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AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON JANUARY 23, 1997
REGISTRATION NO. 33-68712
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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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POST-EFFECTIVE AMENDMENT NO. 1
TO
FORM S-3
REGISTRATION STATEMENT
UNDER THE SECURITIES ACT OF 1933
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BURNHAM PACIFIC PROPERTIES, INC.
(Exact Name of Registrant as Specified in its Charter)
<TABLE>
<S> <C>
CALIFORNIA 33-0204162
(State or other jurisdiction of (I.R.S. Employer Identification
incorporation or organization) Number)
</TABLE>
610 WEST ASH STREET
SUITE 1600
SAN DIEGO, CALIFORNIA 92101
(619) 652-4700
(Address, including zip code, and telephone
number, including area code, of registrant's
principal executive offices)
DANIEL B. PLATT
610 West Ash Street
Suite 1600
San Diego, California 92101
(619) 652-4700
(Name, address, including zip code, and
and telephone, including area code of
agent for service)
COPY TO:
WILLIAM B. KING, P.C.
Goodwin, Procter & Hoar LLP
Exchange Place
Boston, MA 02109
(617) 570-1000
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PROSPECTUS
BURNHAM PACIFIC PROPERTIES, INC.
SHARES OF COMMON STOCK
AND/OR
CONVERTIBLE DEBENTURES
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Any combination of shares of Common Stock, without par value (the "Shares"),
and/or Convertible Debentures, issuable in series (the "Debentures"), valued in
the aggregate at a maximum of $200,000,000, are being offered from time to time
(the "Offerings(s)") by Burnham Pacific Properties, Inc., (the "Corporation") a
California corporation. The Corporation is a real estate investment trust under
the Internal Revenue Code of 1986, as amended (the "Code"). The Shares and
Debentures are hereinafter collectively referred to as the "Securities." When a
particular Offering of the Securities is proposed, a supplement to this
Prospectus (the "Prospectus Supplement") will be delivered with this Prospectus
setting forth: the type and amount of Securities offered; the purchase price and
other terms of the offering; and any listing on a securities exchange; and, if
Debentures are offered, the rate and time of payment of interest; the maturity
or maturities; the initial price and date after which such Debentures may be
converted into Common Stock; the terms for a sinking, purchase or analogous
fund, if any; and the terms for redemption or early payment.
The Securities may be sold: (i) through underwriting syndicates represented
by one or more managing underwriters, or by one or more underwriters without a
syndicate; (ii) through agents designated from time to time; and (iii) directly
to institutional investors. The names of any underwriters or agents of the
Corporation involved in the sale of the Securities in which this Prospectus is
being delivered and any applicable commissions or discounts will be set forth in
the Prospectus Supplement. The net proceeds to the Corporation from such sale
also will be set forth in the Prospectus Supplement.
The Corporation's shares of Common Stock are traded on the New York Stock
Exchange under the symbol "BPP." On January 22, 1997, the closing sale price of
such shares on the New York Stock Exchange was $14 5/8 per share.
The Debentures will be unsecured general obligations of the Corporation
issuable in one or more series and will be subordinated to all existing and
future Senior Indebtedness (as defined herein) of the Corporation. The indenture
under which the Debentures will be issued does not restrict the amount of Senior
Indebtedness or other indebtedness that may be incurred by the Corporation. As
of December 31, 1996, the Corporation had approximately $179,000,000 of Senior
Indebtedness.
There is currently no market for the Debentures.
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No offers or sales will be made except through a Supplement Prospectus.
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THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES
COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY OF
THIS PROSPECTUS. ANY REPRESENTATION TO THE
CONTRARY IS A CRIMINAL OFFENSE.
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The date of this Prospectus is January 23, 1997.
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AVAILABLE INFORMATION
No person has been authorized to give any information or to make any
representation not contained or incorporated by reference in this Prospectus or
any accompanying Prospectus Supplement and, if given or made, such information
or representation must not be relied upon as having been authorized by the
Corporation or any underwriter, dealer or agent. Neither the delivery of this
Prospectus or any accompanying Prospectus Supplement nor any sale made hereunder
or thereunder shall, under any circumstances, create an implication that the
information contained herein or in the accompanying Prospectus Supplement is
correct as of any date subsequent to the date hereof or thereof or that there
has been no change in the affairs of the Corporation since the date hereof or
thereof. Neither this Prospectus nor any accompanying Prospectus Supplement
constitutes an offer to sell or a solicitation of an offer to buy Securities in
any jurisdiction in which such offer or solicitation is not authorized or in
which the person making such offer or solicitation is not qualified to do so or
to any person to whom it is unlawful to make such offer or solicitation.
The Corporation is subject to the informational requirements of the
Securities Exchange Act of 1934, as amended (the "1934 Act"), and in accordance
therewith files periodic and current reports and other information with the
Securities and Exchange Commission (the "Commission"). Information concerning
the directors and officers, their remuneration and any material interest of such
persons in transactions with the Corporation, as of particular dates, is
disclosed in proxy statements distributed to shareholders of the Corporation and
filed with the Commission. Copies of such material can be obtained by mail from
the Public Reference Section of the Commission at 450 Fifth Street, N.W.,
Washington, D.C. 20549 at prescribed rates. Such reports, proxy statements and
other information can also be inspected and copied at the public reference
facilities maintained by the Commission at Room 1024, 450 Fifth Street N.W.,
Washington, D.C. 20549, and at the Commission's Regional Offices located at 500
West Madison Street (Suite 1400), Chicago, Illinois 60661 and at 7 World Trade
Center, 13th Floor, New York, New York 10048 and at the offices of the New York
Stock Exchange, Inc., 20 Broad Street, New York, New York 10005. The Commission
also maintains a Web site that contains reports, proxy statements and other
information about the Corporation filed electronically with the Commission:
http://www.sec.gov.
The Corporation furnishes to its securities holders annual reports
containing audited financial statements and interim reports containing unaudited
financial statements.
The Corporation has filed with the Commission a Registration Statement on
Form S-3 (together with all amendments and exhibits thereto, the "Registration
Statement") under the Securities Act. This Prospectus does not contain all the
information set forth in the Registration Statement, certain parts of which are
omitted in accordance with the rules and regulations of the Commission. For
further information, reference is made to the Registration Statement, copies of
which may be obtained upon payment of a fee prescribed by the Commission, or may
be examined free of charge at the principal office of the Commission in
Washington, D.C.
Statements made in this Prospectus as to the contents of any contract or
other document referred to are not necessarily complete, and reference is made
to the copy of such contract or other document filed as an exhibit to the
Registration Statement, each such statement being qualified in all respects by
such reference.
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
The Corporation hereby incorporates by reference its Annual Report on Form
10-K for the year ended December 31, 1995 and its Quarterly Reports on Form 10-Q
for the fiscal quarters ended March 31, 1996, June 30, 1996 and September 30,
1996.
All documents subsequently filed by the Corporation pursuant to Sections
13(a), 13(c), 14 or 15(d) of the 1934 Act after the date of this Prospectus and
prior to the termination of the offering of the Shares or
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Debentures shall be deemed to be incorporated by reference in this Prospectus
and to be a part thereof from the date of the filing of such documents. Any
statement contained in a document incorporated by reference shall be deemed to
be modified or superseded for purposes of this Prospectus to the extent that a
statement contained herein or in any other subsequently filed incorporated
document or in an accompanying Prospectus Supplement modifies or supersedes such
statement. Any such statement so modified or superseded shall not be deemed,
except as so modified or superseded, to constitute a part of this Prospectus.
UPON WRITTEN OR ORAL REQUEST OF ANY PERSON TO WHOM A PROSPECTUS IS
DELIVERED, THE CORPORATION WILL PROVIDE, WITHOUT CHARGE, A COPY OF THE DOCUMENTS
WHICH HAVE BEEN INCORPORATED BY REFERENCE IN THIS PROSPECTUS. REQUESTS FOR SUCH
DOCUMENTS SHOULD BE DIRECTED TO NINA GALLOWAY, VICE PRESIDENT AND SECRETARY,
BURNHAM PACIFIC PROPERTIES, INC., 610 WEST ASH STREET, SUITE 1600, SAN DIEGO,
CALIFORNIA 92101, (619) 652-4725.
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THE CORPORATION
Burnham Pacific Properties, Inc. (the "Corporation") is a real estate
investment trust ("REIT") that acquires, develops, and operates primarily retail
shopping centers in California. The Corporation's strategic focus is to invest
in shopping centers and other retail or entertainment centers in California and
the Pacific Northwest, taking advantage of the region's growth prospects
resulting from its Pacific Rim location, quality of life, diversified business
base, and well-educated employee base. The Corporation's operating philosophy is
to enhance the performance and value of its portfolio through renovation,
expansion, and leasing strategies designed to meet the needs of an evolving
retail marketplace. The Corporation also seeks to create value through the
acquisition of properties which can benefit from the Corporation's expertise in
shopping center management, renovation and expansion, as well as the development
of new properties.
At December 31, 1996, the Corporation owned interests in 21 retail centers,
all located in California, 16 of which were fully operating, one of which was
operating but undergoing renovation and expansion, and four of which were in
various stages of development by the Corporation or an affiliate. The
Corporation also owned four industrial and office properties in Southern
California, which are considered non-strategic. The Corporation intends to
dispose of the non-strategic properties in the future as market conditions
permit. The properties owned by the Corporation from time to time are sometimes
referred to herein as the "Properties."
The Corporation was formed in 1987 as the successor to a publicly-traded
real estate limited partnership which was organized in 1963.
Reference is made to the applicable Prospectus Supplement accompanying this
Prospectus for additional information concerning the Corporation as of the date
of such Prospectus Supplement.
The Corporation is organized under the laws of the State of California. Its
principal executive Office is located at 610 West Ash Street, Suite 1600, San
Diego, California, 92101, telephone (619) 652-4700.
RATIO OF EARNINGS TO FIXED CHARGES
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31, NINE MONTHS ENDED
----------------------------------------------------- SEPTEMBER 30,
1991 1992 1993 1994 1995 1996
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(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C>
Ratio of earnings to fixed charges........................ 1.24 1.09 1.94 2.13 -- 1.78
Deficiency in the coverage of fixed charges by earnings
before fixed charges..................................... -- -- -- -- $ 15,048 --
</TABLE>
The ratio of earnings to fixed charges equals earnings before fixed charges
divided by fixed charges. For purposes of calculating the ratio of earnings to
fixed charges, earnings before fixed charges consist of income from operations
plus fixed charges. Fixed charges consist of interest expense and capitalized
interest.
Exclusive of the impairments/writedowns of assets, the ratio of earnings to
fixed charges for the year ended December 31, 1995, would have been 1.61.
USE OF PROCEEDS
Unless otherwise described in the applicable Prospectus Supplement, the
Corporation intends to use the net proceeds from the sale of Securities
primarily to repay indebtedness, to acquire additional shopping centers or other
retail or entertainment facilities and to fund the development, expansion and/or
improvement of new or existing shopping centers or other retail or entertainment
centers already owned by the Corporation.
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The Corporation continually evaluates prospective acquisitions of additional
individual properties and portfolios of shopping centers or other retail or
entertainment centers, which the Corporation believes can be purchased at
attractive initial yields and/or which demonstrate the potential for revenue and
cash flow growth through implementation of renovation, expansion, re-tenanting
and re-leasing programs similar to those that the Corporation has undertaken
with respect to retail properties in its existing portfolio.
The Corporation has a revolving line of credit which it may draw on for
acquisitions as well as for other general corporate purposes including
renovations and expansions of existing properties and the development of new
properties. It is the Corporation's expectation that net proceeds from the sale
of the Securities will be used to make further acquisitions and also to repay
such bank borrowings and other outstanding debt from time to time.
Acquisitions or development of additional properties are approved only after
a detailed analysis by the Corporation's management of the effect of the
acquisition (and of any contemplated development, expansion or renovation and
related re-tenanting and re-leasing program with respect to the acquired
properties) on the Corporation as a whole, and with the objective that the
acquisition of the particular shopping centers ultimately be accretive, rather
than dilutive, to outstanding shares of Common Stock (i.e., that anticipated per
share funds from operations of the Corporation will increase following the
acquisition and development and redevelopment and related lease-up of the
properties and after giving effect to the cost to the Corporation of the
additional capital used to make such acquisition). No assurance can be made that
each acquisition or development will in fact be accretive, or may not become so
only after an initially dilutive period following the acquisition and completion
of any development or renovation activities.
Pending their use as described above, the net proceeds from the sale of any
Securities may be used for other general corporate purposes of the Corporation
or invested in short-term securities.
RISK FACTORS
Prospective investors should carefully consider the following information in
conjunction with the other information contained in this Prospectus and the
applicable Prospectus Supplement before purchasing any Securities.
GENERAL REAL ESTATE INVESTMENT RISKS
Real property investments are subject to a variety of risks. The yields
available from equity investments in real estate depend on the amount of income
generated and expenses incurred. If the Properties do not generate sufficient
income to meet operating expenses, including debt service and capital
expenditures, the Corporation's cash flow and ability to make distributions to
its shareholders will be adversely affected. The performance of the economy in
each of the areas in which the Corporation's properties are located affects
occupancy, market rental rates and expenses and, consequently, has an impact on
the income from the properties and their underlying values. The financial
results of major local employers may have an impact on the cash flow and value
of certain of the properties.
Income from the Corporation's Properties may be further adversely affected
by, among other things, the general economic climate, local economic conditions
in which the Properties are located, such as oversupply of space or a reduction
in demand for rental space, the attractiveness of the Properties to tenants,
competition from other available space, the ability of the Corporation to
provide for adequate maintenance and insurance and increased operating expenses.
There is also the risk that as leases on the Properties expire, tenants will
enter into new leases on terms that are less favorable to the Corporation.
Income and real estate values may also be adversely affected by such factors as
applicable laws (e.g., the Americans With Disabilities Act of 1990 and tax
laws), interest rate levels and the availability and terms of financing. In
addition, real estate investments are relatively illiquid and, therefore, will
tend to limit the ability of the Corporation to vary its portfolio promptly in
response to change in economic or other conditions.
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Most of the leases of the Corporation's retail Properties, as is common with
many multi-tenant shopping centers, provide for tenants to reimburse the
Corporation for a portion (frequently based upon the portion of total retail
space in the Property that is occupied by the tenant) of the common area
maintenance ("CAM") expenses of the Property. To the extent that a Property has
vacant rentable space, not only will the Corporation be deprived of the base
rent that it would receive if the vacant space were occupied, but the
Corporation itself will have to bear the unreimbursed CAM expense applicable to
such vacant space.
COMPETITION
Numerous retail properties compete with the Corporation's Properties in
attracting tenants to lease space. Some of these competing properties are newer
and better located or designed and may offer lower expenses or be better
capitalized than the Corporation's Properties. The number of competitive
commercial properties in a particular area could have a material effect on the
Corporation's ability to lease space in its Properties or at newly developed or
acquired properties and on the rents charged.
Additionally, the Corporation may be competing for investment opportunities
with entities that have substantially greater financial resources than the
Corporation. These entities may generally be able to accept more risk that the
Corporation can prudently manage, including risks with respect to the geographic
proximity of its investments. Competition may generally reduce the number of
suitable investment opportunities offered to the Corporation and increase the
bargaining power of property owners seeking to sell.
INVESTMENT IN SINGLE INDUSTRY
The Corporation's current strategy is to acquire interests only in retail
shopping centers and related properties. As a result, the Corporation will be
subject to risks inherent in investments in a single industry. The effects on
cash available for distribution to the Corporation's shareholders resulting from
a downturn in the retail industry might be more pronounced than if the
Corporation's portfolio were more diversified as to property types.
Among the risks that the Corporation as an owner of Properties leased
primarily to retail tenants may face are the volatile nature of the retail
business and changes in consumer preferences, which may result in tenant
failures or changes in the physical requirements of retailers that the owner may
be required to accommodate in order to retain or attract tenants. Retail chains
may overexpand in the same general market area, thereby creating competition
with their own stores that may be in one or more of the Corporation's
Properties. Because many anchor tenants frequently have negotiating power to
demand the exclusive or sole right to sell certain types of products in a
shopping center, the existence of such rights may adversely limit the owner's
ability to lease space in the center to retailers of potentially competing
products. The foregoing and similar factors may effect the profitability and
cash flow, and resulting value, of the Corporation's Properties.
GEOGRAPHIC CONCENTRATION
The Corporation's Properties are all located within the State of California,
and within such state primarily in the San Diego County, greater Los Angeles and
San Francisco Bay areas. The concentration of Properties subjects the
Corporation to the strengths or weaknesses of the California economy and these
local economies in a number of ways. The performance of the economy in each
locality affects occupancy, market rental rates and expenses and, consequently,
has an impact on the income from the Corporation's Properties and their
underlying values. The financial results of major local employers may have an
impact on the cash flow and value of certain of the Properties. A downturn in
the economy of California in general or of any of these local economies could
adversely affect the Corporation's income, cash flows and ability to pay
expected dividends.
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ACQUISITION AND DEVELOPMENT ACTIVITIES
The Corporation intends to acquire existing retail commercial properties to
the extent that they can be acquired on advantageous terms and meet the
Corporation's investment criteria. Acquisitions of retail commercial properties
entail general investment risks associated with any real estate investment,
including the risk that investments will fail to perform as expected or that
estimates of the cost of improvements to bring an acquired property up to
standards established for the intended market position may prove inaccurate.
The Corporation is pursuing certain commercial property development projects
and expects to develop other projects. Such projects generally require various
governmental and other approvals, the receipt of which cannot be assured.
Approvals frequently require undertakings for public infrastructure improvements
or other activities to mitigate the effects of the proposed development, whose
costs also cannot be assured. The Corporation's development activities will
entail a variety of other risks, including the risk that funds will be expended
and management time will be devoted to projects which may not come to fruition;
the risk that construction costs of a project may exceed original estimates,
possibly making the project uneconomic; the risk that occupancy rates and rents
at a completed project will be less than anticipated; and the risk that expenses
at a completed development will be higher than anticipated. These risks may
result in a reduction in the funds available for distribution.
DEBT FINANCING; RISK OF RISING INTEREST RATES
The Corporation will be subject to the risks normally associated with debt
financing, including the risk that the Corporation's cash flow will be
insufficient to meet required payments of principal and interest, the risk that
existing indebtedness on the Corporation's Properties cannot be refinanced or
that the terms of such refinancing will not be as favorable as the terms of
existing indebtedness.
ENVIRONMENTAL MATTERS
Under various federal, state and local laws, ordinances and regulations, an
owner or operator of real estate is liable for the costs of removal or
remediation of certain hazardous or toxic substances on or in such property.
Such laws often impose such liability without regard to whether the owner or
operator knew of, or was responsible for, the presence of such hazardous or
toxic substances. The presence of such substances, or the failure to properly
remediate such substances, may adversely affect the owner's or operator's
ability to sell or rent such property or to borrow using such property as
collateral. Certain environmental laws impose liability for release of
asbestos-containing materials into the air, and third parties may seek recovery
from owners or operators of real properties for personal injuries associated
with asbestos-containing materials. The Corporation may be potentially liable
for removal or remediation costs, as well as certain other costs, including
governmental fines and costs related to injuries to persons and property,
resulting from the environmental condition of its Properties, regardless of
whether the Corporation itself actually contributed to such condition.
INSURANCE COVERAGE LIMITATIONS
The Corporation carries comprehensive general liability coverage and
umbrella liability coverage on all of its Properties with limits of liability
which the Corporation deems adequate to insure against liability claims and
provide for the cost of defense. Similarly, the Corporation is insured against
the risk of direct physical damage in amounts the Corporation estimates to be
adequate to reimburse the Corporation on a replacement cost basis for costs
incurred to repair or rebuild each property, including loss of rental income
during the reconstruction period. Currently, the Corporation also insures
certain of its Properties for loss caused by earthquake in the aggregate amount
of $23 million. Because of the high cost of this type of insurance coverage and
the wide fluctuations in price and availability, the Corporation has made the
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determination that the risk of loss due to earthquake and flood does not justify
the cost to increase coverage limits any further under current market
conditions.
CONSEQUENCES OF FAILURE TO QUALIFY AS A REIT
The Company has operated so as to qualify as a REIT under the Internal
Revenue Code of 1986, as amended (the "Code"). Although the Corporation believes
that it has operated in a manner which satisfies the REIT qualification
requirements since 1987, no assurance can be given that the Corporation's
qualification as a REIT may not be challenged by the Internal Revenue Service
for taxable years still subject to audit or that the Corporation will continue
to qualify as a REIT in future years. A REIT generally is not taxed on income so
long as it distributes to its shareholders at least 95% of its taxable income
currently. Qualification as a REIT involves the satisfaction of numerous
requirements (some on an annual or quarterly basis) established under highly
technical and complex Code provisions for which there are only limited judicial
or administrative interpretations and involves the determination of various
factual matters and circumstances not entirely within the Corporation's control.
In the event the Corporation loses its qualification as a REIT for a year,
unless entitled to relief under certain statutory provisions, the Corporation
would also be disqualified from treatment as a REIT for the four taxable years
following the year during which qualification is lost. This treatment would
reduce the net earnings of the Corporation available for investment or
distribution to shareholders because of the additional tax liability of the
Corporation for the years involved. In addition, distributions would no longer
be required to be made. See "Federal Income Tax Considerations."
AUTHORITY TO ISSUE PREFERRED STOCK
The Articles of Incorporation authorize the Board of Directors to issue up
to 5,000,000 shares of Preference Stock ("Preferred Stock") and to establish the
preferences and rights of any shares issued. See "Description of Common Stock."
The issuance of Preferred Stock would likely result in the holders of the
Preferred Stock being entitled to priority in distributions, thereby potentially
reducing cash available for distribution to holders of Common Stock, and upon
the liquidation of the Corporation. In addition, the issuance of Preferred Stock
could involve the creation of voting rights for the holders of Preferred Stock
that might result in their voting as a class with the holders of Common Stock or
as a separate class on certain matters, including the election of one or more
Directors of the Corporation. No Shares of Preferred Stock are currently issued
or outstanding.
EFFECT OF VARIOUS MARKET FACTORS ON PRICE OF COMMON STOCK
A variety of factors may influence the price of the Corporation's Common
Stock in public trading markets. The Corporation believes that investors
generally perceive REITs as yield-driven investments and compare the annual
yield from distributions by REITs with yields on various other types of
financial instruments. Thus an increase in market interest rates generally that
result in higher yields on various other financial instruments could adversely
affect the market price of the Corporation's Common Stock. Similarly, to the
extent that the investing public has a negative perception of companies in the
retail business or REITs that own and operate shopping centers and other
properties catering to retail tenants, the value of the Corporation's Common
Stock may be negatively impacted in comparison to shares of other REITs owning
other types of properties and catering to different types of tenants.
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DESCRIPTION OF COMMON STOCK
The Corporation is authorized to issue 40,000,000 shares of Common Stock
("Common Stock") and 5,000,000 shares of Preferred Stock, each without stated
par value. The shareholders are authorized to vote on all matters entitled to be
voted upon by shareholders as provided in the California Corporations Code. At
each election of Directors, each holder of Common Stock is entitled to vote the
number of shares of Common Stock held by the shareholder for as many persons as
there are Directors to be elected by vote of the holders of Common Stock, or to
cumulate the shareholder's votes by giving one candidate as many votes as equal
the number of shares of Common Stock held by the shareholder multiplied by the
number of Directors to be elected by such holders, or by distributing such votes
on the same principle among any number of such candidates. Holders of Common
Stock do not have the right to vote on the acquisition or sale of any of the
Corporation's investments (other than upon the dissolution of the Corporation or
other disposition of substantially all of the Corporation's assets) or on the
issuance of additional shares of authorized Common Stock or Preferred Stock.
Subject to any prior rights of any Preferred Stock, each outstanding share
of Common Stock has equal dividend and liquidation rights with every other
outstanding share of Common Stock. Shares of Common Stock are non-assessable and
have no preference, conversion, exchange or preemptive rights. Shareholders have
no liability for the acts or obligations of the Corporation. The shares of
Common Stock are transferable on the books or records of the Corporation in the
same manner as shares of Common Stock of any other California corporation. The
Corporation's shares of Common Stock are listed for trading on the New York
Stock Exchange. Any shares of Common Stock offered hereby will also be listed on
the New York Stock Exchange subject to official notice of issuance thereof.
REDEMPTION AND RESTRICTION ON TRANSFER OF SHARES. Under the provisions of
the Code, one of the requirements for qualification as a REIT is that at no time
during the second half of any taxable year may five or fewer individuals own,
directly or indirectly, more than 50% in value of the outstanding shares of
stock of the REIT.
In order that the Corporation may meet this requirement at all times, its
Bylaws provide that no person shall at any time directly or indirectly acquire
ownership of more than 9.8% of the outstanding shares of Common Stock of the
Corporation. Shares owned by persons in excess of that amount are deemed "Excess
Shares." For purposes of determining indirect ownership, the constructive
ownership provisions applicable under Section 544(a) of the Code attribute
ownership of stock owned by a corporation, partnership, estate or trust
proportionately to its shareholders, partners or beneficiaries, attribute
ownership of stock owned by family members to other members of the same family,
treat stock for which a person has an option as actually owned by that person,
and set forth rules as to when stock constructively owned by a person is
considered to be actually owned by such person. Accordingly, shares of Common
Stock owned by a person who actually owns less than 9.8% of those outstanding
may nevertheless be Excess Shares where one or more of the foregoing
relationships exists.
The Bylaws provide that the Corporation may redeem any shares that are
Excess Shares. From the date of notice of redemption, the shares called for
redemption shall cease to be outstanding. The holder shall not be entitled to
dividends, voting rights or other benefits except the right to payment by the
Corporation of the redemption price. The redemption price will be the average
closing sales price as reported by a national securities exchange during the
30-day period ending on the business day prior to the redemption date or, if
there have been no closing sales, the bid and asked prices, as determined by the
Directors. The Bylaws further provide that unless the Directors determine that
it is in the interest of the Corporation to make earlier payment, the redemption
price shall be payable only upon liquidation of the Corporation. The payment
shall not exceed the amount which is the sum of the per-share distributions
designated as (i) liquidating distributions, and (ii) return of capital
distributions declared with respect to unredeemed shares subsequent to the
redemption date (i.e., the amount per share that a shareholder whose shares are
not redeemed would receive upon liquidation of the Corporation). However, if the
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person from whom the Excess Shares were redeemed sells a like number of shares
within 30 days of the redemption date, the Corporation shall rescind the
redemption of the Excess Shares unless counsel to the Corporation is of the
opinion that such rescission would jeopardize the Corporation's tax status as a
REIT. In that event, in lieu of rescission, the Corporation shall make immediate
payment for the shares.
The Bylaws authorize the Corporation to refuse to effect the transfer of any
shares which would result in a person holding Excess Shares, and also provide
that any purported acquisition of shares that would result in the
disqualification of the Corporation as a REIT shall be null and void.
The Bylaws provide that the foregoing provision shall not apply to
acquisition of shares pursuant to a cash tender offer made for all outstanding
shares of the Corporation if two-thirds of the outstanding shares not owned by
the tender offeror and its associates are tendered pursuant to the offer. Such
provisions also do not apply to the acquisition of shares by an underwriter in a
public offering or to any transaction involving the issuance of shares by the
Corporation when its Board of Directors determines that its qualification as a
REIT would not be jeopardized.
The Bylaws also grant the Board of Directors the authority to cause the
Corporation, from time to time, to repurchase its shares.
TRANSFER AGENT AND REGISTRAR. The transfer agent and registrar for the
shares of Common Stock is First Chicago Trust Company of New York.
PREFERRED STOCK. The Board of Directors of the Corporation has authority to
issue up to 5,000,000 shares of Preferred Stock, which may be issued in one or
more series with such rights, preferences, privileges and restrictions as are
designated and established by the Board. No shares of Preferred Stock are
outstanding and the Board of Directors has not established any series of
Preferred Stock. The terms of any series of Preferred Stock established
subsequent to the date of this Prospectus will be disclosed in an amendment
hereto or in a Prospectus Supplement appended hereto.
