiliate of BPP with which BPP
dealt, is or will be entitled to any broker's or finder's fee or any other
commission or similar fee from BPP in connection with this Agreement or any
of the transactions contemplated hereby for which Contributor will be
responsible.
(q) REOC Status. (i) BPP was incorporated as a California
corporation on June 30, 1986 and from its date of incorporation until January 1,
1987, BPP conducted no business and owned no assets BPP subsequently reorganized
as a Maryland Corporation in 1997.
(ii) As of the date of BPP's first long-term investment that was
not a short-term investment of funds pending long-term commitment, i.e., January
1, 1998 (the "REOC Qualification Date"), and continuously thereafter to and
including the Closing Date, at least 50 percent of the assets of BPP (other than
short-term investments pending long-term commitment or distribution to
investors), valued at cost, have been invested in real estate which has been
under active development or management by BPP.
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(iii) BPP has been actively engaged in the management or
development of real estate in the ordinary course of its business at all times
from the REOC Qualification Date to and including the Closing Date.
(iv) The "real estate" referenced above which was purchased on
the REOC Qualification Date and thereafter includes the Company Properties
except for any such real estate sold. To the extent any of the Company
Properties are subject to tenant leases (the "Leases"), BPP has substantial
responsibilities under each of the Leases, and none of the Leases provides that
substantially all management and maintenance activities with respect to BPP
Property in question or any portion thereof are the responsibility of the tenant
lessees.
(v) BPP has not merely passively assumed the risks of its real
estate ownership, but the return to its stockholders from its investment in BPP
Properties has been and is based in part on the cash flow and capital
appreciation of BPP Properties, and such return depends in substantial part on
the success of BPP's management and development efforts with respect to the
Company Properties.
(vi) The employees of BPP perform most of the development and
management functions of the real estate business described herein, except that
BPP has employed independent contractors, each of which is terminable without
cause and without substantial penalty upon reasonably short notice, to perform
certain of the day-to-day management activities associated with the Company
Properties. In any event, BPP represents and warrants that it has devoted
substantial resources to such management and development activities and to the
oversight of its independent contractors who perform such activities from the
REOC Qualification Date to and including the Closing Date.
(vii) Schedule 3.2(g)(vii) sets forth a complete and accurate
list of (1) the Articles of Incorporation and Bylaws, and all amendments to
each, of Burnham Sleepy Hollow, Inc., the name by which the California
corporation that is the corporate predecessor of BPP (hereinafter, the
"California REIT") was known at the time of its formation, and all amendments
thereto; (2) all material advisory and management agreements entered into by
the California REIT or BPP, and the Subsidiaries of each, from and after
January 1, 1987 with respect to the assets of the California REIT or BPP,
respectively; and (3) the annual reports for the California REIT or BPP, as
the case may be, filed with the Commission under the Exchange Act for the
years 1987 to 1996, inclusive, each of which accurately describes the
business of BPP or, as applicable, its predecessor, the California REIT, and
the types and values (by category) of real properties owned and operated by
them during the periods referenced in this Section 3.2(q).
(r) Knowledge Defined. As used herein, the phrase "to
BPP's knowledge" (or words of similar import) means actual knowledge of those
individuals identified in Schedule 3.2(r), without duty of further inquiry,
who are all of the individuals who are directors and executive officers of
BPP who knew or should know as to the matters referenced herein, and includes
any facts, matters or circumstances set forth in any written notice from any
Authority or
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any other material written notice received by BPP or any Subsidiary, and also
includes any matter of which Contributors informs BPP in writing prior to the
date hereof or to which the BPP acknowledges or agrees.
(s) Maryland Takeover Law. The terms of Section 3-602 and 3-702 of
the Maryland General Corporation Law will not apply to the Contributors or
the Existing Partners or any acquisition of Units, Preferred Units and, if
applicable, Preferred Stock and Common Stock pursuant to this Agreement or as
a result of the exchange, conversion or redemption of Units or Preferred
Units pursuant to this Agreement or the Articles Supplementary, or any other
transaction contemplated by this Agreement. The resolutions substantially in
the form of Schedule 3.2(s) hereto have been adopted by BPP, remain in full
force and effect on the date hereof and will not be amended, modified,
rescinded or revoked in any manner that would cause such terms to apply to
the Contributors or the Existing Partners or any such acquisition.
(t) Proxy Statement. The proxy statement to be mailed to holders
of the Common Stock in connection with the vote of such holders as described
in Section 4.20 (the "Proxy Statement") and all of the information included
or incorporated by reference therein (other than any information supplied or
to be supplied by for inclusion or incorporation by reference therein) will
not, as of the date the Proxy Statement is first mailed to such holders and
as of the time of the meeting of such holders in connection with the
transactions contemplated hereby, contain any untrue statement of a material
fact or omit to state any material fact required to be stated therein or
necessary in order to make the statements therein, in light of the
circumstances under which they are made, not misleading. The Proxy Statement
will comply as to form in all material respects with the provisions of the
Exchange Act and the rules and regulations promulgated by the Commission
thereunder.
(u) Vote Required. The affirmative vote of the holders of a majority
of the outstanding shares of Common Stock entitled to vote and duly present in
person or by proxy at a meeting duly called (and with each share of Common Stock
entitled to one vote per share) at which a quorum is present is the only vote of
the holders of any class or series of Company Stock necessary to approve, for
the purposes of the rules of the NYSE or otherwise, the redemption or exchange
by the Operating Partnership of Units and Preferred Units for Preferred Stock
or Common Stock (as applicable) pursuant to the Operating Partnership Amendment.
(v) Exemption from Ownership Restrictions. The Board of Directors of
BPP (or a special committee designated by BPP's Board of Directors) has adopted
the resolutions, in the form of Schedule 3.2(v), exempting the Blackacre from
the ownership restrictions under Section 7.2.1(a)(i)(1) of the Company Charter,
based upon representations and agreements of Blackacre delivered to BPP in the
form attached as Schedule 3.2(v), which resolutions remain in full force and
effect on the date hereof and will not be amended, modified, rescinded or
revoked without the prior written consent of Blackacre.
(w) Financial Records; Company Charter and By-laws; Corporate
Records.
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(i) The books of account and other financial records of BPP, the
Operating Partnership and each of the Subsidiaries are in all respects true and
complete, have been maintained in accordance with good business practices, and
are accurately reflected in all respects to the extent required by GAAP in the
financial statements included in the Company Reports, except as set forth in
Schedule 3.2(w)(i).
(ii) BPP has previously delivered or made available to the
Contributors true and complete copies of the Company Charter and the by-laws
of BPP, as amended to date, the Operating Partnership Agreement, the form of
Operating Partnership Amendment and the charter, by-laws, organization
documents, partnership agreements and joint venture agreements of the
Subsidiaries, and all amendments thereto. All such documents are listed in
Schedule 3.2(w)(ii). A true, complete and correct chart of BPP, the
Operating Partnership, and the Subsidiaries showing ownership, voting rights
and contractual relationships affecting ownership and voting rights and
identifying the general partner of any limited partnership is set forth in
Schedule 3.2(w)(ii).
(iii) The minute books and other records of corporate or
partnership proceedings of BPP, the Operating Partnership and each of the
Subsidiaries have been made available to the Contributors, contain in all
material respects accurate records of all meetings and accurately reflect in all
material respects all other corporate action of the stockholders and directors
and any committees of BPP's Board of Directors and its Subsidiaries which are
corporations and all actions of the partners or members (as the case may be) of
the Operating Partnership and Subsidiaries which are partnerships or limited
liability company, and all actions of the members of Subsidiaries which are
limited liability companies except for documentation of discussions relating to
or in connection with the transactions contemplated hereby or matters related
thereto, except as set forth in Schedule 3.2(w)(iii).
(x) First Amendment. Each of the Operating Partnership and BPP
hereby represents that, on the date as of which the Operating Partnership
Amendment executed and delivered by the Contributors and the other parties
thereto is effective, such Operating Partnership Amendment will be the only
amendment that has been made to the Operating Partnership Agreement other
than amendments that reflect the transfers of assets to the Operating
Partnership and its Subsidiaries to implement the UPREIT Transaction or the
contribution of assets to the Operating Partnership or its Subsidiaries by
third parties on terms that are not adverse to the rights of the Contributors
described in this Agreement, copies of which amendments shall be delivered to
the Contributors at or prior to the Closing Date.
(y) Section 704(c) Method. In connection with the transfer of assets
to the Operating Partnership by each Contributor, the Operating Partnership
shall use the traditional Section 704(c) method with curative allocations
limited solely to allocations of gain and an equitable state of ordinary income
recapture, if any, recognized by the Operating Partnership upon the sale of such
assets to the extent allocations of depreciation (as computed for tax
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purposes) with respect to such assets to the other Partners have been limited by
the "ceiling rule," as described in Regulations Section 1.704-3(c)(iii)(B).
(z) Section 707 Reporting. Based on the representations of the
Contributors contained in Section 1.2 of this Agreement, the Operating
Partnership shall (i) report, on its 1997 tax returns as required by Regulations
Section 1.707-8, the payment of the Cash Reimbursement Component to the
Contributors as a reimbursement of preformation expenditures that qualifies for
the exception to sale treatment described in Treasury Regulation Section
1.707-4(d), and (ii) not to report any of the transactions described in this
Agreement pursuant to which the Properties were contributed to the Operating
Partnership by the Contributors, or any transfer of redemption consideration to
any Existing Partner upon the redemption of Units or Preferred Units, as a sale
of all or part of the Properties to the Operating Partnership by the
Contributors or as compensation for services rendered by any of the
Contributors, the Existing Partners or their affiliates.
(aa) Disclosure. To BPP's and the Operating Partnership's knowledge,
the representations and warranties and the statements and information contained
in this Agreement, in the Exhibits and Schedules hereto and in all of the
materials delivered by BPP and the Operating Partnership to the Contributors and
their counsel, accountants, appraisers and consultants pursuant to this
Agreement or in connection with the due diligence investigations conducted by or
on behalf of the Contributors in connection with this Agreement, do not contain
any untrue statements of a material fact and, when taken together, do not omit
to state a material fact required to be stated therein or necessary in order to
make such representations, warranties, statements or information not misleading
in light of the circumstances under which they were made.
(bb) Resources. BPP and the Operating Partnership have or will have
at the Closing requisite cash, cash equivalents, equity commitments or other
sources of financing available to consummate the transactions contemplated
hereby.
(cc) Representations and Warranties of the Contributors and the
Existing Partners. To BPP and the Operating Partnership's knowledge, as of the
date of this Agreement, the representations, warranties of the Contributors
contained in this Agreement and the statements of the Contributors contained in
this Agreement and the information contained in this Agreement and the Exhibits
and Schedules hereto delivered by the Contributors to BPP and the Operating
Partnership do not contain any untrue statements of a material fact and do not
otherwise constitute a breach by the Contributors under this Agreement.
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ARTICLE 4
AINTENANCE AND OPERATION OF THE PROPERTY;
CERTAIN COVENANTS
4.1 Maintenance and Operation. Through the Closing, the Contributors
shall maintain and operate each Property in accordance with the Contributors'
past operating policies and procedures and substantially in accordance with the
Stabilized Leasing Plan. Prior to the Closing Date, the Contributors shall
perform all work and other obligations required to be performed by the landlord
under the terms of any applicable Lease to the reasonable satisfaction of the
tenant(s) thereunder to the extent such obligations were required to be
performed prior to Closing. Until the Closing, the Contributors shall use
reasonable efforts to cause all existing personnel on the applicable Property to
be maintained in their current employment positions at their current rate of
compensation.
4.2 Insurance. Through the Closing Date, the Contributors shall maintain
at their sole cost and expense all insurance coverage in effect on the date of
this Agreement as set forth in Exhibit DD.
