<PAGE> 1
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 March 31, 1998
OR
( ) TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES AND EXCHANGE ACT OF 1934
For the Transition Period from _______ to _______
Commission File Number: 1-12546
PACIFIC GULF PROPERTIES INC.
(Exact name of Registrant as specified in its Charter)
MARYLAND 33-0577520
State of Incorporation (I.R.S. Employer Identification No.)
4220 VON KARMAN, SECOND FLOOR, NEWPORT BEACH
CALIFORNIA 92660-2002 (Address of principal
executive offices, including zip code)
949-223-5000
(Registrant's telephone number, including area code)
COMMON STOCK, PAR VALUE $.01 PER SHARE, 19,987,145 SHARES
WERE OUTSTANDING AS OF MAY 5, 1998
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 [ ]
<PAGE> 2
PACIFIC GULF PROPERTIES INC.
FORM 10-Q
PART I: FINANCIAL INFORMATION
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Item 1. Financial Statements
INDEX TO FINANCIAL STATEMENTS
Consolidated Balance Sheets as of March 31, 1998 and
December 31, 1997 1
Consolidated Statements of Operations for the Three
Months ended March 31, 1998 and March 31, 1997 2
Consolidated Statements of Cash Flows for the Three
Months ended March 31, 1998 and March 31, 1997 3
Notes to Financial Statements 4
Item 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations 6
PART II: OTHER INFORMATION 8
SIGNATURES 9
</TABLE>
<PAGE> 3
PACIFIC GULF PROPERTIES INC.
CONSOLIDATED BALANCE SHEETS
(in thousands, except share data)
<TABLE>
<CAPTION>
Mar. 31, 1998 Dec. 31, 1997
(Unaudited) (Audited)
---------- ----------
<S> <C> <C>
ASSETS
Real estate assets
Land $ 201,382 $ 185,789
Buildings 557,432 515,160
---------- ----------
758,814 700,949
Accumulated depreciation (43,475) (39,148)
---------- ----------
715,339 661,801
Properties under development, including land 36,953 32,107
---------- ----------
752,292 693,908
Cash and cash equivalents 3,526 1,466
Accounts receivable 3,894 3,399
Other assets 13,775 13,698
---------- ----------
$ 773,487 $ 712,471
========== ==========
LIABILITIES AND SHAREHOLDERS' EQUITY
Loans payable $ 334,845 $ 283,852
Accounts payable and accrued liabilities 11,692 9,009
Dividends payable 9,602 8,852
Convertible subordinated debentures 12,376 12,592
---------- ----------
368,515 314,305
Minority interest in consolidated partnerships 18,207 9,326
Commitments and contingencies -- --
Shareholders' equity
Preferred shares, $.01 par value; 5,000,000 shares
authorized; 1,351,351 shares Senior Cumulative Convertible
Class A and 1,411,765 shares Senior Cumulative Convertible
Class B outstanding at March 31, 1998 and December 31, 1997,
respectively 28 28
Preferred shares, $.01 par value; 300,000 shares
authorized; Class C Junior Participating Cumulative
Preferred Stock; no shares outstanding -- --
Common shares, $.01 par value; 25,000,000 shares
authorized; 19,987,145 at March 31, 1998 and 19,968,189
shares outstanding at December 31, 1997 200 200
Excess shares, $.01 par value; 30,000,000 shares
authorized; no shares outstanding -- --
Outstanding restricted stock (771) (818)
Additional paid-in capital 411,252 411,187
Distributions in excess of earnings (23,944) (21,757)
---------- ----------
386,765 388,840
---------- ----------
$ 773,487 $ 712,471
========== ==========
</TABLE>
See accompanying notes
1
<PAGE> 4
PACIFIC GULF PROPERTIES INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(in thousands, except share data)
(UNAUDITED)
<TABLE>
<CAPTION>
Three Months Ended March 31
------------------------------
1998 1997
-------- --------
<S> <C> <C>
REVENUES
Rental income
Industrial properties $ 16,307 $ 7,232
Multifamily properties 9,011 7,581
-------- --------
25,318 14,813
EXPENSES
Rental property expenses
Industrial properties 3,783 1,816
Multifamily properties 3,238 2,918
-------- --------
7,021 4,734
Depreciation 4,390 2,356
Interest (including amortization of debenture
discount and financing costs of
$221 and $222 respectively) 5,275 3,953
General and administrative expenses 1,111 688
Minority partners' interest in earnings of
consolidated partnerships 106 --
-------- --------
17,903 11,731
-------- --------
NET INCOME 7,415 3,082
Less preferred dividend requirements 1,207 --
-------- --------
INCOME AVAILABLE TO COMMON SHAREHOLDERS $ 6,208 $ 3,082
======== ========
EARNINGS PER SHARE
Basic $ 0.31 $ 0.27
======== ========
Diluted $ 0.31 $ 0.26
======== ========
DIVIDENDS DECLARED PER COMMON SHARE $ 0.42 $ 0.41
======== ========
</TABLE>
See accompanying notes
2
<PAGE> 5
PACIFIC GULF PROPERTIES INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands)
(UNAUDITED)
<TABLE>
<CAPTION>
Three Months Ended March 31
---------------------------
1998 1997
-------- --------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net income $ 7,415 $ 3,082
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation 4,327 2,356
Amortization of debenture discount
and financing costs 221 222
Minority interests in earnings of
consolidated partnerships 106 --
Compensation recognized related to restricted
stock issued to employees 46 41
Net (increase)/decrease in other assets (792) 466
Net increase in liabilities 2,684 199
-------- --------
Net cash provided by operating activities 14,007 6,366
-------- --------
CASH FLOWS FROM INVESTING ACTIVITIES
Net additions to real estate assets (57,865) (29,192)
Development expenditures (4,845) (10,263)
-------- --------
Net cash used in investing activities (62,710) (39,455)
-------- --------
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from revolving line of credit 75,668 12,483
Repayment of revolving lines of credit (15,000) (13,686)
Proceeds from mortgage notes payable 4,524 --
Repayment of mortgage notes payable (15,110) (309)
Proceeds from construction loans 909 --
Debentures converted to common shares (216) (1,117)
Issuance of common shares 65 45,499
Minority interest contributions 8,775 --
Dividends on common shares (8,387) (4,002)
Dividends on preferred shares (465) --
-------- --------
Net cash provided by financing activities 50,763 38,868
-------- --------
NET DECREASE IN CASH AND CASH EQUIVALENTS 2,060 5,779
CASH AND CASH EQUIVALENTS AT BEGINNING
OF PERIOD 1,466 1,523
-------- --------
CASH AND CASH EQUIVALENTS AT END OF PERIOD $ 3,526 $ 7,302
======== ========
</TABLE>
See accompanying notes
3
<PAGE> 6
NOTES TO FINANCIAL STATEMENTS (UNAUDITED)
1. INTERIM FINANCIAL STATEMENTS
Pacific Gulf Properties Inc. was incorporated in Maryland and operates as a
Real Estate Investment Trust ("REIT") under the Internal Revenue Code of
1986, as amended. The consolidated financial statements include the accounts
of Pacific Gulf Properties Inc. (the "Company") and its consolidated
subsidiaries and partnerships, PGP Inland Communities, L.P., PGP Von Karman
Properties, PGP-Terrace Gardens Holdings Inc., PGP-Morning View Terrace
Holdings Inc., PGP Northern Industrial, L.P. and PGP Southern Industrial II,
L.P. (the "Partnerships"). The information furnished has been prepared in
accordance with generally accepted accounting principles for interim
financial reporting and the instructions to Form 10-Q and Rule 10-01 of
Regulation S-X. Accordingly, certain information and footnote disclosures
normally included in financial statements prepared in accordance with
generally accepted accounting principles have been condensed or omitted.
Certain prior year amounts have been reclassified to conform to the current
year presentation. In the opinion of management, all adjustments considered
necessary for the fair presentation of the Company's financial position,
results of operations and cash flows have been included. These financial
statements should be read in conjunction with the Company's Annual Report on
Form 10-K for the year ended December 31, 1997.
2. REAL ESTATE ACQUISITIONS AND DISPOSITIONS
During the first quarter of 1998 the Company invested $53,615,000 in real
estate assets. Acquisitions included (i) a 140,000 square foot industrial
park in Upland, California for $5,100,000; (ii) a 125,000 square foot
multi-tenant industrial park located in Chatsworth, California for
$7,565,000; (iii) a 300,000 square foot industrial center in Las Vegas,
Nevada for $14,100,000; (iv) a 125,000 square foot business park in Los
Alamitos, California for $7,200,000; (v) a 74,000 square foot building in
Signal Hill, California for $4,800,000; and (vi) a 147,000 square foot
industrial project in Sacramento, California for $5,850,000. All of these
1998 acquisitions were primarily financed with borrowings from the Company's
secured line of credit with Bank of America or the Company's new unsecured
bridge loan agreement with Wells Fargo Bank. (See Liquidity and Capital
Resources for further discussion.)
Also included in the first quarter acquisitions is a 168,000 square foot
distribution facility located in Garden Grove, California in which the
Company acquired a controlling general partnership interest in a newly-formed
California limited partnership ("PGP Southern Industrial II, L.P."). The
other partner in the partnership received an aggregate of 404,950 units of
limited partnership interest in the partnership for an aggregate value of
$9,000,000. The units may be tendered for redemption to the Company any time
after one year of the closing of the transaction. Upon tender, the Company,
at it election, may either issue common shares for the units on a one-for-one
basis (subject to certain adjustments) or pay cash for the units based on the
then fair market value of the common shares.
3. LOANS PAYABLE
The Company's loans payable at March 31, 1998 and December 31, 1997 consist
of the following (in thousands):
<TABLE>
<CAPTION>
1998 1997
-------- --------
Mortgage Notes:
<S> <C> <C>
Conventional mortgage debt $178,009 $188,449
Tax-exempt mortgage debt 59,631 59,778
Construction loans 19,336 18,425
Revolving line of credit and unsecured bridge loan 77,869 17,200
-------- --------
$334,845 $283,852
======== ========
</TABLE>
4
<PAGE> 7
4. CONVERTIBLE SUBORDINATED DEBENTURES
As of March 31, 1998, the Company's outstanding convertible subordinated
debentures totaled $12,376,000, which is net of unamortized discount of
$86,000. Conversion of all the outstanding debentures, which are
convertible into common shares at a rate of 53.6986 common shares of Common
Stock per $1,000 of principal amount of debentures, would require the
issuance of an additional 669,192 common shares. If the debentures were
fully converted, the net income attributable to each common share would not
be diluted. During the three months ended March 31, 1998, $232,000 in
aggregate principal amount of debentures ($216,000 net of discount) were
converted into 12,452 common shares.
5. SHAREHOLDERS' EQUITY
On February 4, 1998, the Company filed a new shelf registration statement
on Form S-3 covering a maximum aggregate offering price of $300,000,000 of
the Company's common stock, preferred stock, debt securities and warrants
to purchase such securities. This filing was declared effective on April
23, 1998.
The Company has a stock rights plan under which the holders of common stock
of the Company ("Common Shares") received a dividend of one preferred stock
purchase right (a "Right") for each Common Share held on the record date.
The Rights shall be distributed and shall be exercisable upon the earliest
of: (a) the tenth business day following the date of announcement that any
person has become the beneficial owner of 10% or more of the then
outstanding voting stock of the Company (such person is a "10% Stockholder"
and the date of announcement is the "10% Ownership Date"), (b) the tenth
business day following the date of commencement of, or the first public
announcement of an intention to commence, a tender offer or exchange offer,
the consummation of which would cause any person to become a 10%
Stockholder, (c) the first date, on or after the 10% Ownership Date, upon
which the Company is acquired in a merger or other business combination in
which the Company is not the surviving corporation or in which the
outstanding Common Shares are changed into or exchanged for stock or assets
of another person, or upon which 50% or more of the Company's consolidated
assets or earning power are sold. Upon distribution, the Rights shall be
exercisable to purchase at the exercise price, initially $100.00 (the
"Exercise Price") (i) one one-hundredth of a share of the Company's Class C
Junior Participating Cumulative Preferred Stock, or (ii) after the tenth
business day following the 10% Ownership Date, Common Shares with a market
value equal to two times the Exercise Price, or (iii) in the event of a
merger, business combination or sale of 50% or more of the Company's
consolidated assets or earning power, shares of common stock of the
surviving company or purchaser, respectively, with an aggregate market
value equal to two times the Exercise Price. The Rights shall expire on
December 11, 2007, unless earlier redeemed or exchanged.
During the three months ended March 31, 1998, 343 shares of common stock
were issued through the Company's Dividend Reinvestment Program.
6. PER COMMON SHARE DATA
The following table sets forth the computation of basic and diluted
earnings per share which have been restated to comply with Statement No.
128:
<TABLE>
<CAPTION>
1998 1997
------------------------------------------- -------------------------------------------
Weighted Weighted
Average Earnings Average Earnings
Earnings Shares Per Earnings Shares Per
(Numerator) (Denominator) Share (Numerator) (Denominator) Share
----------- ------------- ----------- ----------- ------------- -----------
<S> <C> <C> <C> <C> <C> <C>
BASIC EPS
Income available to common
shareholders $6,208,000 19,930,000 .31 $3,082,000 11,440,000 .27
=== ===
EFFECT OF DILUTIVE SECURITIES
Stock Options 23,000 19,000
Restricted Stock 82,000 77,000
Limited Partnership Units 106,000 586,000 225,000
DILUTED EPS $6,314,000 20,621,000 .31 $3,082,000 11,761,000 .26
=== ===
</TABLE>
Shares of Senior Cumulative Convertible Preferred Stock, convertible into
2,763,116 shares of Common Stock were outstanding during 1998 but were not
included in computing diluted earnings per share. Including these shares in
the computation increases earnings per share $.01, and are therefore
considered antidilutive. Convertible subordinated debentures convertible
into 669,000 and 713,000 shares of Common Stock were outstanding during
1998 and 1997, respectively, but were not included in the computation of
diluted earnings per share because the effect would be antidilutive.
7. COMMON SHARE DISTRIBUTIONS AND PREFERRED STOCK DIVIDENDS
On March 11, 1998, the Company declared its quarterly distribution of $.42
per common share covering shares outstanding at March 31, 1998. Assuming
the Board continues to declare quarterly distributions, the estimated
annual distribution based on this amount would be $1.68. The distribution
was paid on April 10, 1998 to holders of record on April 1, 1998.
5
<PAGE> 8
Preferred stock dividends of $465,000 related to the shares of Class A
Preferred Stock and shares of Class B Preferred Stock outstanding in the
fourth quarter of 1997 were paid by the Company on February 15, 1998.
Preferred stock dividends of $590,000 and $617,000 related to 1,351,351
shares of Class A Preferred Stock and 1,411,765 shares of Class B Preferred
Stock have been accrued through March 31, 1998 at the rate of $0.4368 per
share per quarter.
8. INTEREST
Interest incurred for the three months ended March 31 consists of the
following (in thousands):
<TABLE>
<CAPTION>
1998 1997
------- -------
<S> <C> <C>
Interest incurred $ 6,043 $ 3,731
Amortization:
Debenture discount and costs 34 37
Costs related to financing assumed from the Company's
Predecessor and line of credit costs 130 108
Long-term financing costs 57 77
Interest capitalized (893) --
Interest income (96) --
------- -------
Interest expense $ 5,275 $ 3,953
======= =======
</TABLE>
9. RECENTLY ISSUED ACCOUNTING STANDARDS
The Financial Accounting Standards Board has issued Statement No. 131,
"Disclosures About Segments of an Enterprise and Related Information,"
which is required to be adopted on December 31, 1998. At that time, the
Company will be required to report certain information about its operating
segments, its products and services, the geographic areas in which the
Company operates and its major customers. The Company's current financial
statements include substantial information relating to its two operating
segments: industrial and multifamily. The Company does not believe the
additional requirements will have a significant impact on its disclosures.
6
<PAGE> 9
PACIFIC GULF PROPERTIES INC.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
The following discussion addresses the consolidated financial statements of the
Company for the three months ended March 31, 1998 and 1997, together with
liquidity and capital resources as of March 31, 1998.
COMPARISON OF THE THREE MONTHS ENDED MARCH 31, 1998 TO THE THREE MONTHS ENDED
MARCH 31, 1997
Industrial rental income increased by $9,075,000, or 125%, from $7,232,000 in
1997 to $16,307,000 in 1998. This increase was primarily attributable to the
acquisition of thirty industrial parks containing approximately 5,764,000 square
feet of leasable area since March 1997. Multifamily rental income increased by
$1,430,000, or 19%, from $7,581,000 in 1997 to $9,011,000 in 1998. This increase
was primarily attributable to an increase in rental rates and to the acquisition
of three multifamily properties containing 824 apartment units since March 1997.
As a result of these changes, total revenues increased by $10,505,000, or 71%,
from $14,813,000 in 1997 to $25,318,000 in 1998.
Industrial rental income for the three months ended March 31, 1998 totaled
$16,307,000 and included $7,890,000 related to the industrial parks acquired
since March 31, 1997.
Multifamily rental income for the three months ended March 31, 1998 totaled
$9,011,000 and included $1,373,000 related to the multifamily properties
acquired since March 31, 1997.
Industrial rental property expenses increased $1,967,000, or 108%, from
$1,816,000 in 1997 to $3,783,000 in 1998. This increase was primarily
attributable to the acquisition of the above referenced industrial parks.
Multifamily rental property expenses increased by $320,000, or 11%, from
$2,918,000 in 1997 to $3,238,000 in 1998. This increase was primarily
attributable to the acquisition of the above referenced multifamily properties.
Industrial rental property expenses for the three months ended March 31, 1998
totaled $3,783,000 and included $1,698,000 related to industrial parks acquired
since March 31, 1997.
Multifamily rental property expenses for the three months ended March 31, 1998
totaled $3,238,000 and included $493,000 related to multifamily properties
acquired since March 31, 1997.
Total depreciation increased by $2,034,000, or 86%, from $2,356,000 in 1997 to
$4,390,000 in 1998. This increase was primarily attributable to additional
depreciation relating to the acquisition of thirty industrial parks, three
multifamily properties, and capital improvements made to rehabilitate existing
properties.
Interest expense (including amortization of debenture discount and financing
costs) increased by $1,322,000, or 33%, from $3,953,000 in 1997 to $5,275,000 in
1998. This increase was primarily attributable to an increase in outstanding
borrowings due to new acquisitions made during 1997 and 1998.
General and administrative expenses increased by $423,000, or 61%, from $688,000
in 1997 to $1,111,000 in 1998. This increase was primarily attributable to
personnel increases related to acquisitions made since March 31, 1997, the write
off of $99,000 for costs incurred on projects which were not acquired, and the
accrual of anticipated bonuses for 1998.
Minority partners' interest in earnings of consolidated partnerships was
$106,000 in 1998 due to the June 1997 acquisition of a controlling general
partner interest in the two partnerships that each own senior apartments and the
October 1997 acquisition of a controlling general partner interest in the
partnership that owns two industrial properties.
7
<PAGE> 10
LIQUIDITY AND CAPITAL RESOURCES
At March 31, 1998, the Company had $3,526,000 of cash to meet its immediate
short-term liquidity requirements. Future short-term liquidity requirements are
anticipated to be met through net cash flow from operations, existing working
capital, and, if necessary, funding from the Company's Line of Credit.
As of March 31, 1998, the Company had borrowed $39,885,000 under its secured
line of credit and $37,984,000 under its unsecured bridge loan agreement. In
April 1998, the Company replaced its secured line of credit and unsecured bridge
loan facility with a $150,000,000 unsecured revolving credit agreement (the
"Line of Credit"). The interest rate payable under the new facility is LIBOR
plus 1.25%. The facility matures in April of 2001. The Company will use the
facility to finance acquisitions and for general corporate purposes.
The Company intends to acquire additional properties and may seek to fund these
acquisitions through proceeds received from a combination of its Line of Credit,
equity offerings or debt financings, but no assurance can be given that any
acquisitions will be completed.
The Company anticipates that adequate cash will be available to fund its
operating and administrative expenses, continuing debt service obligations and
the payment of dividends in accordance with REIT requirements in the foreseeable
future.
Cash provided by operating activities increased from $6,366,000 for the period
ended March 31, 1997 to $14,007,000 for the period ended March 31, 1998. The
primary reason for these increases is related to the additional rental income
contributed by properties acquired during 1997 and 1998.
Cash used in investing activities increased from $39,455,000 for the period
ended March 31, 1997 to $62,710,000 for the period ended March 31, 1998 as a
result of acquisitions.
Cash provided by financing activities increased from $38,868,000 for the period
ended March 31, 1997 to $50,763,000 for the year ended March 31, 1998 primarily
as a result of a net increase in borrowings on the Company's lines of credit and
mortgage loans as well as the addition of minority partners' interest.
The immediately preceding paragraphs contain forward looking information
involving risks and uncertainties that could significantly impact the Company's
expected liquidity requirements in the short and long term. While it is
impossible to itemize the many factors and specific events that could affect the
Company's outlook for its liquidity requirements, such factors would include the
actual timing of and costs associated with the Company's acquisitions, the
actual capital expenditures associated therewith, and the strength of the local
economies of the submarkets in which the Company operates. Higher than expected
acquisition, rental and/or rehabilitation costs, delays in the rehabilitation of
properties, a downturn in the local economies, competition and/or the lack of
growth of such economies could reduce the Company's revenues and increase its
expenses, resulting in a greater burden on the Company's liquidity than that
which the Company has described above.
8
<PAGE> 11
PART II: OTHER INFORMATION
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits
Exhibit 10.43 - Agreement of Limited Partnership of PGP Southern
Industrial II, L.P.
Exhibit 10.44 - Credit Agreement among Pacific Gulf Properties Inc., a
Maryland corporation, as Borrower and Wells Fargo Bank, National
Association Together with the other Lenders named herein and such other
assignees becoming parties hereto pursuant to Section 11.12, as Lenders
and Wells Fargo Bank, National Association, as Agent dated as of April
9, 1998.
Exhibit 27 Financial Data Schedule.
(b) Reports on Form 8-K
None.
9
<PAGE> 12
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.
PACIFIC GULF PROPERTIES INC.
/s/Glenn L. Carpenter /s/Donald G. Herrman
- -------------------------------------- ------------------------------------
Glenn L. Carpenter Donald G. Herrman
Chairman and Chief Executive Officer Chief Financial Officer and
Secretary
DATED: May 14, 1998
--------------
10
<PAGE> 13
EXHIBIT INDEX
<TABLE>
<CAPTION>
Exhibit
Number Description
- ------ -----------
<S> <C>
10.43 Agreement of Limited Partnership of PGP Southern Industrial II, L.P.
10.44 Credit Agreement among Pacific Gulf Properties Inc., a Maryland
corporation, as Borrower and Wells Fargo Bank, National Association
Together with the other Lenders named herein and such other assignees
becoming parties hereto pursuant to Section 11.12, as Lenders and Wells
Fargo Bank, National Association, as Agent dated as of April 9, 1998
27 Financial Data Schedule
</TABLE>
<PAGE> 1
EXHIBIT 10.43
AGREEMENT OF LIMITED PARTNERSHIP
OF
PGP SOUTHERN INDUSTRIAL II, L.P.
IN RELIANCE UPON CERTAIN EXEMPTIONS FROM REGISTRATION, THE PARTNERSHIP INTERESTS
BEING OFFERED HEREBY HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933,
AS AMENDED (THE "SECURITIES ACT"), OR ANY STATE SECURITIES LAWS, ACCORDINGLY, NO
PARTNERSHIP INTEREST MAY BE SOLD, PLEDGED, HYPOTHECATED OR OTHERWISE TRANSFERRED
UNLESS SUBSEQUENTLY REGISTERED UNDER THE SECURITIES ACT AND ANY APPLICABLE STATE
SECURITIES LAWS, OR UNLESS AN EXEMPTION FROM REGISTRATION IS AVAILABLE, AND
UNLESS THE OTHER TRANSFER RESTRICTIONS CONTAINED HEREIN HAVE BEEN SATISFIED.
INVESTORS SHALL BE AWARE THAT THEY WILL BE REQUIRED TO BEAR THE FINANCIAL RISKS
OF THEIR INVESTMENT FOR AN INDEFINITE PERIOD OF TIME. IN MAKING AN INVESTMENT
DECISION INVESTORS MUST RELY ON THEIR OWN EXAMINATION OF THE PERSON OR ENTITY
CREATING THE SECURITIES AND THE TERMS OF THE OFFERING, INCLUDING THE MERITS AND
RISKS INVOLVED. THESE SECURITIES HAVE NOT BEEN RECOMMENDED BY ANY FEDERAL OR
STATE SECURITIES COMMISSION OR REGULATORY AUTHORITY. FURTHERMORE, THE FOREGOING
AUTHORITIES HAVE NOT CONFIRMED THE ACCURACY OR DETERMINED THE ADEQUACY OF THIS
DOCUMENT, AND ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
----
<S> <C> <C>
ARTICLE 1 DEFINED TERMS............................................................... 1
ARTICLE 2 ORGANIZATIONAL MATTERS...................................................... 12
2.1 Organization................................................................ 12
2.2 Name........................................................................ 12
2.3 Registered Office and Agent; Principal Office............................... 13
2.4 Power of Attorney........................................................... 13
2.5 Term........................................................................ 14
ARTICLE 3 PURPOSE..................................................................... 14
3.1 Purpose and Business........................................................ 14
3.2 Powers...................................................................... 15
3.3 Technical Revisions......................................................... 15
ARTICLE 4 CAPITAL CONTRIBUTIONS....................................................... 15
4.1 Initial Capital Contributions of the Partners............................... 15
4.2 Additional Capital Contributions by the General
Partner..................................................................... 17
4.3 Issuances of Additional Partnership Interests............................... 17
4.4 Preemptive Rights........................................................... 20
4.5 Loans....................................................................... 20
ARTICLE 5 DISTRIBUTIONS............................................................... 20
5.1 Requirement and Characterization of Distributions........................... 20
5.2 General Partner Election.................................................... 21
5.3 Amounts Withheld............................................................ 22
5.4 Distributions Upon Liquidation.............................................. 22
5.5 Other Assets Present........................................................ 22
5.6 Distribution in Kind........................................................ 22
5.7 REIT Distribution Requirements.............................................. 23
ARTICLE 6 ALLOCATIONS................................................................. 23
6.1 Allocations of Net Income and Net Loss...................................... 23
6.2 Other Allocations........................................................... 24
ARTICLE 7 MANAGEMENT AND OPERATIONS OF BUSINESS....................................... 25
7.1 Management.................................................................. 25
7.2 Limitations on General Partner.............................................. 29
7.3 Certificate of Limited Partnership.......................................... 31
7.4 Management Fee and Reimbursement of the General
Partner..................................................................... 31
7.5 Outside Activities of the General Partner................................... 34
7.6 Contracts with Affiliates................................................... 34
7.7 Indemnification............................................................. 35
7.8 Liability of the General Partner............................................ 37
7.9 Other Matters Concerning the General Partner................................ 38
7.10 Title to Partnership Assets................................................. 39
7.11 Reliance by Third Parties................................................... 39
</TABLE>
- i -
<PAGE> 3
<TABLE>
<CAPTION>
Page
----
<S> <C> <C>
ARTICLE 8 RIGHTS AND OBLIGATIONS OF LIMITED PARTNERS.................................. 40
8.1 Limitation of Liability..................................................... 40
8.2 Management of Business...................................................... 40
8.3 Outside Activities of Limited Partners...................................... 40
8.4 Return of Capital........................................................... 41
8.5 Rights of Limited Partners Relating to the
Partnership................................................................. 41
8.6 No Redemption Right......................................................... 42
8.7 Representations and Warranties.............................................. 42
8.8 Right of Offset............................................................. 45
8.9 No Rights as Shareholders................................................... 45
8.10 Limitation on Liability of Original Limited
Partner..................................................................... 46
8.11 Representations and Warranties of General Partner........................... 46
ARTICLE 9 BOOKS, RECORDS, ACCOUNTING AND REPORTS...................................... 46
9.1 Records and Accounting...................................................... 46
9.2 Fiscal Year................................................................. 47
9.3 Reports..................................................................... 47
ARTICLE 10 TAX MATTERS..................................................................... 48
10.1 Preparation of Tax Returns.................................................. 48
10.2 Tax Elections............................................................... 48
10.3 Tax Matters Partner......................................................... 48
10.4 Organizational Expenses..................................................... 50
10.5 Withholding................................................................. 50
10.6 No Assurances............................................................... 51
ARTICLE 11 TRANSFERS AND WITHDRAWALS....................................................... 51
11.1 Transfer.................................................................... 51
11.2 Transfer of the General Partner's Interests................................. 52
11.3 Limited Partners' Rights to Transfer........................................ 52
11.4 Substituted Limited Partners................................................ 54
11.5 Assignees................................................................... 54
11.6 General Provisions.......................................................... 55
11.7 No Exchange................................................................. 56
ARTICLE 12 ADMISSION OF PARTNERS........................................................... 57
12.1 Admission of Successor General Partner...................................... 57
12.2 Admission of Additional Limited Partners.................................... 57
12.3 Amendment of Agreement and Certificate of Limited
Partnership................................................................. 58
ARTICLE 13 DISSOLUTION, LIQUIDATION AND TERMINATION........................................ 58
13.1 Dissolution................................................................. 58
13.2 Winding Up.................................................................. 59
13.3 Compliance with Timing Requirements of
Regulations................................................................. 62
13.4 Deemed Distribution and Re-contribution..................................... 62
13.5 Rights of Limited Partners.................................................. 62
13.6 Notice of Dissolution....................................................... 62
13.7 Termination of Partnership and Cancellation of
Certificate of Limited Partnership.......................................... 62
</TABLE>
- ii -
<PAGE> 4
<TABLE>
<CAPTION>
Page
----
<S> <C> <C>
13.8 Reasonable Time for Winding-Up.............................................. 63
13.9 Waiver of Partition......................................................... 63
ARTICLE 14 AMENDMENT OF PARTNERSHIP AGREEMENT; MEETINGS.................................... 63
14.1 Amendments.................................................................. 63
14.2 Meetings of the Partners.................................................... 65
ARTICLE 15 GENERAL PROVISIONS.............................................................. 66
15.1 Addresses and Notices....................................................... 66
15.2 Titles and Captions......................................................... 66
15.3 Pronouns and Plurals........................................................ 67
15.4 Further Action.............................................................. 67
15.5 Binding Effect.............................................................. 67
15.6 Creditors................................................................... 67
15.7 Waiver...................................................................... 67
15.8 Applicable Law.............................................................. 67
15.9 Invalidity of Provisions.................................................... 67
15.10 Entire Agreement............................................................ 67
15.11 Venue....................................................................... 67
15.12 Exhibits.................................................................... 68
15.13 Legal Representation and Construction....................................... 68
15.14 Joint and Several........................................................... 68
15.15 Counterparts................................................................ 68
</TABLE>
- iii -
<PAGE> 5
AGREEMENT OF LIMITED PARTNERSHIP
OF
PGP SOUTHERN INDUSTRIAL II, L.P.
THIS AGREEMENT OF LIMITED PARTNERSHIP OF PGP SOUTHERN INDUSTRIAL II,
L.P. (this "Agreement"), dated as of March 9, 1998, is entered into by and
between PACIFIC GULF PROPERTIES INC., a Maryland corporation, as general partner
(the "General Partner"), and THE NORTHWESTERN MUTUAL LIFE INSURANCE COMPANY, a
Wisconsin corporation, as limited partner (the "Original Limited Partner.")
RECITALS
The General Partner and the Original Limited Partner desire to form PGP
Southern Industrial II, L.P., a Delaware limited partnership (the
"Partnership"), pursuant to this Agreement and the Delaware Revised Uniform
Limited Partnership Act, as amended (the "Act");
AGREEMENT
NOW, THEREFORE, in consideration of the mutual covenants herein
contained, and other good and valuable consideration, the receipt and
sufficiency of which is hereby acknowledged, the parties hereto agree as
follows:
ARTICLE 1
DEFINED TERMS
The following definitions shall be for all purposes, unless otherwise
clearly indicated to the contrary, applied to the terms used in this Agreement.
1.1 "Act" means the Delaware Revised Uniform Limited Partnership Act, as
it may be amended from time to time, and any successor to such statute.
1.2 "Additional Limited Partner" means a Person admitted to the
Partnership as a Limited Partner pursuant to Section 4.3 hereof and who is shown
as such on the books and records of the Partnership.
1.3 "Adjusted Capital Account" means the Capital Account maintained for
each Partner as of the end of each Partnership taxable year: (i) increased by
any amounts which such Partner is obligated to restore pursuant to any provision
of this Agreement or is deemed to be obligated to restore pursuant to the
penultimate sentences of Regulations Sections 1.704-2(g)(1) and 1.704-2(i)(5);
and (ii) decreased by the items described in Regulations Sections
1.704-1(b)(2)(ii)(d)(4), 1.704-1(b)(2)(ii)(d)(5), and 1.704-1(b)(2)(ii)(d)(6).
<PAGE> 6
The foregoing definition of Adjusted Capital Account is intended to comply with
the provisions of Regulations 1.704-1(b)(2)(ii)(d) and shall be interpreted
consistently therewith.
1.4 "Adjusted Capital Account Deficit" means, with respect to any
Partner, the deficit balance, if any, in such Partner's Adjusted Capital Account
as of the end of the relevant Partnership taxable year.
1.5 "Adjusted Property" means any property, the Carrying Value of which
has been adjusted pursuant to Exhibit "B" hereof.
1.6 "Affiliate" means, with respect to any Person: (i) any Person
directly or indirectly controlling, controlled by or under common control with
such Person; (ii) any Person owning or controlling ten percent (10%) or more of
the outstanding voting interests of such Person; (iii) any Person of which such
Person owns or controls ten percent (10%) or more of the voting interests; or
(iv) any officer, director, general partner or trustee of such Person or of any
Person referred to in clauses (i), (ii), and (iii) above.
1.7 "Agreed Value" means: (i) in the case of any Contributed Property
set forth on Exhibit "D" and as of the time of its contribution to the
Partnership, the Agreed Value of such property as set forth in Exhibit "D"; (ii)
in the case of any Contributed Property not set forth in Exhibit "D" and as of
the time of its contribution to the Partnership, the 704(c) Value of such
property, reduced by any liabilities either assumed by the Partnership upon such
contribution or to which such property is subject when contributed; and (iii) in
the case of any property distributed to a Partner by the Partnership, the
Partnership's Carrying Value of such property at the time such property is
distributed, reduced by any indebtedness either assumed by such Partner upon
such distribution or to which such property is subject at the time of
distribution as determined under Section 752 of the Code and the Regulations
thereunder.
1.8 "Agreement" means this Agreement of Limited Partnership, as it may
be amended, supplemented or restated from time to time.
1.9 "Assignee" means a Person to whom one or more Limited Partnership
Units have been transferred in a manner permitted under this Agreement, but who
has not become a Substituted Limited Partner, and who has the rights set forth
in Section 11.5.
1.10 "Available Cash" means, with respect to any period for which such
calculation is being made:
A. the sum of:
(1) all cash revenues and funds received by the
Partnership from whatever source, including any proceeds of
-2-
<PAGE> 7
sale, financing or refinancing of the Original Property (but excluding the
proceeds of any Capital Contribution and the proceeds of any sale, financing or
refinancing of Partnership assets other than the Original Property); and
(2) the amount of any reduction during such
period in the reserves of the Partnership referred to in clause B(3) below
(including, without limitation, reductions resulting from the General Partner's
determination that such amounts are no longer necessary);
B. less the sum of the following (except to the
extent made with the proceeds of any Capital Contribution):
(1) all cash expenditures (including capital
expenditures, but excluding (a) interest, principal and other payments made with
respect to mortgage indebtedness or any loans to or from the General Partner, or
any Affiliate or Subsidiary of the General Partner, (b) investments in any
entity (including loans made thereto) and (c) any payments made pursuant to the
indemnity in Section 7.7A or 7.7B hereof) made by the Partnership during such
period;
(2) to the extent not already including in clause
B(1) above, any management fee paid during such period pursuant
to Section 7.4; and
(3) the amount of any reserves and other cash or
similar balances (including, but not limited to, reserves for working capital,
property taxes, insurance and capital improvements, but not debt service) set
aside during such period which the General Partner determines to be necessary or
appropriate in its sole and absolute discretion.
Notwithstanding the foregoing, Available Cash shall not include any cash
received or reductions in reserves, or take into account any disbursements made
or reserves established, after commencement of the dissolution and liquidation
of the Partnership.
Additionally, if and after the Partnership acquires Non-Original Limited
Partner Related Assets, or becomes obligated, indebted or liable for or on
account of Non-Original Limited Partner Related Assets or the ownership or
operation thereof, and so long as the General Partner has not consummated the
transactions and made the election described in Sections 4.3B and 5.2,
respectively, of this Agreement, then for purposes of determining distributions
of Available Cash to the Original Limited Partner and its successors and assigns
under the terms of this Agreement, Available Cash shall be calculated separately
with respect to Original Limited Partner Related Assets and the ownership and
operation thereof, together with the operation and existence of the Partnership
insofar as such concerns the Original Limited Partner Related Assets, and shall
not include any revenues, expenses, assets, or liabilities of the Partnership
-3-
<PAGE> 8
relating to the Non-Original Limited Partner Related Assets, the ownership or
operation thereof, or the operation or existence of the Partnership with respect
thereto. (Without limiting the foregoing, Available Cash shall not take into
account any items referred to in Paragraph 1.10.B which were not incurred or
otherwise attributable to the Original Limited Partner Related Assets.)
1.11 "Available Cash Shortfall" means, with respect to any calendar
quarter, the amount of Available Cash which would otherwise be distributed to
the Limited Partners pursuant to Section 5.1, but for which the Partnership
lacks funds to make such distribution solely as the result of the payment by the
Partnership in such calendar quarter of debts, obligations, liabilities or other
items which are not permitted to be deducted in calculating Available Cash
pursuant to Section 1.10.
1.12 "Book-Tax Disparities" means, with respect to any item of
Contributed Property or Adjusted Property, as of the date of any determination,
the difference between the Carrying Value of such Contributed Property or
Adjusted Property and the adjusted basis thereof for federal income tax purposes
as of such date. A Partner's share of the Partnership's Book-Tax Disparities in
all of its Contributed Property and Adjusted Property will be reflected by the
difference between such Partner's Capital Account balance as maintained pursuant
to Exhibit "B" and the hypothetical balance of such Partner's Capital Account
computed as if it had been maintained strictly in accordance with federal income
tax accounting principles.
1.13 "Business Day" means any day other than a Saturday, Sunday,
California or New York State or national holiday or other day on which
commercial banks in California or New York State are generally not open for
business.
1.14 "Capital Account" means the Capital Account maintained for a
Partner pursuant to Exhibit "B" hereof.
1.15 "Capital Contribution" means, with respect to any Partner, any
cash, cash equivalents or the Agreed Value of Contributed Property which such
Partner contributes or is deemed to contribute to the Partnership pursuant to
Article 4 hereof.
1.16 "Carrying Value" means: (i) with respect to a Contributed Property
or Adjusted Property, the 704(c) Value of such property, reduced (but not below
zero) by all Depreciation with respect to such property charged to the Partners'
Capital Accounts following the contribution of or adjustment with respect to
such property; and (ii) with respect to any other Partnership property, the
adjusted basis of such property for federal income tax purposes, all as of the
time of determination. The Carrying Value of any property shall be adjusted from
time to time in accordance with Exhibit "B" hereof, and to reflect changes,
additions or other adjustments to the Carrying Value for
-4-
<PAGE> 9
dispositions and acquisitions of Partnership properties, as deemed appropriate
by the General Partner.
1.17 "Certificate" means a Certificate of Limited Partnership relating
to the Partnership filed in the office of the Delaware Secretary of State, as
amended from time to time in accordance with the terms hereof and the Act.
1.18 "Closing" shall have the meaning given thereto in the Contribution
Agreement.
1.19 "Code" means the Internal Revenue Code of 1986, as amended and in
effect from time to time, as interpreted by the applicable regulations
thereunder. Any reference herein to a specific section or sections of the Code
shall be deemed to include a reference to any corresponding provisions of future
law.
1.20 "Consent" means the consent or approval of a proposed action by a
Partner given in accordance with Section 14.2 hereof.
1.21 "Contributed Property" means each property or other asset, in such
form as may be permitted by the Act (but excluding cash), contributed or deemed
contributed to the Partnership (including deemed contributions to the
Partnership on termination pursuant to Section 708 of the Code). Once the
Carrying Value of a Contributed Property is adjusted pursuant to Exhibit "B"
hereof, such property shall no longer constitute a Contributed Property for
purposes of Exhibit "B" hereof, but shall be deemed an Adjusted Property for
such purposes.
1.22 "Contribution Agreement" means that certain Contribution Agreement
dated as of the date of this Agreement by and among the General Partner, the
Original Limited Partner and the Partnership providing for the contribution to
the Partnership of the Original Property by the Original Limited Partner.
1.23 "Depreciation" means, for each taxable year, an amount equal to the
federal income tax depreciation, amortization, or other cost recovery deduction
allowable with respect to an asset for such year, except that if the Carrying
Value of an asset differs from its adjusted basis for federal income tax
purposes at the beginning of such year or other period, Depreciation shall be an
amount which bears the same ratio to such beginning Carrying Value as the
federal income tax depreciation, amortization, or other cost recovery deduction
for such year bears to such beginning adjusted tax basis; provided, however,
that if the federal income tax depreciation, amortization, or other cost
recovery deduction for such year is zero, Depreciation shall be determined with
reference to such beginning Carrying Value using any reasonable method selected
by the General Partner.
-5-
<PAGE> 10
1.24 "Distribution Deficit" means the amount, if any, by which the
aggregate cash dividend paid to the common shareholders of the General Partner
on account of one share of common stock of the General Partner held by such
shareholder on an uninterrupted basis from and after the Effective Date to the
date of determination exceeds the aggregate cash distributed to the Limited
Partners pursuant to Sections 5.1A(1) and 5.1A(2) on account of one Limited
Partnership Unit for such same period. If the date of determination occurs after
the seventh (7th) anniversary of the Effective Date, the Distribution Deficit
shall mean and include the amount, if any, that would have been calculated on
such seventh (7th) anniversary, less any distributions pursuant to Section
5.1A(2) made after the seventh (7th) anniversary of the Effective Date.
1.25 "Effective Date" means the date of the Closing.
1.26 "Excess Distributions" means distributions to a Limited Partner for
all periods in excess of allocations of Net Income to the Limited Partner for
all periods pursuant to Section 6.1B.
1.27 "Exchange Rights Agreement" means that certain Exchange Rights
Agreement dated as of the date of this Agreement by and between the Partnership,
the General Partner and the Original Limited Partner.
1.28 "General Partner" means Pacific Gulf Properties Inc., a Maryland
corporation, or any successor general partner of the Partnership in compliance
with this Agreement.
1.29 "General Partner Interest" means the Partnership Interest held by
the General Partner, in its capacity as general partner.
1.30 "General Partner Security Rights" shall have the meaning set forth
in Section 4.3B.
1.31 "Incapacity" or "Incapacitated" means: (i) as to any individual
Partner, death, total physical disability or entry by a court of competent
jurisdiction adjudicating him incompetent to manage his Person or his estate;
(ii) as to any corporation which is a Partner, the filing of a certificate of
dissolution, or its equivalent, for the corporation or the revocation of its
charter; (iii) as to any partnership which is a Partner, the dissolution and
commencement of winding up the partnership; (iv) as to any estate which is a
Partner, the distribution by the fiduciary of the estate's entire interest in
the Partnership; (v) as to any trustee of a trust which is a Partner, the
termination of the trust (but not the substitution of a new trustee); or (vi) as
to any Partner, the bankruptcy of such Partner. For purposes of this definition,
bankruptcy of a Partner shall be deemed to have occurred when: (a) the Partner
commences a voluntary proceeding seeking liquidation, reorganization or other
relief under any bankruptcy, insolvency or other similar law now or hereafter in
effect; (b) the Partner is adjudged as bankrupt or insolvent, or
-6-
<PAGE> 11
a final and nonappealable order for relief under any bankruptcy, insolvency or
similar law now or hereafter in effect has been entered against the Partner; (c)
the Partner executes and delivers a general assignment for the benefit of the
Partner's creditors; (d) the Partner files an answer or other pleading admitting
or failing to contest the material allegations of a petition filed against the
Partner in any proceeding of the nature described in clause (b) above; (e) the
Partner seeks, consents to or acquiesces in the appointment of a trustee,
receiver or liquidator for the Partner or for all or any substantial part of the
Partner's properties; (f) any proceeding seeking liquidation, reorganization or
other relief of or against such Partner under any bankruptcy, insolvency or
other similar law now or hereafter in effect which has not been dismissed within
sixty (60) days after the commencement thereof; (g) the appointment without the
Partner's consent or acquiescence of a trustee, receiver or liquidator which has
not been vacated or stayed within thirty (30) days of such appointment; or (h)
an appointment referred to in clause (g) which has been stayed is not vacated
within thirty (30) days after the expiration of any such stay.
1.32 "Indemnitee" means any Person made a party to a proceeding by
reason of (i) his or its status as a Partner, an Affiliate of a Partner, or as a
director, trustee, officer, employee, partner, agent or representative of a
Partner or an Affiliate of a Partner, or (ii) his or its liabilities pursuant to
a loan guarantee or otherwise for or as a result of any indebtedness or
obligation of the Partnership or any Subsidiary of the Partnership (including,
without limitation, any indebtedness or obligation which the Partnership or any
Subsidiary of the Partnership has assumed or taken assets subject to).
"Indemnitee" shall also include any Liquidator.
1.33 "IRS" means the Internal Revenue Service, which administers the
internal revenue laws of the United States.
1.34 "Limited Partner" means any Person named as a Limited Partner on
Exhibit "A" attached hereto, as such Exhibit may be amended from time to time,
or any Substituted Limited Partner or Additional Limited Partner, in such
Person's capacity as a Limited Partner of the Partnership.
1.35 "Limited Partner Interest" means a Partnership Interest of a
Limited Partner in the Partnership. A Limited Partner Interest may be expressed
as a number of Limited Partnership Units.
1.36 "Limited Partner Percentage Interest" means, as to a Limited
Partner, its interest in the Partnership relative to all other Limited Partners,
as determined by dividing the Limited Partnership Units owned by such Limited
Partner by the total number of Limited Partnership Units then outstanding, as
specified in Exhibit "A" attached hereto, as such Exhibit may be amended from
time to time.
-7-
<PAGE> 12
1.37 "Limited Partnership Unit" means a fractional, undivided share of
the Limited Partnership Interests of all Limited Partners issued pursuant to
Article 4 hereof. The number of Limited Partnership Units outstanding and the
Limited Partner Percentage Interest represented by such Limited Partnership
Units are set forth in Exhibit "A" attached hereto, as such Exhibit may be
amended from time to time. The ownership of Limited Partnership Units shall be
evidenced by such form of certificate for units as the General Partner adopts
from time to time unless the General Partner determines that the Limited
Partnership Units shall be uncertificated securities. If the General Partner
elects to evidence the Limited Partnership Units with a certificate, such
certificate may be imprinted with a legend setting forth such restrictions
placed on the Limited Partnership units as specified in this Agreement and such
restrictions will be binding upon all holders of the certificate along with the
terms and conditions set forth in this Agreement.
1.38 "Liquidated Tax Damages" shall have the meaning set forth in
Section 7.2B.
1.39 "Liquidating Casualty" means a casualty affecting the Original
Property (a) which occurs prior to the seventh (7th) anniversary of the
Effective Date, (b) which is covered by the casualty insurance maintained by the
Partnership and for which there are sufficient insurance proceeds to rebuild or
restore the Original Property to its condition existing prior to the occurrence
of the casualty, and (c) in response to which the General Partner voluntarily
elects not to rebuild or restore the Original Property.
1.40 "Liquidating Event" shall have the meaning set forth in Section
13.1.
1.41 "Liquidator" shall have the meaning set forth in Section 13.2.
1.42 "Management Agreement" means a Property Management Agreement
between the Partnership and the General Partner or an Affiliate of the General
Partner substantially in the form of Exhibit "E" attached hereto.
1.43 "Net Income" means for any taxable period, the excess, if any, of
the Partnership's items of income and gain for such taxable period over the
Partnership's items of loss and deduction for such taxable period. The items
included in the calculation of Net Income shall be determined in accordance with
federal income tax accounting principles, subject to the specific adjustments
provided for in Exhibit "B". Additionally, if and after the Partnership acquires
Non-Original Limited Partner Related Assets, or becomes obligated, indebted or
liable for or on account of Non-Original Limited Partner Related Assets or the
ownership or operation thereof, and so long as the General Partner has not
consummated the transactions and made the election described in Sections 4.3B
and 5.2, respectively, of
-8-
<PAGE> 13
this Agreement, then for purposes of determining allocations of Net Income to
the Original Limited Partner and its successors and assigns under this
Agreement, Net Income shall be calculated separately with respect to Original
Limited Partner Related Assets and the ownership and operation thereof, together
with the operation and existence of the Partnership insofar as such concerns the
Original Limited Partner Related Assets and the ownership and operation thereof,
and shall not include any revenues, expenses, assets, or liabilities of the
Partnership relating to the Non-Original Limited Partner Related Assets, the
ownership or operation thereof, or the operation or existence of the Partnership
with respect thereto.
1.44 "Net Loss" means, for any taxable period, the excess, if any, of
the Partnership's items of loss and deduction for such taxable period over the
Partnership's items of income and gain for such taxable period. The items
included in the calculation of Net Loss shall be determined in accordance with
federal income tax accounting principles, subject to the specific adjustments
provided for in Exhibit "B". Additionally, if and after the Partnership acquires
Non-Original Limited Partner Related Assets, or becomes obligated, indebted or
liable for or on account of Non-Original Limited Partner Related Assets or the
ownership or operation thereof, and so long as the General Partner has not
consummated the transactions and made the election described in Sections 4.3B
and 5.2, respectively, of this Agreement, then for purposes of determining
allocations of Net Loss to the Original Limited Partner and its successors and
assigns under this Agreement, Net Loss shall be calculated separately with
respect to Original Limited Partner Related Assets and the ownership and
operation thereof, together with the operation and existence of the Partnership
insofar as such concerns the Original Limited Partner Related Assets and the
ownership and operation thereof, and shall not include any revenues, expenses,
assets, or liabilities of the Partnership relating to the Non-Original Limited
Partner Related Assets, the ownership or operation thereof, or the operation or
existence of the Partnership with respect thereto.
1.45 "Non-Original Limited Partner Related Assets" means all of the real
properties and all other assets and property of the Partnership other than such
as constitute "Original Limited Partner Related Assets" (as defined below).
1.46 "Nonrecourse Built-in Gain" means, with respect to any Contributed
Property or Adjusted Property that is subject to a Nonrecourse Liability, the
amount of any taxable gain that would be allocated to the Partners pursuant to
Section 2.B of Exhibit "C" if such property was disposed of in a taxable
transaction in full satisfaction of such liability and for no other
consideration.
1.47 "Nonrecourse Deductions" shall have the meaning set forth in
Regulations Section 1.704-2(b)(1), and the amount of Nonrecourse Deductions for
a Partnership taxable year shall be
-9-
<PAGE> 14
determined in accordance with the rules of Regulations Section 1.704-2(c).
1.48 "Nonrecourse Liability" shall have the meaning set forth in
Regulations Section 1.752-1(a)(2).
1.49 "Original Limited Partner" means The Northwestern Mutual Life
Insurance Company, a Wisconsin corporation.
1.50 "Original Limited Partner Related Assets" means all of the Original
Property, as well as all replacements thereof and substitutions therefor.
1.51 "Original Property" means the "Property" (as defined in the
Contribution Agreement), together with all other assets and properties
contributed to the Partnership by the Original Limited Partner pursuant to the
terms and provisions of the Contribution Agreement.
1.52 "Partner" means a General Partner or a Limited Partner, and
"Partners" means the General Partner and all Limited Partners collectively.
1.53 "Partner Minimum Gain" means an amount, with respect to each
Partner Nonrecourse Debt, equal to the Partnership Minimum Gain that would
result if such Partner Nonrecourse Debt were treated as a Nonrecourse Liability,
determined in accordance with Regulations Section 1.704-2(i)(3).
1.54 "Partner Nonrecourse Debt" shall have the meaning set forth in
Regulations Section 1.704-2(b)(4).
1.55 "Partner Nonrecourse Deductions" shall have the meaning set forth
in Regulations Section 1.704-2(i)(2), and the amount of Partner Nonrecourse
Deductions with respect to a Partner Nonrecourse Debt for a Partnership taxable
year shall be determined in accordance with the rules of Regulations Section
1.704-2(i)(2).
1.56 "Partnership" means the limited partnership formed under this
Agreement and any successor thereto.
1.57 "Partnership Interest" means an ownership interest in the
Partnership held by either a Limited Partner or the General Partner, and
includes any and all benefits to which the holder of such a Partnership Interest
may be entitled as provided in this Agreement, including without limitation such
Partners' Capital Account, together with all obligations of such Person to
comply with the terms and provisions of this Agreement.
1.58 "Partnership Minimum Gain" shall have the meaning set forth in
Regulations Section 1.704-2(b)(2), and the amount of Partnership Minimum Gain,
as well as any net increase or decrease in a Partnership Minimum Gain, for a
Partnership taxable year
-10-
<PAGE> 15
shall be determined in accordance with the rules of Regulations Section
1.704-2(d).
1.59 "Partnership Record Date" means the record date established by the
General Partner for the distribution of Available Cash pursuant to Article 5
hereof with respect to a calendar quarter, which record date shall be the same
as the record date established by the General Partner for the making of dividend
distributions to its shareholders on account of their common stock holdings in
the General Partner with respect to the same calendar quarter.
1.60 "Partnership Year" means the fiscal year of the Partnership, which
shall be the calendar year.
1.61 "Person" means an individual or a corporation, partnership, trust,
limited liability company, unincorporated organization, association or other
entity.
1.62 "Plan" means any plan or arrangement, whether or not approved by
shareholders or partners, and whether formal or informal, utilized by the
General Partner to provide incentives, benefits or other compensation to its
employees, consultants or advisors, or the employees, consultants or advisors of
any Affiliate of the General Partner.
1.63 "Recapture Income" means any gain recognized by the Partnership
upon the disposition of any property or asset of the Partnership, which gain is
characterized as ordinary income because it represents the recapture of
deductions previously taken with respect to such property or asset.
1.64 "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).
1.65 "REIT" means a real estate investment trust under Section 856 of
the Code.
1.66 "REIT Share" means a share of common stock of the General Partner,
par value $.01 per share.
1.67 "Residual Gain" or "Residual Loss" means any item of gain or loss,
as the case may be, of the Partnership recognized for federal income tax
purposes resulting from a sale, exchange or other disposition of Contributed
Property or Adjusted Property, to the extent such item of gain or loss is not
allocated pursuant to Section 2.B.1(a) or 2.B.2(a) of Exhibit "C" to eliminate
Book-Tax Disparities.
1.68 "Securities Act" means the Securities Act of 1933, as amended.
-11-
<PAGE> 16
1.69 "Securities Issues" shall have the meaning given thereto in the
Contribution Agreement.
1.70 "704(c) Value" of any Contributed Property means the value of such
property as set forth in Exhibit "D", or if no value is set forth in Exhibit
"D", the fair market value of such property or other consideration at the time
of contribution, as determined by the General Partner using such reasonable
method of valuation as it may adopt. Subject to Exhibit "B" hereof, the General
Partner shall, in its sole and absolute discretion, use such method as it deems
reasonable and appropriate to allocate the aggregate of the 704(c) Values of
Contributed Properties in a single or integrated transaction among the separate
properties on a basis proportional to their respective fair market values.
1.71 "Subsidiary" means, with respect to any Person, any corporation,
partnership or other entity of which a majority of (i) the voting power of the
voting equity securities, or (ii) the outstanding equity interests, is owned,
directly or indirectly, by such Person.
1.72 "Substituted Limited Partner" means a Person who is admitted as a
Limited Partner to the Partnership pursuant to Section 11.4.
1.73 "Tax Issues" shall have the meaning given thereto in the
Contribution Agreement.
1.74 "Unrealized Gain" attributable to any item of Partnership property
means, as of any date of determination, the excess, if any, of (i) the fair
market value of such property (as determined under Exhibit "B" hereof) as of
such date, over (ii) the Carrying Value of such property (prior to any
adjustment to be made pursuant to Exhibit "B" hereof) as of such date.
ARTICLE 2
ORGANIZATIONAL MATTERS
2.1 Organization. The Partnership is a limited partnership organized
pursuant to the provisions of the Act and upon the terms and conditions set
forth in this Agreement. Except as expressly provided herein to the contrary,
the rights and obligations of the Partners and the administration and
termination of the Partnership shall be governed by the Act. The Partnership
Interest of each Partner shall be personal property for all purposes.
2.2 Name. The name of the Partnership shall be PGP Southern Industrial
II, L.P. The Partnership's business may be conducted under any other name or
names deemed advisable by 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 purpose of complying
-12-
<PAGE> 17
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.
2.3 Registered Office and Agent; Principal Office. The address of the
registered office of the Partnership in the State of Delaware and the name and
address of the registered agent for service of process on the Partnership in the
State of Delaware is The Corporation Trust Company, Corporation Trust Center,
1209 Orange Street, Wilmington, Delaware 19801. The principal office of the
Partnership shall be c/o Pacific Gulf Properties Inc., 4220 Von Karman, Second
Floor, Newport Beach, California 92660- 2002, or such other place as the General
Partner may from time to time designate by notice to the Limited Partners. The
Partnership may maintain offices at such other place or places within or outside
the State of Delaware as the General Partner deems advisable.
2.4 Power of Attorney.
A. Each Limited Partner and each Assignee hereby 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: (a) all certificates, documents
and other instruments (including, without limitation, this Agreement and the
Certificate and all amendments or restatement thereof) 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 Delaware and in all other jurisdictions in which the Partnership may or plans
to conduct business or own property; (b) all instruments that the General
Partner deems appropriate or necessary to reflect any amendment, change,
modification or restatement of this Agreement made, in each case, in accordance
with the terms of this Agreement; (c) all conveyances and other instruments or
documents that the General Partner or the Liquidator deems appropriate or
necessary to reflect the dissolution and liquidation of the Partnership
undertaken in accordance with the terms of this Agreement, including, without
limitation, a certificate of cancellation; (d) all instruments relating to the
admission, withdrawal, removal or substitution of any Partner in accordance with
Article 11, 12 or 13 hereof or the Capital Contribution of any Partner, or
relating to any of the other events described in, and effectuated in accordance
with, Article 11, 12 or 13 hereof; and (e) all certificates, documents and other
instruments
-13-
<PAGE> 18
relating to the determination of the rights, preferences and privileges of
Partnership Interest; and
(2) execute, swear to, seal, acknowledge and file
all ballots, consents, approvals, waivers, certificates and other instruments
appropriate or necessary, in the sole and absolute discretion of the General
Partner or any Liquidator, to make, evidence, give, confirm or ratify any vote,
consent, approval, agreement or other action by the Limited Partners given
hereunder or pursuant to this Agreement.