DESCRIPTION OF DEBENTURES
The Debentures will be issued in one or more series under an Indenture which
may be supplemented by supplemental indentures (the "Indenture") between the
Corporation and Fleet Bank of Massachusetts, N.A., as Trustee or other Trustee
named in an applicable Prospective Supplement (the "Trustee"). The terms of the
Debentures include those stated in the Indenture and those made part of the
Indenture (before any supplements) by reference to the Trust Indenture Act of
1939, as amended (the "Act"). A copy of the form of the Indenture is filed as an
exhibit to the Registration Statement and is incorporated herein by reference.
The following is a summary of the Indenture, does not purport to the complete,
and is qualified in its entirety by reference to the detailed provisions of the
Indenture, including the definitions of certain terms. Parentical references to
Sections are references to the corresponding section of the Indenture unless
otherwise indicated.
GENERAL. The Indenture does not limit the aggregate principal amount of
Debentures that may be issued thereunder and provides that Debentures may be
issued from time to time in one or more series. The Debentures will be unsecured
general obligations of the Corporation which may be convertible into shares of
Common Stock of the Corporation. Debentures of any series will bear interest
from the date of delivery at the rate shown on the cover page of the applicable
Prospectus Supplement. Principal (and premium, if any) and interest will be
payable, the Debentures will be convertible and exchangeable, and transfers will
be registrable, at the office or agency of the Corporation maintained for such
purposes, initially at the offices of the Trustee. The Corporation may pay
principal and interest by check and may mail an interest check to the address of
the person entitled thereto as it appears in the Debenture Register (Paragraph 2
of the Debenture).
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The Debentures will be issued only in fully registered form in denominations
of $1,000 principal amount or any integral multiple thereof (Section 2.03). The
Debentures are exchangeable and transfers thereof will be registrable without
charge therefor except that, the Corporation may require payment of a sum
sufficient to cover any tax or other governmental charge payable in connection
therewith (Section 2.06).
CONVERSION RIGHTS. Any portion of the principal amount of any Debentures of
any series which is $1,000 or an integral multiple thereof will be convertible
into shares of Common Stock of the Corporation at any time prior to redemption
or maturity, following the date set forth in the applicable Prospectus
Supplement. The conversion price will be set forth on the cover of the
applicable Prospectus Supplement (subject to adjustments as described below),
except that the right to convert Debentures of a series called for redemption
will terminate at the close of business on the specific redemption date and will
be lost if not exercised prior to that time (Section 10.01).
To protect the Corporation's status as a REIT, a Holder may not convert any
Debenture, if as a result of such conversion any Person would then be deemed to
beneficially own 9.8% or more in value of the Corporation's shares (Paragraph 7
of the Debenture).
The conversion price will be subject to adjustment under certain conditions,
including (i) the payment of dividends (and other distributions) in shares of
Common Stock on any class of shares of capital stock of the Corporation; (ii)
subdivisions, combinations and reclassifications of shares of Common Stock;
(iii) the issuance to all or substantially all holders of shares of Common Stock
of rights or warrants entitling them to subscribe for or purchase shares of
Common Stock at a price per share (or having a conversion price per share) at
less than the current market price; as defined (but shares of Common Stock
issued under the Corporation's dividend reinvestment plan or stock option plan
will not be deemed to be issued pursuant to rights or warrants for this
purpose); and (iv) distributions to all or substantially all holders of shares
of Common Stock of any other class, or evidences of indebtedness or assets
(including securities, but excluding those rights, warrants, dividends and
distributions referred to above and dividends and distributions not prohibited
under the terms of the Indenture including purchase rights under the dividend
reinvestment plan) of the Corporation; subject to the limitation that all
adjustments by reason of any of the foregoing would not be made until they
result in a cumulative change in the conversion price of at least 1%. In the
event the Corporation shall effect any capital reorganization or
reclassification of its shares of Common Stock or shall consolidate or merge
with or into any trust or corporation (other than a consolidation or merger in
which the Corporation is the surviving entity) or shall sell or transfer
substantially all its assets, the Holders of any series of the Debentures shall,
if entitled to convert such Debentures at any time after such transaction,
receive upon conversion thereof, in lieu of each share of Common Stock into
which the Debentures would have been convertible prior to such transaction, the
same kind and amount of stock and other securities, cash or property as shall
have been issuable or distributable in connection with such transaction with
respect to each share of Common Stock (Sections 10.04 and 10.10).
A conversion price adjustment made according to the provisions of the
Debentures of any series (or the absence of provision for such an adjustment)
might result in a constructive distribution to the Holders of Debentures of such
series or shares of Common Stock that would be subject to taxation as a
dividend. The Corporation may, at its option, make such reductions in the
conversion price, in addition to those set forth above, as the Board of
Directors deems advisable to avoid or diminish any income tax to holders of
shares of Common Stock resulting from any dividend or distribution of shares of
Common Stock (or rights to acquire shares of Common Stock) or from any event
treated as such for income tax purposes or for any other reason. The Board will
have the power to resolve any ambiguity or correct any error in the provision
relating to the adjustment of the conversion price of the Debentures of such
series. Its actions shall be final and conclusive (Section 10.04).
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Fractional shares will not be issued upon conversion, but, in lieu thereof,
the Corporation will pay a cash adjustment based upon market price (Section
10.08).
The Holders of Debentures at the close of business on an interest payment
record date shall be entitled to receive the interest payable on such Debentures
on the corresponding interest payment date notwithstanding the conversion
thereof. However, Debentures surrendered for conversion during the period from
the close of business on any record date to the opening of business on the
corresponding interest payment date must be accompanied by payment of an amount
equal to the interest payable on such interest payment date. Holders of
Debentures who convert Debentures on an interest payment date will receive the
interest payable on such date and need not include payment of such interest upon
surrender of the Debentures for conversion. Except as aforesaid, no payment or
adjustment is to be made on conversion for interest accrued on the Debentures or
for dividends on shares of Common Stock (Section 10.03).
SUBORDINATION OF DEBENTURES. The indebtedness evidenced by the Debentures
of any series will be subordinated and junior in rights of payment to the extent
set forth in the Indenture to the prior payment in full of amounts then due on
all Senior Indebtedness (as defined). No payment shall be made by the
Corporation on account of principal of (or premium, if any) or interest on the
Debentures of any series or on account of the purchase or other acquisition of
Debentures of any series, if there shall have occurred and be continuing a
default with respect to any Senior Indebtedness permitting the holders to
accelerate the maturity thereof or with respect to the payment of any Senior
Indebtedness, and such default shall be the subject of a judicial proceeding or
the Corporation shall have received notice of such default from any holder of
Senior Indebtedness, unless and until such default or event of default shall
have been cured or waived or shall have ceased to exist. By reason of these
provisions, in the event of default on any Senior Indebtedness, whether now
outstanding or hereafter issued, payments of principal of (and premium if any)
and interest on the Debentures of any series may not be permitted to be made
until such Senior Indebtedness is paid in full, or the event of default on such
Senior Indebtedness is cured or waived (Section 11.02).
Upon any acceleration of the principal of the Debentures or any distribution
of assets of the Corporation upon any receivership, dissolution, winding-up,
liquidation, reorganization, or similar proceedings of the Corporation, whether
voluntary or involuntary, or in bankruptcy or insolvency, all amounts due or to
become due upon all Senior Indebtedness must be paid in full before the Holders
of the Debentures of any series or the Trustee are entitled to receive or retain
any assets so distributed in respect of the Debentures (Section 11.02). By
reason of this provision, in the event of insolvency, Holders of the Debentures
of any series may recover less, ratably, than holders of Senior Indebtedness.
"Senior Indebtedness" is defined to mean the principal, premium, if any,
unpaid interest (including interest accruing on or after the filing of any
petition in bankruptcy or for reorganization relating to the Corporation whether
or not a claim for post-filing interest is allowed in such proceeding), fees,
charges, expenses, reimbursement and indemnification, obligations, and all other
amounts payable under or in respect of Indebtedness (as defined) of the
Corporation, whether any such Indebtedness exists as of the date of the
Indenture or is created, incurred, assumed or guaranteed after such date. Senior
Indebtedness includes, without limitation, indebtedness under the Corporation's
secured and unsecured bank lines the amount of which at the time of any Offering
of Securities hereunder will be described in the applicable Prospectus
Supplement. There is no limit on the amount of Senior Indebtedness that the
Corporation may incur (Section 11.01).
"Indebtedness" with respect to any Person is defined to mean:
(i) all indebtedness for money borrowed whether or not evidenced by a
promissory note, draft, or similar instrument;
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(ii) that portion of obligations with respect to leases that is
properly classified as a liability on a balance sheet in accordance with
generally accepted accounting principles;
(iii) notes payable and drafts accepted representing extensions of
credit;
(iv) any balance owed for all or any part of the deferred purchase
price of property or services which purchase price is due more than six
months from the date of incurrence of the obligation in respect thereof
(except any such balance that constitutes (a) a trade payable or an accrued
liability arising in the ordinary course of business or (b) a trade draft or
note payable issued in the ordinary course of business in connection with
the purchase of goods or services), if and to the extent such debt would
appear as a liability upon a balance sheet of such person prepared in
accordance with generally accepted accounting principles; and
(v) any deferral, amendment, renewal, extension, supplement or
refunding of any liability of the kind described in any of the preceding
clauses (i) through (iv);
PROVIDED, HOWEVER, that, in computing the "Indebtedness" of any Person, there
shall be excluded any particular indebtedness if, upon or prior to the maturity
thereof, there shall have been deposited with a depository in trust money (or
evidences of indebtedness if permitted by the instrument creating such
indebtedness in the necessary amount to pay, redeem or satisfy such indebtedness
as it becomes due, and the amount so deposited shall not be included in any
computation of the assets of such Person (Section 1.01).
OPTIONAL REDEMPTION. The Debentures of any series will be subject to
redemption, in whole or in part, or on any date subsequent to the date set forth
in the Prospectus Supplement at the option of the Corporation on at least 30
days' prior notice by mail at a redemption price equal to 100% (or such greater
price as is set forth in the Prospectus Supplement relating to such series of
Debentures) of the principal amount, plus interest accrued to the date of
redemption (Section 3.01). The Corporation may exercise its redemption powers
over a Holder's securities at anytime to the extent deemed sufficient by the
Corporation to prevent the Holder of such securities or any other person having
an interest therein if such securities were converted into Common Stock from
being deemed to own Excess Shares (See "Description of Common Stock Redemption
and Restriction on Transfer of Shares"). The Indenture does not contain any
provision requiring the Corporation to repurchase Debentures at the option of
the Holders in the event of a leveraged buyout, recapitalization or similar
restructuring of the Corporation, even though the Corporation's creditworthiness
and the market value of the Debentures may decline significantly as a result of
such transaction. Nor does the Indenture protect Holders against any decline in
credit quality.
DIVIDENDS, DISTRIBUTIONS AND ACQUISITIONS OF SHARES. The Indenture provides
that the Corporation will not (i) declare or pay any dividend or make any
distribution to holders of its capital stock (other than dividends or
distributions payable in its shares or other than as the Corporation determines
is necessary to maintain its REIT status) or (ii) purchase, redeem or otherwise
acquire or retire for value any of its capital stock or permit any subsidiary to
do so, if at the time of such action an Event of Default (as defined in the
Indenture) has occurred and is continuing or would exist immediately after
giving effect to such action (Section 4.06).
MODIFICATION OF THE INDENTURE. With certain exceptions, the rights and
obligations of the Corporation and the rights of Holders of any series of
Debentures may only be modified by the Corporation and the Trustee with the
consent of the Holders of at least a majority in principal amount of each series
of affected Debentures. Without the consent of each affected Debenture Holder,
no amendment or waiver of supplement may (i) reduce the principal of, or rate of
interest on, any Debenture; (i) reduce the principal of, or rate of interest on
any Debenture, (ii) change the stated maturity date of the principal of, or any
installment of interest on, any Debenture; (iii) waive a default in the payment
of the principal amount of, or the interest on, or any premium payable on
redemption of, any Debenture; (iv) change the currency for
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payment of the principal of, or premium or interest on, any Debenture; (v)
impair the right to institute suit for the enforcement of any such payment when
due; (vi) adversely affect the right to convert any Debenture; (vii) reduce the
amount of outstanding Debentures necessary to consent to an amendment or waiver
provided for in the Indenture; or (viii) modify any provisions of the Indenture
relating to the modification, supplement and amendment of the Indenture or
waivers of past defaults, except as otherwise specified (Section 9.02).
EVENTS OF DEFAULT, NOTICE AND WAIVER. The following are Events of Default
under the Indenture; (i) default in the payment of interest on the Debentures of
such series when due and payable, which continues for 30 days; (ii) default in
the payment of principal of (and premium, if any) on the Debentures when due, at
maturity, upon redemption or otherwise, which continues for five Business Days;
(iii) failure to perform any other covenant of the Corporation contained in the
Indenture or any Debenture which continues for 60 days after written notice is
given as provided in the Indenture; (iv) default under any bond, debenture or
other Indebtedness of the Corporation, or any subsidiary if (a) either (x) such
event of default results from the failure to pay any such Indebtedness at
maturity or (y) as a result of such event of default, the maturity of such
Indebtedness has been accelerated prior to its expressed maturity and such
acceleration shall not be rescinded or annulled or the accelerated amount paid
within ten days after notice to the Corporation of such acceleration, or such
Indebtedness having been discharged, and (b) the principal amount of such
Indebtedness, together with the principal amount of any other Indebtedness in
default for failure to pay principal or interest thereon, or the maturity of
which has been so accelerated, aggregates $10,000,000 or more; and (v) certain
events of bankruptcy, insolvency or reorganization relating to the Corporation
(Section 6.01). If an Event of Default shall occur and be continuing, the
Trustee or the Holders of a majority in aggregate principal amount of any
Debentures may declare the Debentures due and payable (Section 6.02).
The Indenture provides that the Trustee shall, within 90 days after the
occurrence of any Default or Event of Default with respect to the Debentures of
any series, give to the Holders of Debentures notice of all uncured Defaults or
Events of Default known to it. The Trustee shall be protected if in good faith
it determines that the withholding of such notice is in the interest of the
Holders of Debentures of any series, except in the case of a default in the
payment of the principal of (or premium, if any) or interest on any of the
Debentures of such series in which event notice must be given (Section 7.05).
The Indenture provides that the Holders of a majority in aggregate principal
amount of the outstanding Debentures of any series may direct the time, method
and place of conducting any proceedings for any remedy available to the Trustee
or exercising any trust or power conferred on the Trustee with respect to the
Debentures of such series (Section 6.05). The right of a Holder to institute a
proceeding with respect to the Indenture is subject to certain conditions
including notice and indemnity to the Trustee, but the Holder has an absolute
right to receipt of principal of (and premium, if any) and interest on such
Holder's Debenture on or after the respective due dates expressed in the
Debentures and to institute suit for the enforcement of any such payments
(Section 6.06).
The Holders of a majority in principal amount of the outstanding Debentures
of any series may on behalf of the Holders of all Debentures of such series
waive certain past defaults, except a default in payment of the principal of
(and premium, if any) or interest on any Debentures of such series or in respect
of certain provisions of the Indenture which cannot be modified or amended
without the consent of the Holder of each Debenture affected thereby (Section
9.02).
The Corporation will be required to furnish the Trustee annually a statement
of certain officers of the Corporation stating whether or not they know of any
Default or Events of Default (as defined in the Indenture) and, if they have
such knowledge, a description of the efforts to remedy the same (Section 4.05).
CONSOLIDATION, MERGER, SALE OR CONVEYANCE. The Corporation may merge or
consolidate with, or sell or convey all or substantially all of its assets to,
any other corporation or entity, provided that (i) either the
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Corporation shall be the continuing entity, or the successor entity (if other
than the Corporation) shall be an entity organized and existing under the laws
of the United States or a state thereof or the District of Columbia (although it
may, in turn, be owned by a foreign entity) and such entity shall expressly
assume by supplemental indenture all of the obligations of the Corporation under
the Debentures and the Indenture; (ii) immediately after giving effect to such
transactions no Default or Event of Default shall have occurred and be
continuing, and (iii) the Corporation shall have delivered to the Trustee an
Officers' Certificate and opinion of counsel, stating that the transaction and
supplemental indenture comply with the Indenture (Section 5.01).
REORGANIZATION AND OTHER TRANSACTIONS. The Indenture does not afford the
Holders of the Debentures any protection from a decline of credit quality nor
does it give any protection in the event of a highly leveraged transaction,
reorganization, restructuring, merger or similar transaction ("Leveraged
Transaction") involving the Corporation that may adversely affect Holders of the
Debentures, except to the limited extent described above. The Indenture does not
contain any provision requiring the Corporation to repurchase any of the
Debentures in the event of a Leveraged Transaction, even though the
Corporation's creditworthiness and the market value of the Debentures may
decline significantly as a result of any such transaction.
FEDERAL INCOME TAX CONSIDERATIONS
THE FOLLOWING SUMMARY OF MATERIAL FEDERAL INCOME TAX CONSIDERATIONS IS BASED
ON CURRENT LAW AND DOES NOT PURPORT TO DEAL WITH ALL ASPECTS OF TAXATION THAT
MAY BE RELEVANT TO PARTICULAR SHAREHOLDERS IN LIGHT OF THEIR PERSONAL INVESTMENT
OR TAX CIRCUMSTANCES, OR TO CERTAIN TYPES OF SHAREHOLDERS (INCLUDING INSURANCE
COMPANIES, FINANCIAL INSTITUTIONS AND BROKER-DEALERS) SUBJECT TO SPECIAL
TREATMENT UNDER THE FEDERAL INCOME TAX LAWS. CERTAIN FEDERAL INCOME TAX
CONSIDERATIONS RELEVANT TO HOLDERS OF THE SECURITIES WILL BE PROVIDED IN THE
APPLICABLE PROSPECTUS SUPPLEMENT RELATING THERETO.
EACH PROSPECTIVE PURCHASER IS ADVISED TO CONSULT HIS OWN TAX ADVISOR
REGARDING THE SPECIFIC TAX CONSEQUENCES TO HIM OF THE PURCHASE, OWNERSHIP AND
SALE OF THE SECURITIES.
GENERAL
The Corporation believes that since its formation it has operated in a
manner that permits it to satisfy the requirements for taxation as a REIT under
the applicable provisions of the Code. The Corporation intends to continue to
operate to satisfy such requirement. No assurance can be given, however, that
such requirements will be met.
The sections of the Code relating to qualification and operation as a REIT
are highly technical and complex. The following sets forth the material aspects
of the Code sections that govern the Federal income tax treatment of a REIT and
its shareholders. This summary is qualified in its entirety by the applicable
Code provisions, rules and regulations thereunder, and administrative and
judicial interpretations thereof. Goodwin, Procter & Hoar LLP has acted as tax
counsel to the Corporation in connection with the Corporation's election to be
taxed as a REIT.
In the opinion of Goodwin, Procter & Hoar LLP, commencing with the
Corporation's taxable year ended December 31, 1987, the Corporation has been
organized in conformity with the requirements for qualification as a REIT, and
its method of operation has and will enable it to continue to meet the
requirements for qualification and taxation as a REIT under the Code. This
opinion is based on various assumptions and is conditioned upon certain
representations made by the Corporation as to factual matters. Moreover, such
qualification and taxation as a REIT depends upon the Corporation's ability to
meet, through actual annual operating results, distribution levels and diversity
of stock ownership, the various qualification tests imposed upon the Code
discussed below, the results of which will not be reviewed by Goodwin, Procter &
Hoar LLP. Accordingly, no assurance can be given that the actual results
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of the Corporation's operations for any particular taxable year will satisfy
such requirements. See "-- Failure to Qualify."
In brief, if certain detailed conditions imposed by the REIT provisions of
the Code are met, entities, such as the Corporation, that invest primarily in
real estate and that otherwise would be treated for Federal income tax purposes
as corporations, are generally not taxed at the corporate level on their "REIT
taxable income" that is currently distributed to shareholders. This treatment
substantially eliminates the "double taxation" (i.e., taxation at both the
corporate and shareholder levels) that generally results from the use of
corporate investment vehicles. If the Corporation fails to qualify as a REIT in
any year, however, it will be subject to Federal income tax as if it were a
domestic corporation, and its shareholders will be taxed in the same manner as
shareholders of ordinary corporations. In this event, the Corporation could be
subject to potentially significant tax liabilities and the amount of cash
available for distribution to its shareholders could be reduced.
TAXATION OF THE CORPORATION
In any year in which the Corporation qualifies as a REIT, in general it will
not be subject to Federal income tax on that portion of its net income that it
distributes to shareholders. This treatment substantially eliminates the "double
taxation" on income at the corporate and shareholder levels that generally
results form investment in a corporation. However, the REIT will be subject to
federal income tax as follows: First, the REIT will be taxed at regular
corporate rates on any undistributed real estate investment trust taxable
income, including undistributed net capital gains. Second, under certain
circumstances, the REIT may be subject to the "alterative minimum tax" on its
items of tax preference. Third, if the REIT has (i) net income from the sale or
other disposition of "foreclosure property" which it held primarily for sale to
customers in the ordinary course of business or (ii) other nonqualifying income
from foreclosure property, it will be subject to tax at the highest corporate
rate on such income. Fourth, if the REIT has net income from prohibited
transactions (which are, in general, certain sales or other dispositions of
property held primarily for sale to customers in the ordinary course of business
other than foreclosure property), such income will be subject to a 100% tax.
Fifth, if the REIT should fail to satisfy the 75% gross income test or the 95%
gross income test (discussed below), and has nonetheless maintained its
qualification as a real estate investment trust because certain other
requirements have been met, it will be subject to a 100% tax on the net income
attributable to the greater of the amount by which the REIT fails the 75% or 95%
test. Sixth, if the REIT should fail to distribute during each calendar year at
least the sum of (i) 85% of its real estate investment trust ordinary income for
such year, (ii) 95% of its real estate investment trust capital gain net income
for such year, and (iii) any undistributed taxable income from prior periods,
the REIT will be subject to a 4% excise tax on the excess of such required
distribution over the amounts actually distributed. Seventh, if the REIT
acquires any asset from a C corporation (i.e., generally a corporation subject
to full corporate-level tax) in a transaction in which the basis of the asset in
the REIT's hands is determined by reference to the basis of the asset (or any
other property) in the hands of the C Corporation, and the REIT recognizes on
the disposition of such asset during the 10 year period beginning on the date on
which such asset was acquired by the REIT, then, to the extent of any built-in
gain at the time of acquisition, such gain will be subject to tax at the highest
regular corporate rate, assuming the REIT will make an election pursuant to IRS
Notice 88-19.
REQUIREMENTS FOR QUALIFICATION
The Code defines a real estate investment trust as a corporation, trust or
association (1) which is managed by one or more trustees or directors; (2) the
beneficial ownership of which is evidenced by transferable shares, or by
transferable certificates of beneficial interest; (3) which would be taxable as
a domestic corporation but for Sections 856 through 860 of the Code; (4) which
is neither a financial institution nor an insurance company subject to certain
provisions of the Code; (5) the beneficial ownership of which is held by 100 or
more persons; (6) not more than 50% in value of the outstanding
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stock of which is owned, directly or indirectly, by five or fewer individuals
(as defined in the Code) at any time during the last half of each taxable year;
and (7) which meets certain other tests, described below, regarding the nature
of income and assets. Conditions (1) through (4) must be met during the entire
taxable year, and condition (5) must be met during at least 335 days of a
taxable year of 12 months, or during a proportionate part of a taxable year of
less than 12 months.
In order to ensure compliance with the ownership tests described above, the
Corporation's Bylaws contain certain restrictions on the transfer of stock to
prevent undue concentration of stock ownership. Moreover, to evidence compliance
with these requirements, the Corporation must maintain records which disclose
the actual ownership of its outstanding stock. In fulfilling its obligations to
maintain records, the Corporation must demand written statements each year from
the record holders of designated percentages of its stock disclosing the actual
owners of such stock. A list of those persons failing or refusing to comply with
such demand must be maintained as part of the Corporation's records. A
shareholder failing or refusing to comply with the Corporation's written demand
must submit with his tax returns a similar statement disclosing the actual
ownership of stock and certain other information. In addition, the Bylaws
contain provisions authorizing the redemption and restrictions on the transfer
of its shares that are intended to assist the Corporation in continuing to
satisfy the share ownership requirements. See "Description of Common Stock
Redemption -- Restriction on Transfer of Shares."
ASSET TESTS
At the close of each quarter of its taxable year, the Corporation must
satisfy two tests relating to the nature of its assets. First, at least 75% of
the value of the Corporation's total assets must be represented by interests in
real property, interests in mortgages on real property, shares in other REITs,
cash, cash items and government securities (as well as certain temporary
investments in stock or debt instruments purchased with the proceeds of new
capital raised by the Corporation). Second, although the remaining 25% of the
Corporation's assets generally may be invested without restrictions, securities
in this class may not exceed either (i) 5% of the value of the Corporation's
total assets as to any one nongovernment issuer, or (ii) 10% of the outstanding
voting securities of any one issuer (except a wholly-owned subsidiary of the
REIT that meets the definition of a "qualified REIT subsidiary").
GROSS INCOME TESTS
There are three separate percentage tests relating to the sources of a
REIT's gross income which must be satisfied for each taxable year.
THE 75% TEST. At least 75% of the qualifying REIT's gross income for the
taxable year must consist of (i) rents from real property (consistent with the
discussion below); (ii) interest on obligations collateralized by mortgages on,
or interest in, real property; (iii) gains from the sale or other disposition of
interests in real property and real estate mortgages, other than gain from
property held primarily for sale to customers in the ordinary course of the
REIT's trade or business ("dealer property"); (iv) dividends or other
distributions on shares in other REITs, as well as gain from the sale of such
shares; (v) abatements and refunds of real property taxes; (vi) income from the
operation, and gain from the sale, of property acquired at or in lieu of a
foreclosure of the mortgage collateralized by such property ("foreclosure
property"); and (vii) commitment fees received from agreeing to make loans
collateralized by mortgages on real property or to purchase or lease real
property.
Rents received from a tenant will not, however, qualify as rents from real
property in satisfying the 75% test (or the 95% gross income test described
below) if the REIT, or an owner of 10% or more of the REIT, directly or
constructively owns 10% or more of such tenant (a "related party tenant"). In
addition, if rent attributable to personal property, leased in connection with a
lease of real property, is greater than 15% of the total rent received under the
lease, then the portion of the rent attributable to such personal property will
not qualify as rents from real property. Moreover, an amount received or accrued
generally
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will not qualify as rents from real property (or as interest income) for
purposes of the 75% and 95% gross income tests if it is based in whole or in
part on the income or profits of any person. Rent or interest will not be
disqualified, however, solely by reason of being based on a fixed percentage or
percentages of receipts or sales. Finally, for rents received to qualify as
rents from real property, the REIT generally must not operate or manage the
property or furnish or render services to tenants, other than through an
"independent contractor" from whom the REIT derives no revenue. The "independent
contractor" requirement, however, does not apply to the extent that the services
provided by the REIT are usually or customarily rendered in connection with the
rental of space for occupancy only, and are not otherwise rendered primarily for
the benefit of the tenant. The Corporation believes that the management services
provided by it with respect to the Properties that it owns are of the type that
are usually or customarily rendered in connection with the rental of space for
occupancy only, and therefore that the provision of such service will not cause
the rents received with respect to the Properties to fail to qualify as rents
from real property for purposes of the 75% and 95% gross income tests.
THE 95% TEST. In addition to deriving 75% of its gross income from the
sources listed above, at least 95% of the qualifying REIT's gross income for the
taxable year must be derived from the above-described qualifying income, or from
dividends, interest or gains from the sale or disposition of stock or other
securities that are not dealer property. Dividends and interest on any
obligation not collateralized by an interest on real property are included for
purposes of the 95% test, but not for purposes of the 75% test. For purposes of
determining whether the REIT complies with the 75% and 95% income tests, gross
income does not include income from prohibited transactions. A "prohibited
transaction" is a sale of dealer property, excluding certain property held by
the REIT for at least four years and foreclosure property.
