UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
[X] Quarterly Report Pursuant to Section 13 or 15(d) of the Securities Exchange
Act of 1934
For the quarterly period ended June 30, 1998
or
[ ] Transition Report Pursuant to Section 13 or 15(d) of the Securities Exchange
Act of 1934
For the transition period from to
-------------- --------------
Commission File Number 1-10709
-------
PS BUSINESS PARKS, INC.
-----------------------
(Exact name of registrant as specified in its charter)
California 95-4300881
---------- ----------
(State or Other Jurisdiction I.R.S. Employer
of Incorporation) Identification Number)
701 Western Avenue, Glendale, California 91201-2397
---------------------------------------------------
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (818) 244-8080
--------------
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports) and (2) has been subject to such filing
requirements for the past 90 days.
Yes X No
--
Number of shares outstanding of each of the issuer's classes of common stock, as
- --------------------------------------------------------------------------------
of August 11, 1998: Common Stock, $0.01 par value, 23,635,650 shares outstanding
- --------------------------------------------------------------------------------
<PAGE>
PS BUSINESS PARKS, INC.
INDEX
Page
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
Condensed consolidated balance sheets at June 30, 1998
and December 31, 1997 2
Condensed consolidated statements of income for the three
and six months ended June 30, 1998 and 1997 3
Condensed consolidated statement of shareholder's equity for
the six months ended June 30, 1998 4
Condensed consolidated statements of cash flows for the
six months ended June 30, 1998 and 1997 5-6
Notes to condensed consolidated financial statements 7-15
Item 2. Management's discussion and analysis of
financial condition and results of operations 16-23
PART II. OTHER INFORMATION
Item 2. Changes in Securities and Use of Proceeds 24
Item 5. Other Information 24
Item 6. Exhibits & Reports on Form 8-K 25
<PAGE>
<TABLE>
PS BUSINESS PARKS, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
<CAPTION>
June 30, December 31,
1998 1997
----------------- -----------------
(unaudited)
ASSETS
------
<S> <C> <C>
Cash and cash equivalents............................. $ 36,355,000 $ 3,884,000
Real estate facilities, at cost:
Land............................................. 191,929,000 91,754,000
Buildings and equipment.......................... 453,883,000 226,466,000
----------------- -----------------
645,812,000 318,220,000
Accumulated depreciation......................... (10,314,000) (3,982,000)
----------------- -----------------
635,498,000 314,238,000
Intangible assets, net................................ 1,733,000 3,272,000
Other assets.......................................... 2,180,000 2,060,000
----------------- -----------------
Total assets............................ $ 675,766,000 $ 323,454,000
================= =================
LIABILITIES AND SHAREHOLDERS' EQUITY
------------------------------------
Accrued and other liabilities............................ $ 11,256,000 $ 8,331,000
Mortgage notes payable................................... 29,890,000 -
Note payable to affiliate................................ - 3,500,000
----------------- -----------------
Total liabilities..................................... 41,146,000 11,831,000
Minority interest........................................ 151,225,000 168,665,000
Shareholders' equity:
Preferred Stock, $0.01 par value, 50,000,000
shares authorized, none outstanding at June 30, 1998
and December 31, 1997............................... - -
Common stock, $0.01 par value, 100,000,000 shares
authorized 23,635,650 shares issued and outstanding
at June 30, 1998 (7,728,309 shares issued and
outstanding at December 31, 1997)................... 236,000 773,000
Paid-in capital....................................... 482,167,000 142,581,000
Cumulative net income................................. 14,530,000 3,154,000
Cumulative distributions.............................. (13,538,000) (3,550,000)
----------------- -----------------
Total shareholders' equity...................... 483,395,000 142,958,000
----------------- -----------------
Total liabilities and shareholders' equity. $ 675,766,000 $ 323,454,000
================= =================
</TABLE>
See accompanying notes.
2
<PAGE>
<TABLE>
PS BUSINESS PARKS, INC.
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(Unaudited)
<CAPTION>
For the three months For the six months
ended June 30, ended June 30,
--------------------------------- ---------------------------------
1998 1997 1998 1997
--------------- ---------------- ------------- -----------------
Revenues:
<S> <C> <C> <C> <C>
Rental income................................. $ 21,471,000 $ 6,978,000 $ 35,824,000 $ 12,783,000
Facility management fees primarily from
affiliates.................................. 129,000 228,000 331,000 475,000
Interest and other income..................... 311,000 110,000 544,000 139,000
--------------- ---------------- ------------- -----------------
21,911,000 7,316,000 36,699,000 13,397,000
--------------- ---------------- ------------- -----------------
Expenses:
Cost of operations............................. 6,355,000 2,526,000 10,982,000 5,019,000
Cost of facility management.................... 12,000 49,000 37,000 109,000
Depreciation and amortization.................. 4,256,000 1,195,000 6,556,000 2,015,000
General and administrative..................... 551,000 172,000 996,000 385,000
Interest expense.............................. 822,000 - 1,069,000 -
--------------- ---------------- ------------- -----------------
11,996,000 3,942,000 19,640,000 7,528,000
--------------- ---------------- ------------- -----------------
Income before minority interest.................. 9,915,000 3,374,000 17,059,000 5,869,000
Minority interest in income.................... (2,869,000) (2,579,000) (5,683,000) (4,392,000)
--------------- ---------------- ------------- -----------------
Net income....................................... $ 7,046,000 $ 795,000 $ 11,376,000 $ 1,477,000
--------------- ---------------- ------------- -----------------
Net income per share:
Basic.......................................... $ 0.38 $ 0.36 $ 0.76 $ 0.68
=============== ================ ============= =================
Diluted........................................ $ 0.38 $ 0.36 $ 0.76 $ 0.68
=============== ================ ============= =================
Weighted average shares outstanding:
Basic.......................................... 18,649,693 2,197,779 14,926,093 2,185,569
=============== ================ ============= =================
Diluted........................................ 18,710,576 2,197,779 14,977,776 2,185,569
=============== ================ ============= =================
</TABLE>
See accompanying notes.
3
<PAGE>
<TABLE>
PS BUSINESS PARKS, INC.
CONDENSED CONSOLIDATED STATEMENT OF SHAREHOLDERS' EQUITY
For the six months ended June 30, 1998
(Unaudited)
<CAPTION>
Preferred Stock Common Stock
----------------- -------------------------
Shares Amount Shares Amount Paid-in Capital
-------- ------- --------- ----------- --------------
<S> <C> <C> <C> <C> <C>
Balances at December 31, 1997............. - $ - 7,728,309 $ 773,000 $ 142,581,000
Issuances of common stock:
Conversion of OP Units............. - - 1,785,008 179,000 32,844,000
Private offering, net of costs..... - - 2,185,189 219,000 47,381,000
Exercise of stock options.......... - - 39,021 3,000 648,000
In connection with a business
combination...................... - - 2,283,438 23,000 46,787,000
Public offerings, net of costs..... - - 5,025,800 504,000 118,356,000
Private offering, net of costs..... - - 4,588,885 46,000 104,955,000
Recapitalization in connection with
business combination................. - - - (1,511,000) 1,511,000
Net income............................. - - - - -
Distributions paid..................... - - - - -
Adjustment to reflect minority
interest to underlying ownership
interest............................. - - - - (12,896,000)
------- ------- --------- ----------- --------------
Balances at June 30, 1998................. - $ - 23,635,650 $ 236,000 $ 482,167,000
======= ======= ========== =========== ==============
</TABLE>
<TABLE>
PS BUSINESS PARKS, INC.
CONDENSED CONSOLIDATED STATEMENT OF SHAREHOLDERS' EQUITY
For the six months ended June 30, 1998
(Unaudited)
<CAPTION>
Total
Cumulative Cumulative Shareholders'
Net Income Distributions Equity
------------ -------------- --------------
<S> <C> <C> <C>
Balances at December 31, 1997............. $ 3,154,000 $ (3,550,000) $ 142,958,000
Issuances of common stock:
Conversion of OP Units............. - - 33,023,000
Private offering, net of costs..... - - 47,600,000
Exercise of stock options.......... - - 651,000
In connection with a business
combination...................... - - 46,810,000
Public offerings, net of costs..... - - 118,860,000
Private offering, net of costs..... - - 105,001,000
Recapitalization in connection with
business combination................. - - -
Net income............................. 11,376,000 - 11,376,000
Distributions paid..................... - (9,988,000) (9,988,000)
Adjustment to reflect minority
interest to underlying ownership
interest............................. - - (12,896,000)
------------- --------------- ----------------
Balances at June 30, 1998................. $ 14,530,000 $ (13,538,000) $ 483,395,000
============= =============== ===============
</TABLE>
See accompanying notes.
4
<PAGE>
<TABLE>
<CAPTION>
PS BUSINESS PARKS, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
For the six months ended June 30,
-------------------------------------
1998 1997
-------------- --------------
Cash flows from operating activities:
<S> <C> <C>
Net income................................................. $ 11,376,000 $ 1,477,000
Adjustments to reconcile net income to net
cash provided by operating activities:
Depreciation and amortization expense.................. 6,556,000 2,015,000
Minority interest in income............................ 5,683,000 4,392,000
(Increase) decrease in other assets.................... (468,000) 276,000
Increase (decrease) in accrued and other liabilities... 462,000 (98,000)
-------------- --------------
Total adjustments................................. 12,233,000 6,585,000
-------------- --------------
Net cash provided by operating activities............ 23,609,000 8,062,000
-------------- --------------
Cash flows from investing activities:
Acquisition of real estate facilities.................. (241,674,000) -
Acquisition cost of business combination............... (424,000) -
Capital improvements to real estate facilities......... (3,175,000) (1,366,000)
Payment received from PSI and affiliates for net
property operating liabilities assumed.............. - 2,233,000
-------------- --------------
Net cash (used in) provided by investing activities.. (245,273,000) 867,000
-------------- --------------
Cash flows from financing activities:
Borrowings from an affiliate........................... 179,000,000 -
Repayment of borrowings from an affiliate.............. (182,500,000) -
Principal payments on mortgage notes payable........... (85,000) -
Decrease in receivable from affiliate.................. - 641,000
Proceeds from the issuance of common stock, net........ 272,112,000 80,000
Distributions paid to shareholders..................... (9,988,000) -
Distributions to minority interests.................... (4,404,000) -
-------------- --------------
Net cash provided by financing activities............ 254,135,000 721,000
-------------- --------------
Net increase in cash and cash equivalents..................... 32,471,000 9,650,000
Cash and cash equivalents at the beginning of the period...... 3,884,000 919,000
-------------- --------------
Cash and cash equivalents at the end of the period............ $ 36,355,000 $ 10,569,000
============== ==============
</TABLE>
See accompanying notes.
5
<PAGE>
<TABLE>
<CAPTION>
PS BUSINESS PARKS, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
For the six months ended June 30,
-------------------------------------
1998 1997
-------------- --------------
SUPPLEMENTAL SCHEDULE OF NON CASH INVESTING AND FINANCIAL ACTIVITIES:
Acquisitions of real estate facilities and associated assets and liabilities in
exchange for preferred stock, minority interests, and mortgage notes payable:
<S> <C> <C>
Real estate facilities................................. $ (33,428,000) $(141,480,000)
Other assets (deposits on real estate acquisitions).... 800,000 -
Accrued and other liabilities.......................... 1,245,000 -
Minority interest...................................... 1,408,000 120,750,000
Preferred stock........................................ - 100,000
Paid in capital ....................................... - 19,900,000
Mortgage notes payable................................. 29,975,000 -
Intangible assets...................................... - 730,000
Business combination:
Real estate facilities................................. (48,000,000) -
Other assets........................................... (452,000) -
Accrued and other liabilities.......................... 1,218,000 -
Common stock........................................... 23,000 -
Paid in capital........................................ 46,787,000 -
Recapitalization in connection with business combination:
Common stock........................................... (1,511,000) -
Paid in capital........................................ 1,511,000 -
Conversion of OP Units into shares of common stock:
Minority interest...................................... (33,023,000) -
Common stock........................................... 179,000 -
Paid in capital........................................ 32,844,000 -
Adjustment to reflect minority interest to underlying ownership interest:
Minority interest...................................... 12,896,000 -
Paid in capital........................................ (12,896,000) -
Exchange of preferred stock for common stock:
Preferred stock........................................ - (175,000)
Common stock........................................... - 175,000
Adjustment to acquisition cost (see Note 2):
Real estate facilities................................. (1,315,000) (7,146,000)
Accumulated depreciation............................... - (820,000)
Intangible assets...................................... 1,315,000 (4,395,000)
Paid in capital........................................ - 12,361,000
</TABLE>
See accompanying notes.
6
<PAGE>
PS BUSINESS PARKS, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
June 30, 1998
1. ORGANIZATION AND DESCRIPTION OF BUSINESS
ORGANIZATION
PS Business Parks, Inc. ("PSB"), a California corporation, is the successor
to American Office Park Properties, Inc. ("AOPP") which merged with and
into Public Storage Properties XI, Inc. ("PSP 11") on March 17, 1998 (the
"Merger"). The name of the company was changed to "PS Business Parks, Inc."
in connection with the Merger. See Note 3 for a description of the Merger
and its terms.
Based upon the terms of the Merger, the transaction for financial reporting
and accounting purposes has been accounted for as a reverse acquisition
whereby AOPP is deemed to have acquired PSP11. However, PSP11 is the
continuing legal entity and registrant for both Securities and Exchange
filing purposes and income tax reporting purposes. All subsequent
references to PSB for periods prior to March 17, 1998 shall refer to AOPP.
PSB was organized in California in 1986 as a wholly-owned subsidiary of
Public Storage Management, Inc. ("PSMI"), a privately owned company of B.
Wayne Hughes and his family (collectively "Hughes").
On November 16, 1995, Public Storage, Inc. ("PSI") acquired PSMI in a
business combination accounted for using the purchase method. In connection
with the transaction, PSI exchanged its common stock for all of the
non-voting participating preferred stock of PSB, representing a 95%
economic interest, and Hughes purchased all the voting common stock of PSB,
representing the remaining 5% economic interest. During December 1996,
Ronald L. Havner, Jr. (then an executive officer of PSI) acquired all of
Hughes' common stock in PSB.
On January 2, 1997, in connection with the reorganization of the commercial
property operations of PSI and affiliated entities, PSB formed a
partnership (the "Operating Partnership") whereby PSB became the general
partner. Concurrent with the formation of the Operating Partnership, PSI
and affiliated entities contributed commercial properties to the Operating
Partnership in exchange for limited partnership units ("OP Units"). In
addition, PSI contributed commercial properties to PSB in exchange for
shares of non-voting participating preferred stock, and such properties
were immediately contributed by PSB along with its commercial property
management operations and cash to the Operating Partnership for OP Units.
Subject to certain limitations as described in Note 8, holders of OP Units,
other than PSB, have the right to require PSB to redeem such holders' OP
Units at any time or from time to time beginning on the date that is one
year after the date on which such limited partner is admitted to the
Operating Partnership.
On March 31, 1997, PSI exchanged its non-voting participating preferred
stock into common shares of PSB. As a result of the exchange, PSI owned a
majority of the voting common stock and effectively gained control of PSB
at that time.
DESCRIPTION OF BUSINESS
PSB is a fully-integrated, self-managed real estate investment trust
("REIT") that acquires, owns and operates commercial properties containing
commercial and industrial rental space. From 1986 through 1996, PSB's sole
business activity consisted of the management of commercial properties
owned primarily by PSI and affiliated entities.
Commencing in 1997, PSB began to own and operate commercial properties for
its own behalf. At June 30, 1998, PSB and the Operating Partnership
collectively owned and operated 97 commercial properties (approximately
10.2 million net rentable square feet) located in 11 states. In addition,
the Operating Partnership managed, on behalf of PSI and affiliated
entities, 35 commercial properties (approximately 1.0 million net rentable
square feet).
7
<PAGE>
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
BASIS OF PRESENTATION
The accompanying unaudited condensed consolidated financial statements have
been prepared in accordance with generally accepted accounting principles
for interim financial information and with instructions to Form 10-Q and
Article 10 of Regulation S-X. Accordingly, they do not include all of the
information and footnotes required by generally accepted accounting
principles for complete financial statements. The preparation of the
condensed consolidated financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the amounts reported in the condensed consolidated
financial statements and accompanying notes. Actual results could differ
from estimates. In the opinion of management, all adjustments (consisting
of normal recurring accruals) necessary for a fair presentation have been
included. Operating results for the three and six months ended June 30,
1998 are not necessarily indicative of the results that may be expected for
the year ended December 31, 1998. For further information, refer to the
consolidated financial statements and footnotes of PSB for the year ended
December 31, 1997 filed on Form 8-K/A dated April 17, 1998 (amending Form
8-K dated March 17, 1998).
The condensed consolidated financial statements include the accounts of PSB
and the Operating Partnership. At June 30, 1998, PSB owned approximately 73
% of the OP Units of the Operating Partnership. PSB, as the sole general
partner of the Operating Partnership, has full, exclusive and complete
responsibility and discretion in managing and controlling the Operating
Partnership.
On March 31, 1997, PSB and PSI agreed to exchange the non-voting
participating preferred stock held by PSI for 2,098,288 shares of voting
common stock of PSB. After the exchange, PSI owned in excess of 95% of the
outstanding common voting common stock of PSB and PSB accounted for the
transaction as if PSI acquired PSB in a transaction accounted for as a
purchase. Accordingly, PSB reflected PSI's cost of its investment in PSB in
accordance with Accounting Principles Board Opinion No. 16. As a result of
PSI attaining control of PSB, the carrying value of PSB's assets and
liabilities were adjusted to reflect PSI's acquisition cost of its
controlling interest in PSB of approximately $35 million. As a result, the
carrying value of real estate facilities was increased approximately $8.0
million, intangible assets increased approximately $4.4 million and paid in
capital increased approximately $12.4 million.
STOCK SPLIT AND STOCK DIVIDEND:
On January 1, 1997, the number of outstanding shares of preferred and
common stock increased as a result of a 10 for 1 stock split. In March
1997, the preferred stock of PSB was converted into common stock on a share
for share basis. In December 1997, PSB declared a common stock dividend at
a rate of .01583 shares for each common share outstanding. Similarly, the
Operating Partnership's outstanding OP Units were adjusted to reflect the
stock dividend. No adjustment was made to the outstanding OP Units for the
January 1997 stock split, as the issuance of OP Units during 1997 already
reflected the stock split.
On March 17, 1998, in connection with the merger, PSB's common shares were
converted into 1.18 shares of PSP11. Similarly, holders of OP Units
received an additional 0.18 OP Units for each outstanding OP Unit held at
the time of the merger.
References in the condensed consolidated financial statements and notes
thereto with respect to shares of preferred stock, common stock, stock
options, and OP Units and the related per share/per unit amounts have been
retroactively adjusted to reflect the January 1997 stock split, the
December 1997 stock dividend and the March 1998 conversion in connection
with the Merger.
8
<PAGE>
CASH AND CASH EQUIVALENTS:
PSB considers all highly liquid investments with an original maturity of
three months or less at the date of purchase to be cash equivalents.
REAL ESTATE FACILITIES:
Costs related to the improvements of properties are capitalized.
Expenditures for repair and maintenance are charged to expense when
incurred. After March 31, 1997, acquisition of facilities from PSI and
entities controlled by PSI have been recorded at the predecessor's basis.
Buildings and equipment are depreciated on the straight line method over
the estimated useful lives, which is generally 25 and 5 years,
respectively.
INTANGIBLE ASSETS:
Intangible assets consist of property management contracts for properties
managed, but not owned, by PSB. The intangible assets are being amortized
over seven years. As properties managed are subsequently acquired by PSB,
the unamortized basis of intangible assets related to such property is
included in the cost of acquisition of such property. During April 1997,
PSB acquired four properties from PSI and included in the cost of real
estate facilities for such properties is $730,000 of cost previously
classified as intangible assets. In connection with the Merger, PSB
acquired 13 properties and included in the cost of such properties is
$1,315,000 (which was net of accumulated amortization of $194,000) of costs
previously classified as intangible assets. Intangible assets at June 30,
1998 are net of accumulated amortization of $422,000.
EVALUATION OF ASSET IMPAIRMENT:
In 1995, the Financial Accounting Standards Board ("FASB") issued Statement
of Financial Accounting Standards ("SFAS") No. 121, "Accounting for the
Impairment of Long-Lived Assets and for Long-Lived Assets to be Disposed
Of" which requires impairment losses to be recorded on long-lived assets.
PSB evaluates its assets used in operations, by identifying indicators of
impairment and by comparing the sum of the estimated undiscounted future
cash flows for each asset to the asset's carrying amount. When indicators
of impairment are present and the sum of the undiscounted future cash flows
is less than the carrying value of such asset, an impairment loss is
recorded equal to the difference between the asset's current carrying value
and its value based on discounting its estimated future cash flows. SFAS
No. 121 also addresses the accounting for long-lived assets that are
expected to be disposed of. Such assets are to be reported at the lower of
their carrying amount or fair value, less cost to sell. PSB adopted SFAS
No. 121 in 1996 and the adoption had no effect. PSB's subsequent
evaluations have indicated no impairment in the carrying amount of its
assets.
NOTE PAYABLE TO AND BORROWINGS FROM AFFILIATE:
Note payable to affiliate at December 31, 1997 of $3,500,000 reflects
amounts borrowed from PSI on that date. The note bore interest at 6.97% and
was repaid on January 31, 1998. On May 1, 1998, PSB borrowed $179,000,000
from PSI to fund a portion of the acquisition cost of real estate
facilities. On May 6, 1998, $105.0 million was repaid and the remaining
balance was repaid on May 27, 1998. The borrowings bore interest at 6.91%
(per annum).
REVENUE AND EXPENSE RECOGNITION:
All leases are classified as operating leases. Rental income is recognized
on a straight-line basis over the terms of the leases. Reimbursements from
tenants for real estate taxes and other recoverable operating expenses are
recognized as revenue in the period the applicable costs are incurred.
9
<PAGE>
Costs incurred in connection with leasing (primarily tenant improvements
and leasing commissions) are capitalized and amortized over the lease
period.
Property management fees are recognized in the period earned.
NET INCOME PER COMMON SHARE:
In 1997, the FASB issued SFAS No. 128, Earnings per Share. SFAS No. 128
replaced the calculation of "primary" and "fully diluted" earnings per
share with "basic" and "diluted" earnings per share.
"Diluted" shares include the dilutive effect of stock options, while
"basic" shares exclude such effect. In addition, weighted average shares
utilized in computing basic and diluted earnings per share includes the
weighted average participating preferred shares, because such shares were
allocated income (subject to certain preferences upon liquidation described
below) on an equal per share basis with the common shares.
INCOME TAXES:
During 1997, PSB qualified and intends to continue to qualify as a real
estate investment trust ("REIT"), as defined in Section 856 of the Internal
Revenue Code. As a REIT, PSB is not taxed on that portion of its taxable
income which is distributed to its shareholders provided that PSB meets
certain tests. PSB believes it met these tests during 1997. In addition,
PSP11 (the legal entity for income tax reporting purposes subsequent to the
March 17, 1998 merger) believes it has also met the REIT tests during 1997
and for the six months ended June 30, 1998. Accordingly, no provision for
income taxes has been made in the accompanying financial statements.
GENERAL AND ADMINISTRATIVE EXPENSE:
General and administrative expense includes legal and office expense, state
income taxes, executive salaries, cost of acquisition personnel and other
such administrative items. Such amounts include amounts incurred by PSI on
behalf of PSB, which were subsequently charged to PSB in accordance with
the allocation methodology pursuant to the cost allocation and
administrative services agreement between PSB and PSI.
RECLASSIFICATIONS:
Certain reclassifications have been made to the financial statements for
1997 in order to conform to the 1998 presentation.
3. BUSINESS COMBINATION
On March 17, 1998, AOPP merged into PSP11, a publicly traded real estate
investment trust and an affiliate of PSI. Upon consummation of the Merger
of AOPP into PSP11, the surviving corporation was renamed "PS Business
Parks, Inc." (PSB as defined in Note 1). In connection with the Merger:
* Each outstanding share of PSP11 common stock, which did not elect
cash, continued to be owned by current holders. A total of 106,155
PSP11 common shares elected to receive cash of $20.50 per share.
* Each share of PSP11 common stock Series B and each share of PSP11
common stock Series C converted into .8641 share of PSP11 common
stock.
* Each share of AOPP common stock converted into 1.18 shares of PSP11
common stock.
10
<PAGE>
* Concurrent with the Merger, PSP11 exchanged 11 mini-warehouses and two
properties that combine mini-warehouse and commercial space for 11
commercial properties owned by PSI. The fair value of each group of
real estate facilities was approximately $48 million.
The Merger has been accounted for as a reverse merger whereby PSB is
treated as the accounting acquirer using the purchase method. This has been
determined based upon the following: (i) the former shareholders and
unitholders of PSB owned in excess of 80% of the merged companies and (ii)
the business focus post-Merger will continue to be that of PSB's which
includes the acquisition, ownership and management of commercial
properties. Prior to the Merger, PSP11's business focus has been primarily
on the ownership and operation of its self-storage facilities which
represented approximately 81% of its portfolio.
Allocations of the total acquisition cost to the net assets acquired were
made based upon the fair value of PSP11's assets and liabilities as of the
date of the Merger. The acquisition cost and the fair market values of the
assets acquired and liabilities assumed in the Merger are summarized as
follows:
ACQUISITION COST:
-----------------
Issuance of common stock......... $46,810,000
Cash............................. 424,000
------------
Total acquisition cost....... $47,234,000
ALLOCATION OF ACQUISITION COST:
-------------------------------
Real estate facilities........... $48,000,000
Other assets..................... 452,000
Accrued and other liabilities.... (1,218,000)
------------
Total allocation............. $47,234,000
============
11
<PAGE>
The historical operating results of PSP11 prior to the Merger have not been
included in PSB's historical operating results. Pro forma data for the six
months ended June 30, 1998 and 1997 as though the Merger had been effective
at the beginning of fiscal 1997 are as follows:
<TABLE>
<CAPTION>
Six months ended June 30,
1998 1997
------------- ------------
<S> <C> <C>
Revenues...................................................... $ 38,577 $ 17,494
Net income.................................................... 12,161 3,152
Net income per share - basic.................................. $ 0.77 $ 0.71
Net income per share - diluted................................ $ 0.77 $ 0.71
</TABLE>
The pro forma data does not purport to be indicative either of the results
of operations that would have occurred had the Merger occurred at the
beginning of fiscal 1997 or of the future results of PSB.
4. REAL ESTATE FACILITIES
The activity in real estate facilities for the three months ended June 30,
1998 is as follows:
<TABLE>
<CAPTION>
Accumulated
Land Buildings Depreciation Total
------------ ------------- ----------------- ---------------
<S> <C> <C> <C> <C>
Balances at December 31, 1997........ $ 91,754,000 $ 226,466,000 $ (3,982,000) $ 314,238,000
Property acquisitions................ 85,775,000 189,327,000 - 275,102,000
Acquired in connection with the
Merger............................. 14,400,000 33,600,000 - 48,000,000
Adjustment from intangible assets.... - 1,315,000 - 1,315,000
Capital improvements................. - 3,175,000 - 3,175,000
Depreciation expense................. - - (6,332,000) (6,332,000)
------------ ------------- ----------------- ---------------
Balances at June 30, 1998............ $191,929,000 $ 453,883,000 $ (10,314,000) $ 635,498,000
============ ============= ================= ===============
</TABLE>
On January 13, 1998, PSB purchased a commercial property from an
unaffiliated third party for approximately $22,518,000, consisting of
$22,325,000 cash (of which $500,000 was paid before December 31, 1997) and
the issuance of 8,428 OP Units having a value of approximately $193,000.
In March 1998, PSB purchased two commercial properties from unaffiliated
third parties for an aggregate cost of approximately $32,916,000, composed
of $17,377,000 cash (of which $300,000 was paid before December 31, 1997),
the issuance of 44,250 OP units having a value of approximately $1,013,000,
and the assumption of mortgage notes payable of $14,526,000.
On May 4, 1998, the Company acquired 29 commercial properties
(approximately 2.3 million net rentable square feet) for an aggregate cost
of approximately $190 million in cash.
In June 1998, the Company acquired three properties (approximately 343,000
net rentable square feet) for an aggregate cost of $29,101,000 consisting
of $13,449,000 in cash, $15,449,000 in debt assumption and $203,000 in OP
Units.
12
<PAGE>
5. LEASING ACTIVITY
Future minimum rental revenues under non-cancelable leases as of June 30,
1998 with tenants for the above real estate facilities are as follows:
1998 (July - December) $ 40,940,000
1999 68,379,000
2000 48,142,000
2001 31,847,000
2002 21,603,000
Thereafter 29,283,000
---------------
$ 240,194,000
===============
6. REVOLVING LINE OF CREDIT
At June 30, 1998, the Company had no borrowings on its line of credit
agreement with PSI. On August 6, 1998, PSB entered into an unsecured line
of credit (the "Credit Agreement") with a commercial bank and the line of
credit provided by PSI was canceled. The Credit Agreement has a borrowing
limit of $100.0 million and an expiration date of August 5, 2000. The
expiration date may be extended by one year on each anniversary of the
Credit Agreement. Interest on outstanding borrowings is payable monthly. At
the option of the Company, the rate of interest charged is equal to (i) the
prime rate or (ii) a rate ranging from the London Interbank Offered Rate
("LIBOR") plus 0.55% to LIBOR plus .95% depending on the Company's credit
ratings and coverage rations, as defined. In addition, the Company is
required to pay a quarterly commitment fee of 0.25% (per annum).
7. MORTGAGE NOTES PAYABLE
<TABLE>
<CAPTION>
Mortgage notes at June 30, 1998 consist of the following:
<S> <C>
7-1/8 % mortgage note, secured by one commercial property,
principal and interest payable monthly, due May 2006 $8,984,000
8-1/8 % mortgage note, secured by one commercial property,
principal and interest payable monthly, due July 2005 5,461,000
8-1/2 % mortgage note, secured by one commercial property,
principal and interest payable monthly, due July 2007 1,960,000
8 % mortgage note, secured by one commercial property, principal
and interest payable monthly, due April 2003 1,714,000
7-5/8 % mortgage note, secured by one commercial property,
principal and interest payable monthly, due May 2004 11,771,000
------------
$29,890,000
============
</TABLE>
13
<PAGE>
At June 30, 1998, approximate principal maturities of mortgage notes
payable are as follows:
1998 (July - December) $ 521,000
1999 1,103,000
2000 1,190,000
2001 1,285,000
2002 1,386,000
Thereafter 24,405,000
---------------
$ 29,890,000
===============
8. MINORITY INTERESTS
In consolidation, PSB classifies ownership interests in the Operating
Partnership, other than its own, as minority interest on the consolidated
financial statements. Minority interest in income consists of the minority
interests' share of the consolidated operating results.
Subject to certain limitations described below, each limited partner other
than PSB has the right to require the redemption of such limited partner's
partnership interests at any time or from time to time beginning on the
date that is one year after the date on which such limited partner is
admitted to the Operating Partnership.
Unless PSB, as general partner, elects to assume and perform the Operating
Partnership's obligation with respect to a redemption right, as described
below, a limited partner that exercises its redemption right will receive
cash from the Operating Partnership in an amount equal to the market value
(as defined in the Operating Partnership Agreement) of the partnership
interests redeemed. In lieu of the Operating Partnership redeeming the
partner for cash, PSB, as general partner, has the right to elect to
acquire the partnership interest directly from a limited partner exercising
its redemption right, in exchange for cash in the amount specified above or
by issuance of one share of PSB common stock for each unit of limited
partnership interest redeemed.
A limited partner cannot exercise its redemption right if delivery of
shares of PSB common stock would be prohibited under the applicable
articles of incorporation, if the general partner believes that there is a
risk that delivery of shares of common stock would cause the general
partner to no longer qualify as a REIT, would cause a violation of the
applicable securities laws, or would result in the Operating Partnership no
longer being treated as a partnership for federal income tax purposes.
At June 30, 1998, there were 7,394,411 OP Units owned by minority interests
(7,305,355 were owned by PSI and affiliated entities and 89,056 were owned
by unaffiliated third parties). On a fully converted basis, assuming all
7,394,411 minority interest OP Units were converted into shares of common
stock of PSB at June 30, 1998, the minority interests would own
approximately 23.8% of the pro forma common shares outstanding. At the end
of each reporting period, PSB determines the amount of equity (book value
of net assets) which is allocable to the minority interest based upon this
pro forma ownership interest and an adjustment is made to the minority
interest, with a corresponding adjustment to Paid in Capital, to reflect
the minority interests' equity.
9. PROPERTY MANAGEMENT CONTRACTS
The Operating Partnership manages industrial, office and retail facilities
for PSI and entities affiliated with PSI, and third party owners. These
facilities, all located in the United States, operate under the "Public
Storage" or "PS Business Parks" name.
The property management contracts provide for compensation of five percent
of the gross revenue of the facilities managed. Under the supervision of
the property owners, the Operating Partnership coordinates rental policies,
rent collections, marketing activities, the purchase of equipment and
14
<PAGE>
supplies, maintenance activities, and the selection and engagement of
vendors, suppliers and independent contractors. In addition, the Operating
Partnership assists and advises the property owners in establishing
policies for the hire, discharge and supervision of employees for the
operation of these facilities, including property managers, leasing,
billing and maintenance personnel.
The property management contract with PSI is for a seven year term with the
term being extended one year each anniversary. The property management
contracts with affiliates of PSI are cancelable by either party upon sixty
days notice.
10. SHAREHOLDERS' EQUITY
In addition to common and preferred stock, PSB is authorized to issue
100,000,000 shares of Equity Stock. The Articles of Incorporation provide
that the Equity Stock may be issued from time to time in one or more series
and gives the Board of Directors broad authority to fix the dividend and
distribution rights, conversion and voting rights, redemption provisions
and liquidation rights of each series of Equity Stock.
On January 7, 1998, a holder of OP Units exercised its option and converted
its 1,785,008 OP Units into an equal number of shares of PSB common stock.
The conversion resulted in an increase in shareholders' equity and a
corresponding decrease in minority interest of approximately $33,023,000
representing the book value of the OP Units at the time of conversion.
In January 1998, PSB entered into an agreement with a group of
institutional investors under which PSB agreed to issue up to 6,774,074
shares of PSB common stock at $22.88 per share in cash (an aggregate of
$155,000,000) in separate tranches. The first tranche, representing
2,185,189 shares or $50.0 million, was issued in January 1998. The Company
incurred $2,400,000 in costs associated with the issuance. The remainder of
the common shares (4,588,885 common shares) were issued on May 6, 1998 and
the net proceeds ($105.0 million) were used to fund a portion of the cost
to acquire commercial properties in May 1998.
On March 17, 1998, in connection with the Merger, PSB recapitalized its
equity by changing the par value of its common stock from $0.10 to $0.01
per share. This resulted in a decrease in common stock and a corresponding
increase in Paid-in Capital totaling $1,511,000.
In May 1998, the Company completed two common stock offerings, raising net
proceeds in aggregate totaling $118.9 million through the issuance of
5,025,800 common shares. A portion of the net proceeds were used in
connection with a $190 million property portfolio acquisition.
On March 31, 1998 and June 30, 1998, PSB paid quarterly distributions to
its common shareholders' totaling $4,079,000 ($0.347 per common share) and
$5,909,000 ($0.25 per common share), respectively.
15
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
- -------------------------------------------------------------------------------
GENERAL: Private Securities Litigation Reform Act Safe Harbor Statement. In
addition to historical information, management's discussion and analysis
includes certain forward-looking statements regarding events and financial
trends which may affect the Company's future operating results and financial
position. Such forward-looking statements are often identified by the words
"estimate," "project," "intend," "plan," "expect," "believe," or similar
expressions. Such statements are subject to risks and uncertainties that could
cause the Company's actual results and financial position to differ materially
from that indicated by the forward-looking statement. Such factors include, but
are not limited to a change in economic conditions in the various markets served
by the Company's operations which would adversely affect the level of demand for
rental of commercial space and the cost structure of the Company. Readers are
cautioned not to place undue reliance on these forward-looking statements, which
speak only as of the date hereof. The Company undertakes no obligation to
publicly release the result of any revisions to these forward-looking statements
to reflect events or circumstances after the date hereof or to reflect the
occurrence of unanticipated events.
HISTORICAL OVERVIEW: PS Business Parks, Inc. ("PSB" or the "Company") is a
self-managed, self-advised real estate investment trust that acquires, owns and
operates commercial properties. The Company is the sole general partner of PS
Business Parks, L.P. (the "Operating Partnership") through which the Company
conducts most of its activities and owned, as of June 30, 1998, an approximate
73% partnership interest. Substantially all of the remaining partnership
interest is owned by Public Storage, Inc. ("PSI") and its affiliates.
The commercial properties owned by the Company and the Operating Partnership
generally include both business park (industrial/flex space) and office space.
The industrial space is used for, among other things, light manufacturing and
assembly, storage and warehousing, distribution and research and development
activities. Most of the office space is occupied by tenants who are also renting
industrial space. The commercial properties typically consist of one to ten
one-story buildings located on three to 20 acres and contain from approximately
10,000 to 500,000 square feet of rentable space (more than 50,000 square feet in
the case of the free-standing properties). A property is typically divided into
units ranging in size from 500 to 10,000 square feet. Leases generally range
from one to five years and some tenants have options to extend the original
terms of their leases.
During 1997 and the first six months of fiscal 1998, the Company completed a
number of business transactions which have had a significant impact to the
Company's comparative operating results for the three and six months ended June
30, 1998 and 1997:
* Merger: PS Business Parks, Inc. ("PSB") is the successor to American
Office Park Properties, Inc. ("AOPP") which merged with and into
Public Storage Properties XI, Inc. ("PSP 11") on March 17, 1998 (the
"Merger"). The name of the surviving company was changed to "PS
Business Parks, Inc." in connection with the merger.
Based upon the terms of the Merger, the transaction for financial
accounting purposes has been accounted for as a reverse acquisition
whereby AOPP is deemed to have acquired PSP11. However, PSP11 is the
continuing legal entity and registrant for both Securities and
Exchange Commission filing purposes and income tax reporting purposes.
All subsequent references to "PSB" or the "Company" for periods prior
to March 17, 1998 shall refer to AOPP.
In connection with the Merger, PSP11 exchanged eleven mini-warehouses and
two properties that combine mini-warehouse and commercial space for eleven
commercial properties owned by PSI. The fair value of the real estate
facilities owned by PSP11 and the commercial facilities received by PSP11
was approximately $48 million. As a result of this transaction, PSB
acquired 13 properties with a total of approximately 815,000 net rentable
square feet.
* Property acquisitions: Prior to January 2, 1997, the Company and its
Operating Partnership did not have an ownership interest in any
properties.
16
<PAGE>
On January 2, 1997, the Company acquired 35 commercial properties
(approximately 3.0 million net rentable square feet) from Public
Storage, Inc. ("PSI") and affiliated entities in exchange for
1,198,680 shares of non-voting participating preferred stock and
5,824,383 units of the Operating Partnership ("OP Units").
On April 1, 1997, the Company acquired four commercial properties from
PSI (approximately 370,000 million net rentable square feet) in
exchange for 1,480,968 OP Units.
On July 31, 1997, the Company acquired two commercial properties
(approximately 435,000 net rentable square feet) from an unaffiliated
third party for cash totaling $33,310,000.
On September 24, 1997, the Company acquired a commercial property
(approximately 150,000 net rentable square feet) from an unaffiliated
third party for an aggregate cost of $10,283,000 consisting of cash of
$9,959,000 and the issuance of 14,384 OP Units.
On December 10, 1997, the Company purchased a commercial property
(approximately 51,000 net rentable square feet) from an unaffiliated
third party for $3,854,000, consisting of cash of $3,554,000 and the
issuance of 13,111 OP Units.
On December 24, 1997, the Company acquired six commercial properties
(approximately 2.0 million net rentable square feet) valued at
$118,655,000 and $1,000,000 in cash from a subsidiary of a state
pension plan through a merger and contribution. In connection with the
transaction, the Company issued to the subsidiary of the state pension
plan 3,504,758 common shares of the Company and 1,785,007 OP Units.
The Company incurred approximately $3,300,000 in costs in connection
with the transaction.
On January 13, 1998, the Company acquired a commercial property
(approximately 308,000 net rentable square feet) for $22,518,000,
consisting of cash of $22,325,000 and the issuance of 8,428 OP Units
having a value of approximately $193,000.
In March 1998, the Company acquired two commercial properties
(approximately 403,000 net rentable square feet) for an aggregate cost
of $32,916,000, consisting of cash of $17,377,000, assumption of
mortgage notes payable of $14,526,000 and the issuance of 44,250 OP
Units having a value of approximately $1,013,000.
On May 4, 1998, the Company acquired 29 commercial properties
(approximately 2.3 million net rentable square feet) for an aggregate
cost of approximately $190 million in cash.
In June 1998, the Company acquired three properties (approximately
343,000 net rentable square feet) for an aggregate cost of $29.1
million, consisting of $13,449,000 in cash, $15,448,000 in debt
assumption and $203,000 in OP Units.
* Common stock issuances for cash: In connection with the Company's July
1997 acquisition of properties, the Company issued 2,025,769 shares of
common stock primarily to PSI for cash totaling $33,800,000.
In January 1998, the Company entered into an agreement with a group of
institutional investors under which the Company agreed to issue up to
6,774,074 shares of common stock at $22.88 per share in separate
tranches. The first tranche, representing 2,185,189 shares or $50.0
million was issued in January 1998. The remainder of the shares were
issued on May 6, 1998 for $105.0 million.
In May 1998, the Company completed two common stock offerings, raising
net proceeds totaling $118.9 million. In the first offering, the
Company sold 4,000,000 shares of common stock to an underwriter,
resulting in approximately $95.2 million of net proceeds. These shares
were resold to various institutional investors. A portion of the
17
<PAGE>
proceeds were used to retire debt incurred with a $190 million
property portfolio acquisition. In the second common stock offering,
the Company sold 1,025,800 common shares to an underwriter, resulting
in net proceeds of $23.7 million.
* Exchange of non-voting preferred stock for voting common stock: On
March 31, 1997, PSI exchanged its non-voting common stock for voting
common stock of the Company in a transaction accounted for as a
purchase of PSB by PSI. As a result of PSI attaining a 95% ownership
interest in PSB voting common stock, PSB reflected PSI's cost of its
investment in PSB in accordance with Accounting Principles Board
Opinion No. 16. As a result of PSI attaining control of PSB, the
carrying value of PSB's assets and liabilities were adjusted to
reflect PSI's acquisition cost of its controlling interest in PSB of
approximately $35 million. As a result, the carrying value of real
estate facilities was increased at March 31, 1997 by approximately
$8.0 million, intangible assets increased by approximately $4.4
million and paid in capital increased by approximately $12.4 million.
RESULTS OF OPERATIONS
Three and six months ended June 30, 1998 compared to the three and six months
ended June 30, 1997: Net income for the three months ended June 30, 1998 was
$7,046,000 compared to $795,000 for the same period in 1997. Net income for the
six months ended June 30, 1998 was $11,376,000 compared to $1,477,000 for the
same period in 1997. Net income per common share on a diluted basis was $0.38
(based on weighted average diluted shares outstanding of 18,710,576) for the
three months ended June 30, 1998 compared to net income per common share on a
diluted basis of $0.36 (based on diluted weighted average shares outstanding of
2,197,779) for the three months ended June 30, 1997, representing an increase of
5.6%. Net income per common share on a diluted basis was $0.76 (based on
weighted average diluted shares outstanding of 14,977,776) for the six months
ended June 30, 1998 compared to net income per common share on a diluted basis
of $0.68 (based on diluted weighted average shares outstanding of 2,185,569) for
the six months ended June 30, 1997, representing an increase of 11.8%. The
increases in net income and net income per share reflects the Company's
significant growth in its asset base through the acquisition of commercial
properties.
PROPERTY OPERATIONS: The Company's property operations account for almost all of
the net operating income earned by the Company for the three and six months
ended June 30, 1998. The following table presents the operating results of the
properties for the six months ended June 30, 1998 and 1997:
18
<PAGE>
<TABLE>
<CAPTION>
Three months ended June 30, Six months ended June 30,
------------------------------------ ------------------------------------
1998 1997 Change 1998 1997 Change
----------- ----------- ---------- ----------- ------------ ---------
Rental income:
Facilities owned throughout each period
(35 facilities, 3.0 million net
<S> <C> <C> <C> <C> <C> <C>
rentable square feet)................. $6,366,000 $6,059,000 5.1% $12,381,000 $11,864,000 4.4%
Facilities acquired between March 31,
1997 and March 31, 1998 (30
facilities, 4.6 million net rentable
square feet).......................... 11,070,000 919,000 1,104.6% 19,408,000 919,000 2,011.9%
Facilities acquired during the three
months ended June 30, 1998 (32
facilities, 2.6 million net rentable
square feet).......................... 4,035,000 - n/a 4,035,000 - n/a
----------- ----------- --------- ---------- ---------- ---------
Total rental income..................... $21,471,000 $6,978,000 207.7% $35,824,000 $12,783,000 180.3%
=========== =========== ========= ========== ========== =========
Cost of operations (excluding
depreciation):
Facilities owned throughout each period. $2,154,000 $2,241,000 (3.9%) $4,682,000 $4,734,000 (1.1%)
Facilities acquired between March 31
1997 and March 31, 1998............... 3,540,000 285,000 1,142.1% 5,639,000 285,000 1,878.6%
Facilities acquired during the three
months ended June 30, 1998............ 661,000 - n/a 661,000 - n/a
----------- ----------- --------- ---------- ---------- ---------
Total cost of operations................ $6,355,000 $2,526,000 151.6% $10,982,000 $5,019,000 118.8%
=========== =========== ========= ========== ========== =========
Net operating income (rental income
less cost of operations):
Facilities owned throughout each period. $4,212,000 $3,818,000 10.3% $7,699,000 $7,130,000 8.0%
Facilities acquired between March 31
1997 and March 31, 1998............... 7,530,000 634,000 1,087.8% 13,769,000 634,000 2,071.8%
Facilities acquired during the three
months ended June 30, 1998............ 3,374,000 - n/a 3,374,000 - n/a
----------- ----------- --------- ---------- ---------- ---------
Total net operating income.............. $15,116,000 $4,452,000 239.5% $24,842,000 $7,764,000 220.0%
=========== =========== ========= ========== ========== =========
Other operating data:
For the facilities owned throughout
each period:
Annualized realized rent per occupied
square foot........................... $9.00 $8.52 5.6% $8.76 $8.40 4.3%
Weighted average occupancy for the
period................................ 94.8% 95.8% (1.0%) 95.0% 95.6% (0.6%)
</TABLE>
SUPPLEMENTAL PROPERTY DATA AND TRENDS: In order to evaluate how the Company's
overall portfolio has performed, management analyzes the operating performance
of a consistent group of 51 properties (4.2 million net rentable square feet).
These 51 properties represent a mature group of properties which have been
managed by the Company for at least three years and, as of June 30, 1998, were
owned by the Company. The table below summarizes the historical operations of
the 51 properties for the three and six months ended June 30, 1998 and 1997;
however, the Company did not own all of the properties throughout the periods
presented and therefore, such operations are not all reflected in the Company's
historical operating results.
<PAGE>
The following table summarizes the pre-depreciation historical operating results
of these "Same Park" facilities:
<TABLE>
<CAPTION>
Three months ended June 30,
----------------------------------------------------
1998(1) 1997(1) Change
------------- ------------------ --------------
<S> <C> <C> <C>
Rental income.......................................... $9,767,000 $9,300,000 5.0%
Cost of operations..................................... 3,529,000 3,568,000 (1.1)%
------------- ------------------ --------------
Net operating income................................. $6,238,000 $5,732,000 8.8%
============= ================== ==============
Gross Margin (2)................................... 63.9% 61.6% 2.3%
Annualized realized rent per occupied square foot (3).. $9.85 $9.32 5.7%
Weighted average occupancy for the period.............. 95.1% 96.1% (1.0%)
Six months ended June 30,
----------------------------------------------------
1998(1) 1997(1) Change
------------- ------------------ --------------
Rental income.......................................... $19,157,000 $18,176,000 5.4%
Cost of operations .................................... 7,221,000 7,240,000 (0.3%)
------------- ------------------ --------------
Net operating income................................. $11,936,000 $10,936,000 9.1%
============= ================== ==============
Gross Margin (2)................................... 62.3% 60.2% 2.1%
Annualized realized rent per occupied square foot (3).. $9.64 $9.16 5.2%
Weighted average occupancy for the period.............. 95.3% 95.9% (0.6%)
</TABLE>
(1) Operations for the three and six months ended June 30, 1998 represent the
historical operations of the 51 properties however, the Company did not own
all of the properties throughout all periods presented and therefore such
operations are not reflected in the Company's historical operating results.
All such properties were owned effective March 17, 1998.
(2) Gross margin is computed by dividing property net operating income by
rental revenues.
(3) Realized rent per square foot represents the actual revenue earned per
occupied square foot.
FACILITY MANAGEMENT OPERATIONS: The Company's facility management accounts for a
small portion of the Company's net operating income (less than 1% of net
operating income for the three months ended June 30, 1998). During the three
months ended June 30, 1998, $117,000 in net operating income was recognized from
facility management operations compared to $179,000 for the same period in 1997.
During the six months ended June 30, 1998, $294,000 in net operating income was
recognized from facility management operations compared to $366,000 for the same
period in 1997. Due to the Company's acquisition of properties previously
managed, where the Company managed 53 facilities at March 31, 1997 and 35
facilities at June 30, 1998, facility management fees have decreased.
INTEREST AND OTHER INCOME: Interest and other income primarily reflects earnings
on cash balances. Interest and other income was $311,000 for the three months
ended June 30, 1998 as compared to $110,000 for the same period in 1997.
Interest and other income was $544,000 for the six months ended June 30, 1998 as
compared to $139,000 for the same period in 1997. The increases are attributable
to increased average cash balances principally due to the Company's issuance of
common stock in January and May 1998 and the timing of investing these funds in
newly acquired real estate facilities.
DEPRECIATION AND AMORTIZATION EXPENSE: Depreciation and amortization expense for
the three months ended June 30, 1998 was $4,256,000, as compared to $1,195,000
for the same period in 1997. Depreciation and amortization expense for the six
20
<PAGE>
months ended June 30, 1998 was $6,556,000, as compared to $2,015,000 for the
same period in 1997. The increases are due to the acquisition of real estate
facilities in 1997 and 1998.
GENERAL AND ADMINISTRATIVE EXPENSE: General and administrative expense was
$551,000 for the three months ended June 30, 1998 compared to $172,000 for the
three months ended June 30, 1997. General and administrative expense was
$996,000 for the six months ended June 30, 1998 compared to $385,000 for the six
months ended June 30, 1997. The increase is due to the increased scope and
acquisition activities of the Company. Management anticipates that with the
hiring of executive staff, and as the Company's asset and shareholder bases
increase, general and administrative expense will increase.
INTEREST EXPENSE: Interest expense was $822,000 and $1,069,000 for the three and
six months ended June 30, 1998 (none for the same periods in 1997). Interest
expense for 1998 is attributable to mortgage notes assumed in connection with
the acquisition of real estate facilities in March and June 1998 combined with
interest expense incurred on short-term borrowings from PSI.
MINORITY INTEREST IN INCOME: Minority interest in income reflects the income
allocable to equity interests in the Operating Partnership which are not owned
by the Company. Minority interest in income for the three months ended June 30,
1998 was $2,869,000 as compared to $2,579,000 for the same period in 1997.
Minority interest in income for the six months ended June 30, 1998 was
$5,683,000 as compared to $4,392,000 for the same period in 1997. The increases
in minority interest in income are due to improved operating results and the
issuance of additional Operating Partnership units, primarily in connection with
the acquisition of real estate facilities from PSI on April 1, 1997.
LIQUIDITY AND CAPITAL RESOURCES
Net cash provided by operating activities for the six months ended June 30, 1998
and 1997 was $23,609,000 and $8,062,000, respectively. Management believes that
its internally generated net cash provided by operating activities will continue
to be sufficient to enable it to meet its operating expenses, capital
improvements, debt service requirements and distributions to shareholders and
holders of Operating Partnership units for the foreseeable future.
The following table summarizes the Company's ability to make capital
improvements to maintain its facilities through the use of cash provided by
operating activities. The remaining cash flow is available to the Company to pay
distributions to shareholders and acquire property interests.
<TABLE>
<CAPTION>
Six months ended June 30,
-------------------------------
1998 1997
-------------- --------------
<S> <C> <C>
Net income.......................................................... $ 11,376,000 $1,477,000
Depreciation and amortization....................................... 6,556,000 2,015,000
Change in working capital........................................... (6,000) 178,000
Minority interest in income......................................... 5,683,000 4,392,000
-------------- --------------
Net cash provided by operating activities........................... 23,609,000 8,062,000
Capital improvements to maintain facilities......................... (3,175,000) (1,366,000)
-------------- --------------
Funds available for distributions to shareholders, minority
interests, acquisitions and other corporate purposes.............. 20,434,000 6,696,000
Cash distributions to shareholders and minority interests........... (14,392,000) -
-------------- --------------
Excess funds available for acquisitions and other corporate purposes $ 6,042,000 $ 6,696,000
============== ==============
</TABLE>
The Company's capital structure is characterized by low level of leverage. As of
June 30, 1998, the Company had five fixed rate mortgage notes payable totaling
$29,890,000, which represented 4% of its total capitalization (based on book
value, including minority interests and debt).
At June 30, 1998, the Company had no borrowings on its line of credit agreement
with PSI. On August 6, 1998, PSB entered into an unsecured line of credit (the
"Credit Agreement") with a commercial bank and the line of credit provided by
21
<PAGE>
PSI was canceled. The Credit Agreement has a borrowing limit of $100.0 million
and an expiration date of August 5, 2000. The expiration date may be extended by
one year on each anniversary of the Credit Agreement. Interest on outstanding
borrowings is payable monthly. At the option of the Company, the rate of
interest charged is equal to (i) the prime rate or (ii) a rate ranging from the
London Interbank Offered Rate ("LIBOR") plus 0.55% to LIBOR plus 0.95% depending
on the Company's credit ratings and coverage rations, as defined. In addition,
the Company is required to pay a quarterly commitment fee of 0.25% (per annum).
The Company expects to fund its growth strategies with cash on hand, internally
generated retained cash flows and borrowings from its line of credit. The
Company intends to repay amounts borrowed under the credit facility from
undistributed cash flow or, as market conditions permit and as determined to be
advantageous, from the public or private placement of equity securities.
In January 1998, the Company entered into an agreement with institutional
investors whereby the Company agreed to issue 6,774,074 shares of its common
stock for cash ($155 million) in separate tranches. The first tranche,
representing 2,185,189 shares or $50.0 million, was issued in January 1998. The
Company incurred $2,400,000 in costs associated with the issuance. The remainder
of the common shares (4,588,885 common shares) were issued on May 6, 1998 and
the net proceeds ($105.0 million) were used to repay short-terms borrowings from
PSI.
In May 1998, the Company completed two common stock offerings, raising net
proceeds totaling $118.9 million. In the first offering, the Company sold
4,000,000 shares of common stock to an underwriter, resulting in approximately
$95.2 million of net proceeds. These shares were resold to various institutional
investors In the second common stock offering, the Company sold 1,025,800 common
shares to an underwriter, resulting in net proceeds of $23.7 million. A portion
of the proceeds from these offerings were used to repay short-term borrowings
from PSI and to fund the acquisitions of real estate facilities.
FUNDS FROM OPERATIONS: Funds from operations ("FFO") is defined by the Company
as net income (loss), computed in accordance with generally accepted accounting
principles ("GAAP"), before depreciation, amortization and extraordinary or
non-recurring items. FFO is presented because the Company considers FFO to be a
useful measure of the operating performance of a REIT which, together with net
income and cash flows, provides investors with a basis to evaluate the operating
and cash flow performances of a REIT. FFO does not represent net income or cash
flows from operations as defined by GAAP. FFO does not take into consideration
scheduled principal payments on debt and capital improvements. Accordingly, FFO
is not necessarily a substitute for cash flow or net income as a measure of
liquidity or operating performance or ability to make acquisitions and capital
improvements or ability to pay distributions or debt principal payments. Also,
FFO as computed and disclosed by the Company may not be comparable to FFO
computed and disclosed by other REITs.
Funds from operations for the Company is computed as follows:
Six months ended June 30,
-----------------------------
1998 1997
------------- -------------
Net income........................................ $ 11,376,000 $ 1,477,000
Minority interest in income....................... 5,683,000 4,392,000
Depreciation and amortization..................... 6,556,000 2,015,000
------------- -------------
Subtotal........................................ 23,615,000 7,884,000
FFO allocated to minority interests............... (7,867,000) (5,900,000)
------------- -------------
Funds from operations allocated to shareholders... $ 15,748,000 $ 1,984,000
============= =============
DISTRIBUTIONS: The Company has elected and intends to qualify as a REIT for
federal income tax purposes. As a REIT, the Company must meet, among other
tests, sources of income, share ownership and certain asset tests. In addition,
the Company is not taxed on that portion of its taxable income which is
distributed to its shareholders provided that at least 95% of its taxable income
is so distributed to its shareholders prior to filing of its tax return.
On August 6, 1998, the Company declared a regular dividend of $0.25 per share
payable on September 30, 1998 to shareholders of record on September 15, 1998.
This reflects a decrease from $0.34 per common share which was paid to the
previous shareholders of Public Storage Properties XI, Inc. The Board of
Directors has established a distribution policy to maximize the retention of
operating cash flow and only distribute the minimum amount required for the
Company to maintain its tax status as a REIT.
