<PAGE> 1
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION, VIA EDGAR, ON DECEMBER 24,
1997
REGISTRATION NO. 333-
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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
------------------------
FORM S-3
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
------------------------
LIBERTY PROPERTY TRUST
LIBERTY PROPERTY LIMITED PARTNERSHIP
(EXACT NAME OF EACH REGISTRANT AS SPECIFIED IN ITS GOVERNING DOCUMENTS)
------------------------
<TABLE>
<S> <C>
MARYLAND 23-7768996
PENNSYLVANIA 23-2766549
(STATE OR OTHER JURISDICTION OF INCORPORATION (I.R.S. EMPLOYER IDENTIFICATION
OR ORGANIZATION OF RESPECTIVE REGISTRANT) NUMBER OF RESPECTIVE REGISTRANT)
</TABLE>
------------------------
65 VALLEY STREAM PARKWAY, MALVERN, PENNSYLVANIA 19355
(610) 648-1700
(ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING
AREA CODE, OF REGISTRANTS' PRINCIPAL EXECUTIVE OFFICES)
------------------------
JAMES J. BOWES, ESQUIRE
65 VALLEY STREAM PARKWAY
MALVERN, PENNSYLVANIA 19355
(610) 648-1700
(NAME, ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER,
INCLUDING AREA CODE, OF AGENT FOR SERVICE)
------------------------
PLEASE SEND A COPY OF ALL CORRESPONDENCE TO:
RICHARD A. SILFEN, ESQUIRE
WOLF, BLOCK, SCHORR AND SOLIS-COHEN LLP
TWELFTH FLOOR PACKARD BUILDING
111 SOUTH 15TH STREET
PHILADELPHIA, PENNSYLVANIA 19102
(215) 977-2000
------------------------
APPROXIMATE DATE OF COMMENCEMENT OF THE PROPOSED SALE TO THE PUBLIC: From
time to time after this Registration Statement becomes effective.
------------------------
If the only securities being registered on this Form are being offered
pursuant to dividend or interest reinvestment plans, please check the following
box: [ ]
If any of the securities being registered on this Form are to be offered on
a delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, other than securities offered only in connection with dividend or interest
reinvestment plans, check the following box: [X]
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, please check the following box
and list the Securities Act registration statement number of the earlier
effective registration statement for the same offering: [ ]
- -------------
If this Form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering: [ ]
- -------------
If delivery of the prospectus is expected to be made pursuant to Rule 434
under the Securities Act, please check the following box: [X]
------------------------
CALCULATION OF REGISTRATION FEE
<TABLE>
<CAPTION>
==========================================================================================================================
TITLE OF EACH CLASS PROPOSED MAXIMUM PROPOSED MAXIMUM
OF SECURITIES TO BE AMOUNT TO BE OFFERING PRICE AGGREGATE OFFERING AMOUNT OF
REGISTERED REGISTERED(1) PER UNIT(2) PRICE(2) REGISTRATION FEE
- --------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Common Shares of Beneficial Interest,
$0.001 par value(3)(4)(5)...........
Preferred Shares of Beneficial
Interest, $0.001 par value(4)(5)....
Depositary Shares(4)(5)(6)............ $1,500,000,000 100% $1,500,000,000 $442,500
Warrants(4)(7)........................
Guaranties(4)(8)......................
Debt Securities(9)(10)................
==========================================================================================================================
</TABLE>
(footnotes on following page)
<PAGE> 2
- ---------------
(1) Not specified as to each class of the above-referenced securities
(collectively, the "Securities") being registered hereby, pursuant to
General Instruction II. D of Form S-3. In no event will the aggregate
initial offering price of the Securities registered hereby exceed
$900,000,000 in the case of Liberty Property Trust (the "Trust") or
$600,000,000 in the case of Liberty Property Limited Partnership (the
"Operating Partnership"), or the respective equivalents thereof in one or
more foreign currencies or composite currencies, including European
currency units. The Securities registered hereby may be sold separately,
together or in units with other Securities registered hereby. This
Registration Statement also includes any Securities issuable upon stock
splits or similar transactions pursuant to Rule 416 under the Securities
Act of 1933, as amended (the "Securities Act").
(2) Estimated solely for the purpose of computing the registration fee,
pursuant to Rule 457(o) under the Securities Act. The proposed maximum
offering price per unit will be determined from time to time by the
respective Registrant in connection with the issuance by such Registrant of
the Securities registered hereby.
(3) Includes rights to purchase Series A Junior Participating Preferred Shares
of the Trust (the "Rights"). No separate consideration is paid for the
Rights and, as a result, the registration fee therefor is included in the
fee for the Common Shares of Beneficial Interest of the Trust ("Common
Shares").
(4) Issuable by the Trust.