The Corporation believes that it has held and managed its real estate
Properties in a manner that has given rise to rental income qualifying under the
75% and 95% gross income tests. Even if the Corporation fails to satisfy one or
both the 75% or 95% gross income tests for any taxable year, it may still
qualify as a REIT for such year if it is entitled to relief under certain
provision of the Code. These relief provisions will generally be available if:
(i) the Corporation's failure to comply was due to reasonable cause and not to
willful neglect; (ii) the Corporation reports the nature and amount of each item
of its income included in the 75% and 95% gross income tests on a schedule
attached to its tax return; and (iii) any incorrect information on this schedule
is not due to fraud with intent to evade tax. If these relief provisions apply,
the Corporation would, however, still be subject to a special tax upon the
greater of the amount by which it fails either the 75% or 95% gross income test
for that year.
THE 30% TEST. Finally, a qualifying REIT must derive less than 30% of its
gross income for each taxable year from the sale or other disposition of (i)
real property held for less than four years (other than foreclosure property and
involuntary conversions), (ii) stock or securities held for less than one year,
and (iii) property in a prohibited transaction. The Corporation believes that it
has satisfied this requirement in each year.
ANNUAL DISTRIBUTION REQUIREMENTS
The Corporation, in order to qualify as a REIT, is required to distribute
dividends (other than capital gain dividends) to its shareholders each year in
an amount at least equal to (a) the sum of (i) 95% of the Corporation's REIT
taxable income (computed without regard to the dividends paid deduction and the
REIT's net capital gain) and (ii) 95% of the net income (after tax), if any,
from foreclosure property, minus (b) the sum of certain items of non-cash
income. Such distributions must be paid in the taxable year to which they
relate, or in the following taxable year if declared before the Corporation
timely files its tax return for such year and if paid on or before the first
regular dividend payment after such declaration. To the extent that the
Corporation does not distribute all of its net capital gain or distributes at
least 95%, but less than 100%, of its REIT taxable income, as adjusted, it will
be subject to tax on the undistributed amount at regular capital gains or
ordinary corporate tax rates, a the case may be. Furthermore, if the
18
<PAGE>
REIT should fail to distribute during each calendar year at least the sum of (i)
85% of its REIT ordinary income for such year, (ii) 95% of its REIT capital gain
income for such year, and (iii) any undistributed taxable income from prior
periods, it would be subject to a 4% excise tax on the excess of such required
distribution over the amounts actually distributed. The Corporation believes
that it has made timely distributions sufficient to satisfy the annual
distribution requirements. Even if it fails to meet the 95% distribution
requirement in any year as a result of an adjustment to the Corporation's tax
return by the Service, the Corporation may retroactively cure the failure by
paying a "deficiency dividend" (plus applicable penalties and interest) within a
specified period.
FAILURE TO QUALIFY
If the Corporation fails to qualify for taxation as a REIT in any taxable
year and the relief provisions do not apply, it will be subject to tax
(including any applicable alternative minimum tax) on its taxable income at
regular corporate rates. Distributions to shareholders in any year in which the
Corporation fails to qualify will not be deductible by the Corporation, nor will
they be required to be made. In such event, to the extent of the Corporation's
current and accumulated earnings and profits, all distributions to shareholders
will be taxable as ordinary income, and, subject to certain limitations in the
Code, corporate distributees may be eligible for the dividends received
deduction. Unless entitled to relief under specific statutory provisions, the
Corporation also would be disqualified from taxation as a REIT for the four
taxable years following the year during which qualification was lost.
TAXATION OF SHAREHOLDERS
As long as the Corporation qualifies as a REIT, distributions made to the
Corporation's taxable U.S. shareholders out of current or accumulated earnings
and profits (and not designated as capital gain dividends) will be taken into
account by such U.S. shareholders as ordinary income and will not be eligible
for the dividends received deduction generally available to corporations. As
used herein, the term "U.S. shareholder" means a holder of Common Stock that for
U.S. federal income tax purposes is (i) a citizen or resident of the United
States, (ii) a corporation, partnership, or other entity created or organized in
or under the laws of the United States or any political subdivision thereof, or
(iii) an estate or trust the income of which is subject to U.S. federal income
taxation regardless of its source and does not (iv) have special status under
the Code, such as a tax-exempt organization. Distributions that are designated
by the Corporation as capital gain dividends will be taxed as long-term capital
gains (to the extent they do not exceed the Corporation's actual net capital
gain for the taxable year) without regard to the period for which the
shareholder has held his Common Stock. However, corporate shareholders may be
required to treat up to 20% of certain capital gain dividends as ordinary
income. Distributions in excess of current and accumulated earnings and profits
will not be taxable to a shareholder to the extent that they do not exceed the
adjusted basis of the shareholders Common Stock, but rather will reduce the
adjusted basis of such stock. To the extent that distributions in excess of
current and accumulated earnings and profits exceed the adjusted basis of a
shareholder's Common Stock, the distributions will be included in income as
long-term capital gain (or short-term capital gain if the Common Stock has been
held for one year or less) assuming the Common Stock is a capital asset in the
hands of the shareholder. In addition, any dividend declared by the Corporation
in October, November or December of any year and payable to a shareholder of
record on a special date in any such month shall be treated as both paid by the
Corporation and received they the shareholder on December 31 of such year,
provided that the distribution is actually paid by the Corporation during
January of the following capital year.
Investors are urged to consult their own tax advisors with respect to the
tax consequences arising under federal law and the laws of any state,
municipality or other taxing jurisdiction. Foreign investors should consult
their own tax advisors concerning the tax consequences of an investment in the
Corporation including the possibility of United States income tax withholding on
Corporation distributions.
19
<PAGE>
PLAN OF DISTRIBUTION
The Corporation may sell the Securities in any of three ways: (i) through
underwriting syndicates represented by one or more managing underwriters, or by
one or more underwriters without a syndicate; (ii) through agents designated
from time to time; or (iii) directly to institutional investors. The names of
any underwriters or agents of the Corporation involved in the sale of the
Securities for which this Prospectus is being delivered, and any applicable
commission or discounts, will be set forth in the Prospectus Supplement. The net
proceeds to the Corporation from such sale shall be set forth in the Prospectus
Supplement.
Under agreements entered into with the Corporation, agents and underwriters
may be entitled to indemnification by the Corporation against certain civil
liabilities, including liabilities under the Securities Act, or to contribution
with respect to payments which the agents or underwriters may be required to
make in respect thereof. Agents and underwriters may engage in transactions with
or perform services for the Corporation in the ordinary course of business.
LEGAL MATTERS
The validity of the Securities that are the subject of this Prospectus will
be passed upon for the Corporation by Goodwin, Procter & Hoar LLP, Boston,
Massachusetts. In the case of an underwritten public offering, certain legal
matters will be passed upon for the Underwriters by legal counsel named in the
applicable Prospectus Supplement. Each such legal counsel may rely, as to
matters of California law, upon the opinion of California counsel named in the
applicable Prospectus Supplement.
EXPERTS
The financial statements and the related financial statement schedules
incorporated in this Prospectus by reference from the Corporation's Annual
Report on Form 10-K have been audited by Deloitte & Touche LLP, independent
auditors, as stated in their reports, which are incorporated herein by
reference, and have been so incorporated in reliance upon the reports of such
firm given upon their authority as experts in accounting and auditing.
20
<PAGE>
- -------------------------------------------
-------------------------------------------
- -------------------------------------------
-------------------------------------------
NO DEALER, SALESPERSON OR OTHER PERSON HAS BEEN AUTHORIZED TO GIVE ANY
INFORMATION OR TO MAKE ANY REPRESENTATION NOT CONTAINED IN THIS PROSPECTUS AND
ANY APPLICABLE PROSPECTUS SUPPLEMENT AND IF GIVEN OR MADE, SUCH INFORMATION OR
REPRESENTATION MUST NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED BY THE
CORPORATION, ANY UNDERWRITERS OR ANY OTHER PERSON. THIS PROSPECTUS AND ANY
APPLICABLE PROSPECTUS SUPPLEMENT DOES NOT CONSTITUTE AN OFFER TO SELL OR A
SOLICITATION OF AN OFFER TO BUY ANY OF THE SECURITIES TO WHICH IT RELATES IN ANY
JURISDICTION TO ANY PERSON TO WHOM IT IS UNLAWFUL TO MAKE SUCH OFFER IN SUCH
JURISDICTION. THE DELIVERY OF THIS PROSPECTUS OR ANY APPLICABLE PROSPECTUS
SUPPLEMENT AT ANY TIME DOES NOT IMPLY THAT THE INFORMATION HEREIN OR THEREIN IS
CORRECT AS OF ANY TIME SUBSEQUENT TO ITS DATE.
------------------------
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
---------
<S> <C>
Available Information.......................... 2
Incorporation of Certain Documents by
Reference..................................... 2
The Corporation................................ 4
Ratios of Earnings to Fixed Charges............ 4
Use of Proceeds................................ 4
Risk Factors................................... 5
Description of Common Stock.................... 9
Description of Debentures...................... 10
Federal Income Tax Considerations.............. 15
Plan of Distribution........................... 20
Legal Matters.................................. 20
Experts........................................ 20
</TABLE>
BURNHAM PACIFIC
PROPERTIES, INC.
---------------------
PROSPECTUS
---------------------
JANUARY 23, 1997
- -------------------------------------------
-------------------------------------------
- -------------------------------------------
-------------------------------------------
<PAGE>
ITEM 16. EXHIBITS
<TABLE>
<C> <S>
*1.0 Form of Underwriting Agreement. (Common Stock)
*1.1 Form of Underwriting Agreement (Debentures)
*1.2 Form of Placement Agency Agreement.
*1.3 Form of Escrow Agreement
3.1 Articles of Incorporation of the Corporation, incorporated by reference to
Registration Statement No. 33-14571. Reference is also made to pages A-4 through A-6
of Registration Statement No. 33-20489 for amendments adopted at the Corporation's
Annual Meeting of Shareholders on June 3, 1988, and to pages 9 and 10 of the Proxy
Statement dated March 31, 1989, for amendments adopted at the Corporation's Annual
Meeting of Shareholders on May 2, 1989.
3.2 Bylaws of the Corporation as amended and restated May 3, 1994, incorporated by
reference to pages A-1 through A-20 of the Corporation's Proxy Statement for its
1994 Annual Meeting, filed March 30, 1994.
4.0 Share certificate for Common Stock of the Corporation, incorporated by reference to
Exhibit 4.0 to Registration Statement No. 33-20489.
*4.1 Form of Trust Indenture.
*5.0 Opinion of Goodwin, Procter & Hoar as to legality of Securities (including consent).
10.2 Burnham Pacific Properties, Inc. Stock Option Plan as Amended and Restated as of May
17, 1996, incorporated by reference to Exhibit 10.1 to Registration Statement No.
333-10559 on Form S-8.
**10.3 Revolving Loan Agreement dated November 18, 1996 between the Corporation, as
Borrower, and Nomura Asset Capital Corporation, as Lender.
**12.1 Computation of Ratio of Earnings to Fixed Charges.
**23.0 Consent of Deloitte & Touche LLP.
24.0 Power of Attorney (included as a part of the signature page of this post-effective
Amendment No. 1).
*99.0 Form T-1.
</TABLE>
- ------------------------
* Previously filed
** Filed herewith
ITEM 17. UNDERTAKINGS
The undersigned registrant hereby undertakes that, for purposes of
determining any liability under the Securities Act of 1933, each filing of the
registrant's annual report pursuant to Section 13(a) or 15(d) of the Securities
Exchange Act of 1934 that is incorporated by reference in the Registration
Statement shall be deemed to be a new Registration Statement relating to the
securities offered therein, and the offering of such securities at that time
shall be deemed to be the initial bona fide offering thereof.
Insofar as indemnification for liabilities arising under the Securities Act
of 1933 (the "Act") may be permitted to Directors, officers and controlling
persons of the Corporation, the Corporation has been advised that, in the
opinion of the Securities and Exchange Commission, such indemnification is
against public policy as expressed in the act and is therefore, unenforceable.
In the event that a claim for indemnification against such liabilities (other
than the payment by the Corporation of expenses incurred or paid by a Director,
officer or controlling person of the Corporation in the successful defense of
any action, suit or proceeding) is asserted by such Director, officer or
controlling person in connection with the
II-1
<PAGE>
securities being registered, the Corporation will, unless in the opinion of its
counsel the matter has been settled by controlling precedent, submit to a court
of appropriate jurisdiction the question whether such indemnification by it is
against public policy as expressed in the Act and will be governed by the final
adjudication of such issue.
The undersigned registrant hereby undertakes that:
(1) For purposes of determining any liability under the Securities Act of
1933, the information omitted from the form of prospectus filed as part of this
registration statement in reliance upon Rule 430A and contained in a form of
prospectus filed by the registration pursuant to Rule 4254(b)(1) or (4) or
497(h) under the Securities Act shall be deemed to be part of this registration
statement as of the time it was declared effective.
(2) For the purpose of determining any liability under the Securities Act of
1933, each post-effective amendment that contains a form of prospectus shall be
deemed to be a new registration statement relating to the securities offered
therein, and the offering of such securities at that time shall be deemed to be
the initial bona fide offering thereof.
The undersigned registrant also hereby undertakes:
(1) To file, during any period in which offers and sales are being made, a
post-effective amendment to this registration statement;
(i) To include any prospectus required by Section 10(a)(3) of the
Securities Act of 1933;
(ii) To reflect in the prospectus any facts or events arising after the
effective date of the registration statement (or the most recent
post-effective amendment thereof) which, individually or in the aggregate,
represent a fundamental change in the information set forth in the
registration statement;
(iii) To include any material information with respect to the plan of
distribution not previously disclosed in the registration statement or any
material change to such information in the registration statement;
Provided, however, that paragraphs (a)(1)(i) and (a)(1)(ii) do not apply if the
registration statement is on Form S-3 or Form S-8, and the information required
to be included in a post-effective amendment by these paragraphs is contained in
periodic reports filed by the registrant pursuant to Section 13 or Section 15(d)
of the Securities Exchange Act of 1934 that are incorporated by reference in the
registration statement.
(2) That, for purposes of determining any liability under the Securities Act
of 1933, each such post-effective amendment shall be deemed to be a new
registration statement relating to the securities offered therein, and the
offering of such securities at that time shall be deemed to be the initial bona
fide offering thereof.
(3) To remove from registration by means of a post-effective amendment any
of the securities being registered which remain unsold at the termination of the
offering.
II-2
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the Registrant
certifies that it has reasonable grounds to believe that it meets all of the
requirements for filing on Form S-3 and has duly caused this post-effective
amendment to Registration Statement No. 33-68712 to be signed on its behalf by
the undersigned, thereunto duly authorized, in the City of San Diego, State of
California on January 22, 1997.
BURNHAM PACIFIC PROPERTIES, INC.
By: /s/ J. DAVID MARTIN
-----------------------------------
Name: J. David Martin
Title: President
Pursuant to the requirements of the Securities Act of 1933, this amendment
to the Registration Statement has been signed by the following persons in the
capacities and on the date indicated, each of whom also constitutes and appoints
J. David Martin or Daniel B. Platt, and each of them singly, his true and lawful
attorney-in-fact and agent, for him, with full power of substitution and
resubstitution, for him and in his name, place and stead, in any and all
capacities, to sign any and all amendments (including post-effective amendments)
to this Registration Statement and to file the same with all exhibits thereto,
any other documents in connection therewith with the Securities and Exchange
Commission, granting unto said attorney-in-fact and agent full power and
authority to do and perform each and every act and thing requisite and necessary
to be done, as fully to all intents and purposes as he might or could do in
person, hereby ratifying and conforming all that said attorney-in-fact and agent
or his substitute or substitutes may lawfully do or cause to be done by virtue
hereof.
<TABLE>
<CAPTION>
SIGNATURE CAPACITY DATE
- ------------------------------------------------------ ------------------------------------ -------------------
<C> <S> <C>
/s/ J. DAVID MARTIN President, Chief Executive Officer
------------------------------------------- (Principal Executive Officer) and January 22, 1997
J. David Martin Director
/s/ DANIEL B. PLATT
------------------------------------------- Chief Financial Officer January 17, 1997
Daniel B. Platt
/s/ JEFFREY R. FISHER
------------------------------------------- Director of Finance and Treasurer January 22, 1997
Jeffrey R. Fisher (Principal Accounting Officer)
/s/ MALIN BURNHAM
------------------------------------------- Chairman of the Board of Directors January 22, 1997
Malin Burnham
/s/ PHILIP L. GILDRED, JR.
------------------------------------------- Director January 22, 1997
Philip L. Gildred, Jr.
/s/ JAMES D. KLINGBEIL
------------------------------------------- Director January 16, 1997
James D. Klingbeil
</TABLE>
II-3
<PAGE>
<TABLE>
<CAPTION>
SIGNATURE CAPACITY DATE
- ------------------------------------------------------ ------------------------------------ -------------------
<C> <S> <C>
------------------------------------------- Director
Victor B. MacFarlane
/s/ DONNE P. MOEN
------------------------------------------- Director January 22, 1997
Donne P. Moen
/s/ THOMAS A. PAGE
------------------------------------------- Director January 22, 1997
Thomas A. Page
/s/ PHILIP S. SCHLEIN
------------------------------------------- Director January 16, 1997
Philip S. Schlein
/s/ RICHARD R. TARTRE
------------------------------------------- Director January 17, 1997
Richard R. Tartre
</TABLE>
II-4
<PAGE>
EXHIBIT INDEX
<TABLE>
<CAPTION>
SEQUENTIALLY
EXHIBIT NO. DESCRIPTION NUMBERED PAGE
- ----------- ------------------------------------------------------------------------------------- -----------------
<C> <S> <C>
*1.0 Form of Underwriting Agreement. (Common Stock)
*1.1 Form of Underwriting Agreement (Debentures)
*1.2 Form of Placement Agency Agreement.
*1.3 Form of Escrow Agreement
3.1 Articles of Incorporation of the Corporation, incorporated by reference to
Registration Statement No. 33-14571. Reference is also made to pages A-4 through A-6
of Registration Statement No. 33-20489 for amendments adopted at the Corporation's
Annual Meeting of Shareholders on June 3, 1988, and to pages 9 and 10 of the Proxy
Statement dated March 31, 1989, for amendments adopted at the Corporation's Annual
Meeting of Shareholders on May 2, 1989.
3.2 Bylaws of the Corporation as amended and restated May 3, 1994, incorporated by
reference to pages A-1 through A-20 of the Corporation's Proxy Statement for its 1994
Annual Meeting, filed March 30, 1994.
4.0 Share certificate for Common Stock of the Corporation, incorporated by reference to
Exhibit 4.0 to Registration Statement No. 33-20489.
*4.1 Form of Trust Indenture.
*5.0 Opinion of Goodwin, Procter & Hoar as to legality of Securities (including consent).
10.2 Burnham Pacific Properties, Inc. Stock Option Plan as Amended and Restated as of May
17, 1996, incorporated by reference to Exhibit 10.1 to Registration Statement No.
333-10559 on Form S-8.
**10.3 Revolving Loan Agreement dated November 18, 1996 between the Corporation, as
Borrower, and Nomura Asset Capital Corporation, as Lender.
**12.1 Computation of Ratio of Earnings to Fixed Charges.
**23.0 Consent of Deloitte & Touche LLP.
24.0 Power of Attorney (included as a part of the signature page of this post-effective
Amendment No. 1).
*99.0 Form T-1.
</TABLE>
- ------------------------
* Previously filed.
** Filed herewith.
<PAGE>
REVOLVING LOAN AGREEMENT
between
BURNHAM PACIFIC PROPERTIES, INC.,
AS BORROWER,
and
NOMURA ASSET CAPITAL CORPORATION,
AS LENDER
November 18, 1996
$90,000,000 Secured Revolving Credit Facility
$45,000,000 Unsecured Revolving Credit Facility
<PAGE>
CONTENTS
PAGE
REVOLVING LOAN AGREEMENT.................................................1
ARTICLE 1. DEFINITIONS AND RELATED MATTERS............................1
Section 1.1. DEFINITIONS................................1
Section 1.2. RELATED MATTERS............................15
ARTICLE 2. AMOUNT AND TERMS OF THE CREDIT FACILITIES..................16
Section 2.1. CREDIT FACILITIES..........................16
Section 2.2. USE OF PROCEEDS............................17
Section 2.3. INTEREST...................................18
Section 2.4. NOTE, ETC..................................19
Section 2.5. FEES.......................................19
Section 2.6. TERMINATION, REDUCTION AND
EXTENSION OF COMMITMENT.................20
Section 2.7. REPAYMENTS AND PREPAYMENTS.................21
Section 2.8. MANNER OF PAYMENT..........................22
ARTICLE 3. CONDITIONS PRECEDENT TO ADVANCES...........................23
Section 3.1. CONDITIONS PRECEDENT TO
EFFECTIVE DATE..........................23
Section 3.2. CONDITIONS PRECEDENT TO ADVANCES...........23
Section 3.3. ADDITIONAL CONDITIONS PRECEDENT
AND PROVISIONS APPLICABLE TO
CERTAIN ACQUISITION ADVANCES.............24
Section 3.4. CONDITIONS PRECEDENT TO
DESIGNATION OF A COLLATERAL
PROPERTY................................25
ARTICLE 4. REPRESENTATIONS AND WARRANTIES.............................29
Section 4.1. ORGANIZATION, AUTHORITY AND TAX
STATUS OF THE BORROWER;
ENFORCEABILITY, ETC......................29
i
<PAGE>
Section 4.2. CONSOLIDATED SUBSIDIARIES..................29
Section 4.3. NO CONFLICT................................30
Section 4.4. GOVERNMENTAL APPROVALS.....................30
Section 4.5. FINANCIAL INFORMATION......................31
Section 4.6. NO MATERIAL ADVERSE CHANGE.................31
Section 4.7. LITIGATION.................................31
Section 4.8. AGREEMENTS; APPLICABLE LAW.................31
Section 4.9. GOVERNMENTAL REGULATION....................32
Section 4.10. MARGIN REGULATIONS........................32
Section 4.11. EMPLOYEE BENEFIT PLANS....................32
Section 4.12. TITLE TO PROPERTY; LIENS..................32
Section 4.13. LICENSES, TRADEMARKS, ETC.................33
Section 4.14. ENVIRONMENTAL CONDITION...................33
Section 4.15. ABSENCE OF CERTAIN RESTRICTIONS...........34
Section 4.16. MORTGAGES.................................34
Section 4.17. DELINQUENT PROPERTY LIENS.................34
Section 4.18. IMPROVEMENTS..............................34
Section 4.19. DAMAGE; TAKINGS...........................35
Section 4.20. ZONING AND OTHER LAWS.....................35
Section 4.21. LEASES....................................35
Section 4.22. CONTRACTS.................................35
Section 4.23. PERMITS...................................35
Section 4.24. CERTIFICATES OF OCCUPANCY.................36
Section 4.25. CONDITION OF PROPERTIES...................36
Section 4.26. MANAGEMENT AGREEMENTS.....................36
ii
<PAGE>
Section 4.27. DISCLOSURE................................36
ARTICLE 5. AFFIRMATIVE COVENANTS OF THE BORROWER......................36
Section 5.1. FINANCIAL STATEMENTS AND
OTHER REPORTS.........................37
Section 5.2. INSPECTION.................................38
Section 5.3. CORPORATE EXISTENCE, ETC...................39
Section 5.4. PAYMENT OF TAXES AND CHARGES...............39
Section 5.5. MAINTENANCE OF PROPERTIES..................39
Section 5.6. MAINTENANCE OF INSURANCE...................39
Section 5.7. CONDUCT OF BUSINESS........................40
Section 5.8. NYSE LISTING; REIT STATUS..................40
Section 5.9. REMEDIAL ACTION REGARDING
HAZARDOUS MATERIALS..................40
Section 5.10. OFFERING DOCUMENTS........................40
Section 5.11. RELEASE AND SUBSTITUTION OF REAL
PROPERTIES IN THE COLLATERAL
POOL..................................41
Section 5.12. COLLATERAL PROPERTIES LOCATED
OUTSIDE CALIFORNIA....................42
Section 5.13. REMOVAL OR SUBSTITUTION OF
UNENCUMBERED ASSETS IN
UNENCUMBERED POOL.....................42
Section 5.14. CERTAIN EVENTS WITH RESPECT TO
COLLATERAL PROPERTIES.................43
Section 5.15. ESTOPPELS, SNDAS..........................44
Section 5.16. TITLE INSURANCE...........................44
ARTICLE 6. NEGATIVE COVENANTS OF THE BORROWER PARTIES.................44
Section 6.1. INVESTMENTS; ASSET MIX.....................44
Section 6.2. FINANCIAL COVENANTS........................44
Section 6.3. MINIMUM UNENCUMBERED POOL;
PROPERTY NOI OF UNENCUMBERED
ASSETS................................45
Section 6.4. RESTRICTION ON FUNDAMENTAL
CHANGES...............................45
iii
<PAGE>
Section 6.5. TRANSACTIONS WITH AFFILIATES...............45
Section 6.6. RESTRICTED PAYMENTS........................46
Section 6.7. ERISA......................................46
ARTICLE 7. EVENTS OF DEFAULT..........................................46
Section 7.1. EVENTS OF DEFAULT..........................46
Section 7.2. PROPERTY SPECIFIC MATTERS..................49
Section 7.3. REMEDIES...................................49
ARTICLE 8. MISCELLANEOUS..............................................50
Section 8.1. EXPENSES; INDEMNITY........................50
Section 8.2. WAIVERS; MODIFICATIONS IN WRITING..........50
Section 8.3. CUMULATIVE REMEDIES; FAILURE
OR DELAY............................51
Section 8.4. NOTICES, ETC...............................51
Section 8.5. SUCCESSORS AND ASSIGNS.....................52
Section 8.6. CONFIDENTIALITY............................53
Section 8.7. CHOICE OF FORUM............................53
Section 8.8. CHANGES IN ACCOUNTING PRINCIPLES...........53
Section 8.9. SURVIVAL OF AGREEMENTS,
REPRESENTATIONS AND
WARRANTIES..........................54
Section 8.10. EXECUTION IN COUNTERPARTS.................54
Section 8.11. COMPLETE AGREEMENT........................54
Section 8.12. LIMITATION OF LIABILITY...................54
Section 8.13. UNSECURED ADVANCES; NO LIEN...............54
Section 8.14. WAIVER OF TRIAL BY JURY...................55
Section 8.15. GOVERNING LAW.............................55
Section 8.16. HEADINGS..................................55
iv
<PAGE>
Section 8.17. SEVERABILITY..............................55
Section 8.18. INDEPENDENCE OF COVENANTS.................55
v
<PAGE>
EXHIBITS
Exhibit A-1 Form of Secured Revolving Note
Exhibit A-2 Form of Unsecured Revolving Note
Exhibit B Form of Notice of Borrowing
Exhibit C-1 Form of Secretary's Certificate
Exhibit C-2 Form of Officer's Certificate
Exhibit C-3 Form of Certificate of Property Acquisitions
Exhibit C-4 Form of Compliance Certificate
Exhibit D Form of Opinion of Borrower's Counsel
Exhibit E Form of Mortgage
SCHEDULES
Schedule 1.1A Commitments
Schedule 1.1B Initial Properties
Schedule 1.1C Unencumbered Assets
Schedule 3.1.2 Closing Documents
Schedule 4.2 Consolidated Subsidiaries
Schedule 4.4 Governmental Approvals
Schedule 4.7 Litigation
Schedule 4.14 Environmental Condition
Schedule 4.21 Lease Defaults
Schedule 4.25 Condition of Property
vi
<PAGE>
REVOLVING LOAN AGREEMENT
REVOLVING LOAN AGREEMENT dated as of November 18, 1996 (as amended
from time to time, this "AGREEMENT") between BURNHAM PACIFIC PROPERTIES,
INC., a California corporation (the "BORROWER"), and NOMURA ASSET CAPITAL
CORPORATION (the "LENDER"). ARTICLE
DEFINITIONS AND RELATED MATTERS
SECTION 1.1. DEFINITIONS. The following
terms with initial capital letters have the following meanings:
"ADJUSTED PROPERTY EXPENSES" means, for any Retail Property, for any
period, without duplication, Property Expenses relating to such Retail
Property in such period, adjusted to exclude (to the extent otherwise
included in the determination thereof) Debt Service, leasing costs, capital
improvements and depreciation and amortization expense; PROVIDED, HOWEVER,
that Adjusted Property Expenses shall include:
(i) management fees for such Retail Property in an amount equal
to the greater of (x) actual management fees incurred for such period and (y)
4% of Adjusted Property Income for such Retail Property for such period;
(ii) leasing costs in an amount equal to (x) $1.00 per annum per
rentable square foot for each Real Property that is (A) a power center or
promotional center or (B) a factory outlet center or other Retail Property
that does not have an anchor tenant, and (y) $1.00 per annum per occupied
square foot of shop space for each Real Property that does have an anchor
tenant (in each case (a) subject to the last proviso hereto, as determined by
the Lender in its reasonable discretion, and (b) regardless whether or not
such costs were incurred, or were incurred in such amount, in such period);
and
(iii) a reserve for capital improvements in an amount equal to the
greater of (x) $0.15 per annum per square foot for each Retail Property and
(y) the aggregate amount scheduled for such year for deferred maintenance in
the property condition report in respect of such Retail Property delivered to
the Lender pursuant to Section 3.4 (in either case regardless whether or not
such a reserve for such Retail Property is deducted for such period in
determining net income of the Borrower);
PROVIDED, FURTHER, that, with respect to the Initial Properties, the
characterization of each such Property and the identity of each anchor tenant
shall be set forth in Schedule 1.1B and, with respect to each other
Collateral Property, any written agreement between the Borrower and the
Lender, each acting in its discretion, shall constitute a conclusive
determination of such characterization or identity.