23
<PAGE>
PART II. OTHER INFORMATION
Item 2. Changes in Securities and Use of Proceeds
(c) On May 6, 1998, the Registrant sold in a private placement pursuant
to Section 4(2) of the Securities Act of 1933, as amended, an aggregate of
4,588,885 shares of its common stock for an aggregate amount of $104,999,911 in
cash to the following institutional investors: State of Michigan Retirement
Systems, Cohen & Steers Capital Management, Inc., Morgan Stanley Asset
Management, Harvard Private Capital Realty, Inc., ABKB/LaSalle Securities
Limited Partnership, Fidelity Real Estate Investment Portfolio, Stanford
University, The Fidelity REIT Collective Pool, State Employees' Retirement Fund
of the State of Delaware and J.W. McConnell Family Foundation.
Item 5. Other Information
(a) Appointment of Executive Officers
---------------------------------
On June 8, 1998, Jack E. Corrigan became Vice President,
Chief Financial Officer and Secretary of the Registrant and J. Michael Lynch
became Vice President - Director of Acquisitions and Development of the
Registrant.
Jack E. Corrigan, age 38, is a certified public accountant.
From February 1991 until June 1998, Mr. Corrigan was a partner of LaRue,
Corrigan & McCormick with responsibility for the audit and accounting practice.
He was Controller of Storage Equities, Inc., now known as Public Storage, Inc.,
from 1989 until February 1991 and was also a Vice President from 1990 until
February 1991.
J. Michael Lynch, age 45, was Vice President of Acquisitions
and Development of Nottingham Properties, Inc. from 1995 until May 1998. Mr.
Lynch has 16 years of real estate experience, primarily in acquisitions and
development. From 1988 until 1995, he was a development project manager for The
Parkway Companies. From 1983 until 1988, Mr. Lynch was an Assistant Vice
President, Real Estate Investment Department of First Wachovia Corporation.
(b) Credit Agreement
----------------
On August 6, 1998, PS Business Parks, L.P. entered into a
$100 million Revolving Credit Agreement with a bank. The Revolving Credit
Agreement is attached hereto as Exhibit 10.5 and is incorporated herein by this
reference.
24
<PAGE>
PART II. OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K
(a) The following exhibits are included herein:
(10.1) Agreement of Limited Partnership of PS Business Parks, L.P.
dated as of March 17, 1998.
(10.2) Registration Rights Agreement dated as of March 17, 1998
between PS Business Parks, Inc. and Acquiport Two Corporation
("Acquiport Registration Rights Agreement").
(10.3) Letter dated May 20, 1998 relating to Acquiport Registration
Rights Agreement.
(10.4) Employment Agreement between PS Business Parks, Inc. and J.
Michael Lynch dated as of May 20, 1998.
(10.5) Revolving Credit Agreement dated August 6, 1998 among PS
Business Parks, L.P., Wells Fargo Bank, National Association,
as Agent, and the Lenders named therein.
(11) Statement re: Computation of Earnings per Share
(12) Statement re: Computation of Ratio of Earnings to Fixed
Charges
(27) Financial Data Schedule
(b) Reports on Form 8-K
The Registrant filed a Current Report on Form 8-K/A dated April
17, 1998 (amending Form 8-K dated March 17, 1998) pursuant to Item 7 which filed
financial statements for PS Business Parks, Inc. (successor to American Office
Park Properties, Inc.).
The Registrant filed a Current Report on Form 8-K dated May 4,
1998 (filed May 14, 1998) pursuant to Items 2 and 7 which reported the
acquisition of properties from affiliates of Principal Mutual Life and filed
financial statements for those properties.
The Registrant filed a Current Report on Form 8-K dated May 20,
1998 pursuant to Item 5 which filed certain exhibits relating to the
Registrant's public offering of 4,000,000 shares of common stock.
The Registrant filed a Current Report on Form 8-K dated May 27,
1998 pursuant to Item 5 which filed certain exhibits relating to the
Registrant's public offering of 1,025,800 shares of common stock.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
Dated: August 14, 1998
PS BUSINESS PARKS, INC.
BY: /s/ Jack Corrigan
------------------
Jack Corrigan
Vice President and Chief Financial Officer
25
<PAGE>
<TABLE>
<CAPTION>
PS BUSINESS PARKS, INC.
Exhibit 11: Statement re: Computation of Earnings per Share
For the Three Months Ended For the Six Months Ended
June 30, June 30,
------------------------------------------------------------
Basic and Diluted Earnings Per Share: 1998 1997 1998 1997
----------- -------------- -------------- -------------
<S> <C> <C> <C> <C>
Net income and net income allocable to
common shareholders (same for Basic and
Diluted computations)................................ $7,046,000 $ 795,000 $11,376,000 $1,477,000
=========== ============= ============== =============
Weighted average common shares outstanding:
Basic - weighted average common shares outstanding... 18,649,693 2,197,779 14,926,093 2,185,569
Net effect of dilutive stock options - based on treasury
stock method using average market price............ 60,883 - 51,683 -
----------- -------------- -------------- -------------
Diluted weighted average common shares outstanding... 18,710,576 2,197,779 14,977,776 2,185,569
=========== ============= ============== =============
Basic earnings per common share......................... $ 0.38 $ 0.36 $ 0.76 $ 0.68
=========== ============= ============== =============
Diluted earnings per common share....................... $ 0.38 $ 0.36 $ 0.76 $ 0.68
=========== ============= ============== =============
</TABLE>
Exhibit 11
<PAGE>
<TABLE>
<CAPTION>
PS BUSINESS PARKS, INC.
Exhibit 12: Statement re: Computation of Ratio of Earnings
to Fixed Charges
Six Months Ended
June 30,
--------------------------------------------
1998 1997
---------------- --------------
(Amounts in thousands, except ratios)
<S> <C> <C>
Net income $ 11,376 $ 1,477
Add: minority interest 5,683 4,392
Less: minority interest that does not have fixed
charges - (4,392)
---------------- --------------
17,059 1,477
Add: Interest expense 1,069 -
---------------- --------------
Earnings available to cover fixed charges $ 18,128 $ 1,477
================ ==============
Fixed charges (interest expense) $ 1,069 $ -
================ ==============
Ratio of earnings to fixed charges 16.96 NA
================ ==============
</TABLE>
<TABLE>
<CAPTION>
Year Ended December 31,
----------------------------------------------------------------------------
1997 1996 1995 1994 1993
----------- ----------- ----------- ----------- -----------
(Amounts in thousands, except ratios)
<S> <C> <C> <C> <C> <C>
Net income before taxes $ 3,836 $ 519 $ 1,192 $ 1,245 $ 1,517
Minority interest 8,566 - - - -
----------- ----------- ----------- ----------- -----------
12,402 519 1,192 1,245 1,517
Interest expense 1 - - - -
----------- ----------- ----------- ----------- -----------
Earnings available to cover
fixed charges $ 12,403 $ 519 $ 1,192 $ 1,245 $ 1,517
=========== =========== =========== =========== ===========
Fixed charges - interest expense $ 1 $ - $ - $ - $ -
=========== =========== =========== =========== ===========
Ratio of earnings to fixed
charges 12,403 NA NA NA NA
=========== =========== =========== =========== ===========
</TABLE>
Exhibit 12
Exhibit 10.1
AGREEMENT OF LIMITED PARTNERSHIP
OF
PS BUSINESS PARKS, L.P.
[Exhibits to this Agreement have been omitted and will be furnished to the
Securities and Exchange Commission upon request.]
<PAGE>
AGREEMENT OF LIMITED PARTNERSHIP
OF
PS BUSINESS PARKS, L.P.
This AGREEMENT OF LIMITED PARTNERSHIP ("Agreement"), dated as of March
17, 1998, of PS BUSINESS PARKS, L.P. (the "Partnership") is entered into by and
among PS BUSINESS PARKS, INC., a California corporation (the "General Partner"),
and the Persons whose names are set forth on the attached Exhibit A as the
Limited Partners, together with any other Persons who become Partners in the
Partnership as provided below.
A. Effective on March 17, 1998, the General Partner (American Office
Park Properties, Inc.) merged with and into Public Storage Properties XI, Inc.,
and the name of Public Storage Properties XI, Inc. (which became the General
Partner of the Partnership) was changed to PS Business Parks, Inc. In that
merger, each outstanding share of common stock of American Office Park
Properties, Inc. was converted into 1.18 shares of common stock of PS Business
Parks, Inc.
B. This Agreement amends and restates in its entirety that certain
Second Amended and Restated Agreement of Limited Partnership of American Office
Park Properties, L.P., dated as of February 24, 1998 in order to: reflect the
change in the General Partner, change the name of the Partnership to PS Business
Parks, L.P., and convert each outstanding Unit into 1.18 Units (as reflected on
the attached Exhibit A).
C. The Partners desire to ratify the formation of the Partnership, and
to set forth their respective rights and duties relating to the Partnership on
the terms as provided in this Agreement.
The parties agree as follows:
1. DEFINED TERMS
The following definitions shall be applied to the terms used in this
Agreement for all purposes, unless otherwise clearly indicated to the contrary.
"Act" means the California Revised Uniform Limited Partnership Act, as
it may be amended from time to time, and any successor to such statute.
"Additional Funds" shall have the meaning set forth in Section
4.1(b)(1).
"Additional Limited Partner" means a Person admitted to the Partnership
as a Limited Partner in accordance with the terms of this Agreement and who is
shown as such on the books and records of the Partnership.
"Affiliate" means, with respect to any Person, (a) any Person directly
or indirectly controlling, controlled by or under common control with such
Person, (b) any Person owning or controlling 10 percent or more of the
outstanding voting interests of such Person, (c) any Person of which such Person
owns or controls 10 percent or more of the voting interest, or (d) any officer,
director, general partner or trustee of such Person or any Person referred to in
clauses (a), (b) and (c) above.
"Agreement" means this Agreement of Limited Partnership, as it may be
amended, supplemented or restated from time to time.
"Articles of Incorporation" means the Restated Articles of Incorporation
of the General Partner filed with the Office of the Secretary of State of the
State of California on March 17, 1998, as amended or restated from time to time,
or the articles of incorporation, as amended, of any permitted successor by
merger to the General Partner.
"Assignee" means a Person to whom one or more Partnership Units (as
defined below) have been transferred in a manner permitted under this Agreement,
but who has not become a Substituted Limited Partner, and who has the rights set
forth in Section 11.5.
"Available Cash" means with respect to any period for which such
calculation is being made:
(a) all cash revenues and funds received by the Partnership from
whatever source (excluding the proceeds of any capital contribution) plus
the amount of any reduction (including, without limitation, a reduction
resulting because the General Partner determines such amounts are no longer
necessary) in reserves, working capital accounts or other cash or similar
balances of the Partnership referred to in clause (b)(iv) below;
(b) less the sum of the following (except to the extent made with the
proceeds of any capital contribution):
(i) all interest, principal and other debt payments made during such
period by the Partnership,
(ii) all cash expenditures (including capital expenditures) made by
the Partnership during such period,
(iii) investments in any entity (including loans made to the entity)
to the extent that such investments are not otherwise described in
clauses (b)(i) or (ii), and
(iv) the amount of any increase during such period in reserves,
working capital accounts or other cash or similar balances that the
General Partner determines is necessary or appropriate to meet the needs
of the Partnership in its sole and absolute discretion.
Notwithstanding the foregoing, Available Cash shall not include any cash
received or reductions in reserves, or take into account any disbursements made
or reserves established, after commencement of the dissolution and liquidation
of the Partnership.
"Business Day" means any day except a Saturday, Sunday or other day on
which commercial banks in Los Angeles, California are authorized or required by
law to close.
"Capital Account" means the Capital Account maintained for a Partner
pursuant to Section 4.4.
"Certificate" means the Certificate of Limited Partnership relating to
the Partnership filed in the office of the Secretary of State of the State of
California, as amended from time to time in accordance with the terms of this
Agreement and the Act.
"Code" means the Internal Revenue Code of 1986, as amended. Any
reference in this Agreement to a specific section or sections of the Code shall
be deemed to include a reference to any corresponding provision of future law.
"Common Shares" means the shares of Common Stock, $.01 par value per
share, of the General Partner.
"Event of Dissolution" has the meaning set forth in Section 13.1.
"General Partner" means PS Business Parks, Inc., a California
corporation, or its successors as a general partner of the Partnership.
"General Partnership Interest" means a Partnership Interest held by a
General Partner with respect to its interest as a general partner of the
Partnership. For purposes of allocations and distributions, but not for voting
purposes, a General Partnership Interest may be expressed as a number of
Partnership Units.
"IRS" means the Internal Revenue Service of the United States.
"Incapacity" or "Incapacitated" means:
(a) as to any Partner who is a natural person death or total physical
disability, as reasonably determined by the General Partner or by an entry
by a court of competent jurisdiction adjudicating such Partner as
incompetent to manage his or her Person or estate,
(b) as to any corporation that is a Partner, the filing of a certificate
of dissolution,
(c) as to any partnership or limited liability company that is a
Partner, the dissolution and commencement of winding up of the partnership
or limited liability company,
(d) as to any estate that is a Partner, the distribution by the
fiduciary of the estate's entire interest in the Partnership,
(e) as to any trustee of a trust that is a Partner, the termination of
the trust (but not the substitution of a new trustee) or
(f) as to any Partner, the bankruptcy of such Partner. For purposes of
this definition, bankruptcy of a Partner shall be deemed to have occurred
when
(i) the Partner commences a voluntary proceeding seeking
liquidation, reorganization or other relief under any bankruptcy,
insolvency or similar law now or later in effect,
(ii) the Partner executes and delivers a general assignment for the
benefit of the Partner's creditors,
(iii) the Partner files an answer or other pleading admitting or
failing to contest the material allegations of a petition filed against
the Partner in any voluntary or involuntary, proceeding under any
bankruptcy, or similar law now or later in effect,
(iv) the Partner seeks, consents to or acquiesces in the appointment
of a trustee, receiver or liquidator for the Partner or for all or any
substantial part of the Partner's properties,
(v) any involuntary proceeding seeking liquidation, reorganization
or other relief under any bankruptcy, insolvency or other similar law
now or later in effect has not been dismissed within 60 days after its
commencement,
(vi) the appointment of a trustee, receiver or liquidator that has
not been vacated or stayed within 90 days of such appointment, or
(vii) an appointment referred to in clause (vi) is not vacated
within 90 days after the expiration of any such stay.
"Indemnitee" means:
(a) any Person made a party to a proceeding by reason of his or her
status as (i) a General Partner, (ii) a Limited Partner, or (iii) an officer
of the Partnership or of the General Partner, and
(b) such other Persons (including Affiliates of the General Partner or
the Partnership) as the General Partner may designate from time to time
(whether before or after the event giving rise to potential liability), in
its sole and absolute discretion.
"Limited Partner" means any Person named as a Limited Partner in Exhibit
A attached to this Agreement, as such Exhibit may be amended from time to time,
or any Substituted Limited Partner or Additional Limited Partner, in such
Person's capacity as a Limited Partner in the Partnership.
"Limited Partnership Interest" means a Partnership Interest of a Limited
Partner (and any Partnership Interest of the General Partner other than the
General Partnership Interest) in the Partnership representing a fractional part
of the Partnership Interests of all Limited Partners.
"Liquidator" has the meaning set forth in Section 13.2.
"New Securities" has the meaning set forth in Section 4.2(c).
"Notice of Redemption" means the Notice of Redemption substantially in
the form of Exhibit B to this Agreement.
"Option Plans" means the option plans for Common Shares or Units, as the
case may be, restricted share plans or employee benefit plans established by the
General Partner or the Partnership.
"Partner" means a General Partner or a Limited Partner, and "Partners"
means the General Partner and the Limited Partners.
"Partnership" means the limited partnership formed under the Act and
pursuant to this Agreement, and any successor to that limited partnership.
"Partnership Interest" means an ownership interest in the Partnership
and includes any and all benefits to which the holder of such a Partnership
Interest may be entitled as provided in this Agreement, together with all
obligations of such Person to comply with the terms and provisions of this
Agreement. A Partnership Interest may be expressed as a number of Partnership
Units.
"Partnership Record Date" means the record date established by the
General Partner either (a) for the distribution of Available Cash pursuant to
Section 5.1, which shall be the same as the record date established by the
General Partner for a distribution to its shareholders of some or all of its
portion of such distribution, or (b) for determining the Partners entitled to
vote on or consent to any proposed action for which the consent or approval of
the Partners is sought.
"Partnership Unit" or "Unit" means a fractional, undivided share of the
Partnership Interests of all Partners issued pursuant to Sections 4.1 and 4.2,
in such number as set forth on Exhibit A, as such Exhibit may be amended from
time to time, and as such numbers may be adjusted as a result of changes in the
Unit Adjustment Factor. The ownership of Partnership Units may be evidenced by a
non-transferable, non-negotiable certificate for Units substantially in the form
attached as Exhibit C.
"Partnership Year" means the fiscal year of the Partnership, which shall
be the calendar year.
"Percentage Interest" means, as to a Partner, its interest in the
Partnership as determined by dividing the Partnership Units owned by such
Partner by the total number of Partnership Units then outstanding and as
specified in the attached Exhibit A, as such Exhibit may be amended from time to
time.
"Person" means an individual, corporation, partnership, limited
liability company, association, trust, estate or other entity or organization.
"Preferred Shares" shall mean the shares of Non-Voting Preferred Stock,
$.01 par value per share, of the General Partner.
"Profit" and "Loss" have the meaning set forth in Section 6.1(f).
"Redeeming Partner" has the meaning set forth in Section 8.6(a).
"Redemption Amount" means an amount of cash per Partnership Unit equal
to the Value on the Valuation Date of the Common Shares that the Redeeming
Partner being redeemed would have been entitled to receive if the General
Partner were to assume the Partnership's obligation to redeem Partnership Units
of such Redeeming Partner pursuant to Section 8.6(d) by issuing Common Shares.
"Redemption Right" has the meaning set forth in Section 8.6(a).
"Regulations" means the Income Tax Regulations promulgated under the
Code, as such regulations may be amended from time to time (including
corresponding provisions of succeeding regulations).
"REIT" means a real estate investment trust under Section 856 of the
Code.
"Securities Act" means the Securities Act of 1933, as the same shall be
amended from time to time.
"Shares" means any Common Shares issued to a Limited Partner upon
conversion of such Limited Partner's Units pursuant to Section 8.6(d).
"Shares Amount" means a number of Common Shares equal to the number of
Partnership Units (as appropriately adjusted pursuant to changes in the Unit
Adjustment Factor) offered for redemption by a Redeeming Partner; provided that,
if the General Partner issues to all holders of Common Shares rights, options,
warrants or convertible or exchangeable securities entitling such holders to
subscribe for or purchase Shares or any other securities or property
(collectively, the "rights"), then the Shares Amount shall also include such
rights that a holder of that number of Shares would be entitled to receive.
"Specified Redemption Date" means the tenth Business Day after receipt
by the General Partner of a Notice of Redemption.
"Subsidiary" means, with respect to any Person, any corporation or other
entity of which a majority of (a) the voting power of the voting equity
securities or (b) the outstanding equity interests is owned, directly or
indirectly, by such Person.
"Substituted Limited Partner" means a Person who is admitted as a
Limited Partner to the Partnership pursuant to Section 11.4.
"Unit Adjustment Factor" means initially 1.0 provided that in the event
that the General Partner
(a) declares or pays a dividend on its outstanding Common Shares in
Common Shares or makes a distribution to all holders of its outstanding
Common Shares in Common Shares,
(b) subdivides its outstanding Common Shares or
(c) combines its outstanding Common Shares into a smaller number of
Common Shares,
the Unit Adjustment Factor shall be adjusted to be a fraction, the numerator of
which shall be the number of Common Shares issued and outstanding on the record
date for such dividend, distribution, subdivision or combination (assuming for
such purposes that such dividend, distribution, subdivision or combination has
occurred as of such time), and the denominator of which shall be the actual
number of Common Shares (determined without the above assumption) issued and
outstanding on the record date for such dividend, distribution, subdivision or
combination. If another entity shall become the General Partner (the "Successor
Entity"), the Unit Adjustment Factor shall be adjusted to be a fraction, the
numerator of which is the value of one share of the predecessor General Partner,
determined as of the date when the Successor Entity becomes the General Partner,
and the denominator of which is the value of one share of the Successor Entity,
determined as of that same date. The Board of Directors of the General Partner
shall determine when an adjustment to the Unit Adjustment Factor is necessary.
The Board's determination as to whether an adjustment is necessary and the
amount of such adjustment shall be conclusive absent manifest error. Any
adjustment to the Unit Adjustment Factor shall become effective immediately
after the effective date of such event retroactive to the record date, if any,
for such event (provided, however, if a Notice of Redemption is given prior to
such a record date but the Specified Redemption Date is after the record date,
then the change in the Unit Adjustment Factor with respect to that Redeeming
Partner shall be retroactive to the date of the Notice of Redemption). In the
event of any change in the Unit Adjustment Factor, the number of Partnership
Units held by each Partner shall be proportionately adjusted by multiplying the
number of Partnership Units held by such Partner immediately prior to the change
in the Unit Adjustment Factor by the new Unit Adjustment Factor; the intent of
this provision is for one Partnership Unit to remain exchangeable for one Common
Share without dilution.
"Valuation Date" means the date of receipt by the General Partner of a
Notice of Redemption or, if such date is not a Business Day, the first
subsequent Business Day.
"Value" means, with respect to a Common Share, the average of the daily
market price for the ten (10) consecutive trading days immediately preceding the
Valuation Date. The market price for each such trading day shall be:
(a) if the Common Shares are listed or admitted to trading on any
securities exchange or the Nasdaq National Market, the closing price,
regular way, on such day, or if no such sale takes place on such day, the
average of the closing bid and asked prices on such day;
(b) if the Common Shares are not listed or admitted to trading on any
securities exchange or the Nasdaq National Market, the last reported sale
price on such day or, if no sale takes place on such day, the average of the
closing bid and asked prices on such day, as reported by a reliable
quotation source designated by the General Partner; or
(c) if the Common Shares are not listed or admitted to trading on any
securities exchange or the Nasdaq National Market and no such last reported
sale price or closing bid and asked prices are available, the average of the
reported high bid and low asked prices on such day, as reported by a
reliable quotation source designated by the General Partner, or if there
shall be no bid and asked prices on such day, the average of the high bid
and low asked prices, as so reported, on the most recent day (not more than
10 days prior to the date in question) for which prices have been so
reported; provided that if there are no bid and asked prices reported during
the 10 days prior to the date in question, the Value of the Common Shares
shall be determined by the General Partner acting in good faith on the basis
of such quotations and other information as it considers, in its reasonable
judgment, appropriate.
If a holder of Common Shares would be entitled to receive rights to purchase
Common Shares ("Common Share Rights") issued to all holders of Common Shares,
then the Value of such Common Share Rights shall be determined by the General
Partner acting in good faith on the basis of such quotations and other
information as it considers, in its reasonable judgment, appropriate.
2. ORGANIZATIONAL MATTERS
2.1 Organization and Formation: Application of Act.
(a) Organization and Formation of Partnership. The General Partner
and the Limited Partners ratify the formation and continuation of the
Partnership as a limited partnership according to all of the terms and
provisions of this Agreement and otherwise in accordance with the Act. The
General Partner is the sole general partner and the Limited Partners are the
sole limited partners of the Partnership.
(b) Application of Act. The Partnership is a limited partnership
subject to the provisions of the Act and the terms and conditions set forth in
this Agreement. Except as expressly provided in this Agreement to the contrary,
the rights and obligations of the Partners and the administration and
termination of the Partnership shall be governed by the Act. No Partner has any
interest in any Partnership Property, and the Partnership Interest of each
Partner shall be personal property for all purposes.
2.2 Name. The name of the Partnership is PS Business Parks, L.P. The
Partnership's business may be conducted under any other name or names deemed
advisable by the General Partner, including the name of the General Partner or
any Affiliate of the General Partner. The words "Limited Partnership," "L.P.,"
"Ltd." or similar words or letters shall be included in the Partnership's name
where necessary for the purposes of complying with the laws of any jurisdiction
that so requires. The General Partner in its sole and absolute discretion may
change the name of the Partnership at any time and from time to time and shall
notify the Limited Partners of such change in the next regular communication to
the Limited Partners; provided that the name of the Partnership may not be
changed to include the name of any Limited Partner without the written consent
of that Limited Partner.
2.3 Principal Office. The address of the principal office of the
Partnership shall be located at 701 Western Avenue, Glendale, California 91201,
or such other place as the General Partner may from time to time designate by
notice to the Limited Partners. The Partnership may maintain offices at such
other place or places within or outside the State of California as the General
Partner deems advisable.
2.4 Term. The term of the Partnership commenced as of January 1, 1997,
and shall continue until December 31, 2096, unless it is dissolved sooner
pursuant to the provisions of Article 13 or as otherwise provided by law.
3. PURPOSE
3.1 Purpose and Business. The purpose and nature of the business to be
conducted by the Partnership is:
(a) to conduct any business that may be lawfully conducted by a limited
partnership organized pursuant to the Act,
(b) to enter into any partnership, joint venture or other similar
arrangement to engage in any of the foregoing or the ownership of interests
in any entity engaged in (directly or indirectly) any of the foregoing and
(c) to do anything necessary or incidental to the foregoing;
provided, however, that each of the foregoing clauses (a), (b) and (c) shall be
limited and conducted in such a manner as to permit the General Partner at all
times to be classified as a REIT, unless the General Partner provides notice to
the Partnership that it intends to cease or has ceased to qualify as a REIT. The
Partners acknowledge that the status of the General Partner as a REIT inures to
the benefit of all Partners and not solely to the benefit of the General Partner
and its affiliates.
3.2 Powers. The Partnership is empowered to do any and all acts and
things necessary, appropriate, proper, advisable, incidental to or convenient
for the furtherance and accomplishment of the purposes and business described in
this Agreement and for the protection and benefit of the Partnership; provided
that the Partnership shall not take, or refrain from taking, any action that, in
the judgment of the General Partner, in its sole and absolute discretion, (a)
could adversely affect the ability of the General Partner to continue to qualify
as a REIT, (b) could subject the General Partner to any additional taxes under
Section 857 or Section 4981 of the Code or (c) could violate any law or
regulation of any governmental body or agency having jurisdiction over the
General Partner or its securities, unless such action (or inaction) shall have
been specifically consented to by the General Partner in writing.
3.3 Partnership Only for Purposes Specified. The Partnership shall be a
partnership only for the purposes specified in Section 3.1, and this Agreement
shall not be deemed to create a partnership among the Partners with respect to
any activities whatsoever other than the activities within the purposes of the
Partnership as specified in Section 3.1. Except as otherwise provided in this
Agreement, no Partner shall have any authority to act for, bind, commit or
assume any obligation or responsibility on behalf of the Partnership, its
properties or any other Partner. No Partner, in its capacity as a Partner under
this Agreement, shall be responsible or liable for any indebtedness or
obligation of another Partner, nor shall the Partnership be responsible or
liable for any indebtedness or obligation of any Partner, incurred either before
or after the execution and delivery of this Agreement by such Partner, except as
to those responsibilities, liabilities, indebtedness or obligations incurred
pursuant to and as limited by the terms of this Agreement and the Act.
3.4 Representations and Warranties by the Parties.
(a) Each Partner that is an individual represents and warrants to
each other Partner that:
(i) the consummation of the transactions contemplated by this
Agreement to be performed by such Partner will not result in a breach or
violation of or a default under, any agreement by which such Partner or any
of such Partner's property is or are bound, or any statute, regulation,
order or other law to which such Partner is subject, and
(ii) such Partner shall inform the Partnership whether such
Partner is a "foreign person" within the meaning of Section 1445(f) of the
Code.
(b) Each Partner that is not an individual represents and warrants
to each other Partner that:
(i) all transactions contemplated by this Agreement to be
performed by it have been duly authorized by all necessary action, including
without limitation, that of its general partner(s), committee(s),
trustee(s), beneficiaries, directors and/or shareholder(s), as the case may
be, as required,
(ii) the consummation of such transactions shall not result in a
breach or violation of, or a default under, its partnership agreement, trust
agreement, charter or by-laws, as the case may be, any agreement by which
such Partner or any of such Partner's properties or any of its partners,
beneficiaries, trustees or shareholders, as the case may be, is or are
bound, or any statute, regulation, order or other law to which such Partner
or any of its partners, trustees, beneficiaries or shareholders, as the case
may be, is or are subject and
(iii) such Partner shall inform the Partnership whether such
Partner is a "foreign person" within the meaning of Section 1445(f) of the
Code.
(c) Each Limited Partner further represents, warrants and agrees
that, it does not and will not, without the prior written consent of the General
Partner, actually own or constructively own (under the attribution rules of Code
Section 318, as modified by Code Section 856(d)(5)) stock of any corporation, or
an interest in the assets and profits of any other entity, from which the
General Partner or the Partnership, directly or indirectly, derives material
rental income from real property that would be excluded from "rents from real
property" pursuant to Code Section 856(d)(2)(B).
(d) Upon the request of the General Partner, each Limited Partner
will disclose to the General Partner the amount of Common Shares or other shares
of capital stock of the General Partner that it actually owns or constructively
owns and shall further disclose to the General Partner any ownership in the
stock, assets or net profits of any corporation or other entity from which the
General Partner or the Partnership, directly or indirectly, derives material
rental income from real property.
(e) Each Partner represents and warrants that it is an "accredited
investor" as defined in Rule 501 promulgated under the Securities Act. Each
Partner represents, warrants and agrees that it has acquired and continues to
hold its interest in the Partnership for its own account for investment only and
not for the purpose of, or with a view toward, the resale or distribution of all
or any part of that interest, nor with a view toward selling or otherwise
distributing such interest or any part of that interest at any particular time
or under any predetermined circumstances. Each Partner further represents and
warrants that it is a sophisticated investor, able and accustomed to handling
sophisticated financial matters for itself, particularly real estate
investments, and that it has a sufficiently high net worth that it does not
anticipate a need for the funds it has invested in the Partnership in what it
understands to be a highly speculative and illiquid investment.
(f) The representations and warranties contained in this Section 3.4
shall survive the execution and delivery of this Agreement by each Partner and
the dissolution, liquidation and termination of the Partnership.
(g) Each Partner acknowledges that no representations as to
potential profit, distributions, cash flows, funds from operations or yield, if
any, in respect of the Partnership or the General Partner have been made by any
Partner or any employee or representative or Affiliate of any Partner, and that
projections and any other information, including, without limitation, financial
and descriptive information and documentation, that may have been in any manner
submitted to such Partner shall not constitute any representation or warranty of
any kind or nature, express or implied.
4. CAPITAL CONTRIBUTIONS;
ISSUANCE OF UNITS;
CAPITAL ACCOUNTS
4.1 Capital Contributions of the Partners.
(a) Initial Capital Contributions. At the time of the execution of
this Agreement, the Partners shall make or shall have made the capital
contributions set forth in Exhibit A to this Agreement. The Partners shall own
Partnership Units in the amounts set forth in Exhibit A and shall have a
Percentage Interest in the Partnership as set forth in Exhibit A, which
Percentage Interest shall be adjusted in Exhibit A from time to time by the
General Partner to the extent necessary to reflect accurately redemptions,
conversions, capital contributions, the issuance of additional Partnership
Units, transfers of Partnership Interests permitted under Article 11, or similar
events having an effect on a Partner's Percentage Interest. Sixty-six Thousand,
Eight Hundred and Eighty-five (66,885) Partnership Units held by the General
Partner (representing one percent (1%) of all outstanding Partnership Units as
of the date of the initial capital contributions to the Partnership) shall be
deemed to be the General Partnership Interest.
(b) Additional Capital Contributions.
(1) No Partner shall be assessed or, except as provided for in
Sections 4.1(b)(2) below, and except for any such amounts that a Limited Partner
may be obligated to repay under Section 10.5 (withholding provision), be
required to contribute additional funds or other property to the Partnership.
Any additional funds or other property required by the Partnership, as
determined by the General Partner in its sole discretion ("Additional Funds"),
may, at the option of the General Partner and without an obligation to do so
(except as provided for in Section 4.1(b)(2)), be contributed by the General
Partner as additional capital contributions. If and as the General Partner or
any other Partner makes additional capital contributions to the Partnership,
each such Partner shall receive additional Partnership Units as provided for in
Section 4.2.
(2) The proceeds of any and all funds raised by or through the
General Partner through the issuance of additional shares of the General Partner
(whether Common Shares or Preferred Shares) shall be contributed to the
Partnership as additional capital contributions, and in such event the General
Partner shall be issued additional Partnership Units pursuant to Section 4.2
below. In any such case, if the proceeds so contributed are less than the gross
proceeds of the issuance (i.e., due to any underwriter's discount or other
expenses incurred in connection with the issuance), the General Partner's
capital contribution shall be deemed to equal the amount of the gross proceeds
(i.e., the net proceeds actually contributed, plus any underwriter's discount or
other expenses incurred, and any such discount or expense shall be deemed to
have been incurred on behalf of the Partnership).
(c) Return of Capital Contributions. Except as otherwise expressly
provided in this Agreement, the capital contribution of each Limited Partner
will be returned to that Partner only in the manner and to the extent provided
in Article 5 and Article 13, and no Partner may withdraw from the Partnership or
otherwise have any right to demand or receive the return of its capital
contribution to the Partnership (as such), except as specifically provided in
this Agreement. Under circumstances requiring a return of any capital
contribution, no Partner shall have the right to receive property other than
cash, except as specifically provided in this Agreement. No Partner shall be
entitled to interest on any capital contribution or Capital Account
notwithstanding any disproportion between the Partners in their capital
contributions or Capital Accounts. Except as specifically provided in this
Agreement, the General Partner shall not be liable for the return of any portion
of the capital contribution of any Limited Partner, and the return of such
capital contribution shall be made solely from Partnership assets.
(d) Liability of Limited Partners. No Limited Partner shall have any
further personal liability to contribute money to, or in respect of, the
liabilities or the obligations of the Partnership, nor shall any Limited Partner
be personally liable for any obligations of the Partnership, except as otherwise
provided in this Article 4 or in the Act. No Limited Partner shall be required
to make any contributions to the capital of the Partnership other than its
initial capital contribution.
(e) No Obligations for Deficit Capital Accounts. If any Partner has
a deficit balance in its Capital Account (after giving effect to all
contributions, distributions and allocations for all taxable years, including
those during any year in which a liquidation occurs), such Partner shall have no
obligation at the time of liquidation or otherwise to make any contribution to
the capital of the Partnership with respect to that deficit, and the deficit
shall not be considered a debt owed to the Partnership or to any other Person
for any purpose.
4.2 Issuances of Additional Partnership Interests.
(a) Issuances In General. The General Partner is authorized to cause
the Partnership to issue such additional Partnership Units or other Partnership
Interests for any Partnership purpose at any time or from time to time,
including Units in one or more series of any classes, with such designations,
preferences and relative, participating, optional or other special rights,
powers and duties, including rights, powers and duties senior to other
Partnership Interests, all as shall be determined by the General Partner,
subject to California law, including, without limitation, with respect to (i)
the allocations of items of Partnership income, gain, loss, deduction and credit
to each such class or series of Partnership Interests, (ii) the right of each
such class or series of Partnership Interests to share in Partnership
distributions, and (iii) the rights of each class or series of Partnership
Interests upon dissolution and liquidation of the Partnership, for such
consideration and on such terms and conditions as shall be established by the
General Partner in its sole and absolute discretion, all without the approval of
any Limited Partners except to the extent specifically provided in this
Agreement. The General Partner may also amend the Agreement to provide for the
issuance of Partnership Units the Redemption Right of which will relate to
Preferred Shares on such terms as are determined by the General Partner.
(b) Issuance to the General Partner. In the case of the issuance of
additional Partnership Units or other Partnership Interests to the General
Partner: (i) the agreement to issue the additional Partnership Interests must
arise in connection with an issuance of or agreement to issue shares of the
General Partner, which shares have designations, preferences and other rights,
all such that the economic interests are substantially similar to the
designations, preferences and other rights of the additional Partnership
Interests that would be issued to the General Partner in accordance with this
Section 4.2(b), and (ii) the General Partner shall agree to make a capital
contribution to the Partnership in an amount equal to the proceeds raised in
connection with the issuance of such shares of the General Partner. For this
purpose, if the General Partner merges with another entity, assets of the other
entity acquired as a result of the merger shall be treated as acquired by the
General Partner in connection with the "issuance" of the shares held by the
other entities' shareholders in the surviving entity.
(c) Issuance of Additional Shares. The General Partner is explicitly
authorized to issue additional Common Shares or Preferred Shares of the General
Partner, or rights, options, warrants or convertible or exchangeable securities
containing the right to subscribe for or purchase Common Shares and Preferred
Shares ("New Securities") and in connection with the issuance: (i) the General
Partner shall contribute the proceeds from the issuance of such New Securities
and from the exercise of rights contained in such New Securities to the
Partnership or agree as provided in Section 7.6 at the option of the Partnership
to make such a contribution, and (ii) upon the contribution, the Partnership
shall issue to the General Partner, Partnership Interests or rights, options,
warrants or convertible or exchangeable securities of the Partnership having
designations, preferences and other rights, all such that the economic interests
are substantially similar to those of the New Securities. In connection with the
issuance of Partnership Interests that are substantially similar to New
Securities, the General Partner is authorized to modify or amend the
distributions or allocations under this Agreement solely to the extent necessary
to give effect to the designations, preferences and other rights pertaining to
such Partnership Interests.
(d) Forfeiture of Shares. If the Partnership or the General Partner
acquires Common Shares as a result of the forfeiture of such Common Shares under
a restricted or similar share plan, then the General Partner shall cause the
Partnership to cancel that number of Partnership Units equal to the number of
Common Shares so acquired, and, if the Partnership acquired such Common Shares,
it shall transfer such Common Shares to the General Partner for cancellation.
(e) Issuance Pursuant to Option Plans.
(1) Upon the exercise of an option to acquire Common Shares of
the General Partner that is granted by the Partnership or the General Partner,
the optionee shall transfer the exercise price to the Partnership, and the
Partnership shall purchase from the General Partner for fair market value at the
time of exercise the number of Common Shares with respect to which options were
exercised and shall transfer the shares to the optionee. The General Partner
shall immediately transfer the proceeds received for the Common Shares to the
Partnership in exchange for a number of Units equal to the number of Common
Shares sold.
(2) The General Partner shall cause the Partnership to issue
Partnership Units of the Partnership upon the exercise by any optionee of an
option to acquire Partnership Units granted by the Partnership pursuant to the
Option Plans in accordance with the terms of the Option Plans. Partnership Units
so issued shall represent Limited Partnership Interests.
4.3 No Preemptive Rights. Except to the extent expressly granted by the
General Partner pursuant to a written agreement, no Person shall have any
preemptive, preferential or other similar right with respect to (a) additional
capital contributions or loans to the Partnership, or (b) issuance or sale of
any Partnership Units.
4.4 Capital Accounts. A separate capital account (a "Capital Account")
shall be established and maintained for each Partner in accordance with
Regulations Section 1.704-1(b)(2)(iv) and the terms of this Agreement. The
General Partner is authorized to revalue the property of the Partnership to its
fair market value (as determined by the General Partner, in its sole discretion,
and taking into account Section 7701(g) of the Code) in accordance with
Regulations Section 1.704-1(b)(2)(iv)(f). When the Partnership's property is
revalued by the General Partner, the Capital Accounts of the Partners shall be
adjusted in accordance with Regulations Section 1.704-1(b)(2)(iv)(f) and (g).
4.5 General Partner Loans or Funding. The General Partner may, or to the
extent the General Partner enters into a "Funding Debt" (i.e., any debt incurred
by or on behalf of the General Partner for the purpose of providing funds to the
Partnership), the General Partner shall, lend Additional Funds to the
Partnership or contribute the funds to the Partnership for a Partnership
Interest paying a preferred return (a "General Partner Funding"). If the General
Partner enters into such a Funding Debt, the General Partner Funding will
consist of the proceeds from such Funding Debt and if the funds are loaned to
the Partnership, the loan will be on the same terms and conditions, including
interest rate, repayment schedule and costs and expenses, incurred in connection
with such Funding Debt, and in the case of a contribution to the Partnership,
the preferred partnership interest will substantially reflect the terms of the
Funding Debt. Otherwise, any General Partner Funding made pursuant to this
Section 4.5 shall be on terms and conditions no less favorable to the
Partnership than would be available to the Partnership from any third party. If
a Funding Debt or debt issued by the Partnership is comprised, in whole or in
part, of debt convertible into or exchangeable for Common Shares or other equity
interests in the General Partner and any portion of such debt is converted into
or exchanged for Common Shares, the General Partner shall have the right, but
not the obligation, to convert the equivalent amount of the General Partner
Funding into additional Partnership Interests.
4.6 Loans by Third Parties. The Partnership may incur debt, or enter
into other similar credit, guarantee, financing or refinancing arrangements for
any purpose (including, without limitation, in connection with any further
acquisition of properties) from any Person that is not the General Partner upon
such terms as the General Partner determines appropriate; provided that, the
Partnership shall not incur any debt under which a breach, violation or default
would be deemed to occur by virtue of the transfer of any Limited Partnership
Interest.
5. DISTRIBUTIONS
5.1 Requirement and Characterization of Distributions. The General
Partner shall, commencing in 1998, distribute at least quarterly an amount equal
to all Available Cash generated by the Partnership during such quarter or
shorter period to the Partners who are Partners on the Partnership Record Date
with respect to such quarter or shorter period (i) first, with respect to any
class of Partnership Interests issued pursuant to Section 4.2 that is entitled
to a preference over other Partnership Units on the distribution of Available
Cash (and among such classes in order of the preferences designated between
those classes, and pro rata within each such class), and (ii) then, in
accordance with their respective Percentage Interests on such Partnership Record
Date; provided that in no event may a Redeeming Partner receive a distribution
of Available Cash with respect to a Unit if such Partner is entitled to receive
a distribution with respect to a Common Share for which such Unit has been
redeemed or exchanged. It will be the policy of the Partnership, commencing in
1998, to make distributions per Unit that are equal to the per share
distributions made by the General Partner with respect to its Common Shares, and
in any case the per Unit and per share distributions will be equal during the
Partnership Years 1998, 1999, and 2000. The General Partner shall make such
efforts, as it determines in its sole and absolute discretion, to cause the
Partnership to distribute its operating cash flow in a manner that would ensure
that such distributions are treated by the Limited Partners as "operating cash
flow distributions" within the meaning of Regulations Section 1.707-4(b)(2).
5.2 Amounts Withheld. All amounts withheld pursuant to the Code or any
provisions of any state, local or foreign tax law and Section 10.5 with respect
to any allocation, payment or distribution to the General Partner or any Limited
Partners or Assignees shall be treated as amounts distributed to the General
Partner or such Limited Partners or Assignees pursuant to Section 5.1 for all
purposes under this Agreement.
5.3 Distributions Upon Liquidation. Proceeds from any sale or other
disposition of all or substantially all of the assets of the Partnership or a
related series of transactions that, taken together, results in the sale or
other disposition of all or substantially all of the assets of the Partnership
shall be distributed to the Partners in accordance with Section 13.2.
5.4 Distributions in Kind. No Partner has any right to demand and
receive property other than cash. The General Partner may determine, in its sole
and absolute discretion, to make a distribution in kind to the Partners of
Partnership assets, and such assets shall be distributed in such a fashion as to
ensure that the fair market value is distributed and allocated in accordance
with Articles 5 and 6.
5.5 REIT Distribution Requirements. Notwithstanding anything to the
contrary in this Agreement, the General Partner may cause the Partnership to
distribute amounts sufficient to enable the General Partner to pay shareholder
dividends that will allow the General Partner to (i) meet its distribution
requirement for qualification as a REIT as set forth in Section 857(a)(1)of the
Code and (ii) avoid any federal income or excise tax liability imposed by the
Code.
6. ALLOCATIONS
6.1 Allocation of Profit and Loss.
(a) General. Except as otherwise set forth in this Agreement, Profit
and Loss and items of income, gain, expense, or loss of the Partnership for each
fiscal year of the Partnership shall be allocated among the Partners in
accordance with their respective Percentage Interests. The provisions of this
Section 6.1 shall be amended appropriately in the event that the General Partner
causes the Partnership to issue Units with different preferences or redemption
rights.
(b) Nonrecourse Deductions and Minimum Gain Chargeback.
Notwithstanding any provision to the contrary:
(i) any expense of the Partnership that is a "nonrecourse
deduction" within the meaning of Regulations Section 1.704-2(b)(1) shall be
allocated in accordance with the Partners' respective Percentage Interests,
(ii) any expense of the Partnership that is a "partner
nonrecourse deduction" within the meaning of Regulations Section
1.704-2(i)(2) shall be allocated in accordance with Regulations Section
1.704-2(i)(l),
(iii) if there is a net decrease in "partnership minimum gain"
within the meaning of Regulations Section 1.704-2(g)(1) that would subject a
Partner to a "minimum gain chargeback" within the meaning of Regulations
Section 1.704-2(f) for any Partnership taxable year, items of gain and
income shall be allocated among the Partners in accordance with (to the
minimum extent allowable) Regulations Section 1.704-2(f) and the ordering
rules contained in Regulations Section 1.704-2(j), and
(iv) if there is a net decrease within the meaning of
Regulations Section 1.704-2(i)(4) in "partner nonrecourse debt minimum gain"
within the meaning of Regulations Section 1.704-2(i)(5) that would subject a
Partner to a minimum gain chargeback for any Partnership taxable year, items
of gain and income shall be allocated among the Partners in accordance with
(to the minimum extent allowable) Regulations Section 1.704-2(i)(4) and the
ordering rules contained in Regulations Section 1.704-2(j).
A Partner's "interest in partnership profits" for purposes of determining its
share of the nonrecourse liabilities of the Partnership within the meaning of
Regulations Section 1.752-3(a)(3) shall be such Partner's Percentage Interest.
(c) Qualified Income Offset. If a Partner receives in any taxable
year an adjustment, allocation, or distribution described in subparagraphs
(4),(5) or (6) of Regulations Section 1.704(b)(2)(ii)(d) that causes or
increases a negative balance in such Partner's Capital Account that exceeds the
sum of such Partner's share of "partnership minimum gain" and "partner
nonrecourse debt minimum gain," as determined in accordance with Regulations
Sections 1.704-2(g) and 1.704-2(i), such Partner shall be allocated specially
for such taxable year (and, if necessary, later taxable years) items of income
and gain in an amount and manner sufficient to eliminate such negative Capital
Account balance as quickly as possible as provided in Regulations Section
1.704-1(b)(2)(ii)(d).
(d) Capital Account Deficits. Loss shall not be allocated to a
Partner to the extent that such allocation would cause (or increase) a deficit
in such Partner's Capital Account (after reduction to reflect the items
described in Regulations Section 1.704-1(b)(2)(ii)(d)(4), (5) and (6)) to exceed
the sum of such Partner's shares of "partnership minimum gain" (Regulations
Section 1.704-2(g)(1)) and "partner nonrecourse debt minimum gain" (Regulations
Section 1.704-2(i)(5)). Any Loss in excess of that limitation shall be allocated
to the General Partner.
(e) Allocations Upon Changes in Partnership Interests. If a Partner
transfers any part or all of its Partnership Interest or upon changes in the
outstanding Partnership Interests (such as the issuance or redemption of
Partnership Interests), the distributive shares of the various items of Profit
and Loss and other items attributable to those Partnership Interests allocable
among the Partners during such fiscal year of the Partnership shall be allocated
between the transferor and the transferee Partner or between the persons treated
a Partners prior to such event and those treated as Partners after the event as
the General Partner deems appropriate to take into account their varying
interests during that period (which may include interim closings of the books,
prorations of items, using daily, weekly, monthly, or quarterly proration
periods, etc.). The General Partner, in its sole discretion, shall determine the
method or methods to be used to allocate the distributive shares of items
between the Partners. In addition, allocations of items among the Partners may
be changed by agreement between the General Partner and the affected Limited
Partner or Limited Partners, without amendment of this Agreement or consent of
the other Limited Partners.
(f) Definition of Profit and Loss. "Profit" and "Loss" and any items
of income, gain, expense, or loss referred to in this Agreement shall be
determined by the General Partner in accordance with the Partnership's "book"
income computed under federal income tax accounting principles taking into
account Regulations Section 1.704-1(b)(2)(iv) and the effect of any revaluation
of Partnership property in accordance with Regulations Section
1.704-1(b)(2)(iv)(f), except that Profit and Loss shall not include items of
income, gain, expense and loss that are specifically allocated, such as pursuant
to Section 6.1(b) or 6.1(c).
(g) Tax Allocations. All allocations of income, Profit, gain, Loss,
and expense (and all components of those items) for federal income tax purposes
shall be allocated among the Partners in the same manner as such allocations of
"book" income, gain, loss or deduction are allocated pursuant to this Section
6.1, except as otherwise required by Section 704(c) of the Code and Regulations
Section 1.704-1(b)(4). The General Partner shall have the authority to elect the
method to be used by the Partnership for allocating items of income, gain, and
expense as required by Section 704(c) of the Code and such election shall be
binding on all Partners.
(h) Curative Allocation. The allocations set forth in Section
6.1(b), (c) and (d) (the "Regulatory Allocations") are intended to comply with
certain regulatory requirements, including the requirements of Regulations
Section 1.704-1(b) and 1.704-2. Notwithstanding the provisions of Section
6.1(b),(c) and (d), the Regulatory Allocations shall be taken into account in
allocating other items of income, gain, loss and deduction among the Partners so
that, to the extent possible, the net amount of such allocations of other items
and the Regulatory Allocations to each Partner shall be equal to the net amount
that would have been allocated to each such Partner if the Regulatory
Allocations had not occurred. In applying this Section 6.1(h), a Partner's share
of partnership minimum gain and partner nonrecourse debt minimum gain (within
the meaning of Regulations Sections 1.704-2(g) and 1.704-2(i), respectively) at
any point in time shall be treated as an amount of income or gain that has
already been allocated to the Partner.
6.2 Substantial Economic Effect. It is the intent of the Partners that
the allocations of Profit and Loss and items of income, gain, expense and loss
under the Agreement have substantial economic effect (or be consistent with the
Partners' interests in the Partnership in the case of the allocation of losses
attributable to nonrecourse debt) within the meaning of Section 704(b) of the
Code as interpreted by the related Regulations. Article 6 and other relevant
provisions of this Agreement shall be interpreted in a manner consistent with
that intent.
7. MANAGEMENT AND OPERATIONS OF BUSINESS
7.1 Management.
(a) Powers of General Partner. Except as otherwise expressly
provided in this Agreement, all management powers over the business and affairs
of the Partnership are exclusively vested in the General Partner, and no Limited
Partner shall have any right to participate in or exercise control or management
power over the business and affairs of the Partnership. Notwithstanding anything
to the contrary in this Agreement, the General Partner may not be removed by the
Limited Partners. In addition to the powers that are granted to the General
Partner under any other provision of this Agreement, the General Partner shall
have full power and authority to do all things deemed necessary or desirable by
it to conduct the business of the Partnership, to exercise all powers set forth
in Section 3.2 and to effectuate the purposes set forth in Section 3.1,
including, without limitation:
(1) the making of any expenditures, the lending or borrowing of
money (including, without limitation, making prepayments on loans and
borrowing money to permit the Partnership to make distributions to its
Partners in such amounts as will permit the General Partner (so long as the
General Partner qualifies as a REIT) to avoid the payment of any federal
income tax (including, for this purpose, any excise tax pursuant to Section
4981 of the Code) and to make distributions to its shareholders sufficient
to permit the General Partner to maintain REIT status), the assumption or
guarantee of, or other contracting for, indebtedness and other liabilities,
the issuance of evidences of indebtedness (including the securing of same by
mortgage, deed of trust or other lien or encumbrance on the Partnership's
assets) and the incurring of any obligations it deems necessary for the
conduct of the activities of the Partnership; provided, that all such
borrowing, incurrence of debt and prepayments shall be subject to the
limitations set forth in Sections 4.5 and 4.6;
(2) the making of tax, regulatory and other filings, or
rendering of periodic or other reports to governmental or other agencies
having jurisdiction over the business or assets of the Partnership;
(3) the acquisition, disposition, sale, conveyance, mortgage,
pledge, encumbrance, hypothecation, contribution or exchange of any assets
of the Partnership or the merger or other combination of the Partnership
with or into another entity on such terms as the General Partner deems
proper; provided, however, that: (i) no sale, exchange, disposition or other
transfer of any property of the Partnership contributed on January 2, 1997
shall occur prior to December 31, 1998 without the prior written consent of
the General Partner; (ii) the sale of all or substantially all of the assets
of the Partnership and a Business Combination (as defined in Section 8.7(a))
shall require the consent set forth in Section 8.7(b); and (iii) certain
sales of any Designated Property (as defined in Section 8.8) may require the
consent of specified persons as set forth in Section 8.8.
(4) the use of the assets of the Partnership (including, without
limitation, cash on hand) for any purpose consistent with the terms of this
Agreement and on any terms it sees fit, including, without limitation, the
financing of the conduct of the operations of the General Partner, the
Partnership or any of the Partnership's Subsidiaries, the lending of funds
to other Persons (including the Partnership's Subsidiaries) and the
repayment of obligations of the Partnership and its Subsidiaries and any
other Person in which it has an equity investment and the making of capital
contributions to its Subsidiaries, the holding of any real, personal and
mixed property of the Partnership in the name of the Partnership or in the
name of a nominee or trustee (subject to Section 7.11), the creation, by
grant or otherwise, of easements or servitudes, and the performance of any
and all acts necessary or appropriate to the operation of the Partnership
assets including, without limitation, applications for rezoning, objections
to rezoning, constructing, altering, improving, repairing, renovating,
rehabilitating, razing, demolishing or condemning any improvements or
property of the Partnership;
(5) the negotiation, execution, and performance of any
contracts, conveyances or other instruments (including with Affiliates of
the Partnership to the extent provided in Section 7.7) that the General
Partner considers useful or necessary to the conduct of the Partnership's
operations or the implementation of the General Partner's powers under this
Agreement, including, without limitation, the execution and delivery of
leases on behalf of or in the name of the Partnership (including the lease
of Partnership property for any purpose and without limit as to the term of
the lease, whether or not such term (including renewal terms) shall extend
beyond the date of termination of the Partnership and whether or not the
portion so leased is to be occupied by the lessee or, in turn, subleased in
whole or in part to others);
(6) the opening and closing of bank accounts, the investment of
Partnership funds in securities, certificates of deposit and other
instruments, and the distribution of Partnership cash or other Partnership
assets in accordance with this Agreement;
(7) the establishment of one or more divisions of the
Partnership, the selection and dismissal of employees of the Partnership or
the General Partner (including, without limitation, employees having titles
such as "president," "vice president," "secretary" and "treasurer"), and the
engagement and dismissal of agents, outside attorneys, accountants,
engineers, appraisers, consultants, contractors and other professionals on
behalf of the General Partner or the Partnership and the determination of
their compensation and other terms of employment or hiring;
(8) the maintenance of such insurance for the benefit of the
Partnership and the Partners as it deems necessary or appropriate;
(9) the formation of, or acquisition of an interest in, and the
contribution of property to, any further limited or general partnerships,
joint ventures, limited liability companies or other relationships that it
deems desirable (including, without limitation, the acquisition of interests
in, and the contribution of property to, its Subsidiaries and any other
Person in which it has an equity investment from time to time);
(10) the control of any matters affecting the rights and
obligations of the Partnership, including the conduct of litigation and the
incurring of legal expense and the settlement of claims and litigation, and
the indemnification of any Person against liabilities and contingencies to
the extent permitted by law;
(11) the undertaking of any action in connection with the
Partnership's direct or indirect investment in its Subsidiaries or any other
Person (including, without limitation, the contribution or loan of funds by
the Partnership to such Persons);
(12) the determination of the fair market value of any
Partnership property distributed in kind using such reasonable method of
valuation as it may adopt;
(13) the issuance of Partnership Units to any Subsidiary that
may be necessary for such Subsidiary to satisfy such Subsidiary's
obligations under the Option Plans, in exchange for the transfer to the
Partnership by such Subsidiary of the price per Partnership Unit required by
the Option Plans to be paid by Subsidiaries;
(14) the management, operation, leasing, landscaping, repair,
alteration, demolition or improvement of any real property or improvements
owed by the Partnership or any Subsidiary of the Partnership;
(15) the exercise, directly or indirectly, through any
attorney-in-fact acting under a general or limited power of attorney, of any
right, including the right to vote, appurtenant to any asset or investment
held by the Partnership;
(16) the exercise of any of the powers of the General Partner
enumerated in this Agreement on behalf of or in connection with any
Subsidiary of the Partnership or any other Person in which the Partnership
has a direct or indirect interest, or jointly with any such Subsidiary or
other Person;
(17) the enforcement of any rights against any Partner pursuant
to representations, warranties, covenants and indemnities relating to such
Partner's contribution of property or assets to the Partnership;
(18) the exercise of any of the powers of the General Partner
enumerated in this Agreement on behalf of any Person in which the
Partnership does not have an interest pursuant to contractual or other
arrangements with such Person; and
(19) the making, execution and delivery of any and all deeds,
leases, notes, deeds to secure debt, mortgages, deeds of trust, security
agreements, conveyances, contracts, guarantees, warranties, indemnities,
waivers, releases or legal instruments or agreements in writing necessary or
appropriate in the judgment of the General Partner for the accomplishment of
any of the powers of the General Partner enumerated in this Agreement.
(b) No Approval Required for Above Powers. Each of the Limited
Partners agrees that the General Partner is authorized to execute, deliver and
perform the above-mentioned agreements and transactions on behalf of the
Partnership without any further act, approval or vote of the Partners,
notwithstanding any other provision of this Agreement (except as otherwise
specifically provided in paragraph (a)(3) of Section 7.1), the Act or any
applicable law, rule or regulation. The execution, delivery or performance by
the General Partner or the Partnership of any agreement authorized or permitted
under this Agreement shall not constitute a breach by the General Partner of any
duty that the General Partner may owe the Partnership or the Limited Partners or
any other Persons under this Agreement or of any duty stated or implied by law
or equity.