B. The foregoing power of attorney is hereby declared to be
irrevocable and a power coupled with an interest, in recognition of the fact
that each of the Partners will be relying upon the power of the General Partner
and any Liquidator to act as contemplated by this Agreement in any filing or
other action by it on behalf of the Partnership, and it shall survive and not be
affected by the subsequent Incapacity of any Limited Partner or Assignee and the
transfer of all or any portion of such Limited Partner's Assignee's Limited
Partnership Units and shall extend to such Limited Partner's or Assignee's
heirs, successors, assigns and personal representatives. Each Limited Partner or
Assignee shall execute and deliver to the General Partner or the Liquidator,
within fifteen (15) days after receipt of the General Partner's or Liquidator's
request therefor, such further designations, powers of attorney and other
instruments as the General Partner or the Liquidator, as the case may be, deems
necessary to effectuate this Agreement.
C. Nothing contained in this Section 2.4 shall be construed as
authorizing the General Partner or any Liquidator to take any action that
violates the rights of any Limited Partner or Assignee under this Agreement (or
any other written agreement between the General Partner and such Limited Partner
or Assignee) or to amend this Agreement except in accordance with Article 14
hereof or as may be otherwise expressly provided for in this Agreement.
2.5 Term. The term of the Partnership shall commence on the Effective
Date and shall continue until December 31, 2098, unless the Partnership is
dissolved sooner pursuant to the provisions of Article 13 or as otherwise
provided by law.
ARTICLE 3
PURPOSE
3.1 Purpose and Business. The purpose and nature of the business to be
conducted by the Partnership is: (i) to conduct any business that may be
lawfully conducted by a limited partnership organized pursuant to the Act;
provided, however, that such business shall be limited to and conducted in such
a manner as to permit the General Partner at all times to be classified as a
REIT, unless the General Partner ceases to
-14-
<PAGE> 19
qualify as a REIT for reasons other than the conduct of the business of the
Partnership; (ii) to enter into any partnership, joint venture or other similar
arrangement to engage in any of the foregoing or to own interests in any entity
engaged in any of the foregoing; and (iii) to do anything necessary or
incidental to the foregoing. In connection with the foregoing, and without
limiting the General Partner's right, in its sole discretion, to cease
qualifying as a REIT, the Partners acknowledge the General Partner's current
status as a REIT inures to the benefit of all of the Partners and not solely the
General Partner.
3.2 Powers. The Partnership is empowered to do any and all acts and
things necessary, appropriate, proper, advisable, incidental to or convenient
for the furtherance and accomplishment of the purposes and business described
herein and for the protection and benefit of the Partnership; provided, however,
that the Partnership shall not take, or refrain from taking, any action which,
in the judgment of the General Partner, in its sole and absolute discretion: (i)
could adversely affect the ability of the General Partner to continue to qualify
as a REIT; (ii) could subject the General Partner to any additional taxes under
Section 857 or Section 4981 of the Code; or (iii) could violate any law or
regulation of any governmental body or agency having jurisdiction over the
General Partner or its securities, unless such action (or inaction) shall have
been specifically consented to by the General Partner in writing.
3.3 Technical Revisions. The Limited Partners agree to, and the General
Partner is hereby authorized to make, any modifications or amendments to this
Agreement that may be necessary for the General Partner to maintain its status
as a real estate investment trust or in order for it to avoid a penalty or tax;
provided, however, that such modification or amendment does not materially alter
or affect adversely any Limited Partner's rights, duties, or obligations under
this Agreement or any other written agreement between the General Partner and
such Limited Partner.
ARTICLE 4
CAPITAL CONTRIBUTIONS
4.1 Initial Capital Contributions of the Partners.
A. Concurrently with the Closing, the General Partner shall
contribute to (or pay on behalf of) the Partnership or the General Partner the
cash necessary to pay the transaction costs, closing costs and prorations to be
paid by the Partnership or the General Partner, or which are designated as
Partnership or General Partner expenses, pursuant to the Contribution Agreement.
The amounts so contributed or paid by the General Partner shall constitute
Capital Contributions by the General Partner.
-15-
<PAGE> 20
B. Concurrently with the Closing, the Original Limited Partner
shall transfer, assign, convey, and deliver all right, title, and interest in
and to the real properties, improvements, and other assets relating to the
Original Property as described in, and in accordance with the terms, provisions,
and conditions of, the Contribution Agreement. The Agreed Value of the Original
Property is set forth on Exhibit "D". The Capital Contribution of the Original
Limited Partner to the Partnership shall be equal to the Agreed Value of the
Original Property. The number of Limited Partnership Units issued to the
Original Limited Partner on account of such Capital Contribution shall be equal
to the Agreed Value of the Original Property divided by the "PGP Share Price"
(as defined in the Contribution Agreement). Neither the Partnership nor the
General Partner shall have any liability, obligation, duty, or responsibility to
the Original Limited Partner, any other Limited Partner or any other person or
entity for any Tax Issues or Securities Issues or any other economic,
contractual, or other consequence, impact, or affect resulting, in each case,
directly or indirectly, from the receipt or ownership of Limited Partnership
Units. All such liability, obligation, duty and responsibility shall be that of
the Original Limited Partner and the Original Limited Partner hereby agrees to
indemnify, defend, save, and hold harmless the General Partner, the Partnership
and their officers, directors, employees, agents, accountants, attorneys,
advisors, and the like from and against any damage, loss, expense, cost
(including reasonable attorneys' fees), liability or obligation with respect
thereto or as a result thereof. Among other things, it is acknowledged that
neither the Original Limited Partner nor any of its Affiliates has relied or
will rely on the General Partner, the Partnership, or any of their officers,
directors, employees, agents, accountants, attorneys, advisors or the like, with
regard to any Tax Issues or Securities Issues, but instead has relied and will
rely on their own tax, business and legal advisors therefor and with respect
thereto.
C. In consideration of their initial Capital Contributions, the
Limited Partners shall receive Limited Partnership Units in the amounts set
forth on Exhibit "A", and such amounts shall represent the initial Limited
Partner Percentage Interests shown on said Exhibit. The Limited Partner
Percentage Interests shall be adjusted in Exhibit "A" from time to time by the
General Partner to the extent necessary to reflect accurately redemptions,
additional Capital Contributions, the issuance of additional Limited Partnership
Units (pursuant to any merger or otherwise), or similar or other events having
an effect on any Limited Partner's Limited Partner Percentage Interest, in each
case to the extent permitted hereunder. Except as provided hereinabove and as
expressly provided in Sections 4.3 (with respect to General Partner
contributions) and 10.5, the Partners shall have no obligation whatsoever to
make any additional or further Capital Contributions, loans, or advances of any
kind to the Partnership, or to in any way finance the operation of the
Partnership or any of the debt or obligations of the Partnership.
-16-
<PAGE> 21
D. Except as expressly provided in this Agreement, the Capital
Contribution of each Partner will be returned to that Partner only in the manner
and to the extent provided in Article 5 and Article 13 hereof, 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, 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 herein. No Partner shall be
entitled to interest on any Capital Contribution or Capital Account. 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
Contributions shall be made solely from Partnership assets.
E. Except as provided in the Act and in Section 4.1B and Section
10.5 of this Agreement, and except for the Original Limited Partner's express
obligations to contribute cash and the Original Property at Closing pursuant to
the Contribution Agreement, no Limited Partner shall have any personal liability
whatsoever to contribute money to, or in respect of, the liabilities or the
obligations of the Partnership or the General Partner, nor shall any Limited
Partner be personally liable for any obligations of the Partnership or the
General Partner. No Limited Partner shall be required to make any contributions
to the capital of the Partnership other than as expressly provided in this
Agreement.
4.2 Additional Capital Contributions by the General Partner. From
time to time at or following the Closing, the General Partner may, but shall not
be obligated to, contribute additional capital to the Partnership to pay for any
and all costs and expenses of (a) operating the Partnership; (b) financing,
refinancing and paying off or down Partnership debt; and (c) owning, operating,
leasing, maintaining, repairing, improving, acquiring and selling both Original
and Non-Original Limited Partner Related Assets, including but not limited to
Capital Contributions made to correct or repair any items of seismic compliance,
deferred maintenance and capital improvements to the Original Properties.
4.3 Issuances of Additional Partnership Interests.
A. The General Partner is hereby authorized to cause the
Partnership from time to time to issue to the Partners (including the General
Partner) or other Persons additional Limited Partnership Units or other
Partnership Interests in one or more classes, or one or more series of any of
such classes, with such designations, preferences and relative, participating,
optional or other special rights, powers and duties, including, rights, powers
and duties senior to the Limited Partners (including the Original Limited
Partner and its successors and assigns), except that, notwithstanding the
foregoing, (i) with respect to the Original Limited Partner Related Assets, any
such
-17-
<PAGE> 22
additional Limited Partnership Units or Partnership Interests shall, if at all,
only carry or give to their holders rights to receive distributions (as to
amount, timing, and priority) junior to the rights of the Original Limited
Partner as set forth in this Agreement with respect to the Original Limited
Partner Related Assets and (ii) such additional Limited Partnership Units or
Partnership Interests shall only carry or give to their holders such rights with
respect to the Original Limited Partner Related Assets described in clause (i)
to the extent comparable distribution rights are also granted to the Original
Limited Partner with respect to the Non-Original Limited Partner Related Assets,
in each case, unless and until the General Partner has made the election
provided for in Section 5.2 of this Agreement. Following the making of such
election, the rights as to distributions pertaining to such additional Limited
Partnership Units or Partnership Interests may be equal or junior to those of
the Original Limited Partner and their heirs, successors and assigns. Subject to
the foregoing, the rights, privileges, benefits, burdens, and restrictions
relating to any such additional Limited Partnership Units or Partnership
Interests shall be determined by the General Partner in its sole and absolute
discretion (but without creating different priorities as between the Limited
Partner Interests and the General Partner Interests received by the General
Partner and the Original Limited Partner in connection with the contributions
provided for under the Contribution Agreement), subject to Delaware law,
including, without limitation: (i) the allocations of items of Partnership
income, gain, loss, deduction and credit to each such class or series of
Partnership Interests; (ii) the right of each such class or series of
Partnership Interests to share in Partnership distributions; and (iii) the
rights of each such class or series of Partnership Interests upon dissolution
and liquidation of the Partnership; provided that no such additional Limited
Partnership Units or other Partnership Interests shall be issued to the General
Partner, as the General Partner, or a Limited Partner, or to an Affiliate of
either the General Partner or a Limited Partner, unless the additional
Partnership Interests are issued for a fair economic consideration determined at
the time of or within ninety (90) days prior to the issuance, or unless the
issuance of such additional Partnership Interests is otherwise permitted under
the terms and provisions of this Agreement. A determination by an independent
investment banker or financial advisor that the consideration paid or proposed
to be paid by the General Partner in this regard is a fair economic
consideration, or is otherwise fair from a financial point of view, to the
Partnership shall be conclusive and binding upon all parties hereto for all
purposes, and shall constitute a conclusive, non-rebuttable presumption that the
consideration so paid represented fair, good faith, and proper action by the
General Partner with the Partnership as concerns the General Partner's dealings
and transactions with the Partnership in relation to such issuance.
B. If the General Partner makes the election provided for in
Section 5.2 of this Agreement, then thereafter the General
-18-
<PAGE> 23
Partner shall be authorized at any time, in its sole discretion, and without the
need for any vote, consent or approval from, or consultation with, any Limited
Partner, and further without the need for any appraisal, valuation, or any other
analysis or evaluation of any property, assets, rights, debts, liabilities,
obligations, claims, title, encumbrances, or any other matters of any sort from
any person, to contribute, assign, convey, and transfer to the Partnership all,
but not less than all, of the General Partner's rights, title, claims,
interests, debts, duties, liabilities, and obligations, in, to, and relating to
all, but not less than all, of the General Partner's assets, properties, debts,
liabilities, and obligations (excluding the General Partner's rights, title,
claims, interests, debts, duties, liabilities, and obligations in, to, and
relating to its interest in the Partnership, and also excluding same as such
relates to any other entity in which the General Partner has an interest but
which entity does not own a direct or indirect interest in real property). In
exchange therefor, the Partnership shall immediately issue to the General
Partner (A) that number of Limited Partnership Units equal to the number of the
outstanding shares of common stock of the General Partner at the time of such
contribution by the General Partner to the Partnership, and (B) options,
warrants, and other rights to acquire additional Limited Partnership Units in
the Partnership and other securities of the Partnership on a unit-for-unit basis
equivalent to, and on the same terms and conditions as, all options, warrants,
and other rights and securities issued and then outstanding ("General Partner
Security Rights") with regard to any shares of capital stock or other securities
of any kind of the General Partner then or thereafter issued. After
consolidation of the General Partner's affairs into the Partnership as described
in this Section, upon the exercise by any holder of any General Partner Security
Rights and the General Partner's issuance of its securities to the exercising
party with respect thereto, or the issuance of any other securities of the
General Partner, the General Partner promptly shall contribute to the
Partnership any consideration received upon such exercise (net of all costs,
fees, expenses, and commissions relating thereto), and the Partnership shall
thereupon issue to the General Partner an equivalent number of Limited
Partnership Units (in the case of issuances by the General Partner of shares of
its common stock) or an equivalent number of other interests in the Partnership
which have parallel and comparable rights and privileges to the rights and
privileges of the securities issued by the General Partner (in the case of
issuances by the General Partners other than shares of its common stock.)
C. If the General Partner makes the election provided for in
Section 5.2, the General Partner shall (a) pay to the Original Limited Partner
the amount of its Liquidated Tax Damages, if any, resulting from the
transactions effectuating such election; (b) pay to the Original Limited Partner
the amount of any unpaid Distribution Deficit existing as of the date of such
election; and (c) give the Original Limited Partner such notice thereof, and
distribute to the Original Limited Partner
-19-
<PAGE> 24
such other information concerning the transactions effectuating such election,
as the General Partner distributes generally to the holders of REIT Shares.
4.4 Preemptive Rights. Only the General Partner shall have the right to
make the additional Capital Contributions described in Sections 4.2 and 4.3.
Except as provided in Sections 4.2 and 4.3 hereof, no Person shall have any
preemptive, preferential or other similar right with respect to: (i) the making
of additional Capital Contributions or loans to the Partnership; or (ii) the
issuance or sale of any Limited Partnership Units or other Partnership
Interests.
4.5 Loans. The General Partner and its Affiliates shall have the right,
but not the obligation, to make loans and advances to the Partnership, and shall
be treated as a third party lender to the Partnership (with all attendant
rights, privileges, and remedies) to the extent that they do so. In addition,
provided there then exists no Distribution Deficit or a sufficient portion of
the loan proceeds are committed to repay any existing Distribution Deficit, the
General Partner may borrow funds from the Partnership to the extent necessary to
meet any of its distribution requirements under the Code or otherwise to
preserve its status as a REIT and avoid any tax liability imposed by the Code.
Loans and advances, if any, funded by the General Partner or its Affiliates, and
loans made by the Partnership to the General Partner, shall be on commercially
competitive terms, comparable to similar loans and advances made by unrelated
third party institutional lenders, and shall be evidenced by a promissory note
and other commercially reasonable documentation. If institutional lenders would
not regularly make such loans or advances, then terms for a comparable loan or
advance described by any experienced and reputable unrelated third party loan
broker upon request by the General Partner shall be conclusively presumed to be
commercially competitive and comparable to similar loans and advances made by
unrelated third parties for purposes of this Agreement.
ARTICLE 5
DISTRIBUTIONS
5.1 Requirement and Characterization of Distributions.
A. Subject to Section 5.6, on or before ninety (90) days after
the end of each calendar quarter the General Partner shall distribute to the
Partners who are partners on the Partnership Record Date for such calendar
quarter an amount equal to 100% of the Available Cash for such calendar quarter
in the following order of priority:
(1) First, to the Limited Partners pro rata in
accordance with their respective Limited Partner Percentage Interests, until
such time as the distribution made pursuant to this Section 5.1A(1) for such
calendar quarter on account of each
-20-
<PAGE> 25
Limited Partnership Unit held by a Limited Partner equals the cash dividend paid
to the common shareholders of the General Partner for such calendar quarter on
account of one share of common stock of the General Partner.
(2) Second, if there then exists a Distribution
Deficit with respect to any period prior to the seventh (7th) anniversary of the
Effective Date, to the Original Limited Partner until such time as the
distribution made pursuant to this Section 5.1A(2) eliminates the Distribution
Deficit; and
(3) Thereafter, to the General Partner.
B. Distributions made pursuant to this Section 5.1 shall be made
in the foregoing order of priority, with all Available Cash being distributed at
the highest level of priority until that level of priority is completely
satisfied before any Available Cash is distributed at a lower level of priority,
and distributions at a lower level of priority not being made or being only
partially made if Available Cash is insufficient therefor. If there is an
Available Cash Shortfall with respect to any calendar quarter, the General
Partner shall loan such amount to the Partnership on the terms provided in
Section 4.5 for the purpose of making distributions to the Limited Partners
under this Section 5.1.
C. Anything contained herein to the contrary notwithstanding, the
quarterly distribution of Available Cash made on account of each Limited
Partnership Unit for the calendar quarter which contains the Effective Date
shall not exceed the dividend paid to common shareholders of the General Partner
on account of a share of common stock of the General Partner for the calendar
quarter which contains the Effective Date, multiplied by a fraction (x) the
numerator of which is the number of days from and including the Effective Date
to and including the last day of such calendar quarter, and (y) the denominator
of which is the total number of days in such calendar quarter.
D. Anything contained herein to the contrary notwithstanding, in
no event may a Limited Partner receive a distribution from Available Cash with
respect to a Limited Partnership Unit if such Limited Partner is entitled to
receive a dividend with respect to a REIT Share for which such Limited
Partnership Unit has been redeemed or exchanged pursuant to the Exchange Rights
Agreement.
5.2 General Partner Election. The General Partner may elect, at any
time, in its sole and absolute discretion, to have all future calculations of
Available Cash based upon all Partnership assets without distinction between
Original and Non-Original Limited Partner Related Assets, and to have all future
distributions to Limited Partners made pursuant to the following terms in lieu
of the terms of Section 5.1 (an election under this Section, once made, shall be
irrevocable):
-21-
<PAGE> 26
A. First, the General Partner shall make distributions or
payments to the Limited Partners regardless of the availability or amount of
Available Cash, in an amount, on account of each Limited Partnership Unit held
by a Limited Partner for the calendar quarter in which the distributions are
made, equal to the cash dividend paid to the common shareholders of the General
Partner on account of one share of common stock of the General Partner for such
calendar quarter; and
B. Thereafter, to the General Partner.
5.3 Amounts Withheld. All amounts withheld pursuant to the Code or any
provisions of any state or local tax law and Section 10.5 hereof with respect to
any allocation, payment or distribution to the Partners or Assignees shall be
treated as amounts distributed to the Partners or Assignees pursuant to Sections
5.1 or 5.2 for all purposes under this Agreement.
5.4 Distributions Upon Liquidation. Proceeds from a Liquidating Event,
if any, and any other cash received or reductions in reserves made after
commencement of the liquidation of the Partnership shall be distributed to the
Partners in accordance with Section 13.2.
5.5 Other Assets Present. Notwithstanding the foregoing, if and after
the Partnership acquires Non-Original Limited Partner Related Assets, or becomes
obligated, indebted or liable for or on account of Non-Original Limited Partner
Related Assets or the ownership or operation thereof, and so long as the General
Partner has not consummated the transactions and made the election described in
Sections 4.3B and 5.2, respectively, of this Agreement, then distributions of
Available Cash to the General Partner and the Original Limited Partner and their
respective heirs, successors and assigns under the terms of the foregoing shall
be calculated and made only with respect to Original Limited Partner Related
Assets and the ownership and operation thereof, together with the operation and
existence of the Partnership insofar as such concerns the Original Limited
Partner Related Assets. Distributions under the terms of the foregoing shall not
include any revenues, expenses, assets, or liabilities of the Partnership
relating to the Non-Original Limited Partner Related Assets, the ownership or
operation thereof, or the operation or existence of the Partnership with respect
thereto, all of which shall be as separately determined by the General Partner
in its sole and absolute discretion.
5.6 Distribution in Kind. No right is given to any Partner to demand or
receive distribution of 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 hereof.
-22-
<PAGE> 27
5.7 REIT Distribution Requirements. Notwithstanding anything to the
contrary in this Agreement (but without impairing or otherwise altering the
Original Limited Partner's priority distribution rights under Section 5.1), the
General Partner may cause the Partnership to distribute or lend (to the extent
permitted under Section 4.5) amounts sufficient to enable the General Partner to
pay shareholder dividends that will allow the General Partner to (i) meet its
distribution requirements for qualification as a REIT under the Code and (ii)
avoid any federal income or excise tax liability imposed by the Code.
ARTICLE 6
ALLOCATIONS
6.1 Allocations of Net Income and Net Loss. For purposes of maintaining
the Capital Accounts and in determining the rights of the General and Limited
Partners among themselves, the Partnership's items of income, gain, loss and
deduction (computed in accordance with Exhibit "B" hereof) shall be allocated
among the General and Limited Partners in each taxable year (or portion thereof)
as provided herein below.
A. Net Loss for a particular period shall be
allocated as follows:
(1) First, if applicable, to the General and
Limited Partners in proportion to and to the extent of their positive Capital
Account balances, if any.
(2) Second, to the Limited Partners, in
proportion to and to the extent of, their respective aggregate Excess
Distributions, until the amount allocated under this Section 6.1A(2) for the
current taxable period and all previous taxable periods equals the Excess
Distributions of all Limited Partners.
(3) Third, to the General Partner.
B. Net Income for a particular period shall be allocated as
follows:
(1) First, if applicable, to the Partners that
have previously been allocated Net Loss pursuant to Section 6.1A in amounts and
among such Partners in the reverse order (and in the corresponding amounts) of
all Net Loss previously allocated to them until the amount of Net Income
allocated pursuant to this Section 6.1B(1) equals the aggregate amount of all
Net Loss theretofore allocated pursuant to Section 6.1A.
(2) Second, if applicable, to the Limited
Partners in proportion to their respective Limited Partner Percentage Interests
until the aggregate Net Income allocated pursuant to this Section 6.1B(2) for
the current taxable period
-23-
<PAGE> 28
and all previous taxable periods equals the aggregate amount of Available Cash
distributed to the Limited Partners pursuant to Section 5.1A(1).
(3) Third, if applicable, to the Limited Partners
in proportion to their respective Limited Partner Percentage Interests until the
aggregate Net Income allocated pursuant to this Section 6.1B(3) for the current
taxable period and all previous taxable periods equals the aggregate amount of
Available Cash distributed to the Limited Partners pursuant to Section 5.1A(2).
(4) Fourth, if applicable, to the Limited
Partners in proportion to their respective Limited Partner Percentage Interests
until the aggregate Net Income allocated pursuant to this Section 6.1B(4) for
the current taxable period and all previous taxable periods equals the aggregate
amount distributed to the Limited Partners pursuant to Sections 5.2A.
(5) Fifth, if applicable, to the Original Limited
Partner until the aggregate Net income allocated pursuant to this Section
6.1B(5) for the current taxable period and all previous taxable periods equals
the aggregate amount distributed to the Original Limited Partner on account of
Liquidated Tax Damages pursuant to Section 4.3C or any other applicable
provision requiring the payment of Liquidated Tax Damages to the Original
Limited Partner under this Agreement or the Exchange Rights Agreement.
(6) Sixth, to the General Partner.
6.2 Other Allocations.
A. For purposes of Regulations Section 1.752(a), the Partners
agree that Nonrecourse Liabilities of the Partnership in excess of the sum of
(i) the amount of Partnership Minimum Gain; and (ii) the total amount of
Nonrecourse Built-in Gain shall be allocated among the General Partner and the
Limited Partners in accordance with their respective Capital Accounts.
B. Any gain allocated to the General Partner and the Original
Limited Partner upon the sale or other taxable disposition of any Partnership
asset shall, to the extent possible, after taking into account other required
allocations of gain pursuant to Exhibit "C", be characterized as Recapture
Income in the same proportions and to the same extent as such Partners have been
allocated any deductions directly or indirectly giving rise to the treatment of
such gains as Recapture Income.
-24-
<PAGE> 29
C. If and after the Partnership acquires Non-Original Limited
Partner Related Assets, or becomes obligated, indebted or liable for or on
account of Non-Original Limited Partner Related Assets or the ownership or
operation thereof, and so long as the General Partner has not consummated the
transactions and made the election described in Sections 4.3B and 5.2,
respectively, of this Agreement, then allocations of Net Income, Net Loss, and
any other items to the General Partner and the Original Limited Partner and
their respective heirs, successors and assigns under this Agreement shall be
calculated separately with respect to Original Limited Partner Related Assets
and the ownership and operation thereof, together with the operation and
existence of the Partnership insofar as such concerns the Original Limited
Partner Related Assets and the ownership and operation thereof. Such allocations
and calculations shall not include any revenues, expenses, assets, or
liabilities of the Partnership relating to the Non-Original Limited Partner
Related Assets, the ownership or operation thereof, or the operation or
existence of the Partnership with respect thereto, all of which shall be as
separately determined by the General Partner in its sole and absolute
discretion.
ARTICLE 7
MANAGEMENT AND OPERATIONS OF BUSINESS
7.1 Management.
A. Except as otherwise expressly provided in this Agreement, all
management powers over the business and affairs of the Partnership are and shall
be exclusively vested in the General Partner, and no Limited Partner shall have
any right to participate in or exercise control or management power over the
business and affairs of the Partnership. The General Partner may not be removed
by the Limited Partners with or without cause. In addition to the powers now or
hereafter granted a general partner of a limited partnership under applicable
law or which are granted to the General Partner under any other provision of
this Agreement, but subject to the limitations set forth in Section 7.2 hereof,
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 hereof and to effectuate the
purposes set forth in Section 3.1 hereof, including (to the extent not
prohibited by Section 7.2 hereof), 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
-25-
<PAGE> 30
shareholders in amounts 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 evidence of indebtedness
(including the securing of the same by deed, 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;
(2) the making of tax, regulatory and other
filings, or rendering of periodic or other reports to governmental or other
agencies having jurisdiction over the business or assets of the Partnership;
(3) the acquisition, disposition, mortgage, pledge,
encumbrance, hypothecation or exchange of any assets of the Partnership
(including the exercise or grant of any conversion, option, privilege, or
subscription right or other right available in connection with any assets at any
time held by the Partnership) or the merger or other combination of the
Partnership with or into another entity;
(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, without limitation, the Subsidiaries of
the Partnership and/or the General Partner) 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 and the creation,
by grant or otherwise, of easements or servitudes;
(5) the management, operation, leasing,
collection of rents, marketing, landscaping, repair, alteration, renovation,
rehabilitation, demolition or improvement of the Original Property or any other
real property or improvements owned by the Partnership or any Subsidiary of the
Partnership and the performance of any and other acts necessary or appropriate
to the operation of such properties, including, without limitation, applications
for rezoning or objections to rezoning of such properties;
(6) the negotiation, execution, and performance
of any contracts, conveyances or other instruments that the General Partner
considers useful or necessary to the conduct of the Partnership's operations or
the implementation of the General Partner's powers under this Agreement,
including, without limitation, the execution and delivery of leases on behalf of
or in the name of the Partnership, contracting with contractors, developers,
consultants, accountants, legal counsel, other
-26-
<PAGE> 31
professional advisors and other agents and the payment of their expenses and
compensation out of the Partnership's assets;
(7) 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;
(8) the holding, managing, investing and
reinvesting cash and other assets of the Partnership;
(9) the collection and receipt of revenues and
income of the Partnership;
(10) the establishment of one or more divisions of the
Partnership, the selection and dismissal of employees of the Partnership
(including, without limitation, employees having titles such as "president,"
"vice president," "secretary" and "treasurer" of the Partnership), and agents,
outside attorneys, accountants, consultants and contractors of the Partnership,
and the determination of their compensation and other terms of employment or
hiring (whether or not any of the foregoing are also employed by, consultants
to, independent contractors for, or otherwise do business with the General
Partner or its Affiliates in related or unrelated matters);
(11) the maintenance of such insurance for the benefit of
the Partnership and the Partners as it deems necessary or appropriate (whether
or not such is done as part of a group, combined or other policy or policies
under which the Partnership and the General Partner (or its Affiliates) are also
insured, so long as the General Partner fairly allocates the expense thereof
among the covered parties);
(12) the formation of, or acquisition of an interest in, and
the contribution of some or all of property (or any part thereof or interest
therein) to, any further limited or general partnerships, joint ventures or
other relationships that it deems desirable (including, without limitation, the
acquisition of interests in, and the contributions of property to, its
Subsidiaries and any other Person in which it has an equity investment from time
to time);
(13) the control of any and all matters affecting the rights
and obligations of the Partnership, including the settlement, compromise,
submission to arbitration or any other form of dispute resolution, or
abandonment of, any claim, cause of action, liability, debt or damages, due or
owing to or from the Partnership, the commencement or defense of suits, legal
proceedings, administrative proceedings, arbitration or other forms of dispute
resolution, and the representation of the Partnership in all suits or legal
proceedings, administrative proceedings, arbitrations or other forms of dispute
resolution, the incurring of legal expense, and the indemnification of any
-27-
<PAGE> 32
Person against liabilities and contingencies to the extent permitted by law and
consistent with the terms of this Agreement, including in each and all of the
foregoing instances any such matter or thing in which the General Partner or its
Affiliates have a direct interest;
(14) 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);
(15) the determination of the fair market value of any
Partnership property distributed in kind using such reasonable method of
valuation as the General Partner may adopt;
(16) the exercise, directly or indirectly, through any
attorney-in-fact acting under a general or limited power of attorney, of any
right, including the right to vote, appurtenant to any asset or investment held
by the Partnership;
(17) the exercise of any of the powers of the General
Partner enumerated in this Agreement on behalf of or in connection with any
Subsidiary of the Partnership or any other Person in which the Partnership has a
direct or indirect interest, or an interest jointly with any such Subsidiary or
other Person;
(18) the exercise of any of the powers of the General
Partner enumerated in this Agreement on behalf of any Person in which the
Partnership does not have an interest pursuant to contractual or other
arrangements with such Person;
(19) the making, execution and delivery of any and all
deeds, leases, notes, 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; and
(20) the issuance of additional Limited Partnership Units or
Partnership Interests, as appropriate, in connection with Capital Contributions
by Additional Limited Partners and additional Capital Contributions by Partners
pursuant to Article 4 hereof.
B. Each of the Limited Partners agrees that, subject to the
limitations set forth in Section 7.2 hereof, the General Partner is authorized
to execute, deliver and perform the above-mentioned agreements and transactions
on behalf of the Partnership without any further act, approval or vote of the
Partners, notwithstanding any other provision of this Agreement, the Act or any
applicable law, rule or regulation, to the fullest extent permitted under the
Act or other applicable law, rule or
-28-
<PAGE> 33
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. At all times from and after the date hereof, the General
Partner shall cause the Partnership to obtain and maintain (i) casualty and
liability insurance on the properties of the Partnership and (ii) such other
insurance as the General Partner, in its sole and absolute discretion,
determines to be necessary or appropriate.
D. At all times from and after the date hereof, the General
Partner may cause the Partnership to establish and maintain at any and all times
working capital accounts and other cash or similar balances in such amounts as
the General Partner, in its sole and absolute discretion, deems appropriate and
reasonable from time to time.
E. 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 of any action taken by it. Except for the payment of
Liquidated Tax Damages to the Original Limited Partner if and when required
under this Agreement or the Exchange Rights Agreement, the General Partner and
the Partnership shall not have liability to a Limited Partner under any
circumstances as a result of income tax liability incurred by such Limited
Partner as a result of an action (or inaction) by the General Partner taken
pursuant to its authority under this Agreement and in accordance with the terms
hereof.
7.2 Limitations on General Partner
A. Anything contained herein to the contrary notwithstanding, for
so long as the Original Limited Partner (or its Assignees or Substitute Limited
Partners) owns Limited Partnership Units, the General Partner shall not cause
the Partnership to do any of the following without the prior Consent
of the Original Limited Partner:
(1) For a period of seven (7) years following the
Effective Date, sell, transfer or otherwise dispose of all or any portion of the
Original Property (other than dispositions of personal property and other than
any involuntary sale pursuant to foreclosure, condemnation, deed in lieu of
foreclosure, bankruptcy or insolvency proceedings or otherwise);
(2) Encumber the Original Property with debt, the
principal amount of which exceeds sixty percent (60%) of the
value of the Original Property;
-29-
<PAGE> 34
(3) Invest in or make any loans or contributions
of Partnership funds to any Person unless there then exists no Distribution
Deficit, or unless such loan is a loan to the General Partner made in accordance
with Section 4.5;
(4) Apply or make any distributions of
liquidation proceeds, any allocations of Net Income, Net Loss or any other
items, in each case, other than in the amounts, at the times, and in accordance
with, the priorities set forth in this Agreement; or
(5) Amend this Agreement, except in accordance
with Article 14 hereof.
B. Section 7.2A(1) shall not apply to or prohibit:
(1) Any transaction if such transaction qualifies
as a like-kind exchange under Section 1031 of the Code or an involuntary
conversion under Section 1033 of the Code; provided, however, that any such
replacement property shall thereafter be treated as Original Property for all
purposes of the restrictions in Section 7.2A.
(2) Any transaction if such transaction is one in
which no gain is recognized by the Partnership and the Original Limited Partner
with respect to the Original Property (other than gain, if any, resulting solely
because the share, if any, of indebtedness allocable to a Limited Partnership
Unit is reduced or eliminated), and the entity to which such property is
transferred agrees, for the benefit of the Original Limited Partner, that all of
the restrictions of Section 7.2A, shall apply to the transferred property in the
same manner and to the same extent set forth in Section 7.2A and such agreement
is reflected in the partnership agreement (or other comparable governing
instrument) of the entity to which the property is transferred.
(3) Any transaction not otherwise described in
Sections 7.2B(1) or (2) if, concurrently with the consummation of such
transaction, the Partnership or the General Partner pays to each Original
Limited Partner an amount equal to the lesser of (a) the aggregate federal,
state and local income taxes payable by such Original Limited Partner as a
result of or in connection with such transaction, or (b) the aggregate federal,
state and local income taxes that would have been payable by such Original
Limited Partner if the relevant property had been sold on the Effective Date for
its 704(c) Value (hereinafter, "Liquidated Tax Damages").
C. If, at any time prior to the seventh (7th) anniversary of the
Effective Date, the Partnership pays the amount described in Section 7.2B(3)
above to any Original Limited Partner, and the amount of such payment is, at the
time that it is made, equal to the full amount that would be payable to such
Original Limited Partner under such Section if the Original
-30-
<PAGE> 35
Property were to have been sold on such date for its market value, then the
provisions of Section 7.2A shall thereafter cease to apply to such Original
Limited Partner.
D. Nothing herein shall be deemed to require that the Partnership
or the General Partner take any action to avoid or prevent an involuntary
disposition of any property, whether pursuant to foreclosure, condemnation, deed
in lieu of foreclosure, bankruptcy or insolvency proceedings or otherwise;
provided, however, that General Partner shall pay the Original Limited Partner
its Liquidated Tax Damages resulting from a Liquidating Casualty.
E. Nothing herein shall prevent the sale, exchange, transfer or
other disposition of any property pursuant to the dissolution and liquidation of
the Partnership in accordance with Article XIII hereof; provided, however, that
the General Partner shall pay the Original Limited Partner its Liquidated Tax
Damages in certain instances as provided in Section 13.1.
7.3 Certificate of Limited Partnership.
The General Partner has filed the Certificate with the Secretary of
State of Delaware as required by the Act. 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 continuation,
qualification and operation of a limited partnership (or a partnership in which
the limited partners have limited liability) in the State of Delaware and any
other state, or the District of Columbia, in which the Partnership may elect to
do business or own property. 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
of the things to maintain the Partnership as a limited partnership (or a
partnership in which the limited partners have limited liability) under the laws
of the State of Delaware and each other state, or the District of Columbia, in
which the Partnership may elect to do business or own property. Subject to the
terms of Section 8.5.A(4) hereof, the General Partner shall not be required,
before or after filing, to deliver or mail a copy of the Certificate or any
amendment thereto to any Limited Partner.
7.4 Management Fee and Reimbursement of the General Partner
A. The General Partner and/or its Affiliates shall have the
right, but not the obligation, in the sole discretion of the General Partner, to
perform all or any of the property management services on account of the
property owned or managed by the Partnership. If the General Partner elects to
so perform, or to have an Affiliate so perform, the property management
services, then the General Partner or its Affiliate shall be reimbursed by the
Partnership for the expenses it incurs in providing such services in amounts
determined by the General
-31-
<PAGE> 36
Partner, in its good faith discretion, to be comparable to amounts which would
be reimbursable on account of expenses to reputable unrelated third party
property management companies which have substantial experience in performing
property management services for properties of the type owned or managed by the
Partnership for institutional owners with portfolios under management which are
substantially similar in size, nature, and condition of property owned or
managed by the Partnership. In addition, if the General Partner elects to so
perform, or to have an Affiliate so perform, the property management services
described herein, it is agreed that a management fee of four percent (4%) of
gross income shall be paid by the Partnership to the General Partner or its
Affiliates for the property management services as contemplated hereunder. The
reimbursements and fees payable to the General Partner or its Affiliates under
this Section shall be paid no less frequently than monthly. Except as provided
in this Section 7.4A 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. In furtherance of this Section,
the General Partner may cause the Partnership to enter into one or more property
management agreements with the General Partner or an Affiliate of the General
Partner, substantially in the form of the Management Agreement.
B. The General Partner shall be reimbursed on a monthly basis, or
such other basis as it may determine in its sole and absolute discretion, for
all costs and expenses that it incurs relating to the ownership and operation
of, or for the benefit of, the Original Property, the Partnership or any of its
other assets or related to the administration of the Partnership and the Limited
Partnership Units. After consummation of the transactions and election described
in, respectively, Sections 4.3B and 5.2 of this Agreement as a result of which
the assets of the General Partner are conveyed to the Partnership, such
reimbursement shall include reimbursement to the General Partner for all general
and administrative costs, fees, and expenses incurred by the General Partner due
to its status as a public company, a qualified real estate investment trust, or
otherwise, and any and all other expenses incurred by the General Partner for
any matter, reason or thing whatsoever. Any reimbursement under this Section
shall be in addition to any reimbursement made as a result of indemnification
pursuant to Section 7.7 hereof.
C. It is also acknowledged and agreed that, after consummation of
the transactions and election described in, respectively, Sections 4.3B and 5.2
of this Agreement as a result of which the assets of the General Partner are
conveyed to the Partnership, the General Partner will directly or indirectly
incur costs and expenses, and may issue stock or other securities, or both, to
persons employed or not employed, or retained or not retained, directly by the
Partnership. Such costs, expenses, and issuances may include, but not be limited
to, payment of general and administrative expenses by the General
-32-
<PAGE> 37
Partner, including compensation and bonuses to its officers and directors, and
the award of stock grants and options to purchase securities of the General
Partner. In light of the foregoing, it is agreed that, after consummation of the
transactions and election described in, respectively, Section 4.3B and 5.2 of
this Agreement, appropriate actions shall be taken by the Partnership, as
determined by the General Partner, in its sole discretion, to either (i)
reimburse the General Partner an appropriate portion of any such cost, expense,
or issuance, or (ii) adjust the General Partner's Interest in the Partnership so
as to prevent dilution of the General Partner's Interest.
D. Without limiting the generality of Section 7.4C above, it is
agreed that if, at any time or from time to time after consummation of the
transactions and election described in, respectively, Sections 4.3B and 5.2 of
this Agreement, options to purchase REIT Shares or any other securities granted
to employees, consultants or advisors of the General Partner or any Affiliate of
the General Partner under any Plan or otherwise as compensation or incentive are
exercised, or REIT Shares or any other securities are granted or awarded to
employees, consultants or advisors of the General Partner or any Affiliate of
the General Partner under any Plan or otherwise as compensation or incentive,
then the Partnership promptly shall issue to the General Partner Limited
Partnership Units or other interests in the Partnership with comparable rights,
benefits, and privileges in an amount equal to the REIT Shares or other
securities granted and/or issued, as the case may be. If Limited Partnership
Units or other interests in the Partnership are issued to the General Partner as
a result of the exercise of options to purchase REIT Shares or other securities,
then concurrently with the issuance of the Limited Partnership Units or other
interests to the General Partner, the General Partner shall pay to the
Partnership the cash consideration received by the General Partner on account of
such exercise.
E. After consummation of the transactions and elections described
in Sections 4.3B and 5.2 of this Agreement, in the event that the General
Partner shall elect to purchase from its shareholders REIT Shares for the
purpose of delivering such REIT Shares to satisfy an obligation under any
dividend reinvestment program adopted by the General Partner, any employee stock
purchase plan adopted by the Company, or any similar obligation or arrangement
undertaken by the General Partner in the future, the purchase price paid by the
General Partner for such REIT Shares and any other expenses incurred by the
General Partner in connection with such purchase shall be considered expenses of
the Partnership and shall be reimbursed to the General Partner, subject to the
conditions that: (i) if such REIT Shares subsequently are to be sold by the
General Partner, the General Partner shall pay to the Partnership any proceeds
received by the General Partner for such REIT Shares (provided that a transfer
of REIT Shares for Limited Partnership Units pursuant to the Exchange Rights
Agreement would not be considered a sale for such purposes); and (ii) if such
REIT Shares are not
-33-
<PAGE> 38
re-transferred by the General Partner within 30 days after the purchase thereof,
the General Partner shall cause the Partnership to cancel a number of Limited
Partnership Units held by the General Partner equal to the number of such REIT
Shares (adjusted for stock dividends, stock splits, reorganizations,
reclassifications, mergers, and the like with regard to the REIT Shares prior to
such cancellation of Limited Partnership Units).
7.5 Outside Activities of the General Partner. The General Partner and
its Affiliates shall be permitted to purchase, own, operate, manage and
otherwise deal with and profit from any property, real, personal or mixed, not
owned by the Partnership for their own account and benefit, whether or not
competitive with the business and affairs of the Partnership, and neither the
Partnership, any Limited Partner, or any other Person shall have any right,
claim, interest or cause of action therein or as a result thereof. Without
limiting the generality of the above, nothing in this Agreement shall obligate
the General Partner or its Affiliates to first offer the Partnership an
opportunity to invest in any investment which has been offered to or found by
the General Partner or its Affiliates, whether or not such investment is of a
nature that may be invested in by the Partnership or would compete directly or
indirectly with the business of the Partnership. The Limited Partners hereby
acknowledge that the General Partner currently owns a variety of real estate
investments and may in the future acquire additional real estate investments
that may be competitive with the business of the Partnership.
7.6 Contracts with Affiliates.
A. Subject to the limitations in Section 7.2, the Partnership may
lend or contribute funds or other assets to its Subsidiaries or other Persons in
which it has an equity investment and such Persons may borrow funds from the
Partnership, 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. Subject to the limitations in Section 7.2, the Partnership may
transfer assets to joint ventures, other partnerships, corporations or other
business entities in which it is or thereby becomes a participant upon such
terms and subject to such conditions consistent with this Agreement and
applicable law as the General Partner, in its sole and absolute discretion,
believes are advisable.
C. Except as expressly permitted by this Agreement, but subject
to Section 7.2(A)(1), neither the General Partner nor any of its Affiliates
shall sell, transfer or convey any property to, or purchase or otherwise acquire
any property from, the Partnership, directly or indirectly, except pursuant to
transactions that are determined by the General Partner in good faith to be fair
and reasonable.
-34-
<PAGE> 39
D. 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, stock option plans, and similar
plans funded by the Partnership for the benefit of employees of 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
or any Subsidiaries of the Partnership. Any or all of the foregoing may be
jointly established with the General Partner or its Affiliates, provided that in
such case the allocation of expense shall be shared among the parties on whose
behalf such plans exist as determined by the General Partner in good faith to be
fair and reasonable.
7.7 Indemnification.
A. To the fullest extent permitted by Delaware law, the
Partnership shall indemnify each Indemnitee from and against any and all losses,
claims, damages, liabilities, joint or several, expenses (including, without
limitation, attorneys' fees and other legal fees and expenses), judgments,
fines, settlements, and other amounts arising from any and all claims, demands,
actions, suits or proceedings, civil, criminal, administrative or investigative,
that relate to the operations of the Partnership or the General Partner in its
capacity as general partner of the Partnership as set forth in this Agreement,
in which such Indemnitee may be involved, or is threatened to be involved, as a
party or otherwise, whether or not suit or other legal proceedings are
commenced, unless it is established by a court of competent jurisdiction, and
all appeals relating thereto have been fully completed or the applicable appeal
periods have expired, that: (i) the act or omission of the Indemnitee was
material to the matter giving rise to the proceedings and either was committed
in intentional bad faith or was the result of active and deliberate dishonesty;
(ii) the Indemnitee actually received an improper and unpermitted personal
benefit in money, property or services; (iii) in the case of any criminal
proceeding, the Indemnitee knew, or was reckless in not knowing, that the act or
omission was unlawful; or (iv) the act or omission of the Indemnitee constitutes
a breach of this Agreement or any other agreement relating to the Partnership
between the General Partner and a Limited Partner. Without limitation, the
foregoing indemnity shall extend to any liability of any Indemnitee pursuant to
a loan guaranty, recourse obligation, general partner liability, or otherwise
for any indebtedness of the Partnership or any Subsidiary of the Partnership
(including, without limitation, any indebtedness which the Partnership or any
Subsidiary of the Partnership has assumed or taken subject to), and the General
Partner is hereby authorized and empowered, on behalf of the Partnership, to
enter into one or more indemnity agreements consistent with the provisions of
this Section 7.7 in favor of any Indemnitee having or potentially having
liability for any such indebtedness. The termination of any proceeding by
judgment, order or settlement does not create a presumption that the Indemnitee
did not meet the requisite standard of conduct as
-35-
<PAGE> 40
set forth in this Section 7.7A. The termination of any proceeding by conviction
of an Indemnitee, or an entry of an order of probation against an Indemnitee
prior to judgment, in each case after all appeals relating thereto have been
fully completed or the applicable appeal periods have expired, creates a
rebuttable presumption that such Indemnitee acted in a manner contrary to that
specified in this Section 7.7A with respect to the subject matter of such
proceeding. Any indemnification pursuant to this Section 7.7 shall be made only
out of the assets of the Partnership, and neither the General Partner nor any
Limited Partner shall have any obligation to contribute to the capital of the
Partnership, or otherwise provide funds, to enable the Partnership to fund its
obligations under this Section 7.7.
B. Reasonable expenses incurred by an Indemnitee who is a party
to a proceeding shall be paid or reimbursed by the Partnership in advance of the
final disposition of the proceeding.
C. The indemnification provided by this Section 7.7 shall be in
addition to any other rights to which an Indemnitee or any other Person may be
entitled under any agreement, pursuant to any vote of the Partners, as a matter
of law or otherwise, and shall continue as to an Indemnitee who has ceased to
serve in such capacity unless otherwise provided in a written agreement pursuant
to which such Indemnitees are indemnified.
D. The Partnership may, but shall not be obligated to, purchase
and maintain insurance, on behalf of the Indemnitees and such other Persons as
the General Partner shall determine, against any liability that may be asserted
against or expenses that may be incurred by such Person in connection with the
Partnership's activities, regardless of whether the Partnership would have the
power to indemnify such Person against such liability under the provisions of
this Agreement.
E. For purposes of this Section 7.7, 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 this Section 7.7; 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 which is not opposed to the best interests of the Partnership.
F. In no event may an Indemnitee subject any of the Partners to
personal liability by reason of the Indemnification provisions set forth in this
Agreement.
-36-
<PAGE> 41
G. An Indemnitee shall not be denied indemnification in whole or
in part under this Section 7.7 because the Indemnitee had an interest in the
transaction with respect to which the indemnification applies if the transaction
was otherwise permitted by the terms of this Agreement.
H. The provisions of this Section 7.7 are for the benefit of the
Indemnitees, their heirs, successors, assigns and administrators, and shall not
be deemed to create any rights for the benefit of any other Persons. Any
amendment, modification or repeal of this Section 7.7 or any provision hereof
shall be prospective only and shall not in any way affect the Partnership's
liability to any Indemnitee under this Section 7.7, as in effect immediately
prior to such amendment, modification, or repeal with respect to claims arising
from or 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.
7.8 Liability of the General Partner.
A. Notwithstanding anything to the contrary set forth in this
Agreement, but subject to Section 7.8.F, if applicable, the General Partner and
its officers and directors shall not be liable for monetary damages to the
Partnership, any Partners or any Assignees for losses sustained or liabilities
incurred as a result of errors in judgment or any act or omission of the General
partner undertaken in good faith.
B. The Limited Partners expressly acknowledge that the General
Partner is acting on behalf of the Partnership and the shareholders of the
General Partner collectively, that the General Partner is under no obligation to
consider the separate interests of the Limited Partners (except as otherwise
provided herein) in deciding whether to cause the Partnership to take (or
decline to take) any actions, and that, subject to Section 7.8.F, if applicable,
the General Partner shall not be liable for monetary damages for losses
sustained, liabilities incurred, or benefits not derived by Limited Partners in
connection with such decisions, provided that the General Partner has acted in
good faith.
C. Subject to its obligations and duties as General Partner set
forth in Section 7.1.A hereof, and the limitations thereon set forth in Section
7.2, the General Partner may exercise any of the powers granted to it by this
Agreement and perform any of the duties imposed upon it hereunder either
directly or by or through its agents. The General Partner shall not be
responsible for any misconduct or negligence on the part of any such agent
appointed by the General Partner in good faith.
D. Any amendment, modification or repeal of this Section 7.8 or
any provision hereof shall be prospective only and shall not in any way affect
the limitations on the General Partner's and its officers' and directors'
liability to the
-37-
<PAGE> 42
Partnership and the Limited Partners under this Section 7.8 as in effect
immediately prior to such amendment, modification or repeal with respect to
claims arising from or relating to matters occurring, in whole or in part, prior
to such amendment, modification or repeal, regardless of when such claims may
arise or be asserted.
E. ANY OBLIGATION OR LIABILITY WHATSOEVER OF THE GENERAL PARTNER
WHICH MAY ARISE AT ANY TIME UNDER THIS AGREEMENT OR ANY OBLIGATION OR LIABILITY
WHICH 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 THEREOF 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.
F. Subject to the recourse limitations in Section 7.8E, nothing
in this Section 7.8 shall constitute a waiver of any claim against the General
Partner for any breach of this Agreement or of any other written agreement
between the General Partner and any Limited Partner.
7.9 Other Matters Concerning the General Partner.
A. The General Partner may rely and shall be protected in acting,
or refraining from acting, upon any resolution, certificate, statement,
instrument, opinion, report, notice, request, consent, order, bond, debenture,
or other paper or document believed by it in good faith to be genuine and to
have been signed or presented by the proper party or parties.
B. The General Partner may consult with legal counsel,
accountants, appraisers, management consultants, investment bankers, architects,
engineers, environmental consultants and other consultants and advisers selected
by it, and any act taken or omitted to be taken in reliance upon the opinion of
such Persons as to matters which 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. The General Partner shall have the right, in respect of any of
its powers or obligations hereunder, to act through any of its duly authorized
officers and duly appointed attorneys-in-fact. Each such attorney shall, to the
extent provided by the General Partner in the power of attorney, have full power
and authority to do and perform all and every act and duty which is permitted or
required to be done by the General Partner hereunder.
-38-
<PAGE> 43
D. Notwithstanding any other provisions of this Agreement or the
Act, but subject to the limitations in Section 7.2 hereof, 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.
7.10 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 thereof. Title to any or all of the Partnership assets may be held
in the name of the Partnership, the General Partner or one or more nominees, as
the General Partner may determine, including Affiliates of the General Partner.
The General Partner hereby declares and warrants that any Partnership assets for
which legal title is being 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. 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.
7.11 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 take any and all actions on behalf of the
Partnership and such Person shall be entitled to deal with the General Partner
as if the General Partner were the Partnership's sole party in interest, both
legally and beneficially. Each Limited Partner hereby waives any and all
defenses or other remedies which may be available against such Person to
contest, engage or disaffirm any action of the General Partner in connection
with any such dealing. In no event shall any Person dealing with the General
Partner or its representatives be obligated to ascertain that the terms of this
Agreement have been complied with or to inquire into the necessity or expedience
of any act or action of the General Partner or its representatives. Each and
every certificate, document or other instrument executed on behalf of the
Partnership by the General Partner or its representatives shall be conclusive
evidence in favor of any and every Person relying thereon or claiming thereunder
that: (i) at the time of the execution and delivery of such certificate,
document or instrument, this Agreement was in full force and effect; (ii) the
-39-
<PAGE> 44
Person executing and delivering such certificate, document or instrument was
duly authorized and empowered to do so for and on behalf of the Partnership; and
(iii) such certificate, document or instrument was duly executed and delivered
in accordance with the terms and provisions of this Agreement and is binding
upon the Partnership. Nothing in this Section 7.11 shall constitute a waiver of
any claim against the General Partner for any breach of this Agreement or of any
other written agreement between the General Partner and any Limited Partner.
ARTICLE 8
RIGHTS AND OBLIGATIONS OF LIMITED PARTNERS
8.1 Limitation of Liability. The Limited Partners shall have no
liability under this Agreement or otherwise with respect to the Partnership or
its debts, obligations or liabilities of any nature whatsoever, except as
expressly provided in this Agreement (including Section 10.5 hereof) 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,
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.
A. Subject to the terms and provisions hereof, it is agreed that
any Partner (General and/or Limited) and any Affiliate of any Partner (including
any officer, director, employee, agent, or representative of any 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 that are in direct competition with the Partnership or that are
enhanced by the activities of the Partnership. Without limiting the generality
of the foregoing, any Partner and any Affiliate of any Partner shall be
permitted to purchase, own, operate, manage and otherwise deal with and profit
from any property, real, personal or mixed, not owned by the Partnership for
their own account and benefit, whether or not competitive with the business and
affairs of the Partnership, and neither the Partnership, any Partner, or any
Person shall have any right, claim, interest or cause of
-40-
<PAGE> 45
action therein or as a result thereof. Neither the Partnership nor any Partners
shall have any rights, claims, or interests by virtue of this Agreement or any
relationships, duties or obligations hereunder (including, but not limited to,
any fiduciary or similar duties created by this Agreement, under the Act, or
otherwise existing at law or in equity) in any business ventures or investments
of any General Partner or Limited Partner, or any Affiliate of any of the
foregoing. None of the Limited Partners nor any other Person shall have any
rights by virtue of this Agreement or the Partnership relationship established
hereby in any business ventures of any other Person, and such Person shall have
no obligation pursuant to this Agreement to offer any interest in any such
business ventures to the Partnership, any Limited Partner or any such other
Person, even if such opportunity is of a character which, if presented to the
Partnership, any Limited Partner or such other Person could be taken by such
Person.
B. It is further agreed that none of the Partners, General or
Limited, or any of their Affiliates, have any duty, obligation, or liability to
present to the Partnership any business or investment opportunity which may
arise in the course of activity for or on behalf of the Partnership, or
otherwise, for investment by the Partnership or any of the Partners (even if
within the line and scope of the business and affairs of the Partnership), and
instead any Partner, General or Limited, and any Affiliate may pursue such
opportunity for such Partner's or Affiliate's own benefit and account, without
any participation, right, or claim therein by the Partnership or any other
Partner, and without notification or disclosure to the Partnership or any other
Partner.
8.4 Return of Capital. No Limited Partner shall be entitled to the
withdrawal or return of its Capital Contribution, except to the extent of
distributions made pursuant to this Agreement or upon liquidation of the
Partnership as provided herein. Except to the extent provided by Exhibit "C"
hereof or as otherwise expressly provided in this Agreement, no Limited Partner
or Assignee shall have priority over any other Limited Partner or Assignee,
either as to the return of Capital Contributions or as to profits, losses or
distributions.
8.5 Rights of Limited Partners Relating to the Partnership.
A. In addition to the other rights provided by this Agreement or
by the Act, and except as limited by Section 8.5.B hereof, each Limited Partner
shall have the right, for a purpose reasonably related to such Limited Partner's
interest as a limited partner in the Partnership, upon written demand with a
statement of the purpose of such demand and at such Limited Partner's own
expense (including such reasonable copying and administrative charges as the
General Partner may establish from time to time):
-41-
<PAGE> 46
(1) to obtain a copy of the most recent annual
and quarterly reports filed with the Securities and Exchange
Commission pursuant to the Securities 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 thereto, together with executed copies of all
powers of attorney pursuant to which this Agreement, the Certificate and all
amendments thereto have been executed;
(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, but only
to the extent the foregoing is materially different from information contained
in other reports provided to Limited Partners; and
(6) to audit the books and records of the
Partnership no more than once annually in order to comply with insurance
regulatory requirements applicable to the Limited Partner.
B. 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, desirable or necessary any information that the Partnership is
required by law or by agreement with an unaffiliated third party to keep
confidential. If the General Partner desires to disclose any information of the
type described in the preceding sentence to a Limited Partner, the General
Partner may require, as a condition to such disclosure, that the Limited Partner
agree in writing that such information will be held in strictest confidence and
no distribution of such information will be made.
8.6 No Redemption Right. No Limited Partner (other than the General
Partner) shall have the right to require the Partnership to redeem all or a
portion of the Limited Partnership Units held by such Limited Partner.
8.7 Representations and Warranties. Each Limited Partner represents and
warrants to the General Partner and the Partnership that:
A. If such Limited Partner is an individual, that (1)
consummation of the transactions contemplated by this Agreement
to be performed by such Limited Partner will not result in a
-42-
<PAGE> 47
breach or violation of or a default under, any agreement by which such Limited
Partner or any such Limited Partner's property is or are bound, or any statute,
regulation, order or other law to which such Partner is subject, and (2) such
Limited Partner is not a "foreign person" within the meaning of Section 1445(f)
or the Code.
B. If such Limited Partner is not an individual, that (1)
consummation of the transactions contemplated by this Agreement to be performed
by such Limited Partner have been duly authorized by all necessary action; (2)
the consummation of such transactions shall not result in a breach or violation
of, or a default under, its charter or organizational documents, any agreement
by which such Limited Partner, any of such Limited Partner's properties or any
of such Limited Partner's constituents, is or are bound, or any statute,
regulation, order or other law to which such Limited Partner or any of its
constituents, is or are subject; and (3) such Limited Partner is not a "foreign
person" within the meaning of Section 1445(f) of the Code.
C. It does not and will not actually own or constructively own
(under the attribution rules of Code Section 318, as modified by Code Section
856(d)(5)) more than 9.8% of the value or number of shares, whichever is more
restrictive, of any class of stock of the General Partner, and upon the request
of the General Partner, each Limited Partner will disclose to the General
Partner the number of shares of the General Partner that it actually owns or
constructively owns.