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"ADJUSTED PROPERTY INCOME" means, for any Retail Property, on any
date of determination, the sum of (i) product of (x) gross rents (exclusive
of percentage rents) for such Retail Property for the last month ended prior
to such date of determination for which the information required under
Section 5.1.7.2 has been delivered to the Lender, to the extent that such
rents were paid under Leases of all or any portion of such Real Property in
effect on the last day of such month and under which the tenants are not in
default for more than ninety (90) days in payment of rent and other amounts
due under such Leases on such date, MULTIPLIED BY (y) 12, PLUS (ii)
percentage rents accrued and Recoveries for such Retail Property actually
received, in each case for the last twelve-month period ended prior to such
date of determination for which the information required under Section
5.1.7.2 has been delivered to the Lender; PROVIDED, HOWEVER, that, in
determining such Property Income, if the vacancy rate for such month is less
than (a) 5% of rentable square footage, if such Retail Property is a factory
outlet center or does not have an anchor tenant, or (b) 5% of shop square
footage, if such Retail Property does have an anchor tenant, then such gross
revenue shall be adjusted to give effect to such an assumed vacancy rate of
5%.
"ADJUSTED PROPERTY NOI" means, for any Retail Property on any date of
determination, (i) Adjusted Property Income as determined on such date of
determination minus (ii) Adjusted Property Expenses for the last twelve-month
period ended prior to such date of determination for which the information
required under Section 5.1.7.2 has been delivered to the Lender.
"ADVANCE" means a Secured Advance or an Unsecured Advance, and
"Advances" means the Secured Advances and the Unsecured Advances.
"AFFECTED PROPERTY" means a Property which is the subject of a
Property-Specific Breach, or to which a Property-Specific Breach relates.
"AFFILIATE" means, with respect to any Person, any other Person that,
directly or indirectly through one or more intermediaries, controls, or is
controlled by, or is under common control with, such first Person. Unless
otherwise indicated, "Affiliate" refers to an Affiliate of the Borrower.
Notwithstanding the foregoing, in no event shall the Lender or any Affiliate
of the Lender be deemed to be an Affiliate of the Borrower.
"AGREEMENT" is defined in the Preamble and includes all Schedules and
Exhibits.
"APPLICABLE CAP RATE" means, with respect to any Real Property, (i)
10.50% (expressed as a decimal) or (ii) such other rate applicable to such
Real Property as may be agreed in writing between the Borrower and the
Lender, each acting in its discretion.
"APPLICABLE LAW" means all applicable provisions of all (i)
constitutions, treaties, statutes, laws, rules, regulations and ordinances of
any Governmental Authority, (ii) Governmental Approvals and (iii) orders,
decisions, judgments, and decrees of any Governmental Authority.
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"APPLICABLE LIBO RATE" means, for any Interest Period, the rate per
annum of interest equal to the sum of (i) (x) 1.65% in the case of Secured
Advances, and (y) 1.85% in the case of Unsecured Advances or, upon the
occurrence of the Rate Reduction Date, 1.75% in the case of Unsecured
Advances, PLUS (ii) LIBOR for such Interest Period.
"ASSET VALUE" shall mean, as of any date of determination thereof,
with respect to any Real Property, an amount equal to (i) the Property NOI
for such Real Property for the twelve-month period immediately preceding the
date of determination DIVIDED BY (ii) the Applicable Cap Rate.
"AVAILABLE AMOUNT" shall mean, as of any date of determination, an
amount equal to (i) the quotient obtained by dividing (x) the aggregate
Adjusted Property NOI for all of the Collateral Properties (excluding any
such Property with respect to which notice has been given pursuant to Section
5.14(a) for as long as required by Section 5.14(b)), as determined on such
date, by (y) 1.60, DIVIDED BY (ii) the then effective Debt Service Constant.
"BANKRUPTCY CODE" means Title 11 of the United States Code (11 U.S.C.
Section 101 ET SEQ.), as amended from time to time.
"BANKRUPTCY REMOTE ENTITY" means a Consolidated Subsidiary (i) one
hundred percent of the Capital Stock of which is owned, directly or
indirectly, by the Borrower and (ii) which is a so-called "bankruptcy remote
special purpose vehicle" that meets the criteria in effect from time to time
of the Rating Agencies.
"BORROWER" is defined in the Preamble and includes its successors.
"BUSINESS DAY" means a day of the week (but not a Saturday, Sunday or
legal holiday) on which banks located in New York, New York, and London,
England are open for carrying on substantially all of such banks' business
functions and on which commercial banks are open for dealings in Dollar
deposits in the London interbank market.
"CAPITAL STOCK" means, with respect to any Person, all (i) shares,
interests, participations or other equivalents (howsoever designated) of
capital stock or partnership or other equity interests of such Person and
(ii) rights (other than debt securities convertible into capital stock or
other equity interests), warrants or options to acquire any such capital
stock or partnership or other equity interests of such Person.
"CAPITALIZED LEASE OBLIGATIONS" means all obligations of the Borrower
or a Consolidated Subsidiary under Capitalized Leases.
"CAPITALIZED LEASES" means all leases of the Borrower and its
Consolidated Subsidiaries of real or personal property that are required to
be capitalized on the consolidated balance sheets of such Persons in
accordance with GAAP.
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"CODE" means the Internal Revenue Code of 1986, as amended from time
to time.
"COLLATERAL POOL" means, at any time, the pool of Collateral
Properties at such time, but excluding any such Property with respect to
which notice has been given pursuant to Section 5.14(a) for as long as
required by Section 5.14(b).
"COLLATERAL PROPERTY" means any Retail Property that from time to
time is subject to the Lien of a Mortgage and that that satisfies the
conditions set forth in Section 3.4 at the time such Retail Property first
becomes a Collateral Property, but excluding any such Property with respect
to which notice has been given pursuant to Section 5.14(a) for as long as
required by Section 5.14(b).
"COMMITMENT" means the aggregate amount of the Secured Revolving
Commitment and the Unsecured Revolving Commitment.
"CONSOLIDATED SUBSIDIARY" means each Subsidiary of the Borrower
(whether now existing or hereafter created or acquired) the accounts of which
are (or should be) consolidated with the accounts of the Borrower in the
Borrower's consolidated financial statements in accordance with GAAP.
"CONSOLIDATED TOTAL DEBT" means, at any time, without duplication,
the aggregate amount of all Debt of the Borrower and its Consolidated
Subsidiaries at such time.
"CONTINGENT OBLIGATION" means, as to any Person, without duplication,
any obligation, direct or indirect, contingent or otherwise, of such Person
(i) with respect to any Debt of another Person, including any direct or
indirect guarantee of such Debt (other than any endorsement for collection in
the ordinary course of business) or any other direct or indirect obligation
or liability, by agreement or by operation of law (including without
limitation, in the case of a partnership, the obligation of a general partner
thereof) or otherwise, to pay or purchase or repurchase any such Debt or any
security therefor, or to provide funds for the payment or discharge of any
such Debt (whether in the form of loans, advances, stock purchases, capital
contributions or otherwise), (ii) to provide funds to maintain the financial
condition of the other Person, or (iii) otherwise to assure or hold harmless
the holders of Debt of another Person against loss in respect thereof,
including through minimum or guaranteed payment obligations under a master
lease or similar arrangement. The amount of any Contingent Obligation shall
be an amount equal to the maximum amount of such Person's liability in
respect of the Debt (other than a Contingent Obligation) guaranteed or
otherwise supported thereby.
"CONTRACTUAL OBLIGATION" means, as applied to any Person, any
provision of any security issued by that Person or of any agreement or other
instrument to which that Person is a party or by which it or any of the
properties owned by it is bound or otherwise subject.
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"CONTROLLED GROUP" means all domestic and foreign members of a
controlled group of corporations under Section 1563(a) of the Code
(determined without regard to Section 1563(b)(2)(C) of the Code) and all
trades or businesses (irrespective of whether incorporated) that are under
common control with the Borrower.
"CONVERTIBLE DEBENTURES" means the Borrower's outstanding 81/2%
convertible debentures due 2002.
"DEBT" means, with respect to any Person, the aggregate amount of,
without duplication: (i) all obligations for borrowed money; (ii) all
obligations evidenced by bonds, debentures, notes or other similar
instruments; (iii) all obligations to pay the deferred purchase price of
property or services, except current trade liabilities and other accounts
payable and accrued expenses incurred in the ordinary course of business;
(iv) all Capitalized Lease Obligations; (v) the aggregate redemption price or
liquidation value of preferred stock that is subject to mandatory redemption,
in whole or in part, at any time prior to the second anniversary of the
Maturity Date; (vi) all obligations or liabilities of others secured by a
Lien on any asset owned by such Person (other than taxes not yet delinquent)
whether or not such obligation or liability is assumed by such Person; (vii)
all obligations of such Person, contingent or otherwise, to reimburse the
issuer in respect of any letters of credit or bankers' acceptances, and
(viii) all Contingent Obligations.
"DEBT SERVICE" shall mean, for any period, the sum of (a) all
regularly scheduled payments and mandatory prepayments of principal of Debt
of the Borrower and its Consolidated Subsidiaries made during such period
(exclusive of balloon payments at maturity) PLUS (b) Interest Expense for
such period.
"DEBT SERVICE CONSTANT" means, at any time, the greater of (i) the
sum of (x) the then current Ten-Year Treasury Rate PLUS (y) 2.25% or (ii)
9.25%.
"DEBT SERVICE COVERAGE RATIO" means, on the last day of each calendar
month, the ratio of (i) EBITDA for the twelve (12) months then ended, to (ii)
Debt Service for such twelve-month period.
"DEFAULT" means any condition or event that, with the giving of
notice or lapse of time or both, would, unless cured or waived, become an
Event of Default.
"DOLLARS" AND "$" means lawful money of the United States of America.
"EBITDA" means, for any period, consolidated net income (or loss) of
the Borrower and its Consolidated Subsidiaries for such period taken as a
single accounting period PLUS (i) any loss (or minus any income) attributable
to extraordinary items, (ii) losses (or minus any gains) from sales of
assets, (iii) Interest Expense, (iv) taxes on, or measured by income, and (v)
depreciation and amortization expense, in each case for such period.
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"EFFECTIVE DATE" means the earliest date upon which all of the
conditions to the effectiveness of this Agreement set forth in Section 3.1
are satisfied.
"ENVIRONMENTAL DAMAGES" means all claims, judgments, damages, losses,
penalties, liabilities (including strict liability), costs and expenses,
including costs of investigation, remediation, defense, settlement and
attorneys' fees and consultants' fees, that are incurred at any time as a
result of, relating to or in connection with, the existence of Hazardous
Materials upon, about or beneath any Real Property or migrating or
threatening to migrate to or from any Real Property (in any such case in
violation of Environmental Requirements) or arising in any manner whatsoever
out of any violation of Environmental Requirements.
"ENVIRONMENTAL LIEN" means a Lien in favor of any Governmental
Authority for Environmental Damages.
"ENVIRONMENTAL REQUIREMENTS" means all Applicable Laws relating to
Hazardous Materials or the protection of human health or the environment,
including all requirements pertaining to reporting, permitting, investigation
and remediation of releases or threatened releases of Hazardous Materials
into the environment, or relating to the manufacture, processing,
distribution, use, treatment, storage, disposal, transport or handling of
Hazardous Materials.
"ERISA" means the Employee Retirement Income Security Act of 1974, as
amended from time to time.
"ERISA AFFILIATE" means any Person that is or was a member of the
controlled group of corporations or trades or businesses (as defined in
Subsection (b), (c), (m) or (o) of Section 414 of the Code) of which the
Borrower or any Consolidated Subsidiary is or was a member at any time within
the last six years.
"EVENT OF DEFAULT" means any of the events specified in Section 7.1.
"FEDERAL RESERVE BOARD" means the Board of Governors of the Federal
Reserve System, or any successor thereto.
"FEES" means, collectively, the fees described in Section 2.5 hereof.
"FISCAL YEAR" means the fiscal year of the Borrower, which shall be
the 12-month period ending on December 31 in each year or such other period
as the Borrower may designate and the Lender may approve in writing. "FISCAL
QUARTER" or "FISCAL QUARTER" means any quarter of a Fiscal Year.
"FUNDING DATE" means any date on which an Advance is (or is requested
to be) made.
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"FUNDS FROM OPERATIONS" or "FFO" means consolidated net income of the
Borrower, computed in accordance with GAAP, excluding gains (or losses) from
sales of property, plus depreciation and amortization, and after adjustments
for unconsolidated partnerships and joint ventures. The Borrower shall
compute Funds From Operations in accordance with standards established from
time to time by NAREIT.
"GAAP" means generally accepted accounting principles as in effect in
the United States of America (as such principles are in effect on the date
hereof).
"GOVERNMENTAL APPROVAL" means an authorization, consent, approval,
permit or license issued by, or a registration or filing with, any
Governmental Authority.
"GOVERNMENTAL AUTHORITY" means any nation and any state or political
subdivision thereof and any entity exercising executive, legislative,
judicial, regulatory or administrative functions of or pertaining to
government and any tribunal or arbitrator of competent jurisdiction.
"HAZARDOUS MATERIALS" means any chemical substance (i) the presence
of which requires investigation or remediation under any Applicable Law; or
(ii) that is or becomes defined as a "hazardous waste" or "hazardous
substance" under any Applicable Law, including the Comprehensive
Environmental Response, Compensation and Liability Act (42 U.S.C. Section
9601 ET SEQ.) or the Resource Conservation and Recovery Act (42 U.S.C.
Section 6901 ET SEQ.); or (iii) that is toxic, explosive, corrosive,
flammable, infectious, radioactive, carcinogenic, mutagenic, or otherwise
hazardous and is or becomes regulated by any Governmental Authority; or (iv)
the presence of which on any Real Property causes or threatens to cause a
nuisance upon the Real Property or to adjacent properties or poses or
threatens to pose a hazard to any Real Property or to the health or safety of
Persons on or about any Real Property; or (v) which contains gasoline, diesel
fuel or other petroleum hydrocarbons; or (vi) which contains polychlorinated
biphenyls (PCBs) or asbestos.
"INDEMNIFIED LIABILITIES" is defined in Section 8.1.3.
"INDEMNITEES" is defined in Section 8.1.3.
"INITIAL PROPERTIES" means the Retail Properties listed on SCHEDULE
1.1B hereto.
"INTEREST EXPENSE" means, for any period, the sum (without
duplication) for such period of (i) total interest expense of the Borrower
and its Consolidated Subsidiaries, including without limitation (x) Fees
payable pursuant to Section 2.5.2, (y) the portion of any Capitalized Lease
Obligations allocable to interest expense, and (z) amortization of costs
related to interest rate protection contracts and rate buy-downs, to the
extent such amortization is classified as "interest expense" under GAAP, (ii)
capitalized interest (other than capitalized interest paid from any interest
reserve established in connection with a
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construction loan), and (iii) interest incurred on any liability or
obligation that constitutes a Contingent Obligation of the Borrower or any
Consolidated Subsidiary.
"INTEREST PAYMENT DATE" means the first Business Day in each month.
"INTEREST PERIOD" means each one-month period from and including an
Interest Payment Date (or, in the case of the first Interest Period, from and
including the Effective Date) to, but excluding, the next succeeding Interest
Payment Date.
"INVESTMENT" means, with respect to any Person, (i) any direct or
indirect purchase or other acquisition by that Person of stock or securities,
or any beneficial interest in stock or other securities, of any other Person,
any partnership interest (whether general or limited) in any other Person, or
all or any substantial part of the business or assets of any other Person, or
(ii) any direct or indirect loan, advance or capital contribution by that
Person to any other Person, including all indebtedness and accounts
receivable from that other Person that are not current assets or did not
arise from sales to that other Person in the ordinary course of business.
The amount of any Investment shall be the original cost of such Investment,
PLUS the cost of all additions thereto, without any adjustments for increases
or decreases in value, or write-ups, write-downs or write-offs with respect
to such Investment.
"LEASE" means any agreement, oral or written, relating to the leasing
or occupancy of any Real Property.
"LENDER" is defined in the Preamble, subject to Section 8.5.2..
"LIBOR" shall mean, for any Interest Period, the rate per annum
determined by the Lender to the rate at which deposits in U.S. Dollars are
offered to prime banks in the London interbank eurodollar market at
approximately 11:00 a.m. (London, England time) on the date which is two (2)
Business Days before the first day of such Interest Period for a one (1)
month period, as quoted on Telerate page 3750 or on such replacement system
as is then customarily used to quote the London interbank offered rate. If
two or more such rates appear on Telerate page 3750 or associated pages, the
applicable rate shall be the arithmetic mean of such offered rates. Each
determination of the LIBOR shall be conclusive and binding absent manifest
error.
"LIEN" means any lien, mortgage, pledge, security interest, charge,
or encumbrance of any kind (including any conditional sale or other title
retention agreement or any lease in the nature thereof) and any agreement to
give or refrain from giving any lien, mortgage, pledge, security interest,
charge, or other encumbrance of any kind.
"LOAN DOCUMENTS" means, collectively, this Agreement, the Security
Documents, the Notes and any other agreement, instrument or other writing
executed or delivered by the Borrower in connection herewith from time to
time, and all amendments, exhibits and schedules to any of the foregoing.
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"MARGIN REGULATIONS" means Regulations G, U and X of the Federal
Reserve Board, as amended from time to time.
"MARGIN STOCK" means "margin stock" as defined in Regulation U.
"MATERIAL", "MATERIAL ADVERSE EFFECT" or "MATERIAL ADVERSE CHANGE"
means (i) a condition or event material to, (ii) a material adverse effect on
or (iii) a material adverse change in, as the case may be, any one or more of
the following: (A) the business, assets, results of operations, financial
condition or prospects of the Borrower or the Borrower and its Consolidated
Subsidiaries taken as a whole or (B) the ability of the Borrower to perform
its obligations under any Loan Document to which it is a party.
"MATERIAL ENVIRONMENTAL EVENT" means, with respect to any Real
Property, (i) a violation of any Environmental Requirement or (ii) the
presence of Hazardous Materials on, about or under such Real Property that,
under or pursuant to any Environmental Requirement, would require remediation
if, in any such case, the total cost to the Borrower and its Subsidiaries of
remedying such violation of such Environmental Requirement or remediating
such Hazardous Materials reasonably could be expected to exceed $250,000.
"MATERIAL LEASE" means any Lease (or group of leases at any single
Property to Affiliates of a Person) demising 3,000 square feet or more.
"MATURITY DATE" means November 18, 1998, as such date may be extended
in accordance with the terms hereof.
"MORTGAGES" shall mean, collectively, each (i) mortgage, deed of
trust, assignment of rents, security agreement and fixture filing and similar
instrument executed by the Borrower in favor of the Lender and, in the case
of a deed of trust, the trustee, acting for the benefit of the Lender, (ii)
assignment of lessor's interest in leases and rents executed by the Borrower
in favor of the Lender, (iii) assignment of agreements, permits and contracts
executed by the Borrower in favor of the Lender, and (iv) financing
statements executed by the Borrower in favor of the Lender, in each case
covering the Collateral Properties as security for the Secured Advances,
including, without limitation, the Initial Properties, in substantially the
form of EXHIBIT E attached hereto with such changes thereto as the Lender may
reasonably require to conform such security instrument to the form
customarily used in the jurisdiction in which a Collateral Property is
located, as such may be modified and supplemented and in effect from time to
time.
"MULTIEMPLOYER PLAN" means a "multiemployer plan" as defined in
Section 3(37) and Section 4001(a)(3) of ERISA to which the Borrower or any of
its ERISA Affiliates is making or accruing an obligation to make
contributions or to which any such Person has made or accrued an obligation
to make contributions.
"NAREIT" means the National Association of Real Estate Investment
Trusts.
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"NOTE" means a Secured Revolving Note or an Unsecured Revolving Note,
as the case may be.
"NOTICE OF BORROWING" is defined in Section 2.1.3.
"OBLIGATIONS" means all present and future obligations and
liabilities of the Borrower of every type and description arising under or in
connection with this Agreement, the Mortgages, the Notes and the other Loan
Documents due or to become due to the Lender or any Person entitled to
indemnification, or any of the Lender's successors or permitted transferees,
whether for principal, interest, Fees, expenses, indemnities or other amounts
(including attorneys' fees and expenses) and whether due or not due, direct
or indirect, joint or several, absolute or contingent, voluntary or
involuntary, liquidated or unliquidated, determined or undetermined, and
whether now or hereafter existing, renewed or restructured, whether or not
from time to time decreased or extinguished and later increased, created or
incurred, whether or not arising after the commencement of a proceeding under
the Bankruptcy Code (including post-petition interest) and whether or not
allowed or allowable as a claim in any such proceeding, and whether or not
recovery of any such obligation or liability may be barred by a statute of
limitations or such obligation or liability may otherwise be unenforceable.
"PENSION PLAN" means any pension plan subject to Title IV of ERISA
including a Multiemployer Plan and any money purchase pension plan subject to
the funding requirements of Section 412 of the Code.
"PERMITTED INVESTMENTS" means (i) marketable direct obligations
issued or unconditionally guaranteed by the United States Government or
issued by any agency thereof and backed by the full faith and credit of the
United States, in each case maturing within one year from the date of
acquisition thereof, (ii) marketable direct obligations issued by any state
of the United States or any political subdivision of any such state or any
public instrumentality thereof maturing within one year from the date of
acquisition thereof and having, at the time of acquisition, the highest
rating obtainable from either Standard & Poor's Ratings Group, a division of
McGraw-Hill Inc., or Moody's Investors Service, Inc., (iii) commercial paper
having, at the time of acquisition, the highest rating obtainable from either
Standard & Poor's Ratings Group, a division of McGraw-Hill Inc., or Moody's
Investors Service, Inc., (iv) certificates of deposit, other time deposits,
and bankers' acceptances maturing within one year from the date of
acquisition thereof issued by any bank operating under the laws of the United
States or any state thereof or the District of Columbia that has combined
capital and surplus of not less than $500,000,000, or (v) institutional money
market funds organized under the laws of the United States of America or any
state thereof that invest solely in any of the Investments permitted under
the foregoing clauses (i), (ii), (iii), and (iv).
"PERSON" means an individual, a corporation, a partnership, a limited
liability company, a trust, an unincorporated organization or any other
entity or organization,
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including a government or any agency or political subdivision thereof and,
for the purpose of the definition of "ERISA Affiliate", a trade or business.
"PLAN" means any pension, retirement, disability, defined benefit,
defined contribution, profit sharing, deferred compensation, employee stock
ownership, employee stock purchase, health, life insurance, or other employee
benefit plan or arrangement, irrespective of whether any of the foregoing is
funded, maintained or contributed to by the Borrower or any of its ERISA
Affiliates.
"POST-DEFAULT RATE" means, at any time, a rate per annum equal to the
Applicable LIBO Rate in effect at such time PLUS 5%.
"PROHIBITED TRANSACTION" means a transaction that is prohibited under
Section 4975 of the Code or Section 406 or 407 of ERISA and not exempt under
Section 4975 of the Code or Section 408 of ERISA.
"PROPERTIES" means, at any time, all Real Properties in the
Unencumbered Pool or the Collateral Pool, and "Property" means any of such
Real Properties.
"PROPERTY EXPENSES" means, for any Real Property, for any
twelve-month period, all operating expenses relating to such Real Property in
such period determined in accordance with GAAP, adjusted to exclude (to the
extent otherwise included in the determination thereof) Debt Service and
depreciation and amortization expense.
"PROPERTY INCOME" means, for any Real Property, for any period, all
gross revenue from the ownership or operation of such Real Property (but
excluding (x) income from a sale or other capital transaction, (y) proceeds
of business interruption insurance, and (z) tenant security deposits (except,
and to the extent, that such security deposits are forfeited and applied to
pay the forfeiting tenant's obligations under a Lease)), service fees and
charges (other than amounts paid to a merchants' association or promotional
association) and all Recoveries in such period.
"PROPERTY NOI" means, for any Real Property for any twelve-month
period, (i) Property Income for such period MINUS (ii) Property Expenses for
such period.
"PROPERTY-SPECIFIC BREACH" means a breach of a representation or
warranty or an affirmative covenant set forth in this Agreement or any other
Loan Documents with respect to a Property, which breach would not be a
Default or an Event of Default hereunder if such Property were not in the
Collateral Pool or in the Unencumbered Pool and, in the case of a Collateral
Property, if Borrower had not executed and delivered a Mortgage with respect
to such Property.
"PROPERTY-SPECIFIC EVENT" means (i) a condition or event material to,
(ii) a material adverse effect on or (iii) a material adverse change
affecting, the results of operations or prospective Adjusted Property NOI or
Property NOI of any Property such
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that, at any time and in the Lender's reasonable judgment, the Adjusted
Property NOI or Property NOI for such Property as determined at any time in
the twelve-month period after such time is likely to be materially less than
the Adjusted Property NOI or Property NOI for such Property as determined at
such time.
"RATE REDUCTION DATE" means the first date on which the Borrower has
consummated permanent mortgage financing of Real Properties in which the
Lender or an Affiliate of the Lender is lender in an aggregate principal
amount that equals or exceeds $50,000,000.
"RATING AGENCY" shall mean any rating agency or agencies selected by
the Lender from time to time, including, but not limited to, Standard &
Poor's Ratings Group, a division of McGraw-Hill Inc., Moody's Investors
Service, Inc., Duff & Phelps Credit Rating Co. and Fitch Investors Service
Inc.
"REAL PROPERTIES" means the parcels (or portions thereof) of real
property, improvements and fixtures thereon and appurtenances thereto now or
hereafter owned by the Borrower or in which it has a subsisting ground
leasehold interest; and "Real Property" means any of them.
"RECOVERIES" means, with respect to any Retail Property, all amounts
paid by tenants under leases of all or a portion of such Retail Property for
reimbursement of amounts expended (or deemed expended) by the Borrower with
respect to such Retail Property, in all cases excluding scheduled monthly
base rent and percentage rent, refundable deposits and amounts paid to
merchant's associations.
"REGULATION G" means Regulation G of the Federal Reserve Board, as
amended from time to time.
"REGULATION U" means Regulation U of the Federal Reserve Board, as
amended from time to time.
"REGULATION X" means Regulation X of the Federal Reserve Board, as
amended from time to time.
"RESPONSIBLE OFFICER" is defined in Section 2.1.3.2.