(c) Insurance. The General Partner may cause the Partnership to
obtain and maintain casualty, liability and other insurance on the properties of
the Partnership and liability insurance for the Indemnities under this Agreement
in such amounts as the General Partner, in its sole and absolute discretion,
deems appropriate and reasonable from time to time.
(d) Working Capital Reserves. The General Partner may cause the
Partnership to establish and maintain working capital reserves in such amounts
as the General Partner, in its sole and absolute discretion, deems appropriate
and reasonable from time to time.
(e) No Obligations to Consider Tax Consequences to Limited Partners.
In exercising its authority under this Agreement, the General Partner may, but
shall be under no obligation to, take into account the tax consequences to any
Partner (including the General Partner) of any action taken (or not taken) by
any of them. The General Partner and the Partnership shall not have liability to
a Limited Partner for monetary damages or otherwise for losses sustained,
liabilities incurred or benefits not derived by such Limited Partner in
connection with such decisions, provided that the General Partner has acted in
good faith and pursuant to its authority under this Agreement.
7.2 Restrictions on General Partner's Authority. The General Partner may
not, without the written consent of all of the Limited Partners, take any action
in contravention of this Agreement, including, without limitation:
(a) taking any action that would make it impossible to carry on the
ordinary business of the Partnership, except as otherwise provided in this
Agreement; or
(b) possessing Partnership property, or assigning any rights in
specific Partnership property, for other than a Partnership purpose except as
otherwise provided in this Agreement.
In addition, without the consent of any adversely affected Limited Partner, the
General Partner may not perform any act that would subject a Limited Partner to
liability as a general partner in any jurisdiction or any other liability except
as provided in this Agreement or under the Act.
7.3 Certificate of Limited Partnership. To the extent that such action
is determined by the General Partner to be reasonable and necessary or
appropriate, the General Partner shall file amendments to and restatements of
the Certificate and do all the things to maintain the Partnership as a limited
partnership (or a partnership in which the limited partners have limited
liability) under the laws of the State of California and each other jurisdiction
in which the Partnership may elect to do business or own property. Subject to
the terms of Section 8.5(a)(4) (Rights of Limited Partners to certain business
records), the General Partner shall not be required, before or after filing, to
deliver or mail a copy of the Certificate, as it may be amended or restated from
time to time, to any Limited Partner. The General Partner shall use all
reasonable efforts to cause to be filed such other certificates or documents as
may be reasonable and necessary or appropriate for the formation, continuation,
qualification and operation of a limited partnership (or a partnership in which
the limited partners have limited liability) in the State of California and any
other jurisdiction in which the Partnership may elect to do business or own
property.
7.4 Responsibility for Expenses.
(a) No Compensation. Except as provided in this Section 7.4 and
elsewhere in this Agreement (including the provisions of Articles 5 and 6
regarding distributions, payments and allocations to which it may be entitled),
the General Partner shall not be compensated for its services as general partner
of the Partnership.
(b) Responsibility for Ownership and Operation Expenses. Except as
provided in Section 7.13, the Partnership shall be responsible for and shall pay
all expenses relating to the Partnership's ownership of its assets, and the
operation of, or for the benefit of, the Partnership, and the General Partner
shall be reimbursed on a monthly basis, or such other basis as the General
Partner may determine in its sole and absolute discretion, for all expenses it
incurs relating to the Partnership's ownership of its assets and the operation
of, or for the benefit of, the Partnership. If certain expenses are incurred for
the benefit of the Partnership and other entities, those expenses will be
allocated to the Partnership and the other entities in such a manner as the
General Partner in its sole and absolute discretion deems fair and reasonable.
Such reimbursements shall be in addition to any reimbursement to the General
Partner as a result of indemnification pursuant to Section 7.8. All payments and
reimbursements under this Agreement represent expenses of the Partnership
incurred on its behalf, and not expenses of the General Partner, and shall be so
characterized for federal income tax purposes.
(c) Responsibility for Organization or Issuance Expenses. Except as
provided in Section 7.13, the Partnership shall be responsible for and shall pay
(or shall reimburse the General Partner for) all expenses incurred relating to
the organization of the Partnership (including expenses relating to the issuance
of Units), as well as other costs of capital raising or property acquisition
incurred by the Partnership or General Partner with respect to funds or
properties acquired by the Partnership or by the General Partner for prompt
contribution to the Partnership, all of which expenses are considered by the
Partners to constitute expenses of, and for the benefit of, the Partnership.
7.5 Purchases of Shares by the General Partner. If the General Partner
purchases shares in connection with a share repurchase or similar program or for
the purpose of delivering those shares to satisfy an obligation under any
dividend reinvestment or equity purchase program adopted by the General Partner,
any employee equity purchase plan adopted by the General Partner or any similar
obligation or arrangement undertaken by the General Partner in the future, the
purchase price paid by the General Partner for those shares and any other
expenses incurred by the General Partner in connection with that purchase shall
be considered expenses of the Partnership and shall be reimbursable to the
General Partner, subject to the conditions that: (i) if those shares are
subsequently sold by the General Partner, the General Partner shall pay to the
Partnership any proceeds received by the General Partner for those shares
(provided that a transfer of shares for Partnership Units pursuant to Section
8.6 would not be considered a sale for this purpose); and (ii) if the shares are
not retransferred by the General Partner within thirty (30) days after the
purchase of the shares, the General Partner shall cause the Partnership to
cancel a number of Partnership Units held by the General Partner equal to the
number of shares purchased.
7.6 Outside Activities of the General Partner. The General Partner shall
not directly or indirectly enter into or conduct any business, other than in
connection with the ownership, acquisition and disposition of Partnership
Interests as a General Partner or Limited Partner and the management of the
business of the Partnership, the General Partner's operation as a public
reporting company with securities registered under the Securities Exchange Act
of 1934, as amended, its operation as a REIT, and such activities as are
incidental to those activities. The General Partner shall not own any assets
other than Partnership Interests, the stock of an entity qualifying as a
"qualified REIT subsidiary" under Section 856(i) of the Code, all of the
interests in a limited liability company, debts owed by the Partnership and such
bank accounts or similar instruments as it deems necessary to carry out its
responsibilities contemplated under this Agreement and the Articles of
Incorporation. Notwithstanding the foregoing, the General Partner shall be
permitted to own, directly or through Subsidiaries, interests in Partnership
properties that do not exceed 1% of the economic interest of any property, and
if appropriate for regulatory, tax, or other purposes, the General Partner also
may own, directly or through Subsidiaries, interests in assets that the
Partnership otherwise could acquire, if the General Partner grants to the
Partnership the option to acquire the assets within a period not to exceed three
years in exchange for the number of Partnership Units that would be issued if
the Partnership acquired the assets at the time of acquisition by the General
Partner. The General Partner and Affiliates of the General Partner may acquire
Limited Partnership Interests and shall be entitled to exercise all rights of a
Limited Partner relating to such Limited Partnership Interests. The provisions
of this Section 7.6 shall not be construed to limit the outside activities of
Affiliates of the General Partner.
7.7 Contracts with Affiliates.
(a) Loans. The Partnership may lend or contribute to its
Subsidiaries or other Persons in which it has an equity investment, and such
Persons may borrow funds from the Partnership, on terms and conditions
established in the sole and absolute discretion of the General Partner. The
foregoing authority shall not create any right or benefit in favor of any
Subsidiary or any other Person.
(b) Transfers of Assets. The Partnership may transfer assets to
joint ventures, other partnerships, corporations or other business entities in
which it is or by so transferring the assets becomes a participant upon such
terms and subject to such conditions consistent with this Agreement and
applicable law.
(c) Contracts With General Partner. Except as expressly permitted by
this Agreement, neither the General Partner nor any of its Affiliates shall
sell, transfer or convey any property to, or purchase any property from, the
Partnership, directly or indirectly, except pursuant to transactions that are on
terms that are fair and reasonable and no less favorable to the Partnership than
would be obtained from an unaffiliated third party.
(d) Employee Benefit Plans. The General Partner, in its sole and
absolute discretion and without the approval of the Limited Partners, may
propose and adopt on behalf of the Partnership employee benefit plans funded by
the Partnership for the benefit of employees of the General Partner, the
Partnership, Subsidiaries of the Partnership or any Affiliate of any of them in
respect of services performed, directly or indirectly, for the benefit of the
Partnership, the General Partner, or any of the Partnership's Subsidiaries,
including any such plan that requires the Partnership, the General Partner or
any of the Partnership's Subsidiaries to issue or transfer Partnership Units to
employees.
(e) Conflict Avoidance Arrangements. The General Partner is
expressly authorized to enter into, in the name and on behalf of the
Partnership, a right of first opportunity arrangement, non-competition
agreements and other conflict avoidance agreements with various Affiliates of
the Partnership and the General Partner, on such terms as the General Partner,
in its sole and absolute discretion, believes are advisable.
7.8 Indemnification.
(a) General. Except as provided in Section 7.13, the Partnership
shall indemnify an Indemnitee from and against any and all losses, claims,
damages, liabilities, joint or several, expenses (including legal fees and
expenses), judgments, fines, settlements, and other amounts arising from any and
all claims, demands, actions, suits or proceedings, civil, criminal,
administrative or investigative, that relate to the operations of the
Partnership as set forth in this Agreement in which any Indemnitee may be
involved, or is threatened to be involved, as a party or otherwise, unless it is
established that: (i) the act or omission of the Indemnitee was material to the
matter giving rise to the proceeding and either was committed in bad faith or
was the result of active and deliberate dishonesty; (ii) the Indemnitee actually
received an improper personal benefit in money, property or services; or (iii)
in the case of any criminal proceeding, the Indemnitee had reasonable cause to
believe that the act or omission was unlawful. The termination of any proceeding
by judgment, order or settlement does not create a presumption that the
Indemnitee did not meet the requisite standard of conduct set forth in this
Section 7.8(a). The termination of any proceeding by conviction or upon a plea
of nolo contendere or its equivalent, or an entry of an order of probation prior
to judgment, creates a rebuttable presumption that the Indemnitee did not meet
the required standard of conduct set forth in this Section 7.8(a). Any
indemnification pursuant to this Section 7.8 shall be made only out of the
assets of the Partnership. Notwithstanding the foregoing provisions, the General
Partner shall be entitled to reimbursement by the Partnership for any amounts
paid by it in satisfaction of indemnification obligations owed by the General
Partner to present or former directors of the General Partner, as provided for
in or pursuant to the Articles of Incorporation and By-Laws of the General
Partner or any similar indemnification agreements between the General Partner
and such persons.
(b) In Advance of Final Disposition. Except as provided in Section
7.13, reasonable expenses incurred by an Indemnitee who is a party to a
proceeding may be paid or reimbursed by the Partnership in advance of the final
disposition of the proceeding upon receipt by the Partnership of (a) a written
affirmation by the Indemnitee of the Indemnitee's good faith belief that the
standard of conduct necessary for indemnification by the Partnership as
authorized in this Section 7.8 has been met, and (b) a written undertaking by or
on behalf of the Indemnitee to repay the amount if it shall ultimately be
determined that the standard of conduct was not met.
(c) No Effect on Other Rights. The indemnification provided by this
Section 7.8 shall be in addition to any other rights to which an Indemnitee or
any other Person may be entitled under any agreement, pursuant to any vote of
the Partners, as a matter of law or otherwise, and shall continue as to an
Indemnitee who has ceased to serve in such capacity unless otherwise provided in
a written agreement pursuant to which such Indemnitee is indemnified.
(d) Insurance. The Partnership may purchase and maintain insurance,
on behalf of the Indemnities and such other Persons as the General Partner shall
in its sole and absolute discretion determine, against any liability that may be
asserted against or expenses that may be incurred by such Person in connection
with the Partnership's activities, regardless of whether the Partnership would
have the power to indemnify such Person against such liability under the
provisions of this Agreement or under applicable law.
(e) Employee Benefit Plans. For purposes of this Section 7.8, the
Partnership shall be deemed to have requested an Indemnitee to serve as
fiduciary of an employee benefit plan whenever the performance by it of its
duties to the Partnership also imposes duties on, or otherwise involves services
by, it to the plan or participants or beneficiaries of the plan; excise taxes
assessed on an Indemnitee with respect to an employee benefit plan pursuant to
applicable law shall constitute fines within the meaning of Section 7.8(a); and
actions taken or omitted by the Indemnitee with respect to an employee benefit
plan in the performance of its duties for a purpose reasonably believed by it to
be in the interest of the participants and beneficiaries of the plan shall be
deemed to be for a purpose that is not opposed to the best interests of the
Partnership.
(f) No Personal Liability for Limited Partners. In no event may an
Indemnitee subject the Limited Partners to personal liability by reason of the
indemnification provisions set forth in this Agreement.
(g) Interested Transactions. An Indemnitee shall not be denied
indemnification in whole or in part under this Section 7.8 because the
Indemnitee had an interest in the transaction with respect to which the
indemnification applies if the transaction was otherwise permitted by the terms
of this Agreement.
(h) Binding Effect. The provisions of this Section 7.8 are for the
benefit of the Indemnities, their heirs, successors, assigns and administrators
and shall not be deemed to create any rights for the benefit of any other
Persons.
(i) Effect of Amendment. Any amendment, modification or repeal of
this Section 7.8 or any provision of this Agreement shall be prospective only
and shall not in any way affect the rights of an Indemnitee under this Section
7.8 as in effect immediately prior to such amendment modification or repeal with
respect to claims arising from or relating to matters occurring, in whole or in
part, prior to such amendment, modification or repeal, regardless of when such
claims may arise or be asserted.
7.9 Liability of the General Partner.
(a) General. Notwithstanding anything to the contrary set forth in
this Agreement, the General Partner shall not be liable for monetary damages to
the Partnership, any Partners or any Assignees for losses sustained, liabilities
incurred or benefits not derived as a result of errors in judgment or of any act
or omissions if the General Partner acted in good faith.
(b) No Obligation to Consider Interests of Limited Partners. The
Limited Partners expressly acknowledge that the General Partner is acting on
behalf of the Partnership and the General Partner's shareholders collectively,
that the General Partner is under no obligation to consider the separate
interests of the Limited Partners (including, without limitation, the tax
consequences to Limited Partners or Assignees) in deciding whether to cause the
Partnership to take (or decline to take) any actions that the General Partner
has undertaken in good faith on behalf of the Partnership, including the
disposition of properties of the Partnership, and that the General Partner shall
not be liable for monetary damages for losses sustained, liabilities incurred,
or benefits not derived by Limited Partners in connection with such decisions
provided the General Partner does not violate the terms of any written agreement
between the Partnership and one or more Limited Partners.
(c) Acts of Agents. Subject to its obligations and duties as General
Partner set forth in Section 7.1(a), the General Partner may exercise any of the
powers granted to it by this Agreement and perform any of the duties imposed
upon it under this Agreement either directly or indirectly or by or through its
agents. The General Partner shall not be responsible for any misconduct or
negligence on the part of any such agent appointed by it in good faith.
(d) Effect of Amendment. Any amendment, modification or repeal of
this Section 7.9 or any provision of this Agreement shall be prospective only
and shall not in any way affect the limitations on the General Partner's
liability to the Partnership and the Limited Partners under this Section 7.9 as
in effect immediately prior to such amendment, modification or repeal with
respect to claims arising from or relating to matters occurring, in whole or in
part, prior to such amendment, modification or repeal, regardless of when such
claims may arise or be asserted.
(e) Limitation of Liability of Shareholders, Directors and Officers
of the General Partner. Any obligation or liability of the General Partner that
may arise at any time under this Agreement or any obligation or liability that
may be incurred by it pursuant to any other instrument, transaction or
undertaking contemplated by this Agreement shall be satisfied, if at all, out of
the General Partner's assets only. No such obligation or liability shall be
personally binding upon, nor shall resort for the enforcement of any such
obligation or liability be had to, the property of any of its shareholders,
directors, officers, employees or agents, regardless of whether such obligation
or liability is in the nature of contract, tort or otherwise.
7.10 Other Matters Concerning the General Partner.
(a) Reliance on Documents. The General Partner may rely and shall be
protected in acting or refraining from acting upon any resolution, certificate,
statement, instrument, opinion, report, notice, request, consent, order, bond,
debenture, or other paper or document believed by it to be genuine and to have
been signed or presented by the proper party or parties.
(b) Reliance on Consultants and Advisers. The General Partner may
consult with legal counsel, accountants, appraisers, management consultants,
investment bankers, architects, engineers, environmental consultants, and other
consultants and advisers selected by it, and any act taken or omitted to be
taken in reliance upon the opinion of such Persons as to matters that such
General Partner reasonably believes to be within such Person's professional or
expert competence shall be conclusively presumed to have been done or omitted in
good faith and in accordance with such opinion.
(c) Action Through Officers and Attorneys. The General Partner shall
have the right, in respect of any of its powers or obligations under this
Agreement, to act through any of its duly authorized officers and a duly
appointed attorney or attorneys-in-fact. Each such attorney shall, to the extent
provided by the General Partner in the power of attorney, have full power and
authority to do and perform all and every act and duty that is permitted or
required to be done by the General Partner under this Agreement.
(d) Actions to Maintain REIT Status or Avoid Taxation of General
Partner. Notwithstanding any other provisions of this Agreement or the Act, any
action of the General Partner on behalf of the Partnership or any decision of
the General Partner to refrain from acting on behalf of the Partnership,
undertaken in the good faith belief that such action or omission is necessary or
advisable in order (i) to protect the ability of the General Partner to continue
to qualify as a REIT or (ii) to avoid the General Partner incurring any taxes
under Section 857 or Section 4981 of the Code, is expressly authorized under
this Agreement and is deemed approved by all of the Limited Partners.
7.11 Title to Partnership Assets. Title to Partnership assets, whether
real, personal or mixed and whether tangible or intangible, shall be deemed to
be owned by the Partnership as an entity, and no Partner, individually or
collectively, shall have any ownership interest in such Partnership assets or
any portion of those assets. Title to any or all of the Partnership assets may
be held in the name of the Partnership, the General Partner or one or more
nominees, as the General Partner may determine, including Affiliates of the
General Partner. The General Partner declares and warrants that any Partnership
assets for which legal title is held in the name of the General Partner or any
nominee or Affiliate of the General Partner shall be held by the General Partner
for the use and benefit of the Partnership in accordance with the provisions of
this Agreement; provided, however, that the General Partner shall use its best
efforts to cause beneficial and record title to such assets to be vested in the
Partnership as soon as reasonably practicable. All Partnership assets shall be
recorded as the property of the Partnership in its books and records,
irrespective of the name in which legal title to such Partnership assets is
held.
7.12 Reliance by Third Parties. Notwithstanding anything to the contrary
in this Agreement, any Person dealing with the Partnership shall be entitled to
assume that the General Partner has full power and authority, without consent or
approval of any other Partner or Person, to encumber, sell or otherwise use in
any manner any and all assets of the Partnership and to enter into any contracts
on behalf of the Partnership, and such Person shall be entitled to deal with the
General Partner as if it were the Partnership's sole party in interest, both
legally and beneficially. Each Limited Partner waives any and all defenses or
other remedies that may be available against such Person to contest, negate or
disaffirm any action of the General Partner in connection with any such dealing.
In no event shall any Person dealing with the General Partner or its
representatives be obligated to ascertain that the terms of this Agreement have
been complied with or to inquire into the necessity or expedience of any act or
action of the General Partner or its representatives. Each and every
certificate, document or other instrument executed on behalf of the Partnership
by the General Partner or its representatives shall be conclusive evidence in
favor of any and every Person relying on or claiming under those instruments
that (a) at the time of the execution and delivery of such certificate, document
or instrument, this Agreement was in full force and effect, (b) the Person
executing and delivering such certificate, document or instrument was duly
authorized and empowered to do so for and on behalf of the Partnership and (c)
such certificate, document or instrument was duly executed and delivered in
accordance with the terms and provisions of this Agreement and is binding upon
the Partnership.
7.13 Treatment of and Limitation on Payments to General Partner.
(a) Reimbursement and Indemnification Payments. If and to the extent
any payments to the General Partner pursuant to Sections 7.4 or 7.8 constitute
gross income to the General Partner (as opposed to the repayment of advances
made on behalf of the Partnership), those amounts shall constitute guaranteed
payments within the meaning of Section 707(c) of the Code, and shall be so
treated by the Partnership and all Partners, and shall not be treated as
distributions for purposes of computing the Partners' Capital Accounts.
(b) Limitation on Payments to General Partner. To the extent that
the amount paid or credited to the General Partner or its officers, directors,
employees or agents pursuant to Section 7.4 or Section 7.8 would constitute
gross income of the General Partner that is not described in Sections 856(c)(2)
or 856(c)(3) of the Code (a "GP Payment") then, notwithstanding any other
provisions of this Agreement, the amount of such GP Payment for any fiscal year
shall not exceed the lesser of:
(i) an amount equal to the excess, if any, of
(1) four and eight tenths percent (4.8%) of the General
Partner's total gross income (not including any GP Payments or
gross income from prohibited transactions) for the fiscal year
over
(2) the amount of gross income (within the meaning of
Section 856(c)(2) of the Code) derived by the General Partner
from sources other than those described in subsections (A)
through (H) of Section 856(c)(2) of the Code (taking into
account Section 856(c)(5)(G), but not including the amount of
any GP Payments or gross income from prohibited transactions);
or
(ii) an amount equal to the excess, if any, of
(1) twenty-four and eight tenths percent (24.8%) of the
General Partner's total gross income (not including any GP
Payments or gross income from prohibited transactions) for the
fiscal year over
(2) the amount of gross income (within the meaning of
Section 856(c)(3) of the Code) derived by the General Partner
from sources other than those described in subsections (A)
through (I) of Section 856(c)(3) of the Code (but not including
the amount of any GP Payments or gross income from prohibited
transactions);
Notwithstanding the foregoing, GP Payments in excess of the amounts set forth in
paragraphs (i) and (ii) may be made if and to the extent the General Partner, as
a condition precedent, obtains an opinion of tax counsel that the receipt of
such excess amounts would not adversely affect the General Partner's ability to
qualify as a REIT. To the extent GP Payments may not be made in a year due to
the above limitations, such GP Payments shall carry over and be treated as
arising in the following year(s) (subject again to limitation as set forth above
in those years), for a maximum of seven years (treating amounts payable as first
being paid from the earliest year such amounts were carried over, and the next
succeeding years in chronological order). If any GP Payment is carried over for
such seven-year period and not paid, such amount shall no longer be an
obligation of the Partnership. If a GP Payment is inadvertently made in an
amount in excess of the limitations in this Section 7.13(b), such excess
payments shall be treated as a permitted loan from the Partnership to the
General Partner, to be repaid as soon as practicable following discovery of the
overpayment.
8. RIGHTS AND OBLIGATIONS OF LIMITED PARTNERS
8.1 Limitation of Liability. The Limited Partners shall have no
liability under this Agreement except as expressly provided in this Agreement,
including Section 10.5 (Partnership withholding obligations), or under the Act.
8.2 Management of Business. No Limited Partner or Assignee (other than
the General Partner, any of its Affiliates or any officer, director, employee,
partner, agent or trustee of the General Partner, the Partnership or any of
their Affiliates, in their capacity as such) shall take part in the operation,
management or control (within the meaning of the Act) of the Partnership's
business, transact any business in the Partnership's name or have the power to
sign documents for or otherwise bind the Partnership. The transaction of any
such business by the General Partner, any of its Affiliates or any officer,
director, employee, partner, agent or trustee of the General Partner, the
Partnership or any of their Affiliates, in their capacity as such, shall not
affect, impair or eliminate the limitations on the liability of the Limited
Partners or Assignees under this Agreement.
8.3 Outside Activities of Limited Partners. Subject to any agreements
entered into pursuant to Section 7.7(e) and subject to any other agreements
entered into by a Limited Partner or its Affiliates with the General Partner,
the Partnership or a Subsidiary, the following rights shall govern outside
activities of Limited Partners:
(a) any Limited Partner (other than the General Partner) and any
officer, director, employee, agent, trustee, Affiliate or shareholder of any
Limited Partner shall be entitled to and may have business interests and
engage in business activities in addition to those relating to the
Partnership, including business interests and activities in direct or
indirect competition with the Partnership;
(b) neither the Partnership nor any Partners shall have any rights
by virtue of this Agreement in any business ventures of any Limited Partner
or Assignee;
(c) none of the Limited Partners nor any other Person shall have any
rights by virtue of this Agreement or the partnership relationship
established by this Agreement in any business ventures of any other Person,
other than the General Partner, and such Persons shall have no obligation
pursuant to this Agreement to offer any interest in any such business
ventures to the Partnership, any Limited Partner or any such other Person,
even if such opportunity is of a character that, if presented to the
Partnership, any Limited Partner or such other Person, could be taken by
such Person;
(d) the fact that a Limited Partner may encounter opportunities to
purchase, otherwise acquire, lease, sell or otherwise dispose of real or
personal property and may take advantage of such opportunities or introduce
such opportunities to entities in which it has or has not any interest,
shall not subject such Partner to liability to the Partnership or any of the
other Partners on account of the lost opportunity; and
(e) except as otherwise specifically provided in this Agreement,
nothing contained in this Agreement shall be deemed to prohibit a Limited
Partner or any Affiliate of a Limited Partner from dealing, or otherwise
engaging in business, with Persons transacting business with the Partnership
or from providing services relating to the purchase, sale, rental,
management or operation of real or personal property (including real estate
brokerage services) and receiving compensation for those activities, from
any Persons who have transacted business with the Partnership or other third
parties.
8.4 Priority Among Limited Partners. No Partner (Limited or General) or
Assignee shall have priority over any other Partner (Limited or General) or
Assignee either as to the return of capital contributions or, except to the
extent provided by Article 6 or as permitted by Section 4.2, or otherwise
expressly provided in this Agreement, as to profits, losses or distributions.
8.5 Rights of Limited Partners Relating to the Partnership.
(a) Copies of Business Records. In addition to other rights provided
by this Agreement or by the Act, including rights set forth in Article 14, and
except as limited by Section 8.5(c), each Limited Partner shall have the right,
for a purpose reasonably related to such Limited Partner's interest as a limited
partner in the Partnership, upon written demand with a statement of the purpose
of such demand and at such Limited Partner's own expense:
(1) to obtain a copy of the most recent annual and quarterly
reports filed with the Securities and Exchange Commission by the General
Partner pursuant to the Securities Exchange Act of 1934, as amended;
(2) to obtain a copy of the Partnership's federal, state and
local income tax returns for each Partnership Year;
(3) to obtain a current list of the name and last known
business, residence or mailing address of each Partner;
(4) to obtain a copy of this Agreement and the Certificate and
all amendments, together with executed copies of all powers of attorney
pursuant to which this Agreement, the Certificate and all amendments have
been executed; and
(5) to obtain true and full information regarding the amount of
cash and a description and statement of any other property or services
contributed by each Partner and which each Partner has agreed to contribute
in the future, and the date on which each became a Partner.
(b) Notification of Changes in Unit Adjustment Factor. The
Partnership shall notify each Limited Partner in writing of any change to the
number of Units as a result of a change to the Unit Adjustment Factor within ten
(10) Business Days of the date such change becomes effective.
(c) Confidential Information. Notwithstanding any other provision of
this Section 8.5, the General Partner may keep confidential from the Limited
Partners, for such period of time as the General Partner determines in its sole
and absolute discretion to be reasonable, any Partnership information that (i)
the General Partner believes to be in the nature of trade secrets or other
information the disclosure of which the General Partner in good faith believes
is not in the best interests of the Partnership or (ii) the Partnership is
required by law or by agreements with unaffiliated third parties to keep
confidential.
8.6 Redemption Right.
(a) General. Beginning one year after the date on which each Limited
Partner is admitted to the Partnership (except as otherwise contractually agreed
to by the General Partner), each Limited Partner (other than the General
Partner) shall have the right (the "Redemption Right") to cause the Partnership
to purchase on the Specified Redemption Date all or any of such Limited
Partner's Units for cash equal to the Redemption Amount, provided however, that
the General Partner has the authority to establish different payment schedules
to satisfy a Limited Partner's Redemption Right at the time the Units that are
the subject of such Redemption Right are issued. The Redemption Right may be
exercised by a Limited Partner (a "Redeeming Partner") at any time and from time
to time by delivering a Notice of Redemption to the General Partner not less
than ten (10) days prior to such redemption, provided that a Limited Partner may
not exercise the Redemption Right for less than one thousand (1,000) Partnership
Units unless such Redeeming Partner then holds less than one thousand (1,000)
Partnership Units, in which event the Redeeming Partner must exercise the
Redemption Right for all of the Partnership Units held by such Redeeming
Partner. The Assignee of any Limited Partner may exercise the rights of the
Limited Partner pursuant to this Section 8.6, and the Limited Partner shall be
deemed to have assigned those rights to the Assignee and shall be bound by the
exercise of the rights by the Limited Partner's Assignee, and payments shall be
made directly to the Assignee and not to the Limited Partner.
(b) If Delivery of Common Shares Is Prohibited, Etc. Notwithstanding
the provisions of Section 8.6(a) and (d), a Partner shall not be entitled to
exercise the Redemption Right pursuant to Section 8.6(a) if (i) the delivery of
Common Shares to such Partner on the Specified Redemption Date would be
prohibited under the Articles of Incorporation, or (ii) in the opinion of
counsel to the General Partner, there is a significant risk that a delivery of
Common Shares to the Partner would cause the General Partner to no longer
qualify as a REIT, would constitute a violation of applicable securities laws,
or would result in the Partnership no longer being treated as a partnership for
federal income tax purposes. In addition, the consummation of a redemption shall
be subject to the expiration or termination of the applicable waiting period, if
any, under the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended.
(c) Section 16 Considerations. If a Redemption Right is exercised by
a Redeeming Partner who is a "reporting person" within the meaning of Section
16(a) of the Securities Exchange Act of 1934, as amended (the "Exchange Act"),
the General Partner will promptly notify such Redeeming Partner as to whether
the Redemption Right will be satisfied with the payment of cash or through the
delivery of Common Shares. If the Partnership or the General Partner elects to
satisfy the Redemption Right with the payment of cash, the Redeeming Partner
shall have the right to either withdraw its exercise of the Redemption Right, or
delay the consummation of the redemption to the extent necessary to avoid a
"short-swing" profit under Section 16(b) of the Exchange Act.
(d) General Partner Assumption of Redemption Right.
(1) Subject to the other provisions of this Section 8.6 and
Section 11.3 (Limited Partners' rights to transfer), beginning on the date one
year after a Limited Partner's admission to the Partnership (except as otherwise
contractually agreed to by the General Partner), the General Partner may assume
directly and satisfy the obligations of the Partnership as to a Limited
Partner's Redemption Right by paying to a Redeeming Partner either the Shares
Amount, or cash equal to the Redemption Amount as of the Specified Redemption
Date, with the choice of consideration to be determined at the sole option of
the General Partner. If the General Partner shall exercise and perform its right
to satisfy the Redemption Right in this manner, the Partnership shall have no
obligation to pay any amount to the Redeeming Partner with respect to such
Redeeming Partner's exercise of the Redemption Right, and each of the Redeeming
Partner, the Partnership, and the General Partner shall treat the transaction
between the General Partner and the Redeeming Partner as a sale of the Redeeming
Partner's Partnership Units to the General Partner for federal and state income
tax purposes. Each Redeeming Partner agrees to execute such documents as the
General Partner may reasonably require in connection with the payment of the
Redemption Amount. The General Partner shall at all times reserve and keep
available out of its authorized but unissued Common Shares, solely for the
purpose of effecting the exchange of Partnership Units for Common Shares, such
number of Common Shares as shall from time to time be sufficient to effect the
conversion of all outstanding Partnership Units, and the exercise or conversion
of all other rights to acquire Common Shares. No Limited Partner shall, solely
by virtue of being the holder of one or more Partnership Units, be deemed to be
a shareholder of or have any other interest in the General Partner.
(2) Each Redeeming Partner agrees to execute such documents as
the General Partner may reasonably require in connection with, and as a
condition of, the issuance of Common Shares upon exercise of the Redemption
Right, including, without limitation, executing and delivering an investment
representation letter with respect to the matters set forth in Section 3.4(c)
and related matters.
8.7 Extraordinary Transactions.
(a) The General Partner may not engage in any merger, consolidation
or other combination with or into another person or sale of all or substantially
all of its assets, or any reclassification, or any recapitalization (other than
stock splits and stock dividends or other events described in the definition of
"Unit Adjustment Factor") or change of outstanding Common Shares (a "Business
Combination"), unless (i) the Limited Partners receive, or have the opportunity
to receive, the same consideration per Unit as holders of Common Shares receive
per Common Share in the transaction (without regard to tax considerations), or
(ii) Limited Partners (other than the General Partner) holding at least 60% of
the Units held by Limited Partners (other than the General Partner) vote to
approve the Business Combination.
(b) In addition to the requirements of Section 8.7(a), the General
Partner will not consummate a Business Combination in which the General Partner
conducts a vote of the shareholders of the General Partner unless the matter is
also submitted to a vote of the Partners. For purposes of the Partnership vote,
(i) each holder of Units (including the General Partner, as to its limited and
general partnership interests) shall be entitled to a number of votes equal to
the total votes to which the holder would have been entitled in the vote of the
General Partner's shareholders if the holder's Units had been exchanged for
Common Shares upon the exercise of a Redemption Right, (ii) in the Partnership
vote, the General Partner shall be deemed to vote all Units it holds
(representing both its general and limited partnership interests) in proportion
to the manner in which the General Partner's shareholders voted (disregarding
shareholders who did not vote), and (iii) the Business Combination shall be
deemed approved by the Partnership if the votes so recorded (the deemed vote
with respect to the General Partner's interest and the actual vote of the other
holders of Units) satisfy the standard for a favorable vote of the shareholders
of the General Partner.
(c) Notwithstanding the provisions of Section 8.7(a) and (b), the
General Partner shall be permitted, without compliance with the requirements of
Section 8.7(a) or (b): (i) to transfer all or part of its partnership interest
to an entity wholly owned by the General Partner, or if the General Partner is
wholly owned by another entity (the "Parent"), to transfer all or part of its
General Partner partnership interest to the Parent, (ii) to merge into any
entity wholly-owned by the General Partner or with any parent entity that wholly
owns the General Partner (in either such case no change shall be made to the
Unit Adjustment Factor as a result of that transaction and the surviving entity
shall be treated as was the General Partner), and (iii) to merge into Public
Storage Properties XI, Inc. (in which case the Unit Adjustment Factor shall be
adjusted as provided with respect to a Successor Entity to take into account the
ratio into which shares of the General Partner will be converted into shares of
Public Storage Properties XI, Inc.).
8.8 Consent of Certain Limited Partners. Each of the properties listed
on Exhibit D (as well as any subsequently acquired property, the federal income
tax basis of which is determined by reference to the federal income tax basis of
a listed property, such as a property acquired in a "like-kind exchange" for a
listed property) is referred to as a "Designated Property." The Partnership may
not sell or otherwise dispose of any Designated Property during the ten year
period commencing on the date of the contribution to the Partnership of that
Designated Property in a transaction that will cause gain recognition to the
contributing partner, without the prior written consent of Public Storage, Inc.
The limitation on disposition of the preceding sentence shall not apply if, at
the time of the disposition, Public Storage, Inc. and its affiliated
partnerships then own less than 30% of the Units owned as of the date of this
Agreement. At the time of any subsequent contributions of property to the
Partnership, the General Partner may agree with the contributor to treat the
property as a Designated Property that may not be sold or disposed of by the
Partnership without the contributor's consent for a period to be agreed upon by
the General Partner and the contributor.
9. BOOKS, RECORDS, ACCOUNTING AND REPORTS
9.1 Records and Accounting. The General Partner shall keep or cause to
be kept at the principal office of the Partnership appropriate books and records
with respect to the Partnership's business, including, without limitation, all
books and records necessary to provide to the Limited Partners any information,
lists and copies of documents required to be provided pursuant to Section 9.3.
Any records maintained by or on behalf of the Partnership in the regular course
of its business may be kept on, or be in the form of, punch cards, magnetic
tape, photographs, micrographics or any other information storage device;
provided that the records so maintained are convertible into clearly legible
written form within a reasonable period of time. The books of the Partnership
shall be maintained for financial purposes on an accrual basis in accordance
with generally accepted accounting principles and for tax reporting purposes on
the accrual basis.
9.2 Fiscal Year. The fiscal year of the Partnership shall be the
calendar year.
9.3 Reports.
(a) Annual Reports. As soon as practicable, but in no event later
than 120 days after the close of each Partnership Year, the General Partner
shall cause to be mailed to each Limited Partner as of the close of the
Partnership Year, an annual report containing financial statements of the
Partnership, or of the General Partner if such statements are prepared solely on
a consolidated basis with the General Partner, for such Partnership Year,
presented in accordance with generally accepted accounting principles, such
statements to be audited by a nationally recognized firm of independent public
accountants selected by the General Partner.
(b) Quarterly Reports. If the General Partner distributes quarterly
reports to its shareholders, as soon as practicable, but in no event later than
60 days after the close of each calendar quarter (except the last calendar
quarter of each year), the General Partner shall cause to be mailed to each
Limited Partner as of the last day of the calendar quarter, a report containing
unaudited financial statements of the Partnership, or of the General Partner, if
such statements are prepared solely on a consolidated basis with the General
Partner, and such other information as may be required by applicable law or
regulation, or as the General Partner determines to be appropriate.
10. TAX MATTERS
10.1 Preparation of Tax Returns. The General Partner shall arrange for
the preparation and timely filing of all returns of Partnership income, gains,
deductions, losses and other items required of the Partnership for federal and
state income tax purposes and shall use all reasonable efforts to furnish,
within 90 days of the close of each taxable year, the tax information reasonably
required by the General Partner and the Limited Partners for federal and state
income tax reporting purposes. The Limited Partners shall promptly provide the
General Partner with such information relating to the Contributed Properties,
including tax basis and other relevant information, as may be reasonably
requested by the General Partner from time to time.
10.2 Tax Elections. Except as otherwise provided in this Agreement, the
General Partner shall, in its sole and absolute discretion, determine whether to
make any available election pursuant to the Code; including without limitation,
the election under Section 754 of the Code in accordance with applicable
regulations. The General Partner shall have the right to seek to revoke any such
election (including, without limitation, the election under Section 754 of the
Code) upon the General Partner's determination in its sole and absolute
discretion that such revocation is in the best interests of the Partners.
10.3 Tax Matters Partner.
(a) General. The General Partner shall be the "tax matters partner"
of the Partnership for federal income tax purposes. Pursuant to Section 6223(c)
of the Code, upon receipt of notice from the IRS of the beginning of an
administrative proceeding with respect to the Partnership, the tax matters
partner shall furnish the IRS with the name, address and profit interest of each
of the Limited Partners; provided, however, that such information is provided to
the Partnership by the Limited Partners. The Limited Partners shall provide such
information to the Partnership as the General Partner shall reasonably request.
(b) Powers. The tax matters partner is authorized, but not required:
(1) to enter into any settlement with the IRS with respect to
any administrative or judicial proceedings for the adjustment of Partnership
items required to be taken into account by a Partner for income tax purposes
(such administrative proceedings being referred to as a "tax audit" and such
judicial proceedings being referred to as "judicial review"), and in the
settlement agreement the tax matters partner may expressly state that such
agreement shall bind all Partners, except that such settlement agreement
shall not bind any Partner (a) who (within the time prescribed pursuant to
the Code and Regulations) files a statement with the IRS providing that the
tax matters partner shall not have the authority to enter into a settlement
agreement on behalf of such Partner or (b) who is a "notice partner" (as
defined in Section 6231 of the Code) or a member of a "notice group" (as
defined in Section 6223(b)(2) of the Code);
(2) in the event that a notice of a final administrative
adjustment at the Partnership level of any item required to be taken into
account by a partner for tax purposes (a "final adjustment") is mailed or
otherwise given to the tax matters partner, to seek judicial review of such
final adjustment, including the filing of a petition for readjustment with
the Tax Court or the United States Claims Court, or the filing of a
complaint for refund with the District Court of the United States for the
district in which the Partnership's principal place of business is located;
(3) to intervene in any action brought by any other Partner for
judicial review of a final adjustment;
(4) to file a request for an administrative adjustment with the
IRS at any time and, if any part of such request is not allowed by the IRS,
to file an appropriate pleading (petition, complaint or other document) for
judicial review with respect to such request;
(5) to enter into an agreement with the IRS to extend the period
for assessing any tax that is attributable to any item required to be taken
into account by a Partner for tax purposes, or an item affected by such
item; and
(6) to take any other action on behalf of the Partners of the
Partnership in connection with any tax audit or judicial review proceeding
to the extent permitted by applicable law or regulations.
(c) Electing Large Partnership. The General Partner, in its sole
discretion, may cause the Partnership to elect to be an "electing large
partnership" under Section 775 of the Code. In that case, the General Partner
shall be the person authorized to act on behalf of the Partnership in any
federal or related state income tax proceeding for purposes of Section 6255 of
the Code and shall be authorized to undertake any and all actions on behalf of
the Partnership to the maximum extent contemplated under Sections 6240 through
6255 of the Code (including, without limitation, to bind the Partnership and all
Partners with respect to any settlement of any proceeding).
(d) Reimbursement. The tax matters partner shall receive no
compensation for its services. All third-party costs and expenses incurred by
the tax matters partner in performing its duties as such (including legal and
accounting fees) shall be borne by the Partnership. Nothing in this Agreement
shall be construed to restrict the Partnership from engaging an accounting firm
and a law firm to assist the tax matters partner in discharging its duties under
this Agreement, so long as the compensation paid by the Partnership for such
services is reasonable. The taking of any action and the incurring of any
expense by the General Partner pursuant to this Section 10.3, except to the
extent required by law, is a matter in the sole and absolute discretion of the
General Partner, and the provisions relating to indemnification of the General
Partner set forth in Section 7.8 shall be fully applicable to the General
Partner in its capacity as such.
10.4 Organization Expenses. The Partnership shall elect to deduct
expenses, if any, incurred by it in organizing the Partnership ratably over a
60-month period as provided in Section 709 of the Code.
10.5 Withholding. Each Limited Partner authorizes the Partnership to
withhold from or pay on behalf of or with respect to such Limited Partner any
amount of federal, state, local, or foreign taxes that the General Partner
determines that the Partnership is required to withhold or pay with respect to
any amount distributable or allocable to such Limited Partner pursuant to this
Agreement, including, without limitation, any taxes required to be withheld or
paid by the Partnership pursuant to Sections 1441, 1442, 1445 or 1446 of the
Code. Any amount paid on behalf of or with respect to a Limited Partner shall
constitute a loan by the Partnership to such Limited Partner, which loan shall
be repaid by such Limited Partner within 15 days after notice from the General
Partner that such payment must be made unless (a) the Partnership withholds such
payment from a distribution that would otherwise be made to the Limited Partner
or (b) the General Partner determines, in its sole and absolute discretion, that
such payment may be satisfied out of the available funds of the Partnership that
would, but for such payment, be distributed to the Limited Partner. Any amounts
withheld pursuant to the foregoing clauses (a) or (b) shall be treated as having
been distributed to such Limited Partner. Each Limited Partner unconditionally
and irrevocably grants to the Partnership a security interest in such Limited
Partner's Partnership Interest to secure such Limited Partner's obligation to
pay to the Partnership any amounts required to be paid pursuant to this Section
10.5. If a Limited Partner fails to pay any amounts owed to the Partnership
pursuant to this Section 10.5 when due, the General Partner may, in its sole and
absolute discretion, elect to make the payment to the Partnership on behalf of
such defaulting Limited Partner, and in such event shall be deemed to have
loaned such amount to such defaulting Limited Partner, and shall succeed to all
rights and remedies of the Partnership as against such defaulting Limited
Partner (including, without limitation, the right to receive distributions
otherwise payable by the Partnership to such defaulting Limited Partner). Any
amounts payable by a Limited Partner under this provision shall bear interest at
the base rate on corporate loans at large United States money center commercial
banks, as published from time to time in the Wall Street Journal, plus four
percentage points (but not higher than the maximum lawful rate) from the date
such amount is due (i.e., 15 days after demand) until such amount is paid in
full. Each Limited Partner shall take such actions as the Partnership or the
General Partner shall request in order to perfect or enforce the security
interest created under this provision.
11. TRANSFERS AND WITHDRAWALS
11.1 Transfer.
(a) Definition. The term "transfer," when used in this Article 11
with respect to a Partnership Unit, shall be deemed to refer to a transaction by
which the General Partner purports to assign its Partnership Interest to another
Person or by which a Limited Partner purports to assign its Limited Partnership
Interest to another Person, and includes a sale, assignment, gift, pledge,
encumbrance, hypothecation, mortgage, exchange or any other disposition by law
or otherwise. The term "transfer" when used in this Article 11 does not include
any redemption or repurchase of Partnership Units by the Partnership from a
Partner or acquisition of Partnership Units from a Limited Partner by the
General Partner pursuant to Section 8.6 or otherwise. No part of the interest of
a Limited Partner shall be subject to the claims of any creditor, any spouse for
alimony or support, or to legal process, and may not be voluntarily or
involuntarily alienated or encumbered except as may be specifically provided for
in this Agreement.
(b) Requirements. No Partnership Interest shall be transferred, in
whole or in part, except in accordance with the terms and conditions set forth
in this Article 11. Any transfer or purported transfer of a Partnership Interest
not made in accordance with this Article 11 shall be null and void.
11.2 Transfer of General Partner's Partnership Interest.
(a) General. The General Partner may not withdraw as a General
Partner or transfer its General Partnership Interest except in connection with a
transaction described in Section 8.7.
(b) Transfer to Partnership. The General Partner may transfer
Limited Partnership Interests held by it to the Partnership.
11.3 Limited Partners' Rights to Transfer.
(a) General. Except as provided in this Agreement, a Limited Partner
may not transfer its Partnership Interest without the prior written consent of
the General Partner, which consent may be given or withheld by the General
Partner in its sole and absolute discretion. Notwithstanding the foregoing,
subject to the provisions of subsections (d), (e), (f) and (g) of this Section
11.3, and Sections 11.4 and 11.6, a Limited Partner may, without the prior
written consent of the General Partner
(i) transfer all or any portion of its Partnership Interest to
the General Partner,
(ii) transfer all or any portion of its Partnership Interest to
an Affiliate, another original Limited Partner or to an "Immediate Family"
member (i.e., as to any natural Person, such natural Person's spouse,
parents, descendants, nephews, nieces, brothers and sisters),
(iii) if such Limited Partner is a natural person, transfer all
or any portion of his or her Partnership Interest upon his or her death to
such Limited Partner's estate, executor, administrator or personal
representative or to such Limited Partner's beneficiaries pursuant to a
devise or bequest or by the laws of descent and distribution or to a trust
of which such Limited Partner is a settlor or co-settlor with a member of
his or her Immediate Family and the beneficiaries of which include no Person
other than such Limited Partner and/or such Limited Partner's Immediate
Family,
(iv) transfer all or any portion of its Partnership Interest
pursuant to the exercise of the Redemption Right,
(v) pledge all or any portion of its Partnership Interest to a
lending institution, that is not an Affiliate of such Limited Partner, as
collateral or security for a bona fide loan or other extension of credit,
and transfer such pledged Partnership Interest to such lending institution
in connection with the exercise of remedies under such loan or extension or
credit, and
(vi) if such Limited Partner is a corporation, partnership or
other business entity, transfer all or any portion of its Partnership
Interest to one or more entities that are wholly owned and controlled by
such Limited Partner or by distributing Partnership Interests in a
liquidation, winding up or otherwise without consideration to the equity
owners of such corporation, partnership or business entity.
In order to effect any transfer, the Limited Partner must deliver to the General
Partner a duly executed copy of the instrument making such transfer and such
instrument must evidence the written acceptance by the assignee of, and
compliance with, all of the terms and conditions of this Agreement and represent
that such assignment was made in accordance with all applicable laws and
regulations.
(b) General Partner Right Of First Refusal. A Partner shall give to
the General Partner written notice of any proposed transfer that is not
otherwise permitted pursuant to Section 11.3(a) above, which notice shall state
(i) the identity of the proposed transferee, and (ii) the amount and type of
consideration proposed to be received for the transferred Partnership Units. The
General Partner shall have ten (10) days within which to give the transferring
Partner notice of its election to acquire the Partnership Units on the proposed
terms. If the General Partner does not so elect, the transferring Partner may
transfer such Partnership Units to a third party, on economic terms no more
favorable to the transferee than the proposed terms, subject to the other
conditions of this Section 11.3.
(c) Assumption of Obligations. It is a condition to any transfer
otherwise permitted under this Agreement (excluding Pledges of a Partnership
Interest, but including any transfer of the pledged Partnership Interest,
whether to the secured party or otherwise, pursuant to the secured party's
exercise of its remedies under such Pledge or the related loan or extension of
credit) that the transferee assumes by operation of law or express agreement all
of the obligations of the transferor Limited Partner under this Agreement with
respect to such transferred Partnership Interest and no such transfer (other
than pursuant to a statutory merger or consolidation in which all obligations
and liabilities of the transferor Partner are assumed by a successor corporation
by operation of law) shall relieve the transferor Partner of its obligations
under this Agreement without the approval of the General Partner, in its
reasonable discretion. Notwithstanding the foregoing, any transferee of any
transferred Partnership Interest shall be subject to any and all ownership
limitations contained in the Articles of Incorporation. Any transferee, whether
or not admitted as a Substituted Limited Partner, shall take subject to the
obligations of the transferor under this Agreement. Unless admitted as a
Substitute Limited Partner, no transferee, whether by a voluntary transfer, by
operation of law or otherwise, shall have rights under this Agreement, other
than the rights of an Assignee as provided in Section 11.5.
(d) Incapacitated Limited Partners. If a Limited Partner is subject
to Incapacity, the executor, administrator, trustee, committee, guardian,
conservator or receiver of such Limited Partner's estate shall have all the
rights of a Limited Partner, but not more rights than those enjoyed by other
Limited Partners for the purpose of settling or managing the estate and such
power as the Incapacitated Limited Partner possessed to transfer all or any part
of his or her interest in the Partnership. The Incapacity of a Limited Partner,
in and of itself, shall not dissolve or terminate the Partnership.
(e) Transfers Contrary to Securities Laws. The General Partner may
prohibit any transfer otherwise permitted under Section 11.3 by a Limited
Partner of its Partnership Units if, in the opinion of legal counsel to the
Partnership, such transfer would require filing of a registration statement
under the Securities Act or would otherwise violate any federal or state
securities laws or regulations applicable to the Partnership or the Partnership
Units.
(f) Transfers Affecting Tax Status. No transfer by a Limited Partner
of its Partnership Units (or any economic or other interest, right or attribute)
may be made to any Person, including a redemption or exchange pursuant to
Section 8.6, if (i) in the opinion of legal counsel for the Partnership, it
would cause a termination of the Partnership for federal or state income tax
purposes that the General Partner believes would have a material adverse effect
or result in the Partnership being treated for federal income tax purposes as an
association taxable as a corporation, or (ii) such transfer is effectuated
through an "established securities market" or a "secondary market (or the
substantial equivalent)" within the meaning of Section 7704 of the Code.
Notwithstanding anything to the contrary in this Agreement, no interests in the
Partnership shall be issued in a transaction that is (or transactions that are)
registered or required to be registered under the Securities Act.
(g) Transfers to Holders of Nonrecourse Liabilities. No transfer or
pledge of any Partnership Units may be made to a lender to the Partnership or
any Person who is related (within the meaning of Section 1.752-4(b) of the
Regulations) to any lender to the Partnership whose loan constitutes a
"nonrecourse liability" (within the meaning of Section 1.752-1(a)(2) of the
Regulations) without the consent of the General Partner, in its sole and
absolute discretion, provided that as a condition to any such consent the lender
will be required to enter into an arrangement with the Partnership and the
General Partner to exchange or redeem for the Redemption Amount any Partnership
Units that such lender or related person owns or would acquire upon foreclosure
of a security interest simultaneously with the time at which such lender would
be deemed to be a partner in the Partnership for purposes of allocating
liabilities to such lender under Section 752 of the Code.
(h) Other Restrictions. In addition to any other restrictions on
transfer contained in this Agreement, in no event may a transfer or assignment
of a Partnership Interest by any Partner (including a transfer upon exercise of
the Redemption Right) be made without the consent of the General Partner in its
sole and absolute discretion:
(i) to any person or entity who lacks the legal right, power or
capacity to own a Partnership Interest;
(ii) in violation of applicable law;
(iii) of any component portion of a Partnership Interest, such
as the Capital Account, or rights to distributions, separate and apart from
all other components of a Partnership Interest,
(iv) in the event such transfer adversely affects the General
Partner's ability to qualify as a REIT or could subject the General Partner
to any additional taxes under Section 857 or Section 4981 of the Code;
(v) if such transfer would cause the Partnership to become, with
respect to any employee benefit plan subject to Title I of ERISA, a
"party-in-interest" (as defined in Section 3(14) of ERISA) or a
"disqualified person" (as defined in Section 4975(c) of the Code);
(vi) if such transfer would, in the opinion of counsel to the
Partnership, cause any portion of the assets of the Partnership to
constitute assets of any employee benefit plan pursuant to Department of
Labor Regulations Section 2510.2-101; or
(vii) if such transfer subjects the Partnership to regulation
under the Investment Partnership Act of 1940, the Investment Advisors Act of
1940 or the Employee Retirement Income Security Act of 1974, each as
amended.
11.4 Substituted Limited Partners.
(a) Consent of General Partner Required. No Limited Partner shall
have the right to substitute a transferee as a Limited Partner in its place
without the prior written consent of the General Partner, which consent may be
given or withheld by the General Partner in its sole and absolute discretion.
The General Partner's failure or refusal to permit a transferee of any such
interests to become a Substituted Limited Partner shall not give rise to any
cause of action against the Partnership or any Partner.
(b) Rights and Duties of Substituted Limited Partners. A transferee
who has been admitted as a Substituted Limited Partner in accordance with this
Article 11 shall have all the rights and powers and be subject to all the
restrictions and liabilities of a Limited Partner under this Agreement.
(c) Amendment of Exhibit A. Upon the admission of a Substituted
Limited Partner, the General Partner shall amend Exhibit A to reflect the name,
address, number of Partnership Units, and Percentage Interest of such
Substituted Limited Partner and to eliminate or adjust, if necessary, the name,
address and interest of the predecessor of such Substituted Limited Partner.
11.5 Assignees. If the General Partner, in its sole and absolute
discretion, does not consent to the admission of any permitted transferee under
Section 11.4 as a Substituted Limited Partner, such transferee shall be
considered an Assignee for purposes of this Agreement. An Assignee shall be
entitled to all the rights of an assignee of a limited partnership interest
under the Act, including the right to receive distributions from the Partnership
and the share of Profit, Loss, and gain attributable to the Partnership Units
assigned to such transferee, but shall not be deemed to be an owner of
Partnership Units for any other purpose under this Agreement, and shall not be
entitled to vote such Partnership Units in any matter presented to the Limited
Partners for a vote (such vote remaining with the transferor Limited Partner).
If any such transferee desires to make a further assignment of any such
Partnership Units, such transferee shall be subject to all the provisions of
this Article 11 to the same extent and in the same manner as any Limited Partner
desiring to make an assignment of Partnership Units.
11.6 General Provisions.
(a) Withdrawal of Limited Partner. No Limited Partner may withdraw
from the Partnership other than as a result of a permitted transfer of all of
such Limited Partner's Partnership Units in accordance with this Article 11 or
pursuant to a redemption of all of its Partnership Units upon exercise of the
Redemption Right.
(b) Transfer of All Partnership Units by Limited Partner. Any
Limited Partner who shall transfer all of its Partnership Units in a transfer
permitted pursuant to this Article 11 or pursuant to the Redemption Right shall
cease to be a Limited Partner, except as otherwise provided in Section 11.5.
(c) Timing of Transfers. Transfers pursuant to this Article 11 may
only be made on the first day of a fiscal quarter of the Partnership, unless the
General Partner otherwise agrees.
12. ADMISSION OF PARTNERS
12.1 Admission of Successor General Partner. A successor to all of the
General Partner's General Partnership Interest pursuant to Section 8.7 who is
proposed to be admitted as a successor General Partner shall be admitted to the
Partnership as the General Partner, effective upon such transfer, provided that,
in the case of transactions other than those described in Section 8.7(c),
Limited Partners representing a majority of the Percentage Interests (including
Limited Partnership Interests held by the General Partner) vote to admit such
person as successor General Partner, which votes shall be cast by such Limited
Partners in their sole and absolute discretion. Provided such vote of the
Limited Partners is obtained, any such transferee shall carry on the business of
the Partnership without dissolution. In each case, the admission shall be
subject to the successor General Partner executing and delivering to the
Partnership an acceptance of all of the terms and conditions of this Agreement
and such other documents or instruments as may be required to effect the
admission.
12.2 Admission of Additional Limited Partners.
(a) General. A Person who makes a capital contribution to the
Partnership in accordance with this Agreement or who exercises an option to
receive Partnership Units shall be admitted to the Partnership as an Additional
Limited Partner only upon furnishing to the General Partner (a) evidence of
acceptance in form satisfactory to the General Partner of all of the terms and
conditions of this Agreement, including, without limitation, the power of
attorney granted in Article 16 and (b) such other documents or instruments as
may be required in the discretion of the General Partner in order to effect such
Person's admission as an Additional Limited Partner.
(b) Consent of General Partner Required. Notwithstanding anything to
the contrary in this Section 12.2, no Person shall be admitted as an Additional
Limited Partner without the consent of the General Partner, which consent may be
given or withheld in the General Partner's sole and absolute discretion. The
admission of any Person as an Additional Limited Partner shall become effective
on the date upon which the name of such Person is recorded on the books and
records of the Partnership, following the consent of the General Partner to such
admission.