(5) In addition to any Common Shares, Preferred Shares of Beneficial Interest
of the Trust ("Preferred Shares") or Depositary Shares of the Trust
("Depositary Shares") that may be issued directly under this Registration
Statement, there are being registered hereby an indeterminate number of
Common Shares, Preferred Shares and Depositary Shares that may be issued,
either at the option of the holder thereof or the applicable Registrant,
upon conversion of or in exchange for Debt Securities of the Operating
Partnership ("Partnership Debt Securities"), Preferred Shares, Depositary
Shares or other securities issued by the Trust, the Operating Partnership
or their affiliates, as the case may be, for which no separate
consideration will be received.
(6) There are being registered hereby an indeterminate number of Depositary
Shares to be evidenced by depositary receipts issued pursuant to a Deposit
Agreement to be entered into between the Trust and a depositary. In the
event the Trust elects to offer to the public fractional interests in the
Preferred Shares registered hereby, depositary receipts will be distributed
to those persons purchasing such fractional interests and the Preferred
Shares will be issued to the depositary under a Deposit Agreement.
(7) There are being registered hereby an indeterminate number of Warrants
entitling the holders thereof to purchase Preferred Shares and Common
Shares of the Trust, which may be sold separately, together or in units
with other Securities registered hereby.
(8) Guaranties by the Trust of Partnership Debt Securities.
(9) Issuable by the Operating Partnership.
(10) In addition to any Partnership Debt Securities that may be issued directly
under this Registration Statement, there are being registered hereby an
indeterminate amount of Partnership Debt Securities that may be issued upon
conversion of or in exchange for other Partnership Debt Securities or
Preferred Shares.
THE REGISTRANTS HEREBY AMEND THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANTS
SHALL FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(A) OF
THE SECURITIES ACT OF 1933 OR UNTIL THIS REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE SECURITIES AND EXCHANGE COMMISSION, ACTING
PURSUANT TO SAID SECTION 8(A), MAY DETERMINE.
================================================================================
<PAGE> 3
INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. A
REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED WITH THE
SECURITIES AND EXCHANGE COMMISSION. THESE SECURITIES MAY NOT BE SOLD NOR
MAY OFFERS TO BUY BE ACCEPTED PRIOR TO THE TIME THE REGISTRATION STATEMENT
BECOMES EFFECTIVE. THIS PROSPECTUS SHALL NOT CONSTITUTE AN OFFER TO SELL OR
THE SOLICITATION OF AN OFFER TO BUY NOR SHALL THERE BE ANY SALE OF THESE
SECURITIES IN ANY STATE IN WHICH SUCH OFFER, SOLICITATION OR SALE WOULD BE
UNLAWFUL PRIOR TO REGISTRATION OR QUALIFICATION UNDER THE SECURITIES LAW OF
ANY SUCH STATE.
SUBJECT TO COMPLETION, DATED DECEMBER 24, 1997
PROSPECTUS
[LIBERTY PROPERTY TRUST LOGO]
$900,000,000
LIBERTY PROPERTY TRUST
COMMON SHARES OF BENEFICIAL INTEREST
PREFERRED SHARES OF BENEFICIAL INTEREST
DEPOSITARY SHARES
WARRANTS
GUARANTIES
$600,000,000
LIBERTY PROPERTY LIMITED PARTNERSHIP
DEBT SECURITIES
Liberty Property Trust, a Maryland real estate investment trust (the
"Trust"), may offer from time to time in one or more series hereunder, together
or separately, at prices and on terms to be determined at the time of offering:
(a) its Common Shares of Beneficial Interest, $0.001 par value ("Common
Shares"); (b) its Preferred Shares of Beneficial Interest, $0.001 par value
("Preferred Shares"), which may be issued in the form of depositary shares
evidenced by depositary receipts ("Depositary Shares") and which may be
convertible into or exchangeable for Common Shares or other Securities (as
defined below); and (c) warrants to purchase Preferred Shares ("Preferred Shares
Warrants") or Common Shares ("Common Shares Warrants"). The Preferred Shares
Warrants and Common Shares Warrants are herein referred to collectively as
"Warrants" and, together with Common Shares, Preferred Shares, Depositary Shares
and Trust Guaranties (as defined below), as "Trust Securities."
Liberty Property Limited Partnership, a Pennsylvania limited partnership
(the "Operating Partnership" and, together with the Trust, the "Company"), may
offer from time to time in one or more series hereunder, together or separately,
at prices and on terms to be determined at the time of offering, its debt
securities ("Debt Securities"), consisting of debentures, notes and/or other
evidences of indebtedness, representing secured or unsecured obligations of the
Operating Partnership, which may be either senior or subordinated, which may
have the benefit of conditional or unconditional guaranties of the Trust
("Guaranties") and which may be convertible into or exchangeable for Common
Shares, Preferred Shares, units of limited partnership interest of the Operating
Partnership ("Units") and other Securities. The Debt Securities and Units are
herein referred to as "Partnership Securities" and, together with Trust
Securities, as "Securities."