"RESTRICTED PAYMENT" means (i) any dividend or other distribution,
direct or indirect, on account of any Capital Stock of the Borrower or any
Subsidiary now or hereafter outstanding, except (a) a dividend or other
distribution payable solely in shares of Capital Stock of the Borrower or
such Subsidiary, as the case may be, (b) the issuance of equity interests
upon the exercise of outstanding warrants, options or other rights, and (c) a
dividend or distribution on account of Capital Stock of a Subsidiary (A) that
is paid to the Borrower or a Subsidiary, or (B) that is made PRO RATA to all
holders of Capital Stock of such Subsidiary, or (C) that is paid to any
Person as required under any
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document or instrument governing the rights or preferences of such Capital
Stock as in effect at the time such Person first acquires such Capital Stock
(or any Capital Stock in respect of which such Capital Stock is issued), (ii)
any redemption, retirement, sinking fund or similar payment, repurchase or
other acquisition for value, direct or indirect, of any Capital Stock of the
Borrower or any Subsidiary now or hereafter outstanding, except (x)
conversion of Capital Stock of a Subsidiary into Capital Stock of the
Borrower and (y) redemption or repurchase of Capital Stock of a Subsidiary
from a Person that holds a minority interest in such Subsidiary that is
required under any document or instrument governing the rights and
preferences of such Capital Stock as in effect at the time such Person first
acquires such Capital Stock (or any Capital Stock in respect of which such
Capital Stock is issued).
"RETAIL PROPERTY" means any Real Property that is (w) a neighborhood
or community shopping center, whether or not there is an anchor tenant, (x) a
factory outlet center, or (y) a promotional or power center, or (z) an
entertainment center.
"SEC" means the United States Securities and Exchange Commission, and
any successor.
"SECURED ADVANCE" is defined in Section 2.1.1..
"SECURED OVERDRAW" is defined in Section 2.7.2.
"SECURED REVOLVING COMMITMENT" means the amount set forth as the
Lender's "Secured Revolving Commitment" on SCHEDULE 1.1A, as reduced or
terminated from time to time pursuant to the terms hereof.
"SECURED REVOLVING NOTE" means the Secured Revolving Note made
payable to the order of the Lender, in substantially the form of EXHIBIT A-1
hereto, as amended from time to time.
"SENIOR OFFICER" means, with respect to the Borrower, the Chairman of
the Board of Directors, the President, the Chief Executive Officer, the Chief
Operating Officer or the Chief Financial Officer of the Borrower.
"SINGLE EMPLOYER PLAN" means a Plan other than a Multiemployer Plan.
"SUBSIDIARY" shall mean any (i) corporation of which at least a
sufficient number of the outstanding shares of stock having by the terms
thereof ordinary voting power to elect a majority of the board of directors
of such corporation (irrespective of whether or not at the time stock of any
other class or classes of such corporation shall have or might have voting
power by reason of the happening of any contingency) is at the time directly
or indirectly owned or controlled by the Borrower or one or more of the
Borrower's other Subsidiaries or (ii) partnership or other entity with
respect to which the Borrower has possession, directly or indirectly, of the
power to direct or cause the direction of
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management or policies of such partnership or other entity. "WHOLLY-OWNED
SUBSIDIARY" shall mean any such Subsidiary of which all of the equity, other
than directors' qualifying shares, is so owned or controlled by the Borrower.
"TEN-YEAR TREASURY RATE" means, as of any date of determination, the
yield of United States Treasury Constant Maturities with a term most nearly
approximating that of noncallable United States Treasury obligations having a
maturity as close as possible to ten (10) years from the date of
determination as determined by Lender on the basis of Federal Reserve
Statistical Release H.15-Selected Interest Rates under the heading U.S.
Governmental Security/Treasury Constant Maturities, or other recognized
source of financial market information selected by Lender for the week prior
to the date of determination.
"TOTAL CAPITALIZATION" means, with respect to the Borrower, at any
time, the sum of (i) the product of (x) the last closing sale price prior to
such time of shares of each class of Capital Stock of the Borrower that is
publicly traded, on the principal stock exchange on which shares of such
class of Capital Stock are listed, MULTIPLIED BY (y) the number of shares of
Capital Stock of such class that are issued and outstanding at such time,
PLUS (ii) the aggregate stockholders' equity attributed to shares of each
class of Capital Stock of the Borrower that is not publicly traded, as
reflected in the most recent consolidated balance sheet of the Borrower
delivered to the Lender pursuant to Section 5.1 hereof, PLUS (iii) the
aggregate principal amount of Debt of the Borrower and its Consolidated
Subsidiaries outstanding at such time.
"UNENCUMBERED ASSET" means any Real Property that satisfies all of
the following conditions:
(i) fee simple title to, or a ground leasehold interest in, such Real
Property is held by the Borrower, free and clear of any Lien (other than (a)
easements, covenants, and other restrictions, charges or encumbrances not
securing Debt that do not interfere materially with the ordinary operations
of the property and do not materially detract from the value of the property;
(b) building restrictions, zoning laws and other Applicable Laws, (c) leases
and subleases of the property in the ordinary course of business, (d)
property taxes not yet delinquent; and (e) involuntary Liens that secure
obligations being contested in good faith by appropriate proceedings and with
respect to which the Borrower has, within thirty (30) days after the
attachment of such Lien, recorded or obtained a bond or other security which
has the effect of removing such Lien under Applicable Law (the Liens referred
to in clauses (a), (b), (c) and (d) being referred to as "Permitted
Encumbrances"));
(ii) the Borrower has delivered to the Lender a certificate to the
effect that (x) to the best of the Borrower's knowledge, no Material
Environmental Event has occurred and is continuing with respect to such Real
Property; and (y) in the event that a property condition report with respect
to such Real Property was prepared for the Borrower within 12 months
preceding the time that such Real Property becomes an Unencumbered Asset,
such report reflects no material deferred maintenance requirements for such
Real Property,
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and, in any case, the Borrower knows of no material deferred
maintenance requirements for such Real Property;
(iii) the Real Property has been expressly approved by the Lender in
writing as eligible for inclusion in the Unencumbered Pool in its reasonable
discretion or has been deemed approved by the Lender pursuant to Section
5.13(c) hereof; and
(iv) the Real Property has been designated by the Borrower as an
Unencumbered Asset.
Unless the Borrower shall have notified the Lender to the contrary,
the Real Properties listed as "Unencumbered Assets" in the Compliance
Certificate most recently delivered to the Lender shall be considered
designated by the Borrower as Unencumbered Assets pursuant to clause (iv)
above. As of the Effective Date, all of the Real Properties that have been
approved by the Lender as eligible for inclusion in the Unencumbered Pool
pursuant to clause (iii) above are set forth on SCHEDULE 1.1C.
"UNENCUMBERED ASSET VALUE" means, at any time, the sum of the Asset
Values at such time of all of the Unencumbered Assets that then are in the
Unencumbered Pool.
"UNENCUMBERED POOL" means, at any time, the pool of Unencumbered
Assets at such time, but excluding any such Property with respect to which
notice has been given pursuant to Section 5.13(a) for as long as required by
Section 5.13(b).
"UNSECURED ADVANCE" is defined in Section 2.1.1..
"UNSECURED REVOLVING COMMITMENT" means the amount set forth as the
Lender's "Unsecured Revolving Commitment" on SCHEDULE 1.1A, as reduced or
terminated from time to time pursuant to the terms hereof.
"UNSECURED REVOLVING NOTE" means the Unsecured Revolving Note made
payable to the order of the Lender, in substantially the form of EXHIBIT A-2
hereto, as amended from time to time.
SECTION 1.2. RELATED MATTERS.
1.2.1. CONSTRUCTION. Unless the context of this Agreement
clearly requires otherwise, references to the plural include the singular,
the singular includes the plural, the part includes the whole, "including" is
not limiting, and "or" has the inclusive meaning represented by the phrase
"and/or". The words "hereof", "herein", "hereby", "hereunder" and similar
terms in this Agreement refer to this Agreement as a whole (including the
Preamble, the Schedules and the Exhibits) and not to any particular provision
of this Agreement. Article, section, subsection, exhibit, schedule, recital
and preamble references in this Agreement are to this Agreement unless
otherwise specified. References in this Agreement to any agreement, other
document or law "as amended" or
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"as amended from time to time", or to amendments of any document or law,
shall include any amendments, supplements, replacements, renewals, waivers or
other modifications. References in this Agreement to any law (or any part
thereof) include any rules and regulations promulgated thereunder (or with
respect to such part) by the relevant Governmental Authority, as amended from
time to time.
1.2.2 DETERMINATIONS. Any determination or calculation
contemplated by Section 2.3.2 of this Agreement that is made by the Lender
shall be final and conclusive and binding upon the Borrower, in the absence
of manifest error. References in this Agreement to any "determination" by
the Lender include good faith estimates by the Lender (in the case of
quantitative determinations), and good faith beliefs by the Lender (in the
case of qualitative determinations). All references herein to "discretion"
of the Lender (or terms of similar import) shall, unless otherwise expressly
provided in respect of any particular determination, mean "absolute and sole
discretion". All consents and other actions of the Lender contemplated by
this Agreement may be given, taken, withheld or not taken in the Lender's
discretion (whether or not so expressed), except as otherwise expressly
provided herein.
1.2.3. ACCOUNTING TERMS AND DETERMINATIONS. Unless
otherwise specified herein, all accounting terms used herein shall be
interpreted, all accounting determinations hereunder shall be made, and all
financial statements required to be delivered hereunder shall be prepared on
a consolidated basis in accordance with GAAP applied on a basis consistent
(except for changes that the independent public accountants of the Borrower
deem necessary in order to allow them to render an unqualified opinion to the
Borrower and for changes that are not deemed so necessary but are concurred
in by such independent public accountants and the Lender) with the audited
consolidated financial statements of the Borrower and its Consolidated
Subsidiaries referred to in Section 4.5.1.
ARTICLE 2.
AMOUNT AND TERMS OF THE CREDIT FACILITIES
SECTION 2.1. CREDIT FACILITIES.
2.1.1. COMMITMENTS AND ADVANCES. Upon the terms and subject to
the conditions set forth in this Agreement, the Lender hereby agrees, at any
time from and after the Effective Date until the Business Day next preceding
the Maturity Date, to make advances that are secured by the Lien of the
Mortgages on the Collateral Properties (each, a "SECURED ADVANCE,") to the
Borrower in an aggregate principal amount not to exceed, at any time
outstanding, the lesser of (x) the Available Amount at such time or (y) the
Secured Revolving Commitment. The Lender also agrees, at any time and from
and after the Effective Date until the Business Day next preceding the
Maturity Date, upon the terms and subject to the conditions set forth in this
Agreement, to make unsecured advances (each, an "UNSECURED ADVANCE") to the
Borrower in an aggregate principal
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amount not to exceed at any time outstanding the Unsecured Revolving
Commitment. Advances may be voluntarily prepaid and, subject to the
provisions of this Agreement, any amounts so prepaid may be re-borrowed, up
to the amount available under this Section 2.1.1 at the time of such
re-borrowing.
2.1.2. MINIMUM AMOUNTS. Advances made under this
Section 2.1 shall be in a minimum amount of $500,000 and integral multiples
of $250,000 in excess thereof.
2.1.3. NOTICE OF BORROWING.
2.1.3.1. When the Borrower desires to borrow pursuant to
Section 2.1, it shall deliver to the Lender a Notice of Borrowing in
substantially the form of EXHIBIT B, duly completed and executed by a
Responsible Officer (a "NOTICE OF BORROWING"), no later than 10:00 a.m.
(California time) at least two (2) Business Days before the proposed Funding
Date. Each Notice of Borrowing shall specify whether the requested Advance is
to be a Secured Advance or an Unsecured Advance.
2.1.3.2. The Borrower shall notify the Lender of the
names of its officers and employees authorized to request and take other
actions with respect to Advances on behalf of the Borrower (each a
"RESPONSIBLE OFFICER") and shall provide the Lender with a specimen signature
of each such officer or employee. The Lender shall be entitled to rely
conclusively on a Responsible Officer's authority to request and take other
actions with respect to Advances on behalf of the Borrower until the Lender
receives written notice to the contrary. The Lender shall have no duty to
verify the authenticity of the signature appearing on any Notice of Borrowing.
2.1.4. FUNDING. Subject to and upon satisfaction of the
applicable conditions set forth in Article 3 as determined by the Lender as
set forth therein, the Lender shall make the proceeds of the requested
Advances available to the Borrower in Dollars by transferring immediately
available funds to such account as from time to time may be designated by the
Borrower.
Section 2.2. USE OF PROCEEDS. The proceeds of the Advances shall be
used by the Borrower for general corporate purposes, including, without
limitation, redemption of the Convertible Debentures, refinancing secured or
unsecured Debt, payment of loan fees (including, without limitation, fees in
respect of the Advances pursuant to Section 2.5), property development costs,
property acquisition costs, capital improvements and working capital, in each
case to the extent otherwise permissible hereunder. No part of the proceeds
of the Advances shall be used directly or indirectly for the purpose, whether
immediate, incidental or ultimate, of purchasing or carrying any Margin Stock
or maintaining or extending credit to others for such purpose or for any
other purpose that otherwise violates the Margin Regulations.
SECTION 2.3. INTEREST.
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2.3.1. INTEREST RATE.
2.3.1.1. So long as no Event of Default exists, the
unpaid principal amount of all Advances shall bear interest at the Applicable
LIBO Rate.
2.3.1.2. During such time as an Event of Default
exists (whether or not the Obligations have then become due and payable by
acceleration) and from and after the Maturity Date, the interest rate
applicable to the then outstanding principal balance of all Advances shall be
the Post-Default Rate.
2.3.2. DETERMINATION OF RATE. The Lender shall, on the second
Business Day preceding the first day of each Interest Period, determine the
Applicable LIBO Rate for such Interest Period.
2.3.3. PAYMENT OF INTEREST. Accrued interest shall be due and
payable in arrears on each Interest Payment Date and on the Maturity Date;
PROVIDED that, if the Rate Reduction Date occurs, the Borrower shall receive
a credit in respect of interest payable on Unsecured Advances in an amount
equal to the positive difference between (x) the aggregate amount of interest
accrued on the Unsecured Advances outstanding from time to time from the
Effective Date to, and including, the Rate Reduction Date at the rates
applicable to Unsecured Advances prior to the Rate Reduction Date in
accordance with the terms hereof, LESS (y) the aggregate amount of interest
that would have accrued on Unsecured Advances outstanding from time to time
from the Effective Date to, and including, the Rate Reduction Date at the
rates that would have been in effect if the Rate Reduction Date had occurred
on the Effective Date. The credit referred to in the preceding sentence
shall be applied to reduce the amount of interest on Unsecured Advances
payable on each Interest Payment Date that occurs after the Rate Reduction
Date, on successive Interest Payment Dates or on the Maturity Date, until
such credit is utilized in full (and any unutilized credit remaining on the
Maturity Date shall be applied first to reduce the then outstanding principal
amount of Unsecured Advances and then to reduce the then outstanding
principal amount of Secured Advances).
2.3.4. COMPUTATIONS. Interest on the Advances and other amounts
payable hereunder or the other Loan Documents shall be computed on the basis
of a 360-day year and the actual number of days elapsed.
2.3.5. MAXIMUM LAWFUL RATE OF INTEREST. The rate of interest
payable on any Advances or other amount shall in no event exceed the maximum
rate permissible under Applicable Law. If the rate of interest payable on
any Advances or other amount is ever reduced as a result of this Section and
at any time thereafter the maximum rate permitted by Applicable Law shall
exceed the rate of interest provided for in this Agreement, then the rate
provided for in this Agreement shall be increased to the maximum rate
provided by Applicable Law for such period as is required so that the total
amount of interest received by the Lender is that which would have been
received by the Lender but for the operation of the first sentence of this
Section.
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SECTION 2.4. NOTE, ETC.
2.4.1. ADVANCES EVIDENCED BY NOTE. The Secured Advances made by
the Lender shall be evidenced by the Secured Revolving Note. The Unsecured
Advances made by the Lender shall be evidenced by the Unsecured Revolving
Note. Each Note shall be dated the Effective Date and stated to mature in
accordance with the provisions of this Agreement.
2.4.2. NOTATION OF AMOUNTS AND MATURITIES, ETC. The Lender is
hereby irrevocably authorized to record on the schedule attached to the Notes
(or a continuation thereof) the information contemplated by such schedule.
The failure to record, or any error in recording, any such information shall
not, however, affect the obligations of the Borrower hereunder or under any
Note to repay the principal amount of the Advances evidenced thereby,
together with all interest accrued thereon. All such notations shall
constitute prima facie evidence of the accuracy of the information so
recorded.
SECTION 2.5. FEES.
2.5.1. On the Effective Date, the Borrower shall pay to the
Lender any unpaid portion of the Structuring Fee (as defined in the
Commitment Letter dated September 25, 1996 signed by the Lender and accepted
by the Borrower).
2.5.2. On each Funding Date, the Borrower shall pay to the
Lender a fee in an amount equal to 0.25% of the principal amount of the
Advances made by the Lender on such Funding Date.
2.5.3. Upon extension of the Maturity Date pursuant to Section
2.6.2, the Borrower shall pay to the Lender an extension fee (the "Extension
Fee") equal to .50% of the aggregate Commitments.
2.5.4. All Fees shall be fully earned when payable hereunder
and under the Fee Letter and shall be non-refundable.
2.5.5. The Borrower hereby grants to the Lender a right of
first refusal with respect to any proposed financing or refinancing of any
Real Property owned by the Borrower or any Affiliate of the Borrower. Within
ten (10) days after the Borrower has determined that it intends (or its
Affiliate intends) to finance or refinance any of such Real Properties, the
Borrower shall notify the Lender of such intent. In the event that, after
discussions with the Lender, the Borrower desires to seek bona fide financing
proposals from third parties with respect to such Real Property, the Borrower
shall inform the Lender as to the material terms of any such proposal. If
the Borrower indicates to the Lender that the Borrower intends to accept (or
thereafter accepts) any of such proposals (an "Acceptable Proposal"), the
Borrower shall so inform the Lender and, if the Lender indicates that it
intends to match such Acceptable Proposal but requires written verification
thereof, then the Borrower shall obtain a written definitive proposal from a
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bona-fide third party lender, and the Borrower shall thereupon send a copy of
such written proposal to the Lender. The Lender shall have ten (10) days
after receipt of such written proposal to elect to agree to finance such Real
Property upon the terms described in such written definitive proposal with no
material deviations therefrom. If the Lender agrees to finance such Real
Property on the terms described in such written proposal with no material
deviations therefrom, then the Borrower shall, or shall cause its Affiliate
to, if Borrower elects to proceed with such financing, consummate such
financing with reasonable diligence, subject to satisfaction of the
conditions precedent in such written proposal and the Lender's reasonable and
customary conditions precedent. In the event that the Lender fails to so
elect in writing in such ten (10) day period to finance such Real Property or
indicates that it does not intend to match such Acceptable Proposal, then the
Lender shall be deemed to have elected not to so finance such Real Property.
In such event, the Borrower (or such Affiliate of the Borrower, as the case
may be), shall have a period of ninety (90) days in which to consummate the
financing described in such written definitive proposal or Acceptable
Proposal, as applicable, with such Person with respect to such Real Property.
If either (i) such transaction is not so consummated on or prior to the
conclusion of such ninety (90) day period with such Person, or (ii) there are
material changes to the terms of the financing set forth in such definitive
written proposal or Acceptable Proposal, as applicable (with any increase in
interest rate or spread, reduction in proceeds, increase in fees (other than
reimbursements), or shortening of final maturity being conclusively deemed
material), then the financing of such Real Property shall again be subject to
Lender's right of first refusal, and the Borrower shall thereafter again be
obligated to comply with this Section 2.5.5 with respect to such Real
Property as set forth herein. The foregoing right of first refusal shall
expire upon the later to occur of the indefeasible satisfaction of the
Obligations or the Maturity Date (or any extension thereof pursuant hereto).
SECTION 2.6. TERMINATION, REDUCTION AND EXTENSION OF COMMITMENT.
2.6.1. The Lender's Commitments shall terminate without
further action on the part of the Lender on the Maturity Date unless such
Maturity Date is extended pursuant to Section 2.6.2. In addition, the
Commitments shall terminate in accordance with Section 7.3.
2.6.2. The Borrower may, by written notice to the Lender not
less than 60 days and not more than 120 days before the Maturity Date,
request that the Maturity Date be extended to the date that is one year
following the Maturity Date; PROVIDED that the Maturity Date may be so
extended only one time. If the Borrower shall so request such an extension,
the Maturity Date shall be automatically extended to the date that is one
year following the Maturity Date; PROVIDED that no such extension shall be
effective unless (a) no Default or Event of Default shall exist either on the
date of the notice requesting such extension or on the Maturity Date then in
effect, (b) each of the representations and warranties of the Borrower set
forth in the Loan Documents shall be true and complete in all material
respects on and as of each such date with the same force
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and effect as if made on and as of each such date (or, if any such
representation or warranty is expressly stated to have been made as of a
specific date, as of such specific date) and (c) the Borrower has paid the
Extension Fee to the Lender.
2.6.3. The Borrower shall have the right, at any time or from
time to time after the Effective Date, to terminate in whole or permanently
reduce in part, without premium or penalty, the unused Secured Revolving
Commitment or unused Unsecured Revolving Commitment to an amount not less
than the aggregate principal amount of Secured Advances or Unsecured
Advances, respectively, outstanding at such time, by giving the Lender
written notice of such termination or reduction and the amount of any partial
reduction. Any such termination or partial reduction shall be irrevocable
and shall be effective on the date specified in the Borrower's notice and
shall be in a minimum amount of $250,000 and an integral multiple thereof.
SECTION 2.7. REPAYMENTS AND PREPAYMENTS.
2.7.1. REPAYMENT. The unpaid principal amount of all Advances
shall be paid in full on the Maturity Date.
2.7.2. MANDATORY PREPAYMENT OF EXCESS ADVANCES. If at any time
the outstanding principal amount of all Secured Advances exceeds that lesser
of (v) the then Available Amount or (w) the Secured Revolving Commitment
(such excess shall be referred to herein as the "Secured Overdraw"), the
Borrower shall, no later than the third Business Day after which the Borrower
learns or is notified of the excess, make mandatory prepayments of the
Secured Advances to the extent necessary such that, after such repayment,
such excess is eliminated; provided, however, that if the only Default or
Event of Default hereunder at such time is such excess outstanding balance of
Secured Advances, and if at such time the positive amount obtained by
subtracting (x) the outstanding principal balance of the Unsecured Advances
from (y) the Unsecured Revolving Commitment, exceeds the Secured Overdraw,
then upon satisfaction of the conditions precedent herein to the making of an
Unsecured Advance (other than the two (2) Business Day advance notice
requirement of Section 2.1.3.1 hereof) on or prior to the expiration of such
three (3) Business Day period, the Lender shall be deemed to have made, and
the Borrower shall be deemed to have borrowed, an Unsecured Advance in the
amount of the Secured Overdraw, the proceeds of which shall be deemed to have
been applied to repay Secured Advances. If at any time the outstanding
principal amount of all Unsecured Advances exceeds the Unsecured Revolving
Commitment, the Borrower shall, on the third Business Day after the Borrower
learns or is notified of the excess, make mandatory prepayments of the
Unsecured Advances to the extent necessary such that, after such repayment,
such excess is eliminated.
2.7.3. OPTIONAL PREPAYMENT. The Borrower may, at any time and
from time to time, prepay the Advances, in each case in the minimum amount of
$250,000 (or in such lesser amount of Secured Advances or Unsecured Advances
as may be outstanding at the time of such a prepayment) and integral
multiples of $250,000 in excess thereof,
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and, upon the terms and subject to the conditions hereof, reborrow Advances.
The Borrower shall specify, as to each optional prepayment pursuant to this
Section 2.7.3, whether such prepayment is to be applied to outstanding
Secured Advances or Unsecured Advances.
2.7.4. MANDATORY PREPAYMENT IN CERTAIN EVENTS. If the Borrower
at any time (x) sells or otherwise disposes of any Real Property, (y) issues
and sells any shares of Capital Stock or (z) incurs any Debt described in
clause (i) or (ii) of the definition of the term "Debt", and receives net
cash proceeds equal to or in excess of the minimum prepayment amount
specified in Section 2.7.3, then the Borrower shall give written notice
thereof to the Lender and, if such net cash proceeds are not invested or
reinvested within 20 Business Days in a manner not prohibited by Section 6.1,
then upon request therefor by the Lender, the Borrower shall apply the
remaining uninvested net cash proceeds of such sale, issuance or incurrence
received by the Borrower to repay any outstanding Unsecured Advances.
2.7.5. REPAYMENT ON RECONVEYANCE OF COLLATERAL POOL. If at any
time there is no Collateral Property (or the Collateral Pool is not deemed to
contain any Collateral Property), upon written demand by Lender the Borrower
shall thereupon repay the then outstanding principal amount of Unsecured
Advances, together with all accrued and unpaid interest thereon, and the
Commitments shall terminate.
2.7.6. REINSTATEMENT. To the extent the Lender receives payment
of any amount under the Loan Documents, whether by way of payment by the
Borrower, set-off or otherwise, which payment is subsequently invalidated,
declared to be fraudulent or preferential, set aside or required to be repaid
to a trustee, receiver or any other party under any bankruptcy law, other law
or equitable cause, in whole or in part, then, to the extent of such payment
received, the Obligations or part thereof intended to be satisfied thereby
shall be revived and continue in full force and effect as if such payment had
not been received by the Lender.
SECTION 2.8. MANNER OF PAYMENT. Except as otherwise expressly
provided, the Borrower shall make each payment hereunder or under the other
Loan Documents to the Lender in Dollars and in immediately available funds,
without any deduction for any set-off, recoupment, counterclaim, taxes or tax
withholding or otherwise, not later than 11:00 a.m. (California time) on the
due date thereof. Any payments received after 11:00 a.m. (California time)
on any Business Day shall be deemed received on the next succeeding Business
Day. Whenever any payment to be made hereunder shall be due on a day that is
not a Business Day, such payment shall instead by made on the next succeeding
Business Day. Delivery shall be made in accordance with the written
instructions from time to time given to the Borrower by the Lender.
ARTICLE 3.
CONDITIONS PRECEDENT TO ADVANCES
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SECTION 3.1. CONDITIONS PRECEDENT TO EFFECTIVE DATE. The occurrence
of the Effective Date and the obligation of the Lender to make any Advances
on any Funding Date shall be subject to the satisfaction of the following
conditions precedent:
3.1.1. EFFECTIVE DATE. The Effective Date shall occur on or
before November 30, 1996.
3.1.2. CERTAIN DOCUMENTS. The Lender shall have received the
documents listed on SCHEDULE 3.1.2, all of which shall be in form and
substance satisfactory to the Lender.
3.1.3. FEES AND EXPENSES PAID. The Borrower shall have paid all
of the Fees and out-of-pocket expenses due and payable on or before the
Effective Date, including all reasonable legal fees and disbursements of the
Lender's counsel for which the Borrower shall have been billed on or prior to
such date.
3.1.4. COLLATERAL PROPERTY. The aggregate Adjusted Property NOI
of the Initial Properties that are Collateral Properties as determined on the
Effective Date shall be not less than $7,363,725.00.
3.1.5. GENERAL. All other documents and legal matters in
connection with the transactions contemplated by this Agreement shall have
been delivered or executed or recorded in form and substance reasonably
satisfactory to the Lender and the Lender shall have received all such
counterpart originals or certified copies thereof as the Lender may request.
SECTION 3.2. CONDITIONS PRECEDENT TO ADVANCES. The obligation of the
Lender to make any Advances on any Funding Date shall be subject to the
following conditions precedent:
3.2.1. EFFECTIVE DATE. The conditions precedent set forth in
Section 3.1 shall have been satisfied or waived in writing by the Lender
before the Notice of Borrowing is given.
3.2.2. NOTICE OF BORROWING. The Borrower shall have delivered
to the Lender, in accordance with the applicable provisions of this
Agreement, a Notice of Borrowing in respect of the proposed Advance.
3.2.3. AVAILABLE AMOUNT. In the case of a proposed Secured
Advance, the aggregate outstanding principal amount of Secured Advances
(after giving effect to the proposed Secured Advance) shall not be greater
than the lesser of (x) the Secured Revolving Commitment, or (y) Available
Amount.