12.3 Amendment of Agreement and Certificate. For the admission to the
Partnership of any Partner, the General Partner shall take all steps necessary
and appropriate under the Act to amend the records of the Partnership and, if
necessary, to prepare as soon as practical an amendment of this Agreement
(including an amendment of Exhibit A) and, if required by law, shall prepare and
file an amendment to the Certificate and may for this purpose exercise the power
of attorney granted pursuant to Article 16.
13. DISSOLUTION AND LIQUIDATION
13.1 Dissolution. The Partnership shall not be dissolved by the
admission of Substituted Limited Partners or Additional Limited Partners or by
the admission of a successor General Partner in accordance with the terms of
this Agreement. The Partnership shall dissolve, and its affairs shall be wound
up, upon the first to occur of any of the following ("Events of Dissolution"):
(a) the expiration of the Partnership's term as provided in Section
2.4;
(b) an event of withdrawal of the General Partner, as defined in the
Act, unless, within 90 days after the withdrawal, remaining Partners holding a
majority of the Units agree in writing to continue the business of the
Partnership and to the appointment, effective as of the date of withdrawal, of a
substitute General Partner;
(c) from and after the date of this Agreement through December 31,
2056, an election to dissolve the Partnership made by the General Partner with
the consent of the holders of a majority of the Percentage Interests (including
Limited Partnership Interests held by the General Partner), and on or after
January 1, 2056, an election to dissolve the Partnership made by the General
Partner, in its sole and absolute discretion;
(d) entry of a decree of judicial dissolution of the Partnership
pursuant to the provisions of the Act;
(e) the sale of all or substantially all of the assets and
properties of the Partnership;
(f) the merger or other combination of the Partnership with or into
another entity; or
(g) the General Partner --
(1) makes an assignment for the benefit of creditors;
(2) files a voluntary petition in bankruptcy;
(3) is adjudged a bankrupt or insolvent, or has entered against
it an order for relief in any bankruptcy or insolvency proceeding;
(4) files a petition or answer seeking for itself any
reorganization, arrangements, composition, readjustment, liquidation,
dissolution or similar relief under any statute, law or regulation;
(5) files an answer or other pleading admitting or failing to
contest the material allegations of a petition filed against it in any
proceeding of this nature; or
(6) seeks, consents to or acquiesces in the appointment of a
trustee, receiver or liquidator of the General Partner or of all or any
substantial part of its properties.
13.2 Winding Up.
(a) General. Upon the occurrence of an Event of Dissolution, the
Partnership shall continue solely for the purposes of winding up its affairs in
an orderly manner, liquidating its assets, and satisfying the claims of its
creditors and Partners. No Partner shall take any action that is inconsistent
with, or not necessary to or appropriate for, the winding up of the
Partnership's business and affairs. The General Partner (or, in the event there
is no remaining General Partner, any Person elected by a majority in interest of
the Limited Partners (the "Liquidator")) shall be responsible for overseeing the
winding up and dissolution of the Partnership and shall take full account of the
Partnership's liabilities and property and the Partnership property shall be
liquidated as promptly as is consistent with obtaining the fair value of the
property, and the proceeds shall be applied and distributed in the following
order:
(1) First, to the payment and discharge of all of the
Partnership's debts and liabilities to creditors other than the Partners;
(2) Second, to the payment and discharge of or provision for all
of the Partnership's debts and liabilities to the General Partner;
(3) Third, to the payment and discharge of all of the
Partnership's debt and liabilities to the other Partners, pro rata in
accordance with amounts owed to each such Partner; and
(4) The balance, if any, to the General Partner and Limited
Partners in accordance with their Capital Accounts, after giving effect to
all contributions, distributions, and allocations for all periods.
The General Partner shall not receive any additional compensation
for any services performed pursuant to this Article 13, other than reimbursement
of its expenses.
(b) Where Immediate Sale of Partnership's Assets Impractical.
Notwithstanding the provisions of Section 13.2(a) that require liquidation of
the assets of the Partnership, but subject to the order of priorities set forth
in that provision, if prior to or upon dissolution of the Partnership the
Liquidator determines that an immediate sale of part or all of the Partnership's
assets would be impractical or would cause undue loss to the Partners, the
Liquidator may, in its sole and absolute discretion, defer for a reasonable time
the liquidation of any assets except those necessary to satisfy liabilities of
the Partnership (including to those Partners as creditors) or, with the consent
of the Partners holding a majority of the Partnership Units, distribute to the
Partners, in lieu of cash, as tenants in common and in accordance with the
provisions of Section 13.2(a), undivided interests in such Partnership assets as
the Liquidator deems not suitable for liquidation. Any such distributions in
kind shall be made only if, in the good faith judgment of the Liquidator, such
distributions in kind are in the best interest of the Partners, and shall be
subject to such conditions relating to the disposition and management of such
properties as the Liquidator deems reasonable and equitable and to any
agreements governing the operation of such properties at such time. The
Liquidator shall determine the fair market value of any property distributed in
kind using such reasonable method of valuation as it may adopt.
13.3 Liquidation. Subject to Section 13.4, in the event the Partnership
is "liquidated" within the meaning of Regulations Section 1.704-1(b)(2)(ii)(g),
distributions shall be made pursuant to this Article 13 to the General Partner
and Limited Partners who have positive Capital Accounts in compliance with
Regulations Section 1.704-1(b)(2)(ii)(b)(2) (including any timing requirements
of those provisions). In the discretion of the General Partner, a pro rata
portion of the distributions that would otherwise be made to the General Partner
and Limited Partners pursuant to this Article 13 may be: (a) distributed to a
liquidating trust established for the benefit of the General Partner and Limited
Partners for the purpose of liquidating Partnership assets, collecting amounts
owed to the Partnership, and paying any contingent or unforeseen liabilities or
obligations of the Partnership or of the General Partner arising out of or in
connection with the Partnership (the assets of any such trust shall be
distributed to the General Partner and Limited Partners from time to time, in
the reasonable discretion of the General Partner, in the same proportions as the
amount distributed to such trust by the Partnership would otherwise have been
distributed to the General Partner and Limited Partners pursuant to this
Agreement); or (b) withheld to provide a reasonable reserve for Partnership
liabilities (contingent or otherwise) and to reflect the unrealized portion of
any installment obligations owed to the Partnership, provided that such withheld
amounts shall be distributed to the General Partner and Limited Partners as soon
as practicable.
13.4 Deemed Distribution and Recontribution. Notwithstanding any other
provision of this Article 13, in the event the Partnership is liquidated within
the meaning of Regulations Section 1.704-1(b)(2)(ii)(g) but no Event of
Dissolution has occurred, the Partnership's property shall not be liquidated,
the Partnership's liabilities shall not be paid or discharged, and the
Partnership's affairs shall not be wound up.
13.5 Rights of Limited Partners. Except as specifically provided in this
Agreement, each Limited Partner shall look solely to the assets of the
Partnership for the return of its capital contribution and shall have no right
or power to demand or receive property other than cash from the Partnership.
Except as specifically provided in this Agreement, no Limited Partner shall have
priority over any other Limited Partner as to the return of its capital
contributions, distributions, or allocations.
13.6 Notice of Dissolution. If an Event of Dissolution or an event
occurs that would, but for provisions of Section 13.1, result in a dissolution
of the Partnership, the General Partner shall, within 30 days of the event,
provide written notice of the event to each of the Partners and to all other
parties with whom the Partnership regularly conducts business (as determined in
the sole and absolute discretion of the General Partner) and shall publish
notice of the event in a newspaper of general circulation in each place in which
the Partnership regularly conducts business (as determined in the sole and
absolute discretion of the General Partner).
13.7 Cancellation of Certificate of Limited Partnership. Upon the
completion of the liquidation of the Partnership as provided in Section 13.2,
the Partnership shall be terminated and the Certificate and all qualifications
of the Partnership as a foreign limited partnership in jurisdictions other than
the State of California shall be canceled and such other actions as may be
necessary to terminate the Partnership shall be taken.
13.8 Reasonable Time for Winding-Up. A reasonable time shall be allowed
for the orderly winding-up of the business and affairs of the Partnership and
the liquidation of its assets pursuant to Section 13.2, in order to minimize any
losses otherwise attendant upon such winding-up, and the provisions of this
Agreement shall remain in effect between the Partners during the period of
liquidation.
14. AMENDMENT OF PARTNERSHIP AGREEMENT; MEETINGS
14.1 Amendments.
(a) General. Amendments to this Agreement may be proposed by the
General Partner or by any Limited Partners holding 25 percent or more of the
Partnership Units. Following such proposal, the General Partner shall submit any
proposed amendment to the Limited Partners. The General Partner shall seek the
written vote of the Partners on the proposed amendment or shall call a meeting
to vote on the proposal and to transact any other business that it may deem
appropriate. For purposes of obtaining a written vote, the General Partner may
establish a Partnership Record Date and require a response within a reasonable
specified time, but not less than 15 days, and failure to respond in such time
period shall constitute a vote that is consistent with the General Partner's
recommendation with respect to the proposal. Except as provided in Section
14.1(b) or 14.1(c), a proposed amendment shall be adopted and be effective as an
amendment to this Agreement if it is approved by the General Partner and it
receives the consent of a majority of the Partnership Units held by the Limited
Partners (including Partnership Units held by the General Partner in its
capacity as a Limited Partner).
(b) General Partner's Power to Amend. Notwithstanding Section
14.1(a), the General Partner shall have the power, without the consent of the
Limited Partners, to amend this Agreement as may be required to facilitate or
implement any of the following purposes:
(1) to add to the obligations of the General Partner or
surrender any right or power granted to the General Partner or any Affiliate
of the General Partner for the benefit of the Limited Partners;
(2) to reflect the admission, substitution, termination, or
withdrawal of Partners in accordance with this Agreement;
(3) to set forth the rights, powers, duties, and preferences of
the holders of any additional Partnership Interests issued pursuant to
Section 4.2(b);
(4) to reflect a change that does not adversely affect the
Limited Partners in any material respect, or to cure any ambiguity, correct
or supplement any provision in this Agreement not inconsistent with law or
with other provisions, or make other changes with respect to matters arising
under this Agreement that will not be inconsistent with law or with the
provisions of this Agreement;
(5) to satisfy any requirements, conditions, or guidelines
contained in any order, directive, opinion, ruling or regulation of a
federal or state agency or contained in federal or state law; and
(6) to reflect such changes as are reasonably necessary for the
General Partner to maintain its status as a REIT.
The General Partner will notify the Limited Partners when any
material action under this Section 14.1(b) is taken in the next regular
communication to the Limited Partners.
(c) Consent of Adversely Affected Partner Required. Notwithstanding
Section 14.1(a), this Agreement shall not be amended without the consent of each
Partner adversely affected if such amendment would:
(1) convert a Limited Partner's interest in the Partnership into
a general partner's interest,
(2) modify the limited liability of a Limited Partner,
(3) alter rights of the Partner to receive distributions
pursuant to Article 5, or the allocations specified in Article 6 (except as
permitted pursuant to Section 4.2 and Section 14.1(b)(3)),
(4) alter or modify the Redemption Right or the Redemption
Amount as set forth in Section 8.6 and related definitions,
(5) cause the termination of the Partnership prior to the time
set forth in Sections 2.5 or 13.1,
(6) affect the operation of the Unit Adjustment Factor in a
manner adverse to the Limited Partners,
(7) impose on the Limited Partners any obligation to make
additional capital contributions to the Partnership, or
(8) amend this Section 14.1(c).
Further, no amendment may alter the restrictions of the General Partner's
authority set forth in Section 7.2 without the consent specified in that
Section.
14.2 Meetings of the Partners.
(a) General. Meetings of the Partners may be called by the General
Partner and shall be called upon the receipt by the General Partner of a written
request by Limited Partners holding 25 percent or more of the Partnership Units.
The call shall state the nature of the business to be transacted. Notice of any
such meeting shall be given to all Partners not less than seven days nor more
than 30 days prior to the date of such meeting. Partners may vote in person or
by proxy at such meeting. Whenever the vote or consent of Partners is permitted
or required under this Agreement, such vote or consent may be given at a meeting
of Partners or may be given in accordance with the procedure prescribed in
Section 14.1. Except as otherwise expressly provided in this Agreement, the
consent of holders of a majority of the Percentage Interests (including Limited
Partnership Interests held by the General Partner) shall control.
(b) Action By Written Consent. Any action required or permitted to
be taken at a meeting of the Partners may be taken without a meeting if a
written consent setting forth the action so taken is signed by a majority of the
Percentage Interests of the Partners (or such other percentage as is expressly
required by this Agreement for such action to be taken at a meeting). Such
consent may be in one instrument or in several instruments, and shall have the
same force and effect as a vote of a majority of the Percentage Interests of the
Partners (or such other percentage as is expressly required by this Agreement
for such action to be taken at a meeting). Such consent shall be filed with the
General Partner. An action so taken shall be deemed to have been taken at a
meeting held on the effective date so certified.
(c) Proxies. Each Limited Partner may authorize any Person or
Persons to act for him by proxy on all matters in which a Limited Partner is
entitled to participate, including waiving notice of any meeting, or voting or
participating at a meeting. Every proxy must be signed by the Limited Partner or
its attorney-in-fact. No proxy shall be valid after the expiration of 11 months
from the date of the proxy unless otherwise provided in the proxy. Every proxy
shall, unless otherwise specifically provided in the proxy, be revocable at the
pleasure of the Limited Partner executing it.
(d) Conduct of Meeting. Each meeting of Partners shall be conducted
by the General Partner or such other Person as the General Partner may appoint
pursuant to such rules for the conduct of the meeting as the General Partner or
such other Person deems appropriate, including establishment of a Partnership
Record Date for such meeting.
15. GENERAL PROVISIONS
15.1 Addresses and Notice. All notices and demands under this Agreement
shall be in writing, and may be either delivered personally (which shall include
deliveries by courier) by telefax, telex or other wire transmission (with
request for evidence of receipt in a manner appropriate with respect to
communications of that type, provided that a confirmation copy is concurrently
sent by a nationally recognized express courier for overnight delivery) or
mailed, postage prepaid, by certified or registered mail, return receipt
requested, directed to the parties at their respective addresses set forth on
Exhibit A, as it may be amended from time to time, and, if to the Partnership,
such notices and demands sent in the foregoing manner must be delivered at its
principal place of business set forth above. Notices delivered personally or by
telefax, telex or other wire transmission shall be effective on the first
Business Day following the date of delivery or transmission. Notices that are
mailed shall be deemed to have been received three (3) Business Days following
the date so mailed. Any party may designate a different address to which notices
and demands shall subsequently be directed by written notice given in the same
manner and directed to the Partnership at its office.
15.2 Titles and Captions. All article or Section titles or captions in
this Agreement are for convenience only. They shall not be deemed part of this
Agreement and in no way define, limit, extend or describe the scope or intent of
any provisions of this Agreement. Except as specifically provided otherwise,
references to "Articles" and "Sections" are to Articles and Sections of this
Agreement.
15.3 Pronouns and Plurals. Whenever the context may require, any pronoun
used in this Agreement shall include the corresponding masculine, feminine or
neuter forms, and the singular form of nouns, pronouns and verbs shall include
the plural and vice versa.
15.4 Further Action. The parties shall execute and deliver all
documents, provide all information and take or refrain from taking action as may
be necessary or appropriate to achieve the purposes of this Agreement.
15.5 Binding Effect. This Agreement shall be binding upon and inure to
the benefit of the parties and their heirs, executors, administrators,
successors, legal representatives and permitted assigns.
15.6 Waiver of Partition. The Partners agree that the Partnership
properties are not and will not be suitable for partition. Accordingly, each of
the Partners irrevocably waives any and all rights (if any) that it may have to
maintain any action for partition of any of the Partnership properties.
15.7 Entire Agreement. This Agreement constitutes the entire agreement
among the parties with respect to the matters contained in this Agreement; it
supersedes any prior agreements or understandings among them and it may not be
modified or amended in any manner other than pursuant to Article 14.
15.8 Securities Law Provisions. The Partnership Units have not been
registered under the federal or state securities laws of any state and,
therefore, may not be resold unless appropriate federal and state securities
laws, as well as the provisions of Article 11, have been complied with.
15.9 Remedies Not Exclusive. Any remedies contained in this Agreement
for breaches of obligations under this Agreement shall not be deemed to be
exclusive and shall not impair the right of any party to exercise any other
right or remedy, whether for damages, injunction or otherwise.
15.10 Time. Time is of the essence of this Agreement.
15.11 Creditors. None of the provisions of this Agreement shall be for
the benefit of, or shall be enforceable by, any creditor of the Partnership.
15.12 Waiver. No failure by any party to insist upon the strict
performance of any covenant, duty, agreement or condition of this Agreement or
to exercise any right or remedy consequent upon a breach of this Agreement shall
constitute waiver of any such breach or any other covenant, duty, agreement or
condition.
15.13 Execution Counterparts. This Agreement may be executed in
counterparts, all of which together shall constitute one agreement binding on
all the parties to this Agreement, notwithstanding that all such parties are not
signatories to the original or the same counterpart. Each party shall become
bound by this Agreement immediately upon affixing its signature to this
Agreement.
15.14 Applicable Law. This Agreement shall be construed in accordance
with and governed by the laws (other than the law governing the choice of law)
of the State of California, without regard to the principles of conflicts of
law. In the event of a conflict between any provision of this Agreement and any
nonmandatory provision of the Act, the provisions of this Agreement shall
control and take precedence.
15.15 Invalidity of Provisions. If any provision of this Agreement is or
becomes invalid, illegal or unenforceable in any respect, the validity, legality
and enforceability of the remaining provisions contained in this Agreement shall
not be affected.
15.16 No Third-Party Rights Created. The provisions of this Agreement
are solely for the purpose of defining the interests of the Partners, inter se;
and no other person, firm or entity (i.e., a party who is not a signatory to
this Agreement or a permitted successor to such a signatory) shall have any
right, power, title or interest by way of subrogation or otherwise, in and to
the rights, powers, title and provisions of this Agreement.
16. POWER OF ATTORNEY
16.1 Power of Attorney.
(a) Scope. Each Limited Partner and each Assignee constitutes and
appoints the General Partner, any Liquidator, and authorized officers and
attorneys-in-fact of each, and each of those acting singly, in each case with
full power of substitution, as its true and lawful agent and attorney-in-fact,
with full power and authority in its name, place and stead to:
(1) execute, swear to, acknowledge, deliver, file and record in
the appropriate public offices
(i) all certificates, documents and other instruments
(including, without limitation, this Agreement and the Certificate and
all amendments or restatements of the Agreement or the Certificate) that
the General Partner or the Liquidator deems appropriate or necessary to
form, qualify or continue the existence or qualification of the
Partnership as a limited partnership (or a partnership in which the
limited partners have limited liability) in the State of California and
in all other jurisdictions in which the Partnership may conduct business
or own property;
(ii) all instruments that the General Partner deems
appropriate or necessary to reflect any amendment, change, modification
or restatement of this Agreement in accordance with its terms;
(iii) all conveyances and other instruments or documents
that the General Partner deems appropriate or necessary to reflect the
dissolution and liquidation of the Partnership pursuant to the terms of
this Agreement, including, without limitation, a certificate of
cancellation;
(iv) all instruments relating to the admission, withdrawal,
removal or substitution of any Partner pursuant to, or other events
described in, Articles 11, 12 or 13 or the capital contribution of any
Partner; and
(v) all certificates, documents and other instruments
relating to the determination of the rights, preferences and privileges
of Partnership Interests; and
(2) execute, swear to, acknowledge and file all ballots,
consents, approvals, waivers, certificates and other instruments appropriate
or necessary, in the sole and absolute discretion of the General Partner, to
make, evidence, give, confirm or ratify any vote, consent, approval,
agreement or other action that is made or given by the Partners under this
Agreement or is consistent with the terms of this Agreement or appropriate
or necessary, in the sole discretion of the General Partner, to effectuate
the terms or intent of this Agreement.
Nothing contained in this Agreement shall be construed as
authorizing the General Partner to amend this Agreement except in accordance
with Article 14 or as may be otherwise expressly provided for in this Agreement.
(b) Irrevocability. The foregoing power of attorney is declared to
be irrevocable and a power coupled with an interest, in recognition of the fact
that each of the Partners will be relying upon the power of the General Partner
to act as contemplated by this Agreement in any filing or other action by it on
behalf of the Partnership, and it shall survive and not be affected by the
subsequent Incapacity of any Limited Partner or Assignee and the transfer of all
or any portion of such Limited Partner's or Assignee's Partnership Units and
shall extend to such Limited Partner's or Assignee's heirs, successors, assigns
and personal representatives. Each such Limited Partner or Assignee agrees to be
bound by any representation made by the General Partner, acting in good faith
pursuant to such power of attorney; and each such Limited Partner or Assignee
waives any and all defenses that may be available to contest, negate or
disaffirm the action of the General Partner, taken in good faith under such
power of attorney. Each Limited Partner or Assignee shall execute and deliver to
the General Partner or the Liquidator, within 15 days after receipt of the
General Partner's request, such further designation, powers of attorney and
other instruments as the General Partner or the Liquidator, as the case may be,
deems necessary to effectuate this Agreement and the purposes of the
Partnership.
<PAGE>
The parties have signed this Agreement as of the date specified in the
introductory paragraph of this Agreement.
GENERAL PARTNER:
PS BUSINESS PARKS, INC.,
a California corporation
By: s/ Ronald L. Havner, Jr.
-------------------------------------
Ronald L. Havner, Jr., President and
Chief Executive Officer
LIMITED PARTNERS:
All of those Limited Partners set forth on
Exhibit A
By: PS BUSINESS PARKS, INC.,
a California corporation, their
attorney-in-fact
By: s/ Ronald L. Havner, Jr.
--------------------------------
Ronald L. Havner, Jr., President
and Chief Executive Officer
Exhibit 10.2
REGISTRATION RIGHTS AGREEMENT
THIS REGISTRATION RIGHTS AGREEMENT (this "Agreement") is made and
entered into as of March 17, 1998 by and between PS BUSINESS PARKS, INC., a
California corporation (the "Company"), and ACQUIPORT TWO CORPORATION, a
Delaware corporation (the "Holder").
RECITALS
A. The Holder is currently the owner of 5,289,765 shares of common stock
in the Company (the "Holder's Shares"). Pursuant to certain documents executed
in connection with Holder's acquisition of Holder's Shares, Holder obtained
certain rights to acquire additional securities of the Company. Any such
additional securities of the Company acquired by Holder pursuant to such rights
are sometimes referred to herein as the "Additional Securities".
B. Company and Holder wish to provide in this Agreement for the rights,
duties and obligations of the parties with respect to the registration of the
Holder's Shares, any Additional Securities issued to the Holder and any
securities of the Company that may be issued or distributed with respect to, in
exchange or substitution for, or upon conversion of such Holder's Shares or
Additional Securities, or on account of such Holder's Shares or Additional
Securities as a result of any stock dividend, stock split, reverse split or
other distribution, merger, combination, consolidation, recapitalization or
reclassification or otherwise (collectively, "Registrable Shares").
AGREEMENT
NOW, THEREFORE, in consideration of the foregoing, the mutual covenants
and agreements hereinafter set forth, and other good and valuable consideration,
the receipt and sufficiency of which are hereby acknowledged, the parties hereto
agree as follows:
1. Shelf Registration Statements.
Not later than the first anniversary of the date of this Agreement (or
forty-five (45) days prior to the first anniversary of the date of this
Agreement if the Company is then eligible to file Form S-3 or a successor form),
the Company shall cause to be filed with the Securities and Exchange Commission
(the "SEC") a registration statement, including a prospectus and related
materials (the "Shelf Registration Statement"), in compliance with applicable
SEC rules pursuant to which all Registrable Shares are registered under the
Securities Act of 1933, as amended (the "Securities Act") for offerings to be
made on a continuous, periodic or delayed basis, and, to the extent Holder is
deemed to be an "affiliate" of the Company, pursuant to which resales of such
Registrable Shares may be made. The Company shall use reasonable efforts to
cause the Shelf Registration Statement to be declared effective by the SEC by
the first anniversary of the date of this Agreement, and shall use reasonable
efforts to keep the Shelf Registration Statement effective, including, without
limitation, the preparation and filing of any amendments and supplements
necessary for that purpose.
2. Back-up Registration Rights.
If, despite the reasonable efforts of the Company, the Shelf
Registration Statement, any "Additional Registration Statement" (as hereinafter
defined), or any "New Registration Statement" (as hereinafter defined) ceases to
be effective for any reason, then the Company will cause to be filed with the
SEC as soon as reasonably practicable thereafter a new registration statement,
prospectus and related materials (a "New Registration Statement") that complies
with applicable SEC rules providing for the registration and, to the extent
Holder is deemed to be an "affiliate" of the Company, resale, by the Holder of
the Registrable Shares or Additional Securities, as applicable, on a continuous,
periodic or delayed basis. The Company shall use reasonable efforts to cause
each New Registration Statement to be declared effective by the SEC as soon as
practicable, and shall use reasonable efforts to keep each New Registration
Statement effective, including, without limitation, the preparation and filing
of any amendments and supplements necessary for that purpose.
3. Additional Registration Rights.
If Additional Securities are issued to the Holder, then the Company will
cause to be filed with the SEC, as soon as practicable after each issuance of
such Additional Securities, a registration statement, prospectus and related
materials (an "Additional Registration Statement") that complies with applicable
SEC rules pursuant to which the Additional Securities will be registered under
the Securities Act for offerings to be made on a continuous, periodic or delayed
basis and, to the extent Holder is deemed to be an affiliate of the Company,
resales of such Additional Securities may be made. The Company shall use
reasonable efforts to cause each such Additional Registration Statement to be
declared effective by the SEC as soon as practicable, and shall use reasonable
efforts to keep each Additional Registration Statement effective, including,
without limitation, the preparation and filing of any amendments and supplements
necessary for that purpose. The foregoing to the contrary notwithstanding, the
Company shall not be required to file any Additional Registration Statement
before the first anniversary of the date of this Agreement (or forty-five (45)
days prior to the first anniversary of the date of this Agreement if the Company
is then eligible to file Form S-3 or a successor form), or cause any Additional
Registration Statement to be declared effective prior to the first anniversary
of the date of this Agreement.
4. Certain Registration Procedures.
The following additional registration procedures shall apply with
respect to any Registration Statement required to be filed pursuant to Sections
1, 2 or 3 above. (As used in this Agreement, "Registration Statement" and
"Prospectus" refer to the Shelf Registration Statement and related prospectus,
any New Registration Statement and related prospectus [including any preliminary
prospectus] and any Additional Registration Statement and related prospectus,
including in each case any documents incorporated therein by reference.)
4.1 Suspension of Offering.
(a) The Company shall be entitled, from time to time, to require the
Holder not to sell under a Registration Statement if the negotiation or
consummation of a transaction by the Company or its subsidiaries is pending or
circumstances have arisen, which negotiation, consummation or circumstances
would require additional disclosure by the Company in such Registration
Statement of material information which the Company has a bona fide business
purpose for keeping confidential and the nondisclosure of which in the
Registration Statement might cause the Registration Statement to fail to comply
with applicable disclosure requirements; provided, however, that the Company may
not prohibit sales for such reason more than twice in any twelve (12) month
period, for more than thirty (30) days in one instance, or more than sixty (60)
days in the other instance, at any one time.
(b) Subject to the limitations as to frequency and duration set
forth in Section 4.1(a), upon receipt of any notice from the Company of the
happening of any event which is of a type specified in Section 4.1(a), the
Holder agrees that it will immediately discontinue offers and sales of
securities under the Registration Statement until the Holder receives copies of
a supplemented or amended Registration Statement which addresses the disclosure
issues referred to above, after which the Holder shall be free to resume
offering and selling activities. The Company agrees to promptly prepare any such
supplemented or amended Registration Statement and to use reasonable efforts to
cause such supplemented or amended Registration Statement to be declared
effective by the SEC as soon as practicable. If so directed by the Company, the
Holder will deliver to the Company all copies of any Prospectus in its
possession at the time of receipt of such notice.
4.2 Obligations of the Company with Respect to Registration
Statements. In connection with a Registration Statement and the securities to be
sold thereunder (the "Covered Securities"), the Company agrees to:
(a) furnish to the Holder such number of copies of the
Registration Statement, each amendment, post-effective amendment and supplement
thereto, the Prospectus included in the Registration Statement (including each
preliminary Prospectus) in compliance with the requirements of the Securities
Act, and such other documents as the Holder may reasonably request in order to
facilitate the disposition of the Covered Securities owned by the Holder; the
Company consents to the use of the Prospectus for the Registration Statement,
including each preliminary Prospectus, by the Holder in connection with the
offering and sale of Covered Securities;
(b) use reasonable efforts to register or qualify such Covered
Securities under such other securities or blue sky laws of such jurisdictions as
the Holder reasonably requests, and do any and all other acts and things which
may be reasonably necessary or advisable to enable the Holder to consummate the
disposition in such jurisdictions of the Covered Securities, provided that the
Company will not be required to (i) qualify generally to do business in any
jurisdiction where it would not otherwise be required to qualify but for this
subparagraph, (ii) subject itself to taxation in any jurisdiction where it would
not otherwise be subject to taxation but for this subparagraph, or (iii) consent
to general service of process in any such jurisdiction where it would not
otherwise be subject to service of process but for this subparagraph (except as
may be required by the Securities Act);
(c) cause all such Covered Securities to be listed and qualified
for trading on each securities exchange on which similar securities issued by
the Company are then listed and qualified for trading;
(d) provide a transfer agent and registrar for all such Covered
Securities not later than the effective date of the Registration Statement
applicable thereto, and thereafter maintain such a transfer agent and registrar;
and otherwise cooperate with the sellers to facilitate the timely preparation
and delivery of certificates representing Covered Securities to be sold and not
bearing any Securities Act legends;
(e) otherwise use its best efforts to comply with all applicable
rules and regulations of the SEC, and make available to its security holders, as
soon as reasonably practicable, an earnings statement covering the period of at
least twelve (12) months beginning with the first day of the Company's first
full calendar quarter after the effective date of the Registration Statement,
which earnings statement shall satisfy the provisions of Section 11(a) of the
Securities Act and Rule 158 thereunder;
(f) promptly notify the holder in writing of the issuance by the
SEC or any state securities authority of any stop order suspending the
effectiveness of a Registration Statement, or any part thereof, or of any order
suspending or preventing the use of any related Prospectus or the initiation of
any proceedings for that purpose, or if the Company receives any notification
with respect to the suspension of the qualification of any Registrable
Securities for offer or sale in any jurisdiction or the initiation of any
proceedings for that purpose;
(g) in the event of the issuance of any stop order suspending
the effectiveness of any Registration Statement, or any part thereof, or of any
order suspending or preventing the use of any related Prospectus or suspending
the qualification of any Registrable Securities for sale in any jurisdiction,
the Company will use its best efforts to promptly obtain the withdrawal of such
order;
(h) use reasonable efforts to cause the Covered Securities to be
registered with or approved by such other governmental agencies or authorities
as may be necessary by virtue of the business and operations of the Company to
enable the Holder to consummate the disposition of such Covered Securities;
(i) promptly notify the Holder, at any time when a Prospectus
relating to Covered Securities is required to be delivered under the Securities
Act, of the happening of any event as a result of which the Prospectus included
in the applicable Registration Statement (as then in effect) contains any untrue
statement of a material fact or omits to state a material fact necessary to make
the statements therein (in the case of the Prospectus and any preliminary
Prospectus, in light of the circumstances under which they were made) not
misleading when such Prospectus was delivered; the Company will, as soon as
practicable, prepare and furnish to the Holder a supplement or amendment to such
Prospectus so that, as thereafter delivered to the purchasers of such Covered
Securities, such Prospectus will not contain an untrue statement of a material
fact or omit to state any material fact necessary to make the statements
therein, in light of the circumstances under which they were made, not
misleading;
(j) prepare and file with the SEC such amendments and
supplements to each Registration Statement and the Prospectus used in connection
with such Registration Statement as may be necessary to comply with the
provisions of the Securities Act with respect to the disposition of securities
covered by such Registration Statement; and
(k) to the extent permitted by the professional standards
governing the accounting profession at the time, obtain cold comfort letters and
updates thereof from the independent public accountants of the Company (and, if
necessary, any other independent certified public accountants of any subsidiary
of the Company or of any business acquired by the Company for which financial
statements and financial data are, or are requested to be, included in the
Registration Statement) addressed to the Holder in customary form and covering
such matters of the type customarily covered by cold comfort letters.
4.3 Obligations of Holder with Respect to Registration Statements.
The Holder agrees to provide promptly following any written request therefor,
any information reasonably requested by the Company in connection with the
preparation of and for inclusion in the Registration Statement (including,
without limitation, if applicable, information regarding the proposed
distribution by the Holder of the Covered Securities).
4.4 Review of Registration Statements. No Registration Statement,
Prospectus or related materials, and no supplement or amendment to any
Registration Statement, Prospectus or related materials shall be filed unless
and until all of the following conditions have been satisfied; provided,
however, that, by implementing the following conditions, the Holder shall not be
deemed to have made any representation or warranty of any kind or nature
whatsoever with respect to any matter set forth, contained or addressed in such
Registration Statement, Prospectus or related materials, including but not
limited to the accuracy, adequacy or completeness thereof:
(a) A complete and accurate copy of each Registration Statement,
Prospectus and all related material, and of each proposed supplement or
amendment to any Registration Statement, Prospectus or related materials (all
individually and collectively referred to herein as "Filing Material") shall be
provided to each person or entity designated herein to receive the original or
copies of notices directed to Holder (each a "Notice Party") sufficiently in
advance of that proposed Filing Material being filed with the SEC or any other
federal or state agency having jurisdiction over securities offerings (a
"Filing") so as to allow the Notice Parties a reasonable opportunity to review
and comment on such proposed Filing Material prior to Filing.
(b) Promptly upon receipt of any comments or requested revisions
to any Filing Material from the SEC or any other federal or state agency
(collectively "Agency Comments"), the Company shall provide a complete and
accurate copy of the Agency Comments to each Notice Party.
(c) Promptly upon making any addition, deletion or revision to
any Filing Material not previously provided to all Notice Parties, including but
not limited to any addition, deletion or revision in response to Agency
Comments, the Company shall provide each Notice Party with a complete and
accurate copy of the revised Filing Material, with the changes highlighted
therein, sufficiently in advance of Filing any such addition, deletion or
revision so as to allow the Notice Parties a reasonable opportunity to review
and comment thereon prior to Filing.
(d) Prior to each Filing the Company shall certify to Holder in
writing that the Company, both through the devotion of the necessary time and
attention of capable Company personnel and Company resources, and through the
engagement of and collaboration with qualified legal, accounting, underwriting,
appraisal, environmental and other experts, exercised good faith and due care in
the preparation of the Filing Materials, both as to form and content.
5. Underwritten Offerings.
5.1 Demand by Holder. On or after one (1) year after the date of
this Agreement, the Company shall, at the Holder's written request, assist in an
underwritten offering of Registrable Shares by the Holder; provided, however,
that the Company shall not be obligated to comply with any such request with
respect to an offering of Registrable Shares with a gross retail value of less
than $50,000,000 unless, pursuant to Section 5.5(a), Holder was prevented from
including in an underwritten offering the entire number of Registrable Shares
initially requested by Holder to be included in such offering, in which case the
limitation set forth in this proviso shall be decreased to the lesser of
$50,000,000 or the gross retail value of the Registrable Shares Holder was
prevented from including in such offering. In connection with any such
underwritten offering, the Company agrees to:
(a) enter into such customary agreements (including underwriting
agreements in customary form) and take all such actions as the Holder or the
underwriters, if any, reasonably request in order to expedite or facilitate the
disposition of Covered Securities, including without limitation:
(i) making such representation and warranties to the
underwriters in form, substance and scope reasonably satisfactory to the
managing underwriter, as are customarily made by issuers to underwriters in
primary underwritten offerings;
(ii) obtaining opinions and updates thereof of counsel which
counsel and opinions (in form, scope and substance) shall be reasonably
satisfactory to the managing underwriter, addressed to the underwriters covering
the matters customarily covered in opinions requested in underwritten offerings
and such other matters as may be reasonably requested by the managing
underwriter;
(iii) causing the underwriting agreement to set forth in
full the indemnification provisions and procedures of Section 7 (or such other
substantially similar provisions and procedures as the managing underwriter
shall reasonably request) with respect to all parties to be indemnified pursuant
to said Section; and
(iv) delivering such documents and certificates as may be
reasonably requested by the Holder to evidence compliance with the provisions of
this Section 5.1 and with any customary conditions contained in the underwriting
agreement or other agreement entered into by the Company;
(b) upon receipt by the Company of reasonable confidentiality
agreements, make available for inspection by any underwriter participating in
any disposition pursuant to a Registration Statement and any attorney,
accountant or other agent retained by any such underwriter, all financial and
other records, pertinent corporate documents and properties of the Company, and
cause the Company's officers, directors, employees and independent accountants
to be available on a reasonable basis and cooperate with such parties' "due
diligence" and to supply all information reasonably requested by any such
underwriter, attorney, accountant or agent in connection with such Registration
Statement;
(c) make available appropriate management personnel of the
Company for participation in the preparation and drafting of Registration
Statements, for "due diligence" meetings, for "road shows", and for other
meetings and conference calls with investment bankers and their prospective
investors;
(d) provide written materials customarily made available to
underwriters in underwritten offerings; and
(e) to the extent permitted by the professional standards
governing the accounting profession at the time, obtain cold comfort letters and
updates thereof from the independent certified public accountants of the Company
(and, if necessary, any other independent certified public accountants of any
subsidiary of the Company or of any business acquired by the Company for which
financial statements and financial data are, or are requested to be, included in
any Registration Statement), addressed to the underwriter(s) and Holder, such
letters to be in customary form and covering matters of the type customarily
covered in cold comfort letters in connection with underwritten offerings.
5.2 Selection of Underwriters by Holder. In the case of an
underwritten offering requested by Holder pursuant to Section 5.1, the Holder
shall have the right to approve the investment banker(s), and/or manager(s),
selected by the Company to administer the offering, including the brokerage
and/or selling commissions to be charged, which approval shall not be
unreasonably withheld or delayed. Attached hereto as Exhibit A is a list of
investment bankers and managers which shall be deemed approved by the Holder.
5.3 Limitations on Demands. The Company shall not be obligated to
assist with an underwritten offering requested by Holder pursuant to Section 5.1
more than once in any twelve (12) month period, or more than twice in total;
provided, however, that any underwritten offering in which Holder is prevented
by Section 5.5(a) from including in such offering the entire number of
Registrable Shares initially requested by Holder to be included in such offering
shall not be counted for purposes of this Section 5.3.
5.4 Holder Participation in Company Offering. If the Company
proposes to execute or participate in an underwritten offering of any of the
Company's stock or other securities, whether upon the Company's own initiative
or at the request or demand of any other person, the Company shall promptly give
Holder written notice of such proposed offering. Upon the written request of
Holder delivered to the Company within twenty (20) days from the date of the
Holder's receipt of the Company's notice, the Company shall, subject to the
provisions of Section 5.5, cause to be included in such underwritten offering
all or any portion of Holder's Registrable Shares that are identified in
Holder's written request.
5.5 Underwriting Requirements.
(a) In connection with any underwritten offering pursuant to
Section 5.1, the Company shall not be entitled to include in such underwriting
any securities not held by Holder; except that the Company shall be entitled to
include (i) some or all of the securities held by one or more of ABKB/LaSalle
Securities Limited Partnership, Cohen & Steers Capital Management, Inc., Morgan
Stanley Asset Management, Fidelity Management and Research, Stanford University,
State of Michigan Retirement Systems (collectively, the "Equity Investors")
pursuant to that certain Term Sheet with AOPP dated December 3, 1997 attached
hereto (the "Term Sheet") and (ii) some or all of the securities held by the
parties listed on Exhibit B as a result of their contribution of assets to AOPP
(the "Sellers"), if such Equity Investors and/or Sellers accept the terms of the
underwriting agreement with the underwriters selected pursuant to Section 5.2,
and then only to the extent such securities are securities of the Company or
securities convertible into or exchangeable or exercisable for securities of the
Company and such securities were issued pursuant to the Term Sheet. If the total
amount of securities, including the Holder's Registrable Shares and such
securities of the Equity Investors and/or Sellers, to be included in such
offering exceeds the amount of securities that the underwriters determine in
their sole discretion is compatible with the success of the offering, then the
Company shall be entitled to include in the offering only that number of
securities of Holder, the Equity Investors and/or Sellers which the underwriters
determine in their sole discretion will not jeopardize the success of the
offering, with the securities so included to be apportioned pro rata among the
Holder, the Equity Investors and the Sellers in proportion to the total amount
of securities initially requested by each of them to be included in such
offering.
(b) In connection with any underwritten offering pursuant to
Section 5.4, the Company shall not be required to include any of the Holders'
Registrable Shares in such underwriting unless Holder accepts the terms of the
underwriting agreement between the Company and the underwriters selected by the
Company. If the total amount of securities, including the Holder's Registrable
Shares, to be included in such offering exceeds the amount of securities that
the underwriters determine in their sole discretion is compatible with the
success of the offering, then the Company shall be required to include in the
offering only that number of such securities, including the Holder's Registrable
Shares, which the underwriters determine in their sole discretion will not
jeopardize the success of the offering, with the securities so included to be
apportioned pro rata among the Company, the Holder and all other selling
stockholders in proportion to the total amount of securities initially requested
by each of them to be included in such offering.
6. Term of Agreement.
(a) The Company shall be relieved of its duties under Sections 1, 2,
and 3 of this Agreement upon the earlier to occur of (a) the date on which the
Holder no longer holds any Registrable Shares or any rights to acquire
Registrable Shares, pursuant to any preemptive rights, rights of first refusal,
rights of first offer or otherwise; and (b) the date on which all of the
following conditions are satisfied: (i) Holder's "fully diluted" (as hereinafter
defined) ownership interest in the Company and all other entities in which the
Company owns any direct or indirect interest is less than five percent (5%);
(ii) Holder no longer has the right under that certain Agreement Among
Shareholders and Company to require PSA to vote for the director designated by
Acquiport Two Corporation; and (iii) the Company delivers to Holder its
certificate, and counsel to the Company reasonably acceptable to Holder issues
to Holder an unqualified, unconditional legal opinion, that (A) Holder is not
and has not been an "affiliate" (as defined in Rule 144 under the Securities
Act) of the Company for the preceding three (3) months; (B) at least two (2)
years has elapsed since the date the Holder's Registrable Securities were
acquired by Holder from the Company (applying the rules of paragraph (d) of said
Rule 144); and (C) the Holder's Registrable Shares may then be freely sold,
resold, traded, offered or distributed, whether under Rule 144(k) under the
Securities Act or otherwise, to the same extent as would be permitted had the
Registration Statement and Prospectus remained on file and in full force and
effect. As used herein, "fully diluted" shall mean, with respect to Holder's
ownership interest in the Company, and all other entities in which the Company
owns any direct or indirect interest, a fraction, expressed as a percentage if
so indicated, the numerator of which is the number of shares of common stock in
the Company which Holder would hold if all securities convertible into or
exercisable or exchangeable for common stock in the Company held by Holder were
converted into or exercised or exchanged for common stock in the Company, and
the denominator of which is the total number of shares of common stock in the
Company which would be outstanding if all securities convertible into or
exercisable or exchangeable for common stock in the Company were converted into
or exercised or exchanged for common stock in the Company.
(b) The Company shall be relieved of its duties under Section 5.4 of
this Agreement when the gross retail value of Registrable Shares held by Holder
is less than Twenty Five Million Dollars ($25,000,000).
7. Indemnification; Contribution.
7.1 Indemnification by the Company. The Company agrees to indemnify,
defend and hold harmless the Holder (and each nominee or assignee of the Holder
permitted pursuant to Section 8.5) and each person, if any, who controls the
Holder within the meaning of Section 15 of the Securities Act or Section 20 of
the Securities Exchange Act of 1934, as amended (the "Exchange Act"), as
follows:
(a) against any and all loss, liability, claim, damage and
expense whatsoever (including fees and disbursements of counsel), arising out of
or based upon any untrue statement or alleged untrue statement of a material
fact contained in any Registration Statement (or any amendment thereto) pursuant
to which securities held by the Holder were registered under the Securities Act,
including all documents incorporated therein by reference, or the omission or
alleged omission therefrom of a material fact required to be stated therein or
necessary to make the statements therein not misleading, or arising out of or
based upon any untrue statement or alleged untrue statement of a material fact
contained in any Prospectus (or any amendment or supplement thereto), including
all documents incorporated therein by reference, or the omission or alleged
omission therefrom of a material fact necessary in order to make the statements
therein, in the light of the circumstances under which they were made, not
misleading (collectively a "Material Misstatement"):
(b) against any and all loss, liability, claim, damage and
expense whatsoever (including fees and disbursements of counsel) to the extent
of the aggregate amount paid in settlement of any litigation, or investigation
or proceeding by any governmental agency or body, commenced or threatened, or of
any claim whatsoever arising out of or based upon any Material Misstatements or
alleged Material Misstatement, if such settlement is effected with the written
consent of the Company; and
(c) against any and all loss, liability, claim, damage and
expense whatsoever (including fees and disbursements of counsel), incurred in
investigating, preparing or defending against any litigation, investigation or
proceeding by any governmental agency or body, commenced or threatened, in each
case whether or not a party, or of any claim whatsoever arising out of or based
upon any Material Misstatement or alleged Material Misstatement, to the extent
that any such loss, liability, claim, damage or expense is not paid under
subparagraph (a) or (b) above;
provided, however, that the indemnity provided pursuant to this Section 7.1
shall not apply to any loss, liability, claim, damage or expense to the extent
arising out of any untrue statement or omission or alleged untrue statement or
omission made in reliance upon and in conformity with written information
furnished to the Company by the Holder expressly for use in the Registration
Statement (or any amendment thereto) or the Prospectus (or any amendment or
supplement thereto).
7.2 Indemnification by Holder. Holder agrees to indemnify, defend
and hold harmless the Company, and each of its directors and officers, and each
person, if any, who controls the Company within the meaning of Section 15 of the
Securities Act or Section 20 of the Exchange Act, to the same extent as the
indemnity contained in Section 7.1 hereof (except that any settlement described
in Section 7.1(b) shall be effected with the written consent of the Holder), but
only insofar as such loss, liability, claim, damage or expense arises out of or
is based upon any untrue statement or omission, or alleged untrue statement or
omission, of a material fact made in reliance upon and in conformity with
written information furnished to the Company by the Holder expressly for use in
any Registration Statement (or any amendment or supplement thereto) or the
Prospectus (or any amendment or supplement thereto) pursuant to which securities
held by the Holder (or permitted assignees) were registered under the Securities
Act. In no event shall the liability of Holder hereunder be greater in amount
than the gross dollar amount of the proceeds received by Holder upon the sale of
the Registrable Shares giving rise to such indemnification obligation.
7.3 Conduct of Indemnification Proceedings. The indemnified party
under any indemnity contained in this Agreement shall give reasonably prompt
notice to the indemnifying party of any action or proceeding commenced against
it in respect of which indemnity may be sought hereunder, but failure to so
notify the indemnifying party (a) shall not relieve it from any liability which
it may have under the indemnity agreements provided in this Agreement, unless
and to the extent it did not otherwise learn of such action and the lack of
notice by the indemnified party results in the forfeiture by the indemnifying
party of substantial rights and defenses, and (b) shall not, in any event,
relieve the indemnifying party from any obligations to the indemnified party
other than the indemnification obligations provided under this Agreement. If the
indemnifying party so elects within a reasonable time after receipt of such
notice, the indemnifying party may assume the defense of such action or
proceeding with counsel chosen by the indemnifying party and approved by the
indemnified party, which approval shall not be unreasonably withheld; provided,
however, that the indemnifying party will not settle any such action or
proceeding without the written consent of the indemnified party unless, as a
condition to such settlement, the indemnifying party secures the unconditional
release of the indemnified party; and provided further, that if the defendants
in any such action or proceeding include both the indemnified party and the
indemnifying party and the indemnified party reasonably determines, upon advice
of counsel, that a conflict of interest exists or that there may be legal
defenses available to it or other indemnified parties that are different from or
in addition to those available to the indemnifying party, then the indemnified
party shall be entitled to one separate counsel, the reasonable fees and
expenses of which shall be paid by the indemnifying party. If the indemnifying
party does not assume the defense of such action or proceeding, after having
received the notice referred to in the first sentence of this Section 7.3, the
indemnifying party will pay the reasonable fees and expenses of counsel (which
shall be limited to a single law firm) for the indemnified party. In such event,
however, the indemnifying party will not be liable for any settlement effected
without the written consent of the indemnifying party. If an indemnifying party
is entitled to assume, and assumes, the defense of such action or proceeding in
accordance with this Section, the indemnifying party shall not be liable for any
fees and expenses of counsel for the indemnified party incurred thereafter in
connection with such action or proceeding except as set forth in the second
proviso in the second sentence of this Section 7.3.
7.4 Contribution.
(a) In order to provide for just and equitable contribution in
circumstances in which the indemnity agreements provided for in this Agreement
are for any reason held to be unenforceable by the indemnified party in
accordance with its terms, the Company and the Holder shall contribute to the
aggregate losses, liabilities, claims, damages and expenses of the nature
contemplated by such indemnity agreement incurred by the Company and the Holder,
(a) in such proportion as is appropriate to reflect the relative fault of the
Company on the one hand and the Holder on the other, in connection with the
statements or omissions which resulted in such losses, claims, damages,
liabilities or expenses, or (b) if the allocation provided by clause (a) above
is not permitted by applicable law, in such proportion as is appropriate to
reflect not only the relative fault of but also the relative benefits to the
Company on the one hand and the Holder on the other, in connection with the
statements or omissions which resulted in such losses, claims, damages,
liabilities or expenses, as well as any other relevant equitable considerations.
The relative benefits to the indemnifying party and indemnified party shall be
determined by reference to, among other things, the total proceeds received by
the indemnifying party and indemnified party in connection with the offering to
which such losses, claims, damages, liabilities or expenses relate. The relative
fault of the indemnifying party and indemnified party shall be determined by
reference to, among other things, whether the action in question, including any
untrue or alleged untrue statement of a material fact or omission or alleged
omission to state a material fact, has been made by, or relates to information
supplied by, the indemnifying party or the indemnified party, and the parties'
relative intent, knowledge, access to information and opportunity to correct or
prevent such action.
(b) The parties hereto agree that it would not be just or
equitable if contribution pursuant to this Section 7.4 were determined by pro
rata allocation or by any other method of allocation which does not take account
of the equitable considerations referred to in subparagraph (a) above.
Notwithstanding the provisions of this Section 7.4, the Holder shall not be
required to contribute any amount in excess of the amount of the total proceeds
to the Holder from sales of Covered Securities of the Holder under the
Registration Statement.
(c) Notwithstanding subparagraphs (a) and (b) above, no person
guilty of fraudulent misrepresentation (within the meaning of Section 11(f) of
the Securities Act) shall be entitled to contribution from any person who was
not guilty of such fraudulent misrepresentation. For purposes of this Section
7.4, each person, if any, who controls the Holder within the meaning of Section
15 of the Securities Act or Section 20 of the Exchange Act shall have the same
rights to contribution as the Holder, and each director of the Company, each
officer of the Company who signed a Registration Statement and each person, if
any, who controls the Company within the meaning of Section 15 of the Securities
Act or Section 20 of the Exchange Act shall have the same rights to contribution
as the Company.
8. Holdback Agreements.
8.1 Holder Holdback Agreement. Holder shall not effect any sale or
distribution of Registrable Shares or any securities convertible into or
exchangeable or exercisable for Registrable Shares, including a sale pursuant to
Rule 144 (or any similar provision then in force) under the Securities Act, if
and to the extent required by the managing underwriter of an underwritten
offering being undertaken by the Company; provided, however, that such
restriction on public sales or distributions shall not apply (a) for a period
exceeding the fourteen (14) days prior to, and the one hundred eighty (180) day
period beginning on, the effective date of the registration statement filed in
connection with such underwritten offering; (b) to any sale as a part of or in
conjunction with such underwritten offering; or (c) unless all officers,
directors and other persons with registration rights with respect to securities
of the Company enter into or are restricted by similar holdback agreements.
8.2 Company Holdback Agreement. Company shall not effect any sale or
distribution of (other than in connection with Company employee, Company
consultant or Company director stock options), or assist in an underwritten
offering by any other person of, any securities of the Company or securities
convertible into or exchangeable or exercisable for securities of the Company,
if and to the extent required by the managing underwriter of an underwritten
offering being undertaken pursuant to Section 5.1, above; provided, however,
that such restriction on public sales or distributions shall not apply (a) for a
period exceeding the fourteen (14) days prior to, and the one hundred eighty
(180) day period beginning on, the effective date of the registration statement
filed in connection with such underwritten offering in; or (b) to any sale as a
part of or in conjunction with an underwritten offering in compliance with
Section 5.5(a). The foregoing restrictions shall not apply to issuances by the
Company of its securities upon the exercise of employee, consultant or director
stock options to the extent permitted by the managing underwriter.
9. Miscellaneous.
9.1 Expenses. The Company shall pay all expenses incurred in
connection with any Registration Statement, Prospectus and related materials
with respect to all registrations made pursuant to Sections 1, 2 and 3, and any
underwritten offering requested by Holder pursuant to Section 5.1 or undertaken
by the Company pursuant to Section 5.4, and the performance by it of any and all
of its other obligations under this Agreement, including (a) all stock exchange,
SEC and state securities registration, listing and filing fees, (b) all expenses
incurred in connection with the preparation, printing and distributing of
Registration Statements and Prospectuses, (c) accounting fees, costs of
appraisals, and the costs of environmental and other reports, (d) fees and
disbursements of counsel for the Company, and (e) except as set forth in the
following sentence, underwriting discounts, brokerage and selling commissions
and transfer taxes. The Holder shall be responsible for the payment of any
underwriting discounts, brokerage and selling commissions and transfer taxes
relating to the sale or disposition of securities held by the Holder, and the
fees and disbursements of the Holder's counsel. Notwithstanding the foregoing,
in the event any attempt to file a registration statement with the SEC pursuant
to Sections 1, 2 or 3 fails solely due to the fault or error of Holder, Holder
will reimburse the Company for the Company's reasonable costs and expenses
incurred in attempting to accomplish such registration.
9.2 Authorization; No Conflicts. Each party to this Agreement
represents and warrants to the other parties to this Agreement that the
execution and deliver of this Agreement by such party and the performance by
such party of its covenants and agreements under this Agreement have been, or at
the time of such performance will have been, duly authorized by all necessary
corporate action on the part of such party, and all required consents to the
transactions contemplated hereby have been obtained by such party, or at the
time of such performance will have been received by such party. The execution,
delivery and performance by such party of this Agreement, the fulfillment of and
compliance with the terms and provisions hereof, and the consummation by such
party of the transactions contemplated hereby, do not and will not: (a) conflict
with, or violate any provisions of, the Articles of Incorporation, Bylaws or
other governing documents of such party; (b) conflict with, or violate any
provision of, any statute, law, ordinance, regulation, rule, order, writ or
injunction having applicability to such party or any of its assets; (c) result
in a breach or acceleration of the maturity of any loan or credit agreement to
which such party is a party or by which any of its assets may be affected; or
(d) conflict with, result in any breach of, or constitute a default under any
agreement to which such party is a party or by which it or any of its assets are
bound.
9.3 Integration; Amendment. This Agreement, together with its
exhibits and the other agreements referred to herein, constitutes the entire
agreement among the parties hereto with respect to the matters relating to
registration rights set forth herein and supersedes and renders of no force and
effect all prior oral or written agreements, commitments and understandings
among the parties with respect to the matters relating to registration rights
set forth herein. Except as otherwise expressly provided in this Agreement, no
amendment, modification or discharge of this Agreement shall be valid or binding
unless set forth in writing and duly executed by each of the parties hereto.
9.4 Waivers. No waiver by a party hereto shall be effective unless
made in a written instrument duly executed by the party against whom such waiver
is sought to be enforced, and only to the extent set forth in such instrument.
Neither the waiver by any of the parties hereto of a breach or a default under
any of the provisions of this Agreement, nor the failure of any of the parties,
on one or more occasions, to enforce any of the provisions of this Agreement or
to exercise any right or privilege hereunder shall thereafter be construed as a
waiver of any subsequent breach or default of a similar nature, or as a waiver
of any such provisions, rights or privileges hereunder.
9.5 Assignment; Successors and Assigns. The Holder may elect to have
a nominee take title to any or all of the Registrable Shares, in which went the
benefits of this Agreement shall run directly to such nominee. The Holder may
assign its rights and obligations under this Agreement to the New York State
Common Retirement Fund ("CRF") or to any entity wholly owned, directly or
indirectly, by CRF and to which all of the Registrable Shares have been
transferred. This Agreement shall be binding upon and inure to the benefit of
the Company and its successors by merger. Except as provided in this Section, no
party hereto shall assign its rights and/or obligations under this Agreement, in
whole or in part, whether by operation of law or otherwise.
9.6 Burden and Benefit. This Agreement shall be binding upon and
inure to the benefit of the parties hereto and their respective heirs,
executors, personal and legal representatives, successors and, subject to
Section 8.5 above, assigns.
9.7 Notices. Any notice, consent or approval required or permitted
to be given under this Agreement shall be in writing and shall be deemed to have
been given (i) upon hand delivery to the recipient; (ii) by facsimile
transmission, upon receipt by the sender of confirmation of such transmission,
(iii) one (1) business day after being deposited with Federal Express or another
reliable overnight courier service for next day delivery; or (iv) if deposited
in the United States mail, registered or certified mail, postage prepaid, return
receipt required, on the date of receipt or refusal to accept delivery; and
addressed or telecopied as follows:
If to Company:
PS Business Parks, Inc.