D. It has received and reviewed that certain Prospectus of the
General Partner dated November 17, 1997, that certain Prospectus Supplement
dated November 17, 1997, and that certain Registration Statement, filed February
4, 1998, with the Securities and Exchange Commission under the Securities Act,
as amended, and has had access to such additional financial and other
information, including without limitation the General Partner's Form 10-Q for
the quarters ended March 31, June 30, and September 30, 1997, respectively, the
General Partner's Form 10-K for the fiscal year ended December 31, 1996, the
General Partner's Form 8-Ks filed on December 26, 1996, January 23, 1997, April
3, 1997, May 27, 1997, May 29, 1997, July 18, 1997, October 16, 1997, November
17, 1997, and December 18, 1997, respectively, the General Partner's 1996 Annual
Report to Shareholders and the General Partner's Notice of 1997 Annual Meeting
of Shareholders and accompanying Proxy Statement, and has been afforded the
opportunity to ask questions of representatives of the General Partner, and to
receive answers to those questions, as they have deemed necessary in connection
with the transactions contemplated by this Agreement and in the other agreements
referred to in this Agreement.
E. It acknowledges that the Limited Partnership Units being
acquired pursuant hereto are being acquired in a transaction not involving any
public offering within the meaning
-43-
<PAGE> 48
of the Securities Act and that the Limited Partnership Units have not been
registered under the Securities Act in reliance upon a specific exemption or
exemptions from registration under the Securities Act. It further acknowledges
that the Partnership's reliance on such exemptions is predicated in part on the
accuracy and completeness of the Limited Partner's representations and
warranties contained in this Agreement. Each Limited Partner agrees not to
offer, sell, transfer or otherwise dispose of the Limited Partnership Units (or
REIT Shares issuable by the General Partner to acquire Limited Partnership Units
that may be tendered to the Partnership for redemption) in the absence of
registration under the Securities Act unless such Limited Partner delivers to
the Partnership an opinion of legal counsel reasonably satisfactory to the
Partnership and the General Partner, in form and substance reasonably
satisfactory to the Partnership and the General Partner, to the effect that the
proposed sale, transfer or other disposition may be effected without
registration under the Securities Act and under applicable state securities or
blue sky laws. For purposes of this Section 8.7E, the General Partner agrees
that in-house counsel of the Original Limited Partner will be satisfactory to
the General Partner provided such in-house counsel is an officer of the Original
Limited Partner, the opinions of such counsel are backed by either the full
faith and credit of the Original Limited Partner or by reasonably adequate
errors and omissions insurance, and such in-house counsel is regularly engaged
in the practice of securities law.
F. It is an "accredited investor" within the meaning of Rule
501(a) of Regulation D under the Act. It has such knowledge and experience in
financial and business matters as to be capable of evaluating the merits and
risks of an investment in the Limited Partnership Units and REIT Shares and
protecting its own interests in connection with the investment and has obtained,
in its judgment, sufficient information from the General Partner to evaluate the
merits and risks of an investment in the Limited Partnership Units and REIT
Shares. It acknowledges that it has the financial ability to bear the economic
risk of a loss of its investment in the Limited Partnership Units and REIT
Shares, has adequate means for providing for its current needs and personal
contingencies and has no need for liquidity with respect to the investment in
the Limited Partnership Units and REIT Shares. It has not been organized solely
for the purpose of acquiring the Limited Partnership Units and REIT Shares
acquired under or in connection with this Agreement.
G. It is acquiring the Limited Partnership Units and underlying
REIT Shares for its own account and not with a view to the distribution of the
Limited Partnership Units or REIT Shares or with any present intention of
offering or selling any of the Limited Partnership Units in a transaction that
would violate the Securities Act or the securities laws of any State or any
other applicable jurisdiction.
H. No representations as to potential profit,
distributions, cash flows, funds from operations or yield, if
-44-
<PAGE> 49
any, in respect of the Partnership or the General Partner have been made by any
Partner or any employee or representative or Affiliate or any Partner, and that
projections and any other information, including, without limitation, financial
and descriptive information and documentation, which may have been in any manner
submitted to such Limited Partner shall not constitute any representation or
warranty of any kind or nature, express or implied.
I. The representations and warranties contained in this Section
8.7 shall survive the execution and delivery of this Agreement by each Partner
and the dissolution, liquidation and termination of the Partnership.
8.8 Right of Offset.
A. The General Partner shall have the right to offset any amounts
owed to the Partnership, the General Partner or any Affiliate of the General
Partner by any Limited Partner pursuant to this Agreement or any other written
agreement between such Limited Partner and the Partnership, the General Partner
or Affiliate, against any amounts owed to such Limited Partner by the
Partnership or General Partner hereunder, including the right to cancel or
acquire, if applicable, the Limited Partnership Units held by such Limited
Partner, based on the "Value" (as defined in the Exchange Rights Agreement) as
of the date of such cancellation or acquisition.
B. In exercising the foregoing offset rights, the General Partner
shall be required to give a Limited Partner, (i) in the case of an offset
against a distribution, five (5) days prior written notice (provided, however
that if a distribution is to be made at any time during such five day period the
General Partner may retain the distribution payable to any Limited Partner to
whom such a written notice has been given to the extent of the amount owned by
such Limited Partner pending the passage of such period and upon the passage of
such period without payment of all amounts owned by the applicable Limited
Partner, the General Partner shall be entitled to the right of offset described
above, it being understood that if the Limited Partner pays in full the amount
owed the General Partner shall promptly release the retained distribution to
such Limited Partner); and (2) in the case of an offset against Limited
Partnership Units (through cancellation or acquisition), ten (10) days' prior
written notice. In each case, such written notice shall state the amount owned
(determined as of a date reasonably close to the date of such notice) and the
proposed offset. No offset shall be made unless the Limited Partner has not paid
the amount owed within such period.
8.9 No Rights as Shareholders. Nothing contained in this Agreement shall
be construed as conferring upon the holders of the Limited Partnership Units any
rights whatsoever as shareholders of the General Partner, including, without
limitation, any right to receive dividends or other distributions
-45-
<PAGE> 50
made to shareholders of the General Partner or to vote or to consent or to
receive notice as shareholders in respect of any meeting of shareholders for the
election of directors of the General Partner or any other matter. Nothing
contained in this Section shall be deemed a waiver or relinquishment of any
parties rights under the Exchange Rights Agreement.
8.10 Limitation on Liability of Original Limited Partner. ANY OBLIGATION
OR LIABILITY WHATSOEVER OF THE ORIGINAL LIMITED PARTNER WHICH MAY ARISE AT ANY
TIME UNDER THIS AGREEMENT OR ANY OBLIGATION OR LIABILITY WHICH MAY BE INCURRED
BY THE ORIGINAL LIMITED PARTNER PURSUANT TO ANY OTHER INSTRUMENT, TRANSACTION OR
UNDERTAKING CONTEMPLATED HEREBY SHALL BE SATISFIED, IF AT ALL, OUT OF THE
ORIGINAL LIMITED PARTNER'S ASSETS ONLY. NO SUCH OBLIGATION OR LIABILITY SHALL BE
PERSONALLY BINDING UPON, NOR SHALL RESORT FOR THE ENFORCEMENT THEREOF BE HAD TO,
THE PROPERTY OF ANY OF THE ORIGINAL LIMITED PARTNER'S SHAREHOLDERS, TRUSTEES,
OFFICERS, DIRECTORS, EMPLOYEES OR AGENTS, REGARDLESS OF WHETHER SUCH OBLIGATION
OR LIABILITY IS IN THE NATURE OF CONTRACT, TORT OR OTHERWISE.
8.11 Representations and Warranties of General Partner. The General
Partner represents and warrants to the Limited Partners as of the date hereof
that (1) the execution and delivery of this Agreement and the consummation of
the transactions to be performed by the General Partner in connection therewith
have been duly authorized by all necessary action on the part of the General
Partner; and (2) the execution and delivery of this Agreement and the
connsummation of the transactions to be performed by the General Partner in
connection therewith shall not result in a breach or violation of, or a default
under, its charter or organizational documents, or any statute, regulation,
order or other law to which the General Partner is subject.
ARTICLE 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 those records and documents
required to be maintained by the Act and other books and records deemed by the
General Partner to be appropriate with respect to the Partnership's business.
Any records maintained by or on behalf of the Partnership in the regular course
of its business may be kept on, or be in the form of, punch cards, magnetic
tape, photographs, micrographics or any other information storage device,
provided that the records so maintained are convertible into clearly legible
written form within a reasonable period of time. The books of the Partnership
shall be maintained, for financial and tax reporting purposes, on an accrual
basis in accordance with generally accepted accounting principles, or such other
basis as the General Partner determines to be necessary or appropriate. The
Original Limited Partner shall have the right to inspect the books and records
of the
-46-
<PAGE> 51
Partnership upon reasonable prior notice to the General Partner, which
inspection shall be conducted at a time and place reasonably determined by the
General Partner.
9.2 Fiscal Year. The fiscal year of the Partnership shall
be the calendar year.
9.3 Reports.
A. The Partnership shall mail to each Limited Partner no later
than ninety (90) days after the close of each 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 in its discretion (such selection may include any such accountants who
also perform accounting or auditing work for the General Partner and its
Affiliates).
B. The Partnership shall mail to each Limited Partner no later
than ninety (90) days after the close of each calendar quarter (except the last
calendar quarter of each year), 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.
C. To the extent such statements are prepared by the General
Partner or the Partnership, the Partnership shall mail to the Original Limited
Partner (i) no later than sixty (60) days after the close of each calendar
quarter, an uncertified and unaudited quarterly operating report with respect to
the Original Property for the prior calendar quarter; and (ii) no later than
sixty (60) days after the close of each Partnership Year, an uncertified and
unaudited annual operating report with respect to the Original Property for the
prior Partnership Year.
D. All accounting and other professional fees associated with the
preparation, compilation, review, audit, and any other matters relating to the
Partnership's records, financial statements and reports, tax returns, and any
other Partnership items described in the preceding paragraphs shall be at the
expense of the Partnership, not the General Partner; provided, however, that the
Partnership shall pay only an equitable portion, as determined by the General
Partner in its good faith discretion, of any accounting and other professional
fees relating to the preparation of financial statements prepared on a
consolidated basis with the General Partner.
-47-
<PAGE> 52
ARTICLE 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 ninety (90) days of the close of each taxable year, the tax information
reasonably required by the Limited Partners for federal and state income tax
reporting purposes.
10.2 Tax Elections. Except as otherwise provided herein, the General
Partner shall, in its sole and absolute discretion, determine whether to make
any available election pursuant to the Code; provided, however, that if
requested by a transferee of a Partnership Interest, the General Partner shall
file an election on behalf of the Partnership pursuant to Section 754 of the
Code to adjust the basis of the Partnership property in the case of a transfer
of a Partnership Interest made in accordance with the provisions of this
Agreement. The General Partner elects the so-called "traditional method" of
making Section 704(c) allocations pursuant to Regulations Section 1.704-3 with
respect to property contributed as of the date hereof. The General Partner shall
have the right to seek to revoke any tax election it makes (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 interest of the Partners.
10.3 Tax Matters Partner.
A. The General Partner shall be the "tax matters partner" of the
Partnership for federal income purposes. Pursuant to Section 6230(e) of the
Code, upon receipt of notice from the IRS of the beginning of an administrative
proceeding with respect to the Partnership, the tax matters partner shall
furnish the IRS with the name, address, taxpayer identification number, and
profit interest of each of the Limited Partners and the Assignees; provided,
however, that such information is provided to the Partnership by the Limited
Partners and the Assignees.
B. 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
-48-
<PAGE> 53
settlement agreement shall not bind any Partner: (i) who (within the time period
prescribed pursuant to the Code and Regulations) files a statement with the IRS
providing that the tax matters partner shall not have the authority to enter
into a settlement agreement on behalf of such Partner; or (ii) who is a "notice
partner" (as defined in Section 6231(a)(8) of the Code) or a member of a "notice
group" ( as defined in Section 6223(b)(2) of the Code);
(2) in the event that a notice of a final
administrative adjustment at the Partnership level of any item required to be
taken into account by a Partner for tax purposes (a "final adjustment") is
mailed to the tax matters partner, to seek judicial review of such final
adjustment, including the filing of a petition for readjustment with the Tax
Court or the 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 and, if any part of such request is not allowed by the
IRS, to file an appropriate pleading (petition or complaint) for judicial review
with respect to such request;
(5) to enter into an agreement with the IRS to
extend the period for assessing any tax which is attributable to any item
required to be taken account of by a Partner for tax purposes, or an item
affected by such item; and
(6) to take any other action of behalf of the
Partners or the Partnership in connection with any tax audit or judicial review
proceeding to the extent permitted by applicable law or regulations.
C. The taking of any action and the incurring of any expense by
the tax matters partner in connection with any such proceeding, except to the
extent required by law, is a matter in the sole and absolute discretion of the
tax matters partner and the provisions relating to indemnification of the
General Partner set forth in Section 7.7 of this Agreement shall be fully
applicable to the tax matters partner in its capacity as such.
D. The tax matters partner shall receive no special compensation
for its services as such. All third party costs and expenses incurred by the tax
matters partner in performing its duties as such (including legal and accounting
fees and expenses) shall be borne or reimbursed by the Partnership. Nothing
herein shall be construed to restrict the Partnership from engaging an
accounting firm to assist the tax matters partner in discharging its duties
hereunder, including an accounting firm which also renders services to the
General Partner and its Affiliates.
-49-
<PAGE> 54
10.4 Organizational Expenses. The Partnership shall elect to deduct
expenses, if any, incurred by it in organizing the Partnership ratably over a
sixty (60) month period as provided in Section 709 of the Code.
10.5 Withholding. Each Limited Partner hereby authorizes the Partnership
to withhold from, or pay on behalf of or with respect to, such Limited Partner
any amount of federal, state, local or foreign taxes that the 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 and similar state and local income tax laws, if any. Any amount paid on
behalf of or with respect to a Limited Partner shall constitute a loan by the
Partnership to such Limited Partner, which loan shall be repaid by such Limited
Partner within fifteen (15) days after notice from the General Partner that such
payment must be made, unless: (i) the Partnership withholds such payment from a
distribution which would otherwise be made to the Limited Partner; or (ii) the
General Partner determines, in its sole and absolute discretion, that such
payment may be satisfied out of the available funds of the Partnership which
would, but for such payment, be distributed to the Limited Partner. Any amounts
withheld pursuant to the foregoing clauses (i) or (ii) shall be treated as
having been distributed to such Limited Partner. Each Limited Partner other than
the Original Limited Partner hereby unconditionally and irrevocably grants to
the Partnership a security interest in such Limited Partner's Partnership
Interest to secure such Limited Partner's obligation to pay to the Partnership
any amounts required to be paid pursuant to this Section 10.5. In the event that
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 shall succeed to all rights and remedies of the
Partnership as against such defaulting Limited Partner. Without limitation, in
such event the General Partner shall have the right to receive distributions
that would otherwise be distributable to such defaulting Limited Partner until
such time as such loan, together with all interest thereon, has been paid in
full, and any such distributions so received by the General Partner shall be
treated as having been distributed to the defaulting Limited Partner and
immediately paid by the defaulting Limited Partner to the General Partner in
repayment of such loan. Any amounts payable by a Limited Partner hereunder shall
bear interest at the lesser of (A) the base rate on corporate loans at large
United States money center commercial banks, as published from time to time in
the Wall Street Journal, plus four (4) percentage points, or (B) the maximum
lawful rate of interest on such obligation, such interest to accrue from the
date such amount is due (i.e., fifteen (15) days after demand) until such amount
is paid in full. Each Limited Partner other than the Original Limited Partner
shall at its own expense take
-50-
<PAGE> 55
such actions as the Partnership or the General Partner shall request in order to
perfect or enforce the security interest created hereunder.
10.6 No Assurances. Each Limited Partner, including without limitation
the Original Limited Partner, acknowledges and agrees that it is solely
responsible for its tax planning and the structuring of this Agreement to
accommodate such tax planning, and that neither the Partnership, the General
Partner nor any of their officers, directors, employees, agents, accountants,
attorneys, advisors or the like has made any representation or provided any
assurance to any of them that the provisions of this Agreement affecting or
impacting any of their tax planning, structuring or liability will be respected
or upheld by any agency or authority or achieve the result desired by the
Limited Partners. Therefore, notwithstanding the provisions of this Agreement,
and without limiting the generality of the foregoing, each Limited Partner,
including without limitation the Original Limited Partner, acknowledges and
agrees that neither the Partnership, the General Partner nor any of their
officers, directors, employees, agents, accountants, attorneys, advisors or the
like has made any representation or provided any assurance that the allocation
provided in section 6.2 will be respected or upheld by any agency or authority
or achieve the result desired by the Limited Partners.
ARTICLE 11
TRANSFERS AND WITHDRAWALS
11.1 Transfer.
A. The term "transfer" when used in this Article 11 with respect
to a Limited Partnership Unit shall be deemed to refer to a transaction by which
the General Partner purports to assign all or any part of its General Partner
Interest to another Person or by which a Limited Partner purports to assign all
or any part of its Limited Partner 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 acquisition of Partnership Interests or
Limited Partnership Units by the General Partner from any Limited Partner, nor
does it include any grant of a security interest or any related action involving
levy, execution, or the like contemplated under Section 10.5 of this Agreement.
B. No Partnership Interest shall be transferred, in whole or in
part (including any interest therein), 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 ab initio, and the Partnership shall have no duty or obligation to
recognize the transferee as a partner or holder
-51-
<PAGE> 56
of any interest whatsoever in the Partnership, and the transferee shall have no
rights, interests or claims in or against the Partnership or any Partner.
11.2 Transfer of the General Partner's Interests. The General Partner
may transfer any of its General Partner Interest or withdraw as General Partner,
or transfer any of its Limited Partner Interest, without consent or approval
from any Limited Partners. A transfer hereunder includes, without limitation, a
transfer to an entity which is wholly-owned by the General Partner and is a
Qualified REIT Subsidiary under Section 856(d) of the Code. If the General
Partner voluntarily sells or assigns its General Partner Interest, the General
Partner shall give the Original Limited Partner such notice thereof, and
distribute to the Original Limited Partner such other information concerning the
transactions effectuating such transfer, as the General Partner distributes
generally to the holders of REIT Shares, and, in any event, shall give the
Original Limited Partner notice of such sale or assignment no later than three
(3) Business Days after the consummation thereof. In the event such sale or
assignment is consummated prior to the seventh (7th) anniversary of the
Effective Date, the General Partner shall pay to the Original Limited Partner
the amount of its Liquidated Tax Damages, if any, resulting from such sale or
assignment (including Liquidated Tax Damages, if any, resulting from the
Original Limited Partner's exchange of Limited Partnership Units for REIT Shares
under the Exchange Rights Agreement if and only if such election is exercised by
the Original Limited Partner within thirty (30) days after receiving notice of
such transaction); provided, however, that the General Partner shall not be
obligated to pay Liquidated Tax Damages if the sale or assignment is (a) a
pledge, assignment for security purposes or similar financing transaction, or
(b) a sale or assignment to another publicly traded entity that is the legal
successor of Pacific Gulf Properties, Inc., whether by merger, reorganization,
consolidation, or similar transaction or series of transactions.
11.3 Limited Partners' Rights to Transfer.
A. Subject to the provisions of Sections 11.3C, 11.3D, 11.3E,
11.3F, 11.4 and 11.6, a Limited Partner may transfer, without the consent of the
General Partner, all or any portion of its Partnership Interest, or any of such
Limited Partner's economic rights as a Limited Partner, which Partnership
Interest, in the case of the Original Limited Partner, shall include, without
limitation, all of the rights and interests unique to the Original Limited
Partner under this Agreement and, subject to the restrictions and limitations on
transfer contained therein, all of the rights and interests unique to the
Original Limited Partner under the Exchange Rights Agreement and Registration
Rights Agreement, respectively.
B. If a Limited Partner is subject to Incapacity, the partners,
executor, administrator, trustee, committee, guardian, conservator or receiver
of such Limited Partner's estate shall
-52-
<PAGE> 57
have all of 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 its interest in the Partnership. The Incapacity of a
Limited Partner, in and of itself, shall not dissolve or terminate the
Partnership.
C. The General Partner may prohibit any transfer by a Limited
Partner if, in the opinion of legal counsel to the Partnership or the General
Partner, 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 Limited Partnership
Units.
D. No transfer of Limited Partnership Units by a Limited Partner
(including a redemption or exchange pursuant to the Exchange Rights Agreement)
may be made to any Person if (i) in the opinion of legal counsel for the
Partnership or the General Partner, it would result in the Partnership being
treated as an association taxable as a corporation for federal income tax
purposes or would result in a termination of the Partnership for federal income
tax purposes (except as a result of the redemption or exchange of all Limited
Partnership Units held by all Limited Partners pursuant to the Exchange Rights
Agreement), (ii) in the opinion of legal counsel for the Partnership or the
General Partner, it would adversely affect the ability of the General Partner to
continue to qualify as a REIT or would subject the General Partner to any
additional taxes, or (iii) such transfer is effectuated through an "established
securities market" or a "secondary market (or the substantial equivalent
thereof)" within the meaning of Section 7704 of the Code.
E. No transfer of any Limited Partnership Unit may be made to a
lender to the Partnership or any Person who is related (within the meaning of
Section 1.752-4(b) of the Regulations) to any lender to the Partnership whose
loan constitutes a Nonrecourse Liability, without the consent of the General
Partner, in its sole and absolute discretion. Without limiting the restriction
of the foregoing sentence, if any such consent is given, a condition to such
consent shall be that the lender enter into an arrangement with the Partnership
or the General Partner to exchange or redeem at a price agreeable to the lender,
the General Partner, and the transferring Partner (each in their respective
discretion) all Limited Partnership Units in which a security interest is held
immediately prior to 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.
F. The Limited Partners acknowledge that each certificate or
instrument representing Limited Partnership Units shall bear a legend in
substantially the following form and any other legend required under any
applicable state securities law:
-53-
<PAGE> 58
"NEITHER THE LIMITED PARTNERSHIP UNITS IN THE PARTNERSHIP REPRESENTED BY
THIS CERTIFICATE OR INSTRUMENT NOR ANY PART THEREOF OR INTEREST THEREIN
HAS BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE
'ACT') AND NEITHER MAY BE TRANSFERRED, SOLD, ASSIGNED, PLEDGED,
HYPOTHECATED OR OTHERWISE DISPOSED OF, IN WHOLE OR IN PART, UNLESS SUCH
TRANSFER, SALE, ASSIGNMENT, PLEDGE, HYPOTHECATION OR OTHER DISPOSITION
COMPLIES WITH THE PROVISIONS OF THE AGREEMENT OF LIMITED PARTNERSHIP OF
PGP SOUTHERN INDUSTRIAL II, L.P., AS AMENDED FROM TIME TO TIME (A COPY
OF WHICH IS ON FILE WITH THE PARTNERSHIP); AND, IN ALL EVENTS, NO
TRANSFER, SALE, ASSIGNMENT, PLEDGE, HYPOTHECATION OR OTHER DISPOSITION
OF THE LIMITED PARTNERSHIP UNITS REPRESENTED BY THIS CERTIFICATE (OR ANY
SECURITY ISSUED ON ACCOUNT HEREOF OR WITH RESPECT HERETO) MAY BE MADE
UNLESS THE PARTNERSHIP HAS BEEN FURNISHED WITH AN OPINION OF COUNSEL
(WHICH COUNSEL AND OPINION BOTH MUST BE REASONABLY ACCEPTABLE TO THE
PARTNERSHIP) FOR THE HOLDER THAT, BECAUSE OF THE AVAILABILITY OF AN
EXEMPTION, NO SUCH REGISTRATION, QUALIFICATION OR OTHER COMPLIANCE IS
REQUIRED UNDER THE ACT, APPLICABLE BLUE SKY OR STATE SECURITIES LAWS, OR
OTHERWISE."
11.4 Substituted Limited Partners.
A. No Limited Partner shall have the right to substitute a
transferee as a Limited Partner in his place. The General Partner shall,
however, have the right to consent to the admission of a transferee of the
interest of a Limited Partner pursuant to this Section 11.4 as a Substituted
Limited Partner, which consent shall not be unreasonably withheld or delayed.
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. 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. Upon admission of a Substituted Limited Partner, the General
Partner shall amend Exhibit "A" to reflect the name, address, number of Limited
Partnership Units, and Limited Partner Percentage Interest of such Substituted
Limited Partner.
11.5 Assignees. If the General Partner, in its reasonable discretion,
does not consent to the admission of any permitted transferee as a Substituted
Limited Partner, as described in Section 11.4, such transferee shall be
considered an Assignee for purposes of this Agreement. An Assignee shall be
deemed to have had assigned to it, and shall be entitled to receive
-54-
<PAGE> 59
distributions from the Partnership and the share of Net Income, Net Losses,
Recapture Income, and any other items, gain, loss deduction and credit of the
Partnership attributable to the Limited Partnership Units assigned to such
transferee, but shall not be deemed to be a holder of Limited Partnership Units
for any other purpose under this Agreement, and shall not be entitled to vote
such Limited Partnership Units for any other purpose under this Agreement, and
shall not be entitled to vote such Limited Partnership Units in any matter
presented to the Limited Partners for a vote (such Limited Partnership Units
being deemed to have been voted on such matters in the same proportion as all
other Limited Partnership Units held by Limited Partners are voted except that,
in the case of the Original Limited Partner or its Substitute Limited
Partner(s), such Limited Partner(s) shall retain and be entitled to exercise
voting rights with respect to their Limited Partnership Units until such Limited
Partnership Units have been transferred to a Substitute Limited Partner in
accordance with this Agreement). In the event any such transferee desires to
make a further assignment of any such Limited Partnership Units, such transferee
shall be subject to all of 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
Limited Partnership Units.
11.6 General Provisions.
A. No Limited Partner may withdraw from the Partnership other
than as a result of a permitted transfer of all such Limited Partner's Limited
Partnership Units in accordance with this Article 11 or pursuant to any
agreement consented to by the Partnership pursuant to which the Limited
Partner's interests in the Partnership are conveyed and the Limited Partner's
withdrawal is provided for.
B. Any Limited Partner who shall transfer all of its Limited
Partnership Units in a transfer permitted pursuant to this Article 11 shall
cease to be a Limited Partner upon the admission of all Assignees of such
Limited Partnership Units as Substitute Limited Partners. Similarly, any Limited
Partner who shall transfer all of its Limited Partnership Units pursuant to any
agreement of the type referred to in the preceding paragraph shall cease to be a
Limited Partner.
C. 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.
D. Without limiting the restriction of Section 11.6C, if any
Partnership Interest is transferred or assigned during any quarterly segment of
the Partnership's fiscal year in compliance with the provisions of this Article
11 on any day other than the first day of a Partnership Year, then Net Income,
Net Losses, each item thereof and all other items attributable to such interest
for such Partnership Year shall be divided and allocated between the transferor
Partner and the transferee Partner by
-55-
<PAGE> 60
taking into account their varying interests during the Partnership Year in
accordance with Section 706(d) of the Code, using the interim closing of the
books method. Solely for purposes of making such allocations, each of such items
for the calendar month in which the transfer or assignment occurs shall be
allocated to the transferee Partner, and none of such items for the calendar
month in which a redemption occurs shall be allocated to a redeeming Partner.
All distributions of Available Cash attributable to such Limited Partnership
Unit with respect to which the Partnership Record Date is before the date of
such transfer, assignment, or redemption shall be made to the transferor
Partner, all distributions of Available Cash thereafter attributable to such
Limited Partnership Unit shall be made to the transferee Partner.
E. No transfer by a Limited Partner of its Limited Partnership
Units (including any redemption or exchange pursuant to the Exchange Rights
Agreement) may be made to any Person if: (1) such person lacks the legal right,
power or capacity to own a Partnership Interest; (2) such transfer is in
violation of applicable law; (3) any component portion of a Partnership
Interest, such as the Capital Account, or rights to distributions is transferred
separate and apart from other any components of a Partnership Interest; (4) 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); (5) such transfer would, in the opinion of legal counsel
for the Partnership or the General Partner, 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 (6) such transfer would
subject the Partnership to be regulated under the Investment Company Act of
1940, the Investment Advisors Act of 1940 or the Employee Retirement Income
Security Act of 1974, each as amended.
11.7 No Exchange. Notwithstanding anything in this Section 11 to the
contrary, each of the Limited Partners hereby agrees that, during the "No
Exchange Period" (as defined in the Exchange Rights Agreement), it shall not be
prohibited from tendering but shall be prohibited from settling any tender of
its Limited Partnership Units for exchange or redemption under the Exchange
Rights Agreement. All Limited Partnership Units acquired by the General Partner
pursuant to the Exchange Rights Agreement shall automatically, and without
further action required, be converted into and deemed to be an equal number of
Limited Partnership Units in the Partnership owned by the General Partner, and
all rights, title, interest, claim, cause of action, and the like of any Limited
Partner arising out of such Limited Partnership Units so acquired and/or status
and interest as a partner as a result thereof shall become the property of the
General Partner in its entirety, and such Limited Partner shall have no further
claim or interest therein or thereto.
-56-
<PAGE> 61
ARTICLE 12
ADMISSION OF PARTNERS
12.1 Admission of Successor General Partner. A successor to all of the
General Partner Interest pursuant to Section 11.2 hereof who is proposed to be
admitted as successor General Partner shall be admitted to the Partnership as
the General Partner, effective upon such transfer. The admission of any such
transferee shall not cause a dissolution of the Partnership and such transferee
shall carry on the business of the Partnership in accordance with the forms and
provisions of this Agreement. In each case, the admission shall be subject to
the successor General Partner executing and delivering to the Partnership an
acceptance of all of the terms and conditions of this Agreement and such other
documents or instruments as may be required to effect the admission. In the case
of such admission on any day other than the first day of a Partnership Year, all
items attributable to the General Partner Interest for such Partnership Year
shall be allocated between the transferring General Partner and such successor
as provided in Section 11.6.D hereof.
12.2 Admission of Additional Limited Partners.
A. Except as otherwise provided elsewhere in this Agreement,
after the admission to the Partnership of the Original Limited Partner on the
date hereof, a Person who makes a Capital Contribution to the Partnership in
accordance with this Agreement shall be admitted to the Partnership as an
Additional Limited Partner only upon furnishing to the General Partner (i)
evidence of acceptance in form satisfactory to the General Partner of all of the
terms and conditions of this Agreement, including, without limitation, the power
of attorney granted in Section 2.4 hereof, and (ii) 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. 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.
C. If any Additional Limited Partner is admitted to the
Partnership on any day other than the first day of a Partnership Year, then Net
Income, Net Losses, each item thereof and all other items allocable among
Partners and Assignees for such Partnership Year shall be allocated among such
Additional Limited Partner and all other Partners and Assignees by taking into
account their varying interests during the Partnership Year in accordance with
Section 706(d) of the Code, using the interim
-57-
<PAGE> 62
closing of the books method. Solely for purposes of making such allocations,
each of such items for the calendar month in which an admission of any
Additional Limited Partner occurs shall be allocated among all of the Partners
and Assignees, including such Additional Limited Partner. All distributions of
Available Cash with respect to which the Partnership Record Date is before the
date of such admission shall be made solely to Partners and assignees, other
than the Additional Limited Partner, and all distributions of Available Cash
thereafter shall be made to all of the Partners and Assignees, including such
Additional Limited Partner.
12.3 Amendment of Agreement and Certificate of Limited Partnership. For
the admission to the Partnership of any Partner, the General Partner shall take
all steps necessary and appropriate under the Act to amend the records of the
Partnership and, if necessary, to prepare as soon as practical an amendment to
this Agreement (including an amendment of Exhibit "A") and, if required by law,
shall prepare and file an amendment to the Certificate and may for this purpose
exercise the power of attorney granted pursuant to Section 2.4 hereof.
ARTICLE 13
DISSOLUTION, LIQUIDATION AND TERMINATION
13.1 Dissolution. The Partnership shall not be dissolved by the
admission of Substituted Limited Partners or Additional Limited Partners or by
the admission of a successor General Partner in accordance with the terms of
this Agreement. Upon the withdrawal of the General Partner, any successor
General Partner shall continue the business of the Partnership. The Partnership
shall dissolve, and its affairs be wound up, only upon the first to occur of any
of the following ("Liquidating Events"):
A. the expiration of its term as provided in Section
2.5 hereof;
B. an event of withdrawal of the General Partner, as defined in
the Act (other than an event of bankruptcy), unless within ninety (90) days
after such event of withdrawal a majority in interest in capital and profits of
the remaining Partners agree in writing to continue the business of the
Partnership and to the appointment, effective as of the date of withdrawal of a
successor General Partner;
C. 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; provided, however, that the
-58-
<PAGE> 63
sale of one or more parcels, but less than all, of the Original Property shall
not be a Liquidating Event so long as the Partnership retains any of the
Original Property; or
F. a final and non-appealable judgment is entered by a court of
competent jurisdiction ruling that the General Partner is bankrupt or insolvent,
or a final and non-appealable order for relief is entered by a court with
appropriate jurisdiction against the General Partner, in each case under any
federal or state bankruptcy or insolvency laws as now or hereafter in effect,
unless prior to the entry of such order or judgment all of the remaining
Partners agree in writing to continue the business of the Partnership and to the
appointment, effective as of a date prior to the date of such order or judgment,
of a substitute General Partner.
In the event prior to the seventh (7th) anniversary of the Effective
Date, the Partnership dissolves as the result of any of the Liquidating Events
set forth in Sections 13.1B, 13.1C, 13.1D or 13.1E, then the General Partner
shall pay to the Original Limited Partner its Liquidated Tax Damages, if any,
resulting from such Liquidating Event in accordance with the terms of the
Exchange Rights Agreement; provided, however, that (a) the Original Limited
Partner shall only be entitled to its Liquidated Tax Damages with respect to a
Liquidating Event set forth in Section 13.1D if the General Partner is the
moving party, or otherwise voluntarily participates with the moving party, in
obtaining the entry of judicial dissolution, and (b) the Original Limited
Partner shall only be entitled to its Liquidated Tax Damages with respect to a
Liquidating Event set forth in Section 13.1E if such event consists of a
voluntary sale or other voluntary disposition of the Original Property.
13.2 Winding Up.
A. Upon the occurrence of a Liquidating Event, the Partnership
shall continue solely for the purposes of winding up its affairs in an orderly
manner, liquidating its assets, and satisfying the claims of its creditors and
Partners. No Partner shall take any action that is inconsistent with, or not
necessary to or appropriate for, the winding up of the Partnership's business
and affairs. The General Partner, or in the event there is no remaining General
Partner, any Person elected by a majority in interest of the Limited Partners
(the General Partner or such other Person being referred to herein as the
"Liquidator"), shall be responsible for overseeing the winding up and
dissolution of the Partnership and shall take full account of the Partnership's
liabilities and property and the Partnership property shall be liquidated as
promptly as is consistent with obtaining the fair value thereof, and the
proceeds therefrom (which may, to the extent determined by the General Partner,
include shares of common stock in the General Partner) shall be applied and
distributed in the following order:
-59-
<PAGE> 64
(1) First, to the satisfaction of all of the
Partnership's debts and liabilities to creditors other than the Partners
(whether by payment or the reasonable provision for payment thereof);
(2) Second, if applicable, to the satisfaction of
the Distribution Deficit and Liquidated Tax Damages, if any, payable to the
Original Limited Partner under the terms of this Agreement;
(3) Third, to the satisfaction of all of the
Partnership's debts and liabilities to the General Partner and its Affiliates
(whether by payment or the reasonable provision for payment thereof);
(4) Fourth, to the satisfaction of all of the
Partnership's debts and liabilities to the other Partners
(whether by payment or the reasonable provision for payment
thereof); and
(5) The balance, if any, to the Partners in
accordance with their Capital Accounts, after giving effect to all
contributions, distributions, and allocations for all periods.
The General Partner shall not receive any special compensation
for any services performed pursuant to this Article 13.
B. Notwithstanding the foregoing, if and after the Partnership
acquires Non-Original Limited Partner Related Assets, or becomes obligated,
indebted or liable for or on account of Non-Original Limited Partner Related
Assets or the ownership or operation thereof, and so long as the General Partner
has not consummated the transactions and made the election described in Sections
4.3B and 5.2, respectively, of this Agreement, then distributions under the
terms of Section 13.2A shall be calculated and made only with respect to
Original Limited Partner Related Assets and the ownership and operation thereof,
together with the operation and existence of the Partnership insofar as such
concerns the Original Limited Partner Related Assets. Distributions under the
terms of Section 13.2A shall not include any revenues, expenses, assets, or
liabilities of the Partnership relating to the Non-Original Limited Partner
Related Assets, the ownership or operation thereof, or the operation or
existence of the Partnership with respect thereto, all of which shall be as
separately determined by the General Partner in its sole and absolute
discretion.
C. Anything contained herein to the contrary notwithstanding,
pursuant to the Exchange Rights Agreement all Limited Partnership Units then
held by any Limited Partner (other than Limited Partnership Units held by the
General Partner and, in the case of a Liquidating Event described in Section
13.1.F, Limited Partnership Units held by the Original Limited Partner)
-60-
<PAGE> 65
will be mandatorily exchanged or redeemed prior to any distribution, or the
determination of any entitlement to any distribution, pursuant to Section 13.2A.
As a result of such mandatory exchange or redemption of Limited Partnership
Units, no Limited Partner (other than the General Partner in its capacity as a
Limited Partner and, in the case of a Liquidating Event described in Section
13.1.F, the Original Limited Partner) will receive, nor shall it be entitled to
receive, any distribution upon a Liquidating Event.
D. Notwithstanding the provisions of Section 13.2A hereof which
require liquidation of the assets of the Partnership, but subject to the order
of priorities set forth therein, if prior to or upon dissolution of the
Partnership the Liquidator determines that an immediate sale of part or all of
the Partnership's assets would be impractical or would cause undue loss to the
Partners, the Liquidator may, in its sole and absolute discretion, defer for a
reasonable time the liquidation of any assets except those necessary to satisfy
liabilities of the Partnership (including to those Partners and their Affiliates
as creditors) and/or distribute to the Partners, in lieu of cash, as tenants in
common and in accordance with the provisions of Section 13.2A hereof, 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.
E. In the discretion of the Liquidator, a pro rata portion of the
distributions that would otherwise be made pursuant to this Article 13 may be:
(1) distributed to one or more trust(s)
established for the benefit of the creditors and the General Partner and Limited
Partners for the purposes of liquidating Partnership assets, collecting amounts
owed to the Partnership, and paying any contingent, conditional or unmatured
liabilities or obligations of the Partnership or the General Partner arising out
of or in connection with the Partnership. The assets of any such trust(s) shall
be distributed to the creditors and General Partner and Limited Partners from
time to time, in the reasonable direction of the Liquidator, in the same manner
and proportions as the amount distributed to such trust(s) by the Partnership
would otherwise have been distributed to the creditors and General Partner and
Limited Partners pursuant to this Agreement; and
(2) withheld or escrowed to provide a reasonable
reserve for Partnership liabilities (contingent or otherwise) and
-61-
<PAGE> 66
to reflect the unrealized portion of any installment obligations owed to the
Partnership, provided that such withheld or escrowed amounts shall be
distributed to the creditors and General Partner and Limited Partners in the
manner and order of priority set forth in Section 13.2A as soon as practicable.
13.3 Compliance with Timing Requirements of Regulations. 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) (provided, however,
in no event shall the Partnership be liquidated prior to the date which would be
the Settlement Date within the meaning of the Exchange Rights Agreement for
Partners who tender an Exchange Notice (within the meaning of the Exchange
Rights Agreement) on or before the fifth (5th) day after the date of receipt of
the notice of liquidation by the Partnership.
13.4 Deemed Distribution and Re-contribution. Notwithstanding any other
provision of this Article 13, in the event the Partnership is considered
"liquidated" within the meaning of Regulations Section 1.704-1(b)(2)(ii)(g), but
no Liquidating Event has occurred, the Partnership's property shall not be
liquidated, the Partnership's labilities shall not be paid or discharged, and
the Partnership's affairs shall not be wound up.
13.5 Rights of Limited Partners. Except as otherwise provided in this
Agreement, each Limited Partner shall look solely to the assets of the
Partnership for the return of its Capital Contributions and shall have no right,
power or claim to demand or receive property other than cash from the
Partnership. Except as otherwise provided in this Agreement, no Limited Partner
shall have priority over any other Partner as to the return of its Capital
Contributions, distributions, or allocations.
13.6 Notice of Dissolution. In the event a Liquidating Event occurs or
an event occurs that would, but for the provisions of an election or objection
by one or more Partners pursuant to Section 13.1, result in a dissolution of the
Partnership, the General Partner shall, within thirty (30) days thereafter,
provide written notice thereof to each of the Partners.
13.7 Termination of Partnership and Cancellation of Certificate of
Limited Partnership. Upon the completion of the liquidation of the Partnership's
assets, as provided in Section 13.2 hereof, a certificate of cancellation shall
be filed, the Partnership shall be terminated, and all qualifications of the
Partnership as a foreign limited partnership in jurisdictions other than the
State of Delaware shall be canceled and such other actions as may be necessary
to terminate the Partnership shall be taken.
-62-
<PAGE> 67
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 hereof, 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.
13.9 Waiver of Partition. Each Partner hereby waives any right to
partition of the Partnership property.
ARTICLE 14
AMENDMENT OF PARTNERSHIP AGREEMENT; MEETINGS
14.1 Amendments.
A. Amendments to this Agreement may be proposed by the General
Partner, the Original Limited Partner or by any Limited Partners (other than the
General Partner) holding twenty-five percent (25%) or more of the Limited
Partner Percentage Interests. 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 thereon and to transact any other business that it may deem
appropriate. For purposes of obtaining a written vote, the General Partner may
require a response within a reasonable specified time, but not less than fifteen
(15) days, and failure to respond in such time period shall constitute a vote
which is consistent with the General Partner's recommendation with respect to
the proposal. Except as provided in Section 13.1C, 14.1B, 14.1C, or 14.1D, a
proposed amendment shall be adopted and be effective as an amendment hereto if
it is approved by the General Partner and it receives the Consent of Partners
holding a majority of the Limited Partner Percentage Interests of all Limited
Partners; provided, however, that, except as otherwise provided in Sections 4.3A
and 5.2 hereof, any amendment which materially and adversely alters the right of
a Limited Partner to receive distributions of Available Cash or allocations of
Net Income, Net Loss or any other items in the amounts, in the priorities or at
the times described in this Agreement, or which modifies Sections 7.1, 7.2 or
13.1 hereof, shall require the consent of such Limited Partner in order to
become effective; and provided, further, however, that the Original Limited
Partner shall have the right to approve of any amendment which solely affects
the Original Property and not any of the Non-Original Limited Partner Related
Assets.
B. Notwithstanding Section 14.1.A (but subject to the final
proviso thereof which shall in all events prevail), the General Partner shall
have the power, without the consent or approval of the Limited Partners, to
amend this Agreement as may be required to facilitate or implement any of the
following purposes:
-63-
<PAGE> 68
(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 designations, rights,
powers, distributions, allocations, duties, priorities and preferences of other
holders of any additional Partnership Interests issued in accordance with
Section 4.3, or otherwise in accordance with the terms of this Agreement;
(4) to reflect a change that is of an
inconsequential nature and does not adversely affect the Limited Partners in any
material respect, or to cure any ambiguity, correct or supplement any provision
in this Agreement not inconsistent with law or with other provisions of this
Agreement, or make any 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) the purposes set forth in Section 3.3.
The General Partner shall provide notice to the Limited Partners when
any action under this Section 14.1.B is taken.
C. Notwithstanding Section 14.1.A and 14.1.B hereof, this
Agreement shall not be amended without Consent of each Partner adversely
affected if such amendment would: (i) convert a Limited Partner's interest in
the Partnership into a General Partner Interest; (ii) modify the limited
liability of a Limited Partner in a manner adverse to such Limited Partner;
(iii) alter rights of the Partner to receive distributions pursuant to Article 5
or Article 13, or the allocations specified in Article 6 (except as permitted
pursuant to Section 4.3 and Section 14.1.B(3) hereof); (iv) cause the
termination of the Partnership prior to the time set forth in Sections 2.5 or
13.1; or (v) amend this Section 14.1.C.
D. Notwithstanding Section 14.1.A and 14.1.B hereof, the General
Partner shall not amend Sections 7.1, 7.2, 7.4, 7.5, or Article 14 without
Consent of Limited Partners holding a majority of the Limited Partner Percentage
Interests of the Limited Partners, excluding Limited Partner Interests held by
the General Partner; and, without Consent of Original Limited Partner holding a
majority of the Limited Partner Percentage Interests of the Original Limited
Partner (in each case including their heirs,
-64-
<PAGE> 69
successors and assigns) the General Partner shall not (i) amend Sections 7.1,
7.2, 13.1, or Article 14 in any respect, or (ii) to the extent that any such
amendment would affect the amount, priority, or timing of distributions to any
of the Original Limited Partner or their heirs, successors and assigns under
this Agreement, amend Sections 7.4 or 7.5, unless the transactions and election
described in, respectively, Sections 4.3B and 5.2 of this Agreement have
occurred and been made, in which case the special Consent of the Original
Limited Partner as herein provided shall not be required.
14.2 Meetings of the Partners.
A. 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 the Original Limited Partner or by Limited Partners (other than the General
Partner) holding twenty-five percent (25%) or more of the Limited Partner
Percentage Interests. The request shall state the nature of the business to be
transacted. Notice of any such meeting shall be given to all Partners not less
than seven (7) days nor more than thirty (30) days prior to the date of such
meeting. Partners may vote in person or by proxy at such meeting. Whenever the
vote or consent of the Partners is permitted or required under this Agreement,
such vote or consent may be given at a meeting of the Partners or may be given
in accordance with the procedures prescribed in Sections 14.1A or 14.2B hereof.
Except as otherwise expressly provided in this Agreement, whenever the Consent
of the Limited Partners is required the Consent of holders of a majority of the
Limited Partner Percentage Interests held by Limited Partners (including Limited
Partnership Interests held by the General Partner) shall control; provided,
however, that, except as required by the Act or other applicable law, and unless
and until the General Partner makes the election specified in Section 5.2
hereof, the Original Limited Partner shall have the exclusive right to consent
to any action requiring the consent of the Limited Partners and which solely
affects the Original Property (and not any of the Non-Original Limited Partner
Related Assets).
B. 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 Limited Partners holding a majority of the
Limited Partner Percentage Interests (or such other percentage as is expressly
required by this Agreement); provided, however, that in the event such action
only requires the consent of the Original Limited Partner under this Article 14,
such written consent shall be effective if signed by the Original Limited
Partner. Such consent may be in one instrument or in several instruments, and
shall have the same force and effect as a vote of Limited Partners holding a
majority of the Limited Partner Percentage Interests (or such other percentage
as is expressly required by this Agreement). Such consent shall be filed with
the General
-65-
<PAGE> 70
Partner. An action so taken shall be deemed to have been taken at a meeting held
on the effective date so certified.
C. 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 his
attorney-in-fact. No proxy shall be valid after the expiration of eleven (11)
months from the date thereof unless otherwise provided in the proxy. Every proxy
shall be revocable at the pleasure of the Limited Partner executing it, such
revocation to be effective upon the Partnership's receipt of written notice of
such revocation from the Limited Partner executing such proxy.
D. Each meeting of the Partners shall be conducted by the General
Partner or such other Person as the General Partner may appoint pursuant to such
rules for the conduct of the meeting as the General Partner or such other Person
deems appropriate. Without limitation, meetings of Partners may be conducted in
the same manner as meetings of the shareholders of the General Partner and may
be held at the same time, and as part of, meetings of the shareholders of the
General Partner.
ARTICLE 15
GENERAL PROVISIONS
15.1 Addresses and Notices. All notices and other communications
provided for or permitted hereunder shall be in writing and shall be deemed to
have been duly given (a) when delivered if delivered personally, (b) when
delivered by telecopier if confirmation of receipt has been obtained, (c) three
(3) business days after being deposited in the U.S. mail, registered or
certified (return receipt requested), postage prepaid, or (d) one (1) business
day after depositing with a nationally recognized overnight courier service or
overnight delivery service, to the Partner or Assignee at the address set forth
in Exhibit "A" (or at such other address of which the recipient shall notify the
other Partners and Assignees by like notice, provided that notices of a change
of address shall be effective only upon receipt thereof).
15.2 Titles and Captions. All article or section titles or captions in
this Agreement are for convenience only. They shall not be deemed part of this
Agreement and in no way define, limit, extend or describe the scope or intent of
any provisions hereof. Except as specifically provided otherwise, references to
"Articles" and "Sections" are to Articles and Sections of this Agreement.
-66-
<PAGE> 71
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 form 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 hereto and their heirs, executors, administrators,
successors, legal representatives and permitted assigns.
15.6 Creditors. Other than as expressly set forth herein with respect to
the Indemnitees, none of the provisions of this Agreement shall be for the
benefit of, or shall be enforceable by, any creditor of the Partnership.
15.7 Waiver. No failure by any party to insist upon the strict
performance of any covenant, duty, agreement or condition of this Agreement or
to exercise any right or remedy consequent upon a breach thereof shall
constitute waiver of any such breach or any covenant, duty, agreement or
condition.
15.8 Applicable Law. This Agreement shall be construed and enforced in
accordance with and governed by the laws of the State of Delaware, without
regard to the principles of conflicts of law.
15.9 Invalidity of Provisions. If any provision of this Agreement is or
becomes invalid, illegal or unenforceable in any respect, the validity, legality
or enforceability of other remaining provisions contained herein shall not be
affected thereby.
15.10 Entire Agreement. This Agreement and the other written agreements
executed and delivered by the parties hereto concurrently herewith contain the
entire understanding and agreement among the Partners with respect to the
subject matter hereof and supersedes any other prior written or oral
understandings or agreements among them with respect thereto.
15.11 Venue. Any action initiated by any party under this Agreement
shall be brought and prosecuted in the State 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 state.
-67-
<PAGE> 72
15.12 Exhibits. All exhibits attached hereto are incorporated herein as
though fully set forth herein.
15.13 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.
15.14 Joint and Several. All entities constituting the "Original Limited
Partner" hereunder shall be jointly and severally liable for the duties,
obligations and liabilities of the Original Limited Partner.
15.15 Counterparts. This Agreement may be executed in any number of
counterparts each of which shall be deemed an original and all of which shall
constitute one and the same agreement with the same effect as if all parties had
signed the same signature page. It shall not be necessary that the signatures
of, or on behalf of, each party, or that the signatures of all persons required
to bind any party, appear on a single counterpart, it shall be sufficient that
the signature of, or on behalf of, each party, appear on one or more of the
counterparts. Any signature page of this Agreement may be detached from any
counterpart of this Agreement and reattached to any other counterpart of this
Agreement identical in form hereto but having attached to it one or more
additional signature pages. This Agreement shall be deemed executed and
delivered upon each party's delivery of executed signature pages of this
Agreement which signature pages may be delivered by facsimile with the same
effect as delivery of the originals.
IN WITNESS WHEREOF, the parties hereto have executive this Agreement as
of the day first above written.
PACIFIC GULF PROPERTIES INC., a Maryland
corporation, general partner
By:
-----------------------------------------------
-----------------------------------------------
(Print Name and Title)
By:
-----------------------------------------------
-----------------------------------------------
(Print Name and Title)
-68-
<PAGE> 73
THE NORTHWESTERN MUTUAL LIFE INSURANCE
COMPANY, a Wisconsin corporation
By: NORTHWESTERN INVESTMENT MANAGEMENT
COMPANY, a Wisconsin corporation, its
wholly-owned subsidiary and authorized
representative
By:
---------------------------------------
---------------------------------------
(Print Name and Title)
-69-
<PAGE> 74
EXHIBIT A
PARTNERS CONTRIBUTIONS AND PARTNERSHIP INTERESTS
<TABLE>
<CAPTION>
Limited
Limited Partner
Name and Address Cash Agreed Value of Total Partnership Percentage
of Partner Contribution Contribution Property Contribution Units Interest
---------- ------------ --------------------- ------------ ----- --------
<S> <C> <C> <C> <C> <C>
General Partner
- ---------------
Pacific Gulf $3,770 N/A $3,770 N/A N/A
Properties Inc.
4220 Von Karman, Second Floor
Newport Beach, CA 92660-2002
Attention: Corporate Secretary
Limited Partner
- ---------------
The Northwestern Mutual Life N/A $9,000,000 $9,000,000 404,950 100%
Insurance Company
720 East Wisconsin Avenue
Milwaukee, Wisconsin 53202
Attention: James G. Loduha
Telecopy: (414) 299-1557
With a copy to:
720 East Wisconsin Avenue
Milwaukee, Wisconsin 53202
Attention: John E. Dunn, Esq.
Telecopy: (414) 299-7016
</TABLE>
<PAGE> 75
EXHIBIT B
CAPITAL ACCOUNT MAINTENANCE
1. Capital Accounts of the Partners.
A. The Partnership shall maintain for each Partner a separate Capital
Account in accordance with the rules of Regulations Section 1.704-1(b)(2)(iv).
Such Capital Account shall be increased by (i) the amount of all Capital
Contributions and any other deemed contributions made by such Partner to the
Partnership pursuant to this Agreement; and (ii) all items of Partnership income
and gain (including income and gain exempt from tax) computed in accordance with
Section 1.B hereof and allocated to such Partner pursuant to Section 6.1B of the
Agreement and Exhibit "C" hereof, and decreased by (x) the amount of cash or
Agreed Value of all actual and deemed distributions of cash or property made to
such Partner pursuant to this Agreement; and (y) all items of Partnership
deduction and loss computed in accordance with Section 1.B hereof and allocated
to such Partner pursuant to Section 6.1A of the Agreement and Exhibit "C"
hereof.
B. For purposes of computing the amount of any item of income, gain,
deduction or loss to be reflected in the Partners' Capital Accounts, unless
otherwise specified in this Agreement, the determination, recognition and
classification of any such item shall be the same as its determination,
recognition and classification for federal tax purposes determined in accordance
with Section 703(a) of the Code (for this purpose all items of income, gain,
loss or deduction required to be stated separately pursuant to Section 703(a)(1)
of the Code shall be included in taxable income or loss), with the following
adjustments:
(1) Except as otherwise provided in Regulations Section
1.704-1(b)(2)(iv)(m), the computation of all items of income, gain, loss and
deduction shall be made without regard to any election under Section 754 of the
Code which may be made by the Partnership, provided that the amounts of any
adjustments to the adjusted bases of the assets of the Partnership made pursuant
to Section 734 of the Code as a result of the distribution of property by the
Partnership to a Partner (to the extent that such adjustments have not
previously been reflected in the Partners' Capital Accounts) shall be reflected
in the Capital Accounts of the Partners in the manner and subject to the
limitations prescribed in Regulations Section 1.704-1(b)(2)(iv)(m)(4).
(2) The computation of all items of income, gain, and deduction
shall be made without regard to the fact that items described in Sections
705(a)(1)(B) or 705(a)(2)(B) of the Code are not includable in gross income or
are neither currently deductible nor capitalized for federal income tax
purposes.
(3) Any income, gain or loss attributable to the taxable
disposition of any Partnership property shall be
-1-
<PAGE> 76
determined as if the adjusted basis of such property as of such date of
disposition were equal in amount to the Partnership's Carrying Value with
respect to such property as of such date.
(4) In lieu of depreciation, amortization, and other cost
recovery deductions taken into account in computing such taxable income or loss,
there shall be taken into account Depreciation for such fiscal year.
(5) In the event the Carrying Value of any Partnership Asset is
adjusted pursuant to Section 1.D hereof, the amount of any such adjustment shall
be taken into account as gain or loss from the disposition of such asset.
(6) Any items specifically allocated under Section 1 of Exhibit
"C" hereof shall not be taken into account.
C. Generally, a transferee (including an Assignee) of a Limited
Partnership Unit shall succeed to a pro rata portion of the Capital Account of
the transferor; provided, however, that if the transfer causes a termination of
the Partnership under Section 708(b)(1)(B) of the Code, the Partnership's
properties shall be deemed solely for federal income tax purposes, to have been
contributed to the successor Partnership. The Capital Accounts of such successor
Partnership shall be maintained in accordance with the principles of this
Exhibit "B".
D. (1) Consistent with the provisions of Regulations Section
1.704-1(b)(2)(iv)(f), and as provided in Section 1.D.(2), the Carrying Value of
all Partnership assets shall be adjusted upward or downward to reflect any
Unrealized Gain or Unrealized Loss attributable to such Partnership property, as
of the times of the adjustments provided in Section 1.D.(2) hereof, as if such
Unrealized Gain or Unrealized Loss had been recognized on an actual sale of each
such property and allocated pursuant to Section 6.1 of the Agreement.
(2) Such adjustments shall be made as of the following times: (a)
immediately prior to the acquisition of an additional interest in the
Partnership by any new or existing Partner in exchange for more than a de
minimis Capital Contribution; (b) immediately prior to the distribution by the
Partnership to a Partner of more than a de minimis amount of property as
consideration for an interest in the Partnership; and (c) immediately prior to
the liquidation of the Partnership within the meaning of Regulations Section
1.704-1(b)(2)(ii)(g), provided, however, that adjustments pursuant to clauses
(a) and (b) above shall be made only if the General Partner determines that such
adjustments are necessary or appropriate to reflect economic interests of the
Partners in the Partnership.
(3) In accordance with Regulations Section 1.704-1(b)(2)(iv)(e),
the Carrying Value of Partnership assets distributed in kind shall be adjusted
upward or downward to reflect any Unrealized Gain or Unrealized Loss
attributable to
-2-
<PAGE> 77
such Partnership property, as of the time any such asset is distributed.
(4) In determining Unrealized Gain or Unrealized Loss for
purposes of this Exhibit "B", the aggregate cash amount and fair market value of
all Partnership assets (including cash or cash equivalents) shall be determined
by the General Partner using such reasonable method of valuation as it may
adopt, or in the case of a liquidating distribution pursuant to Article 13 of
the Agreement, shall be determined and allocated by the Liquidator using such
reasonable methods of valuation as it may adopt. The General Partner, or the
Liquidator, as the case may be, shall allocate such aggregate value among the
assets of the Partnership (in such manner as it determines in its sole and
absolute discretion to arrive at a fair market value for individual properties).
E. The provisions of this Agreement (including this Exhibit "B" and
other Exhibits to this Agreement) relating to the maintenance of Capital
Accounts are intended to comply with Regulations Section 1.704-1(b), and shall
be interpreted and applied in a manner consistent with such Regulations. In the
event the General Partner shall determine that it is prudent to modify (i) the
manner in which the Capital Accounts, or any debits or credits thereto
(including, without limitation, debits or credits relating to liabilities which
are secured by contributed or distributed property or which are assumed by the
Partnership, the General Partner, or the Limited Partners) are computed; or (ii)
the manner in which items are allocated among the Partners for federal income
tax purposes in order to comply with such Regulations or to comply with Section
704(c) of the Code, the General Partner may make such modification without
regard to Article 14 of the Agreement, provided that it is not likely to have a
material effect on the amounts distributable to any Person pursuant to Article
13 of the Agreement upon the dissolution of the Partnership. The General Partner
also shall (i) where appropriate, in accordance with Regulations Section
1.704-1(b)(2)(iv)(q), make any adjustments that are necessary or appropriate to
maintain equality between Capital Accounts of the Partners and the amount of
Partnership capital reflected on the Partnership's balance sheet, as computed
for book purposes; and (ii) make any appropriate modifications in the event
unanticipated events might otherwise cause this Agreement not to comply with
Regulations Section 1.704-1(b). In addition, the General Partner may adopt and
employ such methods and procedures for (i) the maintenance of book and tax
capital accounts; (ii) the determination and allocation of adjustments under
Sections 704(c), 734 and 743 of the Code; (iii) the determination of Net Income,
Net Loss, taxable loss and items thereof under this Agreement and pursuant to
the Code; (iv) conventions for the determination of cost recovery, depreciation
and amortization deductions, as it determines in its sole discretion are
necessary or appropriate to execute the provisions of this Agreement, to comply
with federal and state tax laws, and are in the best interest of the Partners.