3.2.4. PRO FORMA DEBT SERVICE COVERAGE RATIO. On the Funding
Date, the ratio of (i) EBITDA for the twelve (12) months immediately
preceding the Funding
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Date, to (ii) PRO FORMA Debt Service in respect of all Debt of the Borrower
and its Consolidated Subsidiaries outstanding on such Funding Date (including
the Advances proposed to be made on such Funding Date) for the twelve (12)
month period beginning on the first day of the first full month following
such Funding Date (assuming that all such Debt will remain outstanding for
the entire twelve-month period and will bear interest throughout such period
at the interest rate applicable thereto on the Funding Date), shall be not
less than 1.75 to 1.00.
3.2.5. PRO FORMA CONSOLIDATED TOTAL DEBT TO TOTAL
CAPITALIZATION OF THE BORROWER. On the Funding Date, after giving PRO FORMA
effect to the Advances proposed to be made on such Funding Date, the ratio of
Consolidated Total Debt to Total Capitalization of the Borrower shall not be
greater than 65.00%.
3.2.6. REPRESENTATIONS AND WARRANTIES. All of the
representations and warranties of the Borrower contained in the Loan
Documents shall be true and correct in all material respects on and as of the
Funding Date as though made on and as of that date (except to the extent that
such representations and warranties expressly were made only as of a specific
date).
3.2.7. NO DEFAULT. No Default or Event of Default shall exist
or result from the making of the Advance.
3.2.8. NO MATERIAL ADVERSE CHANGE. No Material Adverse Change
shall have occurred since September 30, 1996.
Each borrowing of an Advance shall constitute a
representation and warranty by the Borrower as of the Funding Date that the
conditions contained in Sections 3.2.1 through 3.2.8 have been satisfied.
SECTION 3.3. ADDITIONAL CONDITIONS PRECEDENT AND PROVISIONS
APPLICABLE TO CERTAIN ACQUISITION ADVANCES. In the event that the Borrower
desires to acquire a Retail Property that, once acquired, will qualify as a
Collateral Property and in connection therewith Borrower intends to request a
Secured Advance that would cause the aggregate outstanding principal amount
of Secured Advances to exceed the Available Amount, then the Lender shall
make such Secured Advance for the purpose of acquiring such Retail Property
if, in addition to satisfaction of all of the other conditions set forth in
this Agreement, all of the following conditions shall be satisfied as of the
Funding Date:
(i) The Borrower shall have delivered to the Lender the
information and documents required to be delivered under Section 3.4 as to
such Retail Property, and such Retail Property shall be approved as eligible
for inclusion in the Collateral Pool in accordance with Section 3.4.;
(ii) The Borrower shall have delivered to the Lender, together
with the Notice of Borrowing referred to in Section 3.2.2, a certificate, in
substantially the form of
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EXHIBIT C-3 (a "CERTIFICATE OF PROPERTY ACQUISITIONS") together with the
attachments referred to therein, executed by a Senior Officer of the
Borrower, describing the Retail Property to be acquired, designating such
Retail Property as a Collateral Property effective upon consummation of the
acquisition of such Retail Property, and setting forth the Available Amount
as if such Retail Property were a Collateral Property as of the date of such
Certificate of Property Acquisitions;
(iii) All statements set forth in the certificate referred to in
clause (ii) above shall be true and correct as of the date thereof and the
Funding Date;
(iv) The Borrower shall have provided to the Lender such
information as may be reasonably requested by the Lender in order to verify
the terms, timing and method of payment specified in the contract between the
Borrower, as purchaser of the Retail Property to be acquired, and the seller
of such property, or to determine compliance with this Section 3.3; and
(v) On the Funding Date, substantially contemporaneously with the
funding of such Secured Advance, all of the conditions precedent to
designation of such Retail Property as a Collateral Property shall be
satisfied, and such Retail Property shall be a Collateral Property.
SECTION 3.4. CONDITIONS PRECEDENT TO DESIGNATION OF A COLLATERAL
PROPERTY. Each Initial Property, and each other Retail Property designated in
a written notice delivered by the Borrower to the Lender, shall be a
Collateral Property upon satisfaction of the following conditions:
(i) LIENS OF THE MORTGAGES. A Mortgage shall constitute a valid
first mortgage lien on the fee simple title to (or the Borrower's leasehold
interest in a valid and subsisting ground lease of) the proposed Collateral
Property, which shall secure all of the Obligations, subject only to such
Liens as are acceptable to the Lender (including Permitted Encumbrances) that
are permitted by the express terms of the relevant Mortgage; and an amendment
to each existing Mortgage of record in favor of the Lender adding the
applicable Collateral Property to the collateral property subject to the lien
of the Mortgage(s); and the Borrower shall have delivered UCC-1 financing
statements covering fixtures owned or to be owned by the Borrower and affixed
to, or used in connection with, such proposed Collateral Property, in each
case appropriately completed and duly executed and delivered to the Lender
for filing in the appropriate county and state offices.
(ii) TITLE INSURANCE. The Lender shall have received policies of
title insurance on forms of, and issued by, one or more nationally-recognized
title insurance companies reasonably satisfactory to Lender (the "TITLE
COMPANY"), showing fee simple title or ground leasehold interest vested in
the Borrower with respect to such proposed Collateral Property and an
endorsement to all pre-existing title insurance policies in favor of the
Lender, in each case insuring the first priority of the Liens created under
the Mortgages
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insured thereby, with an aggregate liability of not less than the aggregate
principal balance of the Secured Advances, subject only to such Liens as are
acceptable to Lender or permitted by the express terms of the relevant
Mortgage (including Permitted Encumbrances), together with, as may be
reasonably required by the Lender, such reinsurance schedules and
endorsements (including, without limitation, tie-in endorsements) and
otherwise in form and substance reasonably satisfactory to the Lender. In
addition, the Borrower shall have paid to the Title Company (and shall have
delivered to the Lender evidence of such payment) all expenses of the Title
Company in connection with the issuance of such policies, reinsurance
schedules, endorsements and agreements and an amount equal to the recording
and stamp taxes (including, without limitation, mortgage recording taxes), if
any, payable in connection with recording the Mortgages in the appropriate
county land offices.
(iii) ENVIRONMENTAL AUDIT. The Lender shall be satisfied that (A)
there are no pending or threatened claims, suits, actions or proceedings
arising out of or relating to the existence of any Hazardous Materials at,
in, on or under the proposed Collateral Property, (B) the proposed Collateral
Property is in compliance with all applicable Environmental Requirements, and
(C) no Hazardous Materials exist at, in, on or under any Property except in
compliance with applicable Environmental Requirements. The Lender shall have
received, without limitation, (1) a comprehensive environmental audit of each
Property (which shall include, without limitation, a visual survey, a record
review, an area reconnaissance and a Phase I environmental study and, if the
Lender shall so request, a Phase II environmental study), satisfactory in
form and substance to the Lender, conducted and certified by a qualified,
independent environmental consultant within 12 months prior to the time such
Retail Property first becomes a Collateral Property, (2) evidence that all
required approvals from all governmental and quasi-governmental authorities
having jurisdiction with respect to the proposed Collateral Property, and (3)
such other environmental reports, inspections and investigations as the
Lender shall reasonably require, prepared, in each instance, by engineers or
other consultants reasonably satisfactory to the Lender.
(iv) INSURANCE. The Lender shall have received evidence of the
existence of all insurance required to be maintained by the Borrower pursuant
to the Loan Documents and the designation of the Lender as the loss payee or
additional insured, as applicable, thereunder to the extent required by the
Loan Documents, in form and substance specified in the Loan Documents.
(v) OPERATING STATEMENTS; BUDGETS. The Lender shall have
received (a) operating statements for such proposed Collateral Property for
two calendar years prior to the time of designation thereof as a Collateral
Property, and for the twelve months prior to such time, and an itemized
financial forecast and budget for the operation of such proposed Collateral
Property for the 12 month period thereafter, all prepared on a cash basis (or
such other accounting basis reasonably acceptable to the Lender),
consistently applied, together with a written statement of the assumptions
used in the preparation
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thereof and a certificate of the Borrower, to the effect that such budget,
financial forecast and assumptions are reasonable and represent the
Borrower's best estimates of the future financial performance and
requirements of such proposed Collateral Property, and (b) a current rent
roll, certified by the Borrower to be correct and complete in all material
respects, all of the foregoing to be in form and substance reasonably
satisfactory to the Lender.
(vi) SEARCHES. The Lender shall have received copies of UCC filing
searches, tax lien searches, judgment searches and real estate tax searches
and municipal department searches setting forth any and all building
violations (if available) in each county where such proposed Collateral
Property is located (and in the case of UCC filing searches, in the office of
the Secretary of State or other applicable state office of the State where
such proposed Collateral Property is located), demonstrating as of a recent
date the existence of no other financing statements, tax liens, judgments,
building violations or delinquent real estate taxes, together with evidence
that all fees payable in connection with any such searches have been paid.
(vii) SURVEY. The Lender shall have received a survey of such
proposed Collateral Property that is reasonably satisfactory to the Lender,
and is in compliance with the minimum standard detail requirements for an
urban land title surveys adopted by the American Land Title Association and
American Congress on Surveying and Mapping, and certified to the Lender, the
Title Company and any other parties reasonably requested by the Lender as of
a certification date satisfactory to the Lender.
(viii) OTHER DOCUMENTS. The manager of the proposed Collateral
Property shall have executed and delivered a consent and subordination of
management agreement in form and substance satisfactory to the Lender.
(ix) MATERIAL CONTRACTS. The Lender shall have received certified
copies of all material contracts relating to the proposed Collateral
Property, including all amendments and modifications thereto, which shall be
in form and substance reasonably satisfactory to the Lender.
(x) PROPERTY CONDITION REPORT. The Lender shall have received
reports covering the physical and structural condition of the proposed
Collateral Property in form and substance, and prepared by a qualified
independent engineer, reasonably satisfactory to the Lender and dated no more
than 12 months prior to the time such Retail Property first becomes a
Collateral Property, which shall (i) identify deferred maintenance and the
cost thereof and include a 10-year schedule of annual cost to perform
deferred maintenance and of capital expenditures, and (ii) assess the
probable maximum loss in the event of earthquake.
(xi) LEASES. The Lender shall have received a copy of each Material
Lease in effect with respect to all or a portion of such Collateral Property
including all amendments
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and modifications thereto, all of which shall be in form and substance
reasonably satisfactory to the Lender.
(xii) APPRAISAL. The Lender shall have received and approved an MAI
appraisal of the proposed Collateral Property prepared within 12 months prior
to the time such Retail Property first becomes a Collateral Property.
(xiii) ZONING COMPLIANCE, ETC. The Lender shall have received
evidence reasonably satisfactory to the Lender that all improvements have
been constructed and are being used and operated in compliance in all
material respects with (A) all applicable zoning, subdivision, environmental
and other laws, orders, rules, regulations and requirements of all
governmental or quasi-governmental authorities having jurisdiction with
respect to the proposed Collateral Property, and (B) all building permits
issued in respect of the proposed Collateral Property and (if available) a
copy of all certificates of occupancy for each such property.
(xiv) ESTOPPEL LETTERS. The Lender shall have received and approved
subordination, non-disturbance and attornment agreements and tenant estoppel
letters or certificates from each anchor tenant (as determined by the Lender
in its discretion) and from each lessee under a Material Lease relating to
the proposed Collateral Property, and, in the case of a proposed Collateral
Property in which the Borrower is acquiring a leasehold interest, an estoppel
certificate from the applicable ground lessor, each in form and substance
reasonably satisfactory to the Lender.
(xv) RECORDING TAXES. The Borrower shall have paid all mortgage
recording taxes payable (if any) in each jurisdiction in which the proposed
Collateral Property is located in connection with the recordation of any
Mortgage.
(xvi) PERFECTION OF SECURITY INTERESTS. The Lender shall have
received evidence that all actions necessary or, in the opinion of the
Lender, desirable to perfect and protect the Liens and security interests
created by the Loan Documents have been taken, including, without limitation,
evidence that each Mortgage on a proposed Collateral Property has been duly
filed and recorded in the appropriate governmental offices and that the
related UCC financing statements have been duly filed in the appropriate
governmental offices.
(xvii) OPINIONS. The Lender shall have received an opinion of
counsel to the Borrower and an opinion of local counsel to the Lender in the
state in which the proposed Collateral Property is located, in each case with
respect to such matters as the Lender reasonably may request, in form and
substance and from counsel reasonably satisfactory to the Lender.
(xviii) APPROVAL. The proposed Collateral Property has been
expressly approved by the Lender in writing, in its discretion, as a
Collateral Property.
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ARTICLE 4.
REPRESENTATIONS AND WARRANTIES
The Borrower represents and warrants to the Lender as follows:
SECTION 4.1. ORGANIZATION, AUTHORITY AND TAX STATUS OF THE BORROWER;
ENFORCEABILITY, ETC.
4.1.1. ORGANIZATION AND AUTHORITY; TAX STATUS. The Borrower has
been duly incorporated, and validly existing as a corporation in good
standing under the laws of the jurisdiction of its formation and is duly
qualified to transact business and is in good standing in each jurisdiction
in which the conduct of its business or its ownership or leasing of property
requires such qualification, except where the absence of such qualification
would not have a Material Adverse Effect. The Borrower has all requisite
power and authority to own or hold under lease the property it purports to
own (including, without limitation, the properties listed on SCHEDULE 1.1B)
or hold under lease, to carry on its business as now conducted and as
proposed to be conducted, to execute and deliver the Loan Documents to which
it is a party and to perform its obligations hereunder and thereunder.
4.1.2. AUTHORIZATION; BINDING EFFECT. The Borrower has by all
necessary action duly authorized (a) the execution and delivery of the Loan
Documents to which the Borrower is a party and (b) the performance of its
obligations thereunder. Each Loan Document to which the Borrower is a party
constitutes the legal, valid and binding obligation of the Borrower,
enforceable against it in accordance with its terms, except as enforcement
may be limited by bankruptcy, insolvency, reorganization, moratorium or
similar laws relating to creditors' rights generally.
4.1.3. REIT STATUS. The Borrower is organized in conformity
with the requirements for qualification as a real estate investment trust
under the Code and its ownership and method of operation enables it to meet
the requirements for taxation as a real estate investment trust under the
Code.
SECTION 4.2. CONSOLIDATED SUBSIDIARIES.
4.2.1. OWNERSHIP. SCHEDULE 4.2 (as amended from time to time)
contains complete and correct lists of the Borrower's Consolidated
Subsidiaries, showing, in each case, the correct name thereof, the type of
organization, the jurisdiction of its organization, and the percentage of
Capital Stock outstanding and owned by the Borrower and Consolidated
Subsidiaries. All of the outstanding shares of Capital Stock of each
Consolidated Subsidiary shown in SCHEDULE 4.2 as being owned by the Borrower
or any Consolidated Subsidiary have been validly issued and are owned by the
Borrower or such
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Consolidated Subsidiary free and clear of any Lien other than Permitted
Encumbrances (except as otherwise disclosed on SCHEDULE 4.2).
4.2.2. ORGANIZATION AND OWNERSHIP. Each Consolidated Subsidiary
is a corporation, partnership or other legal entity duly organized, validly
existing and in good standing under the laws of its jurisdiction of
organization, and is duly qualified to transact business and is in good
standing in each jurisdiction in which the conduct of its business or its
ownership or leasing of property requires such qualification, except where
the failure or absence of any of the foregoing would not have a Material
Adverse Effect. Each Consolidated Subsidiary has all requisite power and
authority to own or hold under lease the property it purports to own or hold
under lease, to carry on its business as now conducted and as proposed to be
conducted, except where the absence or failure of any of the foregoing would
not have a Material Adverse Effect.
SECTION 4.3. NO CONFLICT. The execution, delivery and performance by
the Borrower of each Loan Document to which it is party, and the consummation
of the transactions contemplated thereby, do not and will not (a) violate any
provision of the charter or bylaws of the Borrower, (b) conflict with, result
in a breach of, or constitute (or, with the giving of notice or lapse of time
or both, would constitute) a default under, or require the approval or
consent of any person pursuant to any Contractual Obligation of the Borrower,
or violate any provision of Applicable Law binding on the Borrower except in
each case where such conflict, breach, default, lack of approval or consent
or violation would not have a Material Adverse Effect and would not
constitute or result in a Property-Specific Event, or (c) result in the
creation or imposition of any Lien securing any material obligation,
encumbering any material asset of the Borrower (excluding the Liens of the
Lender on the Collateral Properties).
SECTION 4.4. GOVERNMENTAL APPROVALS. Except for filings and
recordings which are described on SCHEDULE 4.4, which in each case have been
made and are in full force and effect, no Governmental Approval is or will be
required in connection with the execution, delivery and performance of the
Borrower of this Agreement or any Loan Document to which it is party or the
transactions contemplated hereby or thereby or to ensure the legality,
validity or enforceability hereof or thereof. The Borrower and each of its
Consolidated Subsidiaries possesses all Governmental Approvals that are
necessary for the ownership, maintenance and operation of the Properties and
conduct of its business as now conducted and proposed to be conducted, and is
not in violation thereof except where the failure to possess such
Governmental Approvals would not have a Material Adverse Effect and would not
constitute or result in a Property-Specific Event.
SECTION 4.5. FINANCIAL INFORMATION.
4.5.1. The consolidated balance sheet of the Borrower and its
Consolidated Subsidiaries for the Fiscal Year ended December 31, 1995, and
the consolidated statements of income, retained earnings and cash flow of the
Borrower and its Consolidated Subsidiaries for the Fiscal Year then ended, in
each case certified by the
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Borrower's independent certified public accountants, copies of which have
been delivered to the Lender, were prepared in accordance with GAAP
consistently applied and fairly present the consolidated financial position
of the Borrower and its Consolidated Subsidiaries as of the respective dates
thereof and the results of operations and cash flow of the Borrower and its
Consolidated Subsidiaries for the respective periods then ended. Neither the
Borrower nor any Consolidated Subsidiary had on such dates any material
Contingent Obligations, liabilities for taxes or long-term leases, unusual
forward or long-term commitments or unrealized losses from any unfavorable
commitments which are not reflected in the foregoing statements or in the
notes thereto and which are material to the business, assets, prospects,
results of operation or financial condition of the Borrower and its
Consolidated Subsidiaries taken as a whole.
4.5.2. The unaudited consolidated balance sheet of the Borrower
and its Consolidated Subsidiaries as at September 30, 1996 and related
statements of income and cash flow for the period then ended, certified by
the Chief Financial Officer of the Borrower, a copy of which has been
delivered to the Lender, were prepared in accordance with GAAP consistently
applied (except to the extent noted therein) and fairly present the
consolidated financial position of the Borrower and its Consolidated
Subsidiaries as of such date and the results of operations and cash flow for
the period covered thereby, subject to normal year-end audit adjustments.
Neither the Borrower nor any Consolidated Subsidiary had on such date any
material Contingent Obligations, liabilities for taxes or long-term leases,
unusual forward or long-term commitments or unrealized losses from any
unfavorable commitments which are not reflected in the foregoing statements
or in the notes thereto and which are Material.
SECTION 4.6. NO MATERIAL ADVERSE CHANGE. Since September 30, 1996,
there has been no Material Adverse Change and there has been no
Property-Specific Event.
SECTION 4.7. LITIGATION. Except as disclosed in SCHEDULE 4.7 hereto,
there are no actions, suits or proceedings pending or, to the best knowledge
of the Borrower, threatened against or affecting the Borrower or any
Consolidated Subsidiary or any of its or their respective properties (a) in
which there is a reasonable possibility of an adverse determination that
could have a Material Adverse Effect or would constitute or result in a
Property-Specific Event, or (b) which draws into question the validity or the
enforceability of this Agreement, any other Loan Document or any transaction
contemplated hereby or thereby.
SECTION 4.8. AGREEMENTS; APPLICABLE LAW. Neither the Borrower nor any
Consolidated Subsidiary is in violation of any Applicable Law, or in default
under any Contractual Obligations to which it is a party or by which its
properties are bound, except where such violation or default could not,
individually or in the aggregate, have a Material Adverse Effect and could
not constitute or result in a Property-Specific Event.
SECTION 4.9. GOVERNMENTAL REGULATION. Neither the Borrower nor
any Consolidated Subsidiary is (a) an "investment company" registered or
required to be
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registered under the Investment Company Act of 1940, as amended, or a company
controlled by such a company, or (b) subject to regulation under the Public
Utility Holding Company Act of 1935, the Federal Power Act, the Interstate
Commerce Act or to any Federal or state, statute or regulation limiting its
ability to incur Debt for money borrowed.
SECTION 4.10. MARGIN REGULATIONS. Neither the Borrower nor any
Subsidiary is engaged principally, or as one of its important activities, in
the business of extending credit for the purposes of purchasing or carrying
Margin Stock. The execution, delivery and performance of the Loan Documents
by the Borrower will not violate the Margin Regulations. The value of all
Margin Stock held by the Borrower and its Subsidiaries constitutes less than
25% of the value, as determined in accordance with the Margin Regulations, of
all assets of the Borrower and its Subsidiaries.
SECTION 4.11. EMPLOYEE BENEFIT PLANS. The Borrower and each of the
ERISA Affiliates is in compliance in all Material respects with all
Applicable Laws including any applicable provisions of ERISA and the Code and
the regulations and published interpretations thereunder with respect to all
Plans and Multiemployer Plans. There have been no Prohibited Transactions
with respect to any Plan which could result in any Material liability of the
Borrower or any of the ERISA Affiliates. Neither the Borrower nor any of the
ERISA Affiliates has participated in or contributed to any Pension Plan at
any time. Neither the Borrower nor any of the ERISA Affiliates has failed to
make any Material payments required to be made under any agreement relating
to a Multiemployer Plan or any law pertaining thereto. The Borrower and the
ERISA Affiliates have not had asserted and do not expect to have asserted
against them any Material penalty, interest or excise tax under Sections
4971, 4972, 4975, 4976, 4977, 4979, 4980 or 4980B of the Code or Sections
502(c)(1) or 502(i) of ERISA. Each Plan covering employees of the Borrower
or any of the ERISA Affiliates is able to pay benefits thereunder when due.
There are no Material claims pending or overtly threatened, involving any
Plan, nor is there any reasonable basis to anticipate any claims involving
any such Plans, other than claims for benefits under such Plans.
SECTION 4.12. TITLE TO PROPERTY; LIENS.
4.12.1. Each of the Borrower and its Subsidiaries has good and
marketable title to, or valid and subsisting leasehold interests in, all of
its Real Property and other property reflected in its books and records as
being owned by it, subject to Permitted Encumbrances. On and after the
Effective Date, (i) each Real Property from time to time designated by the
Borrower as an Unencumbered Asset meets the conditions set forth in the
definition of "Unencumbered Asset" and (ii) each Collateral Property meets
the conditions specified in the definition of "Collateral Property".
4.12.2. Neither the Borrower nor any Subsidiary is
in default in the performance or observance of any of the covenants or
conditions contained in any of its
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Contractual Obligations, except where such default or defaults, if any, would
not have a Material Adverse Effect and would not constitute or result in a
Property-Specific Event.
SECTION 4.13. LICENSES, TRADEMARKS, ETC. The Borrower and each
Subsidiary owns or holds valid licenses in all necessary trademarks,
copyrights, patents, patent rights and other similar rights which are
Material to the conduct of their respective businesses as heretofore operated
and as proposed to be conducted. Neither the Borrower nor any Subsidiary has
been charged or, to the best knowledge of the Borrower, threatened to be
charged with any infringement of, nor has any of them infringed on, any
unexpired trademark, patent, patent registration, copyright, copyright
registration or other proprietary right of any Person except where the effect
thereof individually or in the aggregate would not have a Material Adverse
Effect.
SECTION 4.14. ENVIRONMENTAL CONDITION. Except as set forth on
SCHEDULE 4.14 hereto:
4.14.1. To the best of the Borrower's knowledge, all Real
Property owned or operated by the Borrower or any Subsidiary is free from
contamination from any Hazardous Materials except contamination that would
not have a Material Adverse Effect and would not constitute or result in a
Property-Specific Event. To the best of the Borrower's knowledge, no
polychlorinated biphenyls (PCBs) (including any transformers, capacitors,
ballasts, or other equipment which contains dielectric fluid containing PCBs)
or asbestos is constructed within, stored, disposed of or located on such
Real Property, except for matters that would not have a Material Adverse
Effect and that would not constitute or result in a Property-Specific Event.
Neither the Borrower nor any Subsidiary has caused or suffered, nor to the
knowledge of the Borrower has any other owner or user of such Real Property
caused or suffered, any Environmental Damages that has had or which could
have a Material Adverse Effect or which could constitute or result in a
Property-Specific Event.
4.14.2. Neither the Borrower nor any Subsidiary nor, to the
best knowledge of the Borrower, any prior owner or occupant of the Real
Property owned or used by the Borrower or any Subsidiary, has received notice
of any alleged violation of Environmental Requirements, or notice of any
alleged liability for Environmental Damages in connection with the Real
Property, which could reasonably be expected to have a Material Adverse
Effect. There exists no order, judgment or decree outstanding, nor any
action, suit, proceeding, citation or investigation, pending or, to the best
of Borrower's knowledge, threatened, relating to any alleged liability
arising out of the suspected presence of Hazardous Material, any alleged
violation of Environmental Requirements or any alleged liability for
Environmental Damages in connection with the Real Property or the business or
operations of the Borrower and its Subsidiaries that has had or which could
have a Material Adverse Effect or which could constitute or result in a
Property-Specific Event nor, to the best of the Borrower's knowledge, does
there exist any basis for such action, suit, proceeding, citation or
investigation being instituted or filed.
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SECTION 4.15. ABSENCE OF CERTAIN RESTRICTIONS. No Subsidiary or
the Borrower is subject to any Contractual Obligation which restricts or
limits its ability to (a) pay dividends or make any distributions on its
Capital Stock, (b) incur or pay Debt owed the Borrower, (c) make any loans or
advances to the Borrower or (d) transfer any of its property to the Borrower;
PROVIDED that the foregoing restrictions in subclauses (b), (c) and (d) shall
not apply to any Bankruptcy Remote Entity to the extent such restrictions are
required by any rating agency as a condition to the rating of the Debt of
such Bankruptcy Remote Entity.
SECTION 4.16. MORTGAGES. Each of the Mortgages creates the
Liens and/or assignments which it purports to create, and the Mortgages and
financing statements under the UCC in respect of the Mortgages have been duly
filed and recorded in such manner and in such places as are required by
applicable law in order to create, preserve and protect the respective Liens
thereof on the Collateral Properties and the assignment thereunder of any
leases and rents, and to perfect the security interests created thereby in
all of the Collateral Properties as to which a security interest may be
perfected by the filing of a financial statement under the UCC, and all
taxes, fees and other governmental charges due in connection with such
recordings and filings have been paid; the Mortgages constitute valid,
binding and enforceable first priority mortgage Liens on the Collateral
Properties constituting real property in favor of the Lender, subject only to
Liens for real estate taxes and assessment not yet delinquent and other Liens
expressly permitted by the respective Mortgages; the Mortgages create valid,
binding and enforceable first priority security interests in and Liens on the
Collateral Properties in the nature of the fixtures and personalty that can
be encumbered by the Mortgage and, with respect to all Collateral Properties
in the nature of personal property as to which a security interest may be
perfected by the filing of a financing statement under the UCC, a perfected
security interest in all such Collateral Properties, in each case a favor of
the Lender, subject only to Liens expressly permitted by the respective
Mortgages; and each Assignment creates a valid, binding and enforceable first
priority assignment of and Lien on the rents, incomes, agreements and leases
referred to therein in favor of the Lender.
SECTION 4.17. DELINQUENT PROPERTY LIENS. Except for claims which are
being contested in accordance with the relevant Mortgage or which constitute
or will constitute Permitted Encumbrances, or which, individually or in the
aggregate, are not material, there is no delinquent tax, sewer rent, water
charge, assessment or other outstanding charge against any of the Properties;
and there are no mechanics' or similar Liens or claims for overdue payment
for labor or material in a material amount affecting any of the Properties.
SECTION 4.18. IMPROVEMENTS. Except as disclosed in the surveys or title
policies delivered to the Lender hereunder prior to the time any property
becomes a Property, all improvements comprising a portion of any Property lie
wholly within the boundary and building restriction lines of such Property
and no improvements on adjoining properties encroach upon any of the
Properties in any respect except as shown on the surveys delivered to the
Lender on or prior to the date hereof.