701 Western Avenue, Suite 200
Glendale, California 91201
Attn: Mr. Ronald L. Havner, Jr.
Fax No.: (818) 244-9267
Telephone No.: (818) 244-8080
And a copy to:
Hale and Dorr LLP
1455 Pennsylvania Avenue, N.W.
Washington, D.C. 20004
Attn: Steven S. Snider, Esq.
Fax No.: (202) 942-8484
Telephone No.: (202) 942-8400
If to Holder:
Office of the State Comptroller
633 Third Avenue, 31st Floor
New York, New York 10017-6754
Attn: Chief Real Estate Investment
Officer - Equity Program
Fax No.: (212) 681-4485
Telephone No.: (212) 681-4489
And a copy to:
Office of the State Comptroller
633 Third Avenue, 31st Floor
New York, New York 10017-6754
Attn: Marjorie Tsang, Esq.
Fax No.: (212) 681-4485
Telephone No.: (212) 681-4471
And a copy to:
Cox, Castle & Nicholson LLP
2049 Century Park East, Suite 2800
Los Angeles, California 90067
Attn: Amy H. Wells, Esq.
Fax No.: (310) 277-7889
Telephone No.: (310) 284-2233
And a copy to:
Heitman Capital Management Corporation
180 North LaSalle Street
Suite 3400
Chicago, Illinois 60601-2886
Attn: David B. Perisho
Fax No.: (312) 541-6798
Telephone No.: (312) 541-6748
or such other address or telephone number as any party may from time to time
specify in writing to the others; provided, however, that the foregoing
addresses and numbers shall remain in effect unless and until notice of and
change is deemed to have been given in the manner required by this Section.
9.8 Specific Performance. The parties hereto acknowledge that the
obligations undertaken by them hereunder are unique and that there would be no
adequate remedy at law if any party fails to perform any of its obligations
hereunder, and accordingly agree that each party, in addition to any other
remedy to which it may be entitled at law or in equity, shall be entitled to (a)
compel specific performance of the obligations, covenants and agreements of any
other party under this Agreement in accordance with the terms and conditions of
this Agreement; and (b) obtain preliminary injunctive relief to secure specific
performance and to prevent a breach or contemplated breach of this Agreement.
Each party waives the requirement of the posting of any bond or security in
connection with any proceedings or any injunction issued in connection with this
Section.
9.9 Governing Law. Notwithstanding that California law, with respect
to choice of law, or the Constitution, laws or treaties of the United States of
America, may dictate that this Agreement should be governed by or construed in
accordance with the laws of another jurisdiction, this Agreement, and all
documents and instruments executed and delivered in connection herewith shall be
governed by and construed in accordance with the laws of the State of
California.
9.10 Enforcement. If any party hereto institutes any action or
proceeding to interpret or enforce any provision of this Agreement or for an
alleged breach of any provision of this Agreement, the prevailing party shall be
entitled to recover its actual attorneys' fees and all fees, costs and expenses
incurred in connection with such action or proceeding. Such attorneys' fees,
fees, costs and expenses shall include post judgment attorneys' fees, fees,
costs and expenses incurred on appeal or in collection of any judgment. This
provision is separate and several and shall survive the merger of this provision
into any judgment on this Agreement. No person or entity other than the parties
hereto is or shall be entitled to bring any action to enforce any provision of
this Agreement against any of the parties hereto, and the covenants and
agreements set forth in this Agreement shall be solely for the benefit of, and
shall be enforceable only by, the parties hereto or their respective successors
and assigns as permitted hereunder.
9.11 Jurisdiction and Venue. Any action initiated by any party under
this Agreement shall be brought and prosecuted in the United States District
Court for the Central District of California which the parties acknowledge and
agree is a convenient forum in which to litigate such action, and the parties
waive any right to commence or transfer such action in or to any other court.
Should said District Court find that it has no jurisdiction over such action,
then such action shall be brought and prosecuted in the Superior Court of the
County of Los Angeles, State of California. Each party hereto expressly consents
and submits to personal jurisdiction in the federal or state courts, as the case
may be, in the State of California, County of Los Angeles and to permanent and
exclusive venue in Los Angeles County, State of California. In addition, in any
action under this Agreement, each party hereto expressly consents to service of
process by any manner set forth in this Agreement for the giving of notice.
9.12 Headings. Section and subsection headings contained in this
Agreement are inserted for convenience of reference only, shall not be deemed to
be a part of this Agreement for any purpose, and shall not in any way define or
affect the meaning, construction or scope of any of the provisions hereof.
9.13 Pronouns. All pronouns and any variations thereof shall be
deemed to refer to the masculine, feminine, neuter, singular or plural, as the
identity of the person or entity may. require.
9.14 Execution in Counterparts. To facilitate execution, this
Agreement may be executed in as many counterparts as may be required. It shall
not be necessary that the signature of or on behalf of each party appears on
each counterpart, but it shall be sufficient that the signature of or on behalf
of each party appears on one or more of the counterparts. All counterparts shall
collectively constitute a single agreement. It shall not be necessary in any
proof of this Agreement to produce or account for more than a number of
counterparts containing the respective signatures of or on behalf of all of the
parties.
9.15 Severability. If fulfillment of any provision of this
Agreement, at the time such fulfillment shall be due, shall transcend the limit
of validity prescribed by law, then the obligation to be fulfilled shall be
reduced to the limit of such validity; and if any clause or provision contained
in this Agreement operates or would operate to invalidate this Agreement, in
whole or in part, then such clause or provision only shall be held ineffective,
as though not herein contained, and the remainder of this Agreement shall remain
operative and in full force and effect.
9.16 Exhibits. All exhibits attached hereto are incorporated herein
as though fully set forth herein.
9.17 Time of the Essence. Time is of the essence in the performance
of this Agreement.
9.18 Execution of Documents by Holder. Holder has informed Company,
and Company understands and agrees, that for administrative reasons Holder
requires up to five (5) business days to execute any document and an additional
one (1) business day to deliver such document. Therefore, all documents to be
executed by Holder shall be agreed to and prepared in final execution form and
received by Holder for execution not less than six (6) business days prior to
the scheduled delivery date.
9.19 Further Assurances. Each party agrees to cooperate fully with
the other parties and to prepare, execute, and deliver such further instruments
of conveyance, contribution, assignment, or transfer and shall take or cause to
be taken such other or further action as either party shall reasonably request
at any time or from time to time in order to consummate the terms and provisions
and to carry into effect the intents and purposes of this Agreement.
9.20 Legal Representation and Construction. Each party hereto has
been represented by legal counsel in connection with the negotiation and
drafting of this Agreement. The parties acknowledge that each party and its
counsel have reviewed and revised this Agreement, and that the normal rule of
construction to the effect that any ambiguities are to be resolved against the
drafting party shall not be employed in the interpretation of this Agreement.
IN WITNESS WHEREOF, each of the parties hereto has caused this Agreement
to be duly executed on its behalf as of the date first hereinabove set forth.
COMPANY:
PS BUSINESS PARKS, INC., a
California corporation
By: /s/ RONALD L. HAVNER, JR.
--------------------------------
Ronald L. Havner, Jr.
President, CEO
(Print Name and Title)
HOLDER:
ACQUIPORT TWO CORPORATION, a
Delaware corporation
By: /S/ HOWARD J. EDELMAN
--------------------------------
Vice President
(Print Name and Title)
[Exhibit A to this Agreement has been omitted and will be furnished to
the Securities and Exchange Commission upon request]
Exhibit 10.3
COX, CASTLE & NICHOLSON LLP
2049 CENTURY PARK EAST
TWENTY-EIGHTH FLOOR
LOS ANGELES, CALIFORNIA 90067-3284
TELEPHONE (310) 277-4222
FACSIMILE (310) 277-7889
May 20, 1998
VIA FACSIMILE
David Goldberg, Esq.
American Office Park Properties, Inc.
701 Western Avenue, Suite 200
Glendale, California 91201
Re: PS Business Parks, Inc./Acquiport Two Corporation
Dear Dave:
This letter is in reference to that certain Registration Rights
Agreement made and entered into as of March 17, 1998 by and between PS Business
Parks, Inc., a California corporation (the "Company") and Acquiport Two
Corporation, a Delaware corporation (the "Holder"). Terms not otherwise defined
herein shall have the meaning contained in the Registration Rights Agreement.
This will confirm our understanding that the provisions of Section 5.4
of the Registration Rights Agreement become effective on and after one year
after the date of the Registration Rights Agreement, i.e., March 17, 1999.
This will also confirm our understanding and agreement that the
registered shares to be acquired by Holder on or about May 20, 1998 from Bank of
America, which are available as a result of a "spot offering" by Company on May
20, 1998 (the "Bank of America Sale"), shall enjoy the benefits described in
Section 5 of the Registration Rights Agreement applicable to Registrable Shares.
David Goldberg, Esq.
May 20, 1998
Page 2
This will finally confirm our agreement that the parties will, after
the date hereof, memorialize the agreements contained in this letter by
execution of appropriate documentation by the Company and Holder.
To indicate your agreement with the foregoing, please execute a copy of
this letter in the space provided below, and return it to me by telecopy.
Please call me if you have any comments or questions.
Very truly yours,
/s/ AMY H. WELLS
Amy H. Wells
/s/ DAVID GOLDBERG
- ----------------------------------
David Goldberg, Esq.
Exhibit 10.4
EMPLOYMENT AGREEMENT
PS Business Parks, Inc., a California Corporation (hereinafter referred to
as "Employer") and J. Michael Lynch, a resident of the State of Maryland
(hereinafter referred to as "Employee"), in consideration of the mutual promises
hereinafter set forth, agree as follows:
ARTICLE 1.
EMPLOYMENT OF EMPLOYEE
1.1 SPECIFIED PERIOD: Employer hereby employs Employee and Employee hereby
accepts employment with Employer for a period of one (1) year beginning the date
last stated below, such period being referred to as the "Employment Term."
ARTICLE 2.
EMPLOYEE'S DUTIES AND OBLIGATIONS
2.1 GENERAL DUTIES: Employee shall serve as Vice President, Director of
Acquisitions/Development of Employer subject to the direction and control of the
Employer's Chief Executive Officer and Board of Directors. Employee shall be
based at the Employer's headquarters, currently 701 Western Avenue, Suite 200,
Glendale, CA 91201, as such may be changed from time to time.
2.2 DEVOTION TO EMPLOYER'S BUSINESS:
2.2.1 Employee shall devote, during the term of this Agreement, all or
substantially all of his professional time, ability and attention to the
business of Employer as is necessary to perform his duties and
responsibilities inherent in his position in a prudent, reasonable and
businesslike manner.
2.2.2 This Agreement, during its term, shall not be interpreted to
prohibit Employee from making passive personal investments, provided that
such investments do not materially interfere with the Employee's duties and
services required by this Agreement, including, but not limited to, the
competitive provisions of SECTION 2.3 hereof.
2.3 COMPETITIVE ACTIVITIES:
2.3.1 Without the consent in writing of employer, Employee shall not,
during the term of his employment engage in activities that compete with
Employer or its affiliate.
<PAGE>
2.3.2 If a court or other authority having jurisdiction thereof
determines that the foregoing competitive restriction is too broad or
otherwise unreasonable under applicable law, including with respect to time
or space, the court is hereby requested, directed and authorized by the
parties hereto to revise the foregoing restriction to include the maximum
restriction allowed under the applicable law. The Employee expressly agrees
that his breach of the provisions of SECTION 2.3 would result in
irreparable injuries to Employer, that the remedy at law for any such
breach will be inadequate and that upon breach of this SECTION 2.3
Employer, in addition to all other available remedies, shall be entitled as
a matter of right to injunctive relief in any court of competent
jurisdiction.
2.3.3. Nothing herein shall prevent or prohibit the Employee, during
his Employment, from owning less than five percent (5%) of the outstanding
debt or equity securities of (i) any corporation whose securities are
listed on any national securities exchange or on the Nasdaq Stock Market or
(ii) any mutual fund or co-mingled investment entity registered under the
Investment Company Act.
ARTICLE 3.
OBLIGATIONS OF EMPLOYER
3.1 GENERAL PROVISION: Employer shall provide Employee with the salary.
Incentives and benefits specified in this Agreement and in Exhibit A.
3.2 OFFICE AND STAFF: Employer shall provide Employee with an office,
secretarial support, office equipment, supplies and other facilities and
services reasonably suitable to Employee's position and adequate for the
performance of his duties.
3.3 INDEMNIFICATION:
3.3.1 To the fullest extent permitted by law, Employee shall be
indemnified and held harmless by Employer from and against any and all
losses, claims, damages, liabilities (joint and several), expenses
(including reasonable legal fees and expenses), costs, charges, judgments,
fines, settlements and other amounts arising from any and all claims,
demands, actions, suits or proceedings in which Employee may be involved,
or threatened to be involved, as a party or otherwise by reason of
Employee's status as an employee, officer or consultant of Employer if (a)
Employee acted in good faith and in a manner he in good faith believed to
be in, or not opposed to, the best interests of Employer, and, with respect
to any criminal proceedings, had no reasonable cause to believe his conduct
was unlawful, and (b) Employee's conduct did not constitute gross
negligence or willful or wanton misconduct. The termination of any action,
suit or proceeding by judgment, order, settlement, conviction or upon a
plea of nolo contendere, or its equivalent, shall not, of itself, create a
presumption that Employee acted in a manner contrary to that specified in
CLAUSE 3.3.1(a) or CLAUSE 3.3.1 (b) above.
<PAGE>
3.3.2 To the fullest extent permitted by law, reasonable expenses
(including legal fees and expenses) incurred by Employee in defending any
claim, demand, action, suit or proceeding shall be advanced by Employer
prior to the final disposition of such claim, demand, action, suit or
proceeding upon receipt by Employer of a written undertaking by or on
behalf of Employee to repay such amount if it shall be determined that
Employee is not entitled to be indemnified as authorized in this Section.
3.3.3 The indemnification provided by this Section shall be in
addition to any other rights which Employee may be entitled under any
agreement, as a matter of law or otherwise, both as to action in Employee's
capacity as an employee or consultant of Employer and to action in any
other capacity.
ARTICLE 4.
COMPENSATION TO EMPLOYEE
4.1 BASE SALARY: As base compensation for the services to be performed
hereunder, Employee shall receive a base annual salary of One hundred and
Forty-Five Thousand Dollars ($145,000) commencing as of the date Employee's
employment begins as specified in SECTION 1.1 of this Agreement. Such base
salary shall be paid pursuant to the general payroll practices of Employer and
shall be subject to increase from time to time, in the sole and absolute
discretion of Employer.
4.2 ANNUAL BONUS:
4.2.1 For each year, or part thereof, of his employment Employee will
be considered for receipt of an annual bonus. The payment and amount of the
bonus shall be determined solely by Employer, in its sole and absolute
discretion. At the discretion of the Chief Executive Officer of Employer,
Employee shall be paid an annual bonus of up to Fifty Thousand Dollars
($50,000) based on satisfaction of goals and objectives to be determined by
the Chief Executive Officer.
4.2.2 If this Agreement is terminated by Employer for cause, Employee
shall not be entitled to an annual bonus for the fiscal year in which that
termination occurs.
4.2.3 TAX WITHHOLDING: Employer shall have the right to deduct or
withhold from the compensation due to Employee hereunder any and all sums
required for federal, state, local and foreign income tax, Social Security
taxes, unemployment insurance taxes, state compensation fund charges, and
all other federal, state, local and foreign taxes, assessments and charges,
as the case may be, now applicable or that may be enacted and become
applicable in the future.
<PAGE>
ARTICLE 5.
EMPLOYEE BENEFITS
5.1 VACATION, ILLNESS, LIFE INSURANCE AND OTHER BENEFITS: Employer shall
provide Employee with vacation and illness time off, life insurance, medical
insurance covering Employee and his immediate family, and such other fringe
benefits as are customarily made available to employees of like status and
tenure employed by Employer. Employee has been provided a copy of Employer's
"benefits package", which he has read and understands as the benefits that will
be available to him. Further, Employer reserves the right to change such
benefits package.
5.2 STOCK OPTIONS: Employee has read Employer's stock options and
understands its terms and conditions.
ARTICLE 6.
BUSINESS EXPENSES
6.1 BUSINESS EXPENSES:
6.1.1 Employer shall reimburse Employee for all expenses and
disbursements reasonably incurred by Employee in the performance of
Employee's duties for Employer during the Employment Term.
6.1.2 Each such expenditure shall be reimbursable only if Employee
furnishes to Employer reasonable and adequate written records and other
documentary evidence in accordance with Employer's policies established
from time to time and as requested by federal and state law, and
regulations issued by the appropriate taxing authorities, for the
substantiation of each such expenditure as an income tax deduction.
ARTICLE 7.
TERMINATION OF EMPLOYMENT
7.1 TERMINATION FOR CAUSE:
7.1.1 Employer reserves the right to terminate this Agreement if: (i)
Employee is convicted or pleads nolo contendere to a felony or a crime
involving moral turpitude; (ii) Employee fails to perform Employee's duties
as specified in the Agreement and fails to cure said failure within 15 days
after written notice from Employer; or (iii) Employee commits fraud or
theft against the Employer.
<PAGE>
7.1.2 Subject to the notice and cure period set forth in SECTION 7.1.1
above, Employer may at its option terminate this Agreement for the reasons
stated in this Section by giving written notice of termination to Employee
without prejudice to any other remedy to which Employer may be entitled
either at law, in equity or under this Agreement.
7.1.3 Termination under this SECTION 7.1 shall be considered "for
cause" for the purposes of this Agreement.
7.1.4 In the event the Employee's employment is terminated for cause
pursuant to SECTION 7.1.1 the Employer shall pay to the Employee the
compensation, benefits and reimbursement of reasonable expenses otherwise
payable to him as otherwise would have been payable pursuant to this
Agreement through the last day of his actual employment by the Employer.
The Employer shall have no further obligations to the Employee, and the
Employee shall have no further rights, including, without limitation,
rights to any compensation, whatsoever under this Agreement.
7.2 EFFECT OF MERGER, TRANSFER OF ASSETS OR DISSOLUTION:
7.2.1 This Agreement shall terminate by any voluntary or involuntary
dissolution of Employer resulting from either a merger or consolidation in
which Employer is not the consolidated or surviving corporation, or
transfer of all or substantially all of the assets of Employer; provided,
however, that this Section shall not apply in the case of any such merger
or consolidation approved in writing by the Chief Executive Officer of
Employer and in which the surviving or consolidated entity assumes the
obligations of Employer under this Agreement. 7.2.2 Termination under this
Section shall not be considered "for cause" for the purposes of this
Agreement. In the event that the Employee is terminated pursuant to this
Section, Employee shall be entitled to the same severance as if terminated
without cause and, in addition, all options on stock of the Employer
granted to Employee in respect of his employment which have not vested and
become exercisable shall become exercisable at the time of closing of the
transaction which terminates this Agreement pursuant to section 7.2.1
above.
7.3 TERMINATION BY EMPLOYER WITHOUT CAUSE:
7.3.1 Notwithstanding any provision of this Agreement to the contrary,
if Employer terminates this Agreement without cause during its term (i)
Employer shall immediately pay Employee's annual salary and fringe benefits
and reimburse Employee for expenses in each case as set forth herein,
earned or reimbursable and unpaid through the effective date of
termination, and (ii), on the effective date of such termination, Employer
shall also pay Employee, in a lump sum, the present value of the Employee's
annual salary (based on the base salary being earned at the time of the
notice of termination) for the remainder of the Employment Term as would
otherwise be payable (based on a discount rate of 5%), but in no event will
the payment under this (ii) be less than $72,500.00.
<PAGE>
7.4 TERMINATION BY EMPLOYEE WITH CAUSE: Employee may terminate his
obligations under this Agreement with cause after fifteen (15) days' written
notice to Employer fully and accurately describing the cause for termination and
Employer fails to cure the breach within such fifteen (15) day period. With
"cause" shall mean a material and continuing breach by Employer in failing to
pay to Employee amounts to which Employee is entitled under this Agreement. In
the event Employee terminates this Agreement pursuant to this Section 7.4 (i)
Employer shall immediately pay employee's annual salary and fringe benefits and
reimburse Employee for expenses in each case as set forth herein, earned or
reimbursable and unpaid through the effective date of termination, and (ii), on
the effective date of such termination, Employer shall also pay Employee, in a
lump sum of` the present value of the Employee's annual salary (based on the
base salary being at the time of the notice of termination) for the remainder of
the Employment Term as would otherwise be payable (based on a discount rate of
5%), but in no event less than $145,000.00.
ARTICLE 8.
GENERAL PROVISIONS
8.1 NOTICES: Any notices to be given hereunder by either party to the other
may be effected by personal delivery in writing or by registered or certified
mail, postage prepaid with return receipt requested, by nationally recognized
overnight courier or by confirmed facsimile at the following addresses or
facsimile numbers:
If to Employee: J. Michael Lynch
356 Homeland Southway
Baltimore, MD 21212
If to Employer: PS Business Parks, Inc.
701 Western Avenue, Suite 200
Glendale, CA 91201
Facsimile: (818) 244-9267
Attn: Office of General Counsel
Notices delivered personally shall be deemed communicated upon actual
receipt; mailed notices shall be deemed communicated upon receipt of the
mailing; notices sent by overnight courier shall be deemed communicated and
received as of one (1) business day after delivery to the overnight courier; and
notices sent by facsimile shall be deemed communicated and received as of the
time the sender receives written confirmation of the sending of the facsimile.
<PAGE>
8.2 ATTORNEYS' FEES AND COSTS: If any action in law or equity is necessary
to enforce or interpret the terms of this Agreement, the non-prevailing party
shall pay the reasonable attorneys' fees and costs of the prevailing party,
unless otherwise provided by law or this Agreement. A party shall not be
considered a prevailing party unless he or it prevails in substantially all of
his or its position under dispute.
8.3 PARTIAL INVALIDITY: If any provision of this Agreement is held by a
court of competent jurisdiction to be invalid, void or unenforceable, the
remaining provisions shall nevertheless continue in full force without being
impaired or invalidated.
8.4 APPLICABLE LAW: This Agreement shall be governed by and construed in
accordance with the laws of the State of California as now enacted and as may
hereafter be modified and/or amended.
8.5 CONSTRUCTION OF TERMS: The terms and provisions of this Agreement,
which are freely negotiated as between the parties, shall not be construed
either in favor of or against either party in the event of any ambiguity or
uncertainty.
8.6 EMPLOYEE'S CONSULTATION WITH INDEPENDENT ATTORNEY: Employee expressly
acknowledges that Employee has been requested to consult with independent legal
counsel of Employee's choosing to review and have explained to Employee the
legal significance and legal effect of the terms and conditions of this
Agreement prior to Employee's execution of this Agreement. In this regard,
Employee expressly acknowledges that the terms of this Agreement were not forced
upon Employee by Employer, and that the terms of this Agreement were negotiable
and were not "cast in stone," and that Employer has not imposed any time
deadlines upon Employee with regard to the execution of this Agreement.
8.7 ENTIRE AGREEMENT: This Agreement supersedes any and all other
agreements, either oral or in writing, between the parties with respect to that
employment in any manner whatsoever. Each party to this Agreement acknowledges
that no representations, inducements, promises or agreements, orally or
otherwise, have been made by any party, or anyone acting on behalf of any party,
which are not embodied herein, and that no other agreement, statement or promise
not contained in this Agreement shall be valid or binding.
8.8 MODIFICATIONS: Any modification of this Agreement will be effective
only if it is in writing and signed by the party to be charged.
8.9 WAIVER: A waiver of any of the terms and conditions hereof shall not be
construed as a general waiver of the same or any other term or condition hereof
or any subsequent breach thereof.
<PAGE>
8.10 DISPUTE RESOLUTION: Any controversy or claim arising out of, or
relating to, this Agreement or Employee's employment with Employer shall be
settled by arbitration in Los Angeles, California in accordance with the rules
of the American Arbitration Association then existing, and judgment on the
arbitration award may be entered in any court having jurisdiction over the
subject matter of the controversy. Employer and Employee agree to the personal
jurisdiction of any court of competent subject matter jurisdiction in the County
of Los Angeles for the enforcement of any order or judgment related hereto. The
decision of the arbitrator shall be final and binding upon both parties. The
prevailing party in any arbitration shall be entitled to its costs and expenses
(including reasonable attorney's fees) incurred in connection with the
arbitration from the other party. No punitive or exemplary damages may be
awarded by the arbitrator. The foregoing provisions of this Section shall not be
interpreted to restrict either party's right to pursue equitable relief from a
court of competent jurisdiction.
8.11 WAIVER OF JURY TRIAL: BY AGREEING TO ARBITRATE, ALL PARTIES, AS A
PRACTICAL MATTER, HAVE WAIVED THE RIGHT TO JURY TRIAL. The parties hereby waive
trial by jury in any action, proceeding or counterclaim brought by any of them
against any other party on any matters whatsoever arising out of or in any way
connected with this Agreement, provided that all actions brought under this
Agreement shall be brought in the State of California.
WHEREFORE, the parties hereby execute this Agreement this 20th day of May,
1998.
EMPLOYER:
PS BUSINESS PARKS, INC.
By: /s/ Ronald L. Havner, Jr.
-------------------------
Ronald L. Havner, Jr.
President and CEO
EMPLOYEE:
/s/ J. Michael Lynch
--------------------
J. MICHAEL LYNCH
<PAGE>
EXHIBIT A
EMPLOYMENT AGREEMENT FOR
J. MICHAEL LYNCH
1. 40,000 shares of the Company common stock options with a "strike price" of
$23.50 each, vesting 1/3 for each of the first 3 years of employment.
2. A $30,000 signing bonus payable at the end of the first 30 days of
employment.
3. A moving allowance of up to $20,000 to pay for all costs, incurred after
the effective date of this agreement, related to relocating to Los Angeles,
including, but not limited to moving household effects, transporting an
automobile, house hunting trips and the final trip to transport family
members to Los Angeles.
4. Participation in the Company's profit sharing program.
5. An automobile estimated usage allowance intended to reimburse employee for
use of his business automobile usage.
REVOLVING CREDIT AGREEMENT
among
PS BUSINESS PARKS, L.P.
and
THE LENDERS LISTED HEREIN
as Lenders
and
Wells Fargo Bank, National Association,
as Agent
August 6, 1998
$100,000,000
EXHIBITS HAVE BEEN OMITTED AND WILL BE PROVIDED AT THE REQUEST OF THE
SECURITIES AND EXCHANGE COMMISSION
<PAGE>
TABLE OF CONTENTS
Page
ARTICLE 1. DEFINITIONS AND RELATED MATTERS.................................1
Section 1.1. Definitions....................................1
Section 1.2. Related Matters................................24
1.2.1. Construction...................................24
1.2.2. Determinations.................................25
1.2.3. Accounting Terms and Determinations............25
1.2.4. Governing Law..................................25
1.2.5. Headings.......................................26
1.2.6. Severability...................................26
1.2.7. Independence of Covenants......................26
1.2.8. Exhibits, Etc..................................26
1.2.9. Other Definitions..............................26
ARTICLE 2. AMOUNTS AND TERMS OF THE CREDIT FACILITIES......................26
Section 2.1. Revolving Loans................................26
2.1.1. Type of Loans and Minimum Amounts..............27
2.1.2. Notice of Borrowing............................27
2.1.3. Funding........................................29
Section 2.2. Interest; Late Charge; Conversion/Continuation.29
2.2.1. Interest Rate and Payment......................29
2.2.2. Conversion or Continuation.....................30
2.2.3. Computations...................................31
2.2.4. Maximum Lawful Rate of Interest................31
Section 2.3. Notes, Etc.....................................31
2.3.1. Loans Evidenced by Notes.......................31
2.3.2. Notation of Amounts and Maturities, Etc........31
2.3.3. Loan Account...................................32
Section 2.4. Fees...........................................32
2.4.1. Facility Fee...................................32
2.4.2. Extension Fee..................................32
2.4.3. Other Fees.....................................32
2.4.4. Fees Non-Refundable............................32
Section 2.5. Termination and Reduction of Revolving
Commitment; Extension..........................33
2.5.1. Termination....................................33
2.5.2. Extension......................................33
Section 2.6. Repayments and Prepayments.....................34
2.6.1. Mandatory Prepayment...........................34
2.6.2. Optional Prepayments...........................34
2.6.3. Payments Set Aside.............................35
Section 2.7. Manner of Payment..............................35
Section 2.8. Pro Rata Treatment.............................36
Section 2.9. Additional Fees and Costs......................37
Section 2.10. Taxes..........................................43
Section 2.11. Lending Office; Discretion of Lenders as to
Manner of Funding. ............................44
ARTICLE 3. CONDITIONS TO LOANS.............................................45
Section 3.1. Closing Conditions.............................45
3.1.1. Certain Documents..............................45
3.1.2. Fees and Expenses Paid.........................45
3.1.3. General........................................45
Section 3.2. Conditions Precedent to Loans..................45
3.2.1. Conditions Precedent...........................45
3.2.2. Notice of Borrowing............................45
3.2.3. Representations and Warranties.................45
3.2.4. No Default.....................................46
3.2.5. No Overdraw....................................46
3.2.6. Covenant Compliance............................46
3.2.7. No Material Adverse Change.....................46
3.2.8. Satisfaction of Conditions.....................46
ARTICLE 4. REPRESENTATIONS AND WARRANTIES..................................46
Section 4.1. Organization, Powers and Good Standing.........46
Section 4.2. Authorization, Binding Effect,
No Conflict, Etc...............................47
4.2.1. Authorization, Binding Effect, Etc.............47
4.2.2. No Conflict....................................47
4.2.3. Partnership Units; General Partner.............47
4.2.4. Governmental Approvals.........................48
Section 4.3. Guarantor......................................48
Section 4.4. Subsidiaries...................................48
Section 4.5. Financial Information..........................48
Section 4.6. No Material Adverse Changes ...................49
Section 4.7. Litigation.....................................49
Section 4.8. Agreements; Applicable Law.....................49
Section 4.9. Taxes..........................................50
Section 4.10. Governmental Regulation........................50
Section 4.11. Margin Regulations.............................50
Section 4.12. Employees......................................50
Section 4.13. Title to Property..............................50
Section 4.14. Intellectual Property, Etc.....................51
Section 4.15. Environmental Condition........................51
Section 4.16. Labor Matters..................................52
Section 4.17. Disclosure.....................................52
ARTICLE 5. AFFIRMATIVE COVENANTS OF THE BORROWER...........................53
Section 5.1. Financial Statements and Other Reports.........53
Section 5.2. Records and Inspection.........................56
Section 5.3. Corporate Existence, Etc.......................56
Section 5.4. Payment of Taxes...............................56
Section 5.5. Maintenance of Properties......................57
Section 5.6. Maintenance of Insurance.......................57
Section 5.7. Conduct of Business............................57
Section 5.8. Further Assurances.............................57
Section 5.9. Future Information.............................57
Section 5.10. Shareholder Agreement..........................58
Section 5.11. Limitation on Guarantor........................58
Section 5.12. Environmental Matters..........................58
Section 5.13. Listing and Organizational Requirements........59
Section 5.14. Year 2000......................................59
Section 5.15. Change of Management...........................59
ARTICLE 6. NEGATIVE COVENANTS OF THE BORROWER PARTIES......................60
Section 6.1. Payment of Obligations. .......................60
Section 6.2. Investments. ..................................60
Section 6.3. Asset Dispositions. ...........................61
Section 6.4. Financial Covenants............................61
6.4.1. Ratio of Total Liabilities to Gross
Asset Value....................................61
6.4.2. Ratio of Unencumbered Asset Value to
Outstanding Unsecured Liabilities..............62
6.4.3. Minimum Tangible Net Worth.....................62
6.4.4. Secured Debt to Gross Asset Value..............62
6.4.5. Interest Coverage..............................62
6.4.6. Fixed Charge Coverage..........................62
6.4.7. Distributions..................................62
6.4.8. Land Holdings..................................62
6.4.9. Securities Holdings............................62
6.4.10. Mortgage Holdings..............................62
6.4.11. Joint Ventures.................................63
6.4.12. Construction-In-Progress.......................63
6.4.13. Other Assets...................................63
6.4.14. Unsecured Interest Expense Coverage............63
Section 6.5. Restriction on Fundamental Changes.............63
Section 6.6. Transactions with Affiliates...................63
Section 6.7. ERISA..........................................64
Section 6.8. Amendments of Charter Documents................64
Section 6.9. Certain Obligations............................64
Section 6.10. Distributions..................................65
ARTICLE 7. EVENTS OF DEFAULT...............................................65
Section 7.1. Events of Default..............................65
7.1.1. Failure to Make Payments.......................65
7.1.2. Default in Other Debt..........................65
7.1.3. Breach of Covenants............................65
7.1.4. Breach of Warranty.............................65
7.1.5. Involuntary Bankruptcy; Appointment
of Receiver, Etc...............................66
7.1.6. Voluntary Bankruptcy; Appointment
of Receiver, Etc...............................66
7.1.7. Judgments and Attachments......................66
7.1.8. Termination of Loan Documents, Etc.............66
7.1.9. Change of Control..............................67
7.1.10. Change of Condition............................67
7.1.11. Guaranty.......................................67
Section 7.2. Remedies.......................................67
ARTICLE 8. APPOINTMENT, POWERS AND DUTIES OF LENDERS AND AGENT.............68
Section 8.1. Relationship of Borrower and Lenders...........68
Section 8.2. Appointment and Authorization..................69
Section 8.3. Agent and Affiliates...........................69
Section 8.4. Lenders' Credit Decisions......................70
Section 8.5. Action by Agent................................70
Section 8.6. Non-Liability of Agent.........................71
Section 8.7. Indemnification................................73
Section 8.8. The Agent......................................74
Section 8.9. Successor Agent................................74
Section 8.10. Powers of the Agent............................75
Section 8.11. Limitations on the Agent.......................76
Section 8.12. Approval of Lenders............................76
Section 8.13. Method of Payment..............................77
Section 8.14. Increased Costs................................77
Section 8.15. Taxes..........................................78
Section 8.16. Excess Payments................................78
Section 8.17. Return of Payments.............................78
Section 8.18. Default By The Borrower; Acceleration..........79
Section 8.19. Defaults by Lender.............................79
Section 8.20. No Partnership or Joint Venture................81
Section 8.21. Indemnification................................81
ARTICLE 9. MISCELLANEOUS...................................................82
Section 9.1. Expenses.......................................82
Section 9.2. Indemnity......................................82
Section 9.3. Waivers; Modifications in Writing..............84
Section 9.4. Cumulative Remedies; Failure or Delay..........85
Section 9.5. Notices, Etc...................................85
Section 9.6. Successors and Assigns.........................85
Section 9.7. Confidentiality................................87
Section 9.8. Set Off........................................87
Section 9.9. Changes in Accounting Principles...............88
Section 9.10. Survival of Agreements, Representations
and Warranties.................................88
Section 9.11. Execution in Counterparts......................88
Section 9.12. Complete Agreement.............................89
Section 9.13. Inspections....................................89
Section 9.14. Waiver of Right to Trial By Jury...............89
Section 9.15. Limitation of Liability........................90
<PAGE>
REVOLVING CREDIT AGREEMENT
REVOLVING CREDIT AGREEMENT, dated as of August 6, 1998 (as amended from
time to time, the "Agreement"), by and between PS Business Parks, L.P., a
California limited partnership (the "Borrower"), and the Lenders and other
financial institutions that either now or in the future are parties hereto
(collectively, the "Lenders" and each individually, a "Lender") and Wells Fargo
Bank, National Association (the "Arranger" and "Administrative Agent"), as agent
and representative for the Lenders (in such capacity the Arranger and
Administrative Agent or any successor in such capacity is referred to herein
collectively as the "Agent"). The Lenders and the Agent are collectively
referred to herein as the "Lender Parties" and each individually as a "Lender
Party".
ARTICLE 1.
DEFINITIONS AND RELATED MATTERS
Section 1.1. Definitions. The following terms with initial capital letters
have the following meanings:
"Accounts Payable" is defined in Section 6.1.
"Acquiport Two" means Acquiport Two Corporation, a Delaware corporation.
"Acquisition Price" means the aggregate purchase price for an asset,
including bona fide purchase money financing provided by the seller and all
other Debt encumbering such asset at the time of acquisition.
"Agent" is defined in the Preamble.
"Agent's Account" means the account of the Agent identified as such on
Schedule 1.1A, or such other account as the Agent may hereafter designate by
notice to the Borrower and each Lender Party.
"Agent's Offices" means the offices of the Agent identified as such on
Schedule 1.1A, or such other offices as the Agent may hereafter designate by
notice to the Borrower and each Lender Party.
"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. The term
"control" means the possession, directly or indirectly, of the power, whether or
not exercised, to direct or cause the direction of the management or policies of
a Person, whether through the ownership of Capital Stock, by contract or
otherwise, and the terms "controlled" and "common control" have correlative
meanings. Unless otherwise indicated, "Affiliate" refers to an Affiliate of any
Borrower Party. Notwithstanding the foregoing, in no event shall any Lender
Party, any Affiliate of any Lender Party, or PSI be deemed to be an Affiliate of
the Borrower.
1
<PAGE>
"Agreement" is defined in the Preamble and includes all Schedules and
Exhibits.
"AOPP, Inc." means American Office Park Properties, Inc., a California
corporation, predecessor to Guarantor.
"AOPP, L.P." means American Office Park Properties, L.P., a California
limited partnership, currently known as Borrower.
"AMEX" means the American Stock Exchange.
"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,
awards and decrees of any Governmental Authority.
"Applicable Margin" means, with respect to each Loan, the respective
percentages per annum determined, at any time, based on the range into which
Borrower's Credit Rating then falls, in accordance with the table set forth
below. Any change in Borrower's Credit Rating causing it to move to a different
range on the table shall effect an immediate change in the Applicable Margin
(including existing Loans). Promptly after learning of a change in the
Borrower's Credit Rating, Agent shall give notice of such change to the Lenders
and include in such notice the new Applicable Margin and the effective date of
such change. In the event that more than one (1) different Credit Rating has
been assigned, the lower of the Credit Ratings will prevail.
GRID A:
-------
Applicable
Margin for Applicable
Range of Base Rate Margin for
Borrower's Loans LIBOR Loans
Credit Rating (% per annum) (% per annum)
---------------- ---------------- ----------------
Level I A-/A3
or better 0.0 0.550
Level II BBB+/Baa1 0.0 0.600
Level III BBB/Baa2 0.0 0.750
Level IV BBB-/Baa3 0.0 0.800
Level V Unrated or Below
Investment Grade 0.0 See Grid B
2
<PAGE>
GRID B:
-------
Applicable
Margin for Applicable
Base Rate Margin for
Loans LIBOR Loans
Leverage (% per annum) (% per annum)
------------------ ------------------ ----------------
Level I less than 25% 0.0 0.800
Level II 25% to 35% 0.0 0.850
Level III 35% to 45% 0.0 0.900
Level IV greater than 45% 0.0 0.950
"Assignee Lender" means any Person to which an Assignment is made pursuant
to Section 9.6.2.
"Assignment" and "Assignment and Acceptance" are defined in Section 9.6.2.
"Availability" means, on any date, the lesser of (i) an amount equal to
Unencumbered Asset Value as of the end of the most recently concluded Fiscal
Quarter for which the Borrower is, as of such date of determination, required to
have reported to the Lenders pursuant to Section 5.1.5. hereof, multiplied by
.50, and (ii) $100,000,000. Notwithstanding the foregoing, commencing on the
Closing Date, Availability shall be calculated pursuant to the Compliance
Certificate delivered by the Borrower on the Closing Date until such time as
Availability is otherwise changed or modified under this Agreement.
"Available Financing" means the sum of all undrawn committed funds under
credit facilities of the Borrower plus Cash and Cash Equivalents.
"Available Unsecured Liabilities" means the sum of Outstanding Unsecured
Liabilities plus the positive difference (if any) between (i) the sum of all
Revolving Commitments of all Lenders and (ii) the sum of all Revolving
Commitment Usage of all Lenders.
"Bankruptcy Code" means Title 11 of the United States Code (11 U.S.C.
Section 101 et seq.), as amended from time to time.
"Base Rate" means, at any time, a rate per annum equal to the greater of:
(i) the per annum rate of interest most recently publicly announced by the Agent
at its principal office in San Francisco as its prime rate for domestic
commercial loans, or (ii) the Federal Funds Rate at such time plus 0.50%.
"Base Rate Loan" means a Loan that bears interest by reference to the Base
Rate.
"Borrower" is defined in the Preamble, and includes any successor.
3
<PAGE>
"Borrower Account" means the account of the Borrower maintained with Agent,
identified as account number -----------, or such other account as the Borrower
may hereafter designate by notice to the Agent.
"Borrower Party" means the Borrower, Guarantor and any Subsidiary of the
Borrower or Guarantor. "Borrower Parties" shall mean each of the foregoing
Persons individually, and all of the foregoing Persons collectively.
"Borrowing" means a contemporaneous borrowing of Loans of the same Type.
"Borrowing Period" means, with respect to each LIBOR Loan, a period
commencing on a LIBOR Business Day and ending one (1), two (2), three (3) or six
(6) months thereafter, as specified by the Borrower pursuant to Section 2.1. or
2.2. hereof (or, if requested by the Borrower and available to all the Lenders,
a period commencing on a LIBOR Business Day and ending less than thirty (30)
days thereafter), provided that any such period that would otherwise end on a
day that is not a LIBOR Business Day shall be extended to the next succeeding
LIBOR Business Day unless such LIBOR Business Day falls in another calendar
month, in which case such period shall end on the next preceding LIBOR Business
Day.
"Business Day" means any day that is not a Saturday, Sunday or other day on
which Lenders in San Francisco, California are authorized or obligated to close.
"Capital Expenditure Reserve" means, for any period, the amount equal to
(i) $.95 annually, multiplied by (ii) the gross rentable square footage of all
Real Property owned for the entirety of such period.
"Capital Expenditures" means, for any period, the expenditures (whether
paid in cash or accrued and including Capitalized Leases entered into during the
period) of the Borrower Parties during such period with respect to property and
equipment that are capitalized on the balance sheets of the Borrower Parties in
accordance with the Borrower Parties' current capitalization practice.
"Capital Lease" means, as applied to any Person, any lease of any property
(whether real, personal or mixed) by that Person as lessee which, in conformity
with GAAP, is or should be accounted for as a capital lease on the balance sheet
of that Person.
"Capital Stock" means, with respect to any Person, all (i) shares,
interests, participations or other equivalents (howsoever designated) of capital
stock and 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 other equity interests.
"Capitalization Rate" means ten percent (10%).
"Capitalized Leases" means all leases of the Borrower Parties of real or
personal property that are required to be capitalized on the balance sheet of
the Borrower Parties. The amount of any Capitalized Lease shall be the
capitalized amount thereof.
"Cash" means money, currency or a credit balance in a Deposit Account.
4
<PAGE>
"Cash Equivalents" means (i) marketable direct obligations issued or
unconditionally guaranteed by the United States Government or issued by an
agency thereof and backed by the full faith and credit of the United States, in
each case maturing within one year after the date of acquisition thereof, (ii)
marketable direct obligations issued by any state of the United States of
America or any political subdivision of any such state or any public
instrumentality thereof, maturing within 90 days after the date of acquisition
thereof and, at the time of acquisition, having one of the two highest ratings
obtainable from any two of S&P, Moody's, Duff and Phelps, or Fitch Investors
(or, if at any time no two of the foregoing shall be rating such obligations,
then from such other nationally recognized rating services acceptable to Agent)
and not listed for possible down-grade in Credit Watch published by S&P; (iii)
commercial paper, other than commercial paper issued by any Borrower Party or
any of their respective Affiliates, maturing no more than 90 days after the date
of creation thereof and, at the time of acquisition, having a rating of at least
A-2 or P-2 from either S&P or Moody's (or, if at any time neither S&P nor
Moody's shall be rating such obligations, then the highest rating from such
other nationally recognized rating services acceptable to Agent); (iv) domestic
certificates of deposit, time deposits and bankers' acceptances which mature
within one year after the date of acquisition thereof; and (v) overnight
securities, repurchase agreements, or reverse repurchase agreements secured by
any of the foregoing types of Securities or debt instruments issued, in each
case, by (a) any commercial bank organized under the laws of the United States
of America or any state thereof or the District of Columbia or Canada having
combined capital and surplus of not less than $250,000,000 or (b) any Lender.
"Change of Control" means the occurrence of any of the following events:
(a) all or substantially all of the assets of the Borrower are sold, leased,
exchanged or otherwise transferred to any Person or group of persons or entities
acting in concert as a partnership or other group; (b) the Borrower is merged or
consolidated with or into another corporation with the effect that the common
stockholders of Borrower immediately prior to such merger or consolidation hold
less than seventy-five percent (75%) of the ordinary voting power of the
outstanding securities of the surviving corporation of such merger or the
corporation resulting from such consolidation; (c) a change in the composition
of the board of directors of the Borrower after the Closing Date as a result of
which fewer than a majority of the incumbent directors are directors who either
(i) had been directors of the Borrower twenty-four (24) months prior to such
change, or (ii) were elected, or nominated for election, to the board of
directors with the affirmative votes of a majority of the directors who had been
directors of the Borrower twenty-four (24) months prior to such change and who
were still in office at the time of the election or nomination; or (d) a Person
or group (as such term is used in Rule 13d-5 under the Securities Exchange Act
of 1934) of Persons (other than PSI) and any Person eligible to file a statement
on Schedule 13G pursuant to Rule 13d-1(b)(1) of the Securities Exchange Act of
1934) shall, as a result of a tender or exchange offer, open market purchases,
merger, privately negotiated purchases or otherwise, have become, directly or
indirectly, the beneficial owner (within the meaning of Rule 13d-3 under the
Securities Exchange Act of 1934) of securities having twenty-five percent (25%)
or more of the ordinary voting power of then outstanding securities of the
Borrower.
"Closing Date" means August 6, 1998 or such later date on which all
conditions set forth in Section 3.1. have been satisfied.
"Code" means the Internal Revenue Code of 1986, as amended from time to
time.
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"Commencement of Construction" with respect to a Real Property, means the
commencement of material on-site work (including grading) or the commencement of
a work of improvement on such Real Property.
"Commitments" means, collectively, with respect to each Lender, the
Revolving Commitment.
"Compliance Certificate" is defined in Section 5.1.3.
"Consolidated Entities" means, collectively, (i) the Borrower, (ii) any
other Person the accounts of which are consolidated or would be consolidated
with those of any Borrower Party in the consolidated financial statements of
such Borrower Party in accordance with GAAP, and (iii) all Unconsolidated Joint
Ventures of which any Borrower Party or any Person defined in subclause (ii)
above is a general partner.
"Construction-in-Process" means Real Property for which Commencement of
Construction has occurred but such Real Property is not complete.
"Contingent Obligation" means, as to any Person, any obligation, direct or
indirect, contingent or otherwise, of such Person (i) with respect to any Debt
or other obligation 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, by
agreement or otherwise, to purchase or repurchase any such Debt or obligation or
any security therefor, or to provide funds for the payment or discharge of any
such Debt or obligation (whether in the form of loans, advances, stock
purchases, capital contributions or otherwise), (ii) to provide funds to
maintain the financial condition of any other Person, (iii) otherwise to assure
or hold harmless the holders of Debt or other obligations of another Person
against loss in respect thereof, or (iv) under Hedging Contracts. The amount of
any Contingent Obligation under clause (i) or (ii) shall be the lesser of (a)
the amount of such Debt or obligation guaranteed or otherwise supported thereby,
or (b) the maximum amount guaranteed or supported by the Contingent Obligation.
The amount of any obligation under a Hedging Contract shall be determined in
accordance with standard methods of calculating credit exposure under similar
arrangements as prescribed by the Agent from time to time, taking into account
potential movements in interest rates, exchange rates or other relevant indices
and the notional principal amount, term and termination provisions of the
arrangement.
"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 or
leased by it is bound or otherwise subject.
"Credit Rating" means the rating(s) or implied rating assigned by the
Rating Agencies to Borrower's senior unsecured long term indebtedness.
"Debt" means, with respect to any Person, 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; (iv) all Capitalized Leases;
(v) all obligations of others secured by a Lien on any asset owned by such
Person or Persons whether or not such obligation or liability is assumed; (vi)
all obligations of such Person or Persons, contingent or otherwise, in respect
of any letters of credit or bankers' acceptances; (vii) all Contingent
Obligations; and (viii) all obligations under facilities for the discount or
sale of receivables.
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"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.
"Defined Benefit Plan" means any plan subject to Title IV of ERISA that is
not a Multiemployer Plan.
"Deposit Account" means a demand, time, savings, passbook or like account
with a bank, savings and loan association, credit union or like organization,
other than an account evidenced by a negotiable certificate of deposit.
"Depreciation and Amortization Expense" means (without duplication), for
any period, the sum for such period of (i) total depreciation and amortization
expense, whether paid or accrued, of the Borrower Parties and the Consolidated
Entities, plus (ii) the Borrower Parties' and any Consolidated Entity's pro rata
share of depreciation and amortization expenses of Unconsolidated Joint
Ventures. For purposes of this definition, the pro rata share of depreciation
and amortization expense of any Unconsolidated Joint Venture shall be deemed
equal to the product of (i) the depreciation and amortization expense of such
Unconsolidated Joint Venture, multiplied by (ii) the percentage of the total
outstanding Capital Stock of such Person held by a Borrower Party or any
Consolidated Entity, expressed as a decimal.
"Designated Market" means, with respect to any LIBOR Rate Loan, the London
interbank LIBOR market or such other interbank LIBOR market as may be designated
in writing from time to time by the Agent.
"Dollars" and "$" means lawful money of the United States of America.
"Domestic Lending Office" means the office, branch or Affiliate of Agent
designated as its Domestic Lending Office or such other office, branch or
Affiliate as the Agent may hereafter designate as its Domestic Lending Office
for one or more Types of Loans by notice to the Borrower and the Agent.
"EBITDA" means, for any period, (i) Net Income for such period excluding
gains (or losses) from debt restructuring, sales of Real Property or similar
extraordinary items as determined pursuant to GAAP, plus (without duplication)
(A) Interest Expense, (B) Tax Expense, and (C) Depreciation and Amortization
Expense, in each case for such period, including for the purpose of this
calculation any equity in Net Income, plus (without duplication) (A) Interest
Expense, (B) Tax Expense, and (C) Depreciation and Amortization Expense, in each
case for such period, of Unconsolidated Joint Ventures.
"Environmental Damages" means all claims, judgments, damages, losses,
penalties, liabilities (including strict liability), costs and expenses,
including costs of investigation, remediation, defense, settlement and
reasonable attorneys' fees and consultants' fees, that are incurred at any time
as a result of the existence of Hazardous Material upon, about or beneath any
Real Property or migrating to or from any Real Property, or arising in any
manner whatsoever out of any violation of Environmental Requirements.
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"Environmental Lien" means a Lien in favor of any Governmental Authority
for Environmental Damages.
"Environmental Requirements" means all Applicable Laws relating or
pertaining to Hazardous Materials, including without limitation 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.
"Equity Offering Net Proceeds" means, cumulatively, the Net cash proceeds
received and the value of assets acquired (net of Debt incurred or assumed in
connection therewith) through the issuance of Capital Stock of any Borrower
Party after the Closing Date, excluding any amounts attributable to mandatorily
redeemable preferred stock (other than preferred stock redeemable solely with
common stock). "Net" means net of underwriters' discounts, commission and other
reasonable out-of-pocket expenses actually paid to any Person (other than any
Borrower Party or any Affiliate thereof).
"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 any
Borrower Party 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.
"Exchange Act" means the Securities Exchange Act of 1934, as amended from
time to time.
"Excluded Tax" is defined in Section 2.10.1.
"Extension" is defined in Section 2.5.2.
"Extension Notice" is defined in Section 2.5.2.
"Facility Fee" is defined in Section 2.4.1.
"Federal Funds Rate" means, for any day, the rate per annum (rounded
upwards, if necessary, to the nearest 1/100th of 1%) equal to the weighted
average of the rates on overnight Federal funds transactions with members of the
Federal Reserve System arranged by Federal funds brokers on such day, as
published for such day (or, if such day is not a Business Day, for the next
preceding Business Day) by the Federal Reserve Bank of New York on the Business
Day next succeeding such day, provided that if such rate is not so published for
any day that is a Business Day, the Federal Funds Rate for such day shall be the
average rate charged to the Agent on such day on such transactions as determined
by the Agent.
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"Federal Reserve Board" means the Board of Governors of the Federal Reserve
System, or any successor thereto.
"Fee Letter" means that certain letter dated August 5, 1998 between the
Borrower and the Agent.
"Fees" means, collectively, the fees described or referenced in Section
2.4.
"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 Agent may approve in writing, which approval
shall not be unreasonably conditioned, withheld or delayed. "Fiscal Quarter" or
"fiscal quarter" means any quarter of a Fiscal Year ending on March 31, June 30,
September 30 or December 31.
"Fixed Charges" means, for any Fiscal Quarter, and without duplication,
Interest Expense for such Fiscal Quarter, plus scheduled principal amortization
payments (other than balloon payments) on Debt of the Borrower Parties and the
Consolidated Entities during such Fiscal Quarter, plus the Capital Expenditure
Reserve.
"Fixed Rate Loan" means any LIBOR Rate Loan.
"Foreign Lender Party" is as defined in 2.10.3.
"Funding Date" means any date on which a Loan is (or is requested to be)
made.
"Funds from Operations" shall be interpreted consistently with the NAREIT
Definition and shall mean, for any period, Net Income for such period excluding
gains (or losses) from debt restructuring, sales of Real Property or similar
extraordinary items as determined pursuant to GAAP, plus the portion of
Depreciation and Amortization Expenses during such period which is attributable
to Real Property, and after adjustments for Unconsolidated Joint Ventures.
(Adjustments for Unconsolidated Joint Ventures shall be calculated to reflect
funds from operations on the same basis.)
"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.
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"Gross Asset Value" means, at any time, the sum of (without duplication)
the following, determined in accordance with GAAP, subject to the limits
established pursuant to Sections 6.4.10 and 6.4.11:
(i) EBITDA for the most recently concluded Fiscal Quarter, multiplied by four,
less the annual Capital Expenditure Reserve and then divided by the
Capitalization Rate; provided, however, that for the purposes of this
calculation, any Real Property that was not Wholly Owned by a Borrower Party for
the entirety of such Fiscal Quarter shall be excluded;
(ii) the acquisition cost (including commissions, closing costs and other
acquisition expenses not in excess of two percent (2.0%) of the purchase price
and capitalized on the balance sheet of a Borrower Party) of any improved Real
Property acquired in compliance with this Agreement during the most recently
concluded Fiscal Quarter and not included in subclauses (i), (iii) or (iv) of
this definition;
(iii) the amount of all Cash and Cash Equivalents held by the Borrower or the
Guarantor as of the end of the most recently concluded Fiscal Quarter; and
(iv) the value of any Debt payable to a Borrower Party which is secured by
mortgages or deeds of trust on real estate, marketable equity securities,
unconsolidated Joint Ventures and other tangible investments, all determined in
accordance with GAAP.
"Ground Lease" means a ground lease between the Borrower as ground lessor
and a Subsidiary or other Person as ground lessee, in connection with which
ground lease the following conditions are satisfied: (a) under the terms of the
ground lease, the ground lessee is obligated to diligently pursue development of
the leased premises as a commercial office, light industrial or retail project;
and (b) either (i) the ground lessee is in compliance with that obligation, or
(ii) the Borrower is diligently pursuing remedies against the ground lessee as a
result of the ground lessee's failure to comply with that obligation.
"Guarantor" means PS Business Parks, Inc., a California corporation and
with respect to any financial information referred to herein, AOPP, Inc.
"Guaranty" means a General Continuing Repayment Guaranty made by Guarantor
substantially in the form of Exhibit G, which shall bind any successor by merger
to the Guarantor.
"Hazardous Materials" means any oil, flammable explosives, asbestos, urea
formaldehyde insulation, radioactive materials, hazardous wastes, toxic or
contaminated substances or similar materials, including, without limitation, any
substances which are "hazardous substances," "hazardous wastes," "hazardous
materials" or "toxic substances" under the Hazardous Materials Laws, and/or
other applicable environmental laws, ordinances and regulations.
"Hazardous Materials Laws" means all laws, ordinances and regulations
relating to Hazardous Materials including, without limitation: the Clean Air
Act, as amended, 42 U.S.C. Section 7401 et seq.; the Federal Water Pollution
Control Act, as amended, 33 U.S.C. Section 1251 et seq.; the Resource
Conservation and Recovery Act of 1976, as amended, 42 U.S.C. Section 6901 et
seq.; the Comprehensive Environment Response, Compensation and Liability Act of
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1980, as amended (including the Superfund Amendments and Reauthorization Act of
1988, "CERCLA"), 42 U.S.C. Section 9601 et seq.; the Toxic Substances Control
Act, as amended, 15 U.S.C. Section 2601, et seq.; the Occupational Safety and
Health Act, as amended, 29 U.S.C. Section 651, the Emergency Planning and
Community Right-to-Know Act of 1986, 42 U.S.C. Section 11001 et seq.; the Mine
Safety and Health Act of 1977, as amended, 30 U.S.C. Section 801 et seq.; the
Safe Drinking Water Act, as amended, 42 U.S.C. Section 300f et seq.; and all
comparable state and local laws, laws of other jurisdictions or orders and
regulations.
"Hedging Contract" means, for any Person, any interest rate, commodity,
foreign exchange or other hedging agreement (including swaps, collars, caps and
forward contracts) between such Person and one or more financial institutions
providing for the transfer or mitigation of fluctuations of interest rates,
exchange rates or other prices either generally or under specific contingencies.
"Indemnified Liabilities" is defined in Section 9.2.1.
"Indemnitee" is defined in Section 9.2.1.