-3-
<PAGE> 78
2. No Interest. No interest shall be paid by the Partnership on Capital
Contributions or on balances in Partners' Capital Accounts.
3. No Withdrawal. No Partner shall be entitled to withdraw any part of his
Capital Contribution or his Capital Account or to receive any distribution from
the Partnership, except as provided in Articles 4, 5, 7 and 13 of the Agreement.
4. Non-Original Limited Partner Related Assets. Notwithstanding the foregoing,
if and after the Partnership acquires Non-Original Limited Partner Related
Assets, or becomes obligated, indebted or liable for or on account of
Non-Original Limited Partner Related Assets or the ownership or operation
thereof, and so long as the General Partner has not consummated the transactions
and made the election described in Sections 4.3B and 5.2, respectively, of this
Agreement, then allocations provided for in this Exhibit "B" shall be calculated
separately with respect to Original Limited Partner Related Assets and the
ownership and operation thereof, together with the operation and existence of
the Partnership insofar as such concerns the Original Limited Partner Related
Assets and the ownership and operation thereof. Such allocations and
calculations shall not include any revenues, expenses, assets, or liabilities of
the Partnership relating to the Non-Original Limited Partner Related Assets, the
ownership or operation thereof, or the operation or existence of the Partnership
with respect thereto, all of which shall be separately determined by the General
Partner in its sole and absolute discretion.
-4-
<PAGE> 79
EXHIBIT C
SPECIAL ALLOCATION RULES
1. Special Allocation Rules. Notwithstanding any other provision of the
Agreement or this Exhibit "C", the following special allocations shall be made
in the following order:
A. Minimum Gain Chargeback. Notwithstanding the provisions of Section
6.1 of the Agreement or any other provisions of this Exhibit "C", if there is a
net decrease in Partnership Minimum Gain during any Partnership taxable year,
each Partner shall be specially allocated items of Partnership income and gain
for such year (and, if necessary, subsequent years) in an amount equal to such
Partner's share of the net decrease in Partnership Minimum Gain, as determined
under Regulations Section 1.704-2(g). Allocations pursuant to the previous
sentence shall be made in proportion to the respective amounts required to be
allocated to each Partner pursuant thereto. The items to be so allocated shall
be determined in accordance with Regulations Section 1.704- 2(f)(6). This
Section 1.A is intended to comply with the minimum gain chargeback requirements
in Regulations Section 1.704-2(f) and shall be interpreted consistently
therewith. Solely for purposes of this Section 1.A, each Partner's Adjusted
Capital Account Deficit shall be determined prior to any other allocations
pursuant to Section 6.1 of Partner Minimum Gain during such Partnership taxable
year.
B. Partner Minimum Gain Chargeback. Notwithstanding any other provision
of Section 6.1 of this Agreement or any other provisions of this Exhibit "C"
(except Section 1.A hereof), if there is a net decrease in Partner Minimum Gain
attributable to a Partner Nonrecourse Debt during any Partnership taxable year,
each Partner who has a share of the Partner Minimum Gain attributable to such
Partner Nonrecourse Debt, determined in accordance with Regulations Section
1.702-2(i)(5), shall be specially allocated items of Partnership income and gain
for such year (and, if necessary, subsequent years) in an amount equal to such
Partner's share of the net decrease in Partner Minimum Gain attributable to such
Partner Nonrecourse Debt, determined in accordance with Regulations Section
1.704-2(i)(5). Allocations pursuant to the previous sentence shall be made in
proportion to the respective amounts required to be allocated to each Partner
pursuant thereto. The items to be so allocated shall be determined in accordance
with Regulations Section 1.704-2(i)(4). This Section 1.B is intended to comply
with the minimum gain charge-back requirement in such Section of the Regulations
and shall be interpreted consistently therewith. Solely for purposes of this
Section 1.B, each Partner's Adjusted Capital Account Deficit shall be determined
prior to any other allocations pursuant to Section 6.1 of the Agreement or this
Exhibit with respect to such Partnership taxable year, other than allocations
pursuant to Section 1.A hereof.
-1-
<PAGE> 80
C. Qualified Income Offset. In the event any Partner unexpectedly
receives any adjustments, allocations or distributions described in Regulations
Sections 1.704-1(b)(2)(ii)(d)(4), 1.704-1(b)(2)(ii)(d)(5), or
1.704-1(b)(2)(ii)(d)(6), and after giving effect to the allocations required
under Sections 1.A and 1.B hereof such Partner has an Adjusted Capital Account
Deficit, items of Partnership income and gain (consisting of a pro rata portion
of each item of Partnership income, including gross income and gain for the
Partnership taxable year) shall be specifically allocated to such Partner in an
amount and manner sufficient to eliminate, to the extent required by the
Regulations, its Adjusted Capital Account Deficit created by such adjustments,
allocations or distributions as quickly as possible.
D. Nonrecourse Deductions. Nonrecourse Deductions for any Partnership
taxable year shall be allocated to the General Partner. If the General Partner
determines in its good faith discretion that the Partnership's Nonrecourse
Deductions must be allocated in a different ratio to satisfy the safe harbor
requirements of the Regulations promulgated under Section 704(b) of the Code,
the General Partner is authorized, upon notice to the Limited Partners, to
revise the prescribed ratio to the numerically closest ratio for such
Partnership taxable year which satisfy such requirements.
E. Partner Nonrecourse Deductions. Any Partner Nonre- course Deductions
for any Partnership taxable year shall be specially allocated to the Partner who
bears the economic risk of loss with respect to the Partner Nonrecourse Debt to
which such Partner Nonrecourse Deductions are attributable in accordance with
Regulations Section 1.704-2(i).
F. Code Section 754 Adjustments. To the extent an adjustment to the
adjusted tax basis of any Partnership asset pursuant to Section 734(b) or 743(b)
of the Code is required, pursuant to Regulations Section 1.704-1(b)(2)(iv)(m),
to be taken into account in determining Capital Accounts, the amount of such
adjustment to the Capital Accounts shall be treated as an item of gain (if the
adjustment increases the basis of the asset) or loss (if the adjustment
decreases such basis), and such item of gain or loss shall be specially
allocated to the Partners in a manner consistent with the manner in which their
Capital Accounts are required to be adjusted pursuant to such Section of the
Regulations.
G. Curative Allocations. The allocations set forth in Section 1.A
through 1.F of this Exhibit "C" (the "Regulatory Allocations") are intended to
comply with certain requirements of the Regulations under Section 704(b) of the
Code. The Regulatory Allocations may not be consistent with the manner in which
the Partners intend to divide Partnership distributions. Accordingly, the
General Partner is hereby authorized to divide other allocations of income,
gain, deduction and loss among the Partners so as to prevent the Regulatory
Allocations from distorting the manner in which Partnership distributions will
be
-2-
<PAGE> 81
divided among the Partners. In general, the Partners anticipate that this will
be accomplished by specially allocating other items of income, gain, loss and
deduction among the Partners so that the net amount of the Regulatory
Allocations and such special allocations to each person is zero. However, the
General Partner will have discretion to accomplish this result in any reasonable
manner; provided, however, that no allocation pursuant to this Section 1.G shall
cause the Partnership to fail to comply with the requirements of Regulations
Sections 1.7041(b)(2)(ii)(d), -2(e) or -2(i).
2. Allocations for Tax Purposes.
A. Except as otherwise provided in this Section 2, for federal income
tax purposes, each item of income, gain, loss and deduction shall be allocated
among the Partners in the same manner as its correlative item of "book" income,
gain, loss or deduction is allocated pursuant to Section 6.1 of the Agreement
and Section 1 of this Exhibit "C".
B. In an attempt to eliminate Book-Tax Disparities attributable to a
Contributed Property or Adjusted Property, items of income, gain, loss, and
deduction shall be allocated for federal income tax purposes among the Partners
as follows:
(1) (a) In the case of a Contributed Property, such
items attributable thereto shall be allocated
among the Partners, consistent with the
principles of Section 704(c) of the Code and
the Regulations thereunder, to take into
account the variation between the 704(c)
Value of such property and its adjusted basis
at the time of contribution; and
(b) any item of Residual Gain or Residual Loss
attributable to a Contributed Property shall be
allocated among the Partners in the same manner as
its correlative item of "book" gain or loss is
allocated pursuant to Section 6.1 of the Agreement
and Section 1 of this Exhibit "C".
(2) (a) In the case of an Adjusted Property, such items
shall
(1) first, be allocated among the Partners in a
manner consistent with the principals of Section
704(c) of the Code and the Regulations thereunder
to take into account the Unrealized Gain or
Unrealized Loss attributable to such property and
the allocations thereof pursuant to Exhibit "B";
and
(2) second, in the event such property was
originally a Contributed Property, be
-3-
<PAGE> 82
allocated among the Partners in a manner
consistent with Section 2.B(1) of this
Exhibit "C"; and
(b) any item of Residual Gain or Residual Loss
attributable to an Adjusted Property shall be
allocated among the Partners in the same manner its
correlative item of "book" gain or loss is
allocated pursuant to Section 6.1 of the Agreement
and Section 1 of this Exhibit "C".
(3) all other items of income, gain, loss and deduction shall
be allocated among the Partners in the same manner as
their correlative item of "book" gain or loss is allocated
pursuant to Section 6.1 of the Agreement and Section 1 of
this Exhibit "C".
3. No Withdrawal. No Partner shall be entitled to withdrawal any part of his
Capital Contribution or his Capital Account or to receive any distribution from
the Partnership, except as provided in Articles 4, 5, 8 and 13 of the Agreement.
4. Non-Original Limited Partner Related Assets. Notwithstanding the foregoing,
if and after the Partnership acquires Non-Original Limited Partner Related
Assets, or becomes obligated, indebted or liable for or on account of
Non-Original Limited Partner Related Assets or the ownership or operation
thereof, and so long as the General Partner has not consummated the transactions
and made the election described in Sections 4.3B and 5.2, respectively, of this
Agreement, then allocations provided for in this Exhibit "C" shall be calculated
separately with respect to Original Limited Partner Related Assets and the
ownership and operation thereof, together with the operation and existence of
the Partnership insofar as such concerns the Original Limited Partner Related
Assets and the ownership and operation thereof. Such allocations and
calculations shall not include any revenues, expenses, assets, or liabilities of
the Partnership relating to the Non-Original Limited Partner Related Assets, the
ownership or operation thereof, or the operation or existence of the Partnership
with respect thereto, all of which shall be separately determined by the General
Partner in its sole and absolute discretion.
-4-
<PAGE> 83
EXHIBIT D
VALUE OF CONTRIBUTED PROPERTY
<TABLE>
<CAPTION>
Underlying Property 704(c) Value Agreed Value
- ------------------- ------------ ------------
<S> <C> <C>
Garden Grove Industrial $9,000,000 $9,000,000
7373 Hunt Avenue,
Garden Grove, CA
</TABLE>
<PAGE> 84
EXHIBIT E
PROPERTY MANAGEMENT AGREEMENT
THIS PROPERTY MANAGEMENT AGREEMENT (this "Agreement") is made and
entered into as of ______________, by and between PGP SOUTHERN INDUSTRIAL II,
L.P., a Delaware limited partnership ("Owner") and Pacific Gulf Properties Inc.,
a Maryland corporation ("Manager") with reference to the following.
RECITALS
A. The Owner is the owner of an industrial park located on the land
identified in Exhibit A attached hereto (the "Project").
Manager is the sole general partner of Owner.
B. Manager is experienced in managing and operating properties similar
to the Project, and Manager possesses the personnel, skills and experience
necessary for the efficient management and operation of the Project.
C. Owner desires to engage Manager to manage and operate the Project,
and Manager desires to render such management services to Owner, upon and
subject to the terms and conditions set forth below.
AGREEMENT
NOW, THEREFORE, in consideration of the mutual covenants and agreements
set forth below, Owner and Manager agree as follows:
1. Engagement of Manager.
1.1 Exclusive Manager. Owner engages Manager as, and Manager
agrees to serve as, the sole and exclusive manager of the Project, with the
authority to direct, supervise and manage the operation of the Project, for the
period of time and upon the terms and conditions hereinafter set forth.
1.2 Employment of Personnel. Manager shall investigate, hire,
train, pay, supervise and discharge the personnel reasonably necessary to be
employed in order to properly maintain and operate the Project. All salaries,
wages and other compensation of personnel employed by Manager hereunder,
including so-called fringe benefits, medical health insurance, pension plans,
social security taxes, Worker's Compensation insurance and the like
(collectively, the "Personnel Compensation"), shall be payable by Manager from,
and reimbursable to Manager out of, gross revenues generated from the operation
of the Project, including, without limitation, all rent and/or lease payments,
security, cleaning, and other deposits, common area maintenance charges, taxes,
insurance, casualty and/or condemnation loss proceeds and other income due to
Owner
-1-
<PAGE> 85
from each Project ("Project Revenues"). Personnel Compensation shall not reduce
the "Management Fee" (defined below).
2. Duties of Manager.
2.1 Performance of Duties. During the term of this Agreement,
Manager agrees, for and in consideration of the compensation set forth herein,
to supervise and direct the management and operation of the Project on behalf of
Owner and for the account of Owner in an efficient and satisfactory manner as an
industrial park. Manager shall at all times maintain an organization, systems
and personnel sufficient to enable it to carry out all its duties, obligations
and functions under this Agreement. Manager will perform its duties under this
Agreement in accordance with all laws, codes and regulations applicable to the
Project.
2.2 Service Contracts. Manager shall make or renew in Owner's
name as agent of Owner and at Owner's expense, contracts and/or leases for
water, electricity, gas, telephone, vermin extermination, landscape, trash
removal and other services deemed by Manager or Owner to be necessary or
advisable for the operation of the Project. In entering into any contracts or
leases herein contemplated, Manager shall include as a condition thereof the
right to terminate on thirty (30) calendar days' prior written notice with or
without cause, unless Manager obtains the prior written consent of Owner.
2.3 Leasing. Manager shall be responsible for coordinating the
leasing activities of the Project. Manager is hereby authorized to contract, in
Owner's name as agent of Owner and at Owner's expense, with such brokers and
leasing agents as Manager deems necessary or appropriate to facilitate the
leasing activities of the Project. Manager is hereby authorized to prepare,
execute, deliver and renew all leases, lease amendments and lease renewals and
extensions, and to terminate tenancies, evict tenants and recover possession of
rented space within the Project, prosecute legal actions in the name of Owner in
connection with the foregoing, settle, compromise and/or release such actions or
reinstate such tenancies, as Manager deems necessary or appropriate, all on
Owner's behalf and as agent of Owner and at Owner's expense. References of all
prospective tenants shall be investigated carefully by Manager, and Manager
shall use reasonable efforts to ensure that space in the Projects is rented to
desirable and financially responsible tenants.
-2-
<PAGE> 86
2.4 Payment of Expenses. Manager shall establish and maintain on
behalf of Owner at a bank or banks as Manager may, from time to time, determine,
an account for the Project (an "Account"). Manager shall collect all Project
Revenue, and deposit all such income in the Account for the Project. From the
Account, Manager shall make such disbursements to pay Project operating
expenses, including, without limitation, Personnel Compensation, as are
necessary, in Manager's reasonable judgment, to manage, operate and maintain the
Project as provided in this Agreement. All items specified herein to be at
Owner's expense shall be considered operating expenses of the Project.
2.5 Funding Of Account. Owner agrees to deposit moneys into the
Account in the amount and to the extent that Project Revenues are insufficient
to pay any operating expenses, including Personnel Compensation, hereunder.
Manager shall notify Owner in writing as to the amount of any such
insufficiency.
3. Insurance. The Manager shall obtain, upon Owner's request and
approval, at Owner's cost and expense, such insurance as may be required by
Owner in connection with the Project, including, without limitation,
comprehensive general public liability, contractual liability and such other
insurance as Owner deems necessary or desirable. Owner shall designate Manager
as an additional named insured on each such insurance policy.
4. Manager's Compensation.
4.1 Management Fee. In consideration of the management services
to be rendered by Manager pursuant to Article 2 of this Agreement, Manager shall
receive as compensation a monthly sum equal to four percent (4%) of all Project
Revenues from the Project collected during each month during the term of this
Agreement (the "Management Fee").
4.2 Payment of Management Fee. The Management Fee shall be paid
on the first day of each calendar month during the term of this Agreement, based
upon the Project Revenues from the Project collected for the preceding calendar
month. If the term of this Agreement begins on a date other than the first day
of a month or ends on a date other than the last day of a month, the Management
Fee shall be prorated based on the number of days in such month.
4.3 Other Compensation. Manager shall be separately compensated
for any services other than the usual and customary services performed in its
capacity as the manager of the Project; provided that Manager shall not perform
any extraordinary services without obtaining the prior written approval of
Owner.
-3-
<PAGE> 87
5. Books, Records and Statements.
5.1 Maintenance and Access of Records. Manager agrees to maintain
adequate accounting records (which records shall be and remain the property of
Owner) in connection with all matters contemplated by this Agreement in
accordance with the provisions of this Agreement.
5.2 Operating Budget.
(a) Within thirty (30) calendar days after the
execution of this Agreement, Manager shall prepare and submit to Owner for its
approval a proposed operating budget setting forth in reasonable detail the
estimated income and operating expenses of the Project, by month, for the
remainder of the then calendar year for which this Agreement is in effect. On or
before thirty (30) calendar days before each subsequent calendar year during the
term of this Agreement, Manager shall prepare and submit to Owner for its
approval a proposed operating budget setting forth in reasonable detail the
estimated income and operating expenses of the Project, by month, for the
succeeding calendar year.
(b) Owner will consider the proposed budgets and
then will consult with the Manager in the ensuing period prior to the
commencement of the forthcoming calendar year in order to agree on an "Approved
Operating Budget." The parties will use reasonable efforts to agree upon an
Approved Operating Budget for the forthcoming calendar year on or before
December 15th of the then current calendar year. If the parties are unable to
reach such agreement, the Approved Operating Budget for the forthcoming calendar
year will be established by Owner.
(c) Manager agrees to employ reasonable efforts
to ensure that the actual costs of maintaining and operating the Project shall
not exceed the Approved Operating Budget, either in total or in any one
accounting category. In the event it appears to Manager that the actual costs of
maintaining and operating the Project shall exceed the Approved Operating
Budget, Manager shall submit a revised budget proposal for Owner's approval as
provided above. Upon approval, such revised budget shall become the Approved
Operating Budget. In all events, Owner shall pay all actual costs of maintaining
and operating the Project.
5.3 Capital Expenditure Budget.
(a) Within thirty (30) calendar days after the
execution of this Agreement, Manager shall prepare and submit to Owner for its
approval a proposed capital expenditure budget setting forth in reasonable
detail the estimated capital expenditures of the Project, by month, for the
remainder of the then calendar year for which this Agreement is in effect. On or
before thirty (30) calendar days before each subsequent calendar year during the
term of this Agreement, Manager shall prepare and submit to Owner for its
approval a proposed capital expenditure budget setting forth in reasonable
detail the estimated capital
-4-
<PAGE> 88
expenditures of the Project, by month, for the succeeding calendar year.
(b) Owner will consider the proposed budgets and
then will consult with Manager in the ensuing period prior to the commencement
of the forthcoming calendar year in order to agree on an "Approved Capital
Budget." The parties will use reasonable efforts to agree upon an Approved
Capital Budget for the succeeding calendar year on or before December 15th of
the then current calendar year. If the parties are unable to reach such
agreement, the Approved Capital Budget for the forthcoming calendar year will be
established by Owner.
6. Term.
6.1 Initial Term. The term of this Agreement shall commence as of
the date first set forth above and shall continue for an initial term ending on
__________. Unless written notice to terminate is given by either party to the
other at least thirty (30) days prior to the end of the initial term, this
Agreement shall be automatically renewed for another _________ year term, upon
and subject to the terms and conditions set forth in this Agreement.
6.2 Termination. This Agreement may be terminated for "cause" at
any time by Owner upon thirty (30) days prior written notice to Manager setting
forth in detail the "cause" for such termination. The term "cause" shall mean
(i) any material breach of this Agreement by Manager, (ii) any willful
misconduct, intentional misrepresentation or gross negligence of Manager related
to, or in connection with, the management and operation of the Project, (iii)
the commencement of a case under Title 11 U.S.C., or under any similar
insolvency proceeding under applicable state or federal law, involving Manager
as debtor, (iv) Owner's transfer or sale of the Property to an independent third
party, (v) the occurrence of a total destruction of the Project, and (vi) the
taking of the Project by condemnation, eminent domain, or by agreement in lieu
thereof.
7. Indemnification and Hold Harmless. Neither Manager nor any employee
of Manager shall be liable, responsible or accountable in damages or otherwise
to Owner for any acts performed by it in good faith and within the scope of this
Agreement if any such act or failure to act is not attributable to Manager's or
such employee's gross negligence or willful misconduct. Owner shall indemnify,
defend and hold Manager (and each employee thereof) harmless for any loss,
damage, liability, cost or expense (including reasonable attorneys' fees)
arising out of any act or failure to act by Manager (or any employee thereof) if
such act or failure to act is in good faith, is within the scope of this
Agreement, and is not attributable to Manager's or such employee's gross
negligence or willful misconduct.
-5-
<PAGE> 89
8. Miscellaneous.
8.1 Applicable Law. This Agreement shall be construed
in accordance with the laws of the State of California.
8.2 Severability. Each provision of this Agreement is intended to
be severable. If any term or provision of this Agreement shall be determined by
a court of competent jurisdiction to be illegal or invalid for any reason
whatsoever, that provision shall be severed from this Agreement and shall not
affect the validity of the remainder of this Agreement.
8.3 Counterparts. This Agreement may be executed in any number of
counterparts, each of which shall be deemed to be an original and all of which
together shall comprise but a single instrument.
IN WITNESS OF THE FOREGOING, Owner and Manager have caused their duly
authorized representatives to execute this Agreement as of the date first above
written.
OWNER:
PGP SOUTHERN INDUSTRIAL II, L.P.,
a Delaware limited partnership
By: Pacific Gulf Properties Inc.,
a Maryland corporation,
its General Partner
By: _________________________
(Print Name and Title)
By: _________________________
(Print Name and Title)
MANAGER:
PACIFIC GULF PROPERTIES INC.,
a Maryland corporation
By: ________________________________
(Print Name and Title)
By: ________________________________
(Print Name and Title)
-6-
<PAGE> 1
LOAN NO. 3752ZR
================================================================================
CREDIT AGREEMENT
AMONG
PACIFIC GULF PROPERTIES INC.,
A MARYLAND CORPORATION,
AS BORROWER,
AND
WELLS FARGO BANK, NATIONAL ASSOCIATION
TOGETHER WITH THE OTHER LENDERS NAMED HEREIN
AND SUCH OTHER ASSIGNEES
BECOMING PARTIES HERETO PURSUANT
TO SECTION 11.12, AS LENDERS,
AND
WELLS FARGO BANK, NATIONAL ASSOCIATION,
AS AGENT
Dated as of April 9, 1998
================================================================================
<PAGE> 2
TABLE OF CONTENTS
-----------------
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
ARTICLE I DEFINITIONS.......................................................................1
1.1 CERTAIN DEFINED TERMS................................................................1
1.2 COMPUTATION OF TIME PERIODS.........................................................27
1.3 TERMS...............................................................................27
ARTICLE II LOANS...........................................................................28
2.1 LOAN ADVANCES AND REPAYMENT.........................................................28
2.2 AUTHORIZATION TO OBTAIN LOANS.......................................................32
2.3 LENDERS' ACCOUNTING.................................................................33
2.4 INTEREST ON THE LOANS...............................................................33
2.5 FEES................................................................................38
2.6 PAYMENTS............................................................................40
2.7 INCREASED CAPITAL...................................................................41
2.8 NOTICE OF INCREASED COSTS...........................................................41
ARTICLE III UNENCUMBERED POOL PROPERTIES...................................................42
3.1 ACCEPTANCE OF UNENCUMBERED POOL PROPERTIES..........................................42
3.2 TERMINATION OF DESIGNATION AS UNENCUMBERED POOL PROPERTY............................44
ARTICLE IV CONDITIONS TO LOANS.............................................................45
4.1 CONDITIONS TO INITIAL DISBURSEMENT OF LOANS.........................................45
4.2 CONDITIONS PRECEDENT TO ALL LOANS...................................................48
ARTICLE V REPRESENTATIONS AND WARRANTIES...................................................50
5.1 ORGANIZATION; CORPORATE POWERS......................................................50
5.2 AUTHORITY...........................................................................50
5.3 NO CONFLICT.........................................................................50
</TABLE>
i
<PAGE> 3
TABLE OF CONTENTS
-----------------
(CONTINUED)
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
5.4 CONSENTS AND AUTHORIZATIONS.........................................................50
5.5 GOVERNMENTAL REGULATION.............................................................51
5.6 PRIOR FINANCIALS....................................................................51
5.7 FINANCIAL STATEMENTS; PROJECTIONS AND FORECASTS.....................................51
5.8 PRIOR OPERATING STATEMENTS..........................................................51
5.9 QUARTERLY OPERATING REPORTS AND PROJECTIONS.........................................52
5.10 LITIGATION; ADVERSE EFFECTS.........................................................52
5.11 NO MATERIAL ADVERSE CHANGE..........................................................52
5.12 PAYMENT OF TAXES....................................................................52
5.13 MATERIAL ADVERSE AGREEMENTS.........................................................53
5.14 PERFORMANCE.........................................................................53
5.15 FEDERAL RESERVE REGULATIONS.........................................................53
5.16 DISCLOSURE..........................................................................53
5.17 REQUIREMENTS OF LAW.................................................................54
5.18 PATENTS, TRADEMARKS, PERMITS, ETC...................................................54
5.19 ENVIRONMENTAL MATTERS...............................................................54
5.20 UNENCUMBERED POOL PROPERTIES........................................................55
5.21 MAJOR AGREEMENTS; UPP LEASES........................................................55
5.22 SOLVENCY............................................................................55
5.23 TITLE TO ASSETS; NO LIENS...........................................................55
5.24 USE OF PROCEEDS.....................................................................55
5.25 CAPITALIZATION......................................................................55
5.26 ERISA...............................................................................55
5.27 STATUS AS A REIT....................................................................56
5.28 OWNERSHIP...........................................................................56
5.29 NYSE LISTING........................................................................56
5.30 REPRESENTATIONS AND WARRANTIES AS TO EACH GUARANTOR SUBSIDIARY......................56
</TABLE>
ii
<PAGE> 4
TABLE OF CONTENTS
-----------------
(CONTINUED)
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
ARTICLE VI REPORTING COVENANTS.............................................................59
6.1 FINANCIAL STATEMENTS AND OTHER FINANCIAL AND OPERATING INFORMATION..................59
6.2 ENVIRONMENTAL NOTICES...............................................................64
6.3 CONFIDENTIALITY.....................................................................65
ARTICLE VII AFFIRMATIVE COVENANTS..........................................................65
7.1 EXISTENCE...........................................................................65
7.2 QUALIFICATION.......................................................................66
7.3 COMPLIANCE WITH LAWS, ETC...........................................................66
7.4 PAYMENT OF TAXES AND CLAIMS.........................................................66
7.5 MAINTENANCE OF PROPERTIES; INSURANCE................................................66
7.6 INSPECTION OF PROPERTY; BOOKS AND RECORDS; DISCUSSIONS..............................67
7.7 MAINTENANCE OF PERMITS, ETC.........................................................67
7.8 CONDUCT OF BUSINESS.................................................................67
7.9 USE OF PROCEEDS.....................................................................67
7.10 SECURITIES LAW COMPLIANCE...........................................................67
7.11 CONTINUED STATUS AS A REIT; PROHIBITED TRANSACTIONS.................................67
7.12 LISTED COMPANY......................................................................68
7.13 CONSTRUCTION IN PROCESS.............................................................68
7.14 WITH RESPECT TO GUARANTOR SUBSIDIARIES..............................................68
7.15 INDEMNITY OF GUARANTOR SUBSIDIARIES.................................................69
ARTICLE VIII NEGATIVE COVENANTS............................................................70
8.1 LIENS, TRANSFERS, FUNDAMENTAL CHANGES...............................................70
8.2 AMENDMENT OF CONSTITUENT DOCUMENTS..................................................72
8.3 MARGIN REGULATIONS..................................................................73
8.4 MANAGEMENT..........................................................................73
8.5 BORROWER TO REMAIN A LISTED REIT....................................................73
8.6 MAJOR AGREEMENTS....................................................................73
</TABLE>
iii
<PAGE> 5
TABLE OF CONTENTS
-----------------
(CONTINUED)
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
ARTICLE IX FINANCIAL COVENANTS.............................................................74
9.1 MINIMUM NET WORTH...................................................................74
9.2 LEVERAGE RATIO......................................................................74
9.3 SECURED DEBT TO GROSS ASSET VALUE RATIO.............................................74
9.4 EBITDA TO INTEREST EXPENSE RATIO....................................................74
9.5 EBITDA TO DEBT SERVICE AND CAPITAL EXPENDITURES RATIO...............................75
9.6 UNENCUMBERED NOI TO UNSECURED INTEREST EXPENSE RATIO................................75
9.7 DISTRIBUTIONS.......................................................................75
9.8 PERMITTED INVESTMENTS, ETC..........................................................75
9.9 CALCULATION.........................................................................76
ARTICLE X EVENTS OF DEFAULT; RIGHTS AND REMEDIES...........................................77
10.1 EVENTS OF DEFAULT...................................................................77
10.2 RIGHTS AND REMEDIES.................................................................80
10.3 RESCISSION..........................................................................81
ARTICLE XI AGENCY PROVISIONS...............................................................82
11.1 APPOINTMENT.........................................................................82
11.2 NATURE OF DUTIES....................................................................82
11.3 LOAN DISBURSEMENTS..................................................................83
11.4 DISTRIBUTION AND APPORTIONMENT OF PAYMENTS..........................................86
11.5 RIGHTS, EXCULPATION, ETC............................................................87
11.6 RELIANCE............................................................................88
11.7 INDEMNIFICATION.....................................................................88
11.8 AGENT INDIVIDUALLY..................................................................88
11.9 SUCCESSOR AGENT; RESIGNATION OF AGENT; REMOVAL OF AGENT.............................89
11.10 CONSENT AND APPROVALS..............................................................90
11.11 AGENCY PROVISIONS RELATING TO CERTAIN ENFORCEMENT ACTIONS..........................92
</TABLE>
iv
<PAGE> 6
TABLE OF CONTENTS
-----------------
(CONTINUED)
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
11.12 ASSIGNMENTS AND PARTICIPATIONS....................................................93
11.13 RATABLE SHARING...................................................................96
11.14 DELIVERY OF DOCUMENTS.............................................................96
11.15 NOTICE OF EVENTS OF DEFAULT.......................................................97
ARTICLE XII MISCELLANEOUS..................................................................97
12.1 EXPENSES...........................................................................97
12.2 INDEMNITY..........................................................................98
12.3 CHANGE IN ACCOUNTING PRINCIPLES....................................................99
12.4 AMENDMENTS AND WAIVERS.............................................................99
12.5 INDEPENDENCE OF COVENANTS.........................................................101
12.6 NOTICES AND DELIVERY..............................................................101
12.7 SURVIVAL OF WARRANTIES, INDEMNITIES AND AGREEMENTS................................101
12.8 FAILURE OR INDULGENCE NOT WAIVER; REMEDIES CUMULATIVE.............................101
12.9 PAYMENTS SET ASIDE................................................................102
12.10 SEVERABILITY.....................................................................102
12.11 HEADINGS.........................................................................102
12.12 GOVERNING LAW....................................................................102
12.13 LIMITATION OF LIABILITY..........................................................102
12.14 SUCCESSORS AND ASSIGNS...........................................................103
12.15 CONSENT TO JURISDICTION AND SERVICE OF PROCESS; WAIVER OF JURY TRIAL.............103
12.16 SYNDICATION OF THE FACILITY......................................................104
12.17 COUNTERPARTS; EFFECTIVENESS; INCONSISTENCIES.....................................104
12.18 CONSTRUCTION.....................................................................104
12.19 ENTIRE AGREEMENT.................................................................104
</TABLE>
v
<PAGE> 7
TABLE OF CONTENTS
-----------------
(CONTINUED)
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
LIST OF EXHIBITS AND SCHEDULES
------------------------------
Exhibits:
- ---------
A - Form of Assignment and Assumption
B - Form of Unencumbered Pool Certificate
C - Form of Compliance Certificate
D - Form of Loan Notes
E - Form of Notice of Borrowing
F - Form of Fixed Rate Notice
G - Form of Subsidiary Guaranty
Schedules:
- ----------
1 - List of Unencumbered Pool Properties
5.1.19 - Environmental Matters
5.28 - Subsidiaries and Investment Partnerships
</TABLE>
vi
<PAGE> 8
CREDIT AGREEMENT
THIS CREDIT AGREEMENT is dated as of April 9, 1998 (as amended,
supplemented or modified from time to time, the "Agreement") and is among
PACIFIC GULF PROPERTIES INC., a Maryland corporation ("Borrower"), each of the
Lenders, as hereinafter defined, and WELLS FARGO BANK, NATIONAL ASSOCIATION
("Wells Fargo"), in its capacity as Agent and as a Lender.
RECITAL
-------
A. Borrower has requested that Lenders extend an unsecured
revolving loan facility to Borrower, the proceeds of which will be used in
accordance with the provisions of this Agreement, and Lenders are willing to
extend the requested facility on the terms and conditions set forth herein.
NOW, THEREFORE, the parties hereto agree as follows:
ARTICLE I
---------
DEFINITIONS
-----------
1.1 Certain Defined Terms. The following terms used in this Agreement
shall have the following meanings (such meanings to be applicable, except to the
extent otherwise indicated in a definition of a particular term, both to the
singular and the plural forms of the terms defined):
"Accommodation Obligations", as applied to any Person, means (a)
any Indebtedness of another Person in respect of which that Person is liable,
including, without limitation, any such Indebtedness directly or indirectly
guaranteed, endorsed (otherwise than for collection or deposit in the ordinary
course of business), co-made or discounted or sold with recourse by that Person,
or in respect of which that Person is otherwise directly or indirectly liable,
including in respect of any Partnership in which that Person is a general
partner; or (b) Contractual Obligations (contingent or otherwise) arising
through any agreement to purchase, repurchase or otherwise acquire such
Indebtedness or any security therefor, or to provide funds for the payment or
discharge thereof (whether in the form of loans, advances, stock purchases,
capital contributions or otherwise), or to maintain solvency, assets, level of
income, or other financial condition,
<PAGE> 9
or to make payment other than for value received; but excluding, in the case of
Nonrecourse Indebtedness of an Investment Partnership that is otherwise included
in Indebtedness of Borrower, the amount of such Indebtedness in excess of
Borrower's Share thereof.
"Accountants" means Ernst & Young, LLP or any other "big six"
accounting firm or another firm of certified public accountants of national
standing selected by Borrower and acceptable to Agent.
"Acquisition Price" means the aggregate purchase price for an
asset including bona fide purchase money financing provided by the seller and
all (or Borrower's Share of, as applicable) existing Indebtedness pertaining to
such asset.
"Affiliates" as applied to any Person, means any other Person
directly or indirectly controlling, controlled by, or under common control with,
that Person. For purposes of this definition, "control" (including, with
correlative meanings, the terms "controlling", "controlled by" and "under common
control with"), as applied to any Person, means (a) the possession, directly or
indirectly, of the power to vote ten percent (10%) or more of the Securities
having voting power for the election of directors of such Person or otherwise to
direct or cause the direction of the management and policies of that Person,
whether through the ownership of voting Securities or by contract or otherwise,
or (b) the ownership of a general partnership interest or a limited partnership
interest (or other ownership interest) representing ten percent (10%) or more of
the outstanding limited partnership interests or other ownership interests of
such Person.
"Agent" means Wells Fargo in its capacity as agent for the
Lenders under this Agreement, and shall include any successor Agent appointed
pursuant hereto and shall be deemed to refer to Wells Fargo in its individual
capacity as a Lender where the context so requires.
"Apartment Property" means a Property improved (or, in the case
of Construction in Process, being improved) with a multi-family apartment
project.
"Applicable LIBO Rate Margin" means, as of any date of
determination:
(a) If Borrower's senior long-term unsecured debt obligations are
rated by both Moody's and Standard & Poor's or by either Moody's or Standard &
Poor's and at least one other Rating Agency: (i) 0.80%, if Borrower's Rating is
at least A-/A3, (ii) 0.90%, if Borrower's Rating is at least BBB+/Baa1 but the
condition set forth in clause (i) of this definition is not satisfied, (iii)
1.00%, if Borrower's Rating is at least BBB/Baa2 but neither the condition set
forth
2
<PAGE> 10
in clause (i) of this definition nor the condition set forth in clause (ii) of
this definition is satisfied, or (iv) 1.10, if Borrower's Rating is at least
BBB-/Baa3 but neither the condition set forth in clause (i) of this definition,
nor the condition set forth in clause (ii) of this definition, nor the condition
set forth in clause (iii) of this definition, is satisfied; or
(b) in any other case (including, without limitation, if
Borrower's senior long-term unsecured debt obligations are not rated by at least
two Rating Agencies, one of which is either Moody's or Standard & Poor's, or if
Borrower's Rating is less than BBB-/Baa3, but subject to the proviso at the end
of the following paragraph): (i) 1.10% if, for the most recent Fiscal Quarter in
respect of which Borrower is required to have delivered Financial Statements,
the Leverage Ratio was less than 0.25:1; (ii) 1.20% if, for the most recent
Fiscal Quarter in respect of which Borrower is required to have delivered
Financial Statements, the Leverage Ratio was greater than or equal to 0.25:1 but
less than 0.35:1; (iii) 1.25% if, for the most recent Fiscal Quarter in respect
of which Borrower is required to have delivered Financial Statements, the
Leverage Ratio was greater than or equal to 0.35:1 but less than 0.45:1; or (iv)
1.30% if, for the most recent Fiscal Quarter in respect of which Borrower is
required to have delivered Financial Statements, the Leverage Ratio was not less
than 0.45:1.
If Borrower receives ratings from two or more Rating Agencies and such ratings
are not equivalent to each other, then either Moody's or Standard & Poor's (or,
if both have provided ratings which are not equivalent, then the higher of such
two ratings) shall constitute Borrower's "Rating" for purposes of determining
the Applicable LIBO Rate Margin. Each change in the Applicable LIBO Rate shall
become effective (x) if paragraph (a) of this definition applies, on the date as
of which any change in Borrower's Rating becomes effective; or (y) if paragraph
(b) of this definition applies, on the forty-fifth (45th) day after the end of
the relevant Fiscal Quarter; provided that if, as of the forty-fifth (45th) day
after the end of a Fiscal Quarter, Borrower has not delivered the Compliance
Certificate required to be delivered pursuant to Section 6.1.4 setting forth the
Leverage Ratio for such Fiscal Quarter, then, for the period commencing on such
forty-fifth (45th) day and continuing until such Compliance Certificate is so
delivered, the "Applicable LIBO Rate Margin" shall be 1.30%.
"Assignment and Assumption" means an Assignment and Assumption in
the form of Exhibit A hereto (with blanks appropriately filled in) delivered to
Agent in connection with each assignment of a Lender's interest under this
Agreement pursuant to Section 11.12.
"Base Rate" means, on any day, the higher of (a) the base rate of
interest per annum established from time to time by Wells Fargo at its principal
office in San
3
<PAGE> 11
Francisco, California, and designated as its "prime rate" as in effect on such
day, and (b) one-half of one percent (0.5%) plus the Federal Funds Rate in
effect on such day.
"Base Rate Loans" means those Loans bearing interest at the Base
Rate.
"Benefit Plan" means any employee pension benefit plan as defined
in Section 3(2) of ERISA (other than a Multiemployer Plan) in respect of which a
Person or an ERISA Affiliate is, or within the immediately preceding five (5)
years was, an "employer" as defined in Section 3(5) of ERISA.
"Borrower Debt" means (without duplication) all Indebtedness of
Borrower or any Subsidiary of Borrower (without offset or reduction in respect
of prepaid interest, restructuring fees or similar items) minus, in the case of
Nonrecourse Indebtedness of an Investment Partnership that is otherwise included
in Indebtedness of Borrower, the amount of such Indebtedness in excess of
Borrower's Share thereof.
"Borrower's Share" means, in the case of an Investment
Partnership, Borrower's percentage ownership interest therein.
"Borrowing" means a borrowing under the Facility, including a
Swing Line Borrowing.
"Business Day" means (a) with respect to any Borrowing, payment
or rate determination of LIBOR Loans, a day, other than a Saturday or Sunday, on
which Agent is open for business in San Francisco and on which dealings in
Dollars are carried on in the London interbank market, and (b) for all other
purposes any day excluding Saturday, Sunday and any day which is a legal holiday
under the laws of the State of California, or is a day on which banking
institutions located in California are required or authorized by law or other
governmental action to close.
"Business Park Property" means a Property, zoned for industrial
or other commercial use and improved (or, in the case of Construction in
Process, being improved) with one or more buildings designed for industrial or
warehouse purposes (and office space incidental to such use), with respect to
which the net rentable square footage of such Property occupied by tenants,
divided by the number of tenants of such Property, is less than 5,000 square
feet.
"Capital Expenditures" means for any period, the sum of the
following, as applicable: (a) for Industrial Properties and Business Park
Properties, the product of (i) $0.10 (prorated if the relevant period is shorter
or longer than one year) times (ii) the sum of (A) total net rentable square
footage of such Properties then owned or leased by
4
<PAGE> 12
Borrower or a Subsidiary of Borrower, plus (B) Borrower's Share of net rentable
square footage of such Properties then owned or leased by any Investment
Partnership; plus (b) for Apartment Properties, the product of (i) $250
(prorated, if the relevant period is shorter or longer than one year), times
(ii) the number of units included therein (or, in the case of an Investment
Partnership, Borrower's Share of such product); and, when used with respect to
one or more individual Properties, shall have a correlative meaning.
"Capital Leases", as applied to any Person, means 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.
"Cash Equivalents" means (a) 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 (1) year after the date of acquisition thereof;
(b) 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 ninety (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 the Rating Agencies (or, if at any
time no two of the foregoing shall be rating such obligations, then from such
other nationally recognized rating services as may be acceptable to Agent) and
not listed for possible down-grade in Credit Watch published by Standard &
Poor's; (c) commercial paper, other than commercial paper issued by Borrower or
any of its Affiliates, maturing no more than ninety (90) days after the date of
creation thereof and, at the time of acquisition, having a rating of at least
A-1 or P-1 from either Standard & Poor's or Moody's (or, if at any time neither
Standard & Poor's nor Moody's shall be rating such obligations, then the highest
rating from such other nationally recognized rating services as may be
acceptable to Agent); and (d) domestic and Eurodollar certificates of deposit or
time deposits or bankers' acceptances maturing within ninety (90) days after the
date of acquisition thereof, 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 (i) 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 Two Hundred Fifty Million Dollars ($250,000,000) or (ii) any Lender.
"Clause (a) Property" has the meaning given to such term in the
definition of "Individual UPP Value".
5
<PAGE> 13
"Clause (b) Property" has the meaning given to such term in the
definition of "Individual UPP Value".
"Closing Date" means the date on which this Agreement shall
become effective in accordance with Section 12.16.
"Commission" means the Securities and Exchange Commission.
"Commitment" means, with respect to any Lender, such Lender's Pro
Rata Share of the Facility, which amount shall not exceed the principal amount
set out under such Lender's name under the heading "Loan Commitment" on the
signature pages attached to this Agreement or as set forth on an Assignment and
Assumption executed by such Lender, as assignee.
"Compliance Certificate" means a certificate in the form of
Exhibit C delivered to Agent by Borrower pursuant to Section 6.1.4 or any other
provision of this Agreement and covering Borrower's compliance with the
covenants contained in Section 8.4 and Article IX.
"Confidential Information" has the meaning given to such term in
Section 6.3.
"Construction in Process" means an Apartment Property, Industrial
Property or Business Park Property on which building improvements are (or have
been) under construction, until six (6) months after completion of construction
of such improvements, and (a) a certificate of occupancy (or its equivalent), if
required, has been issued with respect to all such improvements or (b) with
respect to rehabilitation projects to which clause (a) does not apply, such
improvements are available for immediate occupancy.
"Contaminant" means any pollutant (as that term is defined in 42
U.S.C. 9601(33)) or toxic pollutant (as that term is defined in 33 U.S.C.
1362(13)), hazardous substance (as that term is defined in 42 U.S.C. 9601(14)),
hazardous chemical (as that term is defined by 29 CFR Section 1910.1200(c)),
toxic substance, hazardous waste (as that term is defined in 42 U.S.C. 6903(5)),
radioactive material, special waste, petroleum (including crude oil or any
petroleum-derived substance, waste, or breakdown or decomposition product
thereof), any constituent of any such substance or waste, including, but not
limited to, polychlorinated biphenyls and asbestos, or any other substance or
waste deleterious to the environment the release, disposal or remediation of
which is now or at any time becomes subject to regulation under any
Environmental Law.
6
<PAGE> 14
"Contractual Obligation," as applied to any Person, means any
provision of any Securities issued by that Person or any indenture, mortgage,
deed of trust, lease, contract, undertaking, document or instrument to which
that Person is a party or by which it or any of its properties is bound, or to
which it or any of its properties is subject (including, without limitation, any
restrictive covenant affecting such Person or any of its properties).
"Court Order" means any judgment, writ, injunction, decree, rule
or regulation of any court or Governmental Authority binding upon or applicable
the Person in question.
"Debt Service" means, for any period, Interest Expense for such
period plus scheduled principal amortization (i.e., excluding any balloon
payment due at maturity) for such period on all Borrower Debt.
"Default Rate" has the meaning given to such term in Section
2.4.4.
"Defaulting Lender" means any Lender which fails or refuses to
perform its obligations under this Agreement within the time period specified
for performance of such obligation or, if no time frame is specified, if such
failure or refusal continues for a period of five (5) Business Days after notice
from Agent.
"DOL" means the United States Department of Labor and any
successor department or agency.
"Dollars" and "$" means the lawful money of the United States of
America.
"Duff & Phelps" means Duff & Phelps Credit Rating Co.
"EBITDA" means, at any time and for any period, (a) (i) the sum
of the amounts for such period of (A) Net Income (excluding any portion of the
net income of any Effectively Controlled Investment Partnership that would
otherwise be included in determining Net Income), (B) depreciation and
amortization expense and other non-cash items deducted on the Financial
Statements in determining such Net Income, (C) Interest Expense, (D) Taxes, (E)
Borrower's Share of the net income of any Effectively Controlled Investment
Partnership and (F) without redundancy, Borrower's Share of depreciation and
amortization expense and other non-cash items, Interest Expense and Taxes
deducted on the financial statements of any Investment Partnership in
determining the net income thereof, minus (ii) the sum for such period of the
net income of any Investment Partnership that is included in Net Income, except
to the extent of the amount of cash dividends or other cash distributions
actually paid to Borrower by such Person
7
<PAGE> 15
during such period; and (b) minus gains (and plus losses) for such period from
extraordinary items or asset sales or write-ups or write-downs or forgiveness of
Indebtedness.
"Effectively Controlled Investment Partnership" means any
Investment Partnership that Agent, in its reasonable discretion, has determined
is effectively controlled by Borrower.
"Eligible Assignee" means (a) (i) (A) a commercial bank organized
under the laws of the United States or any state thereof; (B) a savings and loan
association or savings bank organized under the laws of the United States or any
state thereof; or (C) a commercial bank organized under the laws of any other
country or a political subdivision thereof, provided that (x) such bank is
acting through a branch or agency located in the United States, or (y) such bank
is organized under the laws of a country that is a member of the Organization
for Economic Cooperation and Development or a political subdivision of such
country; that (ii) in each case, is (A) reasonably acceptable to Agent and
(provided that no Event of Default has occurred and is continuing) Borrower, and
(B) has total assets in excess of $10,000,000,000 and a rating on its (or its
parent's) senior unsecured debt obligations of at least BBB/Baa2 by one of the
Rating Agencies; or (b) any Lender or (after the occurrence and during the
continuation of any Event of Default) Affiliate of any Lender; provided that no
Affiliate of Borrower shall be an Eligible Assignee.
"Eligible Ground Lease" means (a) a Grandfathered Ground Lease or
(b) a ground lease (i) between Borrower, as lessee, and an owner of the
underlying fee, as lessor, (ii) which may be transferred and/or assigned and/or
subleased without the consent of the lessor (or as to which the lease expressly
provides that (A) such lease may be transferred and/or assigned with the consent
of the lessor and (B) such consent shall not be unreasonably withheld or
delayed), (iii) which has a remaining term (including any renewal terms
exercisable at the sole option of the lessee) of at least thirty (30) years,
(iv) under which no material default has occurred and is continuing, (v) with
respect to which a Lien may be granted without the consent of the lessor (or
with such consent, which is not to be unreasonably withheld or delayed), (vi)
under which at any time the rent payable by the lessee thereunder for the
preceding four (4) Fiscal Quarters does not exceed twenty percent (20%) of the
sum of (A) such rent and (B) the Net Operating Income of the Property for such
four (4) Fiscal Quarters (or, if such Property has been owned by the Borrower
for less than four Fiscal Quarters, the Borrower's projection of the Net
Operating Income for the first four Fiscal Quarters of its ownership of such
Property, adjusted to reflect the actual Net Operating Income for the Fiscal
Quarters in which the Borrower owns such Property, all as approved by Agent),
(vii) which contains lender protection provisions acceptable to Agent,
including, without limitation, provisions
8
<PAGE> 16
to the effect that (A) the lessor shall notify any holder of a Lien on Lessee's
interest under such lease of the occurrence of any default by the lessee under
such Lease and shall afford such holder the option to cure such default, and (B)
in the event that such lease is terminated, such holder shall have the option to
enter into a new lease having terms substantially identical to those contained
in the terminated lease, and (viii) otherwise in a form generally financible
under normal and customary criteria established by long-term institutional
lenders. Upon the submission to Agent of a written request for approval of the
lender protection provisions and other terms of a proposed Eligible Ground
Lease, Agent shall respond by accepting or rejecting such proposal within ten
(10) business days following receipt of such request; provided that the
foregoing shall not limit the general applicability of Article III regarding
acceptance of a proposed Property as a UPP, including the required approval of
Requisite Lenders.
"Environmental Laws" has the meaning set forth in Section 5.1.19.
"Environmental Lien" means a Lien in favor of any Governmental
Authority for (a) any liability under Environmental Laws, or (b) damages arising
from, or costs incurred by such Governmental Authority in response to, a Release
or threatened Release of a Contaminant into the environment.
"ERISA" means the Employee Retirement Income Security Act of
1974, as amended from time to time, and any successor statute.
"ERISA Affiliate" means, as to any Person, any (a) corporation
which is, becomes, or is deemed to be a member of the same controlled group of
corporations (within the meaning of Section 414(b) of the Internal Revenue Code)
as such Person, (b) partnership, trade or business (whether or not incorporated)
which is, becomes or is deemed to be under common control (within the meaning of
Section 414(c) of the Internal Revenue Code) with such Person, (c) other Person
that is, becomes or is deemed to be a member of the same "affiliated service
group" (as defined in Section 414(m) of the Internal Revenue Code) as such
Person, or (d) any other organization or arrangement described in Section 414(o)
of the Internal Revenue Code which is, becomes or is deemed to be required to be
aggregated pursuant to regulations issued under Section 414(o) of the Internal
Revenue Code with such Person pursuant to Section 414(o) of the Internal Revenue
Code.
"Existing Facility" has the meaning given to such term is Section
4.1.15.
"Extension Fee" has the meaning given to such term in Section
2.1.4.
9
<PAGE> 17
"Event of Default" means any of the occurrences set forth in
Article X after the expiration of any applicable grace period expressly provided
therein.
"Facility" means the loan facility of One Hundred Fifty Million
Dollars ($150,000,000) described in Section 2.1.1.
"FDIC" means the Federal Deposit Insurance Corporation or any
successor thereto.
"Federal Funds Rate" means, for any period, a fluctuating
interest rate per annum equal for each day during such period to the weighted
average of the rates on overnight Federal Funds transactions with members of the
Federal Reserve System arranged by Federal Funds brokers, 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, or, if such rate is not so published
for any day which is a Business Day, the average of the quotations for such day
on such transactions received by Agent from three Federal Funds brokers of
recognized standing selected by Agent.
"Federal Reserve Board" means the Board of Governors of the
Federal Reserve System or any governmental authority succeeding to its
functions.
"Financial Statements" has the meaning given to such term in
Section 6.1.2.
"Fiscal Quarter" means each three-month period ending on March
31, June 30, September 30 and December 31.
"Fiscal Year" means the fiscal year of Borrower, which shall be
the twelve (12) month period ending on the last day of December in each year.
"Fitch" means Fitch Investors Service, L.P.
"Fixed Rate Notice" means, with respect to a LIBOR Loan pursuant
to Section 2.1.2, a notice substantially in the form of Exhibit F.
"Fixed Rate Price Adjustment" has the meaning given to such term
in Section 2.4.8(c).
"Funding Date" means, with respect to any Loan, the date of the
funding of such Loan.
"Funds from Operations" means, for any period, Net Income plus
the sum of depreciation of real estate assets, amortization (except for
amortization of deferred
10
<PAGE> 18
financing costs) and other non-cash items deducted on the Financial Statements
in determining such Net Income, minus gains (or plus losses) on sales of real
estate, Investments (excluding Cash Equivalents) or other assets, or other
extraordinary items, as such definition of "Funds from Operations" may be
amended from time to time by the National Association of Real Estate Investment
Trusts.
"GAAP" means generally accepted accounting principles set forth
in the opinions and pronouncements of the Accounting Principles Board and the
American Institute of Certified Public Accountants and statements and
pronouncements of the Financial Accounting Standards Board, or in such other
statements by such other entity as may be in general use by significant segments
of the accounting profession, which are applicable to the circumstances as of
the date of determination.
"Governmental Authority" means any nation or government, any
federal, state, local, municipal or other political subdivision thereof or any
entity exercising executive, legislative, judicial, regulatory or administrative
functions of or pertaining to government.
"Grandfathered Ground Lease" means each of the ground leases
identified on Schedule 1 attached hereto as a "Grandfathered Ground Lease," as
such lease is in effect on the date hereof or as hereafter amended with the
consent of Requisite Lenders.
"Gross Asset Value" means, as at any date of determination, the
sum of the following (without duplication of any item, and excluding from Gross
Asset Value that portion thereof which exceeds any limit thereon imposed under
Section 9.8):
(a) cash and Cash Equivalents of the Borrower or any Subsidiary
(but, in each case, excluding any tenant deposits or other amounts the use of
which is restricted in such a way as to make it unavailable for the paying of
such Person's general obligations in the ordinary course of business);
(b) in the case of Apartment Properties, Industrial Properties or
Business Park Properties other than Construction in Process, an amount equal to
(i) if such Property has been owned by Borrower, a Subsidiary or an Effectively
Controlled Investment Partnership for at least one Fiscal Quarter, (A) the
aggregate Net Operating Income of such Property (or in the case of Property
owned by an Effectively Controlled Investment Partnership, Borrower's Share of
such aggregate Net Operating Income) for the most recently ended Fiscal Quarter,
times (B) four (4), divided by (C) (1) 0.09, if such Property is an Apartment
Property not described in the following clause (2); (2) 0.075, if such Property
is an Apartment Property the construction, acquisition or rehabilitation of
which has been and continues to be financed by the issuance of debt Securities
the
11
<PAGE> 19
interest on which is exempt from federal income taxation; (3) 0.10, if such
Property is an Industrial Property; and (4) 0.105, if such Property is a
Business Park Property; or (ii) if such Property has not been owned by Borrower,
such Subsidiary or such Effectively Controlled Investment Partnership for at
least one Fiscal Quarter, the Acquisition Price of such Property (or, in the
case of a Property owned by an Effectively Controlled Investment Partnership,
Borrower's Share thereof).
(c) in the case of Non-Core Properties owned by Borrower or any
Subsidiary, the undepreciated book value thereof, as reflected in Borrower's
books and records maintained in accordance with GAAP;
(d) in the case of Land, zero; and
(e) (i) the book value of Construction in Process owned by
Borrower or any Subsidiary, as reflected in Borrower's books and records
maintained in accordance with GAAP, plus (ii) Borrower's Share of the book value
of Construction in Process of an Effectively Controlled Investment Partnership
as reflected in such Effectively Controlled Investment Partnership's books and
records maintained in accordance with GAAP.
"Guarantor Subsidiary" means any Subsidiary that is wholly-owned
by Borrower and the charter documents of which the Requisite Lenders have
approved in accordance with Section 3.1, which (i) owns one or more Unencumbered
Pool Properties, and (ii) has executed and delivered a Guaranty that is, at the
time of determination, in full force and effect.
"Guaranty" means a guaranty of payment and performance executed
by a Guarantor Subsidiary in favor of Agent and Lenders in substantially the
form of Exhibit G hereto.
"Indebtedness", as applied to any Person (and without
duplication), means (a) the principal amount of all indebtedness of such Person
for borrowed money, (b) the principal amount of all indebtedness of such Person
evidenced by Securities or other similar instruments, (c) all reimbursement
obligations and other liabilities of such Person with respect to letters of
credit or banker's acceptances issued for such Person's account, (d) all
obligations of such Person to pay the deferred purchase price of Property or
services (but excluding deferred compensation owed to Borrower's employees), (e)
that portion of such Person's obligations in respect of Capital Leases that
would be reported as principal under GAAP, (f) all Accommodation Obligations of
such Person, (g) all indebtedness, obligations or other liabilities of such
Person or others secured by a Lien on any asset of such Person, whether or not
such indebtedness, obligations or liabilities are assumed by, or are a personal
liability of, such Person (including, without limitation, the
12
<PAGE> 20
principal amount of any indebtedness secured by a Lien encumbering any Property
subject to which such Person has taken title to such Property but excluding any
taxes, assessments or similar obligations encumbering any Property), (h) all
non-contingent net indebtedness, obligations or other liabilities (other than
interest expense liability) in respect of Interest Rate Contracts and foreign
currency exchange agreements, and (i) Borrower's Share of all Indebtedness of
any Effectively Controlled Investment Partnership to the extent not otherwise
included in Indebtedness. Indebtedness shall not include accrued ordinary
operating expenses payable on a current basis.