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SECTION 4.19. DAMAGE; TAKINGS. Except as disclosed in the property
condition reports delivered to the Lender in accordance with Section 3.4(x),
each of the Properties is free of material damage and waste and there is no
proceeding pending or, to the Borrower's knowledge, threatened, for a taking
or condemnation of all or any portion of any of such Properties.
SECTION 4.20. ZONING AND OTHER LAWS. The use and operation of each of
the Properties, separate and apart from any other properties, constitutes a
legal use under applicable zoning regulations and complies in all material
respects with all Applicable Laws and all applicable requirements of
insurance underwriters.
SECTION 4.21. LEASES. The Borrower has delivered to the Lender a
correct and complete copy of each Material Lease relating to the Properties
and all amendments thereto. The Borrower has delivered to the Lender rent
rolls as of September, 1996 for each of the Properties including, in respect
of each Lease, the name and address of the tenant, the date and term of the
Lease, base rent, square footage, expiration provisions, percentage rent
provisions (where applicable), sales figures (where applicable) and such
other information regarding the Leases as the Lender may reasonably require.
The information contained in such rent rolls is correct and complete in all
material respects as of the date set forth thereon. Except as reflected on a
tenant estoppel accepted by the Lender on or prior to the time a property
becomes a Property, or as reflected on Schedule 4.21, to the best knowledge
of the Borrower, there is no event, condition or circumstance that with the
giving of notice or the passage of time or both would constitute a material
default or a material event of default under the Leases relating to the
Properties, or would give Borrower or any of the tenants thereunder the right
to terminate the Lease or abate or offset any material amount of rent
thereunder. Except as disclosed in writing by the Borrower to the Lender,
and approved by the Lender, none of the tenants of any of the Properties have
any: (i) option to purchase any Property or portion thereof or (ii) right of
first refusal to purchase any Property or portion thereof.
SECTION 4.22. CONTRACTS. A true, complete and correct copy
of each material contract or other agreement (including all amendments
thereto) affecting any of the Properties has been provided to the Lender and
each thereof is unmodified and in full force and effect and the Borrower nor,
to the Borrower's knowledge, any other party to any thereof is in default
thereunder (other than any defaults which, if uncured, would not have a
Material Adverse Effect and would not constitute or result in a
Property-Specific Event).
SECTION 4.23. PERMITS. There have been issued in respect of each of
the Properties all material permits and governmental approvals necessary or
required for the Borrower to own and operate such Properties in the manner
currently operated, including any required permits relating to Hazardous
Materials, other than any such permit or approval which, if not obtained,
would not have a Material Adverse Effect and would not constitute or result
in a Property-Specific Event. To the best of the Borrower's knowledge, each
such permit is in full force and effect and the Borrower has not received
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any notice of violation or revocation thereof. No other permits are required
from any governmental entity in order to operate any of the Properties as it
is now operated.
SECTION 4.24. CERTIFICATES OF OCCUPANCY. The Borrower has received no
notice of actual or threatened cancellation or suspension of any certificate
of occupancy for any portion of any Properties, and, to the best of
Borrower's knowledge, all such certificates of occupancy are in full force
and effect.
SECTION 4.25 CONDITION OF PROPERTIES. Except as set forth in the
property condition reports delivered pursuant to Section 3.4(x) or as set
forth in Schedule 4.25, the buildings, structures and improvements included
on or within each of the Properties are structurally sound and in good repair
in all material respects, and all mechanical, electrical, heating, air
conditioning, drainage, sewer, water and plumbing systems are in all material
respects in proper working order.
SECTION 4.26. MANAGEMENT AGREEMENTS. Except for the management agreement
pursuant to which the Collateral Property commonly known as Pacific Outlet
Center is managed, and any management agreement which relates to a Property
hereafter acquired by the Borrower, none of the Properties is subject to or
encumbered by any management agreement.
SECTION 4.27. DISCLOSURE. The information in any document,
certificate or written statement furnished to the Lender by or on behalf of
the Borrower with respect to the business, assets, prospects, results of
operation or financial condition of the Borrower or any Subsidiary, including
operating statements and rent rolls, for use in connection with the
transactions contemplated by this Agreement has been true and correct in all
material respects. There is no fact known to the Borrower (other than
matters of a general economic nature) that has a Material Adverse Effect (or
that constitutes or results in a Property-Specific Event) or could reasonably
be expected to have a Material Adverse Effect (or constitute or result in a
Property-Specific Event) which has not been disclosed herein or in such other
documents, certificates, and statements.
ARTICLE 5.
AFFIRMATIVE COVENANTS OF THE BORROWER
So long as any portion of the Commitments shall be in effect
and until all Obligations are paid in full:
SECTION 5.1. FINANCIAL STATEMENTS AND OTHER REPORTS. The Borrower
will deliver to the Lender:
5.1.1. within 90 days after the end of each Fiscal Year, the
consolidated balance sheet of the Borrower and its Consolidated Subsidiaries
as of the end of such
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Fiscal Year and the related consolidated statements of income, stockholders'
equity and cash flow of the Borrower and its Consolidated Subsidiaries for
such Fiscal Year, setting forth in each case in comparative form the
consolidated or combined figures, as the case may be, for the previous Fiscal
Year, all in reasonable detail and accompanied by a report thereon of
Deloitte & Touche LLP or other independent certified public accountants of
recognized national standing selected by the Borrower and reasonably
satisfactory to the Lender, which report shall be unqualified (except for
qualifications that the Lender does not consider Material in its reasonable
discretion) and shall state that such consolidated financial statements
fairly present the financial position of the Borrower and its Consolidated
Subsidiaries as at the date indicated and the results of their operations and
cash flow for the periods indicated in conformity with GAAP (except as
otherwise stated therein) and that the examination by such accountants in
connection with such consolidated financial statements has been made in
accordance with generally accepted auditing standards;
5.1.2. within 25 days after the end of each month, a
consolidated balance sheet of the Borrower and its Consolidated Subsidiaries
as at the end of such month and the related combined statements of income and
cash flow of the Borrower and its Consolidated Subsidiaries for such month
and the portion of the Fiscal Year ended at the end of such month, setting
forth in each case in comparative form the consolidated or combined figures,
as the case may be, for the corresponding periods of the prior Fiscal Year,
all in reasonable detail and in conformity with GAAP (except as otherwise
stated therein), together with a representation by the Borrower's chief
financial officer, as of the date of such financial statements, that such
financial statements have been prepared in accordance with GAAP (PROVIDED,
HOWEVER, that such financial statements may not include all of the
information and footnotes required by GAAP for complete financial
information) and reflect all adjustments that are, in the opinion of
management, necessary for a fair presentation of the financial information
contained therein;
5.1.3. together with each delivery of financial statements
pursuant to clauses (a) and (b) above, a certificate of the chief financial
officer of the Borrower, in substantially the form of EXHIBIT C-4 (a
"Compliance Certificate"), duly completed and setting forth the calculations
required to establish whether the Borrower was in compliance with Sections
6.2 and 6.3 on the date of such financial statements;
5.1.4. promptly, and in any event no more than 3 days, after
the Borrower becomes aware of the occurrence of any Property-Specific Breach
or any Default or Event of Default, a certificate of a Senior Officer of the
Borrower setting forth the details thereof and the action which the Borrower
is taking or proposes to take with respect thereto;
5.1.5. contemporaneously with their being filed
with the SEC, copies of all financial statements, reports, notices and proxy
statements sent or made available by the Borrower to its security holders,
all registration statements (other than the exhibits thereto) and annual,
quarterly, monthly or other reports, if any, filed by the Borrower with the
SEC (other than reports under Section 16 of the Securities Exchange Act of
1934, as
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amended) and all press releases by the Borrower concerning material
developments in the business of the Borrower;
5.1.6. promptly, and in any event no more than 3
days, after the Borrower obtains knowledge thereof, notice of all litigation
or proceedings commenced or threatened affecting the Borrower or any
Subsidiary in which there is a reasonable possibility of an adverse decision
and (a) which involves alleged liability in excess of $500,000 (in the
aggregate) which is not covered by insurance, (b) in which injunctive or
similar relief is sought which if obtained could have a Material Adverse
Effect or could constitute or result in a Property-Specific Event or (c)
which questions the validity or enforceability of any Loan Document;
5.1.7. for each Unencumbered Asset held in the Unencumbered
Pool and for each Collateral Property:
5.1.7.1. within 90 days after the end of each Fiscal
Year, a property budget with respect to such Unencumbered Asset or Collateral
Property for the next Fiscal Year;
5.1.7.2. within 25 days after the end of each month,
an operating statement for the twelve month period then ended, and a rent
roll and lease status report with respect to such Unencumbered Asset or
Collateral Property, and
5.1.7.3. promptly following the Lender's request
therefor, a certificate of insurance showing the existence of hazard
insurance on the Unencumbered Asset or Collateral Property, which insurance
shall be in form and substance satisfactory to the Lender;
5.1.8. promptly after the receipt thereof, a copy of any
notice, summons, citation or written communication concerning any actual,
alleged, suspected or threatened Material violation of Environmental
Requirements, or Material liability of the Borrower or any Subsidiary for
Environmental Damages in connection with its Real Property or past or present
activities of any Person thereon or Material Environmental Event; and
5.1.9. from time to time such additional information regarding
the financial position or business of the Borrower and the Consolidated
Subsidiaries as the Agent may reasonably request.
SECTION 5.2. INSPECTION. The Borrower shall, and shall cause each
Consolidated Subsidiary to, permit such persons as the Lender may designate,
at reasonable times upon reasonable prior notice, and as often as may be
reasonably requested, to (a) visit and inspect any properties of the
hborrower and the Consolidated Subsidiaries, provided that the lender shall
not unreasonably interfere with the businesses of the Borrower's tenants, (b)
inspect and copy their books and records, and (c) discuss with their officers
and
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and employees and their independent accountants, their respective businesses,
assets, liabilities, prospects, results of operation and financial condition.
SECTION 5.3. CORPORATE EXISTENCE, ETC. The Borrower shall, and shall
cause each Consolidated Subsidiary to, at all times preserve and keep in full
force and effect its partnership, corporate or other legal existence (except
in the case of a Consolidated Subsidiary where the failure to do so would not
have a Material Adverse Effect), as the case may be, and any licenses,
permits, rights and franchises material to its business (except in the case
of a consolidated Subsidiary where the failure to do so would not have a
Material Adverse Effect), PROVIDED, HOWEVER, that the partnership, corporate
or other legal existence of any Consolidated Subsidiary may be terminated if,
in the good faith judgment of the Borrower, such termination is in the best
interest of the Borrower and is not disadvantageous in any material respect
to the Lender.
SECTION 5.4. PAYMENT OF TAXES AND CHARGES. The Borrower shall, and
shall cause each Consolidated Subsidiary to, file all tax returns required to
be filed in any jurisdiction and, if applicable, pay and discharge all taxes
imposed upon it or any of its properties or in respect of any of its
franchises, business, income or property before any material penalty shall be
incurred with respect to such taxes, PROVIDED, HOWEVER, that, unless and
until foreclosure, distraint, levy, sale or similar proceedings shall have
commenced, the Borrower and the Consolidated Subsidiaries need not pay or
discharge any such tax so long as the validity or amount thereof is contested
in good faith and by appropriate proceedings and so long as any reserves or
other appropriate provisions as may be required by GAAP, or as reasonably may
be required by the lender, shall have been made therefor.
SECTION 5.5. MAINTENANCE OF PROPERTIES. The Borrower shall, and shall
cause each Consolidated Subsidiary to, maintain or cause to be maintained in
good repair, working order and condition (ordinary wear and tear excepted),
all Real Properties and all other Material properties useful or necessary to
its business and all Properties (except in each case where the failure to do
so would not have a Material Adverse Effect and would not constitute or
result in a Property-Specific Event), and from time to time the Borrower will
make or cause to be made all appropriate repairs, renewals and replacements
thereto (except where the failure to do so would not have a Material Adverse
Effect and would not constitute or result in a Property-Specific Event).
SECTION 5.6. MAINTENANCE OF INSURANCE. The Borrower shall, and shall
cause each Consolidated Subsidiary to, maintain with financially sound and
reputable insurance companies, insurance in at least such amounts, of such
character and against at least such risks as are usually insured against in
the same general area by companies of established repute engaged in the same
or a similar business, including, without limitation, with respect to each
Unencumbered Asset and each Collateral Property, business interruption
insurance covering a period of 12 months business interruption.
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SECTION 5.7. CONDUCT OF BUSINESS. Neither the Borrower nor any
Consolidated Subsidiary shall engage in any business other than the business
of owning and operating, leasing, developing, selling or brokering Real
Properties or any businesses incident thereto. The Borrower shall, and shall
cause each Consolidated Subsidiary to, conduct its business in compliance
with Applicable Law and all Material Contractual Obligations (except where
the failure to do so would not have a Material Adverse Effect).
SECTION 5.8. NYSE LISTING; REIT STATUS. The Borrower will maintain
the listing of its Capital Stock on the New York Stock Exchange and continue
to qualify as a real estate investment trust under the Code.
SECTION 5.9. REMEDIAL ACTION REGARDING HAZARDOUS MATERIALS. The
Borrower shall promptly take, and shall cause its Subsidiaries promptly to
take, any and all necessary remedial action in connection with the presence,
storage, use, disposal, transportation or release of any Hazardous Materials
on, under or about any Real Property in order to comply with all applicable
Environmental Requirements. In the event that the Borrower or any of its
subsidiaries undertakes any remedial action with respect to any Hazardous
Materials on, under or about any Real Properties, the Borrower and such
Subsidiary shall conduct and complete such remedial action to the extent
required by any applicable Environmental Requirements and in accordance with
the policies, orders and directives of all governmental authorities.
SECTION 5.10. OFFERING DOCUMENTS.
(a) If requested by the Lender, in connection with any sale,
assignment or transfer of the Commitments and the Advances permitted under
Section 8.5.2 , the Notes and other Loan Documents by the Lender, the
Borrower shall assist the Lender in the preparation of a private placement
memorandum or similar document describing the Notes, each property, any other
Collateral for the Loan and any other information regarding the Borrower as
may be reasonably necessary in connection with such sale, assignment or
transfer.
(b) At the request of the Lender, the Borrower shall execute and
deliver to the Lender an instrument (in form and substance reasonably
satisfactory to the Lender) indemnifying and holding the Lender, its
Affiliates and their respective directors, officers, shareholders, employees
and agents, and each of them, harmless from and against any and all costs,
expenses and damages incurred by any indemnified party as a result of any
untrue statement of a material fact contained in any offering document based
upon information provided in writing by the borrower or any affiliate
thereof, which describes the Borrower, an Affiliate thereof, or any Property,
or as a result of any untrue statement of a material fact in any of the
financial statements of the Borrower or any Affiliate thereof incorporated in
such document, or the failure to include in such financial statements or
document any material fact necessary in order to make the statements therein,
in light of the circumstances under which they were made, not misleading,
provided that the
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Borrower or any Affiliate thereof shall have provided the
information and approved the information for use in such document.
SECTION 5.11. RELEASE AND SUBSTITUTION OF REAL PROPERTIES IN THE
COLLATERAL POOL.
(a) If the Borrower at any time desires to withdraw or substitute any
Collateral Property from the Collateral Pool, it shall (i) so notify the
Lender in writing, and (ii) deliver to the Lender a certificate of the
borrower's chief financial officer setting forth the calculations
establishing that, after giving effect to such withdrawal (and any concurrent
addition of properties to the Collateral Pool pursuant to section 3.4), the
then Available Amount is greater than or equal to the then outstanding
principal amount of all Secured Advances. Effective upon the satisfaction of
each and all of the conditions set forth herein (including, without
limitation, (i) the accuracy of such certificate and (ii) in connection with
any substitution of properties in the Collateral Pool that is required in
order for such certificate to be accurate, upon satisfaction of the
conditions precedent to the addition of any proposed new Collateral Property
to the collateral pool pursuant to section 3.4), such Collateral Property
shall no longer be deemed a Collateral Property and the Lender shall, at the
cost and expense of the Borrower, execute and deliver such documents and
instruments as the borrower reasonably may request to effect the release of
such Collateral Property from the lien of the applicable Mortgage. The
following shall be conditions precedent to the Lender's obligation to release
the lien of any Mortgage pursuant hereto:
(i) at the time of such release, no Default or Event of Default shall
then exist or would occur or exist as a result of such release;
(ii) after giving effect to such release the Debt Service Coverage
Ratio would be not less than 1.60;
(iii) at the time of such release, the Lender shall have received, at
the Borrower's sole cost and expense, CLTA 111 endorsements to the title
policies insuring the liens of the Mortgages then remaining unreleased,
ensuring without exception the continued priority of such Mortgages after
such release; and
(iv) at the time of such release, the Lender shall have received such
other documents, instruments, endorsements or assurances as it may reasonably
request, all at the sole cost and expense of the Borrower.
In no event shall the Borrower be entitled to any release of the lien of any
Mortgage on less than the entirety of a Collateral Property without Lender's
prior written consent, which consent may be granted, conditioned or withheld
in Lender's sole and absolute discretion.
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(b) the lender hereby agrees that within five (5) business days after
the lender receives the information described in section 3.4(v) hereof, the
lender shall give the borrower a preliminary indication of the lender's
intent to accept or reject a proposed addition to, or substitution in, the
collateral pool. the lender hereby further agrees that after it has
indicated its preliminary intent to accept a retail property into the
collateral pool, the lender shall use reasonably diligent efforts (as long as
no default or event of default has occurred and is continuing) to complete
its diligence with respect to such retail property and to review and
acknowledge the borrower's satisfaction of the conditions precedent set forth
in this agreement to the inclusion of such retail property into the
collateral pool (or to specify such conditions precedent as the borrower may
have failed to satisfy), in each case within thirty (30) days after the
lender has indicated its intent to accept such retail property into the
collateral pool.
SECTION 5.12. COLLATERAL PROPERTIES LOCATED OUTSIDE CALIFORNIA. In
the event that the Borrower proposes to include a Real Property in the
Collateral Pool which Real Property is located outside the state of
california, and the lender approves the inclusion of such Real Property in
the Collateral Pool pursuant hereto, then the Borrower shall execute such
amendments, modifications and supplements to the Loan Documents and the
secured revolving note as the Lender may reasonably require (including
without limitation a division of the Secured Revolving Note into multiple
notes, if requested by the Lender, and modifications to the Mortgages to
secure one or more of such notes) to enable the Lender to enforce its rights
in multiple jurisdictions in such order, and in such manner, as the Lender
may desire.
SECTION 5.13. REMOVAL OR SUBSTITUTION OF UNENCUMBERED ASSETS IN
UNENCUMBERED POOL.
(a) If any Unencumbered Asset (including any of the Real Properties
listed on SCHEDULE 1.1C) (w) no longer satisfies the conditions of clause (i)
of the definition of the term "Unencumbered Asset", or (x) is subject to a
material environmental event, or (y) suffers or is subject to a Property
Specific Event, or (z) is subject to a Property-Specific Breach, the Lender
shall have the right in its discretion, at any time and from time to time, to
notify the Borrower that, effective upon the giving of such notice, and for
so long as such condition persists, such Real Property shall no longer be
considered an Unencumbered Asset for purposes of calculating the Unencumbered
Asset Value of Unencumbered assets in the Unencumbered pool, or Aggregate
Property NOI of such Unencumbered Assets, for purposes of Section 6.3.
(b) If the Lender has delivered a notice with respect to a Real
Property pursuant to Section 5.13(a) hereof, then at such time as such Real
Property is no longer subject to any condition described in Section
5.13(a)(w)-(z), the Borrower may give the Lender written notice thereof and
if the Borrower gives such written notice (together with reasonably detailed
evidence of the cure of such condition), such Real Property shall, effective
with the delivery by the Borrower of the next Compliance Certificate, again
be considered an Unencumbered Asset, including without limitation for
purposes of
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calculating the Unencumbered Asset value of Unencumbered Assets in the
Unencumbered Pool, and aggregate Property NOI of such Unencumbered Assets for
purposes of section 6.3, until such time as Section 5.13(a) hereof again
applies thereto.
(c) if the Borrower desires to designate a Real Property as an
Unencumbered Asset to be added to the Unencumbered Pool from time to time
(other than those listed on SCHEDULE 1.1c), it will so notify the Lender in
writing, which notice will include (a) a physical description of the property
to be added to the Unencumbered Pool, including its age and location, (b) a
recent title report, (c) information regarding the occupancy of the property
(including without limitation a rent roll), (d) operating statements for the
most recent Fiscal Quarter and the two most recent Fiscal Years (to the
extent available to the Borrower) and (e) an operating budget for the current
Fiscal Year. The Lender shall be deemed to have given approval of any
property to be eligible for inclusion in the Unencumbered Pool unless the
Borrower receives notice from the Lender rejecting the designation of such
property as an Unencumbered Asset in the exercise of its reasonable
discretion or requesting additional information regarding such property
within ten (10) Business Days after the Lender's receipt of written notice of
such designation from the Borrower (in which case such property only shall be
part of the Unencumbered Pool upon the Lender's written approval, not to be
unreasonably withheld or delayed).
(d) If the Borrower at any time intends to withdraw any Real Property
from the Unencumbered Pool, it shall (i) so notify the Lender in writing, and
(ii) deliver to the Lender a certificate of its chief financial officer
setting forth the calculations establishing that the Borrower will be in
compliance with Section 6.3 after giving effect to such withdrawal (and any
concurrent addition of properties to the Unencumbered Pool pursuant to
Section 5.13(c)), which calculations shall be in substantially the form of
the calculations in EXHIBIT C-4. Effective automatically upon delivery of
such notice and certificate by the Borrower, such property shall no longer
constitute an Unencumbered Asset.
SECTION 5.14 CERTAIN EVENTS WITH RESPECT TO COLLATERAL PROPERTIES. (a)
If any Collateral Property (including, without limitation any of the
Initial Properties) is subject to or suffers (x) a Material Environmental
Event or (y) a Property-Specific Event or (z) a Property-Specific Breach, the
Lender shall have the right in its discretion, at any time and from time to
time, to notify the Borrower that, effective upon the giving of such notice,
and for so long as such event or condition persists, such Retail Property no
longer shall be considered a Collateral Property for purposes of calculating
the Available Amount.
(b) if the Lender has delivered a notice with respect to a Retail
Property pursuant to Section 5.14(a) hereof, then at such time as such
Collateral Property is no longer subject to any condition described in
Section 5.14(a)(x)(y) or (z), the Borrower may give the Lender written notice
thereof (together with reasonably detailed evidence of the cure of such
condition) and such retail property shall, effective with the delivery by the
Borrower of the next Compliance Certificate, again be considered a Collateral
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Property for purposes of calculating the Available Amount, until such time as
Section 5.14(a) again applies thereto.
SECTION 5.15. ESTOPPELS, SNDAS. From time to time, upon receipt of
the Lender's reasonable request therefor, the Borrower shall use reasonable,
diligent efforts to obtain an estoppel statement and a subordination,
nondisturbance agreement, each in form and substance reasonably acceptable to
the Lender, from each tenant under a Material Lease in a property which
tenant has not previously delivered such documents to Lender.
SECTION5.16. TITLE INSURANCE. From time to time, upon receipt of the
Lender's request therefor, the Borrower shall obtain such additional title
insurance coverage and endorsements as the Lender may request to ensure that
the total liability under the title policies insuring the Mortgages is not
less than the Available Amount.
ARTICLE 6
NEGATIVE COVENANTS OF THE BORROWER PARTIES
So long as any portion of the Commitments shall be in effect
and until all Obligations are paid in full:
SECTION 6.1. INVESTMENTS; ASSET MIX. The Borrower shall not at any
time after the Effective Date make, and shall not permit any Consolidated
Subsidiary to make, any Investment in any Person, or purchase or lease any
other asset or property, except (i) Capital Stock of the Consolidated
Subsidiaries listed in SCHEDULE 4.2 on the Effective Date, or in any Capital
Stock of any Person formed or acquired after the Effective Date and added to
SCHEDULE 4.2 in accordance with Section 8.2.2 that has substantially no
assets other than direct or indirect ownership or ground leasehold interests
in Retail Properties, (ii) Retail Properties, (iii) Permitted Investments,
and (iv) any other Investments, assets or property to the extent that the
aggregate book value of such Investments, assets or property does not exceed
ten percent (10%) of the consolidated total assets (plus accumulated
depreciation) of the Borrower in each case as shown on its most recent
financial statement delivered or required to be delivered to the Lender
pursuant to Section 5.1 hereof.
SECTION 6.2. FINANCIAL COVENANTS.
6.2.1. MAXIMUM CONSOLIDATED TOTAL DEBT TO TOTAL CAPITALIZATION
OF THE BORROWER. The ratio of Consolidated Total Debt to Total Capitalization
of the Borrower shall not be greater than 75.00% at any time.
6.2.2. DEBT SERVICE COVERAGE RATIO. On the last day of each
month, the Debt Service Coverage Ratio shall not be less than 1.50.
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SECTION 6.3. MINIMUM UNENCUMBERED POOL; PROPERTY NOI OF UNENCUMBERED
ASSETS. The aggregate Unencumbered Asset Value of all Unencumbered Assets in
the Unencumbered Pool shall not, at any time, be less than $33,000,000; and,
on the last day of each month, aggregate Property NOI of the Unencumbered
Assets in the Unencumbered Pool for the twelve-month period then ended shall
be not less than $3,465,000.
SECTION 6.4. RESTRICTION ON FUNDAMENTAL CHANGES. Neither the Borrower
nor any of its Subsidiaries may enter into any merger, consolidation or
reorganization or any sale of all or a substantial portion of the
consolidated total assets of the Borrower and its Subsidiaries, or liquidate,
wind up or dissolve, except that, as long as no Default or Event of Default
shall exist after giving effect to such merger or consolidation, any
Subsidiary may be merged or consolidated with or into the Borrower or a
Consolidated Subsidiary; PROVIDED, HOWEVER, that the Borrower may
reincorporate in any State of the United States, by merger with and into a
wholly-owned Subsidiary formed solely for the purpose of reincorporation
which, prior to such merger, conducts no business and has no assets or
liabilities; PROVIDED, FURTHER, that in connection with any such
reincorporation, the Borrower or its successor shall deliver or cause to be
delivered to the Lender such documents and instruments as the Lender may
reasonably request in form and substance acceptable to the Lender in its
reasonable judgment, including without limitation a reaffirmation or
re-execution of the Loan Documents, certified copies of all organizational
documents, agreements and plans of merger, and certificates issued by
Governmental Authorities, evidence that the material agreements of the
Borrower do not require consent to such transaction or that such consent has
been obtained, and legal opinions regarding the authorization, execution and
delivery of any new documents and the continued enforceability of the Loan
Documents against the survivor of any such merger.
SECTION 6.5. TRANSACTIONS WITH AFFILIATES. Neither the Borrower nor
any Subsidiary shall, directly or indirectly, enter into any transaction
(including the purchase, sale, lease, or exchange of any property or the
rendering of any service) with any Affiliate of such Person unless (a) such
transaction is not otherwise prohibited by this Agreement, (b) such
transaction is in the ordinary course of business and (c) such transaction is
on fair and reasonable terms no less favorable to the Borrower or such
Subsidiary, as the case may be, than those terms which might be obtained at
the time in a comparable arm's length transaction with a Person who is not an
Affiliate or, if such transaction is not one which by its nature could be
obtained from such other Person, is on fair and reasonable terms and was
negotiated in good faith, PROVIDED that this Section 6.5 shall not restrict
(a) dividends, distributions and other payments and transfers on account of
any shares of Capital Stock of any Subsidiary, and (b) payments pursuant to
the terms of any Contractual Obligations in effect on the date hereof,
PROVIDED that such dividends, distributions or other payments are not
otherwise prohibited by the terms of this Agreement or would result in a
Default or an Event of Default.