"Intangible Assets" means (i) all write-ups (other than write-ups resulting
from foreign currency translations and write-ups of assets of a going concern
business made within twelve months after the acquisition of such business)
subsequent to March 31, 1998, in the book value of any asset owned by any
Borrower Party or any Consolidated Entity, and (ii) all unamortized debt
discount and expense, unamortized deferred charges, prepaid fees (including
without limitation legal fees, financing fees and interest but excluding impound
accounts and other deposits), goodwill, patents, trademarks, service marks,
trade names, copyrights, organization or development expenses, receivables from
employees, officers or partners, leasehold options, licenses and other
intangible assets.
"Interest Coverage Ratio" means, at any time, the ratio of (i) EBITDA for
the Fiscal Quarter then most recently ended (or, if shorter, for the period from
the Closing Date to the end of such period), to (ii) Interest Expense for such
period.
"Interest Differential" means the amount as of the date of any prepayment
of a LIBOR Rate Loan by which (a) the amount of interest that would have accrued
on such LIBOR Rate Loan for the remainder of the applicable Borrowing Period
exceeds (b) the amount of interest that would accrue on such LIBOR Rate Loan for
the period from the date of prepayment of such LIBOR Rate Loan to the last day
of the applicable Borrowing Period for such LIBOR Rate Loan if the LIBOR Rate
applicable to such LIBOR Rate Loan (the "Applicable Rate") were determined three
(3) LIBOR Business Days prior to the date of prepayment of such LIBOR Rate Loan.
The period commencing on the date of such prepayment and ending on the last day
of the applicable Borrowing Period shall be deemed to be the "Borrowing Period"
for determination of such Applicable Rate. The calculation of the Interest
Differential by the Agent shall be conclusive in the absence of manifest error.
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"Interest Expense" means, for any period, the sum (without duplication) for
such period of (i) total interest expense, whether paid or accrued, of the
Borrower Parties and the Consolidated Entities, including without limitation the
portion of any Capitalized Lease Obligations allocable to interest expense, and
the Borrower Parties' share of interest expenses in Unconsolidated Joint
Ventures but excluding amortization or write-off of debt discount and expense,
(ii) capitalized interest, (iii) to the extent not included in clauses (i) and
(ii) the Borrower Parties' pro rata share of interest expense and other amounts
of the type referred to in such clauses of the Unconsolidated Joint Ventures,
and (iv) interest incurred on any liability or obligation that constitutes a
Contingent Obligation of any Borrower Party or any Consolidated Entity. For
purposes of clause (iii), a Borrower Party's pro rata share of interest expense
or other amount of any Unconsolidated Joint Venture shall be deemed equal to the
product of (a) the interest expense or other relevant amount of such
Unconsolidated Joint Venture, multiplied by (b) the percentage of the total
outstanding Capital Stock of such Person held by a Borrower Party or any
Consolidated Entity, expressed as a decimal.
"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, (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.
"Joint Venture" means a joint venture, partnership or similar arrangement,
whether in corporate, partnership or other legal form.
"Land Holdings" means unimproved Real Property owned by any Borrower Party
with respect to which Commencement of Construction has not occurred.
"Lender" is defined in the Preamble. For purposes of the Sections referred
to in (and subject to) Section 9.6.3., "Lender" includes a holder of a
Participation.
"Lender Party" is defined in the Preamble. For purposes of the Sections
referred to in (and subject to) Section 9.6.3., "Lender Party" includes a holder
of a Participation.
"Lending Office" means, with respect to the Agent, (i) in the case of any
payment with respect to LIBOR Rate Loans, the Agent's LIBOR Lending Office, and
(ii) in the case of any payment with respect to Base Rate Loans or any other
payment under the Loan Documents, the Agent's Domestic Lending Office.
"Leverage" means Total Liabilities divided by Gross Asset Value, expressed
as a percentage.
"Liabilities" means, at any time, the aggregate amount of all liabilities
of the Guarantor that have been or properly would be classified as liabilities
on the consolidated balance sheet of the Guarantor.
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"LIBOR Business Day" means any Business Day on which dealings in United
States Dollar deposits are conducted by and between banks in the Designated
Market for LIBOR Rate Loans
"LIBOR Fee" is defined in Section 2.9.1.
"LIBOR Lending Office" means, as to each Lender, the office or branch of
the Lender so designated on the signature pages of this Agreement, or such other
office or branch of such Lender as the Lender may hereafter designate, by
written notice to the Borrower and Agent, as its LIBOR Lending Office.
"LIBOR Obligations" means Eurocurrency liabilities (as defined in Section
204.2(h) of Regulation D) and nonpersonal time deposits as defined in Section
204.2-(f)(v) of Regulation D).
"LIBOR Rate" means, with respect to any LIBOR Rate Loan, the rate per annum
(rounded upward to the next 1/16th of one percent) at which deposits in United
States Dollars are offered by the Agent in the Designated Market at
approximately 8:00 a.m. (Pacific Coast time) three (3) LIBOR Business Days prior
to the first day of the applicable Borrowing Period in an amount approximately
equal to such LIBOR Rate Loan, and for a period of time comparable to the number
of days in the applicable Borrowing Period; provided, however, that if the Agent
shall fail as a result of the occurrence of a Special Circumstance to determine
the LIBOR Rate as provided in Section 2.1.2.3., no LIBOR Rate shall be available
with respect to such LIBOR Rate Loan, and such LIBOR Rate Loan shall become a
Base Rate Loan until further designation pursuant to Section 2.1.2. The
determination of the LIBOR Rate by the Agent shall be conclusive in the absence
of manifest error.
"LIBOR Rate Loan" means a Loan which is designated as a LIBOR Rate Loan
pursuant to Section 2.1.2.
"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 and with respect to property, shall include any of
the foregoing, encumbering or otherwise relating to a partnership interest in a
partnership that owns such property.
"Liquidated Cost" shall have the meaning set forth in Section 2.
"Loan" means the Loan made or to be made pursuant to Article 2.
"Loan Account" is defined in Section 2.3.3.
"Loan Documents" means, collectively, this Agreement, the Notes, the
Guaranty, and any other agreement, instrument or other writing executed or
delivered by any Borrower Party in connection herewith, and all amendments,
exhibits and schedules to any of the foregoing.
"Major Agreements" means, with respect to any Real Property included within
the Unencumbered Pool or which Borrower proposes for inclusion within the
Unencumbered Pool, (a) a lease of such Real Property with respect to 100,000
square feet or more of gross leasable area, and (b) each ground lease affecting
such Real Property.
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"Majority Lenders" means Lenders having at least 66.67% of the aggregate
amount of the Commitments.
"Mandatory Prepayment" means any mandatory prepayment described in Section
2.6.1.
"Margin Regulations" means Regulations G, T, U and X of the Federal Reserve
Board, as amended from time to time.
"Margin Stock" means "margin stock" as defined in the Margin Regulations.
"Material," "Material Adverse Effect" or "Material Adverse Change" means
(i) a condition, circumstance 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 or
financial condition of a Borrower Party or (B) the ability of any Borrower Party
to perform its obligations under any Loan Document to which it is a party.
"Materially" has a correlative meaning.
"Maturity Date" means at any time, the then-applicable maturity date
specified hereunder. The initial Maturity Date shall be the second anniversary
of the Closing Date, although such date may be extended by the Lenders as
provided in Section 2.5.2. hereof.
"Moody's" means Moody's Investors Services, Inc. or any successor thereto.
"Multiemployer Plan" means a "multiemployer plan" as defined in Section
3(37) and Section 4001(a)(3)(A) of ERISA to which the Borrower or any of the
ERISA Affiliates is making or accruing an obligation to make contributions or to
which any such Person has within any of the preceding five plan years made or
accrued an obligation to make contributions.
"Multiple Employer Plan" means a "single employer plan," as defined in
Section 4001(a)(15) of ERISA, that (i) is maintained for employees of the
Borrower or any ERISA Affiliate and at least one person other than the Borrower
and the ERISA Affiliates or (ii) was so maintained and in respect of which the
Borrower or any ERISA Affiliate could have liability under Section 4064 or 4069
of ERISA if such plan has been or were to be terminated.
"Net Income" means, for any period, without duplication, total net income
(or loss) of the Borrower Parties and the Consolidated Entities for such period
taken as a single accounting period, including the Borrower Parties' pro rata
share of the income (or loss) of any Unconsolidated Joint Venture for such
period, provided that there shall be excluded therefrom (i) any charges for
minority interests in the Borrower held by Persons other than the Borrower, (ii)
any income or loss attributable to extraordinary items, including without
limitation, income or loss attributable to restructuring of Debt, (iii) gains
and losses from sales of assets, and (iv) except to the extent otherwise
included hereunder, the income (or loss) of any Person accrued prior to the date
it becomes a Consolidated Entity or is merged with a Borrower Party or any
Consolidated Entity or such Person's assets are acquired by a Borrower Party or
any Consolidated Entity. For purposes of this definition, the Borrower Parties'
pro rata share of income (or loss) of any Unconsolidated Joint Venture shall be
deemed equal to the product of (i) the income (or loss) of such Unconsolidated
Joint Venture, multiplied by (ii) the percentage of the total outstanding
Capital Stock of such Person held by the Borrower Parties or any Consolidated
Entity, expressed as a decimal.
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"Net Worth" means, at any date, the consolidated stockholders' equity of
the Borrower and the Consolidated Entities, excluding any amounts attributable
to mandatorily redeemable preferred stock (other than preferred stock redeemable
solely with common stock).
"Nonrecourse Debt" means any indebtedness: (a) under the terms of which the
payee's remedies upon the occurrence of an event of default are limited to
specific, identified assets of a Borrower Party which secure such indebtedness;
and (b) for the repayment of which such Borrower Party has no personal liability
beyond the loss of such specified assets, except for liability for fraud,
material misrepresentation or misuse or misapplication of insurance proceeds,
condemnation awards or rents, waste, existence of hazardous wastes or other
customary exceptions to nonrecourse provisions.
"Note" means a Revolving Loan Note.
"Notice of Borrowing" is defined in Section 2.1.2.
"Notice of Continuation/Conversion" is defined in Section 2.2.2.2.
"Notice of Responsible Officer" is defined in Section 2.1.2.6.
"Obligations" means all present and future obligations and liabilities of
the Borrower of every type and description arising under or in connection with
the Loan Documents due or to become due to the Lender Parties or any Person
entitled to indemnification, or any of their respective successors, transferees
or assigns, 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 and/or several, absolute or contingent, voluntary
or involuntary, liquidated or unliquidated, determined or undetermined, and
whether now or hereafter existing, renewed or restructured.
"Occupancy Rate" with respect to any Real Property, shall mean the ratio of
(a) rentable square feet in such Real Property which are physically occupied by
tenants paying rent pursuant to a lease to (b) the number of rentable square
feet in such Real Property, expressed as a percentage.
"Office Park Property" means each commercial office, light industrial or
retail property owned by any Borrower Party.
"Operating Lease" means, as applied to any Person, any lease of any
property (whether real, personal, or mixed) under which such Person is the
lessee and that is not capitalized on the balance sheet of such Person.
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"Other Assets" means (i) Land Holdings; (ii) Capital Stock (which is owned
by a Borrower Party) of any Person; and (iii) Debt payable to a Borrower Party.
"Outstanding Unsecured Liabilities" means, at any time, the sum of (i)
Revolving Commitment Usage; (ii) the outstanding principal balance of other Debt
of any of the Borrower Parties which is not secured by a Lien (provided,
however, that Debt pursuant to which any Borrower Party shall have granted a
negative pledge or similar promise shall not be deemed to be secured by a Lien);
(iii) trade payables of the Borrower for construction in progress; (iv) all
Liquidated Costs; and (v) with respect to any Borrower Party that has any
employees at any time or has any ERISA Affiliate, benefit liabilities (whether
or not vested) under all Plans (excluding all Plans with assets greater than or
equal to liabilities (whether or not vested)) in excess of the current value of
the assets of such Plans allocable to such benefits; provided, however, that the
portion of any Debt secured by collateral other than real property, which
portion exceeds the fair market value of the collateral therefor, shall be
deemed to be Debt that is not secured by a Lien.
"Overdraw" means any event, condition or circumstance under which the
aggregate Revolving Commitment Usage of all Lenders exceeds Availability.
"Participant" means any holder of a Participation.
"Participation" is defined in Section 9.6.3.
"PBGC" means the Pension Benefit Guaranty Corporation, as defined in Title
IV of ERISA, or any successor.
"Periodic Payment Date" means the first Business Day of each month.
"Permitted Liens" means:
(a) Liens (other than Environmental Liens and any Lien imposed under ERISA)
for taxes, assessments or charges of any Governmental Authority or claims not
yet due;
(b) Liens (other than any Lien imposed under ERISA) incurred or deposits
made in the ordinary course of business (including without limitation surety
bonds and appeal bonds) in connection with workers' compensation, unemployment
insurance and other types of social security benefits or to secure the
performance of tenders, bids, leases, contracts (other than for the repayment of
Indebtedness), and statutory obligations;
(c) Liens imposed by laws, such as mechanics' liens and other similar liens
arising in the ordinary course of business which secure payment of obligations
not more than thirty (30) days past due or are being contested as permitted
under this Agreement;
(d) any Liens which are approved by the Majority Lenders; and
(e) rights of lessees under leases and the rights of lessors under Capital
Leases.
"Person" means an individual, a corporation, a partnership, a limited
liability company, a trust, an unincorporated organization or any other entity
or organization, including a government or any agency or political subdivision
thereof and, for the purpose of the definition of "ERISA Affiliate," a trade or
business.
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"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, other than a Multiemployer Plan, irrespective of whether any of
the foregoing is funded, in which any personnel of the Borrower or ERISA
Affiliate participates or from which any such personnel may derive a benefit.
"Post-Default Rate" means, at any time, a rate per annum equal to the Base
Rate in effect at such time plus 5%.
"Prescribed Forms" is defined in Section 2.10.3.
"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.
"Projections" means those certain financial projections of the Borrower and
Guarantor submitted to Agent on December 15, 1997 and during the week of July
27, 1998.
"Property Expenses" means, for any Real Property, all operating expenses
relating to such Real Property, including without limitation the following items
(provided, however, that notwithstanding anything to the contrary in this
definition, Property Expenses shall not include Debt service, capital
improvements, Depreciation and Amortization Expenses and any extraordinary items
not considered operating expenses under GAAP, and the outstanding principal
balance of assessments shown as a liability on the Borrower's balance sheet):
(i) all expenses for the operation of such Real Property, including any
management fees payable and all insurance expenses, but not including any
expenses incurred in connection with a sale or other capital or interim capital
transaction;
(ii) water charges, property taxes (including the nonprincipal component of
assessment debt not shown on Borrower's balance sheet), assessments, sewer rents
and other impositions, other than fines, penalties, interest or such impositions
(or portions thereof) that are payable by reason of the failure to pay an
imposition timely; and
(iii) the cost of routine maintenance, repairs and minor alterations, to
the extent they are expensed by Borrower under GAAP.
"Property Income" means, for any Real Property, all gross revenue from the
ownership and/or operation of such Real Property (but excluding income from a
sale or other capital item transaction), service fees and charges, tenant
expense reimbursement income payable with respect to such Real Property (but not
such reimbursement for expenditures not included as a Property Expense) and the
proceeds of any business or rental interruption insurance with respect to such
Real Property.
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"Property Information" means the following information and other items with
respect to each Real Property which Borrower intends to designate as an
Unencumbered Asset to be added to the Unencumbered Pool:
(i) A physical description of such Real Property, the date upon which
such Real Property was acquired or is proposed to be acquired by Borrower,
the Acquisition Price of such Real Property, if the building located on
such Real Property or the use of such building does not conform to
applicable zoning ordinances and laws, a description of such nonconformity
and whether such building or use is a legal nonconforming use, a copy of
any reports delivered to Borrower with respect to the structural integrity
of improvements located on such Real Property and Borrower's preliminary
budget for nonrevenue enhancing capital expenditures for such Real Property
for the next succeeding eight (8) Fiscal Quarters;
(ii) A current operating statement for such Real Property, audited or
certified by Borrower as being true and correct in all material respects
and prepared in accordance with GAAP, and comparative operating statements
for the current interim fiscal period and for the previous two (2) Fiscal
Years (or such lesser period as it has been operating); provided, however,
that, if Borrower shall have owned such Real Property for less than the
period to be covered by such operating statements and comparative operating
statements, then the audit and certification requirements shall extend only
to the period of ownership by Borrower, and Borrower shall provide to Agent
complete copies of any operating statements prepared by former owner(s) of
such Real Property with respect to the remainder of the periods required
hereunder, if the same are available to Borrower;
(iii) A current Rent Roll for such Real Property, certified by
Borrower as being true and correct (or if Borrower does not presently own
the Property, a copy of the Rent Roll prepared by the seller thereof);
(iv) A "Phase I" environmental assessment of such Real Property not
more than twelve (12) months old, prepared by an environmental engineering
firm reasonably acceptable to Agent;
(v) Copies of all Major Agreements affecting such Real Property;
(vi) A copy of Borrower's most recent Owner's or Leasehold Policy of
Title Insurance, covering such Real Property or a current preliminary title
report; and
(vii) If Borrower's interest in such Real Property is a ground
leasehold interest, a copy of the ground lease pursuant to which Borrower
leases such Real Property and all amendments thereto and memoranda thereof.
"Property NOI" means, for any Real Property for any period, (i) all
Property Income for such period, minus (ii) all Property Expenses for such
period.
"PSI" means Public Storage, Inc., a California corporation.
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"Rating Agencies" means, collectively, S&P and Moody's. Other nationally
recognized rating agencies shall be "Rating Agencies" following approval thereof
by the Agent.
"Real Property" means each of those parcels (or portions thereof) of real
property, improvements and fixtures thereon and appurtenances thereto now or
hereafter owned or leased for use or development as an Office Park Property by
any Borrower Party and uses ancillary thereto.
"Regulation D" means Regulation D of the Federal Reserve Board, as amended
from time to time.
"Regulatory Change" means (i) the adoption or becoming effective after the
date hereof of any treaty, law, rule or regulation, (ii) any change in any such
treaty, law, rule or regulation (including Regulation D), or any change in the
administration or enforcement thereof, by any Governmental Authority, central
bank or other monetary authority charged with the interpretation or
administration thereof, in each case after the date hereof, or (iii) compliance
after the date hereof by any Lender Party (or its Lending Office or, in the case
of capital adequacy requirements, any holding Borrower of any Lender Party)
with, any interpretation, directive, request, order or decree (whether or not
having the force of law) of any such Governmental Authority, central bank or
other monetary authority.
"Rent Roll" means, with respect to any Real Property, a rent roll for such
Real Property stating for each tenancy within such Real Property the identity of
the lessee, the suite designation of the space leased, the gross leasable area
included within such space, the date of commencement and the date of termination
of such tenancy, the periods of any options to extend or terminate such tenancy,
the base rent and any escalations or operating expense reimbursement payable in
respect of such tenancy and the type of lease (i.e., gross or degree to which
net of expenses, taxes and other items).
"Rental Payments" means, for any period, (i) all Interest Expense
attributable to Capitalized Leases plus (ii) all rents paid under Operating
Leases, in each case for such period.
"Reportable Event" means any of the events set forth in Section 4043(b) of
ERISA or the regulations thereunder, except any such event (other than the
failure to meet minimum funding standards of Section 412 of the Code or Section
302 of ERISA) as to which the provision for 30 days' notice to the PBGC is
waived under applicable regulations.
"Responsible Officer" is defined in Section 2.1.2.6.
"Restricted Payment" means (i) any dividend or other distribution, direct
or indirect, on account of any Capital Stock of any Borrower Party now or
hereafter outstanding, except (a) a dividend or other distribution payable
solely in shares or equivalents of the same class of Capital Stock and (b) the
issuance of equity interests upon the exercise of outstanding warrants, options
or other rights, or (ii) any redemption, retirement, sinking fund or similar
payment, purchase or other acquisition for value, direct or indirect, of any
Capital Stock of any Borrower Party now or hereafter outstanding.
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"Revolving Commitment" means, with respect to each Lender, the amount such
Lender is committed to loan with respect to this Agreement. With respect to the
initial Lender hereunder, such amount shall mean $100,000,000.00.
"Revolving Commitment Termination Date" is defined in Section 2.5.1.
"Revolving Commitment Usage" means, at any time, (i) with respect to any
Lender, the aggregate unpaid principal amount of all Revolving Loans made by
such Lender and (ii) with respect to all Lenders, the aggregate unpaid principal
amount of all Revolving Loans.
"Revolving Loan" is defined in Section 2.1.
"Revolving Loan Note" means a Revolving Loan Note made by the Borrower
payable to the order of any Lender, in the amount of the lesser of (i) such
Lender's Revolving Commitment and (ii) the aggregate principal amount of
Revolving Loans made by such Lender, which note is substantially in the form of
Exhibit A-1, as amended from time to time.
"S&P" means Standard & Poor's Ratings Services, a division of The
McGraw-Hill Companies, Inc., or any successor thereto.
"SEC" means the United States Securities and Exchange Commission, and any
successor.
"Secured Debt" means Debt of any Borrower Party or any Consolidated Entity
in any case secured by any Lien, including without limitation (i) all Debt of
the Borrower or any Consolidated Entity secured by a Lien upon any Real Property
and (ii) all Debt which has a liquidation preference, contractual or otherwise,
over the Obligations (other than wages or tenant security deposits).
"Securities Act" means the Securities Act of 1933, as amended from time to
time.
"Senior Officer" means, with respect to the general partner of the
Borrower, the Chairman of the Board of Directors, the President, the Chief
Executive Officer, the Chief Operating Officer, the Chief Financial Officer, the
Treasurer or any Senior Vice President in charge of a principal business unit or
division of the general partner of the Borrower.
"Shareholders' Agreement" means that certain Agreement Among Shareholders
And Company dated as of December 23, 1997 among Acquiport Two, AOPP, Inc., AOPP,
L.P. and PSI as amended by that certain letter agreement amongst such parties
dated January 21, 1998.
"Single Employer Plan" means a Plan other than a Multiemployer Plan.
"Solvent" means, with respect to any Person, that: (i) the total present
fair salable value of such Person's assets on a going concern basis is in excess
of the total amount of such Person's liabilities, including contingent
liabilities; (ii) such Person is able to pay its liabilities and contingent
liabilities as they become due; and (iii) such Person does not have unreasonably
small capital to carry on such Person's business as theretofore operated and as
proposed to be operated.
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"Special Circumstance" means the application or adoption of any law or
interpretation, or any change therein or thereof, or any change in the
interpretation or administration thereof by any Governmental Authority charged
with the interpretation or administration thereof, or compliance by the Lenders,
any Assignee Lender, any Participant, or the LIBOR Lending Office of any Lender,
Assignee Lender or Participant, with any request or directive (whether or not
having the force of law) of any such Governmental Authority, or the occurrence
of circumstances affecting the Designated Market or the ability of the Lenders
to fix interest rates with reference to the Designated Market which are beyond
the reasonable control of the Lenders, any Assignee Lender or Participant.
"Stated Revolving Termination Date" is defined in Section 2.5.1.
"Subsidiary" means, as of any date of determination and with respect to any
Person, any corporation or partnership (whether or not, in either case,
characterized as such or as a "joint venture"), whether now existing or
hereafter organized or acquired: (a) in the case of a corporation, of which a
majority of the securities having ordinary voting power for the election of
directors or other governing body (other than securities having such power only
by reason of the happening of a contingency) are at the time beneficially owned
by such Person and/or one or more Subsidiaries of such Person, or (b) in the
case of a partnership, of which such Person or a subsidiary of such Person is a
general partner or of which a majority of the partnership or other ownership
interests are at the time beneficially owned by such Person and/or one or more
of its subsidiaries.
"Tangible Net Worth" means, at any time, Net Worth minus Intangible Assets
at such time.
"Tax Expense" means (without duplication), for any period, total tax
expense (if any) attributable to income and franchise taxes based on or measured
by income, whether paid or accrued, of the Borrower Parties and the Consolidated
Entities, including the Borrower Parties' and Consolidated Entity's pro rata
share of tax expenses in any Unconsolidated Joint Venture. For purposes of this
definition, a Borrower Party's pro rata share of any such tax expense of any
Unconsolidated Joint Venture shall be deemed equal to the product of (i) such
tax expense of such Unconsolidated Joint Venture, multiplied by (ii) the
percentage of the total outstanding Capital Stock of such Person held by the
Borrower Parties or any Consolidated Entity, expressed as a decimal.
"Taxes" means any present or future income, stamp and other taxes, charges,
fees, levies, duties, imposts, withholdings or other assessments, together with
any interest and penalties, additions to tax and additional amounts imposed by
any federal, state, local or foreign taxing authority upon any Person.
"Termination Event" means: (i) a Reportable Event or an event described in
Section 4068(f) of ERISA; (ii) the withdrawal of the Borrower or any of its
ERISA Affiliates from a Multiple Employer Plan during a plan year in which it
was a "substantial employer" as defined in Section 4001(a)(2) of ERISA or the
cessation of operations at a facility in the circumstances described in Section
4068(f) of ERISA; (iii) the filing of a notice of intent to terminate a Defined
Benefit Plan (including any such notice with respect to a Defined Benefit Plan
amendment referred to in Section 4041(e) of ERISA) or the termination of a
Defined Benefit Plan excluding, for purposes of this clause (iii), any standard
termination under Section 4041(b) of ERISA; (iv) the institution of proceedings
to terminate a Defined Benefit Plan by the PBGC; or (v) the appointment of a
trustee to administer any Defined Benefit Plan under Section 4042 of ERISA; or
(vi) any other event or condition that might reasonably constitute grounds under
Section 4042 of ERISA for the termination of, or the appointment of a trustee to
administer, any Defined Benefit Plan.
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"To the best of knowledge of" means, when modifying a representation,
warranty or other statement of any Person, that the fact or situation described
therein is known by the Person (or, in the case of a Person other than a natural
person, known by a Responsible Officer of that Person) making the
representation, warranty or other statement, or with the exercise of reasonable
due diligence under the circumstances (in accordance with the standard of what a
reasonable man in similar circumstances would have done) should have been known
by the Person (or, in the case of a Person other than a natural person, should
have been known by a Responsible Officer of that Person).
"Total Liabilities" means, at any time, without duplication, the aggregate
amount of (i) all Debt and other liabilities of the Borrower Parties and the
Consolidated Entities reflected in the financial statements of the Borrower
Parties or disclosed in the financial notes thereto, plus (ii) all liabilities
of all Unconsolidated Joint Ventures that is otherwise recourse to the Borrower
Parties or any Consolidated Entity or any of their respective assets or that
otherwise constitutes Debt of any Borrower Party or any Consolidated Entity,
plus (iii) the Borrower Parties' pro rata share of all Debt and other
liabilities of any Unconsolidated Joint Venture not otherwise constituting Debt
of or recourse to any Borrower Party or any Consolidated Entity or any of its
assets. For purposes of clause (iii), the Borrower Parties' pro rata share of
all Debt and other liabilities of any Unconsolidated Joint Venture shall be
deemed equal to the product of (a) such Debt or other liabilities, multiplied by
(b) the percentage of the total outstanding Capital Stock of such Person held by
a Borrower Party or any Consolidated Entity, expressed as a decimal.
"Trademarks" means trademarks, servicemarks and trade names, all
registrations and applications to register such trademarks, servicemarks and
trade names and all renewals thereof, and the goodwill of the business
associated with or relating to such trademarks, servicemarks and trade names,
including without limitation any and all licenses and rights granted to use any
trademark, servicemark or trade name owned by any other person.
"Type" is defined in Section 2.1.1.
"Unconsolidated Joint Venture" means (i) any Joint Venture of any Borrower
Party or any Consolidated Entity in which any Borrower Party or such
Consolidated Entity holds any Capital Stock but which would not be combined with
a Borrower Party in the consolidated financial statements of such Borrower Party
in accordance with GAAP, and (ii) any Investment of the Borrower or any
Consolidated Entity in any Person that is not a Joint Venture.
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"Unencumbered Asset Value" means, at any time, with respect to Unencumbered
Assets that have been Wholly-Owned for at least one full Fiscal Quarter at such
time, the product of the Property NOI of such Unencumbered Assets during the
period of the full Fiscal Quarter ended most recently, multiplied by 4, less the
product of (i) $.95 multiplied by (ii) the gross rentable square footage of all
Unencumbered Assets that have been Wholly-Owned owned for such period, divided
by the Capitalization Rate plus Cash and Cash Equivalents (excluding tenant
deposits and other restricted cash).
"Unencumbered Asset" means any Real Property designated by Borrower that
satisfies all of the following conditions:
(i) is an Office Park Property;
(ii) is free and clear of any Lien, other than (a) easements,
covenants, and other restrictions, charges or encumbrances not securing
Indebtedness that do not interfere materially with the ordinary operations
of such Real Property and do not materially detract from the value of such
Real Property; (b) building restrictions, zoning laws and other
Requirements of Law that do not interfere materially with the ordinary
operations of such Real Property and do not materially detract from the
value of such Real Property; (c) leases and subleases of such Real Property
in the ordinary course of business; and (d) Permitted Liens and no
condition exists with respect to such Real Property which could give rise
to Environmental Damages;
(iii) is Wholly-Owned; and
(iv) after adding such Real Property to the Unencumbered Pool, the
Real Properties in the Unencumbered Pool shall not have an aggregate
Occupancy Rate less than ninety percent (90%).
As of the date hereof all Unencumbered Assets are described on Schedule
1.1C, provided that if any Unencumbered Asset (including any of the properties
listed on Schedule 1.1C) no longer satisfies any of the conditions set forth in
the foregoing clauses (i) through (iv), inclusive, the Majority Lenders shall
have the right, at any time and from time to time, to notify the Borrower that,
effective upon the giving of such notice, such asset shall no longer be
considered an Unencumbered Asset. If the Borrower intends to designate a Real
Property as an Unencumbered Asset to be added to the Unencumbered Pool from time
to time, it will notify the Agent of such intention, which notice will include,
with respect to such Real Property, the Property Information with respect to
such Real Property, and such other information and items as may be reasonably
requested by Agent with respect to such Real Property. Upon Agent's concurrence
that the evidence presented by Borrower is sufficient to show that such Real
Property constitutes an Unencumbered Asset, it shall be added to the
Unencumbered Pool. If the Borrower at any time intends to withdraw any Real
Property from the Unencumbered Pool, it shall (A) notify the Agent of its
intention, and (B) deliver to the Agent a certificate of its chief financial
officer, chief executive officer or chief operating officer setting forth the
calculations establishing that the Borrower will be in compliance with this
Agreement after giving effect to such withdrawal (and any concurrent addition of
Real Properties to the Unencumbered Pool), which calculations shall be in such
detail, and otherwise in such form and substance, as Agent reasonably requires.
Effective automatically upon receipt of such notice and certificate by the Agent
(or upon any later date stated in such notice), such Real Property shall no
longer constitute an Unencumbered Asset.
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"Unencumbered Pool" means the pool of Unencumbered Assets.
"Unencumbered Net Operating Income" means that portion of Property NOI
derived from Unencumbered Assets.
"Unsecured Interest Expense" means Interest Expense other than that
attributable to liabilities which are Secured Debt.
"Wholly-Owned" means, with respect to any Office Park Property or other
asset owned, that (i) title to such asset is held directly by the Borrower or
Guarantor, or (ii) in the case of Office Park Property, title to such property
is held by a Consolidated Entity at least 99% of the Capital Stock of which is
held of record and beneficially by the Borrower or Guarantor and the balance of
the Capital Stock of which (if any) is held of record and beneficially by the
Guarantor (or any wholly-owned Subsidiary of the Guarantor).
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 Recitals, 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 "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 not prohibited by the Loan Documents. 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. Except as expressly provided otherwise in
Article 2, any determination or calculation contemplated by Article 2
of this Agreement that is made by any Lender Party shall be final and
conclusive and binding upon the Borrower, and, in the case of
determinations by the Agent, also the other Lender Parties, in the
absence of manifest error. References in this Agreement to any
"determination" by any Lender Party include good faith estimates by
such Lender Party (in the case of quantitative determinations), and
good faith beliefs by such Lender Party (in the case of qualitative
determinations). All references herein to "discretion" of any Lender
Party (or terms of similar import) shall mean "absolute and sole
discretion." All consents and other actions of any Lender Party
contemplated by this Agreement may be given, taken, withheld or not
taken in such Lender Party'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 concurred in by the
independent public accountants of the Borrower) with the audited
consolidated financial statements of the Borrower and Guarantor
referred to in Section 4.5.
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1.2.4. Governing Law. THIS AGREEMENT SHALL BE GOVERNED BY, AND
CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF CALIFORNIA
(OTHER THAN CHOICE OF LAW RULES THAT WOULD REQUIRE THE APPLICATION OF
THE LAWS OF ANY OTHER JURISDICTION).
1.2.5. Headings. The Article and Section headings used in this
Agreement are for convenience of reference only and shall not affect
the construction hereof.
1.2.6. 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.
1.2.7. 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.
1.2.8. Exhibits, Etc. All of the appendices, exhibits and
schedules attached to this Agreement shall be deemed incorporated
herein by reference.
1.2.9. Other Definitions. Terms otherwise defined in Preamble,
the Recitals, and in any other provision of this Agreement or any of
the other Loan Documents not defined or referenced in Section 1.1.
have their respective defined meanings when used herein or therein.
ARTICLE 2.
AMOUNTS AND TERMS OF THE CREDIT FACILITIES
Section 2.1. Revolving Loans. Each Lender severally agrees, upon the terms
and subject to the conditions set forth in this Agreement, at any time from and
after the Closing Date until the Business Day next preceding the Revolving
Commitment Termination Date, to make revolving loans (each a "Revolving Loan")
to the Borrower in an aggregate principal amount not to exceed at any time
outstanding, when added to other Revolving Commitment Usage of such Lender at
such time, the Revolving Commitment of such Lender, provided that the Revolving
Commitment Usage of all Lenders at any time, in the aggregate, shall not exceed
the lesser of (i) aggregate Revolving Commitments of all Lenders and (ii)
Availability.
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2.1.0.1. Revolving Loans may be voluntarily prepaid pursuant to
Section 2.6.2. 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.
at the time of such re-borrowing.
2.1.1. Type of Loans and Minimum Amounts. Loans made under this
Section 2.1. may be Base Rate Loans or LIBOR Rate Loans (each a "Type" of Loan),
subject, however, to Section 2.2.2.
2.1.1.1. Each Borrowing of Loans (other than LIBOR Rate Loans) shall
be in a minimum aggregate amount of Two Hundred Thousand Dollars ($200,000.00)
and integral multiples of Ten Thousand Dollars ($10,000.00). Unless the Agent
otherwise consents in writing: (i) the principal amount of each LIBOR Rate Loan
shall be an integral multiple of Ten Thousand Dollars ($10,000.00), but not less
than Two Hundred Thousand Dollars ($200,000.00); and (ii) no more than fifteen
(15) LIBOR Rate Loans shall be permitted to be outstanding at any one time.
2.1.2. Notice of Borrowing.
2.1.2.1. When the Borrower desires to borrow Loans pursuant to
Section 2.1., it shall deliver to the Agent a Notice of Borrowing substantially
in the form of Exhibit B-1, duly completed and executed by a Responsible Officer
(each such notice shall be referred to herein as a "Notice of Borrowing"), no
later than 9:00 a.m. (Pacific Coast time) (a) at least one Business Day before
the proposed Funding Date in the case of a Borrowing of Base Rate Loans, or (b)
at least three LIBOR Business Days before the proposed Funding Date, in the case
of a Borrowing of LIBOR Rate Loans. Except to the extent designated as a LIBOR
Rate Loan pursuant to this Section 2.1.2., the unpaid principal balance of all
Loans shall constitute a Base Rate Loan, and each LIBOR Rate Loan shall become a
Base Rate Loan on the last day of the applicable Borrowing Period.
2.1.2.2. Subject to the terms and conditions set forth in this
Agreement, at any time and from time to time from the Closing Date to the LIBOR
Business Day next preceding the Revolving Commitment Termination Date, the
Borrower may request that any portion of requested or outstanding Loans be
designated, pro rata as to each Lender according to the Commitment of that
Lender, as a LIBOR Rate Loan, provided that the amount included in any such
request shall not exceed the aggregate Revolving Commitments less the aggregate
Revolving Commitment Usage (other than LIBOR Rate Loans with respect to which
the last day in the applicable Borrowing Period coincides with the first day in
the Borrowing Period applicable to the proposed LIBOR Rate Loan).
2.1.2.3. As soon as practicable after receipt of a Notice of
Borrowing pursuant to Section 2.1.2.2., the Agent shall determine the applicable
LIBOR Rate (which determination shall be conclusive in the absence of manifest
error) and shall promptly (and in any event not later than 9:00 a.m. Pacific
Coast time on the date of receipt of such request) give notice of the same to
the Borrower by telephone; at the time of receipt of such telephonic notice, the
Borrower shall immediately either accept such rate for the Loan in question or
reject such rate, in which case the Borrower's Notice of Borrowing with respect
to such Loan shall be ineffective.
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2.1.2.4. If the Borrower gives confirmation by 9:00 a.m., Pacific
Coast time, on the date of delivery of a Notice of Borrowing pursuant to Section
2.1.2.1., that it accepts the applicable LIBOR Rate for the LIBOR Rate Loan in
question, as provided in Section 2.1.2.3., the Agent shall, prior to 10:00 a.m.,
Pacific Coast time, three (3) Business Days before any LIBOR Rate Loan, give
notice to each Lender by telephone, telecopier or telex stating (i) the
effective date of the LIBOR Rate Loan, (ii) the amount of the LIBOR Rate Loan
and (iii) the applicable LIBOR Rate. In no event shall the Agent's failure to so
notify each Lender affect the Borrower's election of the LIBOR Rate with respect
to any Loan.
2.1.2.5. Upon fulfillment of the applicable conditions set forth in
this Section 2.1.2. and in Section 3.2., the LIBOR Rate quoted to and accepted
by the Borrower pursuant to Section 2.1.2.3. shall become effective with respect
to the LIBOR Rate Loan in question on the first day of the applicable Borrowing
Period.
2.1.2.6. The Borrower shall notify the Agent of the names of its
officers and employees of its general partner which are authorized to request
and take other actions with respect to loans on behalf of the Borrower (each a
"Responsible Officer") by providing the Agent with a Notice of Responsible
Officers substantially in the form of Exhibit B-3, duly completed and executed
by a Senior Officer (a "Notice of Responsible Officer"). The Agent shall be
entitled to rely conclusively on a Responsible Officer's authority to request
and take other actions with respect to Loans on behalf of the Borrower until the
Agent receives a new Notice of Responsible Officer that no longer designates
such Person as a Responsible Officer. The Agent shall have no duty to verify the
authenticity of the signature appearing on any Notice of Borrowing, Notice of
Responsible Officer or any other notice given under the Loan Documents.
2.1.2.7. Except as provided in Section 2.1.2.3., any Notice of
Borrowing delivered pursuant to this Section 2.1.2. shall be irrevocable and the
Borrower shall be bound to make a borrowing in accordance therewith.
2.1.2.8. The Agent shall promptly notify each Lender of the contents
of any Notice of Borrowing received by it and such Lender's pro rata portion of
the Borrowing requested. Not later than 10:00 a.m. (Pacific Coast time) on the
date specified in such notice as the Funding Date, each Lender, subject to the
terms and conditions hereof, shall make its pro rata portion of the Borrowing
available, in immediately available funds, to the Agent at the Agent's Account.
2.1.3. Funding.
Not later than 12:00 noon (Pacific Coast time) or such later time as
may be agreed to by the Borrower and the Agent, and subject to and upon
satisfaction of the applicable conditions set forth in Article 3 as determined
by the Agent, the Agent shall make the proceeds of the requested Loans available
to the Borrower in Dollars in immediately available funds in the Borrower
Account.
Section 2.2. Interest; Late Charge; Conversion/Continuation.
2.2.1. Interest Rate and Payment.
2.2.1.1. Each Loan shall bear interest on the unpaid principal amount
thereof, from and including the date of the making of such Loan to and excluding
the due date or the date of any repayment thereof, at the following rates per
annum: (a) for so long as and to the extent that such Loan is a Base Rate Loan,
at the Base Rate (as in effect from time to time) (b) for so long as and to the
extent that such Loan is a LIBOR Rate Loan, at the LIBOR Rate for each Borrowing
Period applicable thereto plus the Applicable Margin.
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2.2.1.2. In the event that the Borrower fails to pay any interest
payable under this Agreement on or prior to the expiration of ten (10) days
after such interest first becomes due and payable, the Borrower shall pay to the
Agent for the pro rata benefit of the Lenders a late charge equal to four
percent (4%) of the amount of such unpaid interest payment. The Borrower
acknowledges and agrees that an accurate determination of the Lender Parties'
damages as a result of the Borrower's failure to pay interest as and when due
hereunder is not reasonably practicable, and the late charge provided for herein
is a reasonable estimate of the amount of additional cost and the value of the
loss of use of funds that will be suffered by the Lender Parties in the event
that an interest payment is not paid when due.
2.2.1.3. Notwithstanding the foregoing provisions of this Section
2.2.1., any interest payable under this Agreement and the other Loan Documents
that is not paid within thirty (30) days after the date such amount is due, or
any principal or other amount payable under this Agreement that is not paid when
due, shall in each case thereafter bear interest at a rate per annum equal to
the Post-Default Rate, without notice or demand of any kind. Such interest at
the Post-Default Rate shall be in addition to, and not in lieu of, the late
charge provided for in Section 2.2.1.2.
2.2.1.4. Accrued interest shall be payable in arrears (a) in the case
of any Type of Loan, on each Periodic Payment Date; and (b) in the case of any
Loan, when the Loan shall become due (whether at maturity, by reason of
prepayment, acceleration or otherwise).
2.2.1.5. In order to assure timely payment to Agent of accrued
interest, principal, fees and late charges due and owing under the Loans,
Borrower hereby irrevocably authorizes Agent to directly debit Borrower's demand
deposit account with Agent, account number 4828-665364, for payment when due of
all such amounts payable hereunder. Borrower represents and warrants to Agent
that Borrower is the legal owner of said account. Written confirmation of the
amount and purpose of any such direct debit shall be given to Borrower by Agent
not less frequently than monthly. In the event any direct debit hereunder is
returned for insufficient funds, Borrower shall pay Agent upon demand, in
immediately available funds, all amounts and expenses due and owing to Agent.
2.2.2. Conversion or Continuation.
2.2.2.1. Subject to Section 2.1.2. and this Section 2.2.2., the
Borrower shall have the option (a) at any time, to convert all or any part of
its outstanding Base Rate Loans to Fixed Rate Loans, or (b) upon the expiration
of any Borrowing Period applicable to a Fixed Rate Loan, to continue all or any
portion of such Loan as a Fixed Rate Loan provided that, there does not exist a
Default or an Event of Default at such time. If a Default or an Event of Default
shall exist upon the expiration of the Borrowing Period applicable to any Fixed
Rate Loan, such Loan automatically shall be converted into a Base Rate Loan.
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2.2.2.2. If the Borrower elects to convert or continue a Loan under
this Section 2.2.2., it shall deliver to the Agent a Notice of
Continuation/Conversion substantially in the form of Exhibit B-5, duly completed
and executed by a Responsible Officer (a "Notice of Continuation/Conversion"),
not later than 10:00 a.m. (Pacific Coast time) at least three LIBOR Business
Days before the proposed conversion or continuation date, if the Borrower
proposes to convert into, or to continue, a LIBOR Rate Loan.
2.2.2.3. Any Notice of Continuation/Conversion shall be irrevocable
and the Borrower shall be bound to convert or continue in accordance therewith.
If any request for the conversion or continuation of a Loan is not made in
accordance with this Section 2.2.2., or if no notice is so given with respect to
a LIBOR Rate Loan as to which the Borrowing Period expires, then such Loan
automatically shall be converted into a Base Rate Loan.
2.2.3. Computations. Interest on each Loan and all Fees 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. Any change in the
interest rate on any Loan or other amount resulting from a change in the rate
applicable thereto (or any component thereof) pursuant to the terms hereof shall
become effective as of the opening of business on the day on which such change
in the applicable rate (or component) shall become effective.
2.2.4. Maximum Lawful Rate of Interest. The rate of interest payable
on any Loan or other amount shall in no event exceed the maximum rate
permissible under Applicable Law. If the rate of interest payable on any Loan 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
Lenders is that which would have been received by the Lenders but for the
operation of the first sentence of this Section.
Section 2.3. Notes, Etc.
2.3.1. Loans Evidenced by Notes. The Revolving Loans made by each
Lender shall be evidenced by a single Revolving Loan Note in favor of such
Lender. The Revolving Loan Notes shall each be dated the Closing Date and stated
to mature in accordance with the provisions of this Agreement applicable to the
relevant Loans.
2.3.2. Notation of Amounts and Maturities, Etc. The Agent is hereby
irrevocably authorized to generate a computer record of the information
contemplated by Schedule A to the Notes and to attach same to the Notes (or a
continuation thereof). 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 Loans evidenced
thereby, together with all interest accrued thereon. All such notations shall
constitute conclusive evidence of the accuracy of the information so recorded,
in the absence of manifest error.
2.3.3. Loan Account. The Agent shall maintain a loan account (the
"Loan Account") on its books in which shall be recorded (a) all Loans made by
the Lenders to the Borrower pursuant to this Agreement, (b) all other
appropriate debits and credits as and when due in accordance with this
Agreement, including all Fees, charges, expenses and interest, and (c) all
payments made by the Borrower on the Obligations. All entries in the Loan
Account shall be made in accordance with the customary accounting practices of
the Agent as in effect from time to time.
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Section 2.4. Fees.
2.4.1. Facility Fee. On each October 1, January 1, April 1 and July 1
of each year, the Borrower shall pay in advance to the Agent, for the pro rata
benefit of the Lenders, a facility fee for the Fiscal Quarter then commencing
equal to one-fourth of the product of (i) the aggregate Commitments times (ii)
0.25% ("Facility Fee"). On or before the Closing Date, Borrower shall pay to the
Agent, for the pro rata benefit of the Lenders, the Facility Fee due for the
period from the Closing Date to October 1, 1998.
2.4.2. Extension Fee. If an extension occurs pursuant to Section
2.5.2. as of the first anniversary of the Closing Date, then the Borrower shall
pay to the Agent, for the pro rata benefit of the Lenders, an extension fee
equal to .05% per annum of the aggregate amount of the Revolving Commitments.
The extension fee due for any subsequent extension pursuant to Section 2.5.2
shall be equal to .10% per annum of the aggregate amount of the Revolving
Commitments.
2.4.3. Other Fees. On the Closing Date and from time to time
thereafter as specified in the Fee Letter, the Borrower shall pay to the Agent
the fees specified in the Fee Letter.
2.4.4. Fees Non-Refundable. All fees shall be fully earned when
accrued hereunder and shall be non-refundable.
Section 2.5. Termination and Reduction of Revolving Commitment;
Extension.
2.5.1. Termination. Unless extended pursuant to Section 2.5.2. hereof,
each Lender's Revolving Commitment shall terminate without further action on the
part of such Lender on the earlier to occur of (a) the Maturity Date (or if that
date is not a Business Day, the next preceding LIBOR Business Day) (the "Stated
Revolving Commitment Termination Date"), and (b) the date of termination of the
Revolving Commitment pursuant to Section 7.2. (such earlier date being referred
to herein as the "Revolving Commitment Termination Date").
2.5.2. Extension. Borrowers may request extensions of the Maturity
Date by making such request to Agent ("Extension Notice") in writing at least
ninety (90) days prior to each anniversary of the Closing Date. The Agent and
the Lenders have no obligation to extend the Maturity Date and the Maturity Date
shall not be extended unless (i) the Borrower is in full compliance with all of
the terms, conditions and covenants of this Agreement at the time of request and
on the applicable anniversary Date, (ii) all of the Lenders and the Agent have
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agreed to do so in writing, (iii) Borrower shall, on or prior to the applicable
anniversary, have executed and delivered to the Agent an extension agreement in
the form provided by Agent, and (iv) Borrower shall, on or prior to the
applicable anniversary, provided all Lenders shall have approved the request,
have remitted to the Agent the extension fee due pursuant to Section 2.4.2. If
Borrower's request for extension is approved and the other foregoing conditions
are met, then (i) the extension of the Maturity Date shall be for a period of
one (1) year and (ii) such extension shall be effective as of the applicable
anniversary. The Agent and the Lenders shall have a period of forty-five (45)
days from receipt of written notice of Borrowers' intention to extend the
Maturity Date to approve such extension, in their sole and absolute discretion.
If Borrower has not received written notice of the Lenders' intention to extend
the Maturity Date within such forty-five (45) day period, then the extension
request shall be deemed to be not approved. If an extension is granted, Borrower
may request subsequent one (1) year extensions subject to the same criteria and
procedures established in this Section 2.5.2. As an example, in order to extend
the initial Maturity Date, Borrower must notify Agent at least ninety (90) days
prior to August 6, 1999. If approved, the Maturity Date would then be extended
from August 6, 2000 to August 6, 2001. In the event that Borrower's initial
request for extension is not granted, any subsequent request for extension is
not granted, or Borrower does not request an extension pursuant to this Section
2.5.2, then, commencing on the Maturity Date, Borrower shall no longer be able
to obtain Loans hereunder and all outstanding Loans shall become all due and
payable.
Section 2.6. Repayments and Prepayments.
2.6.1. Mandatory Prepayment.
2.6.1.1. Excess Revolving Loans. (i) If at any time the aggregate
Revolving Commitment Usage of all Lenders exceeds the aggregate amount of the
Revolving Commitments, the Borrower shall, on or prior to two (2) Business Days
after the day on which a Responsible Officer of the Borrower learns or is
notified of the excess, make mandatory prepayments of the Revolving Loans as may
be necessary so that, after such prepayment, such excess is eliminated.
(ii) If at any time on or prior to the Revolving Commitment
Termination Date, there is an Overdraw, the Borrower shall, on or prior to two
(2) Business Days after the day on which a Responsible Officer of the Borrower
learns or is notified of the Overdraw, make mandatory prepayments of the
Revolving Loans as may be necessary, so that, after such prepayment, such
Overdraw is eliminated (unless prior thereto the Borrower has taken such actions
as have resulted in a sufficient increase in Availability to eliminate such
Overdraw).
(iii) Each Mandatory Prepayment shall be applied to the unpaid
principal amount of Revolving Loans; provided that each Mandatory Prepayment
shall be applied first to reduce the Base Rate Loan constituting a portion of
the respective Loan and then to the Fixed Rate Loans constituting a portion
thereof, in the order of termination of Borrowing Periods applicable thereto.
Each Mandatory Prepayment shall be made together with accrued interest on the
amount prepaid to the date of prepayment.
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2.6.2. Optional Prepayments
2.6.2.1. Subject to this Section 2.6.2., the Borrower may, at its
option, at any time or from time to time, prepay the Loans in whole or in part,
without premium or penalty, provided that (a) any prepayment shall be in an
aggregate principal amount of at least Two Hundred Thousand Dollars
($200,000.00) and in integral multiples of Ten Thousand Dollars ($10,000.00)
(or, alternatively, the whole amount of Loans then outstanding) and (b) any
prepayment of a Fixed Rate Loan, if made on a day other than the last day of the
Borrowing Period applicable thereto, shall be made with amounts payable pursuant
to Section 2.9.5.
2.6.2.2. If the Borrower elects to prepay a Loan under this Section
2.6.2.2., it shall deliver to the Agent a notice of optional prepayment (a) not
later than 10:00 a.m. (Pacific Coast time) at least three LIBOR Business Days
before the proposed prepayment, if the Borrower proposes to prepay a LIBOR Rate
Loan, and (b) otherwise not later than 10:00 a.m. (Pacific Coast time) on the
Business Day on which Borrower proposes to prepay a Loan. Any notice of optional
prepayment shall be irrevocable, and the payment amount specified in such notice
shall be due and payable on the date specified in such notice. Each optional
prepayment shall be applied pro-rata to the unpaid principal amount of Revolving
Loans.
2.6.3. Payments Set Aside. To the extent the Agent or any Lender
receives payment of any amount under the Loan Documents, whether by way of
payment by the Borrower, the Guarantor, 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 Agent or Lender. If prior to any such
invalidation, declaration, setting aside or requirement, this Agreement shall
have been canceled or surrendered, this Agreement shall be reinstated in full
force and effect, and such prior cancellation or surrender shall not diminish,
discharge or otherwise affect the obligations of the Borrower in respect of the
amount of the affected payment.
Section 2.7. Manner of Payment.
2.7.1. The amount of each payment under this Agreement or on the Notes
shall be made in lawful money of the United States of America, in immediately
available funds. Each such payment shall be made to the Agent, for the account
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of each of the Lenders or for the account of the Agent, as the case may be. All
payments received by the Agent from the Borrower after 10:00 a.m., Pacific Coast
time, on any Business Day, or on a day which is not a Business Day, shall be
deemed received on the next succeeding Business Day.
2.7.2. Each payment or prepayment of principal or interest on the
Notes shall be made and applied pro rata among the Lenders according to the
unpaid principal amount of the Note held by each Lender (with appropriate
adjustments for the periods during which each Lender's share of such amount was
loaned by or otherwise owing to such Lender); provided, however, that the
Borrower shall have no liability whatsoever for the Agent's failure to so apply
any such payment.
2.7.3. Following receipt by the Agent from the Borrower of any payment
under this Agreement or on the Notes, the Agent shall, prior to 2:00 p.m.,
Pacific Coast time, of the Business Day such payment is deemed received,
initiate wire transfers to the other Lenders in immediately available funds of
the portions of such payment to which they are entitled under this Agreement.
Delivery of a payment by the Borrower to the Agent shall discharge all of the
Borrower's obligations to the Lenders with respect to the making of the payment.
In no event shall the Borrower have any liability for any failure by the Agent
to pay over to the Lenders their respective shares of payments made by the
Borrower.
2.7.4. Whenever any payment to be made pursuant to this Agreement or
on any Note is due on a day that is not a Business Day, payment shall be made on
the next succeeding Business Day, and such extension of time shall be included
in the computation of interest.
2.7.5. Any payment of the principal of any LIBOR Rate Loan shall be
made on a LIBOR Business Day.
2.7.6. The Agent (and each Lender with respect to its own pro rata
portion of Loans) shall keep a record of Loans made by each Lender and payments
of principal with respect to each Note, and such record shall be presumptive
evidence of the principal amount owing under each Note.
2.7.7. Each payment of principal and interest and all other amounts
payable by the Borrower under this Agreement and the other Loan Documents shall
be made free and clear of, and without reduction or offset for or by reason of,
any offset, counterclaims, taxes (except as permitted by Section 2.10.3.),
assessments or other charges imposed by any Governmental Agency.
Section 2.8. Pro Rata Treatment. Except to the extent otherwise
expressly provided herein, Revolving Loans shall be requested from the Lenders,
pro rata according to their respective Revolving Commitments.
Section 2.9. Additional Fees and Costs.
2.9.1. So long as any Lender, any Assignee Lender or Participant is
required to maintain reserves against LIBOR Obligations under Regulation D, the
Borrower shall pay to any such Lender, Assignee Lender or Participant, with
respect to each LIBOR Rate Loan, a fee (hereinafter referred to as a "LIBOR
Fee") (determined as though the LIBOR Lending Office of such Lender, Assignee
Lender or Participant had funded one hundred percent (100%) of such Lender's pro
rata portion of, or such Assignee Lender's or Participant's share in, such LIBOR
Rate Loan in the Designated Market) calculated as follows:
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(i) [LIBOR Rate applicable to the LIBOR Rate Loan] divided by [(1
minus rate [expressed as a decimal] of reserve requirements under Regulation D
in respect of LIBOR Obligations)] minus [LIBOR Rate applicable to the LIBOR Rate
Loan], times
(ii) [average daily unpaid principal amount of such Lender's pro rata
portion of or such Assignee Lender's or Participant's share in such LIBOR Rate
Loan] times [number of days in the applicable Borrowing Period divided by 360].
Notification that a LIBOR Fee is payable shall be given within a
reasonable time after discovery by the loan officers responsible for the credit
or share hereunder that such LIBOR Fee is payable, and may be given by telephone
if communicated to a Responsible Officer or, if an attempt has been made by such
Lender, Assignee Lender or Participant in good faith to communicate with any
Responsible Officer and such attempt is not successful, then another responsible
official of the Borrower and, in either case, confirmed within a reasonable time
by letter to the Borrower, with a copy of such letter sent concurrently to the
Agent. The LIBOR Fee with respect to each LIBOR Rate Loan or share therein shall
be payable on the later of: (i) the last day of the applicable Borrowing Period;
or (ii) five (5) calendar days after the relevant Lender, Assignee Lender or
Participant notifies the Borrower of the amount due, except that (x) if
notification of the amount due is not given within ninety (90) days after such
LIBOR Fee becomes payable with respect to the applicable Borrowing Period, then
the Borrower shall be allowed to pay such amount within thirty (30) days after
the date upon which notification is given; and (y) on final payment of any Note
in full, any LIBOR Fee with respect to any LIBOR Rate Loan made thereunder not
earlier paid or earlier payable pursuant hereto shall be payable on the date of
payment of such Note. In determining the amount of any LIBOR Fee payable
pursuant to this Section, each Lender, Assignee Lender or Participant shall take
into account any transitional adjustment or phase-in provisions of the reserve
requirements which would reduce the reserve requirements otherwise applicable to
LIBOR Obligations during the applicable Borrowing Period, and in the event of
any change or variation in the reserve requirements during the applicable
Borrowing Period, each Lender, Assignee Lender or Participant may use any
reasonable averaging or attribution method which it deems appropriate. The
determination by each Lender, Assignee Lender or Participant of the amount of
any LIBOR Fee payable to it shall be conclusive in the absence of manifest
error. Terms used in Regulation D shall have the same meanings when used in this
Section.