4.3 Personal Property. BPP and the Operating Partnership acknowledge that
the Contributors shall have the right, from and after the date of this Agreement
through the Closing with respect to each Property, to remove or replace items of
its Personal Property from time to time in the normal course of operation of
such Property. BPP and the Operating Partnership agree that the Contributors
may remove items of Personal Property from such Property if such items are
obsolete and replaced by Personal Property of equal or greater utility or value.
Any such Personal Property removed shall cease to constitute "Personal Property"
for all purposes under this Agreement. Any Personal Property replaced pursuant
to this Section 4.3 shall, to the extent not thereafter removed in accordance
with the terms of this Section 4.3, constitute "Personal Property" for all
purposes under this Agreement.
4.4 Leasing. The provisions of this Section 4.4 only apply to leasing
activities conducted prior to the Closing Date. The Contributors shall not
enter into any Lease which is inconsistent with the Stabilized Leasing Plan
without obtaining BPP's prior written consent thereto. If a Contributor enters
into a Lease prior to Closing in accordance with the Stabilized Leasing Plan,
the Contributors shall give notice to BPP of such new Lease within two (2)
Business Days of entering into such Lease, and in any event prior to the Closing
Date. The Contributors shall not amend or extend (other than extensions in
accordance with Stabilized Leasing Plan) any Lease, terminate or cancel any
Lease, accept a surrender of the tenant's premises under any Lease, or accept
any rent from any tenant more than one month in advance of its due date, without
in each case obtaining BPP's prior written consent thereto, which consent shall
not be unreasonably withheld.
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4.5 Operating Agreements. Except as set forth in Section 4.4, the
Contributors shall not enter into any contract or other agreement affecting any
Property, or any amendment of any contract or agreement, that will be binding on
the Operating Partnership, any Property or BPP after Closing, in each case,
without BPP's prior written consent in its sole and absolute discretion;
PROVIDED, however, that the Contributors shall have the right to enter into
design and construction contracts in connection with new Leases and extensions
of Leases entered into between the date of this Agreement and the Closing Date,
in each case in accordance with the Stabilized Leasing Plan, and all such
contracts shall be governed by the provisions of the Post-Closing Leasing
Agreement. Nothing herein shall be deemed to limit a Contributor's ability to
enter into a contract or agreement which by its own terms shall terminate on or
prior to Closing and which shall not create any liability for or be binding on
the Operating Partnership, BPP or any Property on or after the Closing Date.
The Contributors shall not modify, amend or terminate any applicable Assigned
Contract or other such contract or agreement, without in each case obtaining
BPP's prior written consent thereto, which consent shall not be unreasonably
withheld, delayed or conditioned.
4.6 Damage or Destruction; Condemnation. The Contributors shall promptly
deliver to BPP written notice of any casualty or taking involving any Property.
If all or any part of the Property is damaged and/or destroyed by fire or other
casualty prior to the Closing, then subject to the provisions of Section 8.1(iv)
the Closing Date nevertheless shall occur as scheduled with respect to such
Property notwithstanding such damage or destruction, and the Contributors shall
waive all right or interest in all proceeds of insurance payable by reason of
such casualty or they shall be credited to the Operating Partnership if
previously received by the Contributors. In addition, the Contributors shall be
responsible for any cost of repair not covered by such insurance (whether by
reason of insurance deductible, uninsured casualty or otherwise). The
Contributors' obligations pursuant to the immediately preceding sentence shall
survive the Closing.
If, prior to the Closing Date, an Authority commences any eminent domain or
condemnation proceeding to take any portion of a Property or a Contributor
enters into an agreement in lieu thereof or becomes aware that any such
agreement may be offered, then the Closing Date nevertheless shall occur as
scheduled notwithstanding such proceeding, entry or offer, and the Contributors
shall waive all right or interest in all awards or payments arising out of such
proceedings or agreement or they shall be credited to the Operating Partnership
if previously received by the Contributors. The Contributor's obligations
pursuant to the immediately preceding sentence shall survive the Closing.
4.7 Tests and Inspections. BPP shall have the right to enter upon the
Properties to conduct tests and inspections as set forth in the Access
Agreement. In the event any of the Contributors elect to perform any property
level due diligence (including, without limitation, soil sampling and boring) of
the Company Properties, BPP shall permit such property level due diligence
PROVIDED that the Contributors execute and deliver an access agreement
substantially in
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the form of the Access Agreement (which is for the benefit of BPP and the
Operating Partnership).
4.8 Mortgage Debt. Prior to the Closing, the Contributors will keep all
debt service payments and other payments owed in connection with the Mortgage
Debt current and will not permit or suffer to exist any monetary or material
nonmonetary default under any document evidencing, governing or securing any
Mortgage Debt. Any and all debts secured by any Property other than the
Mortgage Debt and any and all other liens or judgments filed against the
Property (except for the respective Permitted Exceptions shall be satisfied and
released of record by the Contributors at or prior to Closing.
4.9 Disposition of Properties. The Operating Partnership, BPP and their
Subsidiaries and Affiliates shall not (a) dispose of or distribute any of the
Properties, or (b) distribute any property (other than cash, Units, Preferred
Units, Additional Equity Value, or Additional Consideration) to the Contributors
or Existing Partners, in each case, prior to the third anniversary of the
Closing Date without the express written consent of the Contributors, except in
connection with a like-kind exchange under Section 1031 of the Code or other
transaction which does not result in recognition of any income or gain by any
holders of the Preferred Units or Units issued pursuant to this Agreement
(provided that no subsequent transaction results in the recognition of such
income or gain within such three year period).
4.10 Availability of Records. The Contributors agree to cooperate with
BPP to obtain any information needed from the Contributors or the Existing
Partners to enable BPP and the general partner to file any necessary tax
returns. Upon written request of BPP or the Operating Partnership,
continuing for a period of two (2) years after the Closing, the Contributors
shall (i) make its records pertaining to the period of such Contributor's
ownership of the Property available to BPP for inspection, copying and audit
by the BPP's designated accountants at BPP's or the Operating Partnership's
sole cost and expense, and (ii) cooperate with BPP and the Operating
Partnership or to the extent reasonably necessary to obtain any applicable
Licenses not in existence on the Closing Date and necessary for the operation
of all or any portion of the Property; provided, however, that BPP or the
Operating Partnership shall pay all out-of-pocket expenses incurred by the
Contributors in connection with any of the foregoing. Without limiting the
foregoing and in addition thereto, for the period of time commencing on the
date of this Agreement and continuing through the second (2nd) anniversary of
the Closing Date, the Contributors shall, from time to time, upon reasonable
advance notice from BPP, provide BPP and its designated accountants and
employees with access to all financial information in its possession
pertaining to the period of each Contributor's ownership in and operation of,
as the case may be, each Property, which information is relevant and
reasonably necessary, in the opinion of BPP's outside, third party
accountants (the "Accountants"), to enable BPP and its Accountants to prepare
financial statements in compliance with any or all of (a) Rule 3-14 of
Regulation S-X of the Commission; (b) any other rule issued by the Commission
and applicable to BPP; and (c) any registration statement, report or
disclosure statement filed with the Commission by, or on behalf of, BPP;
provided, however, that in any such event(s), BPP shall
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reimburse the Contributors for those third party, out-of-pocket costs and
expenses that the Contributors incur in order to comply with the foregoing
requirements. The Contributors acknowledge and agree that the following is a
representative description of the information and documentation that BPP and the
Accountants may require to be provided (to the extent in the Contributors'
possession or control as of the date of this Agreement and not turned over to
BPP the Operating Partnership at Closing) in order to comply with (a), (b) and
(c) above.
(a) Applicable Rent Rolls for the eleven (11) calendar months
immediately preceding the calendar month in which the Closing occurs;
(b) The Contributors' internally-prepared operating statements;
(c) Access to applicable Leases.
(d) The Contributors' budgeted annual and monthly income and
expenses, and actual annual and monthly income and expenses;
(e) Access to Contributors' cash receipt journal(s) and bank
statements for the applicable Property;
(f) The Contributors' general ledger with respect to the applicable
Property;
(g) The Contributors' schedule of expense reimbursements required
under applicable Leases in effect on the Closing Date, if one exists;
(h) The Contributors' schedule, if one exists, of those items of
repairs and maintenance performed by, or at the direction of a Contributor,
during the Contributor's final fiscal year in which the Contributors owned and
operated the Property (the "Final Fiscal Year");
(i) The Contributors' schedule, if one exists, of those capital
improvements and fixed asset additions made by, or at the direction of, the
Contributors during the Final Fiscal Year;
(j) Access to Contributors' invoices with respect to expenditures
made during the Final Fiscal Year;
(k) Access (during normal and customary business hours) to
responsible personnel to answer accounting questions; and
(l) If requested by BPP's accountants, a representation letter with
respect to the Contributors' period of ownership of the applicable Property,
signed by the individual(s) responsible for the Contributors' financial
reporting, as prescribed by generally accepted auditing standards promulgated by
the Auditing Standards Division of the American Institute of Certified
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Public Accountants, which representation letter may be required to assist the
Accountants in rendering an opinion on such financial statements.
4.11 Ongoing Capital and Tenant Improvement Work. The parties acknowledge
that Contributors are currently making certain capital improvements to the
Properties and constructing tenant improvements pursuant to certain Leases, all
as more fully described in Schedule 4.11 (collectively, the "Ongoing
Improvements Work"). Prior to and following the Closing, the Contributors shall
cause the Ongoing Improvements Work to be completed in accordance with the
requirements of any Lease and the plans, specifications and contracts therefor
provided to BPP, and otherwise diligently and in a good and workmanlike manner,
free and clear of any mechanics', suppliers' or other liens with respect
thereto. The maximum allowance which is directly across from the line item of
certain items of the work on Schedule 4.11 represents the maximum third party
cost obligation of the Contributors for the completion of the such work after
December 4, 1997. To the extent a particular line item of such work is
completed for less than the specified maximum allowance, the Contributors shall
be entitled to the benefits of such cost savings. If the cost of such
particular line item exceeds such maximum allowance, the Operating Partnership
shall be solely responsible for such excess cost, and the Contributors shall not
be responsible to complete the work in question until such time as BPP pays such
excess amount. All other items on Schedule 4.11 where the dollar amount has
been deleted are to be completed by the Contributors regardless of the cost
thereof. The parties agree that the scope of work to be performed for the
Ongoing Improvements Work is the scope set forth in the Freeman Group reports
which have been previously delivered to BPP as further described in the
Contributors' internal spread sheet entitled Capital Improvements, dated
December 2, 1997, for each individual center, a copy of which has been furnished
to BPP.
4.12 A. Title. The Contributors shall prior to Closing correct or resolve
the following title and survey matters so as to cause them not to be listed as
exceptions to title in the Title Policy:
(a) Any and all material title and survey matters first arising from
and after the date of the Preliminary Report as the result of any act or
omission by the Contributors; provided, however, that other than with respect to
liens voluntarily granted or assumed by any Contributor (which the Contributors
shall in any event be obligated to discharge at or prior to Closing), the
Contributors shall not be required to expend funds to discharge or otherwise
correct or resolve any such title or survey matter with respect to any Property
which exceed an amount equal to one percent (1%) of the Valuation with respect
to such Property;
(b) Any and all other title matters set forth in the Preliminary
Report or shown on a survey of the Real Property delivered by the Contributors
to BPP or obtained by BPP to the extent objected to BPP and which the
Contributors have agreed in writing to correct or resolve such objectionable
title or survey matter; and
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(c) The matters identified to be cured on Exhibit P.
B. Survey Matters. In the event the Title Company refuses to issue an
ALTA title insurance policy without a survey exception, BPP and the Contributors
agree to cooperate with each other to cause the Title Company to issue an ALTA
title insurance policy without such survey exception or otherwise resolve the
survey issue in a manner reasonably satisfactory to BPP's lenders.