"Individual Occupancy Rate" means, with respect to any Property,
at any time, the ratio (expressed as a percentage), as of such date, of (a) if
such Property is not an Apartment Property, (i) the net rentable square footage
of such Property occupied by tenants paying rent pursuant to binding leases as
to which no monetary default has occurred and is continuing, to (ii) the total
net rentable square footage comprising such Property; and (b) if such Property
is an Apartment Property, (i) the total number of apartment units in such
Apartment Property that are occupied by tenants paying rent pursuant to binding
leases as to which not monetary default has occurred and is continuing, to (ii)
the total number of apartment units comprising such Apartment Property.
"Individual UPP Value" means, with respect to any Unencumbered
Pool Property or proposed Unencumbered Pool Property:
(a) if such Property has been owned by Borrower or the relevant
Guarantor Subsidiary for at least one Fiscal Quarter and the Individual
Occupancy Rate of such Property has been 85% or more for each of the three
consecutive months then most recently ended ("Clause (a) Property"), an amount
equal to (i) the aggregate Net Operating Income of such Property for the most
recently ended Fiscal Quarter, times (ii) four (4), divided by (iii) (A) 0.09,
if such Property is an Apartment Property; (B) 0.10 if such Property is an
Industrial Property; and (C) 0.105 if such Property is a Business Park Property;
(b) if such Property has been owned by Borrower or the relevant
Guarantor Subsidiary for at least one Fiscal Quarter and the Individual
Occupancy Rate of such Property has been less than 85% for any of the three
consecutive months then most recently ended ("Clause (b) Property"), an amount
equal the greater of (i) eight-five percent (85%) of such Property's book value,
as reflected in Borrower's books and records maintained in accordance with GAAP,
or (ii) the amount determined with respect to such Property in accordance with
the formula set forth in the preceding paragraph (a);
13
<PAGE> 21
(c) if such Property is Construction in Process, seventy-five
percent (75%) of the book value thereof; and
(d) if such Property is not Construction in Process and has not
been owned by Borrower or the relevant Guarantor Subsidiary for at least one
Fiscal Quarter, the Acquisition Price of such Property;
provided that, for any Grandfathered Ground Lease, "Individual UPP Value" shall
mean an amount equal to seventy-seven percent (77%) of the amount determined in
accordance with the preceding clauses (a) through (d), as applicable.
"Industrial Property" means a Property, zoned for industrial or
other commercial use and improved (or, in the case of Construction in Process,
being improved) with one or more buildings designed for industrial or warehouse
purposes (and office space incidental to such use), with respect to which the
net rentable square footage of such Property occupied by tenants, divided by the
number of tenants of such Property, is equal to or greater than 5,000 square
feet.
"Intangible Assets" means all assets that would be classified as
intangible assets under GAAP, including, without limitation, goodwill, patents,
trademarks, trade names, copyrights and franchises, treasury stock held by
Borrower or any consolidated Subsidiary of Borrower, and deferred charges
(including but not limited to unamortized debt discount and expense,
organization expenses, experimental and development (i.e., "R&D") expenses, but
excluding prepaid expenses).
"Interest Expense" means, for any period, the total of the
following in respect of Borrower Debt (without duplication): (a) total interest
expense for such period, determined in accordance with GAAP, plus (b) the total
of all interest capitalized during such period, other than capitalized interest
covered by an interest reserve established under a loan facility, plus (c) to
the extent not included in interest expense under GAAP, all commissions,
discounts and other fees and charges owed with respect to letters of credit, net
costs under Interest Rate Contracts, and Unused Facility Fees payable to
Lenders.
"Interest Period" means, relative to any LIBOR Loans comprising
part of the same Borrowing, the period beginning on (and including) the date on
which such LIBOR Loans are made as, or converted into, LIBOR Loans, and ending
on the last day of the period selected by Borrower pursuant to the provisions
below and, thereafter (to the extent applicable), each subsequent period
commencing on the last day of the immediately preceding Interest Period and
ending on the last day of the period selected by Borrower pursuant to the
provisions below. The duration of each such Interest Period
14
<PAGE> 22
shall be one (1), two (2), three (3) or six (6) months as Borrower may select in
its relevant Notice of Borrowing pursuant to Section 2.1.2; provided, however,
that:
(a) if such Interest Period would otherwise end on a day which is
not a Business Day, such Interest Period shall end on the next following
Business Day; provided, however, that, if such extension would cause the
Interest Period to end in the next following calendar month, the Interest Period
shall end on the next preceding Business Day;
(b) if such Interest Period begins on a day of an initial
calendar month for which there is no numerically corresponding day in the
calendar month that succeeds such initial calendar month by the number of months
equal to the number of months in such Interest Period, such Interest Period
shall end on the last Business Day of such succeeding calendar month; and
(c) no Interest Period may end later than the then applicable
Termination Date.
"Interest Rate Contracts" means, collectively, interest rate
swap, collar, cap or similar agreements providing interest rate protection.
"Internal Revenue Code" means the Internal Revenue Code of 1986,
as amended from time to time hereafter, and any successor statute.
"Investment" means, as applied to any Person, any direct or
indirect purchase or other acquisition by that Person of Securities, or of a
beneficial interest in Securities, of any other Person, and any direct or
indirect loan, advance (other than deposits with financial institutions
available for withdrawal on demand, prepaid expenses, advances to employees and
similar items made or incurred in the ordinary course of business), or capital
contribution by such Person to any other Person, including all Indebtedness and
accounts owed by that other Person which are not current assets or did not arise
from sales of goods or services to that Person in the ordinary course of
business.
"Investment Mortgages" mean first-lien mortgages securing
indebtedness directly or indirectly owned by Borrower or any Subsidiary of
Borrower, including senior certificates of interest in real estate mortgage
investment conduits.
"Investment Partnership" means any Partnership in which Borrower
or any Subsidiary of Borrower has an ownership interest, whose financial results
are not consolidated with those of Borrower under GAAP.
15
<PAGE> 23
"IRS" means the Internal Revenue Service and any Person
succeeding to the functions thereof.
"Land" means unimproved real estate, including future phases of a
partially completed project, owned or leased for the purpose of future
development of building improvements. For purposes of the foregoing definition,
"unimproved" shall mean Land on which (a) no building permit has been issued, or
(b) if a building permit has been issued the construction of building
improvements has not commenced or, if commenced, has been discontinued for a
continuous period longer than sixty (60) days prior to completion.
"Lender Taxes" has the meaning given to such term in Section
2.4.7.
"Leverage Ratio" means, at any time, the ratio of Total
Liabilities to Gross Asset Value.
"Lenders" means Wells Fargo and any other bank, finance company,
insurance or other financial institution which is or becomes a party to this
Agreement by execution of a counterpart signature page hereto or an Assignment
and Assumption, as a permitted assignee. At all times that there are no Lenders
other than Wells Fargo, the terms "Lender" and "Lenders" means Wells Fargo in
its individual capacity. With respect to matters requiring the consent to or
approval of all Lenders at any given time, all then existing Defaulting Lenders
will be disregarded and excluded, and, for voting purposes only, "all Lenders"
shall be deemed to mean "all Lenders other than Defaulting Lenders".
"Liabilities and Costs" means all claims, judgments, liabilities,
obligations, responsibilities, losses, damages (including lost profits),
punitive or treble damages, costs, disbursements and expenses (including,
without limitation, reasonable attorneys', experts' and consulting fees and
costs of investigation and feasibility studies), fines, penalties and monetary
sanctions, interest, direct or indirect, known or unknown, absolute or
contingent, past, present or future.
"LIBOR" means, relative to any Interest Period for any LIBOR Loan
included in any Borrowing, the per annum rate (reserve adjusted as hereinbelow
provided) of interest quoted by Agent, rounded upwards, if necessary, to the
nearest one-sixteenth of one percent (0.0625%) at which Dollar deposits in
immediately available funds are offered by Agent to leading banks in the
Eurodollar interbank market at approximately 9:00 a.m. (Pacific Coast time) two
(2) Business Days prior to the beginning of such Interest Period, for delivery
on the first day of such Interest Period for a period approximately equal to
such Interest Period and in an amount equal or
16
<PAGE> 24
comparable to the LIBOR Loan to which such Interest Period relates. The
foregoing rate of interest shall be reserve adjusted by dividing LIBOR by one
(1.00) minus the LIBOR Reserve Percentage, with such quotient to be rounded
upward to the nearest whole multiple of one-hundredth of one percent (0.01%).
All references in this Agreement or other Loan Documents to LIBOR shall mean and
include the aforesaid reserve adjustment.
"LIBOR Loan" means a Loan bearing interest, at all times during
an Interest Period applicable to such Loan, at a fixed rate of interest
determined by reference to LIBOR.
"LIBOR Office" means, relative to any Lender, the office of such
Lender designated as such on the counterpart signature pages hereto or such
other office of a Lender as designated from time to time by notice from such
Lender to Agent, whether or not outside the United States, which shall be making
or maintaining LIBOR Loans of such Lender.
"LIBOR Reserve Percentage" means, relative to any Interest Period
for LIBOR Loans made by any Lender, the reserve percentage (expressed as a
decimal) equal to the actual aggregate reserve requirements (including all
basic, emergency, supplemental, marginal and other reserves and taking into
account any transactional adjustments or other scheduled changes in reserve
requirements) announced within Agent as the reserve percentage applicable to
Agent as specified under regulations issued from time to time by the Federal
Reserve Board. The LIBOR Reserve Percentage shall be based on Regulation D of
the Federal Reserve Board or other regulations from time to time in effect
concerning reserves for "Eurocurrency Liabilities" from related institutions as
though Agent were in a net borrowing position.
"Lien" means any mortgage, deed of trust, pledge, hypothecation,
assignment, deposit arrangement, security interest, encumbrance (including, but
not limited to, easements, rights-of-way, zoning restrictions and the like),
lien (statutory or other), preference, priority or other security agreement or
preferential arrangement of any kind or nature whatsoever, including without
limitation any conditional sale or other title retention agreement, the interest
of a lessor under a Capital Lease, any financing lease having substantially the
same economic effect as any of the foregoing, and the filing of any financing
statement or document having similar effect (other than a financing statement
filed by a "true" lessor pursuant to Section 9408 of the Uniform Commercial
Code) naming the owner of the asset to which such Lien relates as debtor, under
the Uniform Commercial Code or other comparable law of any jurisdiction.
"Loan Account" has the meaning given to such term in Section 2.3.
17
<PAGE> 25
"Loan Availability" means, at any time, the lesser of (a) an
amount equal to the positive difference, if any, of (i) 57.14286% of the
Unencumbered Pool Value, less (ii) Unsecured Liabilities other than the
outstanding principal of the Loans; and (b) the amount of the Facility from time
to time.
"Loan Documents" means this Agreement, the Loan Notes and all
other agreements, instruments and documents (together with amendments and
supplements thereto and replacements thereof) now or hereafter executed by
Borrower, Guarantor Subsidiary or any other Person that evidence or guarantee
the Obligations.
"Loan Notes" means the promissory notes evidencing the Loans in
the aggregate face amount of One Hundred Fifty Million Dollars ($150,000,000)
executed by Borrower in favor of Lenders, as they may be amended, supplemented,
replaced or modified from time to time. The initial Loan Notes, and any
replacements thereof, shall be substantially in the form of Exhibit D.
"Loans" means the loans made pursuant to the Facility (including,
except where the context otherwise requires, Swing Line Borrowings), as well as
each Loan, initially made under the Swing Line, that is deemed converted into a
Loan pursuant to Section 11.3.3; provided that (a) if any such Loan or Loans (or
portions thereof) is/are combined or subdivided pursuant to Section 2.1.2(c) or
by automatic conversion of LIBOR Loan into a Base Rate Loan, the term "Loan"
means such combination or each such subdivided portion, as the case may be, and
(b) where the context so requires, the term "Loan" means, with respect to a
particular Lender, the advance made (or required to be made) by such Lender in
the amount of such Lender's Pro Rata Share of a Borrowing under the Facility.
"Major Agreements" means, at any time, (a) each Major UPP Lease
and (b) each Eligible Ground Lease affecting an Unencumbered Pool Property.
"Major UPP Lease" means any UPP Lease of fifty percent (50%) or
more of the net rentable space of any Unencumbered Pool Property.
"Material Adverse Effect" means, with respect to a Person, a
material adverse effect upon the condition (financial or otherwise), operations,
performance, properties or prospects of such Person. The phrase "has a Material
Adverse Effect" or "will result in a Material Adverse Effect" or words
substantially similar thereto shall in all cases be intended to mean "has
resulted, or will or could reasonably be anticipated to result, in a Material
Adverse Effect", and the phrase "has no (or does not have a) Material Adverse
Effect" or "will not result in a Material Adverse Effect" or words substantially
18
<PAGE> 26
similar thereto shall in all cases be intended to mean "does not or will not or
could not reasonably be anticipated to result in a Material Adverse Effect".
"Moody's" means Moody's Investors Service.
"Multiemployer Plan" means an employee benefit plan defined in
Section 4001(a)(3) of ERISA which is, or within the immediately preceding six
(6) years was, contributed to by a Person or an ERISA Affiliate of such Person.
"Negative Pledge" means, with respect to a particular asset, that
it is not subject to any agreement (other than this Agreement or any other Loan
Document) that prohibits, restricts or conditions the creation of any Lien
thereon as security for the obligations of any Person under the Loan Documents;
provided, however, that an agreement that establishes a maximum ratio of
unsecured debt to unencumbered assets, or of secured debt to total assets, or
that otherwise conditions a Person's ability to encumber its assets upon the
maintenance of one or more specified ratios that limit such person's ability to
encumber its assets, shall not constitute a "Negative Pledge" for purposes of
the Loan Documents.
"Net Income" means, for any period, the net earnings (or loss) of
Borrower calculated for such period on a consolidated basis in conformity with
GAAP (i.e., after Taxes).
"Net Offering Proceeds" means (a) all cash proceeds received by
Borrower as a result of the sale of common, preferred or other classes of stock
in Borrower (if and only to the extent reflected in stockholders' equity on the
consolidated balance sheet of Borrower prepared in accordance with GAAP) less
customary costs and discounts of issuance paid by Borrower, plus (b) all cash
and the fair market value of the net equity of all properties contributed to
Borrower by one or more Persons, or other value realized by Borrower, in
exchange for equity Securities of Borrower (including, without limitation, upon
any conversion of any equity or debt Security of Borrower or any exercise of any
option, warrant or other right to acquire equity Securities of Borrower).
"Net Operating Income" means, with respect to any Property for
any period, (a) the net operating income of such Property for such period
determined in accordance with GAAP; minus (b) an amount equal to Capital
Expenditures with respect to such Property for such period. Notwithstanding the
foregoing, Net Operating Income may include collected lease termination charges
(amortized monthly over the remaining term of the lease) and delinquent rent
recoveries so long as (x) any such charge or recovery does not relate to a date
earlier than the commencement of the period for which Net Operating Income is
determined and (y) no such recovery shall be made for any
19
<PAGE> 27
month during or after which the space to which such charge or recovery relates
has been re-leased to another Person and such Person has an obligation to pay
rent for such month(s).
"Net Worth" means, at any time, Borrower's stockholders' equity,
as shown on its Financial Statements prepared in accordance with GAAP, minus
minority interests in Subsidiaries of Borrower (to the extent otherwise included
in Borrower's stockholders' equity), plus cumulative net additions to
depreciation and amortization reflected in statements of operation for periods
ending after December 31, 1997, minus Intangible Assets.
"Non-Core Properties" means any Property other than cash or Cash
Equivalents, an Apartment Property, an Industrial Property, a Business Park
Property or Land.
"Non Pro Rata Loan" means a Loan with respect to which fewer than
all Lenders have funded their respective Pro Rata Shares of such Loans and the
failure of the non-funding Lender or Lenders to fund its or their respective Pro
Rata Shares of such Loan constitutes a breach of this Agreement.
"Nonrecourse Indebtedness" means Indebtedness (i) with respect to
which recourse for payment is contractually limited to specific assets
encumbered by a Lien securing such Indebtedness, or (ii) of an Investment
Partnership of which Borrower is a general partner and in respect of which the
creditor has agreed in writing that Borrower shall have no personal liability
therefor.
"Notice of Borrowing" means, with respect to a proposed Borrowing
pursuant to Section 2.1.2, a notice substantially in the form of Exhibit E.
"Obligations" means, from time to time, all Indebtedness of
Borrower owing to Agent, any Lender or any Person entitled to indemnification
pursuant to Section 12.2, or any of their respective successors, transferees or
assigns, of every type and description, whether or not evidenced by any note,
guaranty or other instrument, arising under or in connection with this Agreement
or any other Loan Document or the separate agreement referred to in Section
4.1.11, whether or not for the payment of money, whether direct or indirect
(including those acquired by assignment), absolute or contingent, due or to
become due, now existing or hereafter arising and however acquired. The term
includes, without limitation, all interest, charges, expenses, fees, reasonable
attorneys' fees and disbursements, reasonable fees and disbursements of expert
witnesses and other consultants, and any other sum now or hereinafter chargeable
to Borrower under or in connection with this Agreement or any other Loan
Document.
20
<PAGE> 28
"Officer's Certificate" means a certificate signed by a specified
officer of a Person certifying as to the matters set forth therein.
"Partnership" means any general or limited partnership, joint
venture, limited liability company or limited liability partnership.
"Partnership Agreement" means, with respect to any Partnership,
on a collective basis, its partnership agreement, its agreement of limited
partnership agreement and certificate of limited partnership (if any), its
operating or management agreement and articles or certificate of organization,
or other organizational or governance document(s).
"PBGC" means the Pension Benefit Guaranty Corporation or any
Person succeeding to the functions thereof.
"Permit" means any permit, approval, authorization, license,
variance or permission required from a Governmental Authority under an
applicable Requirement of Law.
"Permitted Investments" means Investments in Land, Securities,
Investment Partnerships, Investment Mortgages and Non-Core Properties, but only
to the extent permitted in Section 9.8.
"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) or statutory obligations;
(c) any laws, ordinances, easements, rights of way, restrictions,
exemptions, reservations, conditions, limitations, covenants or other matters
that, in the aggregate, do not (i) materially interfere with the occupation, use
and enjoyment of the Property or other assets encumbered thereby, by the Person
owning such Property or other assets, in the normal course of its business or
(ii) materially impair the value of the Property subject thereto; and
21
<PAGE> 29
(d) 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.
"Person" means any natural person, employee, corporation, limited
partnership, general partnership, joint stock company, limited liability
company, joint venture, association, company, trust, bank, trust company, land
trust, business trust or other organization, whether or not a legal entity, or
any other non-governmental entity, or any Governmental Authority.
"Plan" means an employee benefit plan defined in Section 3(3) of
ERISA (other than a Multiemployer Plan) in respect of which Borrower or an ERISA
Affiliate of Borrower, as applicable, is an "employer" as defined in Section
3(5) of ERISA.
"Price Adjustment Date" has the meaning given to such term in
Section 2.4.8(c).
"Pro Rata Share" means, with respect to any Lender, a fraction
(expressed as a percentage), the numerator of which shall be the amount of such
Lender's Commitment and the denominator of which shall be the aggregate amount
of all of the Lenders' Commitments.
"Proceedings" means, collectively, all actions, suits,
arbitrations and proceedings, at law, in equity or otherwise, before, and
investigations commenced or threatened by or before, any court or Governmental
Authority with respect to a Person.
"Property" means, as to any Person, any real or personal
property, building, facility, structure, equipment or unit, or other asset owned
and operated by such Person in the ordinary course of its business.
"Quarterly Operating Report" has the meaning given to such term
in Section 6.1.1.
"Rating Agency" means each of Standard & Poor's, Moody's, Fitch
and Duff & Phelps, and such other nationally recognized rating service or
services as may be mutually agreed upon by Borrower and Agent.
"Regulations G, T, U and X" mean such Regulations of the Federal
Reserve Board as in effect from time to time.
"Release" means the release, spill, emission, leaking, pumping,
injection, deposit, disposal, discharge, dispersal, leaching or migration into
the indoor or outdoor
22
<PAGE> 30
environment or into or out of any property, including the movement of
Contaminants through or in the air, soil, surface water, groundwater or
property.
"Remedial Action" means any action required by applicable
Environmental Laws to (a) clean up, remove, treat or in any other way address
Contaminants in the indoor or outdoor environment; (b) prevent the Release or
threat of Release or minimize the further Release of Contaminants so they do not
migrate or endanger or threaten to endanger public health or welfare or the
indoor or outdoor environment; or (c) perform pre-remedial studies and
investigations and post-remedial monitoring and care.
"Reportable Event" means any of the events described in Section
4043(b) of ERISA, other than an event for which the thirty (30) day notice
requirement is waived by regulations.
"Requirements of Law" mean, as to any Person, the charter and
by-laws, Partnership Agreement or other organizational or governing documents of
such Person, and any law, rule or regulation, Permit, or determination of an
arbitrator or a court or other Governmental Authority, in each case applicable
to or binding upon such Person or any of its property or to which such Person or
any of its property is subject, including without limitation, the Securities
Act, the Securities Exchange Act, Regulations G, T, U and X, FIRREA and any
certificate of occupancy, zoning ordinance, building, environmental or land use
requirement or Permit or occupational safety or health law, rule or regulation.
"Requisite Lenders" mean, collectively, Lenders whose Pro Rata
Shares, in the aggregate, are at least sixty-six and two-thirds percent
(66-2/3%), provided that, in determining such percentage at any given time, all
then existing Defaulting Lenders will be disregarded and excluded and the Pro
Rata Shares of Lenders shall be redetermined, for voting purposes only, to
exclude the Pro Rata Shares of such Defaulting Lenders.
"Secretary's Certificate" has the meaning given to such term in
Section 4.1.
"Secured Borrower Debt" means all Borrower Debt that is secured
by a Lien on (a) any real property or (b) any equity interest in a Subsidiary or
Investment Partnership.
"Securities" means any stock, shares, voting trust certificates,
bonds, debentures, notes or other evidences of indebtedness, secured or
unsecured, convertible, subordinated or otherwise, or in general any instruments
commonly known as "securities", or any certificates of interest, shares, or
participations in temporary or interim certificates for the purchase or
acquisition of, or any right to subscribe to,
23
<PAGE> 31
purchase or acquire any of the foregoing, but shall not include any evidence of
the Obligations, provided that Securities shall not include Cash Equivalents,
Investment Mortgages or permitted equity interests in wholly-owned Subsidiaries
or in Investment Partnerships.
"Securities Act" means the Securities Act of 1933, as amended to
the date hereof and from time to time hereafter, and any successor statute.
"Securities Exchange Act" means the Securities Exchange Act of
1934, as amended to the date hereof and from time to time hereafter, and any
successor statute.
"Senior Loans" has the meaning given to such term in Section
11.4.2.
"September 30, 1997 Financials" has the meaning given to such
term in Section 5.6.
"Solvent" means, as to any Person at the time of determination,
that such Person (a) owns property the value of which (both at fair valuation
and at present fair salable value) is greater than the amount required to pay
all of such Person's liabilities (including contingent liabilities and debts);
(b) is able to pay all of its debts as such debts mature; and (c) has capital
sufficient to carry on its business and transactions and all business and
transactions in which it is about to engage.
"Standard & Poor's" means Standard & Poor's Rating Services.
"Subsidiary" of a Person means (a) any corporation, Partnership,
trust or other non-Partnership entity of which a majority of the stock (or
equivalent ownership or controlling interest) having voting power to elect a
majority of the Board of Directors (if a corporation) or to select the trustee
or equivalent controlling interest, shall, at the time such reference becomes
operative, be directly or indirectly owned or controlled by such Person, and (b)
any other Person in which such Person has an ownership interest the financial
results of which are consolidated with the financial results of such Person
under GAAP.
"Swing Line" has the meaning given to such term in Section
2.1.1(b).
"Swing Line Borrowing" means a Borrowing effected under the Swing
Line.
"Swing Line Lender" means Agent acting in its capacity as a
Lender hereunder.
24
<PAGE> 32
"Taxes" means all federal, state, local and foreign income and
gross receipts taxes.
"Termination Date" has the meaning given to such term in Section
2.1.4.
"Termination Event" means (a) any Reportable Event, (b) the
withdrawal of a Person, or an ERISA Affiliate from a Benefit Plan during a plan
year in which it was a "substantial employer" as defined in Section 4001(a)(2)
of ERISA, (c) the occurrence of an obligation arising under Section 4041 of
ERISA of a Person or an ERISA Affiliate of such Person to provide affected
parties with a written notice of an intent to terminate a Benefit Plan in a
distress termination described in Section 4041(c) of ERISA, (d) the institution
by the PBGC of proceedings to terminate any Benefit Plan under Section 4042 of
ERISA, (e) any event or condition which constitutes grounds under Section 4042
of ERISA for the appointment of a trustee to administer a Benefit Plan, (f) the
partial or complete withdrawal of such Person or any ERISA Affiliate of such
Person from a Multiemployer Plan, or (vii) the adoption of an amendment by any
Person or any ERISA Affiliate of such Person to terminate any Benefit Plan.
"Termination of Designation" has the meaning given to such term
in Section 3.2.
"Total Liabilities" of any Person means (a) all Indebtedness of
such Person, whether or not such Indebtedness would be included as a liability
on the balance sheet of such Person in accordance with GAAP, plus (b) all other
liabilities of every nature and kind of such Person that would be included as
liabilities on the balance sheet of such Person in accordance with GAAP, except,
however, liabilities with respect to tenant deposits to the extent that such
deposits (i) are in the possession of the relevant Person and (ii) are
subtracted from cash and Cash Equivalents held by such relevant Person for
purposes of determining either Gross Asset Value or Unencumbered Pool Value.
"Unencumbered NOI" means, for any period, the aggregate Net
Operating Income of all Unencumbered Properties for such period.
"Unencumbered Pool" means, collectively, the Unencumbered Pool
Properties.
"Unencumbered Pool Certificate" has the meaning given to such
term in Section 6.1.6.
"Unencumbered Pool Properties" means the Unencumbered Properties
listed on Schedule 1, as such Schedule 1 may be amended from time to time to
reflect the
25
<PAGE> 33
addition and deletion of Unencumbered Pool Properties pursuant to Article III;
provided, in each case, that such Property has not suffered (a) damage rendering
untenantable more than fifty percent (50%) (determined as if such Property had
not been damaged) of its (i) net rentable square footage (if such Property is
not an Apartment Property), or (ii) total units (if such Property is an
Apartment Property), (b) contamination due to one or more Releases of
Contaminants such that, in the reasonable determination of Agent, Agent would
decline to accept such Property into the Unencumbered Pool if (i) such Property
were not already an Unencumbered Pool Property and (ii) Borrower were to request
that such Property be designated an Unencumbered Pool Property, or (c) a claim
creating a material title defect; and provided further that (x) any Unencumbered
Pool Property that is (i) Construction in Process for a portion of any period of
eighteen consecutive months and (ii) Clause (b) Property for the remainder of
such period, shall cease to constitute an Unencumbered Pool Property on the last
day of such eighteen-month period; and (y) subject to the preceding clause (x),
any Unencumbered Pool Property that is Clause (b) Property for a period of
twelve consecutive months shall cease to constitute an Unencumbered Pool
Property on the last day of such twelve-month period.
"Unencumbered Pool Value" means, at any time, an amount equal to
the sum of (a) cash and Cash Equivalents owned by Borrower or any Guarantor
Subsidiary as of such date (but excluding any tenant deposits or other amounts
the use of which is restricted in such a way as to make it unavailable for the
paying of such Person's general obligations in the ordinary course of business),
provided that such cash or Cash Equivalents are not subject to any Lien or to
any Negative Pledge, plus (b) an amount equal to the sum of the Individual UPP
Values of the Unencumbered Pool Properties; provided that in determining the
Unencumbered Pool Value at any time, the Unencumbered Pool Value shall be
adjusted so that, notwithstanding the Individual UPP Values of Eligible Ground
Leases, Clause (b) Properties and Construction in Process constituting
Unencumbered Pool Properties, (x) no more than ten percent (10%) of the
Unencumbered Pool Value is attributable to Eligible Ground Leases; (y) no more
than twenty-five percent (25%) of the Unencumbered Pool Value is attributable to
Clause (b) Properties and Construction in Process; and (z) no more than fifteen
percent (15%) of the Unencumbered Pool Value is attributable to Construction in
Process.
"Unencumbered Property" means any Apartment Property, Industrial
Property or Business Park Property that is wholly-owned or leased (under an
Eligible Ground Lease) by Borrower or a Guarantor Subsidiary provided that
neither such real property, nor any interest in such Guarantor Subsidiary, is
subject to any Lien (other than Permitted Liens) or to any Negative Pledge.
"Unmatured Event of Default" means an event which, with the
giving of notice or the lapse of time, or both, would constitute an Event of
Default, except that no
26
<PAGE> 34
"Unmatured Event of Default" shall exist by reason of Borrower's failure to pay,
at any time prior to the seventh day of the month, interest becoming due in
respect of the Loans on the first Business Day of such calendar month.
"Unsecured Interest Expense" means, for any period, (a) total
Interest Expense for such period, less (b) Interest Expense attributable to any
Secured Borrower Debt for such period.
"Unsecured Liabilities" means, at any time, (a) Total Liabilities
of Borrower and its Subsidiaries, less (b) Secured Borrower Debt.
"Unused Amount" has the meaning given to such term in Section
2.5.1.
"Unused Facility Fee" has the meaning given to such term in
Section 2.5.1.
"UPP" when used herein refers to an Unencumbered Pool Property.
"UPP Lease" means a tenant lease of an Unencumbered Pool
Property.
1.2 Computation of Time Periods. In this Agreement, in the computation
of periods of time from a specified date to a later specified date, unless
otherwise specified, the word "from" means "from and including" and the words
"to" and "until" each mean "to and including." Periods of days referred to in
this Agreement shall be counted in calendar days unless Business Days are
expressly prescribed.
1.3 Terms.
1.3.1 Any accounting terms used in this Agreement which are not
specifically defined shall have the meanings customarily given them in
accordance with GAAP. All references herein to Borrower or any other Person in
connection with any financial or related covenant, representation or calculation
shall be understood to mean and refer to Borrower or such other Person, as the
case may be, on a consolidated basis in accordance with GAAP, unless otherwise
specifically provided and subject in all events to any adjustments herein set
forth.
1.3.2 Any time the phrase "to the best of Borrower's knowledge"
or a phrase similar thereto is used herein, it means: "to the actual knowledge
of the then executive or senior officers of Borrower, after reasonable inquiry
of those agents, employees or contractors of Borrower or any of its Subsidiaries
who could reasonably be anticipated to have knowledge with respect to the
subject matter or circumstances in question and after review of those documents
or instruments which could reasonably be anticipated to be relevant to the
subject matter or circumstances in question."
27
<PAGE> 35
1.3.3 In each case where the consent or approval of Agent, all
Lenders and/or Requisite Lenders is required, or their non-obligatory action is
requested by Borrower, such consent, approval or action shall be in the sole and
absolute discretion of Agent and, as applicable, each Lender, unless otherwise
specifically indicated.
1.3.4 Any time the word "or" is used herein, unless the context
otherwise clearly requires, it has the inclusive meaning represented by the
phrase "and/or". The words "hereof", "herein", "hereby", "hereunder" and similar
terms refer to this Agreement as a whole and not to any particular provision of
this Agreement. Article, section, subsection, clause, exhibit and schedule
references are to this Agreement unless otherwise specified. Any reference in
this Agreement to this Agreement or to any other Loan Document includes any and
all amendments, modifications, supplements, renewals or restatements thereto or
thereof, as applicable.
ARTICLE II
----------
LOANS
-----
2.1 Loan Advances and Repayment.
2.1.1 Loan Availability.
(a) Subject to the terms and conditions set forth in this
Agreement, Lenders hereby agree to make Loans to Borrower from time to
time during the period from the Closing Date to the Business Day next
preceding the Termination Date, in an aggregate outstanding principal
amount (including outstanding Swing Line Borrowing) which shall not
exceed Loan Availability at any time; provided that if any Swing Line
Borrowings are outstanding on the Funding Date of any Loan other than a
Swing Line Borrowing, (i) such Loan shall be in an amount equal to at
least the aggregate principal amount of all outstanding Swing Line
Borrowings, and (ii) the proceeds thereof shall be applied first to the
payment of such outstanding Swing Line Borrowings. Except as provided in
Section 2.1.1(b) with respect to Swing Line Borrowings, all Loans under
this Agreement shall be made by Lenders simultaneously and
proportionately to their respective Pro Rata Shares, it being understood
that no Lender shall be responsible for any failure by any other Lender
to perform its obligation to make a Loan hereunder and that the
Commitment of any Lender shall not be increased or decreased as a result
of the failure by any other Lender to perform its obligation to make a
Loan. Loans may be voluntarily prepaid pursuant to Section 2.6.1 and,
subject to the provisions of this Agreement, any amounts so prepaid may
be
28
<PAGE> 36
reborrowed under this Section 2.1.1. The principal balance of the Loans
shall be payable in full on the Termination Date. The Loans will be
evidenced by the Loan Notes.
(b) (i) There is hereby established a sub-facility (the "Swing
Line"), in the amount of Twenty Million Dollars ($20,000,000), under and
as a part of the Facility. The Swing Line shall not for any purpose be
an addition to the Commitments or the Facility, but shall be a
sub-feature thereunder. All Loans requested to be made pursuant to the
Swing Line shall be subject to the same terms and conditions applicable
to other Borrowings under the Facility, and all outstanding Swing Line
Borrowings shall likewise be subject to the same terms and conditions
applicable to other outstanding Borrowings under the Facility, except as
expressly provided in (A) the following Section 2.1.1(b)(ii), (B)
Section 2.1.2(a)(iii) with respect to the number of Borrowings permitted
in any calendar month, the time within which the Notice of Borrowing for
Swing Line Borrowings must be given, the minimum and incremental amounts
applicable to Swing Line Borrowings and the interest rate applicable
thereto, (C) Section 2.6.1 with respect to prepayments of Swing Line
Borrowings, and (D) Section 11.3.3.
(ii) The Swing Line Lender hereby agrees to make advances to
Borrower from time to time during the period from the Closing Date to
the Business Day next preceding the Termination Date, in an aggregate
principal amount not exceeding at any one time the lesser of (A) (1) the
Loan Availability, less (2) the outstanding principal of all Loans other
than Swing Line Borrowings, and (B) Twenty Million Dollars
($20,000,000). The Swing Line Lender's obligation to fund Swing Line
Borrowings shall be unaffected by its making of any other Loans,
notwithstanding that the sum of the Swing Line Borrowings plus the Swing
Line Lender's Pro Rata Share of the aggregate principal amount of the
outstanding Loans other than Swing Line Borrowings may exceed the Swing
Line Lender's Commitment.
(c) If at any time the outstanding principal balance of the
Loans exceeds the Loan Availability, as a result of a reduction in the
Unencumbered Pool Value, the failure of any Property previously
constituting an Unencumbered Pool Property to qualify as such, the
incurrence of additional Unsecured Liabilities or for any other reason
whatsoever, Borrower shall, not later than thirty (30) days following
such occurrence, (i) reduce the Unsecured Liabilities in such amounts
and/or (ii) identify to Agent such additional Unencumbered Pool
Property(-ies) as Agent may approve and Requisite Lenders may accept
under Section 3.1 as are necessary so that the outstanding principal
balance of the Loans does not exceed the Loan Availability. Failure by
Borrower to have complied with the foregoing in
29
<PAGE> 37
a timely manner shall constitute an Event of Default without further
notice or grace period hereunder. No further Borrowings, or Termination
of Designation with respect to any Unencumbered Pool Property, shall be
permitted so long as such excess borrowing condition shall continue to
exist. Nothing in this subparagraph (c) shall excuse Borrower's
compliance with all terms, conditions, covenants and other obligations
imposed upon it under the Loan Documents during the period of such
excess borrowing, nor in any manner condition or impair Agent's or
Lenders' rights thereunder in respect of any such breach thereof by
Borrower.
2.1.2 Notice of Borrowing.
(a) (i) Whenever Borrower desires to borrow under this Section
2.1, but in no event more than seven (7) times during any one (1)
calendar month, Borrower shall give Agent, at Wells Fargo Real Estate
Group Disbursement Center, 2120 East Park Place, Suite 100, El Segundo,
California 90245, with a copy to: Wells Fargo Bank, Real Estate Group,
2030 Main Street, Suite 800, Irvine, California 92614, Attention:
Relationship Manager, or such other address as Agent shall designate, an
original or facsimile Notice of Borrowing no later than 9:00 a.m.
(Pacific Coast time), not less than three (3) nor more than five (5)
Business Days prior to the proposed Funding Date of each Loan.
(ii) Each Notice of Borrowing shall specify (1) the Funding
Date (which shall be a Business Day) in respect of the Loan, (2) the
amount of the proposed Loan, provided that the aggregate amount of such
proposed Loan shall equal One Million Dollars ($1,000,000) or integral
multiples of One Hundred Thousand Dollars ($100,000) in excess thereof,
(3) whether the Loan to be made thereunder will be a Base Rate Loan or a
LIBOR Loan and, if a LIBOR Loan, the Interest Period, (4) to which
account of Borrower the funds are to be directed, and (5) the proposed
use of such Loan. Any Notice of Borrowing pursuant to this Section 2.1.2
shall be irrevocable.
(iii) Notwithstanding the foregoing or any other provision
hereof to the contrary: in addition to the number of Loans permissible
monthly under the general Facility pursuant to Section 2.1.2(a)(i),
Borrower shall be permitted to borrow under the Swing Line up to four
(4) times during any calendar month, provided that (A) the Notice of
Borrowing with respect to any Swing Line Borrowing shall be given by
Borrower to Agent no later than 9:00 a.m. (Pacific Coast time) on the
proposed Funding Date of such Swing Line Borrowing and shall designate
such Borrowing as a Base Rate Loan; and (B) each requested
30
<PAGE> 38
Borrowing under the Swing Line shall equal Five Hundred Thousand Dollars
($500,000) or an integral multiple of Ten Thousand Dollars ($10,000) in
excess thereof. The obligation of the Agent (as the Swing Line Lender)
to fund Swing Line Borrowings in accordance with Section 2.1.1(b) shall
not be subject to Section 11.3: the other Lenders have no obligation
under Section 11.3.1 to fund their Pro Rata Share of any Swing Line
Borrowing, and the Agent alone (as the Swing Line Lender) shall fund all
Swing Line Borrowings. Except as provided in Section 2.1.1(b), in the
preceding sentences of this Section 2.1.2(a)(iii), in Section 2.6.1(a)
or in Section 11.3, all other provisions of this Agreement shall apply
to any such Swing Line Borrowing.
(b) Borrower may elect (i) to convert LIBOR Loans or any portion
thereof into Base Rate Loans, (ii) to convert Base Rate Loans or any
portion thereof to LIBOR Loans, or (iii) to continue any LIBOR Loans or
any portion thereof for an additional Interest Period, provided,
however, that the aggregate amount of the Loans being converted into or
continued as LIBOR Loans shall, in the aggregate, equal One Million
Dollars ($1,000,000) or an integral multiple of One Hundred Thousand
Dollars ($100,000) in excess thereof. The applicable Interest Period for
the continuation of any LIBOR Loan shall commence on the day on which
the next preceding Interest Period expires. The conversion of a LIBOR
Loan to a Base Rate Loan shall only occur on the last Business Day of
the Interest Period relating to such LIBOR Loan; such conversion shall
occur automatically in the absence of an election under clause (iii)
above. Each election under clause (ii) or clause (iii) above shall be
made by Borrower giving Agent an original or facsimile Notice of
Borrowing no later than 9:00 a.m. (Pacific Coast time), not less than
three (3) nor more than five (5) Business Days prior to the date of a
conversion to or continuation of a LIBOR Loan, specifying, in each case
(1) the amount of the conversion or continuation, (2) the Interest
Period therefor, and (3) the date of the conversion or continuation
(which date shall be a Business Day).
(c) Upon receipt of a Notice of Borrowing in proper form
requesting LIBOR Loans under subparagraph (a) (i) or (b) above, Agent
shall determine the LIBOR applicable to the Interest Period for such
LIBOR Loans, and shall, two (2) Business Days prior to the beginning of
such Interest Period, give (by facsimile) a Fixed Rate Notice in respect
thereof to Borrower and Lenders; provided, however, that failure to give
such notice to Borrower shall not affect the validity of such rate. Each
determination by Agent of the LIBOR shall be conclusive and binding upon
the parties hereto in the absence of manifest error.
31
<PAGE> 39
(d) Borrower shall pay to Agent an administration fee of Fifty
Dollars ($50.00) for each determination by Agent of the LIBOR applicable
to the Interest Period for such LIBOR Loans.
2.1.3 Making of Loans. Subject to Section 11.3 or as otherwise provided
herein, Agent shall make the proceeds of Loans available to Borrower on the
applicable Funding Date and shall disburse such funds in Dollars in immediately
available funds to Borrower's commercial demand account at Wells Fargo, Account
Number Account No. 0643122377 or such other account, acceptable to Agent, as may
be specified in the Notice of Borrowing or otherwise requested by Borrower in a
writing that is received by Agent no later than 9:00 a.m. (Pacific Coast time)
on such Funding Date.
2.1.4 Term. The outstanding balance of the Loans shall be payable in
full on the earliest to occur of (i) the third anniversary of the date of this
Agreement, or (ii) the acceleration of the Loans pursuant to Section 10.2.1 (the
"Termination Date"); provided, however, that Borrower shall have the right to
extend the Termination Date under the foregoing clause (i) for one (1) year,
provided that each of the following conditions is satisfied:
(a) Borrower gives Agent written notice of Borrower's election
to extend the Termination Date not earlier than ninety (90) days, or
later than thirty (30) days, prior to the then effective Termination
Date (a copy of which notice shall be sent promptly by Agent to each
other Lender);
(b) Not later than the giving of the extension notice under
subparagraph (a) above, Borrower pays to Agent an extension fee (the
"Extension Fee") (for the benefit of all Lenders) equal to 0.10% of the
amount of the Facility; and
(c) No Unmatured Event of Default or Event of Default has
occurred and is continuing either at the date of notice under
subparagraph (a) above or on the then effective Termination Date.
2.2 Authorization to Obtain Loans. Borrower shall provide Agent with
documentation satisfactory to Agent indicating the names of those employees of
Borrower authorized by Borrower to sign Notices of Borrowing, and Agent and
Lenders shall be entitled to rely on such documentation until notified in
writing by Borrower of any change(s) of the persons
32
<PAGE> 40
so authorized. Agent shall be entitled to act on the instructions of anyone
identifying himself or herself as one of the Persons authorized to execute a
Notice of Borrowing, and believed by Agent in good faith to be such a Person,
and Borrower shall be bound thereby in the same manner as if such Person were
actually so authorized. Borrower agrees to indemnify, defend and hold Lenders
and Agent harmless from and against any and all Liabilities and Costs which may
arise or be created by the acceptance of instructions in any Notice of
Borrowing, unless caused by the gross negligence or willful misconduct of the
Person to be indemnified.
2.3 Lenders' Accounting. Agent shall maintain a loan account (the "Loan
Account") on its books in which shall be recorded (i) the names and addresses
and the Commitments of Lenders, and principal amount of Loans owing to each
Lender from time to time, and (ii) all advances and repayments of principal and
payments of accrued interest under the Loans, as well as payments of the Unused
Facility Fee, as provided in this Agreement, separately identifying Loans and
prepayments under the Swing Line. All entries in the Loan Account shall be made
in accordance with Agent's customary accounting practices as in effect from time
to time. Monthly or at such other interval as is customary with Agent's
practice, Agent will render a statement of the Loan Account to Borrower and will
deliver a copy thereof to each Lender. Each such statement shall be deemed
final, binding and conclusive upon Borrower in all respects as to all matters
reflected therein (absent manifest error), unless Borrower, within thirty (30)
days after the date such statement is delivered to Borrower, delivers to Agent
written notice of any objections which Borrower may have to any such statement,
or within ten (10) days after discovery by Borrower of an error with respect to
which Borrower had no knowledge and which could not have been determined after
reasonable inquiry during said 30-day period. In that event, only those items
expressly objected to in such notice shall be deemed to be disputed by Borrower.
In the event that any such objection cannot be settled by Agent and Borrower
within thirty (30) days after Agent receives notice thereof from Borrower, Agent
shall notify all Lenders of such objection. Notwithstanding the foregoing,
Agent's entries in the Loan Account evidencing Loans and other financial
accommodations made from time to time shall be final, binding and conclusive
upon Borrower (absent manifest error) as to the existence and amount of the
Obligations recorded in the Loan Account.
2.4 Interest on the Loans.
2.4.1 Base Rate Loans. Subject to Section 2.4.4, all Base Rate Loans
shall bear interest on the actual daily unpaid principal amount thereof from the
date made until paid in full at a fluctuating rate per annum equal to the Base
Rate. Base Rate Loans shall be made in minimum amounts of One Million Dollars
($1,000,000) or an integral multiple of One Hundred Thousand ($100,000) in
excess thereof.
2.4.2 LIBOR Loans. Subject to Sections 2.4.4 and 2.4.8, all LIBOR Loans
shall bear interest on the unpaid principal amount thereof during the Interest
Period applicable thereto at a rate per annum equal to the sum of LIBOR for such
Interest Period plus the Applicable LIBO Rate Margin. LIBOR Loans shall be in
tranches of One
33
<PAGE> 41
Million Dollars ($1,000,000) or One Hundred Thousand Dollar ($100,000)
increments in excess thereof. No more than ten (10) LIBOR Loan tranches shall be
outstanding at any one time. Notwithstanding anything to the contrary contained
herein and subject to the Default Interest provisions contained in Section
2.4.4, if an Event of Default occurs and as a result thereof the Commitments are
terminated, all LIBOR Loans will convert to Base Rate Loans upon the expiration
of the applicable Interest Periods therefor or the date all Loans become due,
whichever occurs first.
2.4.3 Interest Payments. Subject to Section 2.4.4, interest accrued on
all Loans shall be payable by Borrower, in the manner provided in Section 2.6.2,
in arrears on the first Business Day of the first calendar month following the
Closing Date, the first Business Day of each succeeding calendar month
thereafter, and on the Termination Date.
2.4.4 Default Interest. Notwithstanding the rates of interest specified
in Sections 2.4.1 and 2.4.2 and the payment dates specified in Section 2.4.3,
effective immediately upon the occurrence and during the continuance of any
Event of Default, the principal balance of each Loan then outstanding and, to
the extent permitted by applicable law, any interest payments on the Loans not
paid when due, shall bear interest payable upon demand at a rate which is five
percent (5%) per annum in excess of the rate(s) of interest otherwise payable
from time to time under this Agreement (the "Default Rate"). All other amounts
due Agent or Lenders (whether directly or for reimbursement) under this
Agreement or any of the other Loan Documents if not paid when due, or if due
date is expressed, if not paid within ten (10) days after demand, shall bear
interest from and after demand at the rate set forth in this Section 2.4.4.
2.4.5 Late Fee. Borrower acknowledges that late payment to Agent will
cause Agent and Lenders to incur costs not contemplated by this Agreement. Such
costs include, without limitation, processing and accounting charges. Therefore,
if Borrower fails timely to pay any sum due and payable hereunder through the
Termination Date (other than payment of the entire outstanding balance of the
Loans on the Termination Date), unless waived by Agent pursuant to Section
11.11.1 or Requisite Lenders, a late charge of four cents ($.04) for each dollar
of any principal payment, interest or other charge due hereon and which is not
paid within fifteen (15) days after such payment is due, shall be charged by
Agent (for the benefit of Lenders) and paid by Borrower for the purpose of
defraying the expense incident to handling such delinquent payment. Borrower and
Agent agree that this late charge represents a reasonable sum considering all of
the circumstances existing on the date hereof and represents a fair and
reasonable estimate of the costs that Agent and Lenders will incur by reason of
late payment. Borrower and Agent further agree that proof of actual damages
would be costly and inconvenient. Acceptance of any late charge shall not
constitute a waiver of the default with respect to the overdue installment, and
34
<PAGE> 42
shall not prevent Agent from exercising any of the other rights available
hereunder or any other Loan Document. Such late charge shall be paid without
prejudice to any other rights of Agent.
2.4.6 Computation of Interest. Interest shall be computed on the basis
of the actual number of days elapsed in the period during which interest or fees
accrue and a year of three hundred sixty (360) days. In computing interest on
any Loan, the date of the making of the Loan shall be included and the date of
payment shall be excluded; provided, however, that if a Loan is repaid on the
same day on which it is made, one (1) day's interest shall be paid on that Loan.
Notwithstanding any provision in this Section 2.4, interest in respect of any
Loan shall not exceed the maximum rate permitted by applicable law. Changes in
the Base Rate shall take effect as of the date of any change in the Base Rate,
as defined, and changes in the Applicable LIBO Rate Margin shall take effect as
of the date set forth in the relevant clause of the definition of such term.
2.4.7 Changes; Legal Restrictions. In the event that after the Closing
Date (i) the adoption of or any change in any law, treaty, rule, regulation,
guideline or determination of a court or Governmental Authority or any change in
the interpretation or application thereof by a court or Governmental Authority,
or (ii) compliance by Agent or any Lender with any request or directive made or
issued after the Closing Date (whether or not having the force of law and
whether or not the failure to comply therewith would be unlawful) from any
central bank or other Governmental Authority or quasi-governmental authority:
(a) subjects Agent or any Lender to any tax, duty or other
charge of any kind with respect to the Facility, this Agreement or any
of the other Loan Documents or the Loans, or changes the basis of
taxation of payments to Agent or such Lender of principal, fees,
interest or any other amount payable hereunder, except for net income,
gross receipts, gross profits or franchise taxes imposed by any
jurisdiction (all such non-excepted taxes, duties and other charges
being hereinafter referred to as "Lender Taxes");
(b) imposes, modifies or holds applicable, in the determination
of Agent or any Lender, any reserve, special deposit, compulsory loan,
FDIC insurance, capital allocation or similar requirement (other than a
requirement of the type described in Section 2.7) against assets held
by, or deposits or other liabilities in or for the account of, advances
or loans by, or other credit extended by, or any other acquisition of
funds by, Agent or such Lender or any applicable lending office (except
to the extent that the reserve and FDIC insurance requirements are
reflected in the "Base Rate" or in determining LIBOR); or
35
<PAGE> 43
(c) imposes on Agent or any Lender any other condition (other
than one described in Section 2.7) materially more burdensome in nature,
extent or consequence than those in existence as of the Closing Date,
and the result of any of the foregoing is to increase the cost to Agent or any
Lender of making, renewing, maintaining or participating in the Loans or to
reduce any amount receivable thereunder; then, in any such case, Borrower shall
promptly pay to Agent or such Lender, as applicable, upon demand, such amount or
amounts (based upon a reasonable allocation thereof by Agent or such Lender to
the financing transactions contemplated by this Agreement and affected by this
Section 2.4.7) as may be necessary to compensate Agent or such Lender for any
such additional cost incurred or reduced amounts received; provided, however,
that, if the payment of such compensation may not be legally made (whether by
modification of the applicable interest rate or otherwise), then Lenders shall
have no further obligation to make Loans that cause Agent or any Lender to incur
such increased cost, and all affected Loans shall become due and payable by
Borrower sixty (60) days thereafter. Agent or such Lender shall deliver to
Borrower (and in the case of a delivery by Lender, such Lender shall also
deliver to Agent) a written statement of the claimed additional costs incurred
or reduced amounts received and the basis therefor in reasonable detail as soon
as reasonably practicable after such Lender obtains knowledge thereof. If Agent
or any Lender subsequently recovers any amount of Lender Taxes previously paid
by Borrower pursuant to this Section 2.4.7, whether before or after termination
of this Agreement, then, upon receipt of good funds with respect to such
recovery, Agent or such Lender will refund such amount to Borrower if no Event
of Default or Unmatured Event of Default then exists or, if an Event of Default
or Unmatured Event of Default then exists, such amount will be credited to the
Obligations in the manner determined by Agent or such Lender.
2.4.8 Certain Provisions Regarding LIBOR Loans.
(a) LIBOR Lending Unlawful. If any Lender shall determine (which
determination shall, upon notice thereof to Borrower and Agent, be
conclusive and binding on the parties hereto) that the introduction of
or any change in or in the interpretation of any law makes it unlawful,
or any central bank or other Governmental Authority asserts that it is
unlawful, for such Lender to make or maintain any Loan as a LIBOR Loan,
(i) the obligations of such Lenders to make or maintain any Loans as
LIBOR Loans shall, upon such determination, forthwith be suspended until
such Lender shall notify Agent that the circumstances causing such
suspension no longer exist, and (ii) if required by such law or
assertion, the LIBOR Loans of such Lender shall automatically convert
into Base Rate Loans.
36
<PAGE> 44
(b) Deposits Unavailable. If Agent shall have determined in good
faith that adequate means do not exist for ascertaining the interest
rate applicable hereunder to LIBOR Loans, then, upon notice from Agent
to Borrower the obligations of all Lenders to make or maintain Loans as
LIBOR Loans shall forthwith be suspended until Agent shall notify
Borrower that the circumstances causing such suspension no longer exist.
Agent will give such notice when it determines, in good faith, that such
circumstances no longer exist; provided, however, that Agent shall not
have any liability to any Person with respect to any delay in giving
such notice.
(c) Fixed Rate Price Adjustment. Borrower acknowledges that
prepayment or acceleration of a LIBOR Loan during an Interest Period
shall result in Lenders incurring additional costs, expenses and/or
liabilities and that it is extremely difficult and impractical to
ascertain the extent of such costs, expenses and/or liabilities. (For
all purposes of this subparagraph (c), any Loan not being made as a
LIBOR Loan in accordance with the Notice of Borrowing therefor, as a
result of Borrower's cancellation thereof or failure to satisfy the
conditions precedent thereto, shall be treated as if such LIBOR Loan had
been prepaid.) Therefore, on the date a LIBOR Loan is prepaid or the
date all sums payable hereunder become due and payable, by acceleration
or otherwise ("Price Adjustment Date"), Borrower will pay to Agent, for
the account of each Lender (in addition to all other sums then owing),
an amount ("Fixed Rate Price Adjustment") equal to the then present
value of (i) the amount of interest that would have accrued on the LIBOR
Loan for the remainder of the Interest Period at the rate applicable to
such LIBOR Loan, less (ii) the amount of interest that would accrue on
the same LIBOR Loan for the same period if LIBOR were set on the Price
Adjustment Date. The present value shall be calculated by using as a
discount rate LIBOR quoted on the Price Adjustment Date. Agent shall
calculate the Fixed Rate Price Adjustment on behalf of the affected
Lenders. Upon the written notice to Borrower from Agent, Borrower shall
immediately pay to Agent, for the account of the affected Lenders, the
Fixed Rate Price Adjustment payable with respect to each affected Loan.
Such written notice (which shall include calculations in reasonable
detail) shall, in the absence of manifest error, be conclusive and
binding on the parties hereto.
(d) Borrower understands, agrees and acknowledges the following:
(i) no Lender has any obligation to purchase, sell and/or match funds in
connection with the use of LIBOR as a basis for calculating the rate of
interest on a LIBOR Loan or a Fixed Rate Price Adjustment; (ii) LIBOR is
used merely as a reference in determining such rate and/or Fixed Rate
Price Adjustment; and (iii)
37
<PAGE> 45
Borrower has accepted LIBOR as a reasonable and fair basis for
calculating such rate and a Fixed Rate Price Adjustment. Borrower
further agrees to pay the Fixed Rate Price Adjustment and Lender Taxes,
if any, whether or not a Lender elects to purchase, sell and/or match
funds.
2.4.9 Withholding Tax Exemption. At least five (5) Business Days prior
to the first day on which interest or fees are payable hereunder for the account
of any Lender, each Lender that is not incorporated under the laws of the United
States of America, or a state thereof, agrees that it will deliver to Agent and
Borrower two (2) duly completed copies of United States Internal Revenue Service
Form 1001 or Form 4224, certifying in either case that such Lender is entitled
to receive payments under this Agreement without deduction or withholding of any
United States federal income taxes. Each Lender which so delivers a Form 1001 or
Form 4224 further undertakes to deliver to Agent and Borrower two (2) additional
copies of such form (or any applicable successor form) on or before the date
that such form expires (currently, three (3) successive calendar years for Form
1001 and one (1) calendar year for Form 4224) or becomes obsolete or after the
occurrence of any event requiring a change in the most recent forms so delivered
by it, and such amendments thereto or extensions or renewals thereof as may be
reasonably requested by Agent or Borrower, in each case certifying that such
Lender is entitled to receive payments under this Agreement without deduction or
withholding of any United States federal income taxes, unless an event
(including without limitation any change in treaty, law or regulation) has
occurred prior to the date on which any such delivery would otherwise be
required which renders all such forms inapplicable or which would prevent such
Lender from duly completing and delivering any such form with respect to it and
such Lender advises Agent that it is not capable of receiving payments without
any deduction or withholding of United States federal income taxes. If any
Lender cannot deliver such form, then Borrower may withhold from such payments
such amounts as are required by the Internal Revenue Code.
2.5 Fees.
2.5.1 Unused Facility Fee. From and after the Closing Date and until the
Obligations are paid in full and this Agreement is terminated or, if sooner, the
date the Commitments terminate, and subject to Section 11.4.2, Borrower shall
pay to Agent, for the account of each Lender, a fee accruing at the rate set
forth below upon an amount equal to (i) the average daily amount of the Facility
minus (ii) the average daily principal balance of all Loans (said difference
being the "Unused Amount"), as determined for each Fiscal Quarter. The aforesaid
fee (the "Unused Facility Fee") shall accrue at the applicable rate set forth
below:
38
<PAGE> 46
<TABLE>
<CAPTION>
Average Daily Rate Per Annum
Unused Amount During Applicable to
Applicable Quarter Unused Amount
------------------ -------------
<S> <C>
An amount equal to or greater
than 50% of the Facility 0.25%
An amount less than 50% of the
Facility 0.125%
</TABLE>
The Unused Facility Fee shall be payable, in the manner provided in Section
2.6.2, in arrears on the first Business Day in each Fiscal Quarter, beginning
with the first Fiscal Quarter after the Closing Date, and on the date of payment
in full of all Obligations to Lenders pursuant to Section 2.1.4, with the Unused
Facility Fee to be prorated to the date of such payment. The Unused Facility Fee
shall be calculated on the basis of the actual number of days elapsed
(excluding, however, the date of payment in full of all Obligations to Lenders
pursuant to Section 2.1.4) in a three hundred sixty (360) day year.
2.5.2 Agency Fees. Borrower shall pay Agent such fees as are provided
for in the agency fee agreement between Agent and Borrower, as in existence from
time to time.
2.5.3 Payment of Fees. The fees described in Sections 2.1.4 and 4.1.11
and in this Section 2.5 represent compensation for services rendered and to be
rendered separate and apart from the lending of money or the provision of credit
and do not constitute compensation for the use, detention or forbearance of
money, and the obligation of Borrower to pay the fees described herein shall be
in addition to, and not in lieu of, the obligation of Borrower to pay interest,
other fees and expenses otherwise described in this Agreement. All fees shall be
payable when due in immediately available funds and shall be non-refundable when
paid. If Borrower fails to make any payment of fees or expenses specified or
referred to in this Agreement due to Agent or Lenders, including without
limitation those referred to in this Section 2.5, in Section 12.1, or otherwise
under this Agreement or any separate fee agreement between Borrower and Agent or
any Lender relating to this Agreement, when due, the amount due shall bear
interest until paid at the Base Rate and, after ten (10) days, at the Default
Rate (but not to exceed the maximum rate permitted by applicable law), and shall
constitute part of the Obligations.