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SECTION 6.6. RESTRICTED PAYMENTS. The Borrower shall not, and shall
not permit any Subsidiary to, directly or indirectly, declare, pay or make,
or agree to declare, pay or make, any Restricted Payment, except:
6.6.1. dividends, distributions or payments by any Subsidiary
to the Borrower or to a Wholly-Owned Subsidiary that is not a Bankruptcy
Remote Entity; and
6.6.2. if no Default or Event of Default shall then exist or
result from such Restricted Payment, the Borrower may pay or make Restricted
Payments so long as the aggregate amount of all Restricted Payments pursuant
to this Section 6.6.2 paid during the Fiscal Quarter in which such Restricted
Payment is proposed to be made and the three Fiscal Quarters immediately
preceding such Fiscal Quarter (treated as a single accounting period),
together with the Restricted Payment proposed to be made, does not exceed 95%
of the aggregate amount of Funds From Operations for the period of four
Fiscal Quarters immediately preceding the Fiscal Quarter in which such
Restricted Payment is proposed to be made, or such greater amount as is
required to maintain the qualification of the Borrower as a REIT under the
Code.
SECTION 6.7. ERISA. The Borrower shall not, and shall not permit any
current ERISA Affiliate to:
6.7.1. engage in any Prohibited Transaction or engage in any
conduct or commit any act or suffer to exist any condition with respect to
any Plan that could give rise to any Material excise tax, penalty, interest
or liability under Sections 4971, 4972, 4975, 4976, 4977, 4979, 4980 or 4980B
of the Code or Sections 502(c) or 502(i) of ERISA;
6.7.2. adopt or contribute to any Plan that is Pension Plan;
6.7.3. create or suffer to exist any liability with respect to
Plans that are welfare plans within the meaning of Section 3(1) of ERISA if,
after immediately giving effect to such liability, the aggregate annualized
cost with respect to such Plans for post retirement benefits for any fiscal
year would exceed $500,000.
ARTICLE 7.
EVENTS OF DEFAULT
SECTION 7.1. EVENTS OF DEFAULT. Subject to Section 7.2, the
occurrence of any one or more of the following events, acts or occurrences
shall constitute an event of default (an "EVENT OF DEFAULT"):
7.1.1. FAILURE TO MAKE PAYMENTS. The Borrower (i) shall fail
to pay when due any principal (whether at stated maturity, upon acceleration,
upon required
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prepayment or otherwise) of any Advance or (ii) shall fail to pay interest on
any Advance or any other amount payable under the Loan Documents; or
7.1.2. DEFAULT IN OTHER DEBT. The Borrower or any Consolidated
Subsidiary shall default in the payment (whether at stated maturity, upon
acceleration, upon required prepayment or otherwise), beyond any period of
grace provided therefor, of any principal of or interest on any Debt with a
principal amount of in excess of $1,000,000 if (a) as a result of such
default, the holder or holders of such Debt (or a Person on behalf of such
holder or holders) shall cause such Debt to become or be declared due and
payable prior to its stated maturity, or (b) such payment constitutes the
final payment of principal due upon the stated maturity of such Debt;
PROVIDED, HOWEVER, that it shall not be an Event of Default hereunder if, on
one occasion while this Agreement is in effect, the Borrower shall default,
beyond any applicable grace period, in the payment of a single tranche of
non-recourse indebtedness of the Borrower (other than the Obligations)
secured by a Real Property in a principal amount not to exceed Five Million
Dollars ($5,000,000.00); or
7.1.3. BREACH OF CERTAIN COVENANTS. The Borrower shall fail to
perform, comply with or observe any agreement, covenant or obligation under
Section 2.2, 5.2, 5.3 (as to the Borrower), 5.4, 5.5, 5.6, the first sentence
of Section 5.7 , Section 5.8 or Article 6 (other than Section 6.7) as and
when required, or the Borrower shall fail to perform, comply with or observe
any agreement, covenant or obligation under Section 5.1 hereof within ten
(10) days after such performance, compliance or observance is first required;
or
7.1.4. BREACH OF WARRANTY. (a) Any representation or warranty
or certification made or furnished by the Borrower in Sections 4.1, 4.3(a),
4.5, 4.6, 4.7, 4.9, 4.10 or 4.27 of this Agreement shall prove to have been
false or incorrect in any material respect when made (or deemed made), or (b)
any other representation or warranty or certification made or furnished by
the Borrower in this Agreement or the other Loan Documents or any agreement,
instrument or document contemplated hereby or thereby shall prove to have
been false or incorrect in any material respect when made (or deemed made),
and such falsity or incorrectness shall not have been cured within thirty
(30) days after the date on which the Borrower has knowledge of such falsity
or incorrectness, or if the Borrower is diligently pursuing such cure in such
thirty (30) day period and, in the Lender's judgment such falsity or
incorrectness can be cured with reasonable diligence in an additional sixty
(60) days, then such thirty (30) day limited cure period shall be extended an
additional sixty (60) days for a total of ninety (90) days; or
7.1.5. OTHER DEFAULTS UNDER AGREEMENT AND OTHER LOAN DOCUMENTS.
The Borrower shall fail to perform, comply with or observe any agreement,
covenant or obligation to be performed, observed or complied with by it under
this Agreement (other than those provisions referred to in Section 7.1.1,
7.1.2, 7.1.3 or 7.1.4 above) or under the other Loan Documents and such
failure shall not have been remedied within 30 days after written notice
thereof from the Lender or, if such default can be
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remedied but cannot be remedied within such 30-day period, and so long as the
Borrower is diligently attempting to remedy such failure, such failure shall
not have been remedied within 90 days after such notice; or
7.1.6. INVOLUNTARY BANKRUPTCY; APPOINTMENT OF RECEIVER, ETC.
There shall be commenced against the Borrower or any Consolidated Subsidiary
an involuntary case seeking the liquidation or reorganization of the Borrower
or such Consolidated Subsidiary under Chapter 7 or Chapter 11, respectively,
of the Bankruptcy Code or any similar proceeding under any other Applicable
Law or an involuntary case or proceeding seeking the appointment of a
receiver, liquidator, sequestrator, custodian, trustee or other officer
having similar powers of the Borrower or Consolidated Subsidiary or to take
possession of all or a substantial portion of its property or to operate all
or a substantial portion of its business, and any of the following events
occur: (i) the Borrower or Consolidated Subsidiary consents to the
institution of the involuntary case or proceeding; (ii) the petition
commencing the involuntary case or proceeding is not timely controverted;
(iii) the petition commencing the involuntary case or proceeding remains
undismissed and unstayed for a period of 90 days (PROVIDED, HOWEVER, that,
during the pendency of such period, the Lender shall be relieved of the
Commitments); or (iv) an order for relief shall have been issued or entered
therein; or
7.1.7. VOLUNTARY BANKRUPTCY; APPOINTMENT OF RECEIVER, ETC. The
Borrower or any Subsidiary shall institute a voluntary case seeking
liquidation or reorganization under Chapter 7 or Chapter 11, respectively, of
the Bankruptcy Code or any similar proceeding under any other Applicable Law,
or shall consent thereto; or shall consent to the conversion of an
involuntary case to a voluntary case; or shall file a petition, answer a
complaint or otherwise institute any proceeding seeking, or shall consent or
acquiesce to the appointment of, a receiver, liquidator, sequestrator,
custodian, trustee or other officer with similar powers of it or to take
possession of all or a substantial portion of its property or to operate all
or a substantial portion of its business; or shall make a general assignment
for the benefit of creditors; or shall generally not pay its debts as they
become due; or the Board of Directors (or respective governing body) of the
Borrower or a Subsidiary (or any committee thereof) adopts any resolution or
otherwise authorizes action to approve any of the foregoing; or
7.1.8. JUDGMENTS AND ATTACHMENTS. The Borrower or any
Consolidated Subsidiary shall suffer any money judgments, writs or warrants
of attachment or similar processes which individually or in the aggregate
involve an amount or value in excess of $1,000,000 and such judgments, writs,
warrants or other orders shall continue unsatisfied and unstayed for a period
of 30 days unless the amount of such judgments, writs, warrants or
attachments are fully covered by insurance (other than deductibles
substantially the same as those in effect on the Effective Date and provided
that any deductible in excess of $100,000 is supported by a bond or letter of
credit in at least the amount by which such deductible exceeds $100,000) and
the insurer has in writing accepted liability therefor; or a judgment
creditor shall obtain possession of any material portion of the assets of the
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Borrower or any Consolidated Subsidiary by any means, including, without
limitation, levy, distraint, replevin or self-help; or
7.1.9. CHANGE OF TAX STATUS. The Borrower shall either
determine or receive written notice from the relevant taxing authority that
the Borrower does not conform or no longer conforms to the requirements for
qualification as a real estate investment trust under the Code; or
7.1.10. MATERIAL ADVERSE CHANGE. There shall occur after the
Effective Date a Material Adverse Change.
SECTION 7.2. PROPERTY SPECIFIC MATTERS. Notwithstanding anything
herein or in any of the other Loan Documents to the contrary, a
Property-Specific Breach or a Property-Specific Event (either of which does
not have a Material Adverse Effect) shall not constitute a Default or an
Event of Default so long as (x) if the Affected Property otherwise is an
Unencumbered Asset and the Lender gives notice to the Borrower pursuant to
Section 5.13(a), the Borrower is not in breach of Section 6.3, and (y) if the
Affected Property otherwise is a Collateral Property and the Lender gives
notice to the Borrower pursuant to Section 5.14(a), the outstanding principal
amount of Secured Advances does not exceed the Available Amount (determined
without reference to such Affected Property) unless the Borrower would be
permitted under the terms and conditions of Section 2.7.2 hereof to borrow
Unsecured Advances in an amount at least equal to the Secured Overdraw to
repay such Secured Overdraw when required by Section 2.7.2 hereof.
SECTION 7.3. REMEDIES.
7.3.1. If an Event of Default occurs under Section 7.1.6 or
7.1.7, then the Commitments shall automatically and immediately terminate,
and the obligation of the Lender to make any Advances hereunder shall cease,
and the unpaid principal amount of and any accrued interest on all Advances
shall automatically become immediately due and payable, without presentment,
demand, protest, notice or other requirements of any kind, all of which are
hereby expressly waived by the Borrower.
7.3.2. If an Event of Default occurs and is continuing under
Section 7.1 hereof, other than under Section 7.1.6 or 7.1.7, the Lender may,
by written notice to the Borrower, declare that the Commitments are
terminated, whereupon the obligation of the Lender to make any Advance
hereunder shall cease, and/or declare the unpaid principal amount of all
Advances to be, and the same shall thereupon become, due and payable together
with any and all accrued interest thereon, without presentment, demand,
protest, any additional notice whatsoever or other requirements of any kind,
all of which are hereby expressly waived by the Borrower.
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ARTICLE 8
MISCELLANEOUS
SECTION 8.1. EXPENSES; INDEMNITY. The Borrower shall pay, within 10
days after demand therefor:
8.1.1. any and all reasonable attorneys' fees and disbursements
and out-of-pocket cost and expenses incurred by the Lender in connection with
the development, drafting and negotiation of this Agreement and the other
Loan Documents, the administration hereof and thereof (including any
amendments); and
8.1.2. all costs and expenses (including fees and disbursements
of in-house and other attorneys, appraisers and consultants) incurred by the
Lender in any workout, restructuring or similar arrangements or, after a
Default, in connection with the protection, preservation, exercise or
enforcement of any of the terms of the Loan Documents or in connection with
any foreclosure, collection or bankruptcy proceedings.
8.1.3. The Borrower shall indemnify, defend and hold harmless
the Lender and the officers, directors, employees, agents, attorneys,
affiliates, successors and assigns of the Lender (collectively, the
"INDEMNITEES") from and against (a) any and all transfer taxes, documentary
taxes, assessments or charges made by any Governmental Authority by reason of
the execution and delivery of the Loan Documents or the making of the
Advances, and (b) any and all liabilities, losses, damages, penalties,
judgments, claims, out-of-pocket costs and expenses of any kind or nature
whatsoever (including reasonable attorneys' fees and disbursements in
connection with any actual or threatened investigative, administrative or
judicial proceeding, whether or not such Indemnitee shall be designated a
party thereto) that may be imposed on, incurred by or asserted against such
Indemnitee, in any manner relating to or arising out of the Loan Documents,
the Advances, the use or intended use of the proceeds of the Advances (the
"INDEMNIFIED LIABILITIES"); PROVIDED that (i) no Indemnitee shall have the
right to be indemnified or held harmless hereunder for its own gross
negligence or willful misconduct, as determined by a final judgment of a
court of competent jurisdiction, and (ii) Indemnified Liabilities shall
include amounts attributable to the passive or active negligence of the
Lender.
8.1.4. To the extent that the undertaking to indemnify and hold
harmless set forth in Section 8.1.3 may be unenforceable because it is
violative of any Applicable Law or public policy, the Borrower shall make the
maximum contribution to the payment and satisfaction of each of the
Indemnified Liabilities that is permissible under Applicable Law. All
Indemnified Liabilities shall be payable within 10 days after demand therefor.
SECTION 8.2. WAIVERS; MODIFICATIONS IN WRITING.
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8.2.1. No amendment of any provision of this Agreement or any
other Loan Document (including a waiver thereof or consent relating thereto)
shall be effective unless the same shall be in writing and signed by the
Lender.
8.2.2. Notwithstanding anything to the contrary, the Borrower
may, by written notice furnished to the Lender, amend SCHEDULES 1.1C and 4.2
to the extent the changes to such Schedules are expressly permissible under
this Agreement and, with the prior written consent of the Lender which the
Lender may give or withhold in its discretion, the Borrower may amend
Schedules 4.7, 4.14, 4.21 and 4.25.
8.2.3. Any waiver or consent shall be effective only in the
specific instance and for the specific purpose for which given. No notice to
or demand on the Borrower in any case shall entitle Borrower to any other or
further notice or demand in similar or other circumstances.
SECTION 8.3. CUMULATIVE REMEDIES; FAILURE OR DELAY. The rights and
remedies provided for under this Agreement are cumulative and are not
exclusive of any rights and remedies that may be available to the Lender
under Applicable Law or otherwise. No failure or delay on the part of the
Lender in the exercise of any power, right or remedy under the Loan Documents
shall impair such power, right or remedy or operate as a waiver thereof, nor
shall any single or partial exercise of any such power, right or remedy
preclude other or further exercise thereof or of any other power, right or
remedy.
SECTION 8.4. NOTICES, ETC. All notices and other communications
under this Agreement shall be in writing and (except for financial
statements, other related informational documents and routine communications,
which may be sent by first-class mail, postage prepaid) shall be personally
delivered or sent by prepaid courier, by overnight mail, by overnight,
registered or certified mail (postage prepaid), or by prepaid telex, telecopy
or telegram, and shall be deemed given when received by the intended
recipient thereof. Unless otherwise specified in a notice sent or delivered
in accordance with this Section 8.4, all notices and other communications
shall be given to the parties hereto at their respective addresses (or to
their respective telex or telecopier numbers) set out below:
If to the Borrower:
Burnham Pacific Properties, Inc.
610 West Ash Street
Suite 1600
San Diego, California 92101
Attention: Daniel B. Platt
Chief Financial Officer
Telephone: (619) 652-4700
Facsimile: (619) 652-4711
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If to the Lender:
Nomura Asset Capital Corporation
Two World Financial Center, Building B
New York, New York 10281
Attention: Sheryl McAfee
Telephone: (212) 667-1653
Facsimile: (212) 667-1206
SECTION 8.5. SUCCESSORS AND ASSIGNS.
8.5.1. This Agreement shall be binding upon and inure to the
benefit of the parties hereto and their respective successors and permitted
assigns. The Borrower may not assign or transfer any interest hereunder
without the prior written consent of the Lender.
8.5.2. The Borrower agrees that the Lender may elect, at any
time, to sell or assign its rights and obligations hereunder to any assignee
or purchaser approved by the Borrower, which approval shall not be
unreasonably conditioned, withheld or delayed; PROVIDED, HOWEVER, that no
such approval shall be required with respect to such an assignment at any
time during which an Event of Default has occurred and is continuing. Upon
any such assignment, the Lender shall be released from its obligations
hereunder with respect to the obligations so assigned. The Borrower further
agrees that the Lender may elect, at any time, to grant participations in its
rights and obligations under the Loan Documents to one or more financial
institutions, private investors or other entities, in the Lender's discretion
(each such transferee, a "Participant"), so long as, after giving effect to
any such participation, the Lender retains, beneficially and of record, a
portion of the Commitments in effect from time to time which is a controlling
interest and which is not less than the beneficial interest in the
Commitments held by any such Participant (unless an Event of Default has
occurred and is continuing, in which case the foregoing limitation shall be
inapplicable). The Borrower further agrees that the Lender may disseminate
to any such actual or potential Participant all documents and information
(including, without limitation, all financial information) which has been or
is hereafter provided to or known to the Lender with respect to: (a) the
Unencumbered Assets and the Collateral Properties and their operation; (b)
the Borrower; and/or (c) any lending relationship other than the Loans which
the Lender may have with the Borrower. In the event of any such sale,
assignment or participation, the Lender and the parties to such transaction
shall share in the rights and obligations of the Lender as set forth in the
Loan Documents only as and to the extent they agree among themselves. In
connection with any such sale, assignment or participation, the Borrower further
agrees that the Loan Documents shall be sufficient evidence of the obligations
of Borrower to each Participant, and upon written request by the Lender, the
Borrower shall enter into such amendments or modifications to the Loan Documents
as may be reasonably required in order to evidence any such sale, assignment
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or participation. The indemnity obligations of Borrower under the Loan
Documents shall also apply with respect to any Participant.
SECTION 8.6. CONFIDENTIALITY. The Lender will maintain any
confidential information that it may receive from the Borrower pursuant to
this Agreement confidential and shall not disclose such information to third
parties without the prior consent of the Borrower, except for disclosure:
(a) to legal counsel, accountants and other professional advisors to the
Lender; (b) to regulatory officials having jurisdiction over the Lender; (c)
as required by Applicable Law or in connection with any legal proceeding; (d)
to another Person in connection with a potential assignment or participation
as provided in Section 8.5.2 ; and (e) of information that has been
previously disclosed publicly without breach of this provision.
SECTION 8.7. CHOICE OF FORUM.
8.7.1. All actions or proceedings arising in connection with
this Agreement and the other Loan Documents shall be tried and litigated in
state or Federal courts located in Los Angeles, County of Los Angeles, State
of California, unless such actions or proceedings are required to be brought
in another court to obtain subject matter jurisdiction over the matter in
controversy. EACH OF THE BORROWER AND THE LENDER WAIVES ANY RIGHT IT MAY
HAVE TO ASSERT THE DOCTRINE OF FORUM NON CONVENIENS, TO ASSERT THAT IT IS NOT
SUBJECT TO THE JURISDICTION OF SUCH COURTS OR TO OBJECT TO VENUE TO THE
EXTENT ANY PROCEEDING IS BROUGHT IN ACCORDANCE WITH THIS SECTION.
8.7.2. IN ANY ACTION AGAINST THE BORROWER, SERVICE OF PROCESS
MAY BE MADE UPON THE BORROWER BY REGISTERED OR CERTIFIED MAIL, RETURN RECEIPT
REQUESTED, TO ITS ADDRESS INDICATED IN SECTION 8.4, WHICH SERVICE SHALL BE
DEEMED SUFFICIENT FOR PERSONAL JURISDICTION AND SHALL BE DEEMED EFFECTIVE 10
DAYS AFTER MAILING.
8.7.3. Nothing contained in this Section 8.7 shall preclude the
Lender from bringing any action or proceeding arising out of or relating to
this Agreement and the other Loan Documents in the courts of any place where
the Borrower or any of its assets may be found or located.
SECTION 8.8. CHANGES IN ACCOUNTING PRINCIPLES. Except as otherwise
provided herein, if any changes in generally accepted accounting principles
from those used in the preparation of the financial statements referred to in
this Agreement hereafter result from the promulgation of rules, regulations,
pronouncements, or opinions of or required by the Financial Accounting
Standards Board or the American Institute of Certified Public Accountants (or
successors thereto or agencies with similar functions), or there shall occur
any change in the Borrower's fiscal or tax years and, as a result of any such
changes,
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there shall result a change in the method of calculating any of the financial
covenants, negative covenants, standards or other terms or conditions found
in this Agreement, then the parties agree to enter into negotiations in order
to amend such provisions so as to equitably reflect such changes with the
desired result that the criteria for evaluating the Borrower's financial
condition shall be the same after such changes as if such changes had not
been made.
SECTION 8.9. SURVIVAL OF AGREEMENTS, REPRESENTATIONS AND WARRANTIES.
All agreements, representations and warranties made herein shall survive the
execution and delivery of this Agreement, the closing and the extensions of
credit hereunder and shall continue until payment and performance of any and
all Obligations. Any investigation at any time made by or on behalf of the
Lender shall not diminish the right of the Lender to rely thereon.
SECTION 8.10. EXECUTION IN COUNTERPARTS. This Agreement may be
executed in any number of counterparts, each of which counterparts, when so
executed and delivered, shall be deemed to be an original and all of which
counterparts, taken together, shall constitute but one and the same Agreement.
SECTION 8.11. COMPLETE AGREEMENT. This Agreement, together with the
Exhibits and Schedules hereto, and the other Loan Documents is intended by
the parties as the final expression of their agreement regarding the subject
matter hereof and as a complete and exclusive statement of the terms and
conditions of such agreement.
SECTION 8.12. LIMITATION OF LIABILITY.
8.12.1. No claim shall be made by the Borrower against the
Lender or the Affiliates, directors, officers, employees, attorneys or agents
of the Lender for any special, indirect, consequential or punitive damages in
respect of any claim for breach of contract or under any other theory of
liability arising out of or related to the transactions contemplated by this
Agreement or the other Loan Documents, or any act, omission or event
occurring in connection therewith; and the Borrower hereby waives, releases
and agrees not to sue upon any claim for any such damages, whether or not
accrued and whether or not known or suspected to exist in its favor.
SECTION 8.13. UNSECURED ADVANCES; NO LIEN. The Unsecured Advances
contemplated in this Agreement are unsecured loans and extensions of credit
and no Lien is intended to be created upon the Unencumbered Assets, the
Collateral Pool (or any Collateral Property) or any other property of the
Borrower or any of its Subsidiaries by any provision in this Agreement or the
other Loan Documents. Without limitation of the foregoing, in no event shall
the Borrower's representations, warranties or covenants with respect to the
Unencumbered Pool or any of the Unencumbered Assets be, or be deemed to be,
secured by any property of the Borrower.
REVOLVING LOAN AGREEMENT
54
<PAGE>
SECTION 8.14. WAIVER OF TRIAL BY JURY. EACH PARTY TO THIS AGREEMENT
HEREBY EXPRESSLY WAIVES ANY RIGHT TO TRIAL BY JURY OF ANY CLAIM, DEMAND,
ACTION OR CAUSE OF ACTION (A) ARISING UNDER THE LOAN DOCUMENTS, INCLUDING ANY
PRESENT OR FUTURE AMENDMENT THEREOF OR (B) IN ANY WAY CONNECTED WITH OR
RELATED OR INCIDENTAL TO THE DEALINGS OF THE PARTIES OR ANY OF THEM WITH
RESPECT TO THE LOAN DOCUMENTS (AS NOW OR HEREAFTER AMENDED) OR ANY OTHER
INSTRUMENT, DOCUMENT OR AGREEMENT EXECUTED OR DELIVERED IN CONNECTION
HEREWITH, OR THE TRANSACTIONS RELATED HERETO OR THERETO, IN EACH CASE WHETHER
SUCH CLAIM, DEMAND, ACTION OR CAUSE OF ACTION IS NOW EXISTING OR HEREAFTER
ARISING, AND WHETHER SOUNDING IN CONTRACT OR TORT OR OTHERWISE AND REGARDLESS
OF WHICH PARTY ASSERTS SUCH CLAIM, DEMAND, ACTION OR CAUSE OF ACTION; AND
EACH PARTY HEREBY AGREES AND CONSENTS THAT ANY SUCH CLAIM, DEMAND, ACTION OR
CAUSE OF ACTION SHALL BE DECIDED BY COURT TRIAL WITHOUT A JURY, AND THAT ANY
PARTY TO THIS AGREEMENT MAY FILE AN ORIGINAL COUNTERPART OR A COPY OF THIS
SECTION WITH ANY COURT AS WRITTEN EVIDENCE OF THE CONSENT OF THE PARTIES TO
THE WAIVER OF ANY RIGHT THEY MIGHT OTHERWISE HAVE TO TRIAL BY JURY.
SECTION 8.15. GOVERNING LAW. THIS AGREEMENT SHALL BE GOVERNED BY, AND
CONSTRUED IN ACCORDANCE WITH, THE LAWS (OTHER THAN THE RULES REGARDING
CONFLICTS OF LAWS, EXCEPT THOSE CONTAINED IN CALIFORNIA CIVIL CODE SECTION
1646.5) OF THE STATE OF CALIFORNIA.
SECTION 8.16 HEADINGS. The Article and Section headings used in this
Agreement are for convenience of reference only and shall not affect the
construction hereof.
SECTION 8.17. SEVERABILITY. If any provision of this Agreement shall
be held to be invalid, illegal or unenforceable under Applicable Law in any
jurisdiction, such provision shall be ineffective only to the extent of such
invalidity, illegality or unenforceability, which shall not affect any other
provisions hereof or the validity, legality or enforceability of such
provision in any other jurisdiction.
SECTION 8.18 INDEPENDENCE OF COVENANTS. All covenants under this
Agreement shall each be given independent effect so that if a particular
action or condition is not permitted by any such covenant, the fact that it
would be permitted by another covenant, by an exception thereto, or be
otherwise within the limitations thereof, shall not avoid the occurrence of a
Default or an Event of Default if such action is taken or condition exists.
REVOLVING LOAN AGREEMENT
55
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to
be executed and delivered as of the date first set forth above.
BORROWER:
BURNHAM PACIFIC PROPERTIES, INC.
By: /s/ Daniel B. Platt
-------------------------------------
Name: DANIEL B. PLATT
-----------------------------------
Title: CHIEF FINANCIAL OFFICER
----------------------------------
LENDER:
NOMURA ASSET CAPITAL CORPORATION
By: /s/ David S. Walker
-------------------------------------
Name: DAVID S. WALKER
-----------------------------------
Title: VICE PRESIDENT
----------------------------------
REVOLVING LOAN AGREEMENT
56
<PAGE>
Exhibit 12.1
Burnham Pacific Properties, Inc.
Computation of Ratio of Earnings to Fixed Charges
(Dollars in thousands)
<TABLE>
<CAPTION>
Nine Months
Year Ended Ended
December 31, September
1991 1992 1993 1994 1995 30, 1996
<S> <C> <C> <C> <C> <C> <C>
EARNINGS (LOSS) BEFORE FIXED CHARGES:
Income (loss) from operations $ 2,469 $ 1,058 $ 9,846 $ 13,164 $(14,951) $ 7,991
Interest expense 10,308 11,208 10,483 11,582 11,960 8,251
-------- -------- -------- -------- -------- --------
EARNINGS (LOSS) BEFORE FIXED CHARGES 12,777 12,266 20,329 24,746 (2,991) 16,242
-------- -------- -------- -------- -------- --------
FIXED CHARGES:
Interest expense 10,308 11,208 10,483 11,582 11,960 8,251
Interest capitalized 55 97 897
-------- -------- -------- -------- -------- --------
FIXED CHARGES 10,308 11,208 10,483 11,637 12,057 9,148
-------- -------- -------- -------- -------- --------
-------- -------- -------- -------- -------- --------
RATIO OF EARNINGS (L0SS) TO FIXED CHARGES 1.24 1.09 1.94 2.13 - 1.78
-------- -------- -------- -------- -------- --------
-------- -------- -------- -------- -------- --------
</TABLE>
<PAGE>
EXHIBIT 23.0
CONSENT OF INDEPENDENT AUDITORS
We consent to the incorporation by reference in this Post-Effective
Amendment No. 1 to Registration Statement No. 33-68712 of Burnham Pacific
Properties, Inc. on Form S-3 of our report dated March 11, 1996 appearing in the
Annual Report on Form 10-K of Burnham Pacific Properties, Inc. for the year
ended December 31, 1995 and to the reference to us under the heading "Experts"
in the Prospectus which is part of this Registration Statement.
Deloitte & Touche LLP
San Diego, California
January 22, 1997