4.13 Payoff Letters/Discharges on Mortgage Debt. At least five (5) days
prior to the anticipated Closing Date, the Contributors shall, to the extent
practicable, cause the holders of the Mortgage Debt to provide to the Title
Company (with a copy to BPP) (i) to the extent that the Mortgage Debt is held
by a bank, insurance company or similar institutional lender, payoff letters
stating the amounts required to be paid to such holder to fully satisfy the
Mortgage Debt as of the anticipated Closing Date, with per diem amounts for a
reasonable period thereafter, or (ii) to the extent that the Mortgage Debt is
not held by a bank, insurance company or similar institutional holder, such
payoff letters together with discharges of the applicable mortgages and other
security documents to be held in escrow by the Title Company pending Closing,
and in any event shall deliver such documents and other items as the Title
Company may require to issue the Title Policy at Closing free and clear of
any mortgages or other encumbrances securing the Mortgage Debt. The
Operating Partnership shall cause all of the Mortgage Debt to be fully repaid
within two (2) Business Days following the Closing and thereby to be
discharged and fully released through closing escrow arrangements with the
Title Company reasonably satisfactory to the Contributors. In the event that
the Contributors do not obtain the consent of the existing holders of the
Mortgage Debt to transfer the Properties subject to the Mortgage Debt, then
BPP and the Operating Partnership shall satisfy the Mortgage Debt at Closing.
4.14 Cooperation Regarding Closing Conditions. The Contributors shall
cooperate and shall use reasonable good faith efforts to satisfy any condition
to BPP's and the Operating Partnership's obligations hereunder which are within
the Contributors' control, but the representations and warranties of the
Contributors to BPP shall not be affected or released by BPP's waiver or
fulfillment of any condition. BPP and the Operating Partnership shall cooperate
and shall use reasonable good faith efforts to satisfy any condition to the
Contributor's obligations hereunder, but BPP's and the Operating Partnership's
representations and warranties to the Contributors and the Existing Partners
shall not be affected or released by the Contributors' waiver or fulfillment of
any condition.
4.15 Articles Supplementary. Following authorization by BPP's Board of
Directors, at or before the Closing, BPP shall cause to be duly executed and
filed with the State Department of Assessments and Taxation of the State of
Maryland, the Articles Supplementary.
4.16 [Intentionally Omitted]
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4.17 Conduct of the Business. Except for transactions contemplated
hereby or as disclosed in the Company Reports, during the period from the
date hereof to the Closing Date, and except for the following: (a) any
financings obtained by BPP in order that BPP may obtain sufficient funds to
finance the transactions contemplated hereby, (b) sale of Common Stock up to
$120,000,000 at an offering price to the ultimate purchaser not less than
$13.75 per share, (c) the UPREIT Transaction and any financings related
thereto, (d) the acquisition of real property or interests therein from time
to time in exchange for cash and/or the assumption of indebtedness, the
Units, or units in downREIT transactions, and the financing of such
acquisitions with institutional lenders and (e) the sale of the Company
Property located in Gilroy, California, BPP and the Operating Partnership
will, except as otherwise consented to or approved by the Contributors in
writing or as permitted or required hereby, which consent shall not be
unreasonably withheld, conduct the business of BPP, the Operating Partnership
and their Subsidiaries and engage in transactions only in the ordinary course.
4.18 Intentionally Omitted.
4.19 Notification of Certain Matters. Until the Closing Date, each of the
Contributors and BPP and the Operating Partnership shall use its good faith
efforts to notify the other parties in writing of its discovery of any matter
that would render any of such party's or the other party's representations and
warranties contained herein untrue or incorrect in any material respect, but the
failure of either party so to notify the other parties shall not be deemed a
breach of this Agreement.
4.20 Approval of Company Shareholders. BPP shall at its own expense (i)
exercise reasonable efforts to advance in time as much as is reasonably
practicable the date of, and duly call, its 1998 annual meeting of
shareholders, to a date not later than May 12, 1998, (ii) duly submit for
approval by the holders of a majority of the Common Stock entitled to vote at
such meeting on the issuance by BPP of Common Stock upon the conversion,
exchange of redemption of the Preferred Stock and of the Preferred Units and
Units, (iii) recommend approval thereof and exercise best efforts to obtain
such approval, including, without limitation, retaining a soliciting firm for
customary services in connection therewith, and (iv) in the event that such
approval is not obtained at said annual meeting, then BPP may, at its sole
discretion, convene a special meeting of shareholders for such purpose,
PROVIDED that that same shall be called and held in sufficient time to enable
BPP to satisfy its obligations set forth in Section 9 of Exhibit C to the
Operating Partnership Amendment, but in no event later June 30, 1998. At
such special meeting thereof, BPP shall submit such matter for approval by
the holders of BPP's Common Stock, recommend approval thereof and exercise
best efforts to obtain such approval including, without limitation, retaining
a soliciting firm for customary services in connection therewith. In the
event that approval of such matters by the holders of a majority of BPP's
Common Stock is not obtained BPP and the Operating Partnership shall redeem
the shares of Preferred Stock and Preferred Units in such aggregate number
(of which 7/12 shall be shares of Preferred Stock and 5/12 shall be Preferred
Units) as will result in the aggregate number of
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shares of Common Stock issuable upon the conversion, exchange or redemption of
Preferred Stock and of Preferred Units and Units (issued pursuant to this
Agreement) after such redemption not exceeding 19.9% of the number of shares of
Common Stock outstanding immediately prior to the Closing hereunder and under
the Preferred Stock Purchase Agreement, in accordance with Section 9 of Exhibit
C to the Operating Partnership Amendment. BPP and the Contributors agree that
if BPP were to fail to comply with its obligations under Section 9 of Exhibit C
to the Operating Partnership Amendment, the Contributors would be irreparably
injured and that damages would not provide an adequate remedy for such failure
and accordingly, under those circumstances, that the Contributors shall be
entitled to equitable relief to enforce BPP's obligations under Section 9 of
Exhibit C to the Operating Partnership Amendment to comply therewith.
4.21 REIT Status. From and after the date hereof, BPP will elect to be
taxed as a REIT in its federal income tax returns, will comply with all
applicable laws, rules and regulations of the Code relating to a REIT, and will
not take any action or fail to take any action which would reasonably be
expected to, alone or in conjunction with any other factors, result in the loss
of its status as a REIT for federal income tax purposes or the failure of the
representations in Section 3.2(h) hereof to be true and correct.
4.22 Payments. Except as otherwise provided below, BPP acknowledges and
agrees to pay or reimburse from time to time upon the direction of the
Contributors, at and after the Closing, reasonable expenses of the Contributors
and third-party transaction costs to the Contributors, up to an aggregate amount
equal to $500,000 less any amounts paid to Westbrook Partners, L.L.C. pursuant
to Section 6.3 of the Preferred Stock Purchase Agreement, incurred or paid by
the Contributors in completing this transaction including, without limitation,
any amendment or modification of, or waiver of, the transaction documents (as
invoiced by reasonably detailed statements or invoices). Notwithstanding any
termination of this Agreement pursuant to Section 8.1 hereof (other than
pursuant to clauses (ii) and (iii) thereof, in either event, such payment or
reimbursement shall not be required), BPP acknowledges and agrees to make the
payments as set forth above. BPP shall be relieved of its obligations set forth
in the preceding sentence if the termination of the Agreement results from the
Contributors breach of their obligation to consummate the transactions
contemplated by this Agreement.
4.23 First Offer Rights.
(a) The Existing Partners, as holders of Units or Preferred Units
(collectively in such capacity, the "Holders") shall have the rights set forth
in this Section 4.23 as the holder of the Units and Preferred Units. The rights
set forth herein are in favor of each Holder and its successors and assigns,
provided that any exercise procedures to be accomplished hereunder shall be
performed by each Holder or its nominee designated in writing to BPP
independently of any other Holder and no other Person may accomplish such
procedures or seek to exercise the preemptive rights set forth in this Section
4.23. Absent an express assignment of the rights of a
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Holder under this Section 4.23, no transfer by a Holder of the Units and
Preferred Units or upon redemption or exchange, Preferred Stock or Common Stock
shall affect the rights of the Holders hereunder.
(b) In the case of the proposed issuance by BPP of, or the proposed
granting by BPP of shares of, any class of Company Stock, or any rights to
subscribe for or to purchase, or any warrants or options for the purchase of,
Company Stock or any stock or securities convertible into or exchangeable for
Company Stock to the public, other than an issuance or sale of Common Stock as
contemplated in Section 5(c)(v) of the Articles Supplementary (collectively, the
"Offered Securities") other than issuance of interests in the Operating
Partnership in connection with acquisitions, mergers, joint ventures and similar
transactions, each Holder shall have, at any time and from time to time, the
right to purchase such number of the Offered Securities equal to the product of
(i) the ratio of the total number of Units (on an "as redeemed" basis),
Preferred Units (on an "as redeemed" basis), Preferred Stock (on "as converted"
basis) and Common Stock owned by such Holder at the time such Holder received
the BPP Notice (as defined below) to the total number of Units (on an "as
converted" basis), Preferred Units (on an "as redeemed" basis), Preferred Stock
(on an "as converted" basis) and Common Stock outstanding at the time such
Holder receives the BPP Notice, and (ii) the number of Offered Securities. On
each occasion that BPP proposes to issue any Offered Securities to the public,
BPP shall give to each Holder prior written notice (the "BPP Notice") of its
intention, by first class mail, postage prepaid, addressed at its last address
as shown by the records of BPP or the Operating Partnership describing the same,
the price and the specific terms (or in the context of an offering of Offered
Securities, a range of price and terms) upon which BPP proposes to issue the
same. Each Holder shall have 15 Business Days (but in the case of a retail
"spot" offering, two Business Days so long as BPP has advised the Holders that
it is considering effecting such an offering, on the material terms thereof, as
promptly as is practical for BPP to do so and in any event not less than 10 days
prior to the beginning of such two Business Day period) from the date of the
receipt by such Holder of the BPP Notice to deliver a notice (the "Rights
Exercise Notice") notifying the Company of such Holder's intention to purchase
all or a part of its pro rata share of such Offered Securities in accordance
herewith for the price and upon the terms specified by the BPP Notice and at a
price or prices no less favorable to such Holder than the price or prices at
which such Offered Securities are proposed to be offered for sale to others,
less, in the event of any sale other than a public offering, the per unit or
share amount of any placement fees or commissions to the extent that the same
are not payable by BPP under the terms of any placement agent's or other similar
agreement not applicable to such sale, and provided, however, that the purchase
of such Offered Securities shall be consummated prior to the later of (i) 30
days after the date of the Rights Exercise Notice and (ii) the date that BPP
consummates the issuance of the Offered Securities described in the BPP Notice.
If, in connection with any proposed issue of Offered Securities, a Holder fails
to exercise in full its rights as set forth in this Section 4.23, then subject
to the next following sentence, BPP may sell the unsold Offered Securities at
any time within 180 days (90 days in the case of a public offering) thereafter
at a price and upon terms no more favorable to the purchasers thereof than
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specified in the BPP Notice; PROVIDED, that BPP shall not sell or grant, or
permit conversion under, any Offered Securities after such 180-day period (or
90-day period in the case of a public offering) without renewed compliance with
this Section 4.23; provided, further, that in the case of a widely distributed
underwritten public offering of Offered Securities, if in the good faith opinion
of BPP and the underwriter, such renewed compliance by BPP with the procedural
requirements hereunder (i.e., timing of notices, etc.) would otherwise
materially impede the consummation of such public offering, the parties agree to
take such further action as may be reasonably necessary to effectuate such
offering while preserving each Holder's substantive rights hereunder. Each
Rights Exercise Notice delivered by a Holder to BPP hereunder shall be
irrevocable and binding on such Holder.