2.9.2. If, after the date of this Agreement, the occurrence of any
Special Circumstance shall:
(i) Subject any Lender, Assignee Lender or Participant, or the LIBOR
Lending Office of any Lender, any Assignee Lender or Participant, to any tax,
duty or other charge or cost, or shall change the basis of taxation of payments
to any Lender, Assignee Lender or Participant of the principal of or interest on
such Lender's pro rata portion of, or such Assignee Lender's or Participant's
share in, any LIBOR Rate Loan, any Note of such Lender, or the obligation of
such Lender to permit LIBOR Rate Loans or the obligation of any Assignee Lender
or Participant to acquire any share therein (except for changes in the rate of
tax on the overall net income of such Lender, such Assignee Lender or
Participant, or the LIBOR Lending office of such Lender, Assignee Lender or
Participant, imposed by the jurisdiction in which the principal executive office
or LIBOR Lending office of such Lender, Assignee Lender or Participant is
located);
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(ii) Impose, modify or deem applicable any reserve (including without
limitation any reserve imposed by the Board of Governors of the Federal Reserve
System other than with regard to Regulation D), special deposit or similar
requirements against assets of, deposits with or for the account of, or credit
extended by, any Lender, any Assignee Lender or Participant or the LIBOR Lending
office of any Lender, Assignee Lender or Participant; or
(iii) Impose on any Lender, Assignee Lender or Participant, the LIBOR
Lending Office of any Lender, Assignee Lender or Participant, or the Designated
Market any other condition affecting any Lender's pro rata portion of or any
Assignee Lender's or Participant's share in, any LIBOR Rate Loan, any Note of
such Lender, or the obligation of such Lender to permit LIBOR Rate Loans or the
obligation of any Assignee Lender or Participant to acquire any share therein,
or this Agreement, or shall otherwise affect any of the same; and the result of
any of the foregoing would, in the reasonable opinion of such Lender, Assignee
Lender or Participant, increase the cost to such Lender, Assignee Lender or
Participant or the LIBOR Lending Office of such Lender, Assignee Lender or
Participant of permitting, making, maintaining or funding any LIBOR Rate Loan or
share therein, or with respect to such Lender's pro rata portion of, or such
Assignee Lender's or Participant's share in, any LIBOR Rate Loan, any Note of
such Lender, or its obligation to permit LIBOR Rate Loans or the obligation of
any Assignee Lender or Participant to acquire any share therein, or reduce the
amount of any sum received or receivable by such Lender, Assignee Lender or
Participant or the LIBOR Lending Office of such Lender, Assignee Lender or
Participant with respect to any LIBOR Rate Loan, such Lender's pro rata portion
of, or such Assignee Lender's or Participant's share in, any LIBOR Rate Loan,
any Note of such Lender, or its obligation to permit LIBOR Rate Loans or the
obligation of any Assignee Lender or Participant to acquire any share therein
(assuming such Lender, Assignee Lender or Participant [or, in the case of a
LIBOR Rate Loan, the LIBOR Lending Office of such Lender, Assignee Lender or
Participant] had funded one hundred percent [100%] of such Lender's pro rata
portion of, or such Assignee Lender's or Participant's share in, such LIBOR Rate
Loan in the Designated Market), then, within ten (10) calendar days following
notice and demand by such Lender, Assignee Lender or Participant, which demand
shall be made within a reasonable time after discovery by the loan officers
responsible for the credit or share hereunder that such increased cost or
reduction has been incurred, the Borrower shall pay to such Lender, Assignee
Lender or Participant such additional amount or amounts (taking into account any
LIBOR Fee paid to such Lender, Assignee Lender or Participant by the Borrower
pursuant to Section 2.9.1.) as will compensate such Lender, Assignee Lender or
Participant for such increased cost or reduction. Any Lender, Assignee Lender or
Participant which makes demand on the Borrower for payment pursuant to this
Section 2.9.2. shall notify the Agent of such demand promptly (and in any event
within ten (10) days after making such demand). Notwithstanding the foregoing,
if demand is not made within ninety (90) days after such increased cost or
reduction is incurred, then the Borrower shall be allowed to pay such amount
within thirty (30) days after the date upon which demand is made. The Borrower
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hereby indemnifies each Lender, Assignee Lender or Participant against, and
agrees to hold each Lender, Assignee Lender or Participant harmless from and
reimburse each Lender, Assignee Lender or Participant on demand for, all costs,
expenses, claims, penalties, liabilities, losses, legal fees and damages
incurred or sustained by such Lender, Assignee Lender or Participant in
connection with this Agreement, any share in this Agreement or any of the
rights, obligations or transactions provided for or contemplated herein as a
result of the occurrence of any Special Circumstance. A statement of any Lender,
Assignee Lender or Participant claiming compensation under this Section 2.9.2.
and setting forth the additional amount or amounts to be paid to it pursuant to
this Agreement shall be conclusive in the absence of manifest error or knowing
misrepresentation.
2.9.3. If, after the date of this Agreement, the occurrence of any
Special Circumstance shall, in the reasonable opinion of any Lender, Assignee
Lender or Participant, make it unlawful, impossible or impractical for such
Lender, Assignee Lender or Participant or the LIBOR Lending Office of such
Lender, Assignee Lender or Participant to permit, make, maintain or fund any
LIBOR Rate Loan or share therein, or materially restrict the authority of such
Lender, Assignee Lender or Participant to purchase or sell, or to take deposits
of, nonpersonal time deposits, or to determine or charge interest rates based
upon the LIBOR Rate, then such Lender's obligation to make LIBOR Rate Loans
shall be suspended for the duration of such illegality, impossibility or
impracticality and such Lender shall immediately give notice thereof to the
Borrower. Upon receipt of such notice, the outstanding principal amount of all
LIBOR Rate Loans shall be automatically converted to Base Rate Loans on either:
(i) the last day of the applicable Borrowing Period(s) if such Lender, Assignee
Lender or Participant may lawfully continue to maintain and fund such LIBOR Rate
Loans or shares therein to such day(s); or (ii) immediately if such Lender,
Assignee Lender or Participant may not lawfully continue to fund and maintain
such LIBOR Rate Loans to such day(s); provided that in such event the conversion
shall not be subject to payment of a prepayment fee pursuant to Section 2.9.5.
2.9.4. If, with respect to any proposed LIBOR Rate Loan:
(i) the Agent reasonably determines that, by reason of circumstances
affecting the Designated Market generally which are beyond the reasonable
control of the Lenders, Assignee Lenders or Participants, deposits in dollars
(in the applicable amounts) are not being offered to each of the Lenders,
Assignee Lenders or Participants in the Designated Market for the applicable
Borrowing Period; or
(ii) the Agent reasonably determines that the LIBOR Rate: (i) does not
represent the effective pricing to such Lenders, Assignee Lenders or
Participants for deposits in dollars in the Designated Market in the relevant
amount for the applicable Borrowing Period; or (ii) will not adequately and
fairly reflect the cost to such Lenders, Assignee Lenders or Participants of
making the applicable LIBOR Rate Loan or share therein;
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then the Agent shall forthwith give notice thereof to the Borrower,
whereupon until the Agent notifies the Borrower that the circumstances giving
rise to such suspension no longer exist, the obligation of the Lenders to permit
(and the Borrower's right to designate) any future LIBOR Rate Loans shall be
suspended.
2.9.5. Upon payment or prepayment of any LIBOR Rate Loan, or
conversion of a LIBOR Rate Loan (other than a conversion required under Section
2.9.3.), on a day other than the last day of the applicable Borrowing Period
(whether involuntarily, by reason of acceleration or otherwise), the Borrower
shall pay to the Agent a prepayment fee calculated as follows (and determined as
though one hundred percent (100%) of the LIBOR Rate Loan had been funded in the
Designated Market):
2.9.5.1. the Interest Differential with respect to such LIBOR Rate
Loan (which, when received by the Agent, shall be distributed by the Agent to
the Lenders in proportion to their respective Lender Commitments); plus
2.9.5.2. All out-of-pocket expenses incurred by the Lenders and
reasonably attributable to such payment or prepayment (which, when received by
the Agent, shall be distributed by the Agent to the Lenders in amounts
corresponding to their respective out-of-pocket expenses);
provided that no prepayment fee shall be payable (and no credit or
rebate shall be required) under Section 2.9.5.1. if the Interest Differential
with respect to such LIBOR Rate Loan is not positive. The determination by the
Agent of the amount of any prepayment fee payable under this Section 2.9.5.
shall be conclusive in the absence of manifest error.
2.9.6. The Borrower hereby indemnifies each Lender, Assignee Lender
and Participant against, and agrees to hold each Lender, Assignee Lender and
Participant harmless from and reimburse each Lender, each Assignee Lender and
Participant within ten (10) calendar days following notice and demand (which
notice and demand must be made within a reasonable time after discovery by the
loan officers responsible for the credit or share hereunder) for, all costs,
expenses, claims, penalties, liabilities, losses, legal fees and damages
(including without limitation any interest paid or that would be paid by any
Lender, Assignee Lender or Participant for deposits in dollars in the Designated
Market and any loss sustained or that would be sustained by any Lender, Assignee
Lender or Participant in connection with the reemployment of funds) incurred or
sustained, or that would be incurred or sustained, by each such Lender, Assignee
Lender or Participant, as reasonably determined by each such Lender, Assignee
Lender or Participant, as a result of any failure of the Borrower to consummate,
or the failure of any condition required for the consummation or effectiveness
of, any LIBOR Rate Loan on the date or in the amount requested by the Borrower,
such indemnification to be determined as though each Lender, Assignee Lender and
Participant (or, in the case of a LIBOR Rate Loan, the LIBOR Lending office of
each Lender, Assignee Lender and Participant) had or would have funded one
hundred percent (100%) of its pro rata portion of, or share in, such LIBOR Rate
Loan in the Designated Market. Any Lender, Assignee Lender or Participant which
makes demand on the Borrower for payment pursuant to this Section 2.9.6. shall
notify the Agent of such demand promptly (and in any event within ten (10) days
after making such demand). Notwithstanding the foregoing, if demand is not made
within ninety (90) days after the date upon which the event giving rise to
liability of the Borrower under this Section 2.9.6. occurs, then the Borrower
shall be allowed to pay the amounts demanded within thirty (30) days after the
date upon which demand is made. The determination of such amount by each Lender,
Assignee Lender and Participant shall be conclusive in the absence of manifest
error.
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2.9.7. In the event that any Lender, Assignee Lender or Participant
shall have determined that the adoption of any law, treaty, governmental (or
quasi-governmental) rule, regulation, guideline or order regarding capital
adequacy, or any change therein or in the interpretation or application thereof,
or the compliance by such Lender, Assignee Lender or Participant with any
request or directive regarding capital adequacy (whether or not having the force
of law and whether or not failure to comply therewith would be unlawful) from
any central bank or governmental agency or body having jurisdiction, does or
shall have the effect of (i) increasing the amount of capital required to be
maintained by such Lender, Assignee Lender or Participant with respect to Loans
made by such Lender or shares in Loans by such Assignee Lender or Participant
and/or the Lender Commitment of such Lender or obligations of such Assignee
Lender or Participant to fund portions of any Lender Commitment, or (ii)
increasing the cost to such Lender with respect to making any Loan made by such
Lender or issuing or maintaining the Commitments of such Lender, or increasing
the cost to such Assignee Lender or Participant of funding or issuing or
maintaining its share in any Loan or Commitment, then the Borrower shall from
time to time, within fifteen (15) days after written notice and demand from such
Lender, Assignee Lender or Participant, which notice and demand shall be given
and made within a reasonable time, pay to such Lender, Assignee Lender or
Participant, additional amounts sufficient to compensate such Lender, Assignee
Lender or Participant for the cost of such additional required capital. A
certificate, evidencing the basis of such calculation in reasonable detail, as
to the amount of such cost, submitted to Borrower by such Lender, Assignee
Lender or Participant, shall, absent manifest error, be final, conclusive and
binding for all purposes. Any Lender, Assignee Lender or Participant which makes
demand on the Borrower for payment pursuant to this Section 2.9.7. shall notify
the Agent of such demand promptly (and in any event within ten (10) days after
making such demand). No Lender, Assignee Lender or Participant shall have the
right to collect payments from the Borrower pursuant to this Section 2.9.7.
unless it is the policy of such Lender, Assignee Lender or Participant, at the
time of such collection, to collect similar payments from borrowers (if any) who
are comparable to the Borrower, in connection with credit facilities to such
borrowers which credit facilities are similar to those made available pursuant
to this Agreement, where the documents governing such credit facilities
establish the right of such Lender, Assignee Lender or Participant to collect
such payments.
2.9.8. Each Lender, Assignee Lender and Participant shall, at the
request of the Borrower, provide reasonable detail to the Borrower regarding the
manner in which the amount of any payment requested by it pursuant to the
provisions of Section 2.9. has been determined.
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2.9.9. Any request by any Lender Party for payment of additional
amounts pursuant to Sections 2.9.1. through 2.9.4. and 2.9.7. shall be
accompanied by a certificate of such Lender Party setting forth the basis and
amount of such request. In determining the amount of such payment, such Lender
Party may use such reasonable attribution or averaging methods as it deems
appropriate and practical.
Section 2.10. Taxes.
2.10.1. If the Borrower is required by Applicable Law to make any
deduction or withholding in respect of any Taxes (other than Excluded Taxes)
from any amount payable under any Loan Document to or for the account of any
Lender Party, the Borrower shall pay to or for the account of such Lender Party,
on the date such amount is payable, such additional amounts as such Lender Party
reasonably determines may be necessary so that the net amounts received by it or
for its account, in the aggregate, after all applicable deductions or
withholdings, shall equal the amount that such Lender Party would have been
entitled to receive if no deductions or withholdings were made. "Excluded Taxes"
means, with respect to any payment to any Lender Party, any (a) taxes imposed on
or measured by the overall net income (including a franchise tax based on net
income) of such Lender Party by the United States of America or any political
subdivision or taxing authority thereof or therein, and (b) any taxes imposed on
or measured by the overall net income (including a franchise tax based on net
income) of such Lender Party or its agent's Offices or Lending Office in respect
of which the payment is made, by the jurisdiction in which it is incorporated,
maintains its principal executive office or in which such agent's Lending Office
is located. Whenever any such Taxes (other than Excluded Taxes) are payable by
the Borrower, as promptly as possible after payment is made, the Borrower shall
send to such Lender Party a certified copy of any original official receipt
received by the Borrower showing payment.
2.10.2. If any Lender Party is required by law to make any payment on
account of Taxes (other than Excluded Taxes) on or in relation to any sum
received or receivable by it under any Loan Document, or any liability for Taxes
(other than Excluded Taxes) in respect of any such payment is imposed, levied or
assessed against such Lender Party, then the Borrower shall pay when due such
additional amounts as such Lender Party reasonably determines to be necessary so
that the amount received by it, less any such Taxes paid, imposed, levied or
assessed, including any Taxes (other than Excluded Taxes) imposed on such
additional amounts, shall equal the amount that such Lender Party would have
been entitled to retain in the absence of the payment, imposition, levy or
assessment of such Taxes. Each Lender Party shall make reasonable efforts to
minimize the amount of such Taxes and shall remit to the Borrower any refunds of
Taxes paid, less the costs of such Lender Party expended in obtaining such
refund.
2.10.3. Notwithstanding Section 2.10.1., if any Lender Party is not
organized and existing under the laws of the United States of America or any
political subdivision thereof or therein (a "Foreign Lender Party"), the
Borrower shall be entitled, in respect of payments to or for the account of such
Foreign Lender Party, to the extent it is required to do so by Applicable Law,
to deduct or withhold (and shall not be required to make payments as otherwise
required in Section 2.10.1. on account of such deductions or withholdings) Taxes
imposed by the United States of America, except (a) Taxes (other than Excluded
Taxes) payable as a result of any Regulatory Change (i) after the date hereof
(in the case of any Foreign Lender Party hereto on the date hereof) or (ii)
after the date on which such Lender Party becomes a Lender Party (in the case of
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any Foreign Lender Party becoming a party hereto after the date hereof pursuant
to Section 9.6.) and (b) if the Foreign Lender Party shall on the date hereof
(or on a subsequent date on which such Foreign Lender Party becomes a Lender
Party pursuant to Section 9.6.) be entitled to furnish, and the Borrower shall
have been furnished by such Foreign Lender Party, a duly executed certificate to
the effect that such Foreign Lender Party is entitled to receive all such
payments without deduction or withholding of such Taxes imposed by the United
States (A) pursuant to the terms of an applicable tax treaty in effect with the
United States of America (in which case such certificate shall be accompanied by
two executed copies of IRS Form 1001), (B) under Code Section 1441(c) (in which
case such certificate shall be accompanied by two executed copies of IRS Form
4224) or (C) pursuant to an exemption certificate received from the IRS (in
which case such certificate shall be accompanied by a copy of such exemption
certificate) (such forms or statements being the "Prescribed Forms".) Such
Foreign Lender Party shall thereafter, to the extent entitled under Applicable
Law, provide to the Borrower new Prescribed Forms upon the obsolescence of any
previously delivered form, in each case duly executed and completed by such
Foreign Lender Party. If the Borrower shall so deduct or withhold any Taxes, it
shall provide a statement to such Foreign Lender Party, setting forth the amount
of such Taxes so deducted or withheld, the applicable rate and any other
information or documentation that such Foreign Lender Party may reasonably
request.
Section 2.11. Lending Office; Discretion of Lenders as to Manner of
Funding. Each Lender may make, carry or transfer Fixed Rate Loans at, to, or for
the account of an Affiliate of the Lender, provided that such Lender shall not
be entitled to receive any greater amount under Section 2.10. as a result of the
transfer of any such Loan than such Lender would be entitled to immediately
prior thereto unless (a) such transfer occurred at a time when circumstances
giving rise to the claim for such greater amount did not exist or (b) such claim
would have arisen even if such transfer had not occurred. Notwithstanding any
other provision of this Agreement, each Lender shall be entitled to fund and
maintain its funding of all or any part of its Fixed Rate Loans in any manner it
sees fit, it being understood, however, that for purposes of this Agreement all
determinations hereunder shall be made as if each Lender had actually funded and
maintained each Fixed Rate Loan through the purchase of deposits in the relevant
interbank market having a maturity corresponding to such Loan's Borrowing Period
and bearing interest at the applicable rate.
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ARTICLE 3.
CONDITIONS TO LOANS
Section 3.1. Closing Conditions. The occurrence of the Closing Date
shall be subject to satisfaction of the following conditions:
3.1.1. Certain Documents. The Agent shall have received the documents
listed on Schedule 3.1.1, and the Lenders shall have received the Revolving Loan
Notes, all of which shall be in form and substance satisfactory to the Agent and
the Lenders.
3.1.2. Fees and Expenses Paid. The Borrower shall have paid all Fees
and expenses then due and payable, on the Closing Date.
3.1.3. General. All other documents and legal matters in connection
with the transactions contemplated by this Agreement shall have been delivered
or executed in form and substance satisfactory to the Agent and the Lenders and
the Agent shall have received all such counterpart originals or certified copies
thereof as Agent may request.
Section 3.2. Conditions Precedent to Loans. The obligation of the
Lenders to make any Loan on any Funding Date shall be subject to the following
conditions precedent:
3.2.1. Conditions Precedent. The conditions precedent set forth in
Section 3.1. shall have been satisfied.
3.2.2. Notice of Borrowing. The Borrower shall have delivered to the
Agent, after the time the conditions set forth in Section 3.1. shall have been
satisfied or waived and otherwise in accordance with the applicable provisions
of this Agreement, a Notice of Borrowing.
3.2.3. 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.
3.2.4. No Default. No Default or Event of Default shall exist or
result from the making of the Loan.
3.2.5. No Overdraw. There shall be no Overdraw then in existence.
3.2.6. Covenant Compliance.
The Borrower Parties shall be in full compliance with the financial
covenants set forth in Section 6.4.
3.2.7. No Material Adverse Change No Material Adverse Change shall
have occurred since the date of the financial statements most recently delivered
to the Lenders pursuant hereto (or, in the case of any Funding Date prior to the
delivery of financial statements pursuant hereto, since the date of the
financial statements referred to in Section 4.5.2.).
3.2.8. Satisfaction of Conditions. Each borrowing of a Loan shall
constitute a representation and warranty by the Borrower as of the Funding Date
that the conditions contained in Sections 3.2.3. through 3.2.7. have been
satisfied.
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ARTICLE 4.
REPRESENTATIONS AND WARRANTIES
The Borrower represents and warrants to the Lender Parties as follows:
Section 4.1. Organization, Powers and Good Standing. Each of the
Borrower Parties (a) is duly organized as a corporation, partnership or other
organization, as shown as of the date hereof on Schedule 4.1, (b) is validly
existing and in good standing under the laws of its jurisdiction of
organization, as shown as of the date hereof on Schedule 4.1, and (c) has all
requisite corporate, partnership or other organizational power and authority and
the legal right to own and operate its properties, to carry on its business as
heretofore conducted and as proposed to be conducted, to enter into the Loan
Documents to which it is a party and to carry out the transactions contemplated
thereby. Each of the Borrower Parties is duly qualified and in good standing
authorized to do business in each state or other jurisdiction where the nature
of its business activities conducted or proposed to be conducted or properties
owned or leased requires it to be so qualified. The Borrower is a partnership
for purposes of federal income taxation and for purposes of the tax laws of any
state or locality in which the Borrower is subject to taxation based on its
income. Guarantor 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. Authorization, Binding Effect, No Conflict, Etc.
4.2.1. Authorization, Binding Effect, Etc. As of the Closing Date or
any date thereafter, (a) the execution, delivery and performance by each
Borrower Party of each Loan Document to which it is or will be a party have been
duly authorized by all necessary corporate, partnership or other organizational
action on the part of such Borrower Party; (b) each such Loan Document has been
duly executed and delivered by such Borrower Party and (c) is the legal, valid
and binding obligation of such Borrower Party, enforceable against it in
accordance with its terms, except as enforcement may be limited by equitable
principles and by bankruptcy, insolvency, reorganization, moratorium or similar
laws relating to creditors' rights generally.
4.2.2. No Conflict. The execution, delivery and performance by any
Borrower Party of each Loan Document to which it is or will be a party, and the
consummation of the transactions contemplated thereby, do not and will not (a)
violate any provision of the charter or other organizational documents of such
Borrower Party, (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
material Contractual Obligation of any Borrower Party, or violate any Applicable
Law binding on any Borrower Party, except for consents that have been obtained
and are in full force and effect, or (c) result in the creation or imposition of
any Lien upon any asset of the Borrower.
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4.2.3. Partnership Units; General Partner. Guarantor owns 19,595,122
Partnership Units (as defined in partnership agreement of the Borrower), free
and clear of any Liens. All partnership units owned by Guarantor were offered
and sold in compliance with all Applicable Law (including, without limitation,
federal and state securities laws). Except as set forth on Schedule 4.2.3, there
are no outstanding securities convertible into or exchangeable for partnership
units of the Borrower, or options, warrants or rights to purchase any such
partnership units, or commitments of any kind for the issuance of additional
partnership units or any such convertible or exchangeable securities or options,
warrants or rights to purchase such partnership units. Guarantor is the sole
general partner of the Borrower. The Shareholder Agreement is in full force and
effect and has not been amended or supplemented in any respect. No party to the
Shareholder Agreement is in default under such agreement, nor has any event
occurred which, but for the passing of time or the giving of notice, would
constitute a default under such Agreement. The "PSA Registration Date" as
defined in the Shareholder Agreement is March 17, 2001.
4.2.4. Governmental Approvals. No Governmental Approval is or will be
required in connection with the execution, delivery and performance by any
Borrower Party of any Loan Document to which it is party or the transactions
contemplated thereby. Each Borrower Party and each of the other Consolidated
Entities possesses all Government Approvals, in full force and effect, that are
necessary for the ownership, maintenance and operation of its properties and
conduct of its business as now conducted and proposed to be conducted and the
absence of which would not result in a Material Adverse Effect on any Borrower
Party, and is not in violation thereof.
Section 4.3. Guarantor. All of the outstanding shares of Capital Stock
of the Guarantor have been duly authorized and validly issued and are fully paid
and nonassessable. Except as disclosed on Schedule 4.3, as amended from time to
time, there are not outstanding any securities convertible into or exchangeable
for shares of Capital Stock of the Guarantor, or any options, warrants or other
rights to purchase any such Capital Stock, or any commitments of any kind for
the issuance of additional shares of such Capital Stock or any such convertible
or exchangeable securities or options, warrants or rights to purchase such
Capital Stock. Except for directors qualifying shares or similar arrangements or
as disclosed on Schedule 4.3, neither the Borrower nor Guarantor is a party to
any agreement with respect to the issuance, voting or sale of issued or unissued
shares of Capital Stock of the Guarantor.
Section 4.4. Subsidiaries. The Borrower has no Subsidiaries except as
set forth in Schedule 4.4.
Section 4.5. Financial Information. 4.5.1. The consolidated balance
sheets of the Borrower and Guarantor as of December 31, 1996 and December 31,
1997 and the consolidated statements of income, retained earnings and cash flow
of the Borrower and Guarantor for the Fiscal Years then ended, certified by the
Borrower's independent certified public accountants, copies of which have been
delivered to the Lender Parties, 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 Guarantor, the
Borrower and its Consolidated Subsidiaries for the periods then ended. No
Borrower Party nor any Consolidated Subsidiary on such dates had any material
Contingent Obligations, liabilities for Taxes or long-term leases, forward or
long-term commitments or unrealized losses from any unfavorable commitments that
are not reflected in the foregoing statements or in the notes thereto and which
are Material.
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4.5.2. The unaudited consolidated balance sheet of the Guarantor as at
September 30, 1997 and March 31, 1998 and related statements of income, retained
earnings and cash flow for the period then ended, certified by the Chief
Financial Officer of the Guarantor, 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 Guarantor, the Borrower and the Consolidated Entities as of such date and
the results of operations and cash flow for the period covered thereby, subject
to normal year-end audit adjustments. No Borrower Party nor any Consolidated
Entity 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.
4.5.3. Except as otherwise disclosed in writing to and approved in
writing by the Agent prior to the date hereof, with respect to the Projections:
(a) all assumptions made therein were, in the Borrower Parties' best business
judgment, reasonable under the circumstances existing at the time of preparation
of the Projections, and (b) the forecasts or projections contained therein were,
in the Borrower Parties' best business judgment, reasonably based on the
assumptions contained therein.
Section 4.6. No Material Adverse Changes. Since March 31, 1998 there
has been no Material Adverse Change.
Section 4.7. Litigation. Except as disclosed in Schedule 4.7, there
are no actions, suits or proceedings pending or, to the best knowledge of the
Borrower, threatened against or affecting any Borrower Party or any of their
respective properties before any Governmental Authority (a) in which there is a
reasonable possibility of an adverse determination that could result in a
Material liability or have a Material Adverse Effect or (b) that in any manner
draws into question the validity, legality or enforceability of any Loan
Document or any transaction contemplated thereby.
Section 4.8. Agreements; Applicable Law. No Borrower Party is in
violation of any Applicable Law, or in default under any of its Contractual
Obligations, except where such violation or default could not individually or in
the aggregate have a Material Adverse Effect. No Borrower Party is a party to or
bound by any unduly burdensome Contractual Obligation that, individually or in
the aggregate, has a Material Adverse Effect.
Section 4.9. Taxes. All income tax returns of the Borrower Parties
have been filed with the appropriate Governmental Authority through the fiscal
year ended December 31, 1997. All United States Federal income tax returns and
all other material tax returns required to be filed by the Borrower Parties have
been filed and all Taxes due pursuant to such returns have been paid, except
such Taxes, if any, as are being contested in good faith and as to which
adequate reserves have been established in accordance with GAAP. To the best
knowledge of the Borrower, there have not been asserted or proposed to be
asserted any Tax deficiency against any Borrower Party that would be Material
that is not reserved against on the financial books of the Borrower and its
Subsidiaries. No Borrower Party is a party to or obligated under any Tax sharing
or similar agreement.
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Section 4.10. Governmental Regulation. No Borrower Party is (a) an
"investment company" registered or required to be 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 (other than the Margin Regulations).
Section 4.11. Margin Regulations. No Borrower Party 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 value of all
Margin Stock held by the Borrower Parties constitutes less than 25% of the
value, as determined in accordance with the Margin Regulations, of all assets of
the Borrower Parties. The execution, delivery and performance of the Loan
Documents by the Borrower Parties will not violate the Margin Regulations.
Section 4.12. Employees. As of the date hereof, the Borrower has no
employees. The Borrower has not had, on any date prior to the date hereof, any
employees. As of the date hereof, the Borrower has no ERISA Affiliates.
Section 4.13. Title to Property. Each Borrower Party has good fee
title to, or valid and existing leasehold interests in, all of its Real Property
reflected in its books and records as being owned or leased by it. Each of the
Real Properties listed in Schedule 1.1C is an Unencumbered Asset.
Section 4.14. Intellectual Property, Etc. Each Borrower Party owns or
holds valid licenses in and to all Trademarks, copyrights, patents, trade
secrets and other intellectual property rights that are material to the conduct
of its business as heretofore operated and as proposed to be conducted. No
Borrower Party has infringed, or been charged or, to the best knowledge of the
Borrower, threatened to be charged with any infringement of, any unexpired
Trademark, copyright, patent, trade secret or other intellectual property right
of any Person where such infringement could result in a Material Adverse Effect
on any of the Borrower Parties.
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Section 4.15. Environmental Condition.
4.15.1. Except as disclosed in Schedule 4.15.1, to the best knowledge
of the Borrower, each Real Property in the Unencumbered Pool is free from
contamination from any Hazardous Materials. To the best knowledge of the
Borrower, no polychlorinated biphenyls (PCBs) (including PCBs contained in
dialectic fluid in any transformers, capacitors, ballasts or other equipment)
stored, used or located on, or disposed of at any Real Property in the
Unencumbered Pool in violation of Applicable Law and no asbestos is stored, used
or located on, or has been disposed of at, any Real Property in the Unencumbered
Pool, other than asbestos that does not pose a hazard to human health, which is
not required to be remediated under Applicable Law, and which is subject to an
operations and maintenance plan of the Borrower which restricts and regulates
the disturbance thereof. Neither the Borrower Parties nor, to the best knowledge
of the Borrower, any prior owner or other user of any Real Property in the
Unencumbered Pool has caused or suffered any Environmental Damages.
4.15.2. Except as disclosed in Schedule 4.15.2, neither the Borrower
Parties nor, to the best knowledge of the Borrower, any prior owner or other
user of any Real Property in the Unencumbered Pool has received notice of any
actual or alleged violation of Environmental Requirements, or notice of any
actual or alleged liability for Environmental Damages in connection with any
Real Property in the Unencumbered Pool. There exists no order, judgment or
decree, and there is not pending or, to the best knowledge of the Borrower,
threatened, any action, suit, proceeding or investigation relating to any actual
or alleged liability arising out of the presence or suspected presence of
Hazardous Material, any actual or alleged violation of Environmental
Requirements or any actual or alleged liability for Environmental Damages in
connection with any Real Property in the Unencumbered Pool or the business or
operations of any of the Borrower Parties nor, to the best knowledge of the
Borrower, does there exist any basis for such action, suit, proceeding or
investigation being instituted or filed.
4.15.3. There is no violation of Environmental Requirements with
respect to any Real Property owned by any Borrower Party which Real Property is
not in the Unencumbered Pool, which violation has a Material Adverse Effect on
the Borrower. The Borrower is not obligated to pay Environmental Damages with
respect to any Real Property not in the Unencumbered Pool which payment has a
Material Adverse Effect on the Borrower.
4.15.4. None of the Real Property in the Unencumbered Pool has been
designated as Border Zone Property under the provisions of California Health and
Safety Code, Sections 25220 et seq. or any comparable statute and there has been
no occurrence or condition on any real property adjoining or in the vicinity of
any of the Real Property in the Unencumbered Pool that could cause any of such
Real Property or any part thereof to be designated as Border Zone Property.
Section 4.16. Labor Matters. There are no material strikes or other
material labor disputes or material grievances pending or, to the best knowledge
of the Borrower, threatened against any Borrower Party. Except as set forth in
Schedule 4.16, there are no collective bargaining agreements to which any
Borrower Party is a party. Each Borrower Party has complied in all material
respects with the requirements of the Worker Adjustment and Restraining
Notification Act, 29 U.S.C. Section 2101 et seq. (the "WARN Act"). No claim
under the WARN Act is pending or, to the best knowledge of the Borrower,
threatened against any Borrower Party nor is there any reasonable basis to
anticipate any such claim.
Section 4.17. Disclosure. All factual information in any document,
certificate or written statement furnished to the Lender Parties by any Borrower
Party and prepared by any Borrower Party or any Affiliate thereof with respect
to the business, assets, prospects, results of operation or financial condition
of any Borrower Party for use in connection with the transactions contemplated
by this Agreement was true and correct in all material respects as of the date
of such document, certificate or statement. There is no fact known to the
Borrower (other than matters of a general economic nature) that has had or could
reasonably be expected to have a Material Adverse Effect and that has not been
disclosed herein or in such other documents, certificates or statements. To the
best of the Borrower's knowledge, all factual information in any document,
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certificate or written statement furnished to the Lender Parties by any Borrower
Party and prepared by any Person (other than a Borrower Party or an Affiliate of
any Borrower Party) with respect to the business, assets, prospects, results of
operation or financial condition of any Borrower Party for use in connection
with the transactions contemplated by this Agreement was true and correct in all
material respects as of the date of such document, instrument or certificate and
the Borrower has no actual knowledge, without duty of investigation or inquiry,
of any materially untrue or misleading statement or omission therein.
ARTICLE 5.
AFFIRMATIVE COVENANTS OF THE BORROWER
So long as any portion of the Commitment is in effect or any
Obligations remain unpaid or have not been performed in full, the Borrower
covenants with the Lender Parties as follows:
Section 5.1. Financial Statements and Other Reports. The Borrower
shall deliver to the Agent:
5.1.1. As soon as practicable and in any event within ninety-five (95)
days after the end of each Fiscal Year, (i) the consolidated balance sheet of
the Borrower Parties as of the end of such year and the related consolidated
statements of income, stockholders' equity and cash flow of the Borrower
Parties, for such Fiscal Year, setting forth in each case in comparative form
the consolidated figures for the previous Fiscal Year, all in reasonable detail
and (ii) the consolidated balance sheet of the Borrower Parties as of the end of
such year and the related consolidated statements of income, stockholder's
equity and cash flow for such fiscal years, all in reasonable detail and, in
each case, certified by the Guarantor's chief financial officer as fairly
presenting the consolidated financial condition of the Borrower Parties as of
the dates indicated and the consolidated results of operations and cash flows
for the periods indicated. With respect to the financial statements of Borrower
Parties, such statements shall be accompanied by an unqualified report thereon
of Ernst & Young, LLP or other independent certified public accountants of
recognized national standing selected by the Borrower Parties and reasonably
satisfactory to the Agent, which report shall state that such statements fairly
present the financial position of the Borrower Parties as of the date indicated
and their results of operations and cash flows for the periods indicated in
conformity with GAAP (except as otherwise stated therein) and that the
examination by such accountants in connection with such financial statements has
been made in accordance with generally accepted auditing standards.
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5.1.2. As soon as practicable and in any event within fifty (50) days
after the end of each Fiscal Quarter a consolidated balance sheet of the
Borrower Parties as of the end of such quarter and the related consolidated
statements of income, stockholders' equity and cash flow for such quarter and
the portion of the Fiscal Year ended at the end of such quarter, setting forth
in each case in comparative form the consolidated figures for the corresponding
periods of the prior Fiscal Year, all in reasonable detail and certified by the
Guarantor's chief financial officer as fairly presenting the consolidated
financial condition of the Borrower Parties as of the dates indicated and the
consolidated results of operations and cash flows for the periods indicated,
subject to normal year-end adjustments and made in accordance with GAAP.
5.1.3. Within fifty (50) days after the end of each Fiscal Quarter, a
certificate of the senior vice-president, corporate finance, chief financial
officer, controller or treasurer of the Guarantor substantially in the form of
Exhibit F (a "Compliance Certificate"), (a) duly completed setting forth the
calculations required to establish Availability and compliance with Section 6.4.
on the date of such financial statements and (b) stating that, to the best
knowledge of such officer, after making such inquiry and other investigation as
such officer deems reasonable under the circumstances, no Default exists or, if
a Default does exist, the nature thereof and the action that the Borrower
proposes to take with respect thereto;
5.1.4. Within fifty (50) days after the end of each Fiscal Quarter, a
report showing Available Financing as of the end of such Fiscal Quarter.
5.1.5. An Unencumbered Pool report which includes for each
Unencumbered Asset, the Property NOI for such Fiscal Quarter with reasonable
detail as to all Property Expenses, Capital Expenditures incurred, and average
Occupancy Rate during the Fiscal Quarter. This portion of the report shall be
submitted to the Agent within fifty (50) days after the end of each Fiscal
Quarter.
5.1.6. Within three (3) Business Days after the Borrower becomes aware
of the occurrence of any Default or Event of Default, a certificate of a Senior
Officer of the Borrower setting forth the details thereof and the action that
the Borrower is taking or proposes to take with respect thereto;
5.1.7. Promptly upon their becoming available and in any event within
five (5) Business Days after submission to the SEC, copies of all financial
statements, reports (including forms 10Q and 10K), notices and proxy statements
sent or made available by the Guarantor to its security holders, all
registration statements (other than the exhibits thereto) and annual, quarterly
or monthly reports, if any, filed by the Guarantor with the SEC and all press
releases by the Borrower or the Guarantor concerning material developments in
the business of the Borrower or the Guarantor;
5.1.8. At any time after the Borrower has any employees and is
required to comply with ERISA or has any ERISA Affiliates which are required to
comply with ERISA, within three (3) Business Days after any of the Borrower
Parties becomes aware of the occurrence of (a) any Reportable Event in
connection with any Plan, (b) any Prohibited Transaction in connection with any
Plan (or any trust created thereunder), or (c) any assertion of withdrawal
liability of any Multiemployer Plan, (d) any partial or complete withdrawal by
the Borrower or any ERISA Affiliate from any Multiemployer Plan under Title IV
of ERISA (or assertion thereof), (e) any cessation of operations by the Borrower
or any ERISA Affiliate at a facility in the circumstances described in Section
4068(f) of ERISA, (f) the withdrawal by the Borrower or any ERISA Affiliate from
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a Multiple Employer Plan during a plan year for which it was a substantial
employer, as defined in Section 4001(a)(2) of ERISA, (g) the failure by the
Borrower or any ERISA Affiliate to make a payment to a Plan required under
Section 302(f)(1) of ERISA, (h) the adoption of an amendment to a Plan requiring
the provision of security to such Plan pursuant to Section 307 of ERISA, or (i)
the PBGC's intent to terminate any Plan administered or maintained by the
Borrower or any ERISA Affiliate or to have a trustee appointed to administer any
such Plan, a written notice specifying the nature thereof, and, when known, any
action taken or threatened by the Internal Revenue Service or the PBGC with
respect thereto;
5.1.9. Within three (3) Business Days after the Borrower obtains
knowledge thereof, notice of all litigation or proceedings commenced or
threatened affecting any Borrower Party (a) that involves alleged liability in
excess of $2,500,000 (in the aggregate) and which is not covered by insurance
(or, if purportedly covered by insurance, then as to which the insurer has
reserved its rights with respect to such coverage), (b) in which injunctive or
similar relief is sought that, if obtained, could have a Material Adverse Effect
or (c) that questions the validity or enforceability of any Loan Document;
5.1.10. Within three (3) Business Days after the receipt thereof, a
copy of any notice, summons, citation or written communication concerning any
actual, alleged, suspected or threatened violation of Environmental
Requirements, or liability of any Borrower Party for Environmental Damages,
where the amount in controversy is equal to or greater than Two Million Five
Hundred Thousand Dollars ($2,500,000.00);
5.1.11. Within five (5) Business Days after the availability thereof,
copies of all amendments to the charter, bylaws or other organizational
documents of the Borrower or the Guarantor;
5.1.12. Each Borrower Party shall deliver or cause to be delivered to
the Agent, as the Agent may from time to time request, schedules identifying all
insurance then in effect and certificates evidencing such insurance;
5.1.13. Promptly upon request of the Agent, copies of each Schedule B
(Actuarial Information) to the most recent annual report (Form 5500 Series) with
respect to each Plan (if any);
5.1.14. From time to time such additional information regarding the
Borrower Parties, the Guarantor, the Consolidated Entities and the
Unconsolidated Joint Ventures or their respective businesses, assets,
liabilities, prospects, results of operation or financial condition as the Agent
(or any Lender through the Agent) may reasonably request, including without
limitation evidence regarding the Lien status of any Real Property in the
Unencumbered Pool.
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Section 5.2. Records and Inspection. The Borrower Parties shall
maintain adequate books, records and accounts as may be required or necessary to
permit the preparation of consolidated financial statements in accordance with
sound business practices and GAAP. The Borrower Parties shall permit such
Persons as the Agent may designate, after reasonable advance notice, during
normal business hours, and as often as may be requested, to (a) visit and
inspect any of the Real Properties of any Borrower Party or the offices of any
Borrower Party, (b) inspect and copy any Borrower Party's books and records, and
(c) discuss with its officers and employees and its independent accountants, its
business, assets, liabilities, prospects, results of operation or financial
condition; provided, however, that (i) representatives of the Borrower Parties
may be present during all such inspections and discussions, (ii) each person
designated by the Agent shall take reasonable steps to minimize disruption to
the operations of such Borrower Party caused by such inspection; and (iii)
nothing contained herein shall require any Borrower Party to permit any Lender
to examine or otherwise have access to any matter that is protected from
disclosure by the attorney-client privilege or the doctrine of attorney work
product.
Section 5.3. Corporate Existence, Etc. Except as permitted pursuant to
Section 6.9., each Borrower Party shall at all times preserve and keep in full
force and effect its corporate existence and all Material rights and franchises.
Section 5.4. Payment of Taxes. Each Borrower Party shall 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 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,
a Borrower Party need not pay or discharge any such Tax so long as the validity
or amount thereof is being contested in good faith and by appropriate
proceedings and so long as any reserves or other appropriate provisions as may
be required by GAAP shall have been made therefor.
Section 5.5. Maintenance of Properties. Each Borrower Party shall
maintain or cause to be maintained in good repair, working order and condition
(ordinary wear and tear excepted), all Real Properties and other assets useful
or necessary to its business, and from time to time each Borrower Party shall
make or cause to be made all appropriate repairs, renewals and replacements
thereto; provided, however that the failure to maintain a particular item of
property (other than an improved Real Property) that is not of significant value
to such Borrower Party or which is obsolete shall not constitute a violation of
this covenant.
Section 5.6. Maintenance of Insurance. Each Borrower Party shall
maintain in full force and effect with insurers duly licensed in the applicable
jurisdictions insurance of such types and in such amounts as are customarily
carried in their respective lines of business, including, but not limited to,
fire, hazard, public liability, property damage, products liability and workers'
compensation insurance.
Section 5.7. Conduct of Business. No Borrower Party shall engage in
any business other than the businesses in which the Borrower and the Guarantor
are engaged on the date hereof or any businesses substantially similar or
related thereto. Each Borrower Party shall conduct its business in compliance in
all material respects with all Applicable Law and all its Contractual
Obligations.
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Section 5.8. Further Assurances. At any time and from time to time,
upon the request of the Agent, each Borrower Party shall execute and deliver
such further documents and do such other acts and things as the Agent may
reasonably request in order to effect fully the purposes of the Loan Documents
and any other agreement contemplated thereby and to provide for payment and
performance of the Obligations in accordance with the terms of the Loan
Documents.
Section 5.9. Future Information. All factual information in any
document, certificate or written statement furnished to the Lender Parties by
any Borrower Party after the date hereof and prepared by any Borrower Party or
any Affiliate thereof with respect to the business, assets, prospects, results
of operation or financial condition of any Borrower Party for use in connection
with the transactions contemplated by this Agreement will be true and correct in
all material respects as of the date of such document, certificate or statement.
Each fact known to the Borrower (other than matters of a general economic
nature) that has had or could reasonably be expected to have a Material Adverse
Effect and that has not been disclosed herein or in such other documents,
certificates or statements will be disclosed promptly to the Agent in writing
promptly after a Responsible Officer learns thereof. All factual information in
any document, certificate or written statement furnished to the Lender Parties
by any Borrower Party and prepared by any Person (other than a Borrower Party or
an Affiliate of any Borrower Party) with respect to the business, assets,
prospects, results of operation or financial condition of any Borrower Party for
use in connection with the transactions contemplated by this Agreement will, to
the Borrower's actual knowledge, without duty of investigation or inquiry, be
true and correct in all material respects as of the date of such document,
instrument or certificate except as disclosed by the Borrower to the Lender
Parties in writing concurrently with the delivery to the Lender Parties of such
document, instrument or certificate; provided, however, that Borrower makes no
covenant regarding the truth or accuracy of any third party research reports
regarding the business and operations of the Guarantor which may hereafter be
delivered to the Lender Parties.
Section 5.10. Shareholder Agreement. No Borrower Party shall modify,
amend, terminate, breach or otherwise violate any of the provisions of the
Shareholder Agreement in any material respect without the prior written consent
of the Lenders, which may be withheld in their sole discretion. Borrower shall
cause PSI to comply with all provisions of the Shareholder Agreement.
Section 5.11. Limitation on Guarantor. The sole Investments of
Guarantor shall at all times be (i) its general partnership interest in Borrower
(ii) any wholly-owned Subsidiary of the Guarantor which Subsidiary's sole
business is the construction, ownership and operation of Office Park Property
owned by the Borrower and its Subsidiaries, (iii) Cash, Cash Equivalents and
institutional money market funds organized under the laws of the United States
of America or any state thereof that invest solely in Cash Equivalents, and (iv)
loans to employees of the Guarantor for the purpose of purchasing the Capital
Stock of the Guarantor pursuant to a program therefor adopted by the Guarantor.
The Guarantor shall not at any time incur any Liabilities other than (i)
Liabilities for which the Guarantor is jointly and severally liable due to its
status as the general partner in the Borrower, (ii) Liabilities for overhead,
payroll and employee-related expenses, (iii) Liabilities relating to any
guaranty or suretyship executed by the Guarantor of the Borrower's obligations;
and (iv) Liabilities relating to obligations of wholly-owned Subsidiaries of the
Guarantor not to exceed at any time Two Million Dollars ($2,000,000) in the
aggregate (including Contingent Obligations). At no time shall the Guarantor
have any Debt for borrowed money other than with respect to transactions among
Borrower Parties. Guarantor shall not hold or acquire an interest in any Real
Property other than Office Park Properties.
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Section 5.12. Environmental Matters.
5.12.1. Promptly upon discovery of any violation or alleged violation
of Environmental Requirements with respect to any Real Property of any Borrower
Party, the Borrower shall attempt in good faith as soon as practicable to
determine the cost to remediate such violation of Environmental Requirements and
the Borrower shall thereupon notify the Agent in writing of the Borrower's
reasonable, good faith estimate of the cost to remediate such violation or
alleged violation. Such good faith estimate of the cost of remediation
(exclusive of costs and expenses of investigation), as revised from time to time
pursuant hereto, shall be deemed to be the "Liquidated Cost" of such violation
or alleged violation of Environmental Requirements. From time to time
thereafter, not less than fifty (50) days after the end of each Fiscal Quarter,
the Borrower shall review and update all Liquidated Costs and shall deliver a
written report to the Agent setting forth, in reasonable detail, each Liquidated
Cost in excess of One Million Dollars ($1,000,000), the basis for the
determination of the Liquidated Cost, and the Borrower's plans with respect to
such violation or alleged violation of Environmental Requirements.
5.12.2. The Borrower Parties shall at all times comply in all material
respects with all Environmental Requirements.
Section 5.13. Listing and Organizational Requirements. The Borrower
shall cause the Guarantor to continue to list its Capital Stock on the AMEX or
any other national stock exchange and continue to qualify as a real estate
investment trust under the Code, and the Borrower will do or cause to be done
all things necessary to cause it to be treated as a partnership for purposes of
federal income taxation and the tax laws of any state or locality in which the
Borrower is subject to taxation based on its income.
Section 5.14. Year 2000. Borrower shall ensure that the following are
Year 2000 Compliant in a timely manner, but in no event later than December 31,
1999: (a) the Office Park Properties and improvements located thereon; (b)
Borrower itself; and (c) Guarantor any other major entities in which Borrower or
Guarantor hold a controlling interest. Borrower shall further make reasonable
inquiries of, and request reasonable validation that, each of the following are
similarly Year 2000 Compliant: (x) all major tenants or other entities from
which Borrower or Guarantor receives payments; and (y) all major contractors,
suppliers, service providers and vendors of Borrower or Guarantor. As used in
this paragraph, "major" shall mean entities the failure of which to be Year 2000
Compliant would have a material adverse economic impact upon Borrower or
Guarantor. The term "Year 2000 Compliant" shall mean, in regard to any property
or entity, that all software, hardware, equipment, goods or systems utilized by
or material to the physical operations, business operations, or financial
reporting of such property or entity (collectively the "systems") will properly
perform date sensitive functions before, during and after the year 2000. In
furtherance of this covenant, Borrower shall, in addition to any other necessary
actions perform a comprehensive review and assessment of all systems of
Borrower, Guarantor, the Office Park Properties and the improvements located
thereon, and shall adopt a detailed plan, with itemized budget, for the testing,
remediation, and monitoring of such systems. Borrower shall, within thirty
business days of Lender's written request, provide to Lender such certifications
or other evidence of Borrower's compliance with the terms of this paragraph as
Lender may from time to time reasonably require.
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Section 5.15. Change of Management. The Borrower Parties shall cause
Ronald Havner, Jr. to be actively involved in the management of Borrower;
provided that if Mr. Havner ceases his active involvement in management for any
reason, within one hundred and twenty (120) calendar days after the date of the
commencement of his lack of active involvement, Borrower shall have retained a
replacement that is reasonably satisfactory to the Majority Lenders.
ARTICLE 6.
NEGATIVE COVENANTS OF THE BORROWER PARTIES
So long as any portion of the Commitment is in effect or any
Obligations remain unpaid or have not been performed in full:
Section 6.1. Payment of Obligations.
Each Borrower Party shall pay within ninety (90) days of its receipt
of a bill therefor all Accounts Payable, except that a Borrower Party shall not
be required, under this Section 6.1., to pay (a) any Account Payable (or portion
thereof) that is being actively contested in good faith by appropriate
proceedings; or (b) any Account Payable that is less than Two Hundred Fifty
Thousand Dollars ($250,000.00) so long as the aggregate amount of Accounts
Payable of all Borrower Parties with respect to which a Borrower Party has
received a bill more than ninety (90) days prior to the date of calculation does
not exceed Seven Hundred Fifty Thousand Dollars ($750,000.00). For purposes of
this Section 6.1., "Accounts Payable" means all amounts owed by the Borrower
Parties from time to time, arising out of the conduct of their respective
businesses, including utility charges, amounts owing under open purchase orders,
service contracts or equipment leases, and other amounts owing with respect to
maintenance, clean-up, landscaping and other services performed in connection
with the operation of the Borrower Parties' respective businesses. The term
"Accounts Payable" shall not include indebtedness for borrowed money, amounts
owing with respect to federal, state or local taxes, insurance premiums or
amounts a Borrower Party is required to contribute to any Borrower Plan.
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Section 6.2. Investments. No Borrower Party shall directly or
indirectly, make or own any investment, except:
6.2.1. Cash, Cash Equivalents or institutional money market funds
organized under the laws of the United States of America or any state thereof
that invest solely in Cash Equivalents;
6.2.2. (a) Trade credit extended on usual and customary terms in the
ordinary course of business, and (b) advances to employees for moving,
relocation and travel expenses, drawing accounts and similar expenditures in the
ordinary course of business;
6.2.3. Existing Office Park Property or land upon which the Borrower
plans to develop commercial office, light industrial or retail projects;
6.2.4. Subsidiaries engaged in the construction or operation of Office
Park Property;
6.2.5. Any material acquisition, merger, formation, or investment in a
Joint Venture, asset purchase, or any transfer of assets permitted pursuant to
Section 6.9.; or
6.2.6. Subject to the limits established pursuant to Sections 6.4.8,
6.4.9, 6.4.10, 6.4.11, 6.4.12 and 6.4.13, Debt payable to a Borrower Party which
is secured by mortgages or deeds of trust on real estate, marketable equity
securities, and unconsolidated Joint Ventures.
Section 6.3. Asset Dispositions. Subject to Section 6.5., the Borrower
may sell, lease or otherwise dispose of assets in the normal course of its
business and so long as such dispositions do not result in a violation of any
other provision of this Agreement.
Section 6.4. Financial Covenants.
6.4.1. Ratio of Total Liabilities to Gross Asset Value. The ratio of
Total Liabilities to Gross Asset Value shall not at any time exceed 0.50:1.
6.4.2. Ratio of Unencumbered Asset Value to Outstanding Unsecured
Liabilities. The ratio of Unencumbered Asset Value to Outstanding Unsecured
Liabilities shall at all times be not less than 2.0:1.0.
6.4.3. Minimum Tangible Net Worth. Tangible Net Worth of Borrower and
Guarantor shall not be less than, at any time: (i) $620,000,000 plus (ii) Net
Income, if any, less (iii) Restricted Payments plus (iv) ninety percent (90%) of
Equity Offering Net Proceeds.
6.4.4. Secured Debt to Gross Asset Value. The ratio of Secured Debt to
Gross Asset Value shall not be greater than 0.30:1.0.
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6.4.5. Interest Coverage. At any time, the ratio of EBITDA to Interest
Expense for the most recently completed Fiscal Quarter shall not be less than
2.25:1.0.
6.4.6. Fixed Charge Coverage. At any time, the ratio of EBITDA to
Fixed Charges for the most recently completed Fiscal Quarter shall not be less
than 2.0:1.0.
6.4.7. Distributions. Restricted Payments paid by the Borrower during
the four immediately preceding Fiscal Quarters shall not at any time exceed
ninety-five percent (95%) of Funds from Operations, calculated for such four
Fiscal Quarters.
6.4.8. Land Holdings. The aggregate value of Land Holdings of Borrower
and Guarantor (valued at the lesser of acquisition cost or market value) shall
not at any time exceed ten percent (10%) of Gross Asset Value.
6.4.9. Securities Holdings. The aggregate value of Capital Stock of
any Person other than in Joint Ventures which is owned by Borrower Parties
(valued at the lesser of acquisition cost or market value) shall not at any time
exceed fifteen percent (15%) of Gross Asset Value.
6.4.10. Mortgage Holdings. The aggregate value of any Debt payable to
Borrower Parties shall not at any time exceed fifteen percent (15%) of Gross
Asset Value.
6.4.11. Joint Ventures. The aggregate value of Capital Stock of any
Joint Venture which is owned by Borrower Parties (valued at the lesser of
acquisition cost or market value) shall not at any time exceed fifteen percent
(15%) of Gross Asset Value.
6.4.12. Construction-In-Progress. The aggregate rentable square
footage of Construction-in-Progress that is not subject to signed leases between
the applicable Borrower Party and the tenant for such space shall not at any
time exceed ten percent (10%) of the aggregate rentable square footage of the
Real Property. In addition, the aggregate rentable square footage of all
Construction-in-Progress shall not at any time exceed twenty percent (20%) of
the aggregate rentable square footage of the Real Property.
6.4.13. Other Assets. The aggregate value of Other Assets owned by
Borrower Parties (valued at the lesser of Acquisition Cost or Market Value)
shall not at any time exceed forty percent (40%) of Gross Asset Value.
6.4.14. Unsecured Interest Expense Coverage. At any time, the ratio of
Unencumbered Net Operating Income to Unsecured Interest Expense shall not be
less than 2.00:1.0.
Section 6.5. Restriction on Fundamental Changes. Except as permitted
pursuant to Section 6.9., no Borrower Party shall directly or indirectly, enter
into any merger, consolidation, reorganization or recapitalization, reclassify
its Capital Stock, liquidate, wind up or dissolve or sell, lease, transfer or
otherwise dispose of, in one transaction or a series of transactions, all or
substantially all of its or their business or assets, whether now owned or
hereafter acquired.
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Section 6.6. Transactions with Affiliates. The Borrower Parties shall
not directly or indirectly, enter into any transaction (including the transfer
or lease of any property or the rendering of any service) with any Affiliate of
the Borrower unless (a) such transaction is in the ordinary course of business
of the party thereto, and (b) such transaction is on fair and reasonable terms
no less favorable to such Borrower Party than those terms that might be obtained
at the time in a comparable arm's length transaction with a Person who is not an
Affiliate of the Borrower or, if such transaction is not one that by its nature
could be obtained from such other Person, is on fair and reasonable terms and
was negotiated in good faith and (c) if such transaction involves a transfer or
lease of property in with a value in excess of $5,000,000.00 or the rendering of
services resulting in gross revenues in excess of $5,000,000.00, the Borrower
shall have delivered to the Agent a certified resolution of the Board of
Directors of general partner of the Borrower determining that the standards set
forth in clause (c) above are satisfied with respect to such transaction,
provided that this Section 6.6. shall not restrict (i) dividends, distributions
and other payments and transfers on account of the Capital Stock of the Borrower
or the Guarantor, (ii) payments pursuant to the terms of any Contractual
Obligations in effect on the date hereof listed on Schedule 6.6, or (iii) any
transaction in the ordinary course of business between the Borrower and any
other Borrower Party. Notwithstanding the foregoing, in no event shall any
Borrower Party sell (including within the meaning of a sale, any grant of a
purchase option or any lease of fifteen (15) or more years, including renewal
options) any property or other assets of the Borrower or any Affiliate to the
Borrower or any Affiliate, unless the terms and conditions of such sale have
been approved by the independent directors of Guarantor, as described in its
By-Laws.