39
<PAGE> 47
2.6 Payments.
2.6.1 Voluntary Prepayments. Borrower may, upon not less than two (2)
Business Days' prior written notice to Agent not later than 11:00 a.m. (Pacific
Coast time) on the date given, at any time and from time to time, prepay any
Loans in whole or in part; provided that, notwithstanding the foregoing,
Borrower may, upon not less than one (1) Business Day's prior written notice to
Agent not later than 11:00 a.m. (Pacific Coast time) on the date given, at any
time and from time to time, prepay Swing Line Borrowings in whole or in part.
If, at the time of prepayment of the Loans, there are outstanding Swing Line
Borrowings, such prepayment shall be applied first to the prepayment of
outstanding Swing Line Borrowings (in the order in which they were borrowed),
and second, to the prepayment of other Loans. Any notice of prepayment given to
Agent under this Section 2.6.1 shall specify the date of prepayment and the
aggregate principal amount of the prepayment. In the event of a prepayment of
LIBOR Loans, Borrower shall concurrently pay any Fixed Rate Price Adjustment
payable in respect thereof. Agent shall provide to each Lender a confirming copy
of such notice on the same Business Day such notice is received.
2.6.2 Manner and Time of Payment. All payments of principal, interest
and fees hereunder payable to Agent or the Lenders shall be made without
condition or reservation of right and free of set-off or counterclaim, in
Dollars and by wire transfer (pursuant to Agent's written wire transfer
instructions) of immediately available funds, to Agent, for the account of each
Lender, not later than 11:00 a.m. (Pacific Coast time) on the date due; and
funds received by Agent after that time and date shall be deemed to have been
paid on the next succeeding Business Day. In order to assure timely payment of
interest on the Loans and fees pursuant to Section 2.5, Borrower hereby
irrevocably authorizes Agent to directly debit Borrower's demand deposit account
with Agent (Account No. 0643122377) for payment when due of all such interest
and fees payable to Lenders. Written notice of the amount and purpose of any
such direct debit shall be given to Borrower by Agent not less than two (2)
Business Days prior to its effective date; provided, however, that Agent's
failure to give such notice shall not affect the validity of, or Borrower's
authorization of, such debit. In the event any direct debit hereunder is
returned for insufficient funds, Borrower shall, upon notice from Agent,
immediately deposit sufficient funds into said account to pay all interest, fees
and other related charges due and owing to Lenders; provided, however, that any
such insufficiency of funds in said account shall not excuse or delay the timely
payment by Borrower of the full amount of such interest, fees and related
charges or relieve Borrower of its obligations under Section 2.4.4 or 2.4.5 in
respect of any such insufficiency. The statement of the Loan Account provided by
Agent to Borrower shall show the amounts and dates of such direct debits.
40
<PAGE> 48
2.6.3 Payments on Non-Business Days. Whenever any payment to be made by
Borrower hereunder shall be stated to be due on a day which is not a Business
Day, payments shall be made on the next succeeding Business Day and such
extension of time shall be included in the computation of the payment of
interest hereunder and of any of the fees specified in Section 2.5, as the case
may be.
2.7 Increased Capital. If either (i) the introduction of or any change in or
in the interpretation of any law or regulation after the Closing Date or (ii)
compliance by Agent or any Lender with any guideline or request from any central
bank or other Governmental Authority (whether or not having the force of law and
whether or not the failure to comply therewith would be unlawful) made or issued
after the Closing Date affects or would affect the amount of capital required or
expected to be maintained by Agent or such Lender or any corporation controlling
Agent or such Lender, and Agent or such Lender determines that the amount of
such capital is increased by or based upon the existence of Agent's obligations
hereunder or such Lender's Commitment, then, upon demand by Agent or such
Lender, Borrower shall immediately pay to Agent or such Lender, from time to
time as specified by Agent or such Lender, additional amounts sufficient to
compensate Agent or such Lender in the light of such circumstances, to the
extent that Agent or such Lender reasonably determines such increase in capital
to be allocable to the existence of Agent's obligations hereunder or such
Lender's Commitment; provided, however, that (i) neither Agent nor any Lender
may claim under this Section 2.7 any such additional amount attributable to any
period preceding the date that is ninety (90) days prior to the date of its
demand, and (ii) before making any such demand, Agent, and each Lender, agrees
to use reasonable efforts (consistent with its internal policy and legal and
regulatory restrictions) to designate a different lending office as its lending
office for purposes of the Loans and its Commitment, if the making of such a
designation (1) would avoid the need for, or reduce the amount of, such demand
and (2) would not, in the reasonable judgment of Agent or such Lender, as the
case may be, be otherwise disadvantageous to it. A certificate in reasonable
detail as to such amounts submitted to Borrower by Agent or such Lender shall,
in the absence of manifest error, be conclusive and binding for all purposes.
2.8 Notice of Increased Costs. Each Lender agrees that, as promptly as
reasonably practicable after it becomes aware of the occurrence of an event or
the existence of a condition which would cause it to be affected by any of the
events or conditions described in Section 2.4.7 or 2.4.8 or Section 2.7, it will
notify Borrower, and provide a copy of such notice to Agent, of such event and
the possible effects thereof, provided that the failure to provide such notice
shall not affect Lender's rights to reimbursement provided for herein.
41
<PAGE> 49
ARTICLE III
-----------
UNENCUMBERED POOL PROPERTIES
----------------------------
3.1 Acceptance of Unencumbered Pool Properties. Subject to compliance with the
terms and conditions of Section 4.1, Lenders have accepted the Properties listed
on Schedule 1 as of the Closing Date as Unencumbered Pool Properties. If
Borrower desires that Lenders accept an additional Property as an Unencumbered
Pool Property, Borrower shall so notify Agent, and Agent shall promptly notify
each other Lender. No such additional Property will be evaluated by Lenders as a
potential Unencumbered Pool Property unless:
(a) such Property is an Apartment Property, an Industrial
Property or a Business Park Property;
(b) if such Property is a ground lease, such ground lease is an
Eligible Ground Lease;
(c) if such Property is not owned by Borrower, it is (or, upon
acceptance into the Unencumbered Pool in accordance with this Section
3.1, will be) owned by a Guarantor Subsidiary; and
(d) Borrower delivers to Agent the following:
3.1.2 A current operating statement for such 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 (in the
general form of the Quarterly Operating Reports) for the current period and for
the previous two (2) Fiscal Years; provided, however, that, if Borrower (or the
relevant Guarantor Subsidiary) shall have owned such Property for less than the
period to be covered by such operating statements, then the audit and
certification requirements shall extend only to the period of ownership by
Borrower or such Guarantor Subsidiary, so long as (i) Borrower provides
operating statements prepared and certified by the former owner(s) for the
remainder of the period required hereunder, if such certified operating
statements are reasonably obtainable by Borrower, or (ii) if such certified
operating statements are not reasonably obtainable by Borrower, the best
available information obtainable by Borrower and certified as such by Borrower
with respect to such Property.
3.1.3 A current rent roll for such Property and a three (3) year
operating and occupancy history of such Property in form satisfactory to Agent,
and certified by Borrower to be true and correct (or, with respect to periods
prior to Borrower's (or such
42
<PAGE> 50
Guarantor Subsidiary's) acquisition thereof, if such information is not
reasonably obtainable by Borrower, the best available information obtainable by
Borrower and certified as such by Borrower with respect to such Property);
3.1.4 A copy of Borrower's most recent Owner's Policy of Title Insurance
and survey of such Property (if any);
3.1.5 The most recent "Phase I" environmental assessment of such
Property, and any additional environmental studies or assessments in Borrower's
possession or control that have been performed with respect to such Property;
3.1.6 Copies of all Major Agreements affecting such Property;
3.1.7 Copies of any existing engineering, mechanical, structural or
maintenance studies performed with respect to such Property, in Borrower's
possession or reasonably obtainable by Borrower;
3.1.8 Information regarding the age and location of the Property,
including copies of any existing engineering, mechanical, structural or
maintenance studies performed with respect to such Property, in Borrower's
possession or reasonably obtainable by Borrower;
3.1.9 If the Property is to be owned by a wholly-owned Subsidiary that
has not previously qualified as a Guarantor Subsidiary, copies of the
Partnership Agreement or other charter documents of such Subsidiary and of such
other information regarding such Subsidiary as Agent may reasonably request; and
3.1.10 Such other information as may be reasonably requested by Agent or
any Lender in order to evaluate the potential Unencumbered Pool Property.
Following receipt of the foregoing documents and information, Agent shall review
them as expeditiously as is reasonably practicable under the circumstances. If,
following such review, Agent is prepared to proceed with acceptance of such
Property as an Unencumbered Pool Property (including, if applicable, the
acceptance of any proposed Guarantor Subsidiary as a Guarantor Subsidiary),
Agent will promptly (i) so notify Borrower, and (ii) submit the foregoing
documents and information to the Lenders, for approval by Requisite Lenders.
Upon such approval by Requisite Lenders, and upon execution and delivery of such
items or documents as may be appropriate under the circumstances (including, if
such Guarantor Subsidiary has not previously executed and delivered a Guaranty,
delivery of a Guaranty duly executed by such Guarantor Subsidiary, together with
an opinion of counsel to Borrower, in form and substance
43
<PAGE> 51
reasonably acceptable to Agent, with respect thereto and such other documents
listed in Section 4.2 as may be applicable), such Property shall become an
Unencumbered Pool Property. Notwithstanding Lenders' acceptance of any Property
as an Unencumbered Pool Property, the inclusion of the Individual UPP Value of
such Property in determining the Unencumbered Pool Value shall be subject to the
limitations set forth in the definition of "Unencumbered Pool Value".
3.2 Termination of Designation as Unencumbered Pool Property. From time to
time Borrower may request, upon not less than ten (10) days' prior written
notice to Agent (which shall promptly send a copy thereof to each other Lender),
that an Unencumbered Pool Property cease to be designated as such, which
termination of designation ("Termination of Designation") shall be consented to
by Agent if all of the following conditions are satisfied as of the date of such
Termination of Designation:
3.2.1 No Unmatured Event of Default or Event of Default has occurred and
is continuing; and
3.2.2 Borrower shall have delivered to Agent an Unencumbered Pool
Certificate demonstrating on a pro forma basis, and Agent shall have determined,
that
(a) the outstanding principal balance of the Loans will not
exceed the Loan Availability after giving effect to such Termination of
Designation and any prepayment to be made and/or the acceptance of any
Property as an additional or replacement Unencumbered Pool Property to
be given concurrently with such Termination of Designation; and
(b) such Termination of Designation will not cause Borrower to
be in breach of any of the covenants set forth in Article IX (for tests
based on quarterly results, determined as if such Property had ceased to
be an Unencumbered Pool Property, and if any Property concurrently being
accepted as Unencumbered Pool Properties, had become an Unencumbered
Pool Property, effective as of the first day of the Fiscal Quarter then
most recently ended).
The provisions of this Section 3.2 shall not affect the operation of the
definition of "Unencumbered Pool Properties" with respect to Properties that
cease to qualify as Unencumbered Pool Properties thereunder.
44
<PAGE> 52
ARTICLE IV
----------
CONDITIONS TO LOANS
-------------------
4.1 Conditions to Initial Disbursement of Loans. The obligation of Lenders to
make the initial disbursement of the Loans shall be subject to satisfaction of
each of the following conditions precedent on or before the initial Funding Date
(including, in the case of Borrower, a certificate of the Secretary, or an
Assistant Secretary, of Borrower (a "Secretary's Certificate") with respect to
authorization, incumbency and all organizational documents):
4.1.1 Borrower Documents. Borrower shall have executed and/or delivered
to Agent each of the following, in form and substance acceptable to Agent and
each other Lender:
(a) this Agreement;
(b) the Loan Notes;
(c) Certified copy of Borrower's Articles of Incorporation, as
amended*, certified by the Maryland Secretary of State;
(d) Certified copy of Borrower's bylaws, certified by the
Secretary or an Assistant Secretary of Borrower;
(e) Certificate of Good Standing (or its equivalent) from the
Maryland Secretary of State*;
(f) Evidence of qualification and good standing of Borrower in
California, Washington and Nevada:
(i) Certificate of Status-Foreign Corporation from the
California Secretary of State*;
(ii) Certificate of Good Standing (or its equivalent) from
the Washington Department of Licensing*; and
- --------
* All good standing certificates and certified documents issued by any
Governmental Authority shall be dated as of a date within 30 days of the
Closing Date.
45
<PAGE> 53
(iii) Certificate of Good Standing (or its equivalent) from
the Nevada Secretary of State*;
(g) Funds Transfer Agreement dated February 2, 1998 (on Agent's
standard form);
(h) Transfer Authorizer/Confirmer Designation and Transfer
Statement (on Agent's standard form);
(i) Corporate resolutions of Borrower authorizing Borrower's
execution, delivery and performance of the Loan Documents, as certified
by the Secretary or an Assistant Secretary of Borrower (which
certificate shall also certify the continued accuracy of the Incumbency
Certificate described below); and
(j) Incumbency Certificate of Borrower dated July 23, 1997.
4.1.2 Unencumbered Pool Property Documents. Agent shall have received
all required information with respect to each Unencumbered Pool Property in form
and substance reasonably acceptable to Agent and each other Lender.
4.1.3 Unencumbered Pool Certificate; Compliance Certificate. Borrower
shall have delivered to Agent an Unencumbered Pool Certificate evidencing
sufficient Loan Availability to support the Loans being requested and a
Compliance Certificate.
4.1.4 Notice of Borrowing. Borrower shall have delivered to Agent a
Notice of Borrowing, and, if applicable, Agent shall have delivered to Borrower
a Fixed Rate Notice, in each case in compliance with Section 2.1.2.
4.1.5 Performance. Borrower shall have performed in all material
respects all agreements and covenants required by Agent to be performed by it on
or before the such initial Funding Date.
4.1.6 Solvency. Borrower shall be Solvent.
4.1.7 Material Adverse Changes. No change, as determined by Agent and
Lenders, shall have occurred, during the period commencing September 30, 1997,
and ending on such initial Funding Date, which has a Material Adverse Effect on
Borrower.
4.1.8 Litigation Proceedings. There shall not have been instituted or
threatened, during the period commencing September 30, 1997, and ending on such
initial Funding Date, any litigation or proceeding in any court or Governmental
Authority
46
<PAGE> 54
affecting or threatening to affect Borrower, or any Unencumbered Pool Property,
which has a Material Adverse Effect on Borrower, as reasonably determined by
Agent.
4.1.9 Indefeasible Title. Borrower shall have good, indefeasible and
merchantable title to the Unencumbered Pool Properties, free and clear of all
Liens other than Permitted Liens.
4.1.10 No Event of Default; Satisfaction of Certain Covenants. On such
initial Funding Date and after giving effect to the initial disbursements of the
Loans, no Event of Default or Unmatured Event of Default shall exist and all of
the covenants contained in Section 8.4 and Article IX shall be satisfied.
4.1.11 Fees. Agent shall have received (i) an arrangement fee in the
amount separately agreed to between Agent and Borrower, and (ii) all other fees
then due (including the first annual fee due Agent under Section 2.5.2), and
Borrower shall have performed all of its other obligations as set forth in the
Loan Documents to make payments to Agent on or before such initial Funding Date;
and, to the extent requested by Agent, all expenses of Agent incurred prior to
such initial Funding Date in connection with this Agreement shall have been paid
by Borrower.
4.1.12 Opinion of Counsel. Agent shall have received, on behalf of Agent
and Lenders, favorable opinions of counsel for Borrower, dated as of the initial
Funding Date, in form and substance satisfactory to Agent and Lenders.
4.1.13 Consents and Approvals. All material licenses, permits, consents,
regulatory approvals and corporate action necessary to enter into the financing
transactions contemplated by this Agreement shall have been obtained by
Borrower.
4.1.14 Representations and Warranties. All representations and
warranties contained in this Agreement and the other Loan Documents shall be
true and correct in all material respects.
4.1.15 Payoff of Existing Facilities. Borrower shall have terminated all
commitments under (i) the Unsecured Loan Agreement dated as of February 2, 1998,
between Borrower and Wells Fargo Bank (the "Existing Facility"), and (ii) the
Revolving Line of Credit Agreement dated as of August 30, 1996, between
Borrower, Bank of America NT&SA and certain other lenders, and shall have paid
all principal, interest and other amounts payable in respect of the foregoing.
47
<PAGE> 55
4.2 Conditions Precedent to All Loans. The obligation of each Lender to
make any Loan requested to be made by it, on any date, is subject to
satisfaction of the following conditions precedent as of such date:
4.2.1 Documents. With respect to a request for a Loan, Agent shall have
received, on or before the Funding Date and in accordance with the provisions of
Section 2.1.2, an original and duly executed Notice of Borrowing.
4.2.2 Additional Matters. As of the Funding Date for any Loan and after
giving effect to the Loans being requested:
(a) Representations and Warranties. All of the representations
and warranties contained in this Agreement and in any other Loan
Document (other than representations and warranties which expressly
speak only as of a different date and other than for changes permitted
or contemplated by this Agreement), and each certification,
representation or warranty of Borrower set forth in the Notice of
Borrowing relating to such Loan(s), shall be true and correct in all
material respects on and as of such Funding Date, as though made on and
as of such date;
(b) No Default. No Event of Default or Unmatured Event of
Default shall have occurred and be continuing or would result from the
making of the requested Loan, and all of the covenants contained in
Section 8.4 and Article IX shall be satisfied; and
(c) No Material Adverse Change. Since the Closing Date, no
change shall have occurred which shall have a Material Adverse Effect on
Borrower, as determined by Agent, other than any such change the
occurrence of which has been waived by Requisite Lenders in connection
with any prior Borrowing.
Each submission by Borrower to Agent of a Notice of Borrowing with respect to a
Loan and the acceptance by Borrower of the proceeds of each such Loan made
hereunder shall constitute a representation and warranty by Borrower as of the
Funding Date in respect of such Loan that all the conditions contained in this
Section 4.2.2 have been satisfied.
4.2.3 Guarantor Subsidiary Documents. On or before the first Funding
Date to follow the designation as an Unencumbered Pool Property of Property
owned by a Subsidiary that has not previously delivered the following documents,
such Guarantor Subsidiary shall have executed and/or delivered to Agent each of
the following, in form and substance acceptable to Agent and each other Lender:
48
<PAGE> 56
(a) A Guaranty;
(b) Certified copy of such Person's agreement of limited
partnership, partnership agreement, operating agreement or bylaws, as
the case may be, in each case, as amended*;
(c) If such Guarantor Subsidiary is a limited partnership:
certified copies of its Certificate of Limited Partnership (Form LP-1)
and each amendment thereto (Form LP-2) from the Secretary of the state
under the laws of which such Guarantor Subsidiary is organized*;
(d) If such Guarantor Subsidiary is a limited liability company:
certified copies of its Articles of Organization and each amendment
thereto, from the Secretary of the state under the laws of which such
Guarantor Subsidiary is organized*;
(e) If such Guarantor Subsidiary is a limited partnership,
corporation or a limited liability company: Certificate of Status from
the Secretary of State of the state under the laws of which such
Guarantor Subsidiary is organized*;
(f) If such Guarantor Subsidiary is a corporation: Certified
copies of its Articles or Certificate of Incorporation, as amended*,
certified by the Secretary of State of the state under the laws of which
such Guarantor Subsidiary is organized;
(g) If such Guarantor Subsidiary owns an Unencumbered Pool
Property located in any state other than California: (i) evidence of its
qualification and good standing in such other state; and (ii)
Certificate of Existence/Authorization (or its equivalent) from the
Secretary of State of such state*;
(h) If such Guarantor Subsidiary is not organized under the laws
of the State of California, evidence of qualification and Certificate of
Status from the Secretary of State of California; and
(i) The opinion of counsel referred to in Section 3.1.
49
<PAGE> 57
ARTICLE V
---------
REPRESENTATIONS AND WARRANTIES
------------------------------
In order to induce Lenders to make the Loans, Borrower hereby represents
and warrants to Lenders as follows:
5.1 Organization; Corporate Powers. Borrower (i) is a corporation duly
organized, validly existing and in good standing under the laws of the State of
Maryland, (ii) is duly qualified to do business as a foreign corporation and in
good standing under the laws of each jurisdiction in which it owns or leases
real property or in which the nature of its business requires it to be so
qualified, except for those jurisdictions where failure to so qualify and be in
good standing would not have a Material Adverse Effect on Borrower, and (iii)
has all requisite corporate power and authority to own and operate its property
and assets and to conduct its business as presently conducted and as proposed to
be conducted in connection with and following the consummation of the Loans
contemplated by the Loan Documents.
5.2 Authority. Borrower has the requisite corporate power and authority to
execute, deliver and perform each of the Loan Documents to which it is or will
be a party. The execution, delivery and performance thereof, and the
consummation of the transactions contemplated thereby, have been duly approved
by Board of Directors of Borrower, and no other corporate proceedings or
authorizations on the part of Borrower, its shareholders or any Affiliate are
necessary to consummate such transactions. Each of the Loan Documents to which
Borrower is a party has been duly executed and delivered by Borrower and
constitutes its legal, valid and binding obligation, enforceable against it in
accordance with its terms, subject to bankruptcy, insolvency and other laws
affecting creditors' rights generally.
5.3 No Conflict. The execution, delivery and performance by Borrower of the
Loan Documents to which it is or will be a party, and each of the transactions
contemplated thereby, do not and will not (i) conflict with or violate
Borrower's Articles of Incorporation or bylaws, or (ii) conflict with, result in
a breach of or constitute (with or without notice or lapse of time or both) a
default under any Requirement of Law, Contractual Obligation or Court Order of
or binding upon Borrower, or (iii) require termination of any Contractual
Obligation, or (iv) result in or require the creation or imposition of any Lien
whatsoever upon any of the properties or assets of Borrower, other than
Permitted Liens.
5.4 Consents and Authorizations. Borrower has obtained all consents and
authorizations required pursuant to its Contractual Obligations with any other
Person, and
50
<PAGE> 58
shall have obtained all consents and authorizations of, and effected
all notices to and filings with, any Governmental Authority, as may be necessary
to allow Borrower to lawfully execute, deliver and perform its obligations under
the Loan Documents to which Borrower is a party.
5.5 Governmental Regulation. Neither Borrower nor any Guarantor Subsidiary
is subject to regulation under the Public Utility Holding Company Act of 1935,
the Federal Power Act, the Interstate Commerce Act, the Investment Company Act
of 1940 or any other federal or state statute or regulation such that its
ability to incur indebtedness is limited or its ability to consummate the
transactions contemplated by the Loan Documents is materially impaired.
5.6 Prior Financials. The September 30, 1997 Consolidated Balance Sheet,
Statement of Operations and Statement of Cash Flows of Borrower contained in
Borrower's Form 10Q for the quarter ended September 30, 1997 (the "September 30,
1997 Financials") delivered to Agent prior to the date hereof were prepared in
accordance with GAAP and fairly present the assets, liabilities and financial
condition of Borrower on a consolidated basis, at such date and the results of
its operations and its cash flows, on a consolidated basis, for the period then
ended.
5.7 Financial Statements; Projections and Forecasts. Each of the Financial
Statements to be delivered to Agent pursuant to Sections 6.1.2 and 6.1.3 (i) has
been, or will be, as applicable, prepared in accordance with the books and
records of Borrower on a consolidated basis, and (ii) either fairly present, or
will fairly present, as applicable, the financial condition of Borrower on a
consolidated basis, at the dates thereof (and, if applicable, subject to normal
year-end adjustments) and the results of its operations and cash flows, on a
consolidated basis, for the period then ended. Each of the projections delivered
to Agent prior to the date hereof and the financial projections and property
budgets to be delivered to Agent pursuant to Section 6.1.5 (1) has been, or will
be, as applicable, prepared by Borrower in light of the past business and
performance of Borrower on a consolidated basis and (2) represent, or will
represent, as of the date thereof, the reasonable good faith estimates of
Borrower's financial personnel.
5.8 Prior Operating Statements. Each of the operating statements pertaining
to each of the Unencumbered Pool Properties prepared by or on behalf of Borrower
and delivered to Agent prior to the date hereof was prepared in accordance with
GAAP in effect on the date such operating statement of each Unencumbered Pool
Property was prepared and fairly presents the results of operations of such
Unencumbered Pool Property for the period covered thereby and to Borrower's best
knowledge, each of the operating statements pertaining to each of the
Unencumbered Pool Properties delivered to Agent prior to the date hereof that
was not prepared by or on behalf of Borrower was
51
<PAGE> 59
prepared in accordance with GAAP in effect on the date such operating statement
of each Unencumbered Pool Property was prepared and fairly presents the results
of operations of such Unencumbered Pool Property for the period covered thereby.
5.9 Quarterly Operating Reports and Projections. Each of the Quarterly
Operating Reports to be delivered to Agent pursuant to Section 6.1.1 (i) has
been or will be, as applicable, prepared in accordance with the books and
records of the applicable Unencumbered Pool Property, and (ii) fairly presents
or will fairly present, as applicable, the results of operations of such
Unencumbered Pool Property for the period then ended. Each of the projections,
financial plans and budgets delivered to Agent prior to the date hereof and the
projections and property budgets to be delivered to Agent pursuant to Section
6.1.5 (1) has been, or will be, as applicable, prepared for each Unencumbered
Pool Property in light of the past business and performance of such Unencumbered
Pool Property and (2) represents or will represent, as of the date thereof, the
reasonable good faith estimates of Borrower's financial personnel.
5.10 Litigation; Adverse Effects.
5.10.1 There is no Proceeding pending or, to the best of Borrower's
knowledge, threatened against Borrower or any Property of Borrower (including
any Unencumbered Pool Property), which (i) results in a Material Adverse Effect
on Borrower, (ii) materially and adversely affects the ability of any party to
any of the Loan Documents to perform its obligations thereunder, or (iii)
materially and adversely affects the ability of Borrower to perform its
obligations contemplated in the Loan Documents.
5.10.2 Borrower is not (i) in violation of any applicable law, which
violation has a Material Adverse Effect on Borrower, or (ii) subject to or in
default with respect to any Court Order which has a Material Adverse Effect on
Borrower. There are no material Proceedings pending or, to the best of
Borrower's knowledge, threatened against Borrower or any Unencumbered Pool
Property, which would have a Material Adverse Effect on Borrower.
5.11 No Material Adverse Change. Since September 30, 1997, there has
occurred no event which has a Material Adverse Effect on Borrower, and no
material adverse change in Borrower's ability to perform its obligations under
the Loan Documents or the transactions contemplated thereby.
5.12 Payment of Taxes. All tax returns and reports to be filed by Borrower
have been timely filed, and all taxes, assessments, fees and other governmental
charges shown on such returns or otherwise payable by Borrower have been paid
when due and payable (other than real property taxes, which may be paid prior to
delinquency so long as no
52
<PAGE> 60
penalty or interest shall attach thereto), except such taxes, if any, as are
reserved against in accordance with GAAP and are being contested in good faith
by appropriate proceedings or such taxes, the failure to make payment of which
when due and payable will not have, in the aggregate, a Material Adverse Effect
on Borrower. Borrower has no knowledge of any proposed tax assessment against
Borrower that will have a Material Adverse Effect on Borrower, which is not
being actively contested in good faith by Borrower.
5.13 Material Adverse Agreements. Borrower is not a party to or subject to
any Contractual Obligation or other restriction contained in its Articles of
Incorporation or other governing documents which has a Material Adverse Effect
on Borrower.
5.14 Performance. Borrower is not in default in the performance, observance
or fulfillment of any of the obligations, covenants or conditions contained in
any Contractual Obligation applicable to it, and no condition exists which, with
the giving of notice or the lapse of time or both, would constitute a default
under such Contractual Obligation in each case, except where the consequences,
direct or indirect, of such default or defaults, if any, will not have a
Material Adverse Effect on Borrower.
5.15 Federal Reserve Regulations. No part of the proceeds of the Loan
hereunder will be used to purchase or carry any "margin security" as defined in
Regulation G or for the purpose of reducing or retiring any indebtedness which
was originally incurred to purchase or carry any margin security or for any
other purpose which might constitute this transaction a "purpose credit" within
the meaning of said Regulation G. Neither Borrower nor any Guarantor Subsidiary
is engaged primarily in the business of extending credit for the purpose of
purchasing or carrying out any "margin stock" as defined in Regulation U. No
part of the proceeds of the Loan hereunder will be used for any purpose that
violates, or which is inconsistent with, the provisions of Regulation X or any
other regulation of the Federal Reserve Board.
5.16 Disclosure. The information, representations and warranties of Borrower
or any Guarantor Subsidiary contained in the Loan Documents and in other
certificates, financial statements and other documents delivered to Agent by or
on behalf of Borrower or any Guarantor Subsidiary in connection therewith, taken
as a whole, do not contain any untrue statement of a material fact or omit to
state a material fact necessary in order to make the statements contained herein
or therein, in light of the circumstances under which they were made, not
misleading. Borrower has given to Agent true, correct and complete copies of all
UPP Leases, organizational documents, Financial Statements and all other
documents and instruments referred to in the Loan Documents as having been
delivered to Agent. Borrower has not intentionally withheld any material fact
from Agent in regard to any matter raised in the Loan Documents. Notwithstanding
the foregoing,
53
<PAGE> 61
with respect to projections of Borrower's future performance such
representations and warranties are made in good faith and to the best judgment
of Borrower.
5.17 Requirements of Law. Borrower and its Subsidiaries are in compliance
with all Requirements of Law (including without limitation the Securities Act
and the Securities Exchange Act, and the applicable rules and regulations
thereunder, state securities law and "Blue Sky" laws) applicable to it and its
respective businesses, in each case, where the failure to so comply will have a
Material Adverse Effect on Borrower. Borrower has made all filings with and
obtained all consents of the Commission required under the Securities Act and
the Securities Exchange Act in connection with the execution, delivery and
performance by Borrower of the Loan Documents.
5.18 Patents, Trademarks, Permits, Etc. Borrower and its Subsidiaries own,
are licensed or otherwise have the lawful right to use, or have all permits and
other governmental approvals, patents, trademarks, trade names, copyrights,
technology, know-how and processes used in or necessary for the conduct of each
such Person's business as currently conducted, the absence of which would have a
Material Adverse Effect upon Borrower. The use of such permits and other
governmental approvals, patents, trademarks, trade names, copyrights,
technology, know-how and processes by each such Person does not infringe on the
rights of any Person, subject to such claims and infringements as do not, in the
aggregate, give rise to any liability on the part of any such Person which would
have a Material Adverse Effect on Borrower.
5.19 Environmental Matters. Except as set forth on Schedule 5.1.19, to the
best of Borrower's knowledge, (i) the operations of Borrower and each of its
Subsidiaries comply in all material respects with all applicable local, state
and federal environmental, health and safety Requirements of Law ("Environmental
Laws"); (ii) none of Borrower's or any of its Subsidiaries' present Property or
operations are subject to any Remedial Action or other Liabilities and Costs
arising from the Release or threatened Release of a Contaminant into the
environment in violation of any Environmental Laws, which Remedial Action or
other Liabilities and Costs would have a Material Adverse Effect on Borrower;
(iii) neither Borrower nor any of its Subsidiaries has filed any notice under
applicable Environmental Laws reporting a Release of a Contaminant into the
environment in violation of any Environmental Laws, except as the same may have
been heretofore remedied; (iv) there is not now on or in the Property of
Borrower or any of its Subsidiaries (except in compliance in all material
respects with all applicable Environmental Laws): (A) any underground storage
tanks, (B) any asbestos-containing material, or (C) any polychlorinated
biphenyls (PCB's) used in hydraulic oils, electrical transformers or other
equipment owned by such Person; and (v) neither Borrower nor any of its
Subsidiaries has received any notice or claim to the effect that it is or may be
liable to any Person
54
<PAGE> 62
as a result of the Release or threatened Release of a Contaminant into the
environment.
5.20 Unencumbered Pool Properties. Each of the Properties listed on Schedule
1 qualifies as an Unencumbered Pool Property and is owned by Borrower or any
Guarantor Subsidiary.
5.21 Major Agreements; UPP Leases. With respect to each Unencumbered Pool
Property, Agent has received true, complete and correct copies of each Major
Agreement. All such Major Agreements are in full force and effect and have not
been terminated, and no default or event of default (or event or occurrence
which upon with the passage of time or the giving of notice, or both, will
constitute a default or event of default) exists or will exist under such Major
Agreements as a result of the consummation of the transactions contemplated by
the Loan Documents. Except as reflected on the most current rent rolls delivered
to Agent, all UPP Leases are in full force and effect and no default or event of
default (or event or occurrence which upon with the passage of time or the
giving of notice, or both, will constitute a default or event of default) exists
or will exist thereunder as a result of the consummation of the transactions
contemplated by the Loan Documents.
5.22 Solvency. Borrower is and will be Solvent after giving effect to each
disbursement of the Loans and the payment and accrual of all fees then payable.
5.23 Title to Assets; No Liens. Borrower has good, indefeasible and
merchantable title to all Properties owned or leased by it, including, without
limitation, any Unencumbered Pool Properties owned or leased by Borrower, and
each of the Unencumbered Pool Properties is free and clear of all Liens, except
Permitted Liens.
5.24 Use of Proceeds. Borrower's use of the proceeds of the Loans are, and
will continue to be, legal and proper uses (and to the extent necessary, duly
authorized by Borrower's Board of Directors and shareholders) and such uses are
consistent with all applicable laws and statutes and Section 7.9.
5.25 Capitalization. All of the capital stock and other Securities of
Borrower and each Affiliate have been issued in compliance with all applicable
Requirements of Law.
5.26 ERISA. Neither Borrower nor any ERISA Affiliate thereof has in the past
five (5) years maintained or contributed to or currently maintains or
contributes to any Benefit Plan. No Investment Partnership has or is likely to
incur any liability with respect to any Benefit Plan maintained or contributed
to by such Investment Partnership or its ERISA Affiliates, which would have a
Material Adverse Effect on Borrower. Neither Borrower nor any ERISA Affiliate of
Borrower has during the past five (5) years
55
<PAGE> 63
maintained or contributed to or currently maintains or contributes to any
employee welfare benefit plan within the meaning of Section 3(1) of ERISA which
provides benefits to retirees. Neither Borrower nor any ERISA Affiliate of
Borrower is now contributing nor has it ever contributed to or been obligated to
contribute to any Multiemployer Plan, no employees or former employees of
Borrower or such ERISA Affiliate have been covered by any Multiemployer Plan in
respect of their employment by Borrower, and no ERISA Affiliate of Borrower has
or is likely to incur any withdrawal liability with respect to any Multiemployer
Plan which would have a Material Adverse Effect on Borrower.
5.27 Status as a REIT. Borrower (i) is a real estate investment trust as
defined in Section 856 of the Internal Revenue Code (or any successor provision
thereto), (ii) has not revoked its election to be a real estate investment
trust, (iii) has not engaged in any "prohibited transactions" as defined in
Section 856(b)(6)(iii) of the Internal Revenue Code (or any successor provision
thereto), and (iv) for its current "tax year" (as defined in the Internal
Revenue Code) is and for all prior tax years subsequent to its election to be a
real estate investment trust has been entitled to a dividends paid deduction
which meets the requirements of Section 857 of the Internal Revenue Code.
5.28 Ownership. Borrower does not own or have any interest in any other
Person, other than as set forth on Schedule 5.28, which sets forth, as of the
date of this Agreement, each Subsidiary of Borrower and each Investment
Partnership, the nature and jurisdiction of organization thereof, and the nature
and amount (including Borrower's Share) of Borrower's interest therein.
5.29 NYSE Listing. The common stock of the Borrower is listed for trading,
and is traded, on the New York Stock Exchange, and will continue to be listed
for trading and traded on either the New York Stock Exchange or the American
Stock Exchange.
5.30 Representations and Warranties as to Each Guarantor Subsidiary. In
order to induce Lenders to make the Loans, on any Funding Date on which a
Guarantor Subsidiary owns any Unencumbered Pool Property, Borrower hereby
represents and warrants to Lenders as follows:
5.30.1 Organization; Partnership Powers. Each Guarantor Subsidiary (i)
is duly incorporated or formed, validly existing and in good standing under the
laws of the jurisdiction of its organization, (ii) is duly qualified to do
business as a foreign limited liability company, limited partnership or
corporation, as applicable and in good standing under the laws of each
jurisdiction in which it owns or leases real property or in which the nature of
its business requires it to be so qualified, except for those jurisdictions
where failure to so qualify and be in good standing would not have a Material
Adverse Effect on
56
<PAGE> 64
Borrower and such Guarantor Subsidiary, and (iii) has all requisite corporate,
partnership or other organizational power and authority, as an entity, to own
and operate its Property and assets and to conduct its business as presently
conducted and as proposed to be conducted in connection with and following the
consummation of the transactions contemplated by the Loan Documents.
5.30.2 Authority. Each Guarantor Subsidiary has the requisite power and
authority, as an entity, to execute, deliver and perform each of the Loan
Documents to which it is or will be a party. The execution, delivery and
performance thereof, and the consummation of the transactions contemplated
thereby, have been duly approved by the requisite partners, shareholders or
members, as the case may be, of each such Guarantor Subsidiary, and no other
proceedings on the part of any Guarantor Subsidiary are necessary to consummate
such transactions. Each of the Loan Documents to which any Guarantor Subsidiary
is a party has been duly executed and delivered by such Guarantor Subsidiary and
constitutes its legal, valid and binding obligation, enforceable against such
Guarantor Subsidiary in accordance with its terms, subject to bankruptcy,
insolvency and other laws affecting creditors' rights generally.
5.30.3 No Conflict. The execution, delivery and performance of the Loan
Documents by each Guarantor Subsidiary, and each of the transactions
contemplated thereby, do not and will not (i) conflict with or violate such
Guarantor Subsidiary's articles of incorporation, bylaws, partnership agreement
or other charter documents, as the case may be, (ii) conflict with, result in a
breach of or constitute (with or without notice or lapse of time or both) a
default under any Requirement of Law, Contractual Obligation or Court Order of
any Guarantor Subsidiary, (iii) require termination of any Contractual
Obligation, or (iv) result in or require the creation or imposition of any Lien
whatsoever upon any of the properties or assets of any Guarantor Subsidiary
(other than Permitted Liens).
5.30.4 Consents and Authorizations. Each Guarantor Subsidiary has
obtained all consents and authorizations required pursuant to its Contractual
Obligations with any other Person, and shall have obtained all consents and
authorizations of, and effected all notices to and filings with, any
Governmental Authority, as may be necessary to allow such Guarantor Subsidiary
to lawfully execute, deliver and perform its obligations under the Loan
Documents to which such Guarantor Subsidiary is a party.
5.30.5 Litigation; Adverse Effects.
(a) There is no action, suit, proceeding, governmental
investigation or arbitration, at law or in equity or before or by any
Governmental Authority, pending or, to the best of Borrower's knowledge,
threatened against any
57
<PAGE> 65
Guarantor Subsidiary or any Property of any Guarantor Subsidiary which
would (i) result in a Material Adverse Effect on Borrower, or (ii)
materially and adversely affect the ability of any party to any of the
Loan Documents to perform its obligations thereunder.
(b) No Guarantor Subsidiary is (i) in violation of any
applicable law, which violation has a Material Adverse Effect on such
Guarantor Subsidiary, or (ii) subject to or in default with respect to
any Court Order which has a Material Adverse Effect on such Guarantor
Subsidiary. There are no material Proceedings pending or, to the best of
Borrower's knowledge, threatened against any Guarantor Subsidiary which
would have a Material Adverse Effect on such Guarantor Subsidiary.
5.30.6 Payment of Taxes. All tax returns and reports to be filed by any
Guarantor Subsidiary have been timely filed, and all taxes, assessments, fees
and other governmental charges shown on such returns or otherwise payable by
such Guarantor Subsidiary have been paid when due and payable (other than real
property taxes, which may be paid prior to delinquency so long as no penalty or
interest shall attach thereto), except such taxes, if any, as are reserved
against in accordance with GAAP and are being contested in good faith by
appropriate proceedings or such taxes, the failure to make payment of which when
due and payable would not have, in the aggregate, a Material Adverse Effect on
any Guarantor Subsidiary. Borrower has no knowledge of any proposed tax
assessment against any Guarantor Subsidiary that would have a Material Adverse
Effect on any Guarantor Subsidiary, which is not being actively contested in
good faith by such Guarantor Subsidiary.
5.30.7 Performance. No Guarantor Subsidiary is in default in the
performance, observance or fulfillment of any of the obligations, covenants or
conditions contained in any Contractual Obligation applicable to it, and no
condition exists which, with the giving of notice or the lapse of time or both,
would constitute a default under such Contractual Obligation in each case,
except where the consequences, direct or indirect, of such default or defaults,
if any, would not have a Material Adverse Effect on such Guarantor Subsidiary.
5.30.8 Solvency. Each Guarantor Subsidiary is and will be Solvent, in
each case after giving effect to each disbursement of the Loans, and the payment
and accrual of all fees then payable.
5.30.9 Title to Assets; No Liens. Each Guarantor Subsidiary has good,
indefeasible and merchantable title to the Properties owned or leased by it and
each of the
58
<PAGE> 66
Unencumbered Pool Properties owned by any Guarantor Subsidiary is free and clear
of all Liens, except Permitted Liens.
5.30.10 Beneficial Owner. The sole beneficial owner of each Guarantor
Subsidiary is, and will continue to be, directly or indirectly, Borrower.
ARTICLE VI
----------
REPORTING COVENANTS
-------------------
Borrower covenants and agrees that, on and after the date hereof, until
payment in full of all of the Obligations, the expiration of the Commitments and
termination of this Agreement:
6.1 Financial Statements and Other Financial and Operating Information.
Borrower shall maintain or cause to be maintained a system of accounting
established and administered in accordance with sound business practices and
consistent with past practice to permit preparation of quarterly and annual
financial statements in conformity with GAAP, and each of the financial
statements described below shall be prepared on a consolidated basis for
Borrower from such system and records. Borrower shall deliver or cause to be
delivered to Agent (with copies sufficient for each Lender):
6.1.1 Quarterly Operating Reports. As soon as practicable, and in any
event within forty-five (45) days after the end of each Fiscal Quarter,
operating statements in the form approved by Agent and rent rolls (on Borrower's
detailed form of rent roll) for each Unencumbered Pool Property dated as of the
last day of such Fiscal Quarter (the "Quarterly Operating Reports"), in form and
substance satisfactory to Agent, certified by Borrower's chief financial
officer.
6.1.2 Quarterly Financial Statements Certified by CFO. As soon as
practicable, and in any event within forty-five (45) days after the end of each
Fiscal Quarter, consolidated balance sheets, statements of operations and
statements of cash flow for Borrower ("Financial Statements"), which may, in the
case of the first three Fiscal Quarters, be in the form provided to the
Commission on Borrower's Form 10Q, and certified by Borrower's chief financial
officer.
6.1.3 Annual Financial Statements. Within ninety (90) days after the
close of each Fiscal Year, annual Financial Statements of Borrower, on a
consolidated basis (in the form provided to the Commission on Borrower's Form
10K), audited and certified without qualification by the Accountants and
accompanied by a statement that, in the course of their audit (conducted in
accordance with generally accepted auditing
59
<PAGE> 67
standards), the Accountants obtained no knowledge that an Event of Default or
Unmatured Event of Default has occurred under Article IX hereof. To the extent
Agent desires additional details or supporting information with respect to
Subsidiaries, Investment Partnerships or individual Properties owned or leased
by Borrower, any Subsidiary of Borrower or any Investment Partnership (other
than Unencumbered Pool Properties) not contained in Borrower's Form 10K,
Borrower shall provide Agent with such details or supporting information as
Agent requests which is reasonably available to Borrower.
6.1.4 Officer's Certificate of Borrower. (i) Together with each delivery
of any Financial Statement pursuant to Sections 6.1.2 and 6.1.3, (A) an
Officer's Certificate of Borrower, stating that the executive officer who is the
signatory thereto (which officer shall be the chief executive officer, the chief
operating officer or the chief financial officer of Borrower) has reviewed, or
caused under his supervision to be reviewed, the terms of this Agreement and the
other principal Loan Documents, and has made, or caused to be made under his
supervision, a review in reasonable detail of the transactions and condition of
Borrower and its Subsidiaries during the accounting period covered by such
Financial Statements, and that such review has not disclosed the existence
during or at the end of such accounting period, and that the signers do not have
knowledge of the existence as of the date of the Officer's Certificate, of any
condition or event which constitutes an Event of Default or Unmatured Event of
Default, or, if any such condition or event existed or exists, specifying the
nature and period of existence thereof and what action has been taken, is being
taken and is proposed to be taken with respect thereto; and (B) a Compliance
Certificate demonstrating in reasonable detail (which detail shall include
actual calculation and supporting information) compliance during and at the end
of such accounting periods with the covenants contained in Section 8.4 and
Article IX.
6.1.5 Cash Flow Projections; Property Budgets. Within thirty (30) days
after the end of each Fiscal Year, projections of Borrower, on a consolidated
basis, detailing expected sources and uses of cash for the then current Fiscal
Year, together with property budgets for each of the Unencumbered Pool
Properties for the then current Fiscal Year. Borrower shall also provide such
additional supporting details as Agent may reasonably request.
6.1.6 Unencumbered Pool Certificate. As soon as practicable, and in any
event within forty-five (45) days after the end of each Fiscal Quarter (and more
often if so requested by Agent), a certificate in substantially the form of
Exhibit B, certified as being true and correct by Borrower's chief executive
officer, chief operating officer or chief financial officer (the "Unencumbered
Pool Certificate"). Each Unencumbered Pool Certificate shall set forth
calculations, including calculations of the Individual UPP
60
<PAGE> 68
Values of each Unencumbered Pool Property, Unencumbered Pool Value and Loan
Availability, updated since the date of the last prior Unencumbered Pool
Certificate, and shall reflect any material adverse changes in the Net Operating
Income or other condition of an Unencumbered Pool Property of which the signing
officer has knowledge and which is not reflected in the most recent Unencumbered
Pool Certificate.
6.1.7 Knowledge of Certain Events. Promptly upon Borrower obtaining
knowledge (i) of any condition or event which constitutes an Event of Default or
Unmatured Event of Default, or becoming aware that any Lender has given notice
or taken any other action with respect to a claimed Event of Default or
Unmatured Event of Default; (ii) of any condition or event which has a Material
Adverse Effect on Borrower, an Officer's Certificate specifying the nature and
period of existence of any such condition or event, or specifying the notice
given or action taken by such Lender and the nature of such claimed Event of
Default, Unmatured Event of Default, event or condition, and what action
Borrower has taken, is taking and proposes to take with respect thereto; or
(iii) of any occurrence causing a Property that theretofore constituted
Unencumbered Pool Property to cease to qualify as such.
6.1.8 Litigation, Arbitration or Government Investigation. Promptly upon
Borrower obtaining knowledge of (i) the institution of, or threat of, any
material Proceeding against or affecting Borrower or any of its Subsidiaries not
previously disclosed in writing by Borrower to Agent pursuant to this Section
6.1.8, including any eminent domain or other condemnation proceedings affecting
any Unencumbered Pool Property, or (ii) any material development in any
Proceeding already disclosed, which, in either case, has a Material Adverse
Effect on Borrower, a notice thereof to Agent and such other information as may
be reasonably available to it to enable Agent, Lenders and their counsel to
evaluate such matters.
6.1.9 ERISA Termination Event. As soon as possible, and in any event
within thirty (30) days after Borrower knows or has reason to know that a
Termination Event has occurred, a written statement of the chief financial
officer of Borrower describing such Termination Event and the action, if any,
which Borrower, or any ERISA Affiliate of any of Borrower, has taken, is taking
or proposes to take, with respect thereto, and, when known, any action taken or
threatened by the IRS, the DOL or the PBGC with respect thereto.
6.1.10 Prohibited ERISA Transaction. As soon as possible, and in any
event within thirty (30) days, after Borrower, or any ERISA Affiliate of
Borrower, knows or has reason to know that a prohibited transaction (defined in
Section 406 of ERISA and Section 4975 of the Internal Revenue Code) has
occurred, a statement of the chief financial officer of Borrower describing such
transaction.
61
<PAGE> 69
6.1.11 Benefit Plan Annual Report. Within ten (10) days after the filing
thereof with the DOL, the IRS or the PBGC, copies of each annual report,
including Schedule B thereto, filed with respect to each Benefit Plan of
Borrower or any ERISA Affiliate of Borrower.
6.1.12 Benefit Plan Funding Waiver Request. Within thirty (30) days
after the filing thereof with the IRS, a copy of each funding waiver request
filed with respect to any Benefit Plan of Borrower or any ERISA Affiliate of
Borrower and all communications received by Borrower, or any ERISA Affiliate of
Borrower, with respect to such request.
6.1.13 Establishment of Benefit Plan and Increase in Contributions to
the Benefit Plan. Not less than ten (10) days prior to the effective date
thereof, a notice to Agent of the establishment of a Benefit Plan (or the
incurrence of any obligation to contribute to a Multiemployer Plan) by Borrower
or any ERISA Affiliate of Borrower. Within thirty (30) days after the first to
occur of an amendment of any then existing Benefit Plan of Borrower or any ERISA
Affiliate of Borrower which will result in an increase in the benefits under
such Benefit Plan or a notification of any such increase, or the establishment
of any new Benefit Plan by Borrower or any ERISA Affiliate of Borrower or the
commencement of contributions to any Benefit Plan to which Borrower or any ERISA
Affiliate of Borrower was not previously contributing, a copy of said amendment,
notification or Benefit Plan.
6.1.14 Qualification of ERISA Plan. Promptly upon, and in any event
within thirty (30) days after, receipt by Borrower or any ERISA Affiliate of
Borrower of an unfavorable determination letter from the IRS regarding the
qualification of a Plan under Section 401(a) of the Internal Revenue Code, a
copy of said determination letter, if such disqualification would have a
Material Adverse Effect on Borrower.
6.1.15 Multiemployer Plan Withdrawal Liability. Promptly upon, and in
any event within thirty (30) days after receipt by Borrower or any ERISA
Affiliate of Borrower of a notice from a Multiemployer Plan regarding the
imposition of withdrawal liability, a copy of said notice.
6.1.16 Failure to Make Section 412 Payment. Promptly upon, and in any
event within thirty (30) days after, Borrower, or any ERISA Affiliate of
Borrower, fails to make a required installment under subsection (m) of Section
412 of the Internal Revenue Code or any other payment required under Section 412
of the Internal Revenue Code on or before the due date for such installment or
payment, a notification of such failure, if such failure could result in either
the imposition of a Lien under said Section 412 or
62
<PAGE> 70
otherwise have or could reasonably be anticipated to have a Material Adverse
Effect on Borrower.
6.1.17 Failure of Borrower to Qualify as Real Estate Investment Trust.
Promptly upon, and in any event within forty-eight (48) hours after Borrower
first has actual knowledge of (i) Borrower failing to continue to qualify as a
real estate investment trust as defined in Section 856 of the Internal Revenue
Code (or any successor provision thereof), (ii) any act by Borrower causing its
election to be taxed as a real estate investment trust to be terminated, (iii)
any act causing Borrower to be subject to the taxes imposed by Section 857(b)(6)
of the Internal Revenue Code (or any successor provision thereto), or (iv)
Borrower failing to be entitled to a dividends paid deduction which meets the
requirements of Section 857 of the Internal Revenue Code, a notice of any such
occurrence or circumstance.
6.1.18 Asset Acquisitions and Dispositions, Indebtedness, Etc. Without
limiting Article VIII or any other restriction in the Loan Documents, concurrent
with notice to Borrower's priority mailing list and in all events not later than
any public disclosure, prior written notice of any material Investments (other
than in Cash Equivalents), material acquisitions, asset purchases, dispositions,
disposals, divestitures or similar transactions involving Property, the raising
of additional equity or the incurring or repayment of material Indebtedness, by
Borrower or any Subsidiary.
6.1.19 Ratings. Promptly upon (i) the issuance by any Rating Agency of
any rating in respect of Borrower's senior long-term unsecured debt obligations,
or (ii) the change by any Rating Agency of any theretofore existing rating of
such obligations, notice of such issuance or change.
6.1.20 Other Information. Such other information, reports, contracts,
schedules, lists, documents, agreements and instruments in the possession or
under the control of Borrower with respect to (i) the Unencumbered Pool
Properties, (ii) any material change in Borrower's investment, finance or
operating policies, or (iii) Borrower's business, condition (financial or
otherwise), operations, performance, properties or prospects as Agent may from
time to time reasonably request, including, without limitation, annual
information with respect to cash flow projections, budgets, operating statements
(current year and immediately preceding year), rent rolls, lease expiration
reports, leasing status reports, note payable summaries, bullet note summaries,
equity funding requirements, contingent liability summaries, line of credit
summaries, line of credit collateral summaries, wrap note or note receivable
summaries, schedules of outstanding letters of credit, summaries of cash and
Cash Equivalents, projections of management and leasing fees and overhead
budgets. Provided that Agent gives Borrower reasonable prior notice and an
opportunity to participate, Borrower hereby authorizes
63
<PAGE> 71
Agent to communicate with the Accountants and authorizes the Accountants to
disclose to Agent any and all financial statements and other information of any
kind, including copies of any management letter or the substance of any oral
information, that such accountants may have with respect to Borrower's condition
(financial or otherwise), operations, properties, performance and prospects.
Concurrently therewith, Agent will notify Borrower of any such communication. At
Agent's request, Borrower shall deliver a letter addressed to the Accountants
instructing them to disclose such information in compliance with this Section
6.1.20.
6.1.21 Press Releases; Creditor Reports and SEC Filings; Tax Returns,
Etc. Telephonic or telecopy notice to Agent concurrent with or prior to issuance
of any material press release concerning Borrower and, as soon as practicable
after filing with the Commission, all reports and notices, proxy statements,
registration statements and prospectuses of Borrower. All materials sent or made
available generally by Borrower to the holders of its publicly held Securities
or to a trustee under any indenture or filed with the Commission, including all
periodic reports required to be filed with the Commission, will be delivered to
Agent within five (5) days after being so sent, made available or filed, as the
case may be; and all Federal income tax returns filed by Borrower shall be
delivered to Agent within ten (10) days after being so filed.
6.1.22 Accountant Reports. Copies of all reports prepared by the
Accountants and submitted to Borrower in connection with each annual, interim or
special audit or review of the financial statements or practices of Borrower or
any of its Subsidiaries, including the comment letter submitted by the
Accountants in connection with their annual audit.
6.2 Environmental Notices. Borrower shall notify Agent, in writing, as soon
as practicable, and in any event within ten (10) days after Borrower's learning
thereof, of any: (i) written notice or claim to the effect that Borrower or any
of its Subsidiaries is or may be liable to any Person as a result of any
material Release or threatened Release of any Contaminant into the environment;
(ii) written notice that Borrower or any of its Subsidiaries is subject to
investigation by any Governmental Authority evaluating whether any Remedial
Action is needed to respond to the Release or threatened Release of any
Contaminant into the environment; (iii) written notice that any Property is
subject to an Environmental Lien; (iv) written notice of violation to Borrower
or any of its Subsidiaries or awareness of a condition which might reasonably
result in a notice of violation of any Environmental Laws by Borrower or any of
its Subsidiaries; (v) commencement or written threat of any Proceeding alleging
a violation of any Environmental Laws; (vi) written notice from a Governmental
Authority of any changes to any existing Environmental Laws that will have a
Material Adverse Effect on the operations of Borrower; or (vii) any proposed
acquisition of stock, assets, real estate or
64
<PAGE> 72
leasing of property, or any other action by Borrower that, to the best of
Borrower's knowledge, could subject Borrower or any of its Subsidiaries to
environmental, health or safety Liabilities and Costs that will have a Material
Adverse Effect on Borrower. With regard to the matters referred to in clauses
(i) through (v) above, the same shall apply in respect of each Unencumbered Pool
Property and, in the case of other Property of Borrower or any of its
Subsidiaries only if the matter will have a Material Adverse Effect on Borrower.
6.3 Confidentiality. Confidential Information obtained by Agent or Lenders
pursuant to this Agreement or in connection with the Facility shall not be
disseminated by Agent or Lenders and shall not be disclosed to third parties
except to regulators, taxing authorities and other governmental agencies having
jurisdiction over Agent or such Lender or otherwise in response to Requirements
of Law, to their respective auditors and legal counsel and in connection with
regulatory, administrative and judicial proceedings as necessary or relevant
including enforcement proceedings relating to the Loan Documents, and to any
prospective assignee or permitted pledgee of or participant in a Lender's
interest under this Agreement or any prospective purchaser of the assets or a
controlling interest in any Lender, provided that such prospective assignee,
participant or purchaser first agrees to be bound by the provisions of this
Section 6.3. In connection with disclosures of Confidential Information to any
non-governmental third-party, the Lender(s) from whom the same has been
requested shall, to the extent feasible and permitted, give prior notice of such
request to Borrower; however, neither Agent nor any such Lender shall incur any
liability to Borrower for failure to do so. For purposes hereof, "Confidential
Information" shall mean all nonpublic information obtained by Agent or Lenders,
unless and until such information becomes publicly known, other than as a result
of unauthorized disclosure by Agent or Lenders of such information.
ARTICLE VII
-----------
AFFIRMATIVE COVENANTS
---------------------
Borrower covenants and agrees that, on and after the date hereof, until
payment in full of all of the Obligations, the expiration of the Commitments and
termination of this Agreement:
7.1 Existence. Borrower shall at all times maintain its existence as a
corporation and preserve and keep in full force and effect its rights and
franchises unless the failure to maintain such rights and franchises does not
have a Material Adverse Effect on Borrower.
65
<PAGE> 73
7.2 Qualification. Borrower shall qualify and remain qualified to do
business in each jurisdiction in which the nature of its business requires it to
be so qualified except for those jurisdictions where failure to so qualify does
not have a Material Adverse Effect on Borrower.
7.3 Compliance with Laws, Etc. Borrower shall (i) comply with all
Requirements of Law, and all restrictive covenants affecting Borrower or the
properties, performance, prospects, assets or operations of Borrower, and (ii)
obtain as needed all Permits necessary for its operations and maintain such in
good standing, except in each of the foregoing cases where the failure to do so
will not have a Material Adverse Effect on Borrower.
7.4 Payment of Taxes and Claims. Borrower shall pay (i) all taxes,
assessments and other governmental charges imposed upon it or on any of its
properties or assets or in respect of any of its franchises, business, income or
property before any penalty or interest accrues thereon, the failure to make
payment of which will have a Material Adverse Effect on Borrower, and (ii) all
claims (including, without limitation, claims for labor, services, materials and
supplies) for sums, material in the aggregate to Borrower, which have become due
and payable and which by law have or may become a Lien other than a judgment
lien upon any of Borrower's properties or assets, prior to the time when any
penalty or fine shall be incurred with respect thereto.