(c) The provisions of this Section 4.23 shall not apply to (i) any
shares of any class of the Company Stock or convertible securities, issuable
upon the redemption or exchange of the Units or Preferred Units issued pursuant
to this Agreement or Preferred Stock issued pursuant to the Preferred Stock
Purchase Agreement, (ii) any options to purchase shares of Company Stock
(determined at the time of the grant of such options) at an exercise price not
less than the fair market value of such shares on the date of the grant issued
from time to time to employees, consultants or directors as compensation or
incentives for services rendered to BPP or the Operating Partnership, whether
under BPP's amended Stock Option and Incentive Plan or any successor thereto and
(iii) any other issuance or sale of Common Stock as contemplated by clause (i)
of the parenthetical of the first sentence of Section 5(e)(v) of the Articles
Supplementary.
(d) Notwithstanding the foregoing, if and to the extent that a Holder
is prevented or prohibited from the exercise in full or in part of its rights to
purchase any Offered Securities under this Section 4.23 due to restrictions on
the ownership by a Holder (or any group of holders with which such Holder may be
affiliated or may be deemed to be affiliated) of any thereof, whether under
applicable Maryland law, or the charter or the bylaws of BPP, as amended, or by
reason of restrictions applicable for purposes of the BPP's continued
qualification as a REIT for purposes of the Code (the "Exercise Restriction"),
such number of Offered Securities required to be purchased pursuant to such
preemptive right shall automatically be reduced to such amount as to not exceed
the Exercise Restriction, and such Holder, from time to time thereafter may
exercise such right up to an aggregate number of Offered Securities as is equal
to such reduction, subject always to the restrictions as aforesaid.
(e) The rights of the Holders set forth in this Section 4.23 shall
commence on the date hereof and shall expire on that date when the Holders no
longer own 250,000 or more Preferred Units and/or shares of Preferred Stock,
except as to purchases as to which Holders may make on a deferred basis under
Section 4.23(d) which shall continue without time restriction.
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4.24 Board of Directors.
(a) To the extent that Westbrook Partners, L.L.C. no longer has the
"Nomination Rights" available to it under Section 6.5 of the Preferred Stock
Purchase Agreement, pursuant to the standards and procedures set forth in
Section 4.24(b), the Contributors shall, from time to time when there exists a
vacancy on BPP's Board of Directors with respect to a seat occupied or to be
occupied by the Preferred Stock nominee, but not less often than annually,
propose a person for nomination and election to BPP's Board of Directors (the
"Nomination Right"). Such member shall have a seat on a committee of BPP's
Board of Directors, as determined by BPP's Board of Directors, and thereafter,
as determined by the BPP's Board of Directors. If the Contributors are entitled
to the Nomination Right, and if a vacancy on BPP's Board of Directors should
exist prior to the date of the next annual meeting, a nominee proposed by the
Contributors approved by the nominations committee (or other committee with
appropriate authority of BPP's Board of Directors), will be appointed to such
vacancy in lieu of waiting until the next annual meeting. The Nomination Right
will no longer be available to the Contributors on the earlier to occur of: (a)
the date on which the Holders' ownership of Preferred Units (on an "as redeemed"
basis) and Preferred Stock (on an "as converted" basis) considered in the
aggregate, decreases to below 30% of the aggregate number of shares of Preferred
Stock then outstanding (on an "as converted" basis), together with the number of
Preferred Units then outstanding (on an "as converted" basis) and Preferred
Stock (on an "as converted" basis) considered in the aggregate, decreases to
below 30% of the number of shares of Preferred Stock then outstanding (on an "as
converted" basis), together with the number of Preferred Units then outstanding
(on an "as converted" basis); and (b) the date on which (i) the Holders'
ownership of Preferred Units (on an "as redeemed" basis) and Preferred Stock (on
an "as converted" basis), decreases to below 50% of the number of Preferred
Units (on an "as redeemed" basis) issued pursuant to this Agreement and (ii) the
Holders' ownership of Units (on an "as redeemed" basis), Preferred Units (on an
"as redeemed" basis) and shares of Preferred Stock (on an "as-converted" basis),
considered in the aggregate, is less than 2% of outstanding shares of the Common
Stock on a fully-diluted basis and (c) the Current Market Price of the Common
Stock relative to the Base Price (as such term is defined in the Articles
Supplementary) has achieved or exceeded 7% per annum price increases from a
price of $14.38 per share of Common Stock, measured from the Closing Date to the
date of determination of whether the Nomination Right has terminated, and (d) a
publicly underwritten, widely distributed offering (one in which at least 50% of
the shares sold are distributed to retail purchasers) of Preferred Stock.
Blackacre Capital Group, L.P. will be permitted to have representatives attend
BPP's Board of Directors and significant committee meetings, except executive
sessions of the BPP's Board of Directors or the committees until the later of
the Nomination Right (assuming it is activated) terminates or until no Units,
Preferred Units, or shares of Preferred Stock remain outstanding.
(b) All nominees proposed by the Contributors under paragraph (a) of
this Section 4.23 shall be of such character, and shall have such educational
background, experience
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and knowledge of complex financial and management issues and matters as to be
qualified, and shall otherwise be suitable, for membership on a board of
directors of a publicly held company engaged in real estate investment. Except
as hereinafter provided, the nomination committee (or any other committee with
appropriate authority) of BPP's Board of Directors shall have the right in its
discretion to reject any such nominee, provided that it so notifies the
Contributors within 20 days after the Contributors propose such nominee. In the
event committee (or such other committee) rejects a nominee, the Contributors
shall have the right to propose three alternate candidates meeting the criteria
set forth in this paragraph, one of which shall be approved by the nomination
committee (or such other committee of BPP's Board of Directors) as promptly as
practicable.
(c) BPP's obligation under this Section 4.24 shall be subject to the
performance by the directors of BPP of their duties in compliance with Maryland
law.
4.25 Retained Property. Notwithstanding anything contained in this
Agreement to the contrary, it is expressly acknowledged by BPP and the Operating
Partnership that the following properties (the "Retained Properties") shall be
excluded from the conveyance of Properties described herein: (i) 133,744 square
feet of land located at Ralph's Center, Redondo Beach, California, as shown on
Exhibit EE-1, and (ii) the Appleby's pad site located at Westminister Center,
Westminister, California as shown on Exhibit EE-2. In the event a formal
subdivision of the Retained Properties is not completed by Closing, the
Contributors and the Operating Partnership shall apportion the real estate taxes
between the Retained Properties and the balance of each of such shopping centers
being conveyed pursuant to this Agreement. The Contributors shall use best
efforts to complete such subdivision as promptly as practicable at Contributors'
sole cost and expense, and the Operating Partnership agrees to cooperate with
the Contributors in connection with completing the subdivision, including
without limitation, executing and delivering confirmatory deeds and municipal
applications for the formal subdivision of the Retained Properties. Until such
time as the subdivision of the Retained Properties is finalized, the Operating
Partnership shall act as the Contributor's nominee and any conveyance of the
Retained Properties to the Contributors shall be for no consideration other than
reimbursement of any reasonable out-of-pocket expenses incurred by the Operating
Partnership in connection with such conveyance. If either of the Retained
Properties cannot be legally subdivided within 18 months of Closing, the
Operating Partnership agrees to ground lease the Retained Properties, subject
only to encumbrances existing as of the Closing Date (other than the Mortgage
Debt), to the Applicable Contributor for nominal consideration (i.e. $1 per
year) on a form of ground lease reasonably acceptable to the Contributors. The
Contributors expressly acknowledge and agree that the Operating Partnership
shall have the right to encumber the Retained Properties at or following the
Closing with secured financing encumbering the respective shopping center of
which the Retained Property forms a part; PROVIDED, HOWEVER, the Operating
Partnership shall have the express right to release such Retained Property
without the requirement of repaying a portion of the debt and notwithstanding
the occurrence of a default on the secured loan in question.
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4.26 Post-Closing Delivery of Schedules and Exhibits. The Contributors
shall deliver to the Operating Partnership, within thirty (30) days after the
Closing Date, (a) a Schedule showing the tax basis as of the Closing Date of
each Contributor in the Property(ies) contributed by it to the Operating
Partnership and (b) revised Exhibit A-1 to the Operating Partnership Amendment
that correct any errors in the apportionment of Units, Preferred Units and the
Cash Reimbursement Component among the Existing Partners in light of closing
adjustments made after the date of this Agreement among the Existing Partners,
and BPP and the Operating Partnership shall have the right to conclusively rely
on such revised Exhibit A-1.
4.27 Operating Partnership Preferred Units. BPP and the Contributors
agree that, for so long as shares of Preferred Stock are outstanding, BPP (i)
shall own and hold the number of Preferred Units on behalf of the holders of
Preferred Stock in an amount equal to the number of shares of Preferred Stock
issued and outstanding and having in all material respects the same liquidation
and distribution preferences with respect to the Operating Partnership as
Preferred Stock has with respect to BPP, which distribution and preferences
shall be applied exclusively to the satisfaction of the rights of the holders of
the Preferred Stock , (ii) shall receive, hold and pay over to such holders the
proceeds of such Preferred Units, and (iii) shall act solely at the direction of
the holders of a majority of the Company Preferred Stock in exercising any right
or taking any action requested to be taken by it in its capacity as a holder of
the Preferred Units.
4.28 Company Rent Roll. BPP agrees to update the Company Rent Roll not
more than five (5) Business Days prior to the Closing Date.
4.29 Changes to Existing Partners and Allocation of Contribution
Consideration. The Contributors shall have the right, by giving notice to the
Operating Partnership at least five (5) prior to the Closing Date, to change the
identity of any of the Existing Partners (for example, because BSMC and BSMC II
may have contributed their interests in HPBA or HPBA II to another entity and
cause such entity to be designated as an Existing Partner in lieu of BSMC and
BSMC II) or the apportionment of Contribution Consideration or rights to receive
Additional Equity Value or Additional Consideration among the then Existing
Partners. To the extent Exhibits A-1 or A-2 have not been completed on or
before the date this Agreement is executed and delivered, the Contributors shall
have the right to provide such Schedules to the Operating Partnership not less
than two (2) Business Days prior to the Closing Date (upon which BPP and the
Operating Partnership shall conclusively rely).
4.30 Westbrook Registration Rights Agreement. Without the approval of the
Existing Partners, BPP will not make or permit to occur any amendment to the
Westbrook Registration Rights Agreement or the Operating Partnership Agreement,
nor waive or fail to observe in any material respect any provisions thereof, if
the effect thereof could adversely affect the rights of any Existing Partner or
other Person under the Registration Rights Agreement and BPP will afford such
Person the opportunity to obtain a similar benefit resulting from any amendment
or waiver of, or failure to observe, any material provisions of such Agreement.
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4.31 REOC Status. BPP shall conduct its business in such fashion that the
representations made in Section 3.2(q) of this Agreement remain true and correct
after the Closing Date. BPP covenants and warrants that it will comply with all
requirements, and take all actions and cause it subsidiaries to take all actions
necessary, to maintain its status as a "real estate operating company" as such
term is defined in 29 C.F.R. Section 2510.3-101. Specifically, but without
limitation, BPP covenants that it has or it will establish an "annual valuation
period", which will be an annual period of no more than 90 days that will begin
no later than the anniversary of the REOC Qualification Date, and that on at
least one day within each annual valuation period, BPP will maintain the
investment of at least 50 percent of its assets (other than short-term
investments pending long-term commitment or distribution to investors), valued
at cost, in real estate which is under active development or management by BPP
as described above. BPP also covenants to devote substantial resources to the
management of the real estate it owns, and continuously to remain actively
engaged in the management or development of real estate in the ordinary course
of its business. BPP agrees to cooperate with the Contributors and to furnish
such additional information as may be reasonably requested by the Contributors
to evidence the actions indicated above.