Section 6.7. ERISA. In the event that the Borrower ever has any
employees, the Borrower will not, and will not permit any ERISA Affiliate to:
(a) engage in any Prohibited Transaction or engage in any conduct or commit any
act or suffer to exist any condition that could give rise to any excise tax,
penalty, interest or liability, (b) fail to make any payments to any
Multiemployer Plan that the Borrower or any of its ERISA Affiliates may be
required to make under any agreement relating to such Multiemployer Plan, or any
law pertaining thereto; or (c) voluntarily terminate or amend any one or more of
their Plans, if such termination would result in the imposition of Liens on the
Borrower or any ERISA Affiliate.
Section 6.8. Amendments of Charter Documents. None of the Borrower
Parties shall amend its charter, bylaws, partnership agreement or other
organizational documents in any material respect, without in each case obtaining
the prior written consent of the Majority Lenders, which consent will not be
unreasonably withheld, conditioned or delayed, except to increase the percentage
of shares that may be owned by any person and to reflect issuances of
securities.
Section 6.9. Certain Obligations. No Borrower Party shall engage in
any material acquisition, merger, formation, investment in any partnership/joint
venture/Subsidiary, asset acquisition (other than of Office Park Property) or
transfer of assets without first giving notice thereof to Agent and certifying
compliance with all covenants of this Agreement after giving effect to the
proposed transaction. For purposes of this Section 6.9., "material" is defined
as any transaction in which the obligation of a Borrower Party equals or exceeds
ten percent (10%) of Gross Asset Value. With respect to any proposed acquisition
of Office Park Property, if the acquisition price of such Office Park Property
is greater than ten percent (10%) of Gross Asset Value, Borrower must first give
notice thereof to Agent and certify compliance with all covenants of this
Agreement after giving effect to the proposed transaction.
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Section 6.10. Distributions. Unless waived by the Majority Lenders, no
Borrower Party shall make any Restricted Payments after the occurrence of and
during the continuation of an Event of Default under Section 7.1.1. and no
Borrower Party shall make any Restricted Payment in excess of that required to
maintain Guarantor's status as a REIT after the occurrence of and during the
continuation of a Material non-monetary Event of Default under Section 7.1.
ARTICLE 7.
EVENTS OF DEFAULT
Section 7.1. Events of Default. The occurrence of any one or more of
the following events, acts or occurrences shall constitute an event of default
(each an "Event of Default"):
7.1.1. Failure to Make Payments. The Borrower (a) shall fail to pay as
and when due (whether at stated maturity, upon acceleration, upon required
prepayment or otherwise) any principal of any Loan, or (b) shall fail to pay any
interest within ten (10) days after it first becomes due, or (c) shall fail to
pay Fees or other amounts payable under the Loan Documents when due under the
Loan Documents; or
7.1.2. Default in Other Debt. Any Borrower Party shall have defaulted
(beyond any applicable grace period) under any Debt of such party (other than
the Obligations) if the aggregate amount of such other Debt is One Million
Dollars ($1,000,000) or more and such default shall not have been cured or
waived; or
7.1.3. Breach of Covenants. Any Borrower Party shall fail to perform,
comply with or observe any agreement, covenant or obligation under any of the
Loan Documents (other than those set forth in the other subsections of this
Section 7.1.) and such failure shall continue for a period of thirty (30) days
after notice of such failure is given by the Agent; or
7.1.4. Breach of Warranty. Any representation or warranty or
certification made or furnished by any Borrower Party under any Loan Document
shall prove to have been false or incorrect in any Material respect when made
(or deemed made); or
7.1.5. Involuntary Bankruptcy; Appointment of Receiver, Etc. There
shall be commenced against any Borrower Party an involuntary case seeking the
liquidation or reorganization of such Borrower Party 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 any Borrower Party or to take possession of all
or any portion of its property or to operate all or a substantial portion of its
business, and any of the following events occur: (a) such Borrower Party
consents to the institution of the involuntary case or proceeding; (b) the
petition commencing the involuntary case or proceeding is not timely
controverted; (c) the petition commencing the involuntary case or proceeding
remains undismissed or undischarged and unstayed for a period of sixty (60)
days; or (d) an order for relief shall have been issued or entered therein; or
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7.1.6. Voluntary Bankruptcy; Appointment of Receiver, Etc. Any
Borrower Party 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 to or acquiesce in 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 such
Borrower Party (or any committee thereof) adopts any resolution or otherwise
authorizes action to approve any of the foregoing; or
7.1.7. Judgments and Attachments. (a) A final unappealable judgment
against a Borrower Party shall be entered for the payment of money in excess of
Two and One Half Million Dollars ($2,500,000.00) and shall remain unsatisfied
without procurement of a stay of execution within thirty (30) calendar days
after the date of entry of judgment; or (b) a judgment creditor shall obtain a
lien against or possession of any Real Property in the Unencumbered Pool by any
means, including levy, distraint, replevin or self-help; or
7.1.8. Termination of Loan Documents, Etc. Any Loan Document, or any
material provision thereof, shall cease to be in full force and effect for any
reason, except upon a release or termination of such Loan Document pursuant to
the terms thereof; or any Borrower Party shall contest or purport to repudiate
or disavow any of its obligations under or the validity of enforceability of any
Loan Document or any material provision thereof; or
7.1.9. Change of Control. A Change of Control shall occur;
7.1.10. Change of Condition. The Majority Lenders reasonably determine
that a change has occurred since the date of this Agreement in the operations,
business or condition, financial or otherwise, which change has a material and
adverse effect on the ability of any of the Borrower Parties to perform its
obligations under the Loan Documents, and fifteen (15) days have elapsed since
the date that notice of such determination has been given to such Borrowing
Party; or
7.1.11. Guaranty. An Event of Default shall occur under the Guaranty.
Section 7.2. Remedies. Upon the occurrence of an Event of Default:
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7.2.1. If an Event of Default occurs under Section 7.1.5. or 7.1.6.,
then the Commitment shall automatically and immediately terminate, and the
obligation of the Lender Parties to make any Loan hereunder shall cease, and the
unpaid principal amount of the Loans and all other Obligations 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.
7.2.2. If an Event of Default occurs, other than under Section 7.1.5.
or 7.1.6., the Majority Lenders may declare the unpaid principal of all Notes,
all interest accrued and unpaid thereon and all other amounts payable under the
Loan Documents to be forthwith due and payable, whereupon the same shall become
and be forthwith due and payable, without protest, presentment, notice of
dishonor, demand or further notice of any kind, all of which are expressly
waived by the Borrower.
7.2.3. The order and manner in which the Lenders' rights and remedies
are to be exercised shall be determined by the Majority Lenders in their sole
discretion. Regardless of how each Lender may treat payments received by it for
the purpose of its own accounting, for the purpose of computing the Borrower's
obligations under this Agreement and under the Notes, all moneys collected or
received by the Agent on account of the Obligations or in respect of the
security for the Obligations, directly or indirectly, shall be applied in the
following order of priority:
7.2.3.1. to the payment of all proper and reasonable costs and
expenses actually incurred in the collection of such moneys;
7.2.3.2. to the payment of all proper and reasonable costs and
expenses (including attorneys' fees and disbursements and the allocated costs
and expenses of in-house legal and other professional services) of the Agent,
acting as Agent, and of the Lenders as set forth above;
7.2.3.3. (A) in case the entire unpaid principal of the Obligations
shall not have become due and payable, first to the payment of interest on the
Obligations ratably to the Lenders as their respective pro rata shares appear,
and then to the payment of principal to the Lenders as their respective pro rata
shares appear, or (B) in case the entire unpaid principal of the Loan shall have
become due and payable, to the payment of the whole amount then due and payable
on the Obligations until paid in full, for principal to the Lenders as their
respective pro rata shares appear, and for interest ratably to the Lenders as
their respective pro rata shares appear; and
7.2.3.4. to the payment of all other amounts (including fees) then
owing to the Agent or the Lenders under the Loan Documents.
No application of the payments will cure any Event of Default or
prevent acceleration, or continued acceleration, of amounts payable under the
Loan Documents or prevent the exercise, or continued exercise, of rights or
remedies of the Lenders under this Agreement or under law.
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ARTICLE 8.
APPOINTMENT, POWERS AND DUTIES OF LENDERS AND AGENT
Section 8.1. Relationship of Borrower and Lenders. It is expressly
understood and agreed that with the exception of this Section 8.1., the
provisions of Article 8. are among, and for the benefit of, the Lenders and the
Agent only and contain terms, conditions and agreements to which the Borrower is
not bound, under which the Borrower does not have rights, and with which the
Borrower need not be concerned. Each of the Lenders and the Agent hereby agrees
that as to all matters relating to the Loans and any other provision contained
in this Agreement to which the Borrower is bound, unless expressly stated to the
contrary, the Borrower need only deal with the Agent and need not send notice to
or seek the consent or approval of any of the Lenders other than the Agent. The
Borrower shall be entitled to rely solely on notices, consents, authorizations
and directions received from the Agent and shall have no duty to inquire as to
whether the Agent shall have received the consents or approval of the Lenders as
provided in this Article 8. In the event the Agent or any of the Lenders breach
their respective obligations under this Article 8., the sole remedy of the
non-breaching parties shall be against the Lender or Agent which committed such
breach, and the Borrower shall have no liability for such breach.
Section 8.2. Appointment and Authorization. Each Lender hereby
irrevocably appoints and authorizes the Agent to take such action as agent on
its behalf and to exercise such powers under the Loan Documents as are delegated
to the Agent by the terms thereof or are reasonably incidental, as determined by
the Agent, thereto; and each Lender hereby irrevocably appoints and authorizes
the Agent to take such action as agent on its behalf and to exercise such powers
under the Loan Documents as are delegated to the Agent by the terms thereof or
are reasonably incidental, as determined by the Agent, thereto. These
appointments and authorizations are intended solely for the purpose of
facilitating the servicing of the Loans and do not constitute the appointment of
the Agent as trustee for any Lender or as a representative of any Lender for any
other purpose and, except as specifically set forth in this Agreement to the
contrary, the Agent shall take such action and exercise such powers only in an
administrative and ministerial capacity.
Section 8.3. Agent and Affiliates. The Agent and each successor
thereto, has the same rights and powers under the Loan Documents as any other
Lender and may exercise the same as though it were not a Agent. The terms
"Lender(s)" or "Lender Parties" includes each Agent. Unless otherwise expressly
prohibited hereunder, each Agent and each Lender (and each of the Lenders'
respective successors) and its respective Affiliates may accept deposits from,
lend money to, and generally engage in any kind of banking, trust or other
business with, the Borrower, the Guarantor, any Affiliate of the Borrower or of
the Guarantor, as if it were not a Agent or a Lender, as the case may be, and
without any duty to account therefor to the other Lenders. No Agent shall be
obligated to account to any other Lender for any monies received by it for any
credit facility management fees, reimbursement of its costs and expenses as
Agent under this Agreement, or for any monies received by it in its capacity as
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a Lender under this Agreement. If any property is taken by any Agent or any
Lender as collateral for any other loans or extensions of credit made by any
Agent or any Lender to or for the Borrower, or any property is in any Agent's or
any Lender's possession or control, or any deposit is held or other indebtedness
is owing by any Agent or any Lender, and that property, deposit or indebtedness,
or the proceeds thereof, may be or become collateral for or otherwise available
for payment in connection with the Obligations by reason of the general
description of secured obligations contained in any security agreement or other
agreement or instrument held by any Agent, or any Lender or by reason of a right
of setoff, counterclaim or otherwise, the other Lenders shall have no interest
in that property, deposit or indebtedness, or the indebtedness, or the proceeds
thereof, except that if the property, deposit or indebtedness, or the proceeds
thereof, shall be applied in reduction of amounts outstanding in connection with
the Obligations, then each Lender shall be entitled to its pro rata share
therein.
Section 8.4. Lenders' Credit Decisions. Each Lender hereby
acknowledges that it has received the Loan Documents and financial statements,
certificates, instruments, documents, affidavits, resolutions and agreements as
it deemed necessary to make its own credit analysis and decision to enter into
this Agreement. Each Lender agrees that it has, independently and without
reliance upon the Agent, any Lender or the directors, officers, agents or
employees of the Agent or any Lender, and instead in reliance upon information
supplied to it by or on behalf of the Borrower and upon such other information
as it has deemed appropriate, made its own independent credit analysis and
decision to enter into this Agreement. Each Lender also agrees that it shall,
independently and without reliance upon the Agent, any Lender or the directors,
officers, agents or employees of the Agent or any Lender, continue to make its
own independent credit analyses and decisions in acting or not acting under the
Loan Documents.
Section 8.5. Action by Agent.
8.5.1. The Agent has only those obligations under the Loan Documents
as are expressly set forth therein.
8.5.2. The Agent may assume that no Event of Default has occurred,
unless the Agent has actual knowledge of the Event of Default, has received
notice from the Borrower stating the nature of the Event of Default, or has
received notice from a Lender stating the nature of the Event of Default and
that the Lender considers the Event of Default to have occurred.
8.5.3. If the Agent has actual knowledge of an Event of Default, has
received notice from the Borrower stating the nature of an Event of Default or
has received notice from a Lender stating the nature of an Event of Default,
such Agent shall give notice thereof to the Lenders.
8.5.4. Except for any obligation expressly set forth in the Loan
Documents and as long as the Agent may assume that no Event of Default has
occurred, the Agent may, but shall not be required to, exercise its discretion
to act or not act, except that (i) the Agent may, if it elects to do so in its
sole discretion, suspend the taking of any action pending receipt of
instructions or authorizations from the Majority Lenders of the action to be
taken and (ii) the Agent shall be required to act or not act upon the
instructions of the Majority Lenders and those instructions shall be binding
upon the Agent and all the Lenders, provided that the Agent shall not be
required to act or not act if to do so would be contrary to any Loan Document or
to applicable Law.
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8.5.5. If the Agent has knowledge that an Event of Default has
occurred, the Agent shall act or not act upon the instructions of the Majority
Lenders, provided that the Agent shall not be required to act or not act if to
do so would be contrary to any Loan Document or to applicable Law, and except
that if the Majority Lenders fail to instruct the Agent within the time periods
set forth herein, then the Agent in its discretion, may act or not act as it
deems advisable for the protection of the interests of the Lenders.
8.5.6. The Agent shall have no liability to any Lender for acting, or
not acting, notwithstanding any other provision hereof, except for its own gross
negligence or willful misconduct while so acting or not acting.
Section 8.6. Non-Liability of Agent. The Agent shall perform its
duties under this Agreement and the other Loan Documents with the same degree of
care as the Agent would use in performing similar functions with respect to a
loan of similar size and type held for its own account. Neither the Agent, nor
any of its respective directors, officers, agents or employees shall be liable
for any action taken or not taken by them under or in connection with the Loan
Documents or as instructed by the Majority Lenders, except for its own gross
negligence or willful misconduct. Without limitation on the foregoing, but
subject to the foregoing provisions concerning gross negligence or willful
misconduct, the Agent and its respective directors, officers, agents and
employees:
8.6.1. may treat the payee of any Note as the holder thereof until the
Agent receives notice of the assignment or transfer thereof, and may treat each
Lender as the owner of that Lender's interest in the Obligations for all
purposes of this Agreement until the Agent receives notice of the assignment or
transfer thereof;
8.6.2. may consult with legal counsel (including in-house legal
counsel), accountants (including in-house accountants) and other professionals
or experts selected by it, or with legal counsel, accountants or other
professionals or experts for the Borrower, and shall not be liable for any
action taken or not taken by it or them in good faith in accordance with the
advice of such legal counsel, accountants or other professionals or experts;
8.6.3. make no representation or warranty to any Lender and will not
be responsible to any Lender for any statement, warranty or representation made
in any of the Loan Documents or in any notice, certificate, report, request or
other statement (written or oral) in connection with any of the Loan Documents
or the financial condition of the Borrower or any other party or for the title
of any collateral hereunder;
8.6.4. except to the extent expressly set forth in the Loan Documents,
will have no duty to ascertain or inquire as to the performance or observance by
the Borrower of any of the terms, conditions or covenants of any of the Loan
Documents or to inspect the property, books or records of the Borrower;
8.6.5. will not be responsible to any Lender for the due execution,
legality, validity, enforceability, genuineness, effectiveness, sufficiency,
value or collectability of any Loan Document, or any other instrument or writing
furnished pursuant thereto or in connection therewith;
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8.6.6. will not be responsible to any Lender for the legality,
validity, enforceability, genuineness, sufficiency, perfection (other than the
timely filing of any continuation statements for financing statements given to
the Agent by the Borrower in connection with the collateral hereunder), value,
collectability or priority of any rights in all or any portion of the collateral
hereunder;
8.6.7. will not incur any liability by acting or not acting in
reliance upon any Loan Document, notice, consent, certificate, statement,
request or other instrument or writing (which may be by telegram, telecopy,
cable or telex) believed by it or them to be genuine and signed or sent by the
proper party or parties; and
8.6.8. will not incur any liability for any arithmetical error in
computing any amount payable to or receivable from any Lender pursuant to this
Agreement, including without limitation principal, interest, fees, Loans and
other amounts; provided that promptly upon discovery of such an error in
computation, the Agent, the Lenders and (to the extent applicable) the Borrower
shall make such adjustments as are necessary to correct such error and to
restore the parties to the position that they would have occupied had the error
not occurred.
Section 8.7. Indemnification.
8.7.1. Each Lender, individually and severally in accordance with its
pro rata share, agrees to indemnify, defend, reimburse and hold the Agent (and
its directors, officers, agents or employees) ("Indemnified Parties") harmless,
within ten (10) Business Days of request therefor (to the extent not reimbursed
by the Borrower), in accordance with its pro rata share, for any and all
liabilities, obligations, losses, damages, penalties, actions, judgments, suits,
and costs, expenses or disbursements which may be imposed on, incurred by, or
asserted against the Indemnified Parties in any way relating to or arising out
of the Obligations, or any action taken or omitted by the Indemnified Parties
under the Loan Documents, provided that each Lender shall not be liable for any
portion of such liabilities, obligations, losses, damages, penalties, actions,
judgments, suits, costs, expenses or disbursements resulting from: (i) the gross
negligence or willful misconduct of the Indemnified Parties or their breach
hereunder or (ii) the acts or omissions of any other Lender or Agent. Without
limitation of the foregoing, each Lender agrees to reimburse the Agent promptly
upon demand for its pro rata share in any and all out-of-pocket costs,
disbursements and expenses (including appraisal fees, third-party expanses and
reasonable counsel fees) incurred or made by the Agent or any of them after the
Closing Date in connection with the preparation, execution, delivery,
modification, amendment, collection or enforcement (whether through
negotiations, legal proceedings, foreclosure or otherwise) of, or legal advice
in respect of rights or responsibilities under, the Loan Documents, to the
extent that the Agent is not reimbursed for such expenses by the Borrower. In
addition, each Lender agrees to reimburse the Agent promptly upon demand for its
pro rata share in all protective advances made by the Agent. The Agent shall be
entitled to deduct from any payments to be made to any Lender under this
Agreement, and to retain, amounts due the Agent as reimbursement hereunder,
provided that the Agent shall have first delivered to such Lender thirty (30)
days prior written notice of such amounts and the circumstances giving rise
thereto, and such Lender has not paid such amounts The Agent shall make
reasonable attempts to collect such amounts referred to in this Section 8.7.1.
from the Borrower to the extent that the Borrower is obligated to make such
reimbursement under this Agreement. If the Agent receives payment of any amount
referred to in this Section 8.7.1. from the Borrower or any third party after a
Lender has reimbursed the Agent for such amount, the Agent shall promptly return
to such Lender the amount of the reimbursement (or, if more than one Lender made
reimbursement, such Lender's ratable portion thereof).
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8.7.2. Each Defaulting Lender shall indemnify, defend and hold the
Agent and each of the other Lenders harmless from and against any and all
losses, damages, liabilities or expenses (including, but not limited to,
reasonable attorneys' fees and interest at the Default Rate set forth in the
Loan Documents for funds advanced by any of the Agent or any other Lender on
account of such Defaulting Lender) which they may sustain or incur by reason of
or in consequence of each Defaulting Lender's failure or refusal to abide by its
obligations under this Agreement. The Agent shall setoff against principal and
interest payments due to each Defaulting Lender for the claims of the Agent and
the other Lenders against such Defaulting Lender. The exercise of the above
remedies shall not reduce, diminish or liquidate the Defaulting Lender's pro
rata share of the obligations for the sharing of losses and reimbursement of
costs, liabilities and expenses under the Loan Documents.
Section 8.8. The Agent. The Agent shall have primary responsibility
for the following activities:
(i) Funding the Loans in accordance with the provisions of this
Agreement and the Loan Documents. With respect to the respective pro rata shares
of the Lenders in the Loans, unless the Agent receives notice from a Lender on
or prior to the Closing or, with respect to any Loan made after the Closing, at
least one Business Day prior to the date of such Loan, that such Lender will not
make available as and when required hereunder to the Agent for the account of
the Borrower the amount of such Lender's pro rata share of the Loan, the Agent
may assume that each Lender has made such amount available to the Agent in
immediately available funds on the Funding Date and the Agent may (but shall not
be so required), in reliance upon such assumption, make available to the
Borrower on such date a corresponding amount. If and to the extent any Lender
shall not have made its full amount available to the Agent in immediately
available funds and the Agent in such circumstances has made available to the
Borrower such amount, that Lender shall on the Business Day following such
Funding Date make such amount available to the Agent, together with interest at
the Federal Funds Rate for each day during such period. A notice of the Agent
submitted to any Lender with respect to amounts owing under this subsection
shall be conclusive, absent manifest error. If such amount is so made available,
such payment to the Agent shall constitute such Lender's Loan on the Funding
Date for all purposes of this Agreement. If such amount is not made available to
the Agent on the Business Day following the Funding Date, the Agent will notify
the Borrower of such failure to fund and, upon demand by the Agent, the Borrower
shall pay such amount to the Agent for the Agent's account, together with
interest thereon for each day elapsed since the date of such Loan, at a rate per
annum equal to the interest rate applicable at the time to such Loan;
(ii) Receiving all payments of principal, interest, fees and other
charges paid by, or on behalf of, the Borrower and distribute such funds to the
Lenders as specifically required in this Agreement.
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Section 8.9. Successor Agent.
8.9.1. Upon written notice to the Lenders, the Agent may resign as
Agent hereunder at any time without the prior written consent of the Lenders or
any of them. Upon any such resignation in accordance with the foregoing
provisions, the Majority Lenders shall have the right to appoint a successor
Agent (subject to the provisions below).
8.9.2. In addition, the Majority Lenders may elect, by written notice
to the Agent, to remove the Agent hereunder for good cause. Upon any such
removal in accordance with the foregoing provisions, the Majority Lenders shall
have the right to appoint a successor.
8.9.3. If, within thirty (30) days of the giving of notice of the
Agent's resignation, a successor Agent has not been appointed by the Majority
Lenders or such successor has not accepted such appointment, the retiring Agent
may, on behalf of the Lenders, appoint a successor Agent. Any successor Agent
must be a Lender. Upon the acceptance of any appointment as the Agent hereunder
by a successor Agent, such successor Agent shall thereupon succeed to and become
vested with all rights, powers, privileges and duties of a retiring (or removed)
Agent, including the right to any agency fee to be paid by the Borrower, and the
retiring (or removed) Agent shall be discharged from its duties and obligations
under this Agreement.
Section 8.10. Powers of the Agent. Except as otherwise expressly
provided for in this Agreement, and subject to the provisions of Section 8.11.
hereof, the Agent shall have the right, in its sole discretion, in each
instance: (a) to grant or withhold approvals under the Loan Documents; (b) to
exercise or refrain from exercising any rights which the Agent or the Lenders
may have with respect to the obligations, the Loan Documents, or with respect to
any of the collateral hereunder; and (c) including, without limitation, the
right to:
(i) Receive, review and process all documents, certificates, opinions,
insurance policies, reports, requisitions and other materials of every nature
and description submitted by, or on behalf of, the Borrower or any other party;
(ii) Enforce all of the rights, remedies and privileges afforded or
available to the Lenders under the terms of this Agreement and the other Loan
Documents, any opinion, certificates, warranties, representations or insurance
policies furnished by or on behalf of the Borrower or any other party (but only
after election to declare an Event or Events of Default and/or to accelerate
amounts outstanding under the Loan Documents as provided in this Agreement); and
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(iii) Do or refrain from doing all such other acts as may be
reasonably necessary or incident to the implementation, administration or
servicing of the Loan Documents and the enforcement of the rights and remedies
of the Lenders.
Section 8.11. Limitations on the Agent. Notwithstanding anything to
the contrary herein contained, the Agent shall not (a) agree to the modification
or waiver of any of the terms of this Agreement, the Notes, or the other Loan
Documents, or (b) consent to any act or omission by the Borrower, or any other
party, or (c) exercise any rights which either Agent or the Lenders may have
with respect to the Obligations, this Agreement, the Notes, or the other Loan
Documents, if any such modification, waiver, agreement, consent or exercise
would compromise or settle any litigation or legal proceeding against the
Borrower or the Guarantor in connection with the Obligations in any manner which
would have a Material and Adverse Effect on the interest of any Lender in the
Obligations once such litigation or legal proceeding has been commenced by the
Agent; or, unless consented to in writing by the Majority Lenders or by all of
the Lenders if required by Section 9.3.1.1.
As to any matters which are subject to the consent of the Majority
Lenders (as the case may be), the Agent shall not be permitted to exercise any
discretion or take any action except upon the instructions of the Majority
Lenders, which instructions shall be binding upon all Lenders. The Agent and its
directors, officers, agents and employees shall be fully protected in acting or
in refraining from acting upon such instructions (subject to Section 8.5.), but
in no event shall the Agent be required to take any action which exposes the
directors, officers, agents or employees of the Agent to personal liability or
which is contrary to the Loan Documents or applicable Law. As to any matters not
expressly provided for by the Loan Documents or this Agreement, the Agent shall
not be required to exercise any discretion or take any action, unless such
inaction on the part of an Agent exposes the Agent or its directors, officers,
agents or employees to personal liability or is contrary to applicable Law. In
acting hereunder as an Agent, Agent shall be acting for the account of and as
agent for all Lenders, to the extent of their respective pro rata shares in the
Obligations.
Section 8.12. Approval of Lenders.
8.12.1. All communications ("Communication") from the Agent to the
Lenders requesting the Lenders' determination, consent, approval or disapproval
(i) shall be given in the form of a written notice to each Lender, (ii) shall be
accompanied by a description of the matter or thing as to which such
determination, approval, consent or disapproval is requested, or shall advise
each Lender where such matter or thing may be inspected, or shall otherwise
describe the matter or issue to be resolved, (iii) shall include, if reasonably
requested by a Lender and to the extent not previously provided to such Lender,
written materials and a summary of all oral information provided to the Agent by
the Borrower in respect of the matter or issue to be resolved, and (iv) shall
include the Agent's recommended course of action or determination in respect
thereof and the date by which the Lender shall respond. Each Lender shall reply
promptly, but in any event (x) if this Agreement or any other Loan Document sets
forth a period within which the Lenders are to reply to the Communication, each
Lender shall reply to the Communication within such period, or (y) if no such
period is set forth, within ten (10) Business Days (or such lesser period as may
be required under the Loan Documents for the Agent to respond) for those matters
requiring the consent by all Lenders, Majority Lenders or less than Majority
Lenders, in each instance, after receipt of the request therefore by the Agent
(in any event, the "Lender Reply Period").
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8.12.2. Unless a Lender shall give written notice to the Agent that it
objects to the recommendation or determination of the Agent (together with a
written explanation of the reasons behind such objection), within the Lender
Reply Period, such Lender shall be deemed to have approved of or consented to
such recommendation or determination.
Section 8.13. Method of Payment. Upon receipt of any payments of
principal, interest and late payment charges in connection with the Loan
Documents or Fees, the Agent shall distribute each such payment in accordance
with the applicable provisions of this Agreement. If the Agent fails to make
such distribution by the close of business on the Business Day on which such
payment is required to be delivered pursuant to the terms of this Agreement, the
Agent shall remit to each Lender its Pro Rata Share in such payment on the
immediately following Business Day, together with interest thereon at the
overnight rate for federal funds transactions between member Lenders of the
Federal Reserve System, as published by the Federal Reserve Bank of New York.
Each payment to the Agent under this Section 8.13. shall constitute a similar
payment by the Borrower to each Lender, and any portion of the Obligations paid
by any such payment to the Agent by or on behalf of the Borrower shall not be
considered outstanding for any purpose after the date of its receipt by the
Agent; provided, however, as between each Lender and the Agent, such payment
shall be deemed outstanding until made by the Agent to each Lender in accordance
with the provisions above. In the absence of gross negligence or willful
misconduct, the Agent shall not be liable for any apportionment or distribution
of payments made by it in good faith pursuant to this Agreement, and if any such
apportionment or distribution is subsequently determined to have been made in
error, the sole recourse of any Person to whom payment was due, but not made,
shall be, except as otherwise expressly set forth in this Agreement, to recover
from the recipient of such payment any payment in excess of the amount to which
they are determined to have been entitled.
Section 8.14. Increased Costs. If any Lender is entitled to and
decides to require payment of any amounts described in Sections 2.9. or 2.10.,
such Lender shall: (a) give written notice thereof to the Borrower and shall
send a copy of such notice to the Agent, and such amounts shall be payable to
such Lender in accordance with the terms of Sections 2.9. or 2.10.; and (b)
simultaneously with the giving of such notice, furnish to the Borrower (and
deliver a copy to the Agent) (i) a certificate of an officer of such Lender
setting forth the amount to which such Lender is then entitled pursuant to
Section 2.9. or 2.10. and (ii) such other information, certifications and
documentation as is required to be furnished to the Borrower under the terms of
Section 2.9. or 2.10.
Section 8.15. Taxes. Except as specifically set forth in this
Agreement, all taxes due and payable on any payments to be made to the Lenders
in respect of the Obligations or under this Agreement shall be the Lenders' sole
responsibility. All payments payable to the Lenders hereunder or with respect to
the Loan Documents shall be made to the Lenders without deduction for any taxes,
charges, levies or withholdings except to the extent, if any, that such amounts
are required to be withheld by the Agent under the laws, rules and regulations
of the United States of America and any other applicable taxing authority. If a
Lender is organized or is existing under the laws of another jurisdiction
outside the United States, such Lender shall provide to the Agent upon the
execution of this Agreement and, from time to time thereafter, completed and
signed copies of any form that may be required by the United States Internal
Revenue Service in order to certify such Lender's exemptions from United States
withholding taxes with respect to payments to be made to such Lender in respect
of the Obligations or under this Agreement.
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Section 8.16. Excess Payments. If a Lender shall obtain any payment
(whether voluntary, involuntary, through the exercise of any right of setoff or
otherwise) on account of its interest in the Obligations in excess of its pro
rata share in the Obligations, such excess shall be shared among all Lenders in
accordance with their respective pro rata shares. However, if all or any portion
of such excess payment is thereafter recovered by the Borrower or other party
entitled thereto through legal action or otherwise, each Lender shall promptly
reimburse the party required to refund such payment to the Borrower or other
party entitled thereto in an amount equal to such Lender's pro rata share in the
amount of the excess required to be refunded. Within three Business Days after
obtaining any such payment, the Lender obtaining the same agrees to notify the
Agent of such excess payment.
Section 8.17. Return of Payments. If, for any reason, the Agent makes
any payment to a Lender before the Agent has received or applied that
corresponding payment on the obligations (it being understood that the Agent is
under no obligation to do so), and, thereafter, the Agent does not receive the
corresponding payment within five Business Days after the date the Agent made
such payment to a Lender (or in the event the Agent by error makes a payment to
a Lender to which it is not entitled), such Lender shall, at the Agent's
request, promptly return that payment to the Agent (together with interest on
that payment at the overnight rate for federal funds transactions between member
Lenders of the Federal Reserve System, as published by the Federal Reserve Bank
of New York for each day from the making of that payment to such Lender until
its return to the Agent); provided, however, interest on such payment shall not
be due: (a) if such payment was made to a Lender and such Lender had no
knowledge that it had received such payment due to error which was the fault of
the Agent (except for the period after which such Lender receives notice that it
has received such payment), and (b) if such Lender can provide the Agent with
evidence, reasonably satisfactory to the Agent, that any such payment received
by such Lender was not invested by such Lender. If the Agent has received or
applied any payment in respect of the Obligations and has paid a Lender its Pro
Rata Share in such payment and, thereafter, the payment or application is
rescinded or must otherwise be returned or paid over by the Agent, whether or
not required pursuant to any bankruptcy or insolvency law, the sharing of
payments clause of any loan agreement or otherwise, such Lender will, at the
Agent's request, promptly return its pro rata share in that payment or
application to the Agent, together with such Lender's pro rata share in any
interest or other amount required to be paid by the Agent with respect to that
payment or application.
Section 8.18. Default By The Borrower; Acceleration. The Agent will
send to each Lender copies of any notices of a Default or an Event of Default
sent by the Agent to the Borrower under the terms of the Loan Documents promptly
after sending the same to the Borrower, but in any case within three Business
Days after sending the same to the Borrower. In the event of any Default or
Event of Default, the Agent shall (as soon as is practicable under the
circumstances) consult with the Lenders in an effort to determine a mutually
acceptable course of action with respect to the Default or Event of Default. The
Agent may deliver to the Lenders a written recommendation of a course of action
(the "recommended course of action"), in which case each Lender shall either
approve such action in writing or object in writing to such action within thirty
(30) days (or such lesser period as specified in the notice from the Agent)
following such notice. Failure to deliver a written objection within thirty (30)
days (or such lesser period) will be deemed to constitute an approval. The Agent
may take the recommended course of action if consented or approved as provided
above by the Majority Lenders; provided that no rights shall be released without
the consent of all Lenders. In furtherance of the foregoing, and notwithstanding
anything herein to the contrary, each Lender hereby appoints and constitutes the
Agent its agent with full power and authority to exercise in the name of, and on
behalf of each Lender, any and all rights and remedies which each Lender may
have with respect to, and to the extent necessary under applicable law for, the
enforcement of the Loan Documents, or which the Agent may have as a matter of
law. It is understood and agreed that in the event the Agent determines it is
necessary to engage counsel for the Lenders from and after the occurrence of an
Event of Default, said counsel shall be selected by the Agent and written notice
of the same shall be delivered to the Lenders.
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Section 8.19. Defaults by Lender.
8.19.1. If for any reason any Lender ("Defaulting Lender") shall fail
or refuse to abide by its obligations under this Agreement or under any Loan
Document and such failure or refusal shall continue for five (5) Business Days
after notice with respect to monetary obligations hereunder or under any Loan
Document or thirty (30) days after notice with respect to non-monetary
obligations hereunder or under any Loan Document (provided, however, that if
such non-monetary default is of a nature that the same cannot be reasonably
cured within thirty (30) days and such Lender shall have commenced to cure such
non-monetary default within such period and shall thereafter proceed with
reasonable due diligence and good faith to cure such non-monetary default, such
period shall be extended for such longer period as shall be necessary for such
Lender to cure such default with all reasonable diligence, but in no event
beyond that date which is one hundred twenty (120) days after such Lender
received notice of such default), then, in addition to the rights and remedies
that may be available to the Agent at law and in equity, such Defaulting
Lender's right to participate in the administration of the Loan Documents,
including, without limitation, any rights to consent to or direct any action or
inaction of the Agent, pursuant to Section 8.11. above or otherwise, or to be
taken into account in the calculation of Majority Lenders, shall be suspended
during the pendency of such failure or refusal. If for any reason a Lender fails
to make timely payment to the Agent of any amount required to be paid to it
hereunder (without giving effect to any notice or cure periods), in addition to
other rights and remedies which the Agent may have under this Section 8.19.1. or
otherwise, the Agent shall be entitled (i) to collect interest from such Lender
for the period from the date on which the payment was due at the overnight rate
for federal funds transactions between member Lenders of the Federal Reserve
System, as published by the Federal Reserve Bank of New York, for each day
during such period, (ii) to withhold or setoff, and to apply to the payment of
the defaulted amount and any related interest, any amounts to be paid to such
Lender under this Agreement, and (iii) to bring an action or suit against such
Lender in a court of competent jurisdiction to recover the defaulted amount and
any related interest.
8.19.2. In the event a Lender becomes a Defaulting Lender, other
Lenders shall have the right, but not the obligation, in their sole discretion,
to acquire (or, if more than one Lender exercises such right, each such Lender
shall have the right to acquire, pro rata, or such proportion as they may
mutually agree) the pro rata share in the Obligations of the Defaulting Lender.
Upon any such purchase of the Pro Rata Share in the Obligations of the
Defaulting Lender, the Defaulting Lender's interest in the Obligations and its
rights hereunder (but not its liability with respect thereof or under the Loan
Documents or this Agreement to the extent the same relate to the period prior to
the effective date of the purchase) shall terminate at the date of purchase, and
the Defaulting Lender shall promptly execute all documents reasonably requested
to surrender and transfer such interest, including an Assignment and Assumption.
On or before the date of such purchase, the Defaulting Lender shall pay to the
Agent a processing fee of Five Thousand Dollars ($5,000.00).
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8.19.3. The Lenders, and each of them, shall have the right to acquire
the pro rata share in the Obligations of the Defaulting Lender pursuant to
Section 8.19.2. for a purchase price equal to the proportionate share amount of
the principal balance of the Obligations outstanding and owed by the Borrower to
the Defaulting Lender. Payment of the purchase price for the Defaulting Lender's
pro rata share in the Loan so acquired shall be deferred and shall be limited to
and made only from the repayment of the outstanding principal balance of the
Obligations (after all of the non-defaulting Lenders have been paid the full
principal amount of their respective proportionate shares of the Obligations
exclusive of any Defaulting Lender's proportionate share-which may have been
purchased pursuant to Section 8.19.2.), if and as received in repayment of
principal of the Obligations, and credited to the pro rata share in the
Obligations previously owned by the Defaulting Lender. Interest on the purchase
price of the Defaulting Lender's pro rata share in the Obligations shall be paid
to the Defaulting Lender. Such interest shall be equal to the amount that would
have been payable to the Defaulting Lender pursuant to the terms of this
Agreement, calculated on the unpaid balance of the purchase price, and payment
thereof shall be limited to and made only from the repayment of interest on the
Obligations, and credited to the pro rata share in the Obligations previously
owned by the Defaulting Lender. The Defaulting Lender shall also be entitled to
receive amounts owed to it by the Borrower under the Loan Documents which
accrued prior to the date of the default by the Defaulting Lender, to the extent
the same are received by the Agent from or on behalf of the Borrower. There
shall be no recourse against any non-defaulting Lender nor the Agent for the
payment of such sums except to the extent of the receipt of such sums from the
Borrower by a non-defaulting Lender or the Agent. Payments to the Defaulting
Lender shall be made promptly after receipt of such payments by the Agent in
accordance with the payment provisions set forth in Section 8.13. hereof.
8.19.4. The provisions of Sections 8.19.2. and 8.19.3. shall not
preclude any Lender from acquiring the interest of a Defaulting Lender on any
other terms agreed to by the Defaulting Lender and the purchasing Lender(s).
Section 8.20. No Partnership or Joint Venture. Neither the execution
of this Agreement nor the purchase of the pro rata share in the Obligations or
in the Loan Documents, or any agreement to share in profits and losses arising
out of this transaction, is intended to be, nor shall it be construed to be, the
formation of a partnership or joint venture between any of the Lenders, or the
Agent, and none of the Agent or Lenders shall be liable to any other person or
entity for the liability in tort or contract of the Agent or any other Lender
arising in connection with the Obligations or any transaction connected herewith
or therewith nor shall the Agent have any fiduciary obligations to any Lender.
The Agent shall have and may exercise such powers as are specifically delegated
to it under this Agreement.
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Section 8.21. Indemnification. Agent shall not in any event be
required to take any action under the Loan Documents or in relation thereto
unless it shall first be indemnified to its satisfaction by the Lender parties
against any and all liability and expense that it may incur by reason of taking
any such action. Each Lender agrees to indemnify and hold the Agent harmless (to
the extent not promptly paid or reimbursed by the Borrower, ratably according to
their respective Commitments), from and against any and all (a) costs, expenses
and other amounts incurred by the Agent otherwise payable by the Borrower
pursuant to Section 9.1. and (b) Indemnified Liabilities that may be imposed on,
incurred by, or asserted against the Agent, except to the extent they are
finally adjudged by a court of competent jurisdiction to have directly resulted
from the gross negligence or willful misconduct of the Agent. Without limitation
of the foregoing, each Lender agrees to reimburse the Agent promptly upon demand
for its ratable share of any out-of-pocket expenses (including counsel fees)
incurred by the Agent in connection with the preparation, execution, delivery,
administration, modification, amendment or enforcement (whether through
negotiations, legal proceedings or otherwise) of, or legal advice in respect to
rights or responsibilities under, the Loan Documents, to the extent that the
Agent is not promptly reimbursed for such expenses by the Borrower.
ARTICLE 9.
MISCELLANEOUS
Section 9.1. Expenses. The Borrower shall pay on demand:
9.1.1. Any and all reasonable attorneys' fees and disbursements
(including allocated costs of in-house counsel) and out-of-pocket cost and
expenses incurred by the Agent in connection with the development, drafting and
negotiation of the Loan Documents, and the arrangement, underwriting,
syndication, administration and closing of the transactions contemplated
thereby; and
9.1.2. all costs and expenses (including fees and disbursements of
in-house and other attorneys, appraisers and consultants) incurred by the Lender
Parties in any amendment, workout, restructuring or similar arrangements or, in
connection with the administration (including photocopying and overnight mail
cost for communication with Lenders), protection, preservation, exercise or
enforcement of any of the terms of the Loan Documents or in connection with any
collection or bankruptcy proceedings.
Section 9.2. Indemnity.
9.2.1. Borrower shall indemnify, defend and hold harmless each Lender
Party and the officers, directors, employees, agents, attorneys, affiliates,
successors and assigns of each Lender Party (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 Loans, and (b) any and all
liabilities, losses, damages, penalties, judgments, claims, costs and expenses
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of any kind or nature whatsoever (including reasonable attorneys' fees,
including allocated costs of in-house counsel, 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 relationship between any Borrower Party
and any Lender Party under any of the Loan Documents, the Loans, the use or
intended use of the proceeds of the Loans (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 any Lender Party
9.2.2. Each Indemnitee will promptly notify the Borrower of each event
of which it has knowledge that may give rise to a claim under clause (b) of
Section 9.2.1., provided that the failure to so notify the Borrower shall in no
way impair the Borrower's obligations under this Section 9.2. (except to the
extent that such failure to so notify arises from the gross negligence or
willful misconduct of such Indemnitee and has an adverse effect on the
Borrower). If any investigative, judicial or administrative proceeding is
brought against any Indemnitee indemnified or intended to be indemnified
pursuant to this Section 9.2., the Borrower, to the extent and in the manner
directed by the Indemnitee, will resist and defend such proceeding with counsel
designated by the Borrower (which counsel shall be reasonably satisfactory to
the Indemnitee). Each Indemnitee will use its best efforts to cooperate in the
defense of any such action, writ, or proceeding. The Borrower shall keep such
Indemnitee advised of the status of such defense and consult with such
Indemnitee prior to taking any material position with respect thereto. Such
Indemnitee shall, however, be entitled to employ counsel separate from counsel
for the Borrower and from any other party in such proceeding if such Indemnitee
shall reasonably determine that a conflict of interest or other circumstance
exists that makes representation by counsel chosen by the Borrower not
advisable. The fees and disbursements of such separate counsel shall be paid by
the Borrower. Such Indemnitee shall not agree to the settlement of any such
claim without the consent of the Borrower, unless the Borrower shall have been
given notice of the commencement of an action and shall have failed to provide
the defense thereof as herein provided or an Event of Default shall have
occurred.
9.2.3. To the extent that the undertaking to indemnify and hold
harmless set forth in Section 9.2.1. may be unenforceable as 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 on demand.
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Section 9.3. Waivers; Modifications in Writing.
9.3.1. 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 Agent and the
Majority Lenders. Notwithstanding the foregoing,
9.3.1.1. no amendment that has the effect of (a) reducing the rate or
amount, or extending the stated maturity or due date, of any amount payable by
the Borrower to any Lender Party under the Loan Documents, (b) increasing the
amount, or extending the stated termination or reduction date, of any Lender's
Revolving Commitment hereunder or subjecting any Lender Party to any additional
obligation to extend credit, (c) altering the rights and obligations of the
Borrower to prepay the Loans, (d) releasing any Guarantor under the Guaranty,
(e) changing this Section 9.3. or the definition of the term "Majority Lenders,"
or (f) forgiving of principal or interest, shall be effective unless the same
shall be signed by or on behalf of all of the Lenders;
9.3.1.2. no amendment that has the effect of (a) increasing the duties
or obligations of the Agent, (b) increasing the standard of care or performance
required on the part of the Agent, or (c) reducing or eliminating the
indemnities or immunities to which the Agent is entitled (including any
amendment of this Section 9.3.1.2.), shall be effective unless the same shall be
signed by or on behalf of the Agent; and
9.3.1.3. 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 the Borrower to any other or further
notice or demand in similar or other circumstances. Any amendment effected in
accordance with this Section 9.3. shall be binding upon each present and future
Lender Party and the Borrower.
Section 9.4. 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 Parties under
Applicable Law or otherwise. No failure or delay on the part of any Lender Party
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 9.5. 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, registered or certified mail (postage prepaid),
or by prepaid telex or telecopy, 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 9.5., all notices and other
communications shall be given to the parties hereto at their respective
addresses (or to their respective telex or telecopier numbers) indicated on the
signature pages attached hereto.
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Section 9.6. Successors and Assigns.
9.6.1. 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 each Lender.
9.6.2. Each Lender shall have the right at any time to assign (an
"Assignment") all or any portion of such Lender's Revolving Commitment to one or
more Lenders or other institutions; provided that the following conditions are
satisfied: (a) each Assignment shall be of a portion of the Revolving Commitment
at least equal to $10,000,000 and, unless otherwise agreed by the Agent, each
such assignment shall be of a constant, and not a varying, percentage of all of
the assigning Lender's rights and obligations under this Agreement and the other
Loan Documents; (b) no Assignment (other than an Assignment to a Person that is
then a Lender or an Affiliate of a Lender) shall be effective without the
consent of the Borrower and the Agent, which consents shall not be unreasonably
withheld or delayed; provided, however, no consent of the Borrower will be
required if a monetary Event of Default has occurred and has not been cured on
or prior to the date that is six (6) months after such occurrence, and the
Majority Lenders have not, on or prior to the expiration of such six (6) month
period, agreed upon a plan submitted by the Borrower (which may be an interim
plan) setting forth the Borrower's then intended plan to cure such Event of
Default (provided, further, that nothing herein shall constitute a waiver by any
Lender Party of any rights or remedies of any Lender Party upon the occurrence
of a Default or an Event of Default); (c) the parties to the Assignment shall
execute and deliver to the Agent, with a copy to the Borrower, an Assignment and
Assumption substantially in the form of Exhibit E (an "Assignment and
Assumption"); (d) the assignee shall pay to the Agent a processing and
recordation fee of $3,000; (e) if the assignee is not organized and existing
under the laws of the United States of America or any political subdivision
thereof or therein, the assignee shall have furnished to the Borrower the
Prescribed Forms; and (f) the Revolving Commitment retained by the Agent shall
not be reduced below the amount of the largest Revolving Commitment held by any
Lender other than Agent. Each proposed assignee must be an existing Lender or a
bank or financial institution which (A) has (or, in the case of a bank which is
a subsidiary, such bank's parent has) a rating of its senior unsecured debt
obligations of not less than Baa-2 by one of the Rating Agencies and (B) has
total assets in excess of Ten Billion Dollars ($10,000,000,000). Unless Borrower
gives written notice to the assigning Lender that it objects to the proposed
assignment (together with a written explanation of the reasons behind such
objection) within ten (10) Business Days following receipt of the assigning
Lender's written request for approval of the proposed assignment, Borrower shall
be deemed to have approved such assignment. From and after the date on which the
conditions in the foregoing clauses and the Assignment and Acceptance have been
satisfied, the assignee shall be a "Lender" hereunder and, to the extent that
rights and obligations hereunder have been assigned to it, shall have the rights
and obligations, and the assigning Lender shall, to the extent that rights and
obligations hereunder have been assigned by it, relinquish its rights and be
released from its obligations under this Agreement (and, in the case of an
Assignment covering all or the remaining portion of the assigning Lender's
rights and obligations under this Agreement, cease to be a party hereto).
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9.6.3. Each Lender shall have the right at any time to grant or sell
participations (each a "Participation") in all or any portion of such Lender's
Revolving Commitment, Loans to one or more Lenders or other institutions,
subject to the terms and conditions set forth in this Section 9.6.3.. If any
Lender sells or grants a Participation, (a) such Lender shall make and receive
all payments for the account of its participant, (b) such Lender's obligations
under this Agreement shall remain unchanged, (c) such Lender shall continue to
be the sole holder of its Notes and other Loan Documents subject to the
Participation and shall have the sole right to enforce its rights and remedies
under the Loan Documents, (d) the Borrower and the other Lender Parties shall
continue to deal solely and directly with such Lender in connection with such
Lender's rights and obligations under the Loan Documents, and (e) the
Participation agreement shall not restrict such Lender's ability to agree to any
amendment of the terms of the Loan Documents, or to exercise or refrain from
exercising any powers or rights that such Lender may have under or in respect of
the Loan Documents, except that the participant may be granted the right to
consent to any (A) reduction of the rate or amount, or any extension of the
stated maturity or due date, of any principal, interest or Fees payable by the
Borrower and subject to the Participation, (B) increase in the amount or
extension of the stated termination or any reduction date of the affected
Revolving Commitment or Term Commitment or (C) release of the Guaranty, except
to the extent otherwise provided in the Loan Documents. A participant shall have
the rights of the Lenders under Sections 2.9., 2.10. and 9.9., subject to the
obligations imposed by such Sections; provided that amounts payable to any
participant shall not exceed the amounts that would have been payable under such
Sections to the Lender granting the Participation, had such Participation not
been granted, unless the Participation is made with the prior written consent of
the Borrower.
9.6.4. Each Lender may at any time assign or pledge any portion of its
rights under the Loan Documents to a Federal Reserve Bank. No such assignment or
pledge shall be subject to the provisions of Sections 9.6.2. or 9.6.3.
9.6.5. Subject to the provisions of Section 9.7., each Lender shall
have the right at any time to furnish one or more potential assignees or
participants with any information concerning the Borrower and the Guarantor that
has been supplied by the Borrower to any Lender Party. The Borrower shall supply
all reasonably requested information and execute and deliver all such
instruments and take all such further action (including, in the case of an
Assignment, the execution and delivery of replacement Notes) as the Agent may
reasonably request in connection with any Assignment or Participation
arrangement.
75
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Section 9.7. Confidentiality.
Each Lender Party will maintain any confidential information that it
may receive from the Borrower or the Guarantor 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 Party; (b) to
regulatory officials having jurisdiction over the Lender Party; (c) required by
Applicable Law or in connection with any legal proceeding; (d) to any other
Lender Party; (e) to another Person in connection with a potential Assignment or
Participation, provided such Person shall have agreed in writing to be subject
to this Section 9.7.; and (g) of information that has been previously disclosed
publicly without breach of this provision. Each Lender Party shall return, upon
request by the Borrower made within a reasonable time after termination of this
Agreement, any confidential material clearly and conspicuously marked
"Confidential and Subject to Return" by the Borrower when furnished to such
Lender Party, provided that the return of such material is not inconsistent with
standard banking practice or, in the judgment of the Lender Party, otherwise
disadvantageous to it.
Section 9.8. Set Off.
In addition to any rights now or hereafter granted under Applicable
Law, upon and after any acceleration of the Maturity Date hereunder, each Lender
Party is hereby irrevocably authorized by the Borrower, at any time or from time
to time, without notice to the Borrower or to any other Person, any such notice
being hereby expressly waived, to set off and to appropriate and to apply any
and all deposits (general or special, including certificates of deposit, whether
matured or unmatured, but not including trust accounts) and any other
indebtedness, in each case whether direct or indirect or contingent or matured
or unmatured at any time held or owing by such Lender Party to or for the credit
or the account of the Borrower, against and on account of the Obligations of the
Borrower to such Lender Party under the Loan Documents to which the Borrower is
a party, irrespective of whether or not such Lender Party shall have made any
demand for payment and although such Obligations may be contingent and
unmatured. Each Lender Party agrees to notify the Borrower promptly of any such
set-off and the application made by such Lender Party, provided that the failure
to give such notice shall not affect the validity of such set-off and
application.
Section 9.9. Changes in Accounting Principles.
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 by 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, 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 hereto 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 9.10. 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
76
<PAGE>
of Lender Parties shall not diminish the right of Lender Parties to rely
thereon. Without limitation, the agreements and obligations of the Borrower
contained in Sections 2.9., 2.10., 9.1. and 9.2., and the obligations of the
Lender Parties under Section 8.21. shall survive the payment in full of all
other Obligations.
Section 9.11. 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. This Agreement shall become effective upon the execution
of a counterpart hereof by each of the parties hereto. Faxed signatures to this
Agreement shall be binding for all purposes.
Section 9.12. Complete Agreement.
This Agreement, together with 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 9.13. Inspections.
Lender shall have the right to enter upon the Office Park Property at
all reasonable times to inspect the improvements thereon to verify information
disclosed or required pursuant to this Agreement, provided that Lender shall not
unreasonably disturb any tenants occupying such Office Park Property. Any
inspection or review of the improvements by Lender is solely to determine
whether Borrower is properly discharging its obligations to Lender and may not
be relied upon by Borrower or by any third party as a representation or warranty
of compliance with this Agreement or any other agreement. Lender owes no duty of
care to Borrower or any third party to protect against, or to inform Borrower or
any third party of, any negligent, faulty, inadequate or defective design or
construction of the improvements as determined by Lender.
Section 9.14. Waiver of Right to 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, WITHOUT LIMITATION, ANY PRESENT OR FUTURE
MODIFICATION THEREOF OR (b) IN ANY WAY CONNECTED WITH OR RELATED OR INCIDENTAL
TO THE DEALINGS OF THE PARTIES HERETO OR ANY OF THEM WITH RESPECT TO THE LOAN
DOCUMENTS (AS NOW OR HEREAFTER MODIFIED) 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 EACH PARTY HEREBY AGREES AND CONSENTS 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 HERETO
TO THE WAIVER OF ANY RIGHT THEY MIGHT OTHERWISE HAVE TO TRIAL BY JURY.
77
<PAGE>
Section 9.15. Limitation of Liability.
In the event that any Lender is found to have breached its obligations
hereunder, then such Lender shall be severally and not jointly liable for all
damages available under Applicable Law for breach of contract. Notwithstanding
the foregoing sentence or anything in this Agreement to the contrary, no claim
shall be made by the Borrower against any Lender Party or the Affiliates,
directors, officers, employees or agents of any Lender Party 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 any act, omission or event
occurring in connection therewith; and the Borrower 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.
78
<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:
PS BUSINESS PARKS, L.P.
a California limited partnership
By: PS Business Parks, Inc.
a California corporation,
General Partner
By: /s/Jack Corrigan
------------------------
Name: Jack Corrigan
Title: Vice President
Chief Financial Officer
THE BORROWER: PS BUSINESS PARKS, L.P.
701 Western Avenue
Glendale, California 91201
Attention: Chief Financial Officer
Telephone: (818) 244-8080
Telecopier: (818) 244-9267
<PAGE>
Agent:
Wells Fargo Bank, National Association
By: /s/ KIM SURCH
----------------------------------
Name: Kim Surch
----------------------------------
Title:Vice President
----------------------------------
WELLS FARGO: Wells Fargo Bank, National Association
2030 Main Street, 8th Floor
Irvine, California 92614
Attention: Office Manager
Telephone: (949) 251-4300
Telecopier: (949) 851-9728
<PAGE>
Lender:
Wells Fargo Bank, National Association
By: /s/ KIM SURCH
----------------------------
Name: Kim Surch
----------------------------
Title: Vice President
----------------------------
WELLS FARGO: Wells Fargo Bank, National Association
2030 Main Street, 8th Floor
Irvine, California 92614
Attention: Office Manager
Telephone: (949) 251-4300
Telecopier: (949) 851-9728
WELLS FARGO'S Wells Fargo Bank, National Association
LIBOR LENDING 2120 East Park Place, Suite 100
OFFICE: El Segundo, California 90245
Attention: Anne Colvin
Telephone: (310) 335-9458
Telecopier: (310) 615-1014
<TABLE> <S> <C>
<ARTICLE> 5
<CIK> 0000866368
<NAME> PS Business Parks, Inc.
<MULTIPLIER> 1
<CURRENCY> U.S. $
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-START> JAN-01-1998
<PERIOD-END> JUN-30-1998
<EXCHANGE-RATE> 1
<CASH> 36,355,000
<SECURITIES> 0
<RECEIVABLES> 0
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 36,355,000
<PP&E> 645,812,000
<DEPRECIATION> (10,314,000)
<TOTAL-ASSETS> 675,766,000
<CURRENT-LIABILITIES> 11,256,000
<BONDS> 0
0
0
<COMMON> 236,000
<OTHER-SE> 483,159,000
<TOTAL-LIABILITY-AND-EQUITY> 675,766,000
<SALES> 0
<TOTAL-REVENUES> 36,699,000
<CGS> 0
<TOTAL-COSTS> 11,019,000
<OTHER-EXPENSES> 8,621,000
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 1,069,000
<INCOME-PRETAX> 11,376,000
<INCOME-TAX> 0
<INCOME-CONTINUING> 11,376,000
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 11,376,000
<EPS-PRIMARY> 0.76
<EPS-DILUTED> 0.76
</TABLE>