7.5 Maintenance of Properties; Insurance. Borrower shall maintain in good
repair, working order and condition, excepting ordinary wear and tear, all of
its Properties and will make or cause to be made all appropriate repairs,
renewals and replacements thereof. Borrower shall maintain commercially
reasonable and appropriate amounts of fire and extended coverage and liability
insurance, which insurance shall include in any event:
(a) with respect to each Property: (i) property and casualty insurance
(including coverage for flood and water damage for any Property located within a
100-year flood plain) in an amount not less than the replacement costs of the
improvements thereon, and (ii) loss of rental insurance income in an amount not
less than one year's gross revenues of such Property; and
(b) comprehensive general liability insurance in an amount not less than
$20,000,000 per occurrence.
At the request of Agent, Borrower shall provide, as to each Unencumbered Pool
Property evidence of insurance, including certificates of insurance and binders.
66
<PAGE> 74
7.6 Inspection of Property; Books and Records; Discussions. Borrower shall
permit, and shall cause each of its Subsidiaries to permit, any authorized
representative(s) designated by any Lender to visit and inspect any of its
properties, to inspect financial and accounting records and leases, and to make
copies and take extracts therefrom, all at such times during normal business
hours and as often as any Lender may reasonably request. In connection
therewith, Borrower shall pay all expenses of the types described in Section
12.1. Borrower will keep proper books of record and account in which entries, in
conformity with GAAP and as otherwise required by this Agreement and applicable
Requirements of Law, shall be made of all dealings and transactions in relation
to its businesses and activities and as otherwise required under Section 6.1.
7.7 Maintenance of Permits, Etc. Borrower will maintain in full force and
effect all Permits, franchises, patents, trademarks, trade names, copyrights,
authorizations or other rights necessary for the operation of its business,
except where the failure to obtain any of the foregoing would not have a
Material Adverse Effect on Borrower; and notify Agent in writing, promptly after
learning thereof, of the suspension, cancellation, revocation or discontinuance
of or of any pending or threatened action or proceeding seeking to suspend,
cancel, revoke or discontinue any material Permit, patent, trademark, trade
name, copyright, governmental approval, franchise authorization or right.
7.8 Conduct of Business. Except for Permitted Investments pursuant to
Section 9.8 and Investments in cash and Cash Equivalents, Borrower and its
Subsidiaries shall engage only in the business of direct ownership, operation
and development of Apartment Properties, Industrial Properties and Business Park
Properties of the same general type as owned by such Persons as of the Closing
Date in California, Washington and Nevada, and any other business activities of
Borrower and its Subsidiaries will remain incidental thereto.
7.9 Use of Proceeds. Borrower shall use the proceeds of the Loans only for
pre-development costs, development and construction costs, acquisitions, working
capital, equity Investments, capital expenditures, and repayment of Indebtedness
(including the Indebtedness referred to in Section 4.1.17), including required
interest and/or principal payments thereon.
7.10 Securities Law Compliance. Borrower shall comply in all material
respects with all rules and regulations of the Commission and file all reports
required by the Commission relating to Borrower's publicly held Securities.
7.11 Continued Status as a REIT; Prohibited Transactions. Borrower (i) will
continue to be a real estate investment trust as defined in Section 856 of the
Internal Revenue Code (or any successor provision thereto), (ii) will not revoke
its election to be a
67
<PAGE> 75
real estate investment trust, (iii) will not engage in any "prohibited
transactions" as defined in Section 856(b)(6)(iii) of the Internal Revenue Code
(or any successor provision thereto), and (iv) will continue to be entitled to a
dividend paid deduction meeting the requirements of Section 857 of the Internal
Revenue Code.
7.12 Listed Company. The common stock of Borrower shall at all times be
listed for trading and be traded on the New York Stock Exchange or the American
Stock Exchange.
7.13 Construction in Process: Borrower shall continuously and diligently
pursue the expeditious completion of all Construction in Process and shall
promptly notify Agent in writing of any interruption thereof on any Property for
a continuous period in excess of thirty (30) days, which notice shall include
the reason for such interruption and the anticipated date for resumption and
completion of such Construction in Process.
7.14 With Respect to Guarantor Subsidiaries:.
7.14.1 Existence. Borrower will cause each Guarantor Subsidiary at all
times to maintain its existence as a Partnership or corporation, as the case may
be, and preserve and keep in full force and effect its rights and franchises
unless the failure to maintain such rights and franchises would not have a
Material Adverse Effect on such Guarantor Subsidiary. Borrower will cause each
Guarantor Subsidiary to be owned and continue to be owned, directly or
indirectly, only by Borrower.
7.14.2 Qualification, Name. Borrower will cause each Guarantor
Subsidiary to qualify and remain qualified to do business in each jurisdiction
in which the nature of its business requires it to be so qualified except for
those jurisdictions where failure to so qualify does not have a Material Adverse
Effect on such Guarantor Subsidiary.
7.14.3 Compliance with Laws, Etc. Borrower will cause each Guarantor
Subsidiary to (i) comply with all Requirements of Law, and all restrictive
covenants affecting such Guarantor Subsidiary or the properties, performance,
prospects, assets or operations of such Guarantor Subsidiary, and (ii) obtain as
needed all Permits necessary for its operations and maintain such in good
standing, except in each of the foregoing cases where the failure to do so will
not have a Material Adverse Effect on such Guarantor Subsidiary.
7.14.4 Payment of Taxes and Claims. Borrower will cause each Guarantor
Subsidiary to pay (i) all taxes, assessments and other governmental charges
imposed upon it or on any of its properties or assets or in respect of any of
its franchises,
68
<PAGE> 76
business, income or property before any penalty or interest accrues thereon, the
failure to make payment of which will have a Material Adverse Effect on such
Guarantor Subsidiary, and (ii) all claims (including, without limitation, claims
for labor, services, materials and supplies) for sums, material in the aggregate
to such Guarantor Subsidiary, which have become due and payable and which by law
have or may become a Lien other than a judgment lien upon any of such Guarantor
Subsidiary's properties or assets, prior to the time when any penalty or fine
shall be incurred with respect thereto.
7.14.5 Material Contracts. Borrower will cause each Guarantor Subsidiary
to perform all of its obligations under its leases and agreements except where
the failure to perform such obligations will not have a Material Adverse Effect
on such Guarantor Subsidiary.
7.14.6 Maintenance of Permits, Etc. Borrower will cause each Guarantor
Subsidiary to maintain in full force and effect all Permits, franchises,
patents, trademarks, trade names, copyrights, authorizations or other rights
necessary for the operation of its business, except where the failure to obtain
any of the foregoing will not have a Material Adverse Effect on such Guarantor
Subsidiary; and Borrower shall notify Agent in writing, promptly after learning
thereof, of the suspension, cancellation, revocation or discontinuance of or of
any pending or threatened action or proceeding seeking to suspend, cancel,
revoke or discontinue any material Permit, patent, trademark, trade name,
copyright, governmental approval, franchise authorization or right.
7.14.7 Conduct of Business. Each Guarantor Subsidiary shall continue to
be a single purpose, Partnership or corporation with its sole business being
owning, operating and developing the Unencumbered Pool Properties owned by it.
7.15 Indemnity of Guarantor Subsidiaries. Borrower shall indemnify and hold
harmless each Guarantor Subsidiary from and against any liability (in the form
of indebtedness repaid to Lenders in respect of the Borrower's Obligations,
including (if applicable) by way of foreclosure on any collateral in which such
Guarantor Subsidiary may at any time hereafter grant to Lenders a security
interest) in excess of the benefit realized by such Guarantor Subsidiary from
the proceeds of the Loan. As between Borrower and each Guarantor Subsidiary,
Borrower shall be responsible to reimburse each Guarantor Subsidiary in respect
of amounts paid by such Guarantor Subsidiary under its guaranty of Borrower's
obligations under the Loan Documents to the end that Borrower, and each
Guarantor Subsidiary, ultimately bears the burden of payment of its respective
share of such obligations. Borrower's obligations to Guarantor Subsidiaries
under this section shall be subordinated to its obligations to Lenders as
provided in the Guaranties.
69
<PAGE> 77
7.16 Year 2000 Compliance. Borrower shall ensure that the following
properties and entities are Year 2000 Compliant in a timely fashion, but in no
event later than December 31, 1999: (i) any Property owned by Borrower, any
Subsidiary or any Effectively Controlled Investment Partnership; (ii) Borrower,
any Subsidiary and any Effectively Controlled Investment Partnership; (iii) any
other major commercial properties and entities in which Borrower holds an
interest; (iv) any major tenants or other major entities from which Borrower
receives payments (other than Agent and Lenders); and (v) any major contractors,
suppliers or service providers or other major entities from which Borrower
receives payments. As used in this Section 7.16, "major" shall mean properties
or entities the failure of which to be Year 2000 Compliant would have a Material
Adverse Effect on Borrower. 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, without limitation,
perform a comprehensive review and assessment of all Systems of Borrower and any
Property owned by Borrower, a Subsidiary or Effectively Controlled Investment
Partnership, and shall adopt a detailed plan, with itemized budget, for the
remediation, monitoring and testing of such systems. Borrower shall, within
thirty (30) days of the written request of Agent, provide Lenders with such
certifications or other evidence of Borrower's compliance with the terms of this
Section 7.16 as Agent or any Lender may from time to time reasonably require.
ARTICLE VIII
------------
NEGATIVE COVENANTS
------------------
Borrower covenants and agrees that, on and after the date hereof, until
payment in full of all of the Obligations, the expiration of the Commitments and
termination of this Agreement:
8.1 Liens, Transfers, Fundamental Changes: Borrower shall not:
8.1.1 Liens. (i) Directly or indirectly create, incur, assume or permit
to exist any Lien, except for Permitted Liens, on or with respect to all or any
portion of any Unencumbered Pool Property; or (ii) directly or indirectly
create, assume or permit to exist any Negative Pledge with respect to any
Unencumbered Pool Property.
8.1.2 Transfers of Unencumbered Pool Property. Transfer, directly or
indirectly, all or any interest in any Unencumbered Pool Property.
70
<PAGE> 78
8.1.3 Restrictions on Fundamental Changes.
(a) (i) Enter into, or permit any Subsidiary to enter into, any
merger or consolidation or liquidate, wind-up or dissolve (or suffer any
liquidation or dissolution); or (ii) except (A) with the prior written
consent of Requisite Lenders (which consent shall not be unreasonably
withheld, but which may be conditioned, among other things, upon
Borrower's delivery to Agent of a Compliance Certificate demonstrating
in reasonable detail (which detail shall include actual calculations)
compliance, after giving effect to such proposed transaction(s), with
the covenants contained in Section 8.4 and Article IX), and (B) under
circumstances such that, immediately following consummation thereof, no
Unmatured Event of Default or Event of Default exists, make any material
investment, acquisition, asset purchase, or similar transaction (either
as a single transaction or a related series of transactions).
Notwithstanding anything to the contrary contained herein, Borrower may,
without the prior written consent of Requisite Lenders and provided that
no Unmatured Event of Default or Event of Default then exists, or would
be caused thereby, liquidate a Subsidiary or enter into a merger or
consolidation (1) of a Subsidiary into Borrower or another wholly-owned
Subsidiary of Borrower, pursuant to which Borrower or such wholly-owned
Subsidiary is the surviving corporation or (2) with any Person so long
as (A) such merger or consolidation is not material, (B) Borrower is the
surviving corporation and (C) Borrower delivers to Agent, not later than
five (5) Business Days prior to such merger or consolidation, a
Compliance Certificate demonstrating in reasonable detail (which detail
shall include actual calculations) compliance, after giving effect to
such transaction, with the covenants contained in Section 8.4 and
Article IX. For purposes of this Section 8.1.3, any investment,
acquisition, asset purchase, merger or similar transaction shall be
considered "material" if it involves assets exceeding twenty-five
percent (25%) of Borrower's assets (as existing prior to giving effect
to such transaction), determined on a consolidated basis and in
accordance with GAAP.
(b) Change, or permit any Subsidiary to change, its Fiscal Year;
(c) Except for Permitted Investments, engage (or permit any
Subsidiary to engage) in any line of business other than as expressly
permitted under Section 7.8; or
(d) Create or acquire any Subsidiary, except in accordance with
the limitations set forth in Section 9.8.
71
<PAGE> 79
8.1.4 ERISA. Permit any ERISA Affiliate of Borrower to do any of the
following to the extent that such act or failure to act would result in the
aggregate, after taking into account any other such acts or failure to act, in a
Material Adverse Effect on Borrower:
(a) Engage, or knowingly permit an ERISA Affiliate of Borrower
to engage, in any prohibited transaction described in Section 406 of the
ERISA or Section 4975 of the Internal Revenue Code which is not exempt
under Section 407 or 408 of ERISA or Section 4975(d) of the Internal
Revenue Code for which a class exemption is not available or a private
exemption has not been previously obtained from the DOL;
(b) Permit to exist any accumulated funding deficiency (as
defined in Section 302 of ERISA and Section 412 of the Internal Revenue
Code), whether or not waived;
(c) Fail, or permit an ERISA Affiliate of Borrower to fail, to
pay timely required contributions or annual installments due with
respect to any waived funding deficiency to any Plan if such failure
could result in the imposition of a Lien or otherwise would have a
Material Adverse Effect on Borrower;
(d) Terminate, or permit an ERISA Affiliate of Borrower to
terminate, any Benefit Plan which would result in any liability of
Borrower or any ERISA Affiliate of Borrower under Title IV of ERISA; or
(e) Fail, or permit any ERISA Affiliate of Borrower to fail, to
pay any required installment under section (m) of Section 412 of the
Internal Revenue Code or any other payment required under Section 412 of
the Internal Revenue Code on or before the due date for such installment
or other payment, if such failure could result in the imposition of a
Lien or otherwise would have a Material Adverse Effect on Borrower.
8.2 Amendment of Constituent Documents. Except for any such amendment that
is required (i) under any Requirement of Law imposed by any Governmental
Authority or (ii) in order to maintain compliance with Section 7.11: Borrower
shall not, and shall not permit any Guarantor Subsidiary to, amend its articles
of incorporation or by-laws or other charter documents except (x) upon at least
ten (10) Business Days' prior written notice to Agent, and (y) if Agent notifies
Borrower within such 10-Business Day period that such amendment is, in Agent's
reasonable judgment, an amendment that reasonably could be expected to have a
material adverse effect on any rights of Lenders
72
<PAGE> 80
or of Borrower's or such Guarantor Subsidiary's ability to perform under the
Loan Documents, with the prior written consent of Requisite Lenders.
8.3 Margin Regulations. No portion of the proceeds of any Loans shall be
used in any manner which would cause the extension of credit or the application
of such proceeds to violate Regulation G, U or X or any other regulation of the
Federal Reserve Board or to violate the Securities Exchange Act or the
Securities Act, in each case as in effect on the applicable Funding Date.
8.4 Management. Glenn Carpenter shall not cease to be active on a full time,
continuous basis in the senior management of Borrower (the occurrence of such an
event, a "Discontinuity in Management"); provided that, if the death,
incapacity, resignation or dismissal of Glenn Carpenter results in a
Discontinuity in Management, Borrower shall have up to one hundred eighty (180)
days to obtain the approval of Requisite Lenders, which approval shall not
unreasonably be withheld, to one or more additional executives, such that the
remaining and new management executives, as a group, have substantial and
sufficient knowledge, experience and capabilities in the management of a
publicly held company engaged in the operation of a multi-asset real estate
business of the type engaged in by Borrower. In the event Borrower shall fail to
obtain approval of Requisite Lenders as aforesaid within said 180-day period,
then Borrower shall, at the election and upon the demand of Requisite Lenders,
pay in full all Obligations under the Loan Documents not later than thirty (30)
days after the end of such 180-day period, whereupon this Agreement and all
Commitments hereunder shall be terminated. Upon the occurrence of a
Discontinuity in Management, no further Borrowings shall be permitted until
Borrower shall have obtained approval of Requisite Lenders under this Section
8.4, or unless otherwise agreed to by Requisite Lenders.
8.5 Borrower to Remain a Listed REIT. Borrower shall at no time (i) cease to
be a listed company on either the New York Stock Exchange or the American Stock
Exchange, or (ii) cease to be a qualified real estate investment trust in the
manner referred to in Section 5.27.
8.6 Major Agreements. Neither Borrower nor any Guarantor Subsidiary shall
(a) amend any Eligible Ground Lease in a manner which causes such Eligible
Ground Lease to cease to qualify as an Eligible Ground Lease pursuant to the
terms of this Agreement or (b) amend any Grandfathered Ground Lease without the
prior consent of Requisite Lenders, which consent shall not be unreasonably
withheld. Neither Borrower nor any Subsidiary shall terminate any other Major
Agreement except upon ten (10) Business Days' prior written notice to Agent.
Borrower shall, promptly upon entering into any modification of a Major
Agreement, provide Agent with a copy of such modification.
73
<PAGE> 81
8.7 With Respect to Each Guarantor Subsidiary:
8.7.1 No Guarantor Subsidiary shall directly or indirectly create,
incur, assume or otherwise become or remain directly or indirectly liable with
respect to, any unsecured Indebtedness, except its guaranty of the Obligations
and trade debt incurred in the ordinary course of business.
8.7.2 No Guarantor Subsidiary shall directly or indirectly create,
incur, assume or permit to exist any Lien on or with respect to any of its
Unencumbered Pool Property owned by it, except Permitted Liens.
8.7.3 There shall be no change in the ownership interests of any
Guarantor Subsidiary.
ARTICLE IX
----------
FINANCIAL COVENANTS
-------------------
Borrower covenants and agrees that, on and after the date of this
Agreement and until payment in full of all the Obligations, the expiration of
all Commitments and the termination of this Agreement:
9.1 Minimum Net Worth. Borrower will maintain a Net Worth of not less than
Three Hundred Fifty Million Dollars ($350,000,000) plus ninety percent (90%) of
Net Offering Proceeds received by Borrower after the December 31, 1997.
9.2 Leverage Ratio. The Leverage Ratio shall not exceed (a) at any time
prior to the last day of the fourth Fiscal Quarter to commence on or after the
Closing Date, 0.55:1; and (b) at any time on or after the last day of the fourth
Fiscal Quarter to commence on or after the Closing Date, 0.50:1.
9.3 Secured Debt to Gross Asset Value Ratio. The ratio of Secured Borrower
Debt to Gross Asset Value shall not exceed (a) at any time prior to the last day
of the fourth Fiscal Quarter to commence on or after the Closing Date, 0.40:1;
and (b) at any time on or after the last day of the fourth Fiscal Quarter to
commence on or after the Closing Date, 0.35:1.
9.4 EBITDA to Interest Expense Ratio. The ratio of EBITDA to Interest
Expense shall not be less than 2.00:1.
74
<PAGE> 82
9.5 EBITDA to Debt Service and Capital Expenditures Ratio. The ratio of
EBITDA to the sum of Debt Service and Capital Expenditures shall not be less
than 1.75:1.
9.6 Unencumbered NOI to Unsecured Interest Expense Ratio. The ratio of
Unencumbered NOI to Unsecured Interest Expense shall not be less than 1.75:1.
9.7 Distributions.
9.7.1 Subject to Section 9.7.2, aggregate distributions to shareholders
of Borrower and holders of any equity interest in any Subsidiary of Borrower in
any Fiscal Quarter shall not exceed ninety-five percent (95%) of Funds From
Operations for such Fiscal Quarter. For purposes of this Section 9.7, the term
"distributions" shall mean and include all dividends and other distributions to,
and the repurchase of stock or other equity interests from, the holder of any
equity interests in Borrower or any Subsidiary of Borrower.
9.7.2 No distributions shall be made during the continuance of any Event
of Default arising out of Borrower's failure to pay any of the Obligations when
due (a "Monetary Default"). Aggregate distributions during the continuance of
any Event of Default other than a Monetary Default shall not exceed the lesser
of (i) the aggregate amount permitted to be made during the continuance thereof
under Section 9.7.1, and (ii) the minimum amount that Borrower must distribute
to its shareholders in order to maintain compliance with Section 7.11.
9.8 Permitted Investments, Etc.
9.8.1 Notwithstanding the limitations set forth in Section 7.8, Borrower
may make the following Permitted Investments, so long as (i) the aggregate
amount of all Permitted Investments under this Section 9.8.1 does not exceed, at
any time, twenty-five percent (25%) of Borrower's Gross Asset Value, and (ii)
the aggregate amount of each of the following categories of Permitted
Investments does not exceed the specified percentage of Borrower's Gross Asset
Value, in each case as of the date made:
75
<PAGE> 83
<TABLE>
<CAPTION>
Maximum Percentage
of Gross Asset
Permitted Investment Value
-------------------- -----
<S> <C>
Land: 5%
Securities: 10%
Investment Mortgages: 10%
Investment Partnerships: 10%
Non-Core Properties: 10%
</TABLE>
For purposes of calculating compliance with the foregoing: (1) (i) the amount of
each Investment in an Investment Partnership (other than an Effectively
Controlled Investment Partnership), a Security, an Investment Mortgage, a
Non-Core Property or Land, will be deemed to be the lesser of the original
Acquisition Price thereof or the amount at which such asset is carried on
Borrower's books, and (ii) holdings in each Effectively Controlled Investment
Partnership shall be valued as described in the definition of "Gross Asset
Value," based on the underlying Properties held by such Effectively Controlled
Investment Partnership; and (2) in the case of each Investment in Land,
Investment Mortgages, Non-Core Properties and Investment Partnerships, the
nature of each underlying real property asset and the conduct of business in
respect thereof shall in all respects comply with the limitations set forth in
Section 7.8.
9.8.2 In addition:
(a) at no time shall the sum of (i) the percentage of Borrower's
Gross Asset Value attributable to assets held in Subsidiaries (defined
in accordance with the definition of "Gross Asset Value"), plus (ii) the
value of Borrower's interests in Investment Partnerships (determined in
accordance with Section 9.8.1), expressed as a percentage of Borrower's
Gross Asset Value, exceed twenty percent (20%); and
(b) at no time shall the percentage of Borrower's Gross Asset
Value attributable to Construction in Process exceed fifteen percent
(15%).
9.9 Calculation. Each of the foregoing ratios and financial requirements
shall be calculated as of the last day of each Fiscal Quarter, but shall be
satisfied at all times. For purposes of determining compliance with Sections
9.4, 9.5 and 9.6, the period covered thereby shall be the Fiscal Quarter ending
on such last day.
76
<PAGE> 84
ARTICLE X
---------
EVENTS OF DEFAULT; RIGHTS AND REMEDIES
--------------------------------------
10.1 Events of Default. Each of the following occurrences shall constitute an
Event of Default under this Agreement:
10.1.1 Failure to Make Payments When Due. Borrower or any Guarantor
Subsidiary shall fail to pay (i) any amount due on the Termination Date, (ii)
any principal when due, (iii) any monthly payment of interest due hereunder on
or before the fifteenth calendar day of the month in which such interest first
becomes due, or (iv) any other interest on any Loan, or any fee or other amount
included within the Obligations, within five (5) days after the same becomes due
(and, for purposes of this Section 10.1.1, amounts stated to be payable
"immediately" or "upon demand" are due upon demand).
10.1.2 Distributions. Borrower shall breach any covenant set forth in
Section 7.11 or 9.7.
10.1.3 Breach of Financial Covenants. (i) Borrower shall fail to satisfy
any financial covenant set forth in Article IX (other than the requirements in
Section 9.4, 9.5, 9.6 and 9.7) and such failure shall continue for thirty (30)
days; or (ii) Borrower shall fail to satisfy any financial covenant set forth in
Section 9.4, 9.5 or 9.6 as of the last day of any Fiscal Quarter and as of the
last day of the next calendar month (determined, in the latter case, on the
basis of the three-month period ended as of such date).
10.1.4 Other Defaults. Borrower, or any Guarantor Subsidiary, shall fail
duly and punctually to perform or observe any agreement, covenant or obligation
binding on Borrower or such Guarantor Subsidiary under this Agreement or under
any of the other Loan Documents (other than as described in any other provision
of this Section 10.1), and with respect to agreements, covenants or obligations
for which no time period for performance is otherwise provided and for which
cure is possible, such failure shall continue for fifteen (15) days after
Borrower or such Guarantor Subsidiary knew of such failure (or such lesser
period of time as is mandated by applicable Requirements of Law); provided,
however, if such failure is not capable of cure within such fifteen (15) day
period, but is capable of cure, then if Borrower promptly undertakes action to
cure such failure and thereafter diligently prosecutes such cure to completion
within forty-five (45) days after Borrower or such Guarantor Subsidiary knew of
such failure, then Borrower or such Guarantor Subsidiary, as the case may be,
shall not be in default hereunder.
10.1.5 Breach of Representation or Warranty. Any representation or
warranty made or deemed made by Borrower or any Guarantor Subsidiary to Agent or
77
<PAGE> 85
any Lender herein or in any of the other Loan Documents or in any statement,
certificate or financial statements at any time given by Borrower pursuant to
any of the Loan Documents shall be false or misleading in any material respect
on the date as of which made.
10.1.6 Default as to Other Indebtedness. (i) Borrower or any Subsidiary
of Borrower shall have (A) failed to pay when due (beyond any applicable grace
period), any amount in respect of any Indebtedness of such Person (other than
the Obligations), if the aggregate amount of such other Indebtedness is Two
Hundred and Fifty Thousand Dollars ($250,000) or more; or (B) otherwise
defaulted (beyond any applicable grace period) under any Indebtedness of such
Person (other than the Obligations) if (1) the aggregate amount of such other
Indebtedness is One Million Dollars ($1,000,000) or more, and (2) the holder of
such Indebtedness has accelerated such Indebtedness; or (ii) any such other
Indebtedness shall have otherwise become payable, or be required to be purchased
or redeemed, prior to its scheduled maturity; or (iii) the holder(s) of any
Lien, in any amount, commence foreclosure of such Lien upon any Property having
an aggregate value in excess of Two Hundred Fifty Thousand Dollars ($250,000).
10.1.7 Involuntary Bankruptcy; Appointment of Receiver, etc.
(a) An involuntary case shall be commenced against Borrower or
any Subsidiary of Borrower and the petition shall not be dismissed
within sixty (60) days after commencement of the case, or a court having
jurisdiction shall enter a decree or order for relief in respect of any
such Person in an involuntary case, under any applicable bankruptcy,
insolvency or other similar law now or hereinafter in effect; or any
other similar relief shall be granted under any applicable federal,
state or foreign law; or
(b) A decree or order of a court (or courts) having jurisdiction
in the premises for the appointment of a receiver, liquidator,
sequestrator, trustee, custodian or other officer having similar powers
over Borrower or any Subsidiary of Borrower, or over all or a
substantial part of the property of any such Person, shall be entered;
or an interim receiver, trustee or other custodian of any such Person or
of all or a substantial part of the property of any such Person, shall
be appointed or a warrant of attachment, execution or similar process
against any substantial part of the property of any such Person, shall
be issued and any such event shall not be stayed, vacated, dismissed,
bonded or discharged within sixty (60) days of entry, appointment or
issuance.
10.1.8 Voluntary Bankruptcy; Appointment of Receiver, Etc. Borrower or
any Subsidiary of Borrower shall have an order for relief entered with respect
to it or
78
<PAGE> 86
commence a voluntary case under any applicable bankruptcy, insolvency or other
similar law now or hereafter in effect, or shall consent to the entry of an
order for relief in an involuntary case, or to the conversion of an involuntary
case to a voluntary case, under any such law, or shall consent to the
appointment of or taking of possession by a receiver, trustee or other custodian
for all or a substantial part of its property; any such Person shall make any
assignment for the benefit of creditors or shall be unable or fail, or admit in
writing its inability, to pay its debts as such debts become due; or Borrower's
Board of Directors (or any committee thereof) adopts any resolution or otherwise
authorizes any action to approve any of the foregoing.
10.1.9 Judgments and Attachments. (i) Any money judgment (other than a
money judgment covered by insurance but only if the insurer has admitted
liability with respect to such money judgment), writ or warrant of attachment,
or similar process involving in any case an amount in excess of Two Hundred
Fifty Thousand Dollars ($250,000) shall be entered or filed against Borrower or
any Subsidiary of Borrower or their respective assets and shall remain
undischarged, unvacated, unbonded or unstayed for a period of thirty (30) days,
or (ii) any judgment or order of any court or administrative agency awarding
material damages shall be entered against any such Person in any action under
the Federal securities laws seeking rescission of the purchase or sale of, or
for damages arising from the purchase or sale of, any Securities, such judgment
or order shall have become final after exhaustion of all available appellate
remedies and, in Agent's judgment, the payment of such judgment or order would
have a Material Adverse Effect on Borrower.
10.1.10 Dissolution. Any order, judgment or decree shall be entered
against Borrower or any Subsidiary of Borrower decreeing its involuntary
dissolution or split up and such order shall remain undischarged and unstayed
for a period in excess of thirty (30) days; or Borrower or any Subsidiary of
Borrower shall otherwise dissolve or cease to exist (except for mergers of
Subsidiaries into Borrower pursuant to which Borrower is the surviving
corporation, and for voluntary dissolutions of Subsidiaries).
10.1.11 Validity of Loan Documents; Subordination of Obligations. If for
any reason (i) any Loan Document shall cease to be in full force and effect, or
(ii) (A) any Obligation shall be subordinated in right of payment to any other
liability of the Borrower or (B) any obligation of a Guarantor Subsidiary under
its Guaranty shall be subordinated in right of payment to any other liability of
such Guarantor Subsidiary; and, in any such case, such condition or event shall
continue for fifteen (15) days after Borrower or any Guarantor Subsidiary knew
of such condition or event.
10.1.12 ERISA Liabilities. Any Termination Event occurs which will or is
reasonably likely to subject Borrower or any ERISA Affiliate of Borrower to a
liability
79
<PAGE> 87
which Agent reasonably determines will have a Material Adverse Effect on
Borrower, or the plan administrator of any Benefit Plan applies for approval
under Section 412(d) of the Internal Revenue Code for a waiver of the minimum
funding standards of Section 412(a) of the Internal Revenue Code and Agent
reasonably determines that the business hardship upon which the Section 412(d)
waiver was based will or would reasonably be anticipated to subject Borrower or
any Subsidiary of Borrower to a liability which Agent determines will have a
Material Adverse Effect on Borrower.
10.1.13 Environmental Liabilities. Borrower or any Subsidiary of
Borrower becomes subject to any Liabilities and Costs which Agent reasonably
deems to have a Material Adverse Effect on Borrower arising out of or related to
(i) the Release or threatened Release at any Property of any Contaminant into
the environment, or any Remedial Action in response thereto, or (ii) otherwise
any violation of any Environmental Laws.
10.1.14 Solvency; Material Adverse Change. Borrower or any Subsidiary of
Borrower shall cease to be Solvent, or there shall have occurred any material
adverse change in the business, operations, properties, assets or condition
(financial or otherwise) of Borrower.
10.1.15 Guaranties. (a) Any Guarantor Subsidiary shall disavow, or
purport to revoke, its obligations under its Guaranty; or (b) any Guaranty shall
fail to be valid or enforceable in any material respect.
An Event of Default shall be deemed "continuing" until cured or waived
in writing in accordance with Section 12.4.
10.2 Rights and Remedies.
10.2.1 Acceleration, Etc.. Upon the occurrence of any Event of Default
described in the foregoing Section 10.1.7 or 10.1.8 with respect to Borrower,
the Commitments shall automatically and immediately terminate and the unpaid
principal amount of and any and all accrued interest on the Loans shall
automatically become immediately due and payable, with all additional interest
from time to time accrued thereon and without presentment, demand or protest or
other requirements of any kind (including, without limitation, valuation and
appraisement, diligence, presentment, notice of intent to demand or accelerate
or notice of acceleration), all of which are hereby expressly waived by
Borrower, and the obligations of Lenders to make any Loans hereunder shall
thereupon terminate; and upon the occurrence and during the continuance of any
other Event of Default, Agent shall, at the request of Requisite Lenders, or
may, with the consent of Requisite Lenders, by written notice to Borrower, (i)
declare that the
80
<PAGE> 88
Commitments are terminated, whereupon the Commitments and the obligation of
Lenders to make any Loan hereunder shall immediately terminate, and/or (ii)
declare the unpaid principal amount of, any and all accrued and unpaid interest
on the Loans and all of the other Obligations to be, and the same shall
thereupon be, immediately due and payable with all additional interest from time
to time accrued thereon and without presentment, demand, or protest or other
requirements of any kind (including without limitation, valuation and
appraisement, diligence, presentment, notice of intent to demand or accelerate
and of acceleration), all of which are hereby expressly waived by Borrower.
Without limiting Agent's authority hereunder, on or after the Termination Date,
Agent shall, at the request, or may, with the consent, of Requisite Lenders
exercise any or all rights and remedies under the Loan Documents or applicable
law. Upon the occurrence of and during the continuance of an Event of Default,
Agent shall be entitled to request and receive, by or through Borrower or
appropriate legal process, any and all information concerning Borrower, any
Subsidiary of Borrower, or any property of Borrower or any Subsidiary of
Borrower, which is reasonably available to or obtainable by Borrower.
10.2.2 Waiver of Demand. Demand, presentment, protest and notice of
nonpayment are hereby waived by Borrower. Borrower also waives, to the extent
permitted by law, the benefit of all exemption laws.
10.2.3 Waivers, Amendments and Remedies. No delay or omission of Agent
or Lenders to exercise any right under any Loan Document shall impair such right
or be construed to be a waiver of any Event of Default or an acquiescence
therein, and any single or partial exercise of any such right shall not preclude
other or further exercise thereof or the exercise of any other right, and no
waiver, amendment or other variation of the terms, conditions or provisions of
the Loan Documents whatsoever shall be valid unless in a writing signed by Agent
after obtaining written approval thereof or the signature thereon of those
Lenders required to approve such waiver, amendment or other variation, and then
only to the extent in such writing specifically set forth. All remedies
contained in the Loan Documents or by law afforded shall be cumulative and all
shall be available to Agent and Lenders until the Obligations have been paid in
full, the Commitments have expired or terminated and this Agreement has been
terminated.
10.3 Rescission. If at any time after acceleration of the maturity of the
Loans, Borrower shall pay all arrears of interest and all payments on account of
principal of the Loans which shall have become due otherwise than by
acceleration (with interest on principal and, to the extent permitted by law, on
overdue interest, at the rates specified in this Agreement) and all Events of
Default and Unmatured Events of Default (other than nonpayment of principal of
and accrued interest on the Loans due and payable solely by virtue of
acceleration) shall be remedied or waived pursuant to Section 12.4, then by
written notice to Borrower, Requisite Lenders may elect, in their sole
discretion, to
81
<PAGE> 89
rescind and annul the acceleration and its consequences; but such action shall
not affect any subsequent Event of Default or Unmatured Event of Default or
impair any right or remedy consequent thereon. The provisions of the preceding
sentence are intended merely to bind Lenders to a decision which may be made at
the election of Requisite Lenders; they are not intended to benefit Borrower and
do not give Borrower the right to require Lenders to rescind or annul any
acceleration hereunder, even if the conditions set forth herein are met.
ARTICLE XI
----------
AGENCY PROVISIONS
-----------------
11.1 Appointment.
11.1.1 Each Lender hereby (i) designates and appoints Wells Fargo as
Agent of such Lender under this Agreement and the Loan Documents, (ii)
authorizes and directs Agent to enter into the Loan Documents other than this
Agreement for the benefit of Lenders, and (iii) authorizes Agent to take such
action on its behalf under the provisions of this Agreement and the Loan
Documents and to exercise such powers as are set forth herein or therein,
together with such other powers as are reasonably incidental thereto, subject to
the limitations referred to in Sections 11.10.1 and 11.10.2. Agent agrees to act
as such on the express conditions contained in this Article XI.
11.1.2 The provisions of this Article XI are solely for the benefit of
Agent and Lenders, and Borrower shall not have any rights to rely on or enforce
any of the provisions hereof (other than as expressly set forth in Sections
11.3, 11.9 and 11.12), provided, however, that the foregoing shall in no way
limit Borrower's obligations under this Article XI. In performing its functions
and duties under this Agreement, Agent shall act solely as Agent of Lenders and
does not assume and shall not be deemed to have assumed any obligation toward or
relationship of agency or trust with or for Borrower or any other Person.
11.2 Nature of Duties. Agent shall not have any duties or responsibilities
except those expressly set forth in this Agreement or in the Loan Documents. The
duties of Agent shall be administrative in nature. Subject to the provisions of
Sections 11.5 and 11.7, Agent shall administer the Loans in the same manner as
it administers its own loans. Promptly following the effectiveness of this
Agreement, Agent shall send to each Lender its originally executed Note and the
executed original, to the extent the same are available in sufficient numbers,
of each other Loan Document other than the Notes in favor of other Lenders and
filed or recorded security document or instruments, if any, with the latter to
82
<PAGE> 90
be held and retained by Agent for the benefit of all Lenders. Agent shall not
have by reason of this Agreement a fiduciary relationship in respect of any
Lender. Nothing in this Agreement or any of the Loan Documents, expressed or
implied, is intended or shall be construed to impose upon Agent any obligation
in respect of this Agreement or any of the Loan Documents except as expressly
set forth herein or therein. Each Lender shall make its own independent
investigation of the financial condition and affairs of Borrower and each
Unencumbered Pool Property in connection with the making and the continuance of
the Loans hereunder and shall make its own appraisal of the creditworthiness of
Borrower and each Guarantor Subsidiary, and, except as specifically provided
herein, Agent shall not have any duty or responsibility, either initially or on
a continuing basis, to provide any Lender with any credit or other information
with respect thereto, whether coming into its possession before the Closing Date
or at any time or times thereafter.
11.3 Loan Disbursements.
11.3.1 Not later than 1:00 p.m. (Pacific Coast time) on the same
Business Day following receipt of a Notice of Borrowing, Agent shall send a copy
thereof by facsimile to each other Lender and shall otherwise notify each Lender
of the proposed Borrowing and the Funding Date. Except with respect to Swing
Line Borrowings to be funded by Agent pursuant to Section 2.1.1(b)(ii), each
Lender shall make available to Agent (or the funding bank or entity designated
by Agent), the amount of such Lender's Pro Rata Share of such Borrowing in
immediately available funds not later than the times designated in Section
11.3.2. Unless Agent shall have been notified by any Lender prior to such time
for funding in respect of any Borrowing that such Lender does not intend to make
available to Agent such Lender's Pro Rata Share of such Borrowing, Agent may
assume that such Lender has made such amount available to Agent. In any case
where a Lender does not for any reason make available to Agent such Lender's Pro
Rata Share of such Borrowing, Agent, in its sole discretion, may, but shall not
be obligated to, fund to Borrower such Lender's Pro Rata Share of such
Borrowing; provided, however, that Agent shall first have obtained Borrower's
concurrence in such funding by Agent if the same is to be made later than the
Funding Date for the subject Borrowing. If the amount so funded by Agent is not
in fact made available to Agent by the responsible Lender, then Borrower agrees
to repay to Agent such amount, together with interest thereon at the Base Rate
for each day from the date such amount is made available to Borrower until the
date such amount is repaid to Agent, not later than three (3) Business Days
following Agent's demand to Borrower that such repayment be made. In addition,
such Lender agrees to pay to Agent forthwith on demand such corresponding
amount, together with interest thereon at the Federal Funds Rate. If such Lender
shall pay to Agent such corresponding amount, such amount so paid shall
constitute such Lender's Pro Rata Share of such
83
<PAGE> 91
Borrowing, and if both such Lender and Borrower shall have paid and repaid,
respectively, such corresponding amount, Agent shall promptly return to Borrower
such corresponding amount in same day funds; interest paid by Borrower in
respect of such corresponding amount shall be prorated, as of the date of
payment thereof by such Lender to Agent. In the event that Agent shall not have
funded such Lender's Pro Rata Share under this Section 11.3.1, then Borrower
shall not be obligated to accept a late funding of such Lender's Pro Rata Share
if such funding is made more than two (2) Business Days following the applicable
Funding Date. If Borrower declines to accept such delinquent funding, Agent
shall promptly return to such Lender the amount of such funding. Nothing in this
Section 11.3.1 shall alter the respective rights and obligations of the parties
hereunder in respect of a Defaulting Lender or a Non-Pro Rata Loan.
11.3.2 Requests by Agent for funding by Lenders of Loans will be made by
telecopy. Each Lender shall make the amount of its Loan available to Agent in
Dollars and in immediately available funds, to such bank and account, in El
Segundo, California (or to such bank and account in such other place within the
United States) as Agent may designate, not later than 10:00 a.m. (Pacific Coast
time) on the Funding Date designated in the Notice of Borrowing with respect to
such Loan, but in no event earlier than two (2) Business Days following Lender's
receipt of the applicable Notice of Borrowing.
11.3.3 If (a) as of 10:00 a.m. (Pacific Coast time) on the second (2nd)
Business Day after the Swing Line Lender has funded any Swing Line Borrowing
(the date such Swing Line Borrowing was funded, the "Swing Line Funding Date"),
Borrower has neither (i) repaid such Swing Line Borrowing in full, nor (ii)
notified the Swing Line Lender in writing that Borrower intends to repay such
Swing Line Borrowing in full on the next Business Day, nor (iii) timely
delivered a Notice of Borrowing requesting a proposed Funding Date, no later
than the third (3rd) Business Day after such Swing Line Funding Date, with
respect to a Loan in a principal amount sufficient to repay such Swing Line
Borrowing in full; or (b) as of 11:00 a.m. (Pacific Coast time) on the third
(3rd) Business Day after such Swing Line Funding Date, (i) Borrower has not
repaid such Swing Line Borrowing in full, or (ii) the conditions precedent to
any requested Loan the proceeds of which were to have been used (in whole or in
part) to repay such Swing Line Borrowing have not been satisfied; or (c) at any
time prior to the repayment of any Swing Line Borrowing, an Event of Default
shall have occurred or the Loans shall be accelerated, or the Termination Date
shall occur, for any reason whatsoever: (1) the Swing Line Lender shall promptly
(or, if an Event of Default has occurred but the Loans have not been accelerated
and the Termination Date has not occurred, may) notify each Lender by telephone
(confirmed promptly by telex, facsimile transmission or cable), telex, facsimile
transmission, or cable of the amount of such Swing Line Borrowing; and (2) each
Lender
84
<PAGE> 92
shall (subject to the limitation that no Lender shall be required to fund any
Loan that would cause its Loans to exceed such Lender's Commitment), (A) in a
case described in clause (a) of this Section 11.3.3, before 10:00 a.m. (Pacific
Coast time) on the next Business Day, or (B) in a case described in clause (b)
or clause (c) of this Section 11.3.3, before 12:00 noon (Pacific Coast time) on
the date of such notice, pay to the Swing Line Lender, to such bank and account
in El Segundo, California (or to such bank and account in such other place
within the United States) as the Swing Line Lender may designate, in immediately
available funds, such Lender's Pro Rata Share of the principal amount of such
Swing Line Borrowing. Upon such funding, each Lender shall be deemed to have
acquired from the Swing Line Lender (and the Swing Line Lender shall be deemed
to have assigned to each such Lender) a percentage interest in such Swing Line
Borrowing equal to such Lender's Pro Rata Share, and, for purposes of
determining the availability of Swing Line Borrowings or Loans, such Swing Line
Borrowing shall be deemed a Loan (and no longer a Swing Line Borrowing);
provided that the obligations of the Lenders under this Section 11.3.3 shall not
be subject to the notice or amount requirements, or to satisfaction of
conditions precedent, otherwise applicable to the making of Loans. Each Lender's
obligation to fund, and to purchase from the Swing Line Lender, its Pro Rata
Share of a Swing Line Borrowing pursuant to this Section 11.3.3 shall be
absolute and unconditional under any and all circumstances (including, without
limitation, irrespective of any intervening bankruptcy of Borrower or
acceleration of the Loans). It is not the parties' intent that the obligations
of the Lenders under this Section 11.3.3 constitute guaranties or obligations of
suretyship. If and to the extent, however, that the obligations of any Lender
under this Section 11.3.3 are determined to be those of a guarantor or surety,
such Lender, with full knowledge of the consequences thereof, hereby expressly
waives the benefit of each and every right or defense of a guarantor or surety
the effect of which would relieve such Lender of all or any portion of its
obligations under this Section 11.3.3. In the event that any Lender fails to pay
to the Swing Line Lender when due any amount it is required to fund under this
Section 11.3.3, such Lender and Borrower severally agree to pay to the Swing
Line Lender, on demand, the amount such Lender has failed to so pay, together
with interest thereon for each day from the date on which such payment was due
until the date such amount is repaid to the Agent, at (p) in the case of
Borrower, the Base Rate, or (q) in the case of such Lender, the Federal Funds
Rate.
11.3.4 Nothing in this Section 11.3 shall be deemed to relieve any
Lender of its obligation (subject only to Section 2.1.1(b) in respect of the
funding of Swing Line Borrowings) hereunder to make its Pro Rata Share of Loans
on any Funding Date, nor shall any Lender be responsible for the failure of any
other Lender to perform its obligations to make any Loan hereunder, and the
Commitment of any Lender shall not be increased or decreased as a result of the
failure by any other Lender to perform its obligation to make a Loan.
85
<PAGE> 93
11.4 Distribution and Apportionment of Payments.
11.4.1 Subject to Section 11.4.2, payments actually received by Agent
for the account of Lenders shall be paid to them promptly after receipt thereof
by Agent, but in any event within two (2) Business Days, provided that Agent
shall pay to Lenders interest thereon, at the lesser of (i) Federal Funds Rate
and (ii) the rate of interest applicable to such Loans, from the Business Day
following receipt of such funds by Agent until such funds are paid in
immediately available funds to Lenders. Subject to Section 11.4.2, all payments
of principal and interest in respect of outstanding Loans, all payments of the
fees described in this Agreement (except those fees due Agent from Borrower as
referred to in Sections 2.5.2 and 4.1.11), and all payments in respect of any
other Obligations shall be allocated among such of Lenders as are entitled
thereto, in proportion to their respective Pro Rata Shares or otherwise as
provided herein. Agent shall promptly distribute, but in any event within two
(2) Business Days, to each Lender at its primary address set forth on the
appropriate signature page hereof or on the Assignment and Assumption, or at
such other address as a Lender may request in writing, such funds as it may be
entitled to receive, provided that Agent shall in any event not be bound to
inquire into or determine the validity, scope or priority of any interest or
entitlement of any Lender and may suspend all payments and seek appropriate
relief (including, without limitation, instructions from Requisite Lenders or
all Lenders, as applicable, or an action in the nature of interpleader) in the
event of any doubt or dispute as to any apportionment or distribution
contemplated hereby. The order of priority herein is set forth solely to
determine the rights and priorities of Lenders as among themselves and may at
any time or from time to time be changed by Lenders as they may elect, in
writing in accordance with Section 12.4, without necessity of notice to or
consent of or approval by Borrower or any other Person. All payments or other
sums received by Agent for the account of Lenders shall not constitute property
or assets of Agent and shall be held by Agent, solely in its capacity as agent
for itself and the other Lenders, subject to the Loan Documents.
11.4.2 Notwithstanding any provision hereof to the contrary: (a) The
Unused Facility Fee shall be apportioned among the Lenders in proportion to the
actual daily unused portions of their respective Commitments (treating Swing
Line Borrowings, for such purpose, as usage of Agent's Commitment above); and
(b) until such time as a Defaulting Lender has funded its Pro Rata Share of a
Loan which was previously a Non Pro Rata Loan, or all other Lenders have
received payment in full (whether by repayment or prepayment) of the principal
and interest due in respect of such Non Pro Rata Loan, all of the Obligations
owing to such Defaulting Lender hereunder shall be subordinated in right of
payment, as provided in the following sentence, to the prior payment in full of
all principal, interest and fees in respect of all Non Pro Rata Loans in which
the Defaulting
86
<PAGE> 94
Lender has not funded its Pro Rata Share (such principal, interest and fees
being referred to as "Senior Loans"). All amounts paid by Borrower and otherwise
due to be applied to the Obligations owing to the Defaulting Lender pursuant to
the terms hereof shall be distributed by Agent to the other Lenders in
accordance with their respective Pro Rata Shares (recalculated for purposes
hereof to exclude the Defaulting Lender's Commitment), until all Senior Loans
have been paid in full. This provision governs only the relationship among
Agent, each Defaulting Lender, and the other Lenders; nothing hereunder shall
limit the obligation of Borrower to repay all Loans in accordance with the terms
of this Agreement. The provisions of this section shall apply and be effective
regardless of whether an Event of Default occurs and is then continuing, and
notwithstanding (i) any other provision of this Agreement to the contrary, (ii)
any instruction of Borrower as to its desired application of payments or (iii)
the suspension of such Defaulting Lender's right to vote on matters which are
subject to the consent or approval of Requisite Lenders or all Lenders. No
Unused Facility Fee shall accrue in favor of, or be payable to, such Defaulting
Lender from the date of any failure to fund Loans or reimburse Agent for any
Liabilities and Costs as herein provided until such failure has been cured, and
Agent shall be entitled to (1) withhold or setoff, and to apply to the payment
of the defaulted amount and any related interest, any amounts to be paid to such
Defaulting Lender under this Agreement, and (2) bring an action or suit against
such Defaulting Lender in a court of competent jurisdiction to recover the
defaulted amount and any related interest. In addition, the Defaulting Lender
shall indemnify, defend and hold Agent and each of the other Lenders harmless
from and against any and all Liabilities and Costs, plus interest thereon at the
Default Rate, which they may sustain or incur by reason of or as a direct
consequence of the Defaulting Lender's failure or refusal to abide by its
obligations under this Agreement.
11.5 Rights, Exculpation, Etc. Neither Agent, any Affiliate of Agent, nor
any of their respective officers, directors, employees, agents, attorneys or
consultants, shall be liable to any Lender for any action taken or omitted by
them hereunder or under any of the Loan Documents, or in connection herewith or
therewith, except that Agent shall be liable for its gross negligence or willful
misconduct, or willful misconduct in the performance of its express obligations
hereunder. In the absence of gross negligence or willful misconduct, Agent shall
not be liable for any apportionment or distribution of payments made by it in
good faith pursuant to Section 11.4, 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 to
recover from the recipients of such payments any payment in excess of the amount
to which they are determined to have been entitled. Agent shall not be
responsible to any Lender for any recitals, statements, representations or
warranties herein or for the execution, effectiveness, genuineness, validity,
enforceability, collectibility or sufficiency of this
87
<PAGE> 95
Agreement or any of the other Loan Documents, or any of the transactions
contemplated hereby and thereby; or for the financial condition of Borrower or
any of its Affiliates. Agent shall not be required to make any inquiry
concerning either the performance or observance of any of the terms, provisions
or conditions of this Agreement or any of the Loan Documents or the financial
condition of Borrower or any of its Affiliates, or the existence or possible
existence of any Unmatured Event of Default or Event of Default.
11.6 Reliance. Agent shall be entitled to rely upon any written notices,
statements, certificates, orders or other documents, telecopies or any telephone
message believed by it in good faith to be genuine and correct and to have been
signed, sent or made by the proper Person, and with respect to all matters
pertaining to this Agreement or any of the Loan Documents and its duties
hereunder or thereunder, upon advice of legal counsel (including counsel for
Borrower), independent public accountant and other experts selected by it.
11.7 Indemnification. To the extent that Agent is not reimbursed and
indemnified by Borrower, Lenders will reimburse, within ten (10) Business Days
after notice from Agent, and indemnify and defend Agent for and against any and
all Liabilities and Costs which may be imposed on, incurred by, or asserted
against it in any way relating to or arising out of this Agreement or any of the
other Loan Documents or any action taken or omitted by Agent or under this
Agreement or any of the other Loan Documents, in proportion to each Lender's Pro
Rata Share; provided that no Lender shall be liable for any portion of such
Liabilities and Costs resulting from Agent's gross negligence or willful
misconduct or in respect of normal administrative costs and expenses incurred by
Agent (prior to any Event of Default or any Unmatured Event of Default) in
connection with its performance of administrative duties under this Agreement
and the other Loan Documents. The obligations of Lenders under this Section 11.7
shall survive the payment in full of all Obligations and the termination of this
Agreement. In the event that after payment and distribution of any amount by
Agent to Lenders, any Lender or third party, including Borrower, any creditor of
Borrower or a trustee in bankruptcy, recovers from Agent any amount found to
have been wrongfully paid to Agent or disbursed by Agent to Lenders, then
Lenders, in proportion to their respective Pro Rata Shares, shall reimburse
Agent for all such amounts. Notwithstanding the foregoing, Agent shall not be
obligated to advance Liabilities and Costs and may require the deposit by each
Lender of its Pro Rata Share of any material Liabilities and Costs anticipated
by Agent before they are incurred or made payable.
11.8 Agent Individually. With respect to its Pro Rata Share of the
Commitments hereunder and the Loans made by it, Agent shall have and may
exercise the same rights and powers hereunder and is subject to the same
obligations and liabilities as and to the extent set forth herein for any other
Lender. The terms "Lenders", "Requisite Lenders" or
88
<PAGE> 96
any similar terms may include Agent in its individual capacity as a Lender or
one of the Requisite Lenders, but Requisite Lenders shall not include Agent
solely in its capacity as Agent and need not necessarily include Agent in its
capacity as a Lender. Agent and any Lender and its Affiliates may accept
deposits from, lend money to, and generally engage in any kind of banking, trust
or other business with Borrower or any of its Affiliates as if it were not
acting as Agent or Lender pursuant hereto.
11.9 Successor Agent; Resignation of Agent; Removal of Agent.
11.9.1 Agent may resign from the performance of all its functions and
duties hereunder at any time by giving at least thirty (30) Business Days' prior
written notice to Lenders and Borrower, and shall automatically cease to be
Agent hereunder in the event a petition in bankruptcy shall be filed by or
against Agent or the Federal Deposit Insurance Corporation or any other
Governmental Authority shall assume control of Agent or Agent's interests under
the Facility. Further, Requisite Lenders may remove Agent at any time, for good
cause, by giving at least thirty (30) Business Days' prior written notice to
Agent, Borrower and all other Lenders. Such resignation or removal shall take
effect upon the acceptance by a successor Agent of appointment pursuant to
Section 11.9.2 or 11.9.3; concurrent with the effectiveness of such appointment,
Borrower shall pay to the retiring or removed Agent any accrued and unpaid
agency fee, or Agent shall refund to Borrower any prepaid agency fee, in each
case prorated to the effective date of such appointment of a successor Agent.
11.9.2 Upon any such notice of resignation by or removal of Agent,
Requisite Lenders shall appoint a successor Agent with the consent of Borrower,
which consent shall not be unreasonably withheld or delayed and which consent
shall not be required if there shall then exist any Event of Default. Any
successor Agent must be a bank (i) the senior debt obligations of which (or such
bank's parent's senior unsecured debt obligations) are rated not less than
BBB/Baa2 by Moody's or Standard & Poor's and (ii) which has total assets in
excess of Ten Billion Dollars ($10,000,000,000). Such successor Agent shall
separately confirm in writing with Borrower the fee to be paid to such Agent
pursuant to Section 2.5.2.
11.9.3 If a successor Agent shall not have been so appointed within said
thirty (30) Business Day period, the retiring or removed Agent, with (unless an
Event of Default has occurred and is continuing) the consent of Borrower (which
may not be unreasonably withheld or delayed), shall then appoint a successor
Agent who shall meet the requirements described in Section 11.9.2 and who shall
serve as Agent until such time, if any, as Requisite Lenders, with the consent
of Borrower, appoint a successor Agent as provided above. Each successor Agent
appointed pursuant to this Section 11.9 shall concurrently assume the rights and
obligations of the Swing Line Lender under this
89
<PAGE> 97
Agreement (including the Swing Line Lender's commitment to fund Swing Line
Borrowings and its interest in outstanding advances under the Swing Line). Upon
the acceptance of any appointment as Agent hereunder by a successor Agent, such
successor Agent shall thereupon succeed to and become vested with all the
rights, powers, privileges and duties of the retiring Agent and Swing Line
Lender, and the retiring Agent and Swing Line Lender shall be discharged from
its duties and obligations under this Agreement. Notwithstanding any provision
of Section 11.12 to the contrary, the commitment of the Swing Line Lender to
fund Swing Line Borrowings and the Swing Line Lender's interest in outstanding
Swing Line Borrowings may not be assigned to any Person other than a Person who
concurrently becomes both a successor Agent pursuant to this Section 11.9 and
the Swing Line Lender.
11.10 Consent and Approvals.
11.10.1 Each of the following shall require the approval or consent of
Requisite Lenders:
(a) Approval of each new Unencumbered Pool Property (Section
3.1);
(b) Approval of any material amendment of organizational
documents (Section 8.2);
(c) Approval of certain changes in management;
(d) Acceleration following an Event of Default (Section 10.2.1)
or rescission of such acceleration (Section 10.3);
(e) Approval of the exercise of rights and remedies under the
Loan Documents following an Event of Default (Section 10.2.1);
(f) Removal of Agent and appointment of a successor (Section
11.9);
(g) Approval of certain changes in GAAP affecting calculation of
financial covenants (Section 12.3);
(h) Except as referred to in Section 11.10.2 or 11.11.1,
approval of any amendment, modification or termination of this
Agreement, or waiver of any provision herein (Section 12.4);
90
<PAGE> 98
(i) Approval of any waiver of late charge pursuant to Section
2.4.5 for late payments by Borrower in excess of two (2) times in any
twelve (12) month period;
(j) Approval of any modification to a Grandfathered Ground Lease
(Section 8.6); and
(k) Approval of any Guarantor Subsidiary (Section 3.1).
11.10.2 Each amendment, modification or waiver specifically enumerated
in Section 12.4.1 shall require the consent of all Lenders. Each amendment,
modification or waiver specifically enumerated in Section 12.4.2 shall require
the consent of Agent and Requisite Lenders.
11.10.3 In addition to the required consents or approvals referred to in
Section 11.10.1, Agent may at any time request instructions from Requisite
Lenders with respect to any actions or approvals which, by the terms of this
Agreement or of any of the Loan Documents, Agent is permitted or required to
take or to grant without instructions from any Lenders, and if such instructions
are promptly requested, Agent shall be absolutely entitled to refrain from
taking any action or to withhold any approval and shall not be under any
liability whatsoever to any Person for refraining from taking any action or
withholding any approval under any of the Loan Documents until it shall have
received such instructions from Requisite Lenders. Without limiting the
foregoing, no Lender shall have any right of action whatsoever against Agent as
a result of Agent acting or refraining from acting under this Agreement or any
of the other Loan Documents in accordance with the instructions of Requisite
Lenders or, where applicable, all Lenders. Agent shall promptly notify each
Lender at any time that the Requisite Lenders have instructed Agent to act or
refrain from acting pursuant hereto.