4.32 80% Ownership Condition. To the extent that as of the effective time
of the Closing the Operating Partnership and its Subsidiaries do not have legal
or beneficial ownership of at least 80% of the then value of the assets of BPP
(other than its interest in the Operating Partnership) and its Subsidiaries
(including the Operating Partnership) immediately prior to the effective time of
Closing (the "80% Ownership Condition"), BPP shall use its best efforts to
satisfy the 80% Ownership Condition on or before December 31, 1998, including
repaying or refinancing any BPP Mortgage Debt (as defined in Section 7.5.A of
the Operating Partnership Agreement) if necessary to obtain (or to avoid the
need to obtain) any consent required to make the transfers necessary to satisfy
the 80% Ownership Condition on or before December 31, 1998. The parties hereto
acknowledge their intent that all transfers of legal or beneficial interests in
property that are necessary to satisfy the 80% Ownership Condition shall be
deemed to have occurred prior to the effective time of the Closing and,
consistent therewith, will treat any such transfers of property that are delayed
because of third party consent requirements and that occur on or before December
31, 1998 as having occurred immediately prior to the effective time of the
Closing for purposes of computing distributions to the Partners and filing the
parties' tax returns.
4.33 Board of Directors Resolutions. The resolutions of BPP's board of
directors referenced in Sections 3.2(s) and 3.2(v) will not be amended,
modified, rescinded or revoked in contravention of the last sentences of
Sections 3.2(s) and 3.2(v).
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ARTICLE 5
CLOSING ADJUSTMENTS
5.1 Taxes, Assessments and Utilities. All real estate taxes, charges and
assessments (including betterment and other special assessments) affecting each
Property and all charges for water, sewer, electricity, gas, telephone and all
other utilities with respect to each Property, shall be apportioned on a per
diem basis between the Operating Partnership and the Contributors as provided
below. General real estate taxes with respect to each Property payable for the
year in which the Closing occurs and any amounts prepaid to any Authority,
including by way of example but without limitation, prepaid license and annual
permit and inspection fees, if any, shall be prorated by the Contributors and
the Operating Partnership as of the Closing Date. The Contributors shall cause
all the applicable utility meters to be read on the Closing Date and will be
responsible for the cost of all utilities used prior to the Closing Date, except
to the extent such utility charges are billed to and paid by tenants directly.
If the Closing shall occur before a new real estate or personal property tax
rate is fixed, the apportionment of taxes at the Closing shall be based upon the
old tax rate for the preceding fiscal year applied to the latest assessed
valuation. Promptly after the new tax rate is fixed, the apportionment of taxes
shall be recomputed and any discrepancy resulting from such recomputation or any
errors or omissions in computing apportionments at Closing shall be promptly
corrected and the proper party reimbursed by the other party, as the case may
be. If any prorations under this Section cannot be calculated finally on the
Closing Date, then they shall be estimated at the Closing and calculated finally
as soon after the Closing Date as feasible. The parties' obligations under this
Section shall survive the Closing.
5.2 Rent. Except for delinquent rent, all rent under the applicable
Leases and other income attributable to any Property shall be apportioned on a
per diem basis as of midnight on the date immediately preceding the Closing
Date. Payments received by the Operating Partnership from tenants of the
Property prior to the date which is six (6) months after the Closing Date with
respect to a Property shall be applied first to rents then due for any period
following Closing from such tenant and any excess then delivered to the
Contributors to the extent of such tenant's delinquent rent as of the time of
apportionment. Any amounts received by the Contributors on account of rent or
other income accruing from and after the Closing Date with respect to any
Property shall be turned over to the Operating Partnership for application in
accordance with the terms of this Section.
5.3 Common Area Reimbursement Adjustment.
(a) Within a reasonable period of time following the Closing and
periodically thereafter, Contributors shall prepare and deliver to the Operating
Partnership a Schedule demonstrating the computation of the common area
maintenance charges and other expense reimbursements payable by the tenants of
the Properties for calendar year 1997 and showing the
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estimated payments made by all tenants with respect thereto. BPP shall
cooperate with Contributors to assist in preparing such Schedule.
(b) Upon a determination of the actual amount of common area
maintenance charges and other expense reimbursements as provided in Section
5.3(a) above, the Contributors shall remit to the tenants, or the Contributors
shall have the right to cause the Operating Partnership to demand payment from
the tenants, as the case may be, of an amount equal to the difference between
(x) the estimated common area maintenance charges and other expense
reimbursements paid by tenants and the actual common area maintenance charges
and other expense reimbursements for calendar year 1997. Any such amounts
received by BPP shall be received by BPP or the Operating Partnership as agent,
and in trust, for the Contributors and shall be paid over to the Contributors.
In the event the Closing is delayed to 1998 the Operating Partnership agrees to
perform a final reconciliation at the end of 1998 and the Operating Partnership
and the Contributors shall apportion any amounts either owed to tenants or owed
by tenants to the Operating Partnership, as landlord, and the Contributors shall
thereafter pay to the Operating Partnership its share of any amounts owed to
tenants and the Operating Partnership shall pay to the Contributors their share
of any amounts so owed by tenants when received. The Contributors' share of any
such amount shall be calculated as the total amount to be paid either to tenants
or received from tenants multiplied by a fraction which is the total number of
days Contributors owned the Properties in 1998 divided by 365. BPP and
Contributors shall remit amounts owed to the other party within ten (10) days of
the final reconciliation of common area maintenance charges and other expense
reimbursements.
5.4 Payments on Permitted Exceptions. Payments under the Permitted
Exceptions shall be apportioned on a per diem basis as of midnight on the date
immediately preceding the Closing Date. Such payments accruing prior to the
Closing Date shall be deemed to be the responsibility of the Applicable
Contributors, and, subject to the terms of this Agreement, any such payments
accruing on or after such Closing Date shall be deemed to be an expense of the
Operating Partnership.
5.5 Operating Agreement Payments and Other Expenses. Payments under all
Contracts and for each Property's operating maintenance expenses shall be
apportioned on a per diem basis as of midnight on the date immediately preceding
the Closing Date to the extent possible. All such expenses accruing prior to
such Closing Date shall be deemed to be the responsibility of the Contributors
and all such expenses accruing as of the Closing Date and thereafter shall be
expenses of the Operating Partnership. If final bills are not available as of
Closing, amounts to be prorated under this Section shall be prorated on the
basis of the most current bills then available and promptly re-prorated on
receipt of final bills.
5.6 Partners' Consents. All costs and expenses of obtaining any required
Partners' Consents shall be the responsibility of the applicable Contributors.
BPP shall be responsible for
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any required filings for any securities laws in connection with the Partners'
Consents, and the cost thereof shall be paid 50% by each of BPP and the
Contributors.
5.7 Post-Closing Audit. The parties agree to apportion all prorations
made under this Article as of December 31, 1997 regardless of the actual date of
Closing. Within sixty (60) days after the Closing Date, the Operating
Partnership and the Contributors shall conduct a post-Closing reconciliation to
determine the actual prorations as of the actual Closing Date made under this
Article (the "Post-Closing Reconciliation"). Any party owing another party a
sum of money based on post-Closing prorations required under this Article or the
Post-Closing Reconciliation shall promptly pay such sum to the other party,
together with interest thereon at the Reference Rate commencing ten (10) days
after delivery of a bill therefor if not paid within such ten (10) day period.
5.8 Survival. The parties' obligations under this Article 5 shall survive
Closing.
ARTICLE 6
DEFAULTS AND REMEDIES
6.1 Breakup Fee. If the Contributors willfully default in their
obligations to contribute the Properties to the Operating Partnership or if BPP
and the Operating Partnership willfully default in their obligation to accept
such contribution and to issue the Contribution Consideration therefor, then the
nondefaulting party shall have the right to terminate its obligation to
consummate the transactions contemplated by this Agreement by delivery of notice
thereof to the other party, whereupon the Deposit shall be returned to BPP and
the defaulting party shall within fifteen (15) days of such termination pay to
the nondefaulting party Fifteen Million Dollars ($15,000,000) (the "Breakup
Damages Amount") as liquidated damages for such default.
6.2 Deposit. Within five (5) Business Days of the Date of this Agreement,
BPP shall deposit with the Title Company the amount of $25,000.00 (together with
all interest, if any, earned thereon, the "Deposit"). The Deposit shall be held
by the Title Company in an interest bearing account designated by BPP. Upon
Closing or termination of this Agreement pursuant to Section 6.1, BPP shall be
entitled to return of the Deposit .
6.3 BREAKUP DAMAGES AMOUNT AS LIQUIDATED DAMAGES. THE PARTIES HEREBY
AGREE THAT THEY SHALL NOT BE ENTITLED TO ACTUAL DAMAGES PURSUANT TO THE TERMS OF
THIS AGREEMENT IN THE EVENT OF A WILLFUL DEFAULT ENTITLING THE OTHER PARTY TO
THE BREAKUP DAMAGES AMOUNT AS SET FORTH IN SECTION 6.1, AND THAT IN SUCH EVENT
IT SHALL ONLY BE ENTITLED TO THE BREAKUP DAMAGES AMOUNT, AS
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DESCRIBED ABOVE IN THIS ARTICLE. THE PARTIES AGREE THAT IT IS DIFFICULT OR
IMPOSSIBLE TO CALCULATE WHAT ITS ACTUAL DAMAGES WOULD BE IN THE EVENT OF ANY
SUCH WILLFUL DEFAULT AND AGREE THAT THE BREAKUP DAMAGES AMOUNT IS A REASONABLE
ESTIMATION THEREOF. THEREFORE, BY PLACING ITS INITIALS BELOW, THE PARTIES
ACKNOWLEDGES THAT ITS RIGHT TO THE BREAKUP DAMAGES AMOUNT SHALL CONSTITUTE
LIQUIDATED DAMAGES AND ITS SOLE RIGHT AND REMEDY IN CONNECTION WITH THIS
AGREEMENT IN THE EVENT OF SUCH A WILLFUL DEFAULT. NOTWITHSTANDING THE
FOREGOING, NEITHER THIS PARAGRAPH NOR SECTION 6.1 SHALL LIMIT A PARTY'S RIGHTS
WITH RESPECT TO A DEFAULT OR BREACH OCCURRING AFTER CLOSING OR WITH RESPECT TO
ANY OTHER DEFAULT.
INITIALS: CONTRIBUTORS BPP AND OPERATING PARTNERSHIP
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ARTICLE 7
INDEMNIFICATION
7.1 By the Contributors and Existing Partners.
(a) Subject to the limitations provided below, from and after the
Closing Date, the Existing Partners agree to indemnify, defend and hold harmless
the BPP Indemnified Parties from and against all Losses which are incurred or
suffered by any of them (A) arising out of or by reason of the breach of any of
the representations or warranties of the Contributors set forth in this
Agreement, (B) arising out of or by reason of any liability or obligation
relating to any Property arising or occurring prior to Closing that has not been
expressly assumed by BPP or the Operating Partnership pursuant to this Agreement
or any Related Agreement, (C) arising out of or by reason of the failure of the
Contributors to perform or comply, in whole or in part, with any of the
covenants or agreements contained herein or in any Related Agreement to be
performed or complied with by the Contributors including, without limitation,
under or pursuant to any Contributors Estoppel, Contributors Ground Lessor
Estoppel, Contributors REA Estoppel, any other estoppel certificate delivered by
the Contributors pursuant to this Agreement, any Master Lease, or any other
indemnity obligation of the Contributors or the Existing Partners expressly set
forth in this Agreement or in any of the Related Agreements, (D) arising from
any brokerage commission or similar compensation payable in respect of any of
the Leases entered into prior to the Closing Date, (E) all tenant improvements,
tenant concessions (including, without limitation, moving allowances, takeover
fees and other similar tenant inducements) and other improvements
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required to be furnished, constructed or installed or paid for by the landlord
under each Lease entered into prior to the Closing Date (including by any
predecessor of a Contributor as landlord under such Lease), (F) arising with
respect to any labor performed or materials furnished to or for the benefit of a
Property prior to the Closing, (G) subject to the limitations set forth in
Section 4.11, arising out of the Contributors' performance of, or failure to
fully perform, the Ongoing Improvements Work, (H) arising out of BPP's and the
Operating Partnership's reliance on Exhibits A-1 and A-2 and any supplements or
amendments thereto (I) arising out of the failure to obtain any of the consents
or waivers set forth on Schedule 3.1(b) provided that any Losses shall be
limited to the positive difference, if any, between the value of the
Contribution Consideration paid to the Existing Partners for the applicable
Property (as set forth on Exhibit A to the Operating Partnership Agreement) and
the purchase price actually received by BPP or the Operating Partnership for
such Property pursuant to the exercise of the applicable right of first refusal
plus all legal fees and transfer taxes and other transactions costs incurred by
them and attributable to the applicable Property sale, (J) arising out of the
Contributors' failure to pay the Additional NOI Lease Expenses in circumstances
where the Contributors have leased the Identified Space pursuant to the
Post-Closing Leasing Agreement, and (K) arising from the Operating Partnership
acting as nominee for the Contributors with respect to the Retained Properties
provided such Losses did not result from the gross negligence or willful
misconduct of the Operating Partnership.