11.10.4 Each Lender agrees that any action taken by Agent at the
direction or with the consent of Requisite Lenders in accordance with the
provisions of this Agreement or any Loan Document, and the exercise by Agent at
the direction or with the consent of Requisite Lenders of the powers set forth
herein or therein, together with such other powers as are reasonably incidental
thereto, shall be authorized and binding upon all Lenders, except for actions
specifically requiring the approval of all Lenders. All communications from
Agent to Lenders requesting 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
91
<PAGE> 99
extent not previously provided to such Lender, written materials and a summary
of all oral information provided to Agent by Borrower in respect of the matter
or issue to be resolved, and (iv) shall include Agent's recommended course of
action or determination in respect thereof. Each Lender shall reply promptly,
but in any event within ten (10) Business Days (the "Lender Reply Period").
Unless a Lender shall give written notice to Agent that it objects to the
recommendation or determination of 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. With respect to decisions requiring the approval of Requisite
Lenders or all Lenders, Agent shall submit its recommendation or determination
for approval of or consent to such recommendation or determination to all
Lenders and upon receiving the required approval or consent shall follow the
course of action or determination recommended to Lenders by Agent or such other
course of action recommended by Requisite Lenders, and each non-responding
Lender shall be deemed to have concurred with such recommended course of action.
11.11 Agency Provisions Relating to Certain Enforcement Actions.
11.11.1 Agent is hereby authorized on behalf of all Lenders, without the
necessity of any notice to or further consent from any Lender, to waive the
imposition of late fees provided for in Section 2.4.5 up to a maximum of two (2)
times during any calendar year, including any extensions.
11.11.2 Should Agent (i) employ counsel for advice or other
representation (whether or not any suit has been or shall be filed) with respect
to any of the Loan Documents, or (ii) commence any proceeding or in any way seek
to enforce its rights or remedies under the Loan Documents, each Lender, upon
demand therefor from time to time, shall contribute its share (based on its Pro
Rata Share) of the reasonable costs and/or expenses of any such advice or other
representation, enforcement or acquisition, including, but not limited to, fees
of receivers, court costs and fees and expenses of attorneys to the extent not
otherwise reimbursed by Borrower; provided that Agent shall not be entitled to
reimbursement of its attorneys' fees and expenses incurred in connection with
the resolution of disputes between Agent and other Lenders unless Agent shall be
the prevailing party in any such dispute. Any loss of principal and interest
resulting from any Event of Default shall be shared by Lenders in accordance
with their respective Pro Rata Shares. It is understood and agreed that in the
event Agent determines it is necessary to engage counsel for Lenders from and
after the occurrence of an Event of Default, said counsel shall be selected by
Agent.
92
<PAGE> 100
11.12 Assignments and Participations.
11.12.1 After first obtaining the approval of Agent and (provided that
no Event of Default then exists) Borrower, which approval will not be
unreasonably withheld, each Lender may assign, to one or more Eligible
Assignees, all or a portion of its rights and obligations under this Agreement
(including without limitation all or a portion of its Commitment and the Loans
owing to it) and other Loan Documents; provided, however, that (i) each such
assignment shall be of a constant, and not a varying, percentage of the
assigning Lender's rights and obligations under this Agreement and other Loan
Documents, and the assignment shall cover the same percentage of such Lender's
Commitment and Loans, (ii) unless Agent and Borrower otherwise consent, the
aggregate amount of the Commitment of the assigning Lender being assigned
pursuant to each such assignment (determined as of the date of the Assignment
and Assumption with respect to such assignment) shall in no event be less than
Ten Million Dollars ($10,000,000) and shall be an integral multiple of One
Million Dollars ($1,000,000), (iii) after giving effect to such assignment, the
aggregate amount of the Commitment retained by the assigning Lender shall in no
event be less than Ten Million Dollars ($10,000,000), (iv) at all times prior to
its resignation or replacement, Agent's Commitment shall be equal to or exceed
the Commitment of each other Lender, (v) the parties to each such assignment
shall execute and deliver to Agent, for its approval and acceptance (and, unless
an Event of Default has occurred and is continuing, for acknowledgment by
Borrower), an Assignment and Assumption, and (vi) Agent shall receive from the
assignor a processing fee of Three Thousand Dollars ($3,000). Unless Agent or
Borrower (if Borrower's approval is required) 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, Agent or Borrower, as the case may be,
shall be deemed to have approved such assignment. Upon such execution, delivery,
approval and acceptance, and upon the effective date specified in the applicable
Assignment and Assumption, (X) the assignee thereunder shall be a party hereto
and, to the extent that rights and obligations hereunder have been assigned to
(and assumed by) it pursuant to such Assignment and Assumption, have the rights
and obligations of a Lender hereunder, and (Y) the assigning Lender thereunder
shall, to the extent that rights and obligations hereunder have been assigned by
it (and assumed by its assignee) pursuant to such Assignment and Assumption,
relinquish its rights and be released from its obligations under this Agreement.
11.12.2 By executing and delivering an Assignment and Assumption, the
assigning Lender thereunder and the assignee thereunder confirm to and agree
with each other and the other parties hereto as follows: (i) other than as
provided in such
93
<PAGE> 101
Assignment and Assumption, such assigning Lender makes no representation or
warranty and assumes no responsibility with respect to any statements,
warranties or representations made in or in connection with this Agreement or
any other Loan Document or the execution, legality, validity, enforceability,
genuineness, sufficiency or value of this Agreement or any other Loan Document
or any other instrument or document furnished pursuant hereto; (ii) such
assigning Lender makes no representation or warranty and assumes no
responsibility with respect to the financial condition of Borrower, any
Guarantor Subsidiary or any of Borrower's Affiliates or the performance or
observance by Borrower of any of its obligations under any Loan Document or any
other instrument or document furnished pursuant hereto; (iii) such assignee
confirms that it has received a copy of this Agreement, together with copies of
the financial statements referred to in Article V or delivered pursuant to
Article VI to the date of such assignment and such other Loan Documents and
other documents and information as it has deemed appropriate to make its own
credit analysis and decision to enter into such Assignment and Assumption; (iv)
such assignee will, independently and without reliance upon Agent, such
assigning Lender or any other Lender and based on such documents and information
as it shall deem appropriate at the time, continue to make its own credit
decisions in taking or not taking action under this Agreement; (v) such assignee
appoints and authorizes Agent to take such action as Agent on its behalf and to
exercise such powers under this Agreement and the other Loan Documents as are
delegated to Agent by the terms hereof and thereof, together with such powers as
are reasonably incidental thereto; and (vi) such assignee agrees that it will
perform in accordance with their terms all of the obligations which by the terms
of this Agreement are required to be performed by it as a Lender.
11.12.3 Agent shall maintain, at its address referred to on the
counterpart signature pages hereof, a copy of each Assignment and Assumption
delivered to and accepted by it and shall record in the Loan Account the names
and addresses of each Lender and the Commitment of, and principal amount of the
Loans owing to, such Lender from time to time. Borrower, Agent and Lenders may
treat each Person whose name is recorded in the Loan Account as a Lender
hereunder for all purposes of this Agreement.
11.12.4 Upon its receipt of an Assignment and Assumption executed by an
assigning Lender and an assignee, Agent shall, if such Assignment and Assumption
has been properly completed and is in substantially the form of Exhibit A, (i)
accept such Assignment and Assumption, (ii) record the information contained
therein in the Loan Account, and (iii) give prompt notice thereof to Borrower
(and, unless an Event of Default has occurred and is continuing, obtain
Borrower's acknowledgment thereon). Upon request, Borrower will execute and
deliver to Agent an appropriate replacement promissory note or replacement
promissory notes in favor of each assignee (and assignor,
94
<PAGE> 102
if such assignor is retaining a portion of its Commitment and Loans) reflecting
such assignee's (and assignor's) Pro Rata Share(s) of the Facility. Upon
execution and delivery of such replacement promissory notes the original
promissory note or notes evidencing all or a portion of the Commitments and
Loans being assigned shall be canceled and returned to Borrower.
11.12.5 Each Lender may sell participations to one or more banks or
other entities in or to all or a portion of its rights and obligations under
this Agreement (including without limitation all or a portion of its Commitment
and the Loans owing to it) and other Loan Documents; provided, however, that (i)
such Lender's obligations under this Agreement (including without limitation its
Commitment to Borrower hereunder) shall remain unchanged, (ii) such Lender shall
remain solely responsible to the other parties hereto for the performance of
such obligations, (iii) Borrower, Agent and the other Lenders shall continue to
deal solely and directly with such Lender in connection with such Lender's
rights and obligations under this Agreement and with regard to any and all
payments to be made under this Agreement, and (iv) the holder of any such
participation shall not be entitled to voting rights under this Agreement except
for voting rights with respect to (A) increases in the Facility; (B) extensions
of the Termination Date, except as provided in Section 2.1.4; and (C) decreases
in the interest rates described in this Agreement. No participant shall be
entitled to vote on any matter until the Lender with which such participant is
participating in the Facility and the Loans confirms such participant's status
as a participant hereunder.
11.12.6 Borrower will use reasonable efforts to cooperate with Agent and
Lenders in connection with the assignment of interests under this Agreement or
the sale of participations herein.
11.12.7 Anything in this Agreement to the contrary notwithstanding, and
without the need to comply with any of the formal or procedural requirements of
this Agreement, including this Section 11.12, any Lender may at any time and
from time to time pledge and assign all or any portion of its rights under all
or any of the Loan Documents to a Federal Reserve Bank; provided that no such
pledge or assignment shall release such Lender from its obligations thereunder.
To facilitate any such pledge or assignment, Agent shall, at the request of such
Lender, enter into a letter agreement with the Federal Reserve Bank in
substantially the form of the exhibit to Appendix C to the Federal Reserve Bank
of New York Operating Circular No. 12.
11.12.8 Anything in this Agreement to the contrary notwithstanding, any
Lender may assign all or any portion of its rights and obligations under this
Agreement to another branch or Affiliate of such Lender without first obtaining
the approval of Agent and Borrower, provided that (i) at the time of such
assignment such Lender is not a
95
<PAGE> 103
Defaulting Lender, (ii) such Lender gives Agent and Borrower at least fifteen
(15) days' prior written notice of any such assignment, (iii) the parties to
each such assignment execute and deliver to Agent an Assignment and Assumption,
and (iv) Agent receives from assignor a processing fee of Three Thousand Dollars
($3,000).
11.12.9 No assignee of any rights and obligations under this Agreement
shall be permitted to subassign such rights and obligations.
11.12.10 No Lender shall be permitted to assign or sell all or any
portion of its rights and obligations under this Agreement to Borrower or any
Affiliate of Borrower.
11.13 Ratable Sharing. Subject to Sections 11.3 and 11.4, Lenders agree
among themselves that (i) with respect to all amounts received by them which are
applicable to the payment of the Obligations, equitable adjustment will be made
so that, in effect, all such amounts will be shared among them ratably in
accordance with their Pro Rata Shares, whether received by voluntary payment, by
counterclaim or cross action or by the enforcement of any or all of the
Obligations, (ii) if any of them shall by voluntary payment or by the exercise
of any right of counterclaim or otherwise, receive payment of a proportion of
the aggregate amount of the Obligations held by it which is greater than its Pro
Rata Share of the payments on account of the Obligations, the one receiving such
excess payment shall purchase, without recourse or warranty, an undivided
interest and participation (which it shall be deemed to have done simultaneously
upon the receipt of such payment) in such Obligations owed to the others so that
all such recoveries with respect to such Obligations shall be applied ratably in
accordance with their Pro Rata Shares; provided, that if all or part of such
excess payment received by the purchasing party is thereafter recovered from it,
those purchases shall be rescinded and the purchase prices paid for such
participations shall be returned to that party to the extent necessary to adjust
for such recovery, but without interest except to the extent the purchasing
party is required to pay interest in connection with such recovery. Borrower
agrees that any Lender so purchasing a participation from another Lender
pursuant to this Section 11.13 may, to the fullest extent permitted by law,
exercise all its rights of payment with respect to such participation as fully
as if such Lender were the direct creditor of Borrower in the amount of such
participation.
11.14 Delivery of Documents. Agent shall as soon as reasonably practicable
distribute to each Lender at its primary address set forth on the appropriate
counterpart signature page hereof, or at such other address as a Lender may
request in writing, (i) copies of all documents to which such Lender is a party
or of which such Lender is a beneficiary set forth in Article IV, (as well as an
original counterpart of this Agreement and such Lender's original Loan Note),
(ii) all documents of which Agent receives copies
96
<PAGE> 104
from Borrower pursuant to Sections 6.1 and 12.6, (iii) all other documents or
information which Agent is required to send to Lenders pursuant to the terms of
this Agreement, (iv) other information or documents received by Agent at the
request of any Lender, and (v) all notices received by Agent pursuant to Section
6.2. In addition, within fifteen (15) Business Days after receipt of a request
in writing from a Lender for written information or documents provided by or
prepared by Borrower or any Subsidiary or other Affiliate of Borrower, Agent
shall deliver such written information or documents to such requesting Lender if
Agent has possession of such written information or documents in its capacity as
Agent or as a Lender.
11.15 Notice of Events of Default. Agent shall not be deemed to have
knowledge or notice of the occurrence of any Unmatured Event of Default or Event
of Default (other than nonpayment of principal of or interest on the Loans)
unless Agent has received notice in writing from a Lender or Borrower referring
to this Agreement or the other Loan Documents, describing such event or
condition and expressly stating that such notice is a notice of an Unmatured
Event of Default or Event of Default. Should Agent receive such notice of the
occurrence of an Unmatured Event of Default or Event of Default, or should Agent
send Borrower a notice of Unmatured Event of Default or Event of Default, Agent
shall promptly give notice thereof to each Lender.
ARTICLE XII
-----------
MISCELLANEOUS
-------------
12.1 Expenses.
12.1.1 Generally. Borrower agrees upon demand to pay, or reimburse Agent
for, all of Agent's external audit, legal, appraisal, valuation and
investigation expenses and for all other reasonable out-of-pocket costs and
expenses of every type and nature (including, without limitation, the reasonable
fees, expenses and disbursements of Agent's internal appraisers, environmental
advisors or legal counsel) incurred by Agent at any time (whether prior to, on
or after the date of this Agreement) in connection with (i) its own audit and
investigation of Borrower and the Unencumbered Pool Properties; (ii) the
negotiation, preparation and execution of this Agreement (including, without
limitation, the satisfaction or attempted satisfaction of any of the conditions
set forth in Article IV) and the other Loan Documents and the making of the
Loans; (iii) the review and, if applicable, acceptance of additional
Unencumbered Pool Properties, including reasonable attorneys' fees and costs
incurred in connection therewith; (iv) administration of this Agreement, the
other Loan Documents and the Loans, including, without
97
<PAGE> 105
limitation, consultation with attorneys in connection therewith; and (v) the
protection, collection or enforcement of any of the Obligations.
12.1.2 After Event of Default. Borrower further agrees to pay, or
reimburse Agent and Lenders, for all reasonable out-of-pocket costs and
expenses, including without limitation reasonable attorneys' fees and
disbursements incurred by Agent or Lenders after the occurrence of an Event of
Default (i) in enforcing any Obligation or exercising or enforcing any other
right or remedy available by reason of such Event of Default; (ii) in connection
with any refinancing or restructuring of the credit arrangements provided under
this Agreement in the nature of a "work-out" or in any insolvency or bankruptcy
proceeding; (iii) in commencing, defending or intervening in any litigation or
in filing a petition, complaint, answer, motion or other pleadings in any legal
proceeding relating to Borrower or any of its Affiliates and related to or
arising out of the transactions contemplated hereby; or (iv) in taking any other
action in or with respect to any suit or proceeding (whether in bankruptcy or
otherwise).
12.2 Indemnity. Borrower further agrees to defend, protect, indemnify and
hold harmless Agent, each and all of the Lenders, each of their respective
Affiliates and participants and each of the respective officers, directors,
employees, agents, attorneys and consultants (including, without limitation,
those retained in connection with the satisfaction or attempted satisfaction of
any of the conditions set forth in Article IV) of each of the foregoing
(collectively called the "Indemnitees") from and against any and all Liabilities
and Costs imposed on, incurred by, or asserted against such Indemnitees (whether
based on any federal or state laws or other statutory regulations, including,
without limitation, securities and commercial laws and regulations, under common
law or in equity, and based upon contract or otherwise, including any
Liabilities and Costs arising as a result of a "prohibited transaction" under
ERISA to the extent arising from or in connection with the past, present or
future operations of Borrower or its predecessors in interest) in any manner
relating to or arising out of this Agreement or the other Loan Documents, or any
act, event or transaction related or attendant thereto, the making of and
participation in the Loans and the management of the Loans, or the use or
intended use of the proceeds of the Loans (collectively, the "Indemnified
Matters"); provided, however, that Borrower shall have no obligation to an
Indemnitee hereunder with respect to (i) matters for which such Indemnitee has
been compensated pursuant to or for which an exemption is provided in Section
2.4.7 or any other provision of this Agreement, and (ii) Indemnified Matters to
the extent caused by or resulting from the willful misconduct or gross
negligence of that Indemnitee or of that Indemnitee's officers, directors,
employees, agents, attorneys or consultants, as determined by a court of
competent jurisdiction. To the extent that the undertaking to indemnify, pay and
hold harmless set forth in the preceding sentence may be unenforceable because
it is violative of any law or
98
<PAGE> 106
public policy, Borrower shall contribute the maximum portion which it is
permitted to pay and satisfy under applicable law, to the payment and
satisfaction of all Indemnified Matters incurred by the Indemnitees.
12.3 Change in Accounting Principles. Except as otherwise provided herein,
if any changes in accounting principles from those used in the preparation of
the most recent financial statements delivered to Agent pursuant to the terms
hereof are hereinafter required or permitted by the rules, regulations,
pronouncements and opinions of the Financial Accounting Standards Board or the
American Institute of Certified Public Accountants (or successors thereto or
agencies with similar functions) and are adopted by Borrower with the agreement
of its independent certified public accountants and such changes result in a
change in the method of calculation of any of the financial covenants, standards
or terms found herein, 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 financial condition of
Borrower shall be the same after such changes as if such changes had not been
made; provided, however, that no change in GAAP that would affect the method of
calculation of any of the financial covenants, standards or terms shall be given
effect in such calculations until such provisions are amended, in a manner
satisfactory to Agent and Requisite Lenders, to so reflect such change in
accounting principles.
12.4 Amendments and Waivers. (i) No amendment or modification of any
provision of this Agreement shall be effective without the written agreement of
Requisite Lenders (after notice to all Lenders) and Borrower (except for
amendments to Section 11.4, which do not require the consent of Borrower), and
(ii) no termination or waiver of any provision of this Agreement, or consent to
any departure by Borrower therefrom (except as expressly provided in Section
11.11.1 with respect to waivers of late fees), shall in any event be effective
without the written concurrence of Requisite Lenders (after notice to all
Lenders), which Requisite Lenders shall have the right to grant or withhold at
their sole discretion, except that:
12.4.1 The following amendments, modifications or waivers shall require
the consent of all Lenders:
(a) increasing the Commitments or Lender's Commitments;
(b) changing the principal amount or final maturity of the Loans
except as provided in Section 2.1.4;
(c) reducing the interest rates applicable to the Loans;
99
<PAGE> 107
(d) reducing the rates on which fees payable pursuant hereto are
determined;
(e) forgiving or delaying any amount payable or receivable under
Article II (other than late fees);
(f) changing the definition of "Requisite Lenders", "Loan
Availability", "Pro Rata Shares", "Negative Pledge", "Unencumbered Pool
Value" or "Individual UPP Value";
(g) changing any provision contained in this Section 12.4;
(h) releasing any obligor under any Loan Document, except that
Agent may release the guaranty of any Person if, at the time of such
release, such Person owns no Unencumbered Pool Properties and there
exists no Unmatured Event of Default or Event of Default; or
(i) consent to assignment by Borrower of all of its duties and
Obligations hereunder pursuant to Section 12.14.
12.4.2 The following amendments, modifications or waivers shall require
the consent of Agent and Requisite Lenders:
(a) amending the Leverage Ratio that Borrower is required to
maintain pursuant to Section 9.2, waiving any failure of Borrower to
maintain such ratio or amending the definitions of "Total Liabilities,"
"Gross Asset Value," "Cash Equivalents," or "EBITDA", or of any defined
term used in the definition of "EBITDA"; and
(b) amending the definition of "Unsecured Liabilities" or "Net
Operating Income," or of any defined term used in any of the foregoing
definitions, or amending or waiving any portion of Section 2.1.1.
12.4.3 No amendment, modification, termination or waiver of any
provision of Article XI or any other provision referring to Agent shall be
effective without the written concurrence of Agent, but only if such amendment,
modification, termination or waiver alters the obligations or rights of Agent.
Any waiver or consent shall be effective only in the specific instance and for
the specific purpose for which it was given. No notice to or demand on Borrower
in any case shall entitle Borrower to any other further notice or demand in
similar or other circumstances. Any amendment, modification, termination, waiver
or consent effected in accordance
100
<PAGE> 108
with this Section 12.4 shall be binding on each assignee, transferee or
recipient of Agent's or any Lender's Commitment under this Agreement or the
Loans at the time outstanding.
12.5 Independence of Covenants. All covenants hereunder shall be given
independent effect so that if a particular action or condition is not permitted
by any of such covenants, the fact that it would be permitted by an exception
to, or be otherwise within the limitations of, another covenant shall not avoid
the occurrence of an Event of Default or Unmatured Event of Default if such
action is taken or condition exists, and if a particular action or condition is
expressly permitted under any covenant, unless expressly limited to such
covenant, the fact that it would not be permitted under the general provisions
of another covenant shall not constitute an Event of Default or Unmatured Event
of Default if such action is taken or condition exists.
12.6 Notices and Delivery. Unless otherwise specifically provided herein,
any consent, notice or other communication herein required or permitted to be
given shall be in writing and may be personally served, telecopied or sent by
courier service or United States mail and shall be deemed to have been given
when delivered in person or by courier service, upon receipt of a telecopy (or
on the next Business Day if such telecopy is received on a non-Business Day or
after 5:00 p.m. (at the office of the recipient) on a Business Day) or four (4)
Business Days after deposit in the United States mail (registered or certified,
with postage prepaid and properly addressed). Notices to Agent pursuant to
Article II shall not be effective until received by Agent. For the purposes
hereof, the addresses of the parties hereto (until notice of a change thereof is
delivered as provided in this Section 12.6) shall be as set forth below each
party's name on the signature pages hereof, or, as to each party, at such other
address as may be designated by such party in a written notice to all of the
other parties. All deliveries to be made to Agent for distribution to the
Lenders shall be made to Agent at the addresses specified for notice on the
signature page hereto and in addition, a sufficient number of copies of each
such delivery shall be delivered to Agent for delivery to each Lender at the
address specified for deliveries on the signature page hereto or such other
address as may be designated by Agent in a written notice.
12.7 Survival of Warranties, Indemnities and Agreements. All agreements,
representations, warranties and indemnities made or given herein shall survive
the execution and delivery of this Agreement and the other Loan Documents and
the making and repayment of the Loans hereunder and such indemnities shall
survive termination hereof.
12.8 Failure or Indulgence Not Waiver; Remedies Cumulative. No failure or
delay on the part of Agent or any Lender in the exercise of any power, right or
privilege under any of the Loan Documents shall impair such power, right or
privilege or be
101
<PAGE> 109
construed to be a waiver of any default or acquiescence therein, nor shall any
single or partial exercise of any such power, right or privilege preclude other
or further exercise thereof or of any other right, power or privilege. All
rights and remedies existing under the Loan Documents are cumulative to and not
exclusive of any rights or remedies otherwise available.
12.9 Payments Set Aside. To the extent that Borrower makes a payment or
payments to Agent or the Lenders or Agent or the Lenders exercise their rights
of setoff, and such payment or payments or the proceeds of such setoff or any
part thereof are subsequently invalidated, declared to be fraudulent or
preferential, set aside and/or required to be repaid to a trustee, receiver or
any other party under any bankruptcy law, state or federal law, common law or
equitable cause, then to the extent of such recovery, the Obligation or part
thereof originally intended to be satisfied, and all rights and remedies
therefor, shall be revived and continued in full force and effect as if such
payment had not been made or such setoff had not occurred.
12.10 Severability. In case any provision in or obligation under this
Agreement or the other Loan Documents shall be invalid, illegal or unenforceable
in any jurisdiction, the validity, legality and enforceability of the remaining
provisions or obligations, or of such provision or obligation in any other
jurisdiction, shall not in any way be affected or impaired thereby, provided,
however, that if the rates of interest or any other amount payable hereunder, or
the collectibility thereof, are declared to be or become invalid, illegal or
unenforceable, Lenders' obligations to make Loans shall not be enforceable.
12.11 Headings. Section headings in this Agreement are included herein for
convenience of reference only and shall not constitute a part of this Agreement
for any other purpose or be given any substantive effect.
12.12 Governing Law. THIS AGREEMENT SHALL BE GOVERNED BY, AND SHALL BE
CONSTRUED AND ENFORCED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF CALIFORNIA.
12.13 Limitation of Liability. To the extent permitted by applicable law, no
claim may be made by Borrower, any Lender or any other Person against Agent or
any Lender, or the affiliates, directors, officers, employees, attorneys or
agents of any of them, for any special, indirect, consequential or punitive
damages in respect of any claim for breach of contract or 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
Borrower and each Lender hereby waive, release and agree 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, provided that if a Lender refuses to fund a
Loan and a court
102
<PAGE> 110
of competent jurisdiction finds that (a) such refusal was without justification
and (b) such Lender's conduct constituted either gross negligence or willful
misconduct, such Lender may be liable to Borrower for Borrower's reasonable and
foreseeable damages resulting from such refusal to fund.
12.14 Successors and Assigns. This Agreement and the other Loan Documents
shall be binding upon the parties hereto and their respective successors and
assigns and shall inure to the benefit of the parties hereto and the successors
and permitted assigns of Agent and Lenders. The terms and provisions of this
Agreement shall inure to the benefit of any assignee or transferee of the Loans
and the Commitments of Lenders under this Agreement, and in the event of such
transfer or assignment, the rights and privileges herein conferred upon Agent
and Lenders shall automatically extend to and be vested in such transferee or
assignee, all subject to the terms and conditions hereof. Borrower's rights or
any interest therein hereunder, and Borrower's duties and Obligations hereunder,
shall not be assigned without the consent of all Lenders.
12.15 Consent to Jurisdiction and Service of Process; Waiver of Jury Trial.
ALL JUDICIAL PROCEEDINGS BROUGHT AGAINST BORROWER WITH RESPECT TO THIS AGREEMENT
OR ANY OTHER LOAN DOCUMENT MAY BE, AND ALL JUDICIAL PROCEEDINGS BROUGHT BY
BORROWER WITH RESPECT TO THIS AGREEMENT OR ANY OTHER LOAN DOCUMENT SHALL BE,
BROUGHT IN ANY STATE OR FEDERAL COURT OF COMPETENT JURISDICTION HAVING SITUS
WITHIN THE BOUNDARIES OF THE FEDERAL COURT DISTRICT OF THE SOUTHERN DISTRICT OF
CALIFORNIA, AND BY EXECUTION AND DELIVERY OF THIS AGREEMENT, BORROWER ACCEPTS,
FOR ITSELF AND IN CONNECTION WITH ITS PROPERTIES, GENERALLY AND UNCONDITIONALLY,
THE JURISDICTION OF THE AFORESAID COURTS, AND IRREVOCABLY AGREES TO BE BOUND BY
ANY FINAL JUDGMENT RENDERED THEREBY FROM WHICH NO APPEAL HAS BEEN TAKEN OR IS
AVAILABLE. BORROWER IRREVOCABLY CONSENTS TO THE SERVICE OF PROCESS OF ANY OF THE
AFOREMENTIONED COURTS IN ANY SUCH ACTION OR PROCEEDING BY THE MAILING OF COPIES
THEREOF BY REGISTERED OR CERTIFIED MAIL, POSTAGE PREPAID, TO ITS NOTICE ADDRESS
SPECIFIED ON THE SIGNATURE PAGES HEREOF. BORROWER, AGENT AND LENDERS EACH
IRREVOCABLY WAIVES (i) TRIAL BY JURY IN ANY ACTION OR PROCEEDING WITH RESPECT TO
THIS AGREEMENT OR ANY OTHER LOAN DOCUMENT, AND (ii) ANY OBJECTION (INCLUDING,
WITHOUT LIMITATION, ANY OBJECTION OF THE LAYING OF VENUE OR BASED ON THE GROUNDS
OF FORUM NON CONVENIENS) WHICH IT MAY NOW OR HEREAFTER HAVE TO THE BRINGING OF
ANY SUCH ACTION OR
103
<PAGE> 111
PROCEEDING WITH RESPECT TO THIS AGREEMENT OR ANY OTHER LOAN DOCUMENT IN ANY
JURISDICTION SET FORTH ABOVE. NOTHING HEREIN SHALL AFFECT THE RIGHT TO SERVE
PROCESS IN ANY OTHER MANNER PERMITTED BY LAW OR SHALL LIMIT THE RIGHT OF AGENT
OR ANY LENDER TO BRING PROCEEDINGS AGAINST BORROWER IN THE COURTS OF ANY OTHER
JURISDICTION.
12.16 Syndication of the Facility. Borrower will use reasonable efforts to
cooperate with Agent and Lenders in connection with the assignment of interests
under this Agreement or the sale of participations herein. Borrower also agrees
to amend this Agreement to add such additional provisions, not materially
inconsistent with those herein as of the Closing Date, as Agent may reasonably
determine are necessary to facilitate syndication of the Facility, and to
refrain from activity in the loan syndication market until Agent has completed
the syndication of the Facility or until otherwise agreed in order to assure a
clear market for the syndication.
12.17 Counterparts; Effectiveness; Inconsistencies. This Agreement and any
amendments, waivers, consents or supplements may be executed in counterparts,
each of which when so executed and delivered shall be deemed an original, but
all such together shall constitute but one and the same instrument. This
Agreement shall become effective when Borrower, the initial Lenders and Agent
have duly executed and delivered execution pages of this Agreement to each other
(delivery by Borrower to Lenders and by any Lender to Borrower and any other
Lender being deemed to have been made by delivery to Agent). Agent shall send
written confirmation of the Closing Date to Borrower and each other Lender
promptly following the occurrence thereof. Effective as of the Closing Date, the
commitment of Wells Fargo Bank under the Existing Facility shall terminate, and
all accrued and unpaid obligations of Borrower under the Existing Facility shall
be due and payable in full. This Agreement and each of the other Loan Documents
shall be construed to the extent reasonable to be consistent one with the other,
but to the extent that the terms and conditions of this Agreement are actually
and directly inconsistent with the terms and conditions of any other Loan
Document, this Agreement shall govern.
12.18 Construction. 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 or
any amendments or exhibits hereto.
12.19 Entire Agreement. This Agreement, taken together with all of the other
Loan Documents and all certificates and other documents delivered by Borrower to
Agent (including documents incorporating separate agreements relating to the
payment of fees),
104
<PAGE> 112
embodies the entire agreement and supersede all prior agreements, written and
oral, relating to the subject matter hereof.
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]
105
<PAGE> 113
IN WITNESS WHEREOF, this Agreement has been duly executed on the date
set forth above.
BORROWER: PACIFIC GULF PROPERTIES INC.,
a Maryland corporation,
By
----------------------------------
Title
-------------------------------
ADDRESS FOR NOTICE AND DELIVERY:
4220 Von Karman, Second Floor
Newport Beach, CA 92660
Attn: Donald G. Herrman
Executive Vice President and
Chief Financial Officer
Tel: (714) 223-5000
Fax: (714) 223-5034
106
<PAGE> 114
AGENT/LENDER: WELLS FARGO BANK, NATIONAL
ASSOCIATION
By
----------------------------------
Title
-------------------------------
ADDRESS FOR NOTICE AND DELIVERY:
Real Estate Group
Orange County
2030 Main Street, Suite 800
Irvine, CA 92614
Attn: Patrick J. Murphy
Vice President
Tel: (714) 251-4359
Fax: (714) 851-9728
Pro Rata Share: 50%
Loan Commitment:$75,000,000
LIBOR OFFICE:
Address: Real Estate Group
Disbursement Center
2120 East Park Place, Suite 100
El Segundo, CA 90245
Attn: Cathy Lambert
Telephone: (310) 335-9433
Telecopy: (310) 615-1014
107
<PAGE> 115
OTHER LENDERS: DRESDNER BANK AG
By
----------------------------------
Title
-------------------------------
ADDRESS FOR NOTICE AND DELIVERY:
Dresdner Bank New York
75 Wall Street
New York, New York 10005-2889
Attn: Robert Raddington
Tel: (212) 429-2269
Fax: (212) 429-2130
Pro Rata Share: 16.66666667%
Loan Commitment: $25,000,000
KEYBANK, NATIONAL ASSOCIATION
By
----------------------------------
Title
-------------------------------
ADDRESS FOR NOTICE AND DELIVERY:
KeyBank N.A.
127 Public Square
Cleveland, Ohio 44114
Attn: Dawn Murphy
Tel: (216) 689-3920
Fax: (216) 689-3566
Pro Rata Share: 16.66666667%
Loan Commitment: $25,000,000
108
<PAGE> 116
BANK OF AMERICA NT & SA
By
----------------------------------
Title
-------------------------------
ADDRESS FOR NOTICE AND DELIVERY:
Bank of America NT & SA
555 S. Flower Street, 6th Floor
Los Angeles, California 90071
Attn: Marilyn Harvey
Tel: (213) 228-4013
Fax: (213) 228-5389
Pro Rata Share: 16.66666667%
Loan Commitment: $25,000,000
109
<PAGE> 117
EXHIBIT D TO CREDIT AGREEMENT
FORM OF LOAN NOTE
-----------------
,
---------- ----
$
---------------
FOR VALUE RECEIVED, PACIFIC GULF PROPERTIES INC., a Maryland
corporation ("BORROWER"), HEREBY PROMISES TO PAY to the order of _______________
("LENDER") the principal sum of (i) _______________ MILLION Dollars
($_______________), or if less, the aggregate unpaid principal amount of all
"LOANS" disbursed by Lender pursuant to Lender's "COMMITMENT" (as such terms are
defined in the Credit Agreement dated as of April 9, 1998 (as amended,
supplemented or restated from time to time, the "CREDIT AGREEMENT"), among
Borrower, Lender, certain other Lenders named therein or made parties thereto
and Wells Fargo Bank, National Association, as Agent, together with interest on
the unpaid principal balance hereof at the rate (or rates) determined in
accordance with Section 2.4 of the Credit Agreement from the date such principal
is advanced until it is paid in full. It is contemplated that there will be
advances and payments under this Loan Note from time to time, but no advances or
payments under this Loan Note (including payment in full of the unpaid balance
of principal hereof prior to maturity) shall affect or impair the validity or
enforceability of this Loan Note as to future advances hereunder.
This Loan Note is one of the Loan Notes referred to in and
governed by the Credit Agreement, which Credit Agreement, among other things,
contains provisions for the acceleration of the maturity hereof and for the
payment of certain additional sums to Lender upon the happening of certain
stated events. Capitalized terms used in this Loan Note without definition have
the same meanings as in the Credit Agreement.
The principal amount of this Loan Note, unless accelerated in
accordance with the Credit Agreement as described below, if not sooner paid,
will be due and payable, together with all accrued and unpaid interest and other
amounts due and unpaid under the Credit Agreement, on the Termination Date.
Borrower may make voluntary prepayments of all or a portion of this Loan Note,
upon prior written notice, in accordance with the provisions of Section 2.6.1 of
the Credit Agreement.
Interest on the Loans is payable in arrears on the first Business
Day of each month during the term of the Credit Agreement, commencing with the
first Business Day of the first calendar month to begin after the date of this
Loan Note. Interest will be computed on the basis of the actual number of days
elapsed in the period during which interest accrues and a year of three hundred
sixty (360) days. The Credit Agreement provides for the payment by Borrower of
various other charges and fees, in addition to the interest charges described in
the Credit Agreement, as set forth more fully in the Credit Agreement.
All payments of any amount becoming due under this Loan Note
shall be made in the manner provided in the Credit Agreement, in Dollars.
Upon and after the occurrence of an Event of Default, unless such
Event of Default is waived as provided in the Credit Agreement, this Loan Note
may, at the option of Requisite Lenders and without demand, notice or legal
process of any kind, be declared by
<PAGE> 118
Agent, and in such case immediately shall become, due and payable. Upon and
after the occurrence of certain Events of Default, this Loan Note shall, without
any action by Lenders and without demand, notice or legal process of any kind,
automatically and immediately become due and payable.
Demand, presentment, protest and notice of nonpayment and
protest, notice of intention to accelerate maturity, notice of acceleration of
maturity and notice of dishonor are hereby waived by Borrower. Subject to the
terms of the Credit Agreement, Lender may extend the time of payment of this
Loan Note, postpone the enforcement hereof, grant any indulgences, release any
party primarily or secondarily liable hereon or agree to any subordination of
Borrower's obligations hereunder without affecting or diminishing Lender's right
of recourse against Borrower, which right is hereby expressly reserved.
This Loan Note has been delivered and accepted at Irvine,
California. This Loan Note shall be interpreted in accordance with, and the
rights and liabilities of the parties hereto shall be determined and governed
by, the laws of the State of California.
In no contingency or event whatsoever shall interest charged in
respect of the Loans evidenced hereby, however such interest may be
characterized or computed, exceed the highest rate permissible under any law
that a court of competent jurisdiction shall, in a final determination, deem
applicable hereto. If such a court determines that Lender has received interest
hereunder in excess of the highest rate applicable hereto, Lender shall, at
Lender's election, either (a) promptly refund such excess interest to Borrower
or (b) credit such excess to the principal balance of the Loans. This provision
shall control over every other provision of all agreements between Borrower and
Lender.
Whenever possible each provision of this Loan Note shall be
interpreted in such manner as to be effective and valid under applicable law,
but if any provision of this Loan Note shall be prohibited by or invalid under
applicable law, such provision shall be ineffective to the extent of such
prohibition or invalidity, without invalidating the remainder of such provision
or the remaining provisions of this Loan Note.
PACIFIC GULF PROPERTIES INC., a
Maryland corporation
By:
--------------------------------
Its:
-------------------------------
2
<PAGE> 119
EXHIBIT C TO CREDIT AGREEMENT
COMPLIANCE CERTIFICATE
This Compliance Certificate is delivered pursuant to the Credit
Agreement dated as of April 9, 1998 (as amended, supplemented or restated from
time to time, the "Agreement"), among Pacific Gulf Properties Inc., the Persons
named therein as Lenders and such other Persons as may become Lenders in
accordance with the terms of the Agreement, and Wells Fargo Bank, National
Association, as Agent. (All capitalized terms used herein without definitions
shall have the meanings given to them in the Agreement.)
1. The undersigned hereby certifies that (a) the undersigned has
reviewed the terms of the Agreement and has made a review of the transactions,
financial condition and other affairs of Borrower, each Subsidiary, and any
Investment Partnership as of, and during the relevant accounting period ending
on, _______________, ____, and (b) such review has not disclosed the existence
during such accounting period, and the undersigned does not have knowledge of
the existence, as of the date hereof, of any condition or event constituting an
Unmatured Event of Default or an Event of Default except as set forth on
Attachment A hereto, which accurately describes the nature of the condition(s)
or event(s) that constitute Unmatured Event(s) of Default or Event(s) of Default
and the actions which Borrower (is taking) (is planning to take) with respect to
such condition(s) or event(s).
2. The calculations required to establish compliance with each of the
provisions of Article IX of the Agreement are attached hereto as Schedule 1.
3. The management covenant set forth in Section 8.4 of the Agreement is
being fully complied with, as confirmed on Schedule 1.
4. The aggregate outstanding principal amount of the Loans as of the
date hereof is equal to or less than Loan Availability.
------------------------------------
Chief Financial Officer of the REIT
Date: ,
------------ ------
1
<PAGE> 120
LOAN NOTE
---------
$75,000,000 April 9, 1998
FOR VALUE RECEIVED, PACIFIC GULF PROPERTIES INC., a Maryland
corporation ("BORROWER"), HEREBY PROMISES TO PAY to the order of WELLS FARGO
BANK, NATIONAL ASSOCIATION ("LENDER") the principal sum of (i) SEVENTY-FIVE
MILLION Dollars ($ 75,000,000), or (ii) if less, the aggregate unpaid principal
amount of all "LOANS" disbursed by Lender pursuant to Lender's "COMMITMENT" (as
such terms are defined in the Credit Agreement dated as of April 9, 1998 (as
amended, supplemented or restated from time to time, the "CREDIT AGREEMENT"),
among Borrower, Lender, certain other Lenders named therein or made parties
thereto and Wells Fargo Bank, National Association, as Agent, together with
interest on the unpaid principal balance hereof at the rate (or rates)
determined in accordance with Section 2.4 of the Credit Agreement from the date
such principal is advanced until it is paid in full. It is contemplated that
there will be advances and payments under this Loan Note from time to time, but
no advances or payments under this Loan Note (including payment in full of the
unpaid balance of principal hereof prior to maturity) shall affect or impair the
validity or enforceability of this Loan Note as to future advances hereunder.
This Loan Note is one of the Loan Notes referred to in and
governed by the Credit Agreement, which Credit Agreement, among other things,
contains provisions for the acceleration of the maturity hereof and for the
payment of certain additional sums to Lender upon the happening of certain
stated events. Capitalized terms used in this Loan Note without definition have
the same meanings as in the Credit Agreement.
The principal amount of this Loan Note, unless accelerated in
accordance with the Credit Agreement as described below, if not sooner paid,
will be due and payable, together with all accrued and unpaid interest and other
amounts due and unpaid under the Credit Agreement, on the Termination Date.
Borrower may make voluntary prepayments of all or a portion of this Loan Note,
upon prior written notice, in accordance with the provisions of Section 2.6.1 of
the Credit Agreement.
Interest on the Loans is payable in arrears on the first Business
Day of each month during the term of the Credit Agreement, commencing with the
first Business Day of the first calendar month to begin after the date of this
Loan Note. Interest will be computed on the basis of the actual number of days
elapsed in the period during which interest accrues and a year of three hundred
sixty (360) days. The Credit Agreement provides for the payment by Borrower of
various other charges and fees, in addition to the interest charges described in
the Credit Agreement, as set forth more fully in the Credit Agreement.
All payments of any amount becoming due under this Loan Note
shall be made in the manner provided in the Credit Agreement, in Dollars.
Upon and after the occurrence of an Event of Default, unless such
Event of Default is waived as provided in the Credit Agreement, this Loan Note
may, at the option of Requisite Lenders and without demand, notice or legal
process of any kind, be declared by
<PAGE> 121
Agent, and in such case immediately shall become, due and payable. Upon and
after the occurrence of certain Events of Default, this Loan Note shall, without
any action by Lenders and without demand, notice or legal process of any kind,
automatically and immediately become due and payable.
Demand, presentment, protest and notice of nonpayment and
protest, notice of intention to accelerate maturity, notice of acceleration of
maturity and notice of dishonor are hereby waived by Borrower. Subject to the
terms of the Credit Agreement, Lender may extend the time of payment of this
Loan Note, postpone the enforcement hereof, grant any indulgences, release any
party primarily or secondarily liable hereon or agree to any subordination of
Borrower's obligations hereunder without affecting or diminishing Lender's right
of recourse against Borrower, which right is hereby expressly reserved.
This Loan Note has been delivered and accepted at Irvine,
California. This Loan Note shall be interpreted in accordance with, and the
rights and liabilities of the parties hereto shall be determined and governed
by, the laws of the State of California.
In no contingency or event whatsoever shall interest charged in
respect of the Loans evidenced hereby, however such interest may be
characterized or computed, exceed the highest rate permissible under any law
that a court of competent jurisdiction shall, in a final determination, deem
applicable hereto. If such a court determines that Lender has received interest
hereunder in excess of the highest rate applicable hereto, Lender shall, at
Lender's election, either (a) promptly refund such excess interest to Borrower
or (b) credit such excess to the principal balance of the Loans. This provision
shall control over every other provision of all agreements between Borrower and
Lender.
Whenever possible each provision of this Loan Note shall be
interpreted in such manner as to be effective and valid under applicable law,
but if any provision of this Loan Note shall be prohibited by or invalid under
applicable law, such provision shall be ineffective to the extent of such
prohibition or invalidity, without invalidating the remainder of such provision
or the remaining provisions of this Loan Note.
PACIFIC GULF PROPERTIES INC., a
Maryland corporation
By:
-------------------------------------
Its:
------------------------------------
2
<PAGE> 122
LOAN NOTE
---------
$25,000,000 April 9, 1998
FOR VALUE RECEIVED, PACIFIC GULF PROPERTIES INC., a Maryland
corporation ("BORROWER"), HEREBY PROMISES TO PAY to the order of DRESDNER BANK
AG ("LENDER") the principal sum of (i) TWENTY-FIVE MILLION Dollars ($
25,000,000), or (ii) if less, the aggregate unpaid principal amount of all
"LOANS" disbursed by Lender pursuant to Lender's "COMMITMENT" (as such terms are
defined in the Credit Agreement dated as of April 9, 1998 (as amended,
supplemented or restated from time to time, the "CREDIT AGREEMENT"), among
Borrower, Lender, certain other Lenders named therein or made parties thereto
and Wells Fargo Bank, National Association, as Agent, together with interest on
the unpaid principal balance hereof at the rate (or rates) determined in
accordance with Section 2.4 of the Credit Agreement from the date such principal
is advanced until it is paid in full. It is contemplated that there will be
advances and payments under this Loan Note from time to time, but no advances or
payments under this Loan Note (including payment in full of the unpaid balance
of principal hereof prior to maturity) shall affect or impair the validity or
enforceability of this Loan Note as to future advances hereunder.
This Loan Note is one of the Loan Notes referred to in and
governed by the Credit Agreement, which Credit Agreement, among other things,
contains provisions for the acceleration of the maturity hereof and for the
payment of certain additional sums to Lender upon the happening of certain
stated events. Capitalized terms used in this Loan Note without definition have
the same meanings as in the Credit Agreement.
The principal amount of this Loan Note, unless accelerated in
accordance with the Credit Agreement as described below, if not sooner paid,
will be due and payable, together with all accrued and unpaid interest and other
amounts due and unpaid under the Credit Agreement, on the Termination Date.
Borrower may make voluntary prepayments of all or a portion of this Loan Note,
upon prior written notice, in accordance with the provisions of Section 2.6.1 of
the Credit Agreement.
Interest on the Loans is payable in arrears on the first Business
Day of each month during the term of the Credit Agreement, commencing with the
first Business Day of the first calendar month to begin after the date of this
Loan Note. Interest will be computed on the basis of the actual number of days
elapsed in the period during which interest accrues and a year of three hundred
sixty (360) days. The Credit Agreement provides for the payment by Borrower of
various other charges and fees, in addition to the interest charges described in
the Credit Agreement, as set forth more fully in the Credit Agreement.
All payments of any amount becoming due under this Loan Note
shall be made in the manner provided in the Credit Agreement, in Dollars.
Upon and after the occurrence of an Event of Default, unless such
Event of Default is waived as provided in the Credit Agreement, this Loan Note
may, at the option of Requisite Lenders and without demand, notice or legal
process of any kind, be declared by
<PAGE> 123
Agent, and in such case immediately shall become, due and payable. Upon and
after the occurrence of certain Events of Default, this Loan Note shall, without
any action by Lenders and without demand, notice or legal process of any kind,
automatically and immediately become due and payable.
Demand, presentment, protest and notice of nonpayment and
protest, notice of intention to accelerate maturity, notice of acceleration of
maturity and notice of dishonor are hereby waived by Borrower. Subject to the
terms of the Credit Agreement, Lender may extend the time of payment of this
Loan Note, postpone the enforcement hereof, grant any indulgences, release any
party primarily or secondarily liable hereon or agree to any subordination of
Borrower's obligations hereunder without affecting or diminishing Lender's right
of recourse against Borrower, which right is hereby expressly reserved.
This Loan Note has been delivered and accepted at Irvine,
California. This Loan Note shall be interpreted in accordance with, and the
rights and liabilities of the parties hereto shall be determined and governed
by, the laws of the State of California.
In no contingency or event whatsoever shall interest charged in
respect of the Loans evidenced hereby, however such interest may be
characterized or computed, exceed the highest rate permissible under any law
that a court of competent jurisdiction shall, in a final determination, deem
applicable hereto. If such a court determines that Lender has received interest
hereunder in excess of the highest rate applicable hereto, Lender shall, at
Lender's election, either (a) promptly refund such excess interest to Borrower
or (b) credit such excess to the principal balance of the Loans. This provision
shall control over every other provision of all agreements between Borrower and
Lender.
Whenever possible each provision of this Loan Note shall be
interpreted in such manner as to be effective and valid under applicable law,
but if any provision of this Loan Note shall be prohibited by or invalid under
applicable law, such provision shall be ineffective to the extent of such
prohibition or invalidity, without invalidating the remainder of such provision
or the remaining provisions of this Loan Note.
PACIFIC GULF PROPERTIES INC., a
Maryland corporation
By:
-------------------------------------
Its:
------------------------------------
2
<PAGE> 124
LOAN NOTE
---------
$25,000,000 April 9, 1998
FOR VALUE RECEIVED, PACIFIC GULF PROPERTIES INC., a Maryland
corporation ("BORROWER"), HEREBY PROMISES TO PAY to the order of BANK OF AMERICA
NATIONAL TRUST & SAVINGS ASSOCIATION ("LENDER") the principal sum of (i)
TWENTY-FIVE MILLION Dollars ($ 25,000,000), or (ii) if less, the aggregate
unpaid principal amount of all "LOANS" disbursed by Lender pursuant to Lender's
"COMMITMENT" (as such terms are defined in the Credit Agreement dated as of
April 9, 1998 (as amended, supplemented or restated from time to time, the
"CREDIT AGREEMENT"), among Borrower, Lender, certain other Lenders named therein
or made parties thereto and Wells Fargo Bank, National Association, as Agent,
together with interest on the unpaid principal balance hereof at the rate (or
rates) determined in accordance with Section 2.4 of the Credit Agreement from
the date such principal is advanced until it is paid in full. It is contemplated
that there will be advances and payments under this Loan Note from time to time,
but no advances or payments under this Loan Note (including payment in full of
the unpaid balance of principal hereof prior to maturity) shall affect or impair
the validity or enforceability of this Loan Note as to future advances
hereunder.
This Loan Note is one of the Loan Notes referred to in and
governed by the Credit Agreement, which Credit Agreement, among other things,
contains provisions for the acceleration of the maturity hereof and for the
payment of certain additional sums to Lender upon the happening of certain
stated events. Capitalized terms used in this Loan Note without definition have
the same meanings as in the Credit Agreement.
The principal amount of this Loan Note, unless accelerated in
accordance with the Credit Agreement as described below, if not sooner paid,
will be due and payable, together with all accrued and unpaid interest and other
amounts due and unpaid under the Credit Agreement, on the Termination Date.
Borrower may make voluntary prepayments of all or a portion of this Loan Note,
upon prior written notice, in accordance with the provisions of Section 2.6.1 of
the Credit Agreement.
Interest on the Loans is payable in arrears on the first Business
Day of each month during the term of the Credit Agreement, commencing with the
first Business Day of the first calendar month to begin after the date of this
Loan Note. Interest will be computed on the basis of the actual number of days
elapsed in the period during which interest accrues and a year of three hundred
sixty (360) days. The Credit Agreement provides for the payment by Borrower of
various other charges and fees, in addition to the interest charges described in
the Credit Agreement, as set forth more fully in the Credit Agreement.
All payments of any amount becoming due under this Loan Note
shall be made in the manner provided in the Credit Agreement, in Dollars.
Upon and after the occurrence of an Event of Default, unless such
Event of Default is waived as provided in the Credit Agreement, this Loan Note
may, at the option of Requisite Lenders and without demand, notice or legal
process of any kind, be declared by
<PAGE> 125
Agent, and in such case immediately shall become, due and payable. Upon and
after the occurrence of certain Events of Default, this Loan Note shall, without
any action by Lenders and without demand, notice or legal process of any kind,
automatically and immediately become due and payable.
Demand, presentment, protest and notice of nonpayment and
protest, notice of intention to accelerate maturity, notice of acceleration of
maturity and notice of dishonor are hereby waived by Borrower. Subject to the
terms of the Credit Agreement, Lender may extend the time of payment of this
Loan Note, postpone the enforcement hereof, grant any indulgences, release any
party primarily or secondarily liable hereon or agree to any subordination of
Borrower's obligations hereunder without affecting or diminishing Lender's right
of recourse against Borrower, which right is hereby expressly reserved.
This Loan Note has been delivered and accepted at Irvine,
California. This Loan Note shall be interpreted in accordance with, and the
rights and liabilities of the parties hereto shall be determined and governed
by, the laws of the State of California.
In no contingency or event whatsoever shall interest charged in
respect of the Loans evidenced hereby, however such interest may be
characterized or computed, exceed the highest rate permissible under any law
that a court of competent jurisdiction shall, in a final determination, deem
applicable hereto. If such a court determines that Lender has received interest
hereunder in excess of the highest rate applicable hereto, Lender shall, at
Lender's election, either (a) promptly refund such excess interest to Borrower
or (b) credit such excess to the principal balance of the Loans. This provision
shall control over every other provision of all agreements between Borrower and
Lender.
Whenever possible each provision of this Loan Note shall be
interpreted in such manner as to be effective and valid under applicable law,
but if any provision of this Loan Note shall be prohibited by or invalid under
applicable law, such provision shall be ineffective to the extent of such
prohibition or invalidity, without invalidating the remainder of such provision
or the remaining provisions of this Loan Note.
PACIFIC GULF PROPERTIES INC., a
Maryland corporation
By:
-------------------------------------
Its:
------------------------------------
2
<PAGE> 126
LOAN NOTE
---------
April 9, 1998
$25,000,000
FOR VALUE RECEIVED, PACIFIC GULF PROPERTIES INC., a Maryland
corporation ("BORROWER"), HEREBY PROMISES TO PAY to the order of KEYBANK,
NATIONAL ASSOCIATION ("LENDER") the principal sum of (i) TWENTY-FIVE MILLION
Dollars ($ 25,000,000), or (ii) if less, the aggregate unpaid principal amount
of all "LOANS" disbursed by Lender pursuant to Lender's "COMMITMENT" (as such
terms are defined in the Credit Agreement dated as of April 9, 1998 (as amended,
supplemented or restated from time to time, the "CREDIT AGREEMENT"), among
Borrower, Lender, certain other Lenders named therein or made parties thereto
and Wells Fargo Bank, National Association, as Agent, together with interest on
the unpaid principal balance hereof at the rate (or rates) determined in
accordance with Section 2.4 of the Credit Agreement from the date such principal
is advanced until it is paid in full. It is contemplated that there will be
advances and payments under this Loan Note from time to time, but no advances or
payments under this Loan Note (including payment in full of the unpaid balance
of principal hereof prior to maturity) shall affect or impair the validity or
enforceability of this Loan Note as to future advances hereunder.
This Loan Note is one of the Loan Notes referred to in and
governed by the Credit Agreement, which Credit Agreement, among other things,
contains provisions for the acceleration of the maturity hereof and for the
payment of certain additional sums to Lender upon the happening of certain
stated events. Capitalized terms used in this Loan Note without definition have
the same meanings as in the Credit Agreement.
The principal amount of this Loan Note, unless accelerated in
accordance with the Credit Agreement as described below, if not sooner paid,
will be due and payable, together with all accrued and unpaid interest and other
amounts due and unpaid under the Credit Agreement, on the Termination Date.
Borrower may make voluntary prepayments of all or a portion of this Loan Note,
upon prior written notice, in accordance with the provisions of Section 2.6.1 of
the Credit Agreement.
Interest on the Loans is payable in arrears on the first Business
Day of each month during the term of the Credit Agreement, commencing with the
first Business Day of the first calendar month to begin after the date of this
Loan Note. Interest will be computed on the basis of the actual number of days
elapsed in the period during which interest accrues and a year of three hundred
sixty (360) days. The Credit Agreement provides for the payment by Borrower of
various other charges and fees, in addition to the interest charges described in
the Credit Agreement, as set forth more fully in the Credit Agreement.
All payments of any amount becoming due under this Loan Note
shall be made in the manner provided in the Credit Agreement, in Dollars.
Upon and after the occurrence of an Event of Default, unless such
Event of Default is waived as provided in the Credit Agreement, this Loan Note
may, at the option of Requisite Lenders and without demand, notice or legal
process of any kind, be declared by Agent,
<PAGE> 127
and in such case immediately shall become, due and payable. Upon and after the
occurrence of certain Events of Default, this Loan Note shall, without any
action by Lenders and without demand, notice or legal process of any kind,
automatically and immediately become due and payable.
Demand, presentment, protest and notice of nonpayment and
protest, notice of intention to accelerate maturity, notice of acceleration of
maturity and notice of dishonor are hereby waived by Borrower. Subject to the
terms of the Credit Agreement, Lender may extend the time of payment of this
Loan Note, postpone the enforcement hereof, grant any indulgences, release any
party primarily or secondarily liable hereon or agree to any subordination of
Borrower's obligations hereunder without affecting or diminishing Lender's right
of recourse against Borrower, which right is hereby expressly reserved.
This Loan Note has been delivered and accepted at Irvine,
California. This Loan Note shall be interpreted in accordance with, and the
rights and liabilities of the parties hereto shall be determined and governed
by, the laws of the State of California.
In no contingency or event whatsoever shall interest charged in
respect of the Loans evidenced hereby, however such interest may be
characterized or computed, exceed the highest rate permissible under any law
that a court of competent jurisdiction shall, in a final determination, deem
applicable hereto. If such a court determines that Lender has received interest
hereunder in excess of the highest rate applicable hereto, Lender shall, at
Lender's election, either (a) promptly refund such excess interest to Borrower
or (b) credit such excess to the principal balance of the Loans. This provision
shall control over every other provision of all agreements between Borrower and
Lender.
Whenever possible each provision of this Loan Note shall be
interpreted in such manner as to be effective and valid under applicable law,
but if any provision of this Loan Note shall be prohibited by or invalid under
applicable law, such provision shall be ineffective to the extent of such
prohibition or invalidity, without invalidating the remainder of such provision
or the remaining provisions of this Loan Note.
PACIFIC GULF PROPERTIES INC., a
Maryland corporation
By:
-------------------------------------
Its:
------------------------------------
2
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-START> JAN-01-1998
<PERIOD-END> MAR-31-1998
<CASH> 3,526
<SECURITIES> 0
<RECEIVABLES> 4,894
<ALLOWANCES> 1,000
<INVENTORY> 0
<CURRENT-ASSETS> 7,420
<PP&E> 795,767
<DEPRECIATION> 43,475
<TOTAL-ASSETS> 773,487
<CURRENT-LIABILITIES> 21,294
<BONDS> 347,221
0
28
<COMMON> 200
<OTHER-SE> 386,537
<TOTAL-LIABILITY-AND-EQUITY> 773,487
<SALES> 0
<TOTAL-REVENUES> 25,318
<CGS> 0
<TOTAL-COSTS> 12,522
<OTHER-EXPENSES> 106
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 5,275
<INCOME-PRETAX> 7,415
<INCOME-TAX> 0
<INCOME-CONTINUING> 7,415
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 6,208
<EPS-PRIMARY> 0.31
<EPS-DILUTED> 0.31
</TABLE>