(b) Notwithstanding anything to the contrary contained herein or in
any Related Agreement or in any Contributor Estoppel delivered pursuant to the
Agreement, (i) the liability of the Existing Partners hereunder shall not be
joint but rather shall be several, with each Existing Partner being liable for a
pro rata portion of each claim for which the Existing Partners are liable under
this Article 7, which pro rata portion shall be based on the proportion to which
the Contribution Consideration received by an Existing Partner as of the date
the claim is made bears to the aggregate Contribution Consideration paid to the
Existing Partners as of such same date and (ii) except as set forth in the
following sentence, recourse against any individual Existing Partner for the
payment of any amount due hereunder shall be limited to an amount equal to the
product of (A) $15,000,000 and (B) a fraction, the numerator of which is the
amount of Contribution Consideration received by such Existing Partner and the
denominator of which is the aggregate amount of Contribution Consideration
received by all the Existing Partners. The limitation set forth in Clause (ii)
above shall not apply to liability in respect of any Master Lease, Payment
Estoppel delivered by the Contributors, or the matters decided in clauses (E),
(G), (H), (I), (J) and (K) of Section 7.1(a).
(c) Notwithstanding the preceding, the BPP Indemnified Parties shall
not be entitled to any recovery unless a claim for indemnification is made in
accordance with Section 7.3 and within the time period of survival set forth in
Section 7.5 and the person seeking indemnification complies with the procedures
set forth in Section 7.3.
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(d) The Existing Partners shall have no liability (for
indemnification or otherwise) with respect to the matters described in clause
(A) of Section 7.1(a) until the total of all Losses with respect thereto exceeds
$1,000,000, and after the total of such Losses so exceeds $1,000,000, the
Existing Partners shall be liable for only those Losses in excess of $1,000,000.
The Existing Partners shall have no liability (for indemnification or otherwise)
under is Agreement, or any Related Agreement or any Contributor estoppel
delivered pursuant to this Agreement in an amount greater than $15,000,000. The
limitations on liability set forth in this Section 7.1 shall not apply to any
Losses resulting from any acts of fraud, or (ii) any Losses in respect of any
Master Lease, Payment Estoppel delivered by the Contributors, or the matters
described in Clauses (E), (G), (H), (I), (J) and (K) of Section 7.1(a).
7.2 By the Operating Partnership and BPP.
(a) Subject to the limitation provided below, from and after the
Closing Date BPP and the Operating Partnership shall indemnify and hold the
Contributors harmless from and against any and all Losses incurred by the
Contributors (A) arising out of or by reason of the breach of any of the
representations or warranties of BPP or the Operating Partnership under Sections
3.2(j) and 3.2(k), (B) arising out of or by reason of the breach of any of the
other representations or warranties of BPP or Operating Partnership, (C) arising
out of or by reason of the failure to perform or comply in whole or in part,
with any of the covenants or agreements contained herein or in any Related
Agreement to be performed or complied with by BPP or the Operating Partnership,
(D) arising out of or by reason of any liability or obligation relating to any
Property arising or occurring following Closing during BPP's, the Operating
Partnership's or any Subsidiary's period of ownership of the Property except to
the extent that the Contributors or Existing Partners have expressly agreed to
be responsible for such liability or perform such obligation pursuant to this
Agreement or any Related Agreement, (E) BPP's or the Operating Partnership's
failure to pay to DLJ the DLJ Fee or (F) resulting from the following actions or
inactions of BPP and the Operating Partnership with respect to the Retained
Properties: (i) encumbering the Retained Properties (other than the debt which
by its terms can be released without cost), (ii) the discharge of Hazardous
Substances on or otherwise affecting the Retained Properties by the Operating
Partnership or BPP or (iii) the failure to maintain reasonable amounts of
general liability insurance covering the Retained Properties.
(b) Notwithstanding the preceding, the Contributors and the
Existing Partners shall not be entitled to any recovery unless a claim for
indemnification is made in accordance with Section 7.3 and within the time
period of survival set forth in Section 7.5 and the person seeking
indemnification complies with the procedures set forth in Section 7.3.
(c) Neither BPP nor the Operating Partnership shall have any
liability (for indemnification or otherwise) with respect to the matters
described in clause (A) of Section 7.2(a) until the total of all Losses incurred
by the Contributors or the Existing Partners with respect thereto, exceeds
$1,250,000, and after the total of such Losses so exceeds $1,250,000,
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BPP and the Operating Partnership shall be liable for only those Losses incurred
by the Contributors and the Existing Partners in excess of $1,250,000. Neither
BPP nor the Operating Partnership shall have any liability (for indemnification
or otherwise) with respect to the matters described in clause (B) of Section
7.2(a) until the total of all Losses incurred by the Contributors and the
Existing Partners with respect hereto exceeds $1,250,000, and after the total of
such Losses so exceeds $1,250,000, BPP and the Operating Partnership shall be
liable only for those Losses in excess of $1,250,000. The limitations on
liability set forth in this Section 7.2(c) shall not apply to any Losses
resulting from any acts of fraud.
7.3 Indemnification Procedure.
(a) In the event that any party shall incur or suffer any Losses in
respect of which indemnification may be sought by such party pursuant to the
provisions of this Article 7, the party seeking to be indemnified hereunder (the
"Indemnitee") shall assert a claim for indemnification by written notice (a
"Notice") to the party from whom indemnification is sought (the "Indemnitor")
stating the nature and basis of such claim. In the case of Losses arising by
reason of any third party claim, the Notice shall be given within 30 days of the
filing of any such claim against the Indemnitee or the determination by
Indemnitee that a claim will ripen into a claim for which indemnification will
be sought, but the failure of the Indemnitee to give the Notice within such time
period shall not relieve the Indemnitor of any liability that the Indemnitor may
have to the Indemnitee except to the extent that the Indemnitor is prejudiced
thereby and then only to the extent of such prejudice.
(b) The Indemnitee shall provide to the Indemnitor on request all
information and documentation reasonably necessary to support and verify any
Losses which the Indemnitee believes give rise to a claim for indemnification
hereunder and shall give the Indemnitor reasonable access to all books, records
and personnel in the possession or under the control of the Indemnitee which
would have bearing on such claim.
(c) In the case of third party claims for which indemnification is
sought, the Indemnitor shall have the option (x) to conduct any proceedings or
negotiations in connection therewith, (y) to take all other steps to settle or
defend any such claim (provided that the Indemnitor shall not, without the
consent of the Indemnitee, settle any such claim unless (A) there is no finding
or admission of any violation of law or any violation of the rights of any
Person and no effect on any other claims that may be made against the Indemnitee
and (B) the sole relief provided is monetary damages that are paid in full by
the Indemnitor) and (z) to employ counsel, which counsel shall be reasonably
acceptable to the Indemnitee, to contest any such claim or liability in the name
of the Indemnitee or otherwise. In any event, the Indemnitee shall be entitled
to participate at its own expense and by its own counsel in any proceedings
relating to any third party claim; PROVIDED, HOWEVER, that if the defendants in
any such action or claim include both the Indemnitee and the Indemnitor and the
Indemnitee shall have reasonably concluded that representation by the same
counsel creates a conflict of interest, the Indemnitee
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shall be entitled to be represented by separate counsel at the Indemnitor's
expense; PROVIDED FURTHER, HOWEVER, that such action or claim shall not be
settled without the Indemnitor's consent. The Indemnitor shall, within 30 days
of receipt of the Notice, notify the Indemnitee of its intention to assume the
defense of such claim. Until the Indemnitee has received notice of the
Indemnitor's election whether to defend any claim (or if earlier, the expiration
of such 30 day period), the Indemnitee shall take reasonable steps to defend
(but may not settle) such claim. If the Indemnitor shall decline to assume the
defense of any such claim, or shall fail to notify the Indemnitee within 30 days
after receipt of the Notice of the Indemnitor's election to defend such claim,
the Indemnitee shall assume the exclusive right to defend against such claim
(provided that the Indemnitee shall not settle such claim without the consent of
the Indemnitor, which consent shall not be unreasonably withheld or delayed, and
which shall be granted unless the Indemnitor provides the Indemnitee in writing
specific reasons for its disapproval of the proposed settlement within 15 days
of its receipt of all of the material aspects of the proposed settlement.). The
expenses of all proceedings, contests or lawsuits in respect of the claims
described in the preceding sentence shall be borne by the Indemnitor but only if
the Indemnitor is responsible pursuant hereto to indemnify the Indemnitee in
respect of the third party claim and, if applicable, only as required within the
limitations set forth in Section 7.1 or Section 7.2 as the case may be.
Regardless of which party shall assume the defense of the claim, the parties
agree to cooperate fully with one another in connection therewith.
(d) In the case of a claim for indemnification made under Section 7.1
or 7.2, (i) if (and to the extent) the Indemnitor is responsible pursuant hereto
to indemnify the Indemnitee in respect of the third party claim, then within ten
days after the occurrence of a final non-appealable determination with respect
to such third party claim (or sooner if required by such determination), the
Indemnitor shall pay the Indemnitee (or sooner if required by such
determination), in immediately available funds, the amount of any Losses (or
such portion thereof as the Indemnitor shall be responsible for pursuant to the
provisions hereof) and (ii) in the event that any Losses incurred by the
Indemnitee do not involve payment by the Indemnitee of a third party claim,
then, if (and to the extent) the Indemnitor is responsible pursuant hereto to
indemnify the Indemnitee against such Losses, the Indemnitor shall within ten
days after agreement on the amount of Losses or the occurrence of a final
non-appealable determination of such amount pay to the Indemnitee, in
immediately available funds, the amount of such Losses (or such portion thereof
as the Indemnitor shall be responsible for pursuant to the provisions hereof).
(e) At the election of the Existing Partners, any amounts payable by
the Existing Partners pursuant to this Article 7 may be paid in any combination
of cash, Units, Preferred Units, BPP Preferred Stock and BPP Common Stock held
by the Existing Partners. For purposes of this Section 7.3(d), any Preferred
Units and Preferred Stock shall be valued at an amount equal to the product of
the Common Exchange Rate and the Current Market Price determined as of the date
immediately prior to the date on which the payment is made. Any Units and BPP
Common
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Stock shall be valued at an amount equal to the Current Market Price determined
as of the date immediately prior to the date on which the payment is made.
7.4 Cooperation in Defense. Each party indemnified under any indemnity
contained in this Agreement shall cooperate in all reasonable respects in the
defense of the third-party claim pursuant to which the indemnifying party is
alleged to have liability.
7.5 Survival. This Article 7 shall survive Closing or the termination of
the parties' obligations to consummate the transactions contemplated by this
Agreement. Subject to the terms of this Section below, (i) all representations
and warranties of the Contributors contained in this Agreement (other than those
contained in Section 9.1 which shall survive Closing for a period of 60 days
after the expiration date of the applicable statute of limitations), and all
covenants and agreements to be complied with prior to the Closing Date shall
survive the Closing until that date which is eighteen (18) months after the
Closing and (ii) all representations and warranties of BPP and the Operating
Partnership (other than those contained in Sections 3.2(j) and 3.2(k) which
shall survive the Closing for a period of eighteen (18) months after the Closing
Date), and all covenants and agreements to be complied with prior to the Closing
Date shall survive Closing until that date which is sixty days after the
expiration of the applicable statute of limitations; provided, however, that, if
a written notice asserting a claim for breach of any such representation or
warranty or covenant or agreement or a claim for indemnification under
Section 7.3 shall have been given to the indemnifying party prior to the
expiration of such representation or warranty or covenant or agreement or claim
under Section 7.3, as the case may be, such representation and warranty and any
right to indemnification for breach thereof, shall survive, to the extent of
such claim only, until such claim is resolved. All covenants and agreements of
the parties to be performed and complied with after the Closing Date shall
survive indefinitely. No representation or warranty which is untrue as a result
of judicially determined fraud by the party making it shall terminate, but shall
survive indefinitely.
7.6 Interest. The indemnity against Losses pursuant to Section 7.1 and
Section 7.2 shall also include interest on cash disbursements in respect thereof
at an annual rate of interest equal to the prime lending rate of Bank of America
in effect from time to time plus 2% (the "Reference Rate"), based on actual days
elapsed from the later of the date a valid claim is made hereunder or the date
of such disbursement until the date the applicable party is fully reimbursed
therefor.
7.7 Exclusivity. From and after the Closing Date, the rights and remedies
provided in this Article 7 shall be the exclusive rights and remedies,
contractual or otherwise, of the Indemnitees with respect to any Losses, or any
other claim for breach of the Agreement and all other remedies, if any,
hereunder other than remedies in equity are hereby waived.
7.8 Mutual Pursuit of Claims. In the event of a claim by the Contributors
(which terms shall include their Affiliates for purposes of this Section 7.8)
under Section 7.2 of this
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Agreement with respect to a representation or warranty of BPP and the Operating
Partnership under Section 3.2 hereof, Contributors will, prior to asserting such
claim, first advise Buyer under the Preferred Stock Purchase Agreement
("Westbrook") of its intention to do so and will request that Westbrook advise
Blackacre of whether it wishes to pursue such claim under the Preferred Stock
Purchase Agreement based on the representations and warranties of BPP
established thereunder. If Westbrook does not so advise the Contributors that
it wishes to pursue such claim jointly with the Contributors by a written
notice, including provision for such sharing of expenses as Westbrook and the
Contributors may jointly determine, within twenty (20) Business Days of the date
the Contributors advise Westbrook of their intention to assert a claim, unless
any applicable statute of limitations shall require the assertion of a claim in
a lesser amount of time, the Contributors shall no longer consult with Westbrook
as to such claim, their assertion or any resolution thereof. BPP and the
Operating Partnership acknowledge that, pursuant to Section 8.6 of the Preferred
Stock Purchase Agreement, Westbrook has a reciprocal understanding with BPP.
The Contributors agree that, if the Contributors shall have not provided to
Westbrook such written notice, then, if such claim is subsequently asserted in a
court of appropriate jurisdiction where the Contributors can also establish
appropriate venue, the Contributors will not seek separately to assert such
claim against BPP and the Operating Partnership, unless and to the extent that
the Contributors do not wish to pursue such claim jointly with Westbrook because
of defenses or counterclaims which exist against Westbrook under the Preferred
Stock Purchase Agreement which are not available to BPP and the Operating
Partnership with respect to the Contributors under this Agreement.
ARTICLE 8--TERMINATION
8.1 Termination. This Agreement may be terminated prior to the Closing as
provided below:
(i) at any time prior to Closing, by the mutual consent of the
Contributors, BPP and the Operating Partnership;
(ii) by the Contributors on or before fifteen days after the
date of this Agreement if the Contributors determine, in their sole discretion,
that they are not satisfied with their environmental due diligence investigation
of the Company Properties;
(iii) by BPP and the Operating Partnership on or before
fifteen days after the date of this Agreement if BPP and the Operating
Partnership determine, in their sole discretion, that they are not satisfied
with their environmental due diligence investigation of the Properties;
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(iv) by BPP and the Operating Partnership if a material casualty
shall have occurred at a Property that causes damage to such Property in an
amount in excess of $1,000,000.
(v) by either the Contributors on the one hand or BPP and the
Operating Partnership on the other hand, if the Closing shall not occur prior to
December 31, 1997; provided, however, such date shall be automatically extended
to February 28, 1998 in the event the Closing does not occur as a result of the
failure of the condition set forth in Section 2.2(w) but the Contributors waive
the condition to closing set forth in Section 2.2(w).
(vi) by the Contributors in the event the Preferred Stock
Purchase Agreement is terminated prior to a closing occurring thereunder; or
(vii) by either the Contributors on the one hand or BPP or
the Operating Partnership on the other hand if a breach or failure of any
representation, warranty, covenant or agreement contained herein that is
material in the context of the transactions contemplated hereby has been
committed by the other party and such breach has not be waived.
8.2 Effect of Termination. In the event of termination of this Agreement
by either or both of the Contributors, on the one hand, and BPP and the
Operating Partnership, on the other hand, pursuant to Section 8.1, written
notice thereof shall be promptly given by the terminating party to the other
parties hereto, and this Agreement shall thereon terminate and become void and
have no effect and the transactions contemplated hereby shall be abandoned
without further action by the parties hereto, except that the Deposit shall be
returned to BPP and the provisions of Sections 4.22, 6.1, 9.4, 9.7, and 9.12 and
any related definitional, interpretive or other provisions necessary for the
logical interpretation of such provisions, shall survive the termination of this
Agreement; provided, however, that such termination shall not relieve any party
hereto of any liability for any breach of this Agreement. In the event of the
termination of this Agreement prior to the Closing, the parties acknowledge that
the sole remedy for breach of this Agreement shall be a claim for monetary
damages (including, if applicable, liquidated damages as set forth in Section
6.1). All other remedies in law or equity (including, without limitation,
injunction or lis pendens) are hereby waived.
ARTICLE 9--MISCELLANEOUS
9.1 Brokers. Each party to this Agreement represents and warrants that
neither it nor any of its Affiliates has had any contact or dealings regarding
any Property, or any communication in connection with the subject matter of the
transactions contemplated by this Agreement, through any real estate broker or
other person who can claim a right to a commission or finder's fee in connection
with therewith other than Donaldson Lufkin & Jenrette ("DLJ"). All commissions
and other amounts required to be paid to DLJ in connection with the
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transactions contemplated hereby, other than the DLJ Fee (as set forth below),
shall be paid by the Contributors . If the Closing occurs, the DLJ Fee shall be
paid to DLJ by BPP and the Operating Partnership. In the event that any other
broker or finder claims a commission or finder's fee based upon any contact,
dealings or communication, the party through whom or through whose Affiliate
such other broker or finder makes its claim shall be responsible for such
commission or fee and all costs and expenses (including, without limitation,
reasonable attorneys' fees and disbursements) incurred by the other party and
its Affiliates in defending against the same. The party through whom or through
whose Affiliate such other broker or finder makes a claim shall hold harmless,
indemnify and defend the other party hereto, its successors and assigns, agents,
employees, officers and directors, and the Property from and against any and all
Losses, arising out of, based on, or incurred as a result of such claim. The
provisions of this Section shall survive the Closing or termination of the
parties' obligations to consummate the transactions contemplated by this
Agreement.
9.2 Marketing. The Contributors agree not to market any Property for sale
during the term of this Agreement or entertain solicit, discuss or negotiate for
the sale of any Property or any direct or indirect interest therein with any
Person other than BPP and its Affiliates.
9.3 Entire Agreement; No Amendment. This Agreement and the October 6,
1997 letter agreement referred to in Section 9.12 (and, when executed and
delivered, the Related Agreements) represents the entire agreement among each of
the parties hereto with respect to the subject matter hereof. It is expressly
understood that no representations, warranties, guarantees or other statements
shall be valid or binding upon a party unless expressly set forth in this
Agreement. Except as set forth in Section 9.12, and in the Access Agreement it
is further understood that any prior agreements or understandings between the
parties with respect to the subject matter hereof have merged in this Agreement,
which alone fully expresses all agreements of the parties hereto as to the
subject matter hereof and supersedes all such prior agreements and
understandings. This Agreement may not be amended, modified or otherwise
altered except by a written agreement signed by the party hereto against whom
enforcement is sought. It is agreed that no obligation under this Agreement
which by its terms is to be performed or continue to be performed after Closing
and no provision of this Agreement which is expressly to survive Closing shall
merge upon Closing, but shall survive Closing.
9.4 Certain Expenses. Except as otherwise set forth below and in Section
4.22, each party hereto will pay all of its own expenses incurred in connection
with this Agreement and the transactions contemplated hereby (whether or not the
Closing shall take place), including, without limitation, all costs and expenses
herein stated to be borne by such party and all of its respective accounting,
legal, investigatory and appraisal fees. The Contributors shall be responsible
for paying (i) all applicable State, County and City transfer taxes and/or
transfer fees due in connection with the transactions contemplated by this
Agreement, (ii) all costs associated with obtaining and issuing a CLTA standard
coverage Title Policy, including, without limitation, examination costs,
commitment fees and premiums. Any escrow fees incurred in connection
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with the consummation of the transactions contemplated by this Agreement shall
be split evenly between BPP and the Contributors. BPP shall make capital
contributions to the Operating Partnership to pay (i) all costs associated with
obtaining any survey it may require, and the incremental increase in the cost of
upgrading the Title Policy from a standard form CLTA policy to ALTA coverage or
to obtain any extended coverage endorsement or any other endorsements required
by BPP. All other costs and charges in connection with the consummation of the
transactions contemplated by this Agreement not otherwise provided for in this
Agreement shall be allocated by standard accounting and conveyancing practices
in the relevant jurisdiction where each shopping center Property is located.
9.5 Notices. Any notice or communication required under or otherwise
delivered in connection with this Agreement to any of the parties hereto shall
be written and shall be delivered to such party as follows:
If to Contributors:
c/o Highridge Partners, Inc.
300 Continental Blvd.
Suite 360
El Segundo, CA 90245
Attn: Mr. John S. Long
and Mr. Steven A. Berlinger
Fax: (310) 648-7619
and to:
c/o Blackacre Capital
450 Park Avenue
28th Floor
New York, New York 10022
Attn: Mr. Ronald J. Kravit
Fax: (212) 758-5305
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with a copy to:
Battle Fowler LLP
Park Avenue Tower
75 East 55th Street
New York, New York 10022
Attn: Steven L. Lichtenfeld, Esq.
Fax: (212) 856-7823
If to BPP or the Operating Partnership to:
Burnham Pacific Properties, Inc.
610 West Ash Street, Suite 1600
San Diego, CA 92101
Attn: Mr. Daniel B. Platt, Chief Financial Officer
Fax: (619) 652-4711
with a copy to:
Goodwin, Procter & Hoar LLP
Exchange Place
53 State Street
Boston, MA 02109
Attn: Christopher B. Barker, Esq.
Fax: (617) 227-8591
Each notice shall be in writing and shall be sent to the party to receive it
either by (i) postage prepaid by certified mail, return receipt requested, (ii)
by a nationally recognized overnight courier service that provides tracking and
proof of receipt or (iii) by facsimile as long as such notice sent by facsimile
is also sent the same Business Day by a nationally recognized overnight courier
service as set forth above. A Notice shall be deemed delivered upon deposit in
the U.S. mail or when given to such courier as aforesaid. The time to respond
shall commence to run on the Business Day it is received or refused as long as
it is received or refused by 6:00 p.m. on such Business Day. If received or
refused on a non-Business Day or if received or refused later than 6:00 p.m. on
a Business Day, then the time to respond to such notice shall commence to run on
the next Business Day.
9.6 No Assignment. Except as provided in this Section below, neither
this Agreement nor any of the rights or obligations hereunder may be assigned
by any party hereto without the prior written consent of the other parties.
BPP may, without such consent, assign any of its rights and obligations
hereunder to the Operating Partnership but such assignment shall not relieve
BPP of its obligations hereunder Contributors may, without such consent,
assign any of
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its rights accruing after the Closing to the Existing Partners, but such
assignment shall not relieve the Contributors of their obligations hereunder
9.7 Governing Law; Waiver of Jury Trial. The laws of the State of
California shall govern the validity, enforcement and interpretation of this
Agreement.
IN THE EVENT OF ANY DISPUTE ARISING PURSUANT TO THIS AGREEMENT, INCLUDING THE
INTERPRETATION OR IMPLEMENTATION OF THIS AGREEMENT, THE PARTIES HERETO HEREBY
WAIVE ANY AND ALL RIGHTS THEY MAY HAVE TO A TRIAL BY JURY.
9.8 Multiple Counterparts. This Agreement may be executed in multiple
counterparts. If so executed, all of such counterparts shall constitute but one
agreement, and, in proving this Agreement, it shall not be necessary to produce
or account for more than one such counterpart.
9.9 Further Assurances. From and after the date of this Agreement and
after the Closing, the parties hereto shall take such further actions and
execute and deliver such further documents and instruments as may be reasonably
requested by the other party and are reasonably necessary to provide to the
respective parties hereto the benefits intended to be afforded hereby,
including, without limitation, all books and records relating to the Property
and the addresses of all parties.
9.10 Miscellaneous. Whenever herein the singular number is used, the same
shall include the plural, and the plural shall include the singular where
appropriate, and words of any gender shall include the other gender when
appropriate. The headings of the Articles and the Sections contained in this
Agreement are for convenience only and shall not be taken into account in
determining the meaning of any provision of this Agreement. The words "hereof"
and "herein" refer to this entire Agreement and not merely the Section in which
such words appear. If the last day for performance of any obligation hereunder
is not a Business Day, then the deadline for such performance or the expiration
of the applicable period or date shall be extended to the next Business Day.
9.11 Invalid Provisions. If any provision of this Agreement (except the
provision relating to the Contributors' obligation to contribute the Properties
and the Operating Partnership's obligation to issue the Units, Preferred Units,
Cash Consideration Component, Additional Equity Value or Additional
Consideration, the invalidity of which shall cause this Agreement to be null and
void) is held to be illegal, invalid or unenforceable under present or future
laws, such provision shall be fully severable, this Agreement shall be construed
and enforced as if such illegal, invalid or unenforceable provision had never
comprised a part of this Agreement, and the remaining provisions of this
Agreement shall remain in full force and effect
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and shall not be affected by the illegal, invalid or unenforceable provision or
by its severance from this Agreement.
9.12 Confidentiality; Publicity. The parties agree that this Agreement
shall not be recorded in any public real estate registry. In the event this
Agreement is terminated, BPP shall promptly return to the Contributors all
materials delivered to BPP by the Contributors and the Contributors shall
promptly return to BPP all materials delivered to the Contributors or their
representatives by BPP. If the Closing occurs, the Contributors on behalf of
themselves and their affiliates (including Existing Partners) expressly agree to
comply with the standards for use of materials and information received from BPP
(other than materials filed with the Commission which are available to the
public) in connection with the transactions contemplated by this Agreement in
accordance with the confidentiality agreement entered into prior to the date of
this Agreement between BPP and the Contributors. Otherwise, the Contributors
and BPP agree that all materials and information received in connection with the
transactions contemplated by this Agreement shall be subject to the provisions
of a certain letter agreement between BPP and HPBA, LLC and HPBA II, LLC,
affiliates of the Contributors, dated as of October 6, 1997, the effectiveness
of which shall survive the Closing.
9.13 Time of Essence. Time is of the essence with respect to the
December 31, 1997 outside date set for Closing.
9.14 Authorized Representatives. Any notice, election, consent or approval
on behalf of the Contributors or the Existing Partners shall be valid only if
given in writing pursuant to the notice provisions of Section 9.5 and only if
signed (a) in the case of any Contributor, by any one of Jeffrey Citrin, Ronald
J. Kravit, John S. Long, Steven A. Berlinger, Jack Mahoney or Mark Cassidy, (b)
in the case of Existing Partners BSMC or BSMC II, any one of Jeffrey Citrin or
Ronald J. Kravit, or (c) in the case of any other Existing Partner, any one of
John S. Long, Steven A. Berlinger, Jack Mahoney or Mark Cassidy ("Authorized
Representatives"). Any Contributor or Existing Partner may, by notice to the
Operating Partnership and BPP in accordance with Section 9.5, change its
Authorized Representatives (or add additional Authorized Representatives) at any
time (effective upon the receipt of such notice by the Operating Partnership).
EACH AUTHORIZED REPRESENTATIVE IS ALSO AUTHORIZED TO INITIAL SECTION 6.3 HEREOF
ON BEHALF OF ALL OF THE CONTRIBUTORS AND THE EXISTING PARTNERS.
9.15 Conflict. In the event of any conflict between the provisions of this
Agreement and those of the Operating Partnership Agreement, the provisions of
this Agreement shall control.
9.16 Applicable Contribution Agreement. This Agreement shall be deemed to
constitute both an "Applicable Contribution Agreement" and a "Contribution
Agreement," as such terms are defined in the Operating Partnership Agreement.
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9.17 Schedules. Any matter set forth on any Exhibit or Schedule to this
Agreement shall be deemed to refer to all other Exhibits and Schedules to which
such matter logically relates and where such reference would be appropriate and
can reasonably be inferred from the matters disclosed on the first Exhibit or
Schedule as if set forth on such other Exhibit or Schedule.
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]
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IN WITNESS WHEREOF, the parties hereto have executed this Contribution
Agreement as an instrument under seal as of the date and year first above
written.
BPP:
BURNHAM PACIFIC PROPERTIES, INC.
By: /s/ J. David Martin
----------------------------------------
Name: J. David Martin
Title: CEO
Burnham Pacific Operating Partnership, L.P.
By: Burnham Pacific Properties, Inc., its
general partner
By: /s/ J. David Martin
----------------------------------------
Name: J. David Martin
Title: CEO
<PAGE>
CONTRIBUTORS:
HPBA - Benicia Associates, L.L.C.,
HPBA - Madera Associates, L.L.C.,
HPBA - Castro Associates, L.L.C.,
HPBA - Redondo Beach Associates, L.L.C.,
HPBA - Suisun Associates, L.L.C.,
HPBA - Durate Associates, L.L.C.,
HPBA - Sacramento Associates, L.L.C.,
HPBA - Westminster Associates, L.L.C.,
Delaware limited liability companies
By: HPBA, LLC, a Delaware limited liability
company, Managing Member
By: GSF Associates, L.L.C., a Delaware
limited liability company, Manager
Member
By: MJL Associates, a California
Limited Partnership, Managing
Member
By: MJL Investments, Inc., a
California corporation,
General Partner
By: /s/ John S. Long
------------------------------------------
Name: John S. Long
Title: President
<PAGE>
HPBA II - AC Sacramento Associates, L.L.C.,
HPBA II - Bell Gardens Associates, L.L.C.,
HPBA II - Bellflower Associates, L.L.C.,
HPBA II - Fremont Associates, L.L.C.,
HPBA II - Menifee Associates, L.L.C.,
HPBA II - Placerville Associates, L.L.C.,
HPBA II - San Jose Associates, L.L.C.,
HPBA II - San Marcos Associates, L.L.C.,
HPBA II - Santa Rosa Associates, L.L.C.,
HPBA II - Shasta Associates, L.L.C.,
HPBA II - SHP Sacramento Associates, L.L.C.,
HPBA II - Vacaville Associates, L.L.C.,
Delaware limited liability companies
By: HPBA II, LLC, a Delaware limited
liability company, Managing Member
By: GSF II Associates, L.L.C., a
Delaware limited liability company,
Managing Member
By: MJL Associates, a California
Limited Partnership, Managing
Member
By: MJL Investments, Inc., a
California corporation,
General Partner
By: /s/ John S. Long
-------------------------------------
Name: John. S. Long
Title: President
EXISTING PARTNERS:
MJL Associates, a California Limited
Partnership
By: MJL Investments, Inc., a California
corporation, General Partner
By: /s/ John S. Long
-------------------------------------
Name: John S. Long
Title: President
<PAGE>
BLACKACRE SMC HOLDINGS, L.P.,
By: Blackacre Capital Group, L.P.,
its general partner
By: Blackacre Capital Management Corp.,
its general partner
By: /s/ Ronald J. Kravit
--------------------------------
Name: Ronald J. Kravit
Title:
BLACKACRE SMC II HOLDINGS LLC
By: Blackacre Capital Group, L.P.,
its managing member
By: Blackacre Capital Management Corp.,
its managing member
By: /s/ Ronald J. Kravit
--------------------------------
Name: Ronald J. Kravit
Title:
/s/ Eugene S. Rosenfeld
---------------------------------------------
Eugene S. Rosenfeld
/s/ Steven A. Berlinger
---------------------------------------------
Steven A. Berlinger
/s/ Jack L. Mahoney
---------------------------------------------
Jack L. Mahoney
/s/ Mark H. Cassidy
---------------------------------------------
Mark H. Cassidy
SAB ASSOCIATES, A CALIFORNIA LIMITED
PARTNERSHIP
By: SAB Investments, Inc.
as General Partner
By: /s/ Steven A. Berlinger
---------------------------
Steven A. Berlinger
President
<PAGE>
EXHIBIT 23.1
INDEPENDENT AUDITORS' CONSENT
We consent to the incorporation by reference in Registration Statement Nos.
333-10559 on Form S-8 and 33-56555 and 333-31591 on Form S-3 of Burnham Pacific
Properties, Inc. of our report dated November 14, 1997, with respect to the
Combined Statement of Revenues and Certain Expenses of the Golden State
Properties Portfolio included in this Current Report on Form 8-K of Burnham
Pacific Properties, Inc. dated December 15, 1997.
/s/ Ernst & Young LLP
Newport Beach, California
December 15, 1997
<PAGE>
EXHIBIT 23.2
INDEPENDENT AUDITORS' CONSENT
We consent to the incorporation by reference in Registration Statement Nos.
333-10559 on Form S-8 and 33-56555 and 333-31591 on Form S-3 of Burnham Pacific
Properties, Inc. of our report dated October 10, 1997 on the Powell Portfolio
Historical Statements of Revenues and Direct Operating Expenses for the years
ended December 31, 1996, 1995 and 1994; our report dated December 11, 1997 on
the Mountaingate Plaza Historical Statements of Revenues and Direct Operating
Expenses for the years ended December 31, 1996, 1995 and 1994; our report dated
December 12, 1997 on the Simi Valley Plaza Historical Statement of Revenues and
Direct Operating Expenses for the year ended December 31, 1996; and our report
dated December 12, 1997 on the Meridian Village Shopping Center Historical
Statement of Revenues and Direct Operating Expenses for the year ended December
31, 1996, included in this Form 8-K of Burnham Pacific Properties, Inc.
/s/ Deloitte & Touche LLP
San Diego, California
December 15, 1997