The specific terms of the Securities in respect of which this Prospectus is
being delivered will be set forth in an accompanying Prospectus Supplement (the
"Prospectus Supplement") which will describe, without limitation and to the
extent applicable, terms for such Securities, including: (a) in the case of
Common Shares, the aggregate number of shares offered, public offering price and
other terms thereof; (b) in the case of Preferred Shares, the specific
designation and stated value, number of shares or fractional interests therein,
any dividend, liquidation preference, redemption, sinking fund, voting or other
rights, the terms for conversion into or exchange for other Securities, if any,
including terms of any Securities into or for which they are convertible or
exchangeable, the initial public offering price and any securities exchange
listings; (c) in the case of Depositary Shares, the fraction of a Preferred
Share represented by one Depositary Share and terms of
<PAGE> 4
the Preferred Shares; (d) in the case of Warrants, to the extent applicable, the
duration, offering price, exercise price, terms of the Securities for which they
are exercisable, any securities exchange listings and detachability and other
terms thereof; and (e) in the case of Debt Securities, the specific title,
aggregate principal amount, currency, denomination, maturity, priority, rate of
interest (which may be fixed or variable), time and place of payment of
interest, terms for optional redemption or repayment by the issuer thereof or
any holder thereof or for sinking fund payments, terms for conversion into or
exchange for other Securities, if any, including terms of any Securities into or
for which they are convertible or exchangeable, the initial public offering
price, any securities exchange listings, any special provisions related to
denomination in a foreign currency or issuance as medium term notes, original
issue discount or other special terms, the designation of the Trustee (as
defined below), Security Registrar (as defined below) and Paying Agent (as
defined below), and the terms of any applicable Guaranty. The Prospectus
Supplement will also contain information, where applicable, with regard to
certain U.S. federal income tax, accounting or other considerations relating to
the Securities offered thereby.
The offering price to the public of the Securities to be issued by the
Trust and the Operating Partnership will be limited to US $900,000,000 and US
$600,000,000, respectively (or the equivalent based on the applicable exchange
rate at the time of issue, if Securities offered are denominated in one or more
foreign currencies or currency units). The Debt Securities may be denominated in
United States dollars or, at the option of the Operating Partnership, if so
specified in the applicable Prospectus Supplement, in one or more foreign
currencies or currency units. Such Debt Securities may be issued in registered
form or bearer form, or both. If so specified in the applicable Prospectus
Supplement, Debt Securities of a series may be issued in whole or in part in the
form of one or more temporary or permanent global securities.
The Securities may be sold to or through dealers or underwriters, directly
to other purchasers or through agents. If an agent of the Trust or the Operating
Partnership or a dealer or an underwriter is involved in the sale of the
Securities with respect to which this Prospectus is being delivered, such
agent's commission or dealer's purchase price or underwriter's discount will be
set forth in, or may be calculated from, the Prospectus Supplement. Any
underwriters, dealers or agents participating in the offering of Securities may
be deemed "underwriters" within the meaning of the Securities Act of 1933, as
amended (the "Securities Act"). See "Plan of Distribution" for possible
indemnification arrangements for any agents, dealers or underwriters.
The Securities may be used as all or part of the consideration to be paid
by the Trust or the Operating Partnership for the acquisition of non-operating
assets, for which financial statements would not be required to be filed with
the Securities and Exchange Commission (the "Commission"), or in exchange for
units of limited partnership interest of the Operating Partnership. In addition,
Common Shares may be offered hereby in exchange for certain debt securities of
the Operating Partnership that are exchangeable for such Common Shares. This
Prospectus may not be used to consummate sales of Securities unless accompanied
by a Prospectus Supplement.
The Common Shares are traded on the New York Stock Exchange (the "NYSE")
under the symbol "LRY."
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION NOR HAS THE COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY
OF THIS PROSPECTUS OR ANY SUPPLEMENT HERETO. ANY REPRESENTATION TO THE CONTRARY
IS A CRIMINAL OFFENSE.
THE DATE OF THIS PROSPECTUS IS , 1997.
<PAGE> 5
RISK FACTORS
Liberty Property Trust, a Maryland real estate investment trust (the
"Trust"), conducts substantially all of its operations through Liberty Property
Limited Partnership, a Pennsylvania limited partnership (the "Operating
Partnership"). Unless the context otherwise requires, as used in this
Prospectus, (i) the term "Operating Partnership" includes Liberty Property
Limited Partnership and its subsidiaries (and, where the context indicates, its
predecessor entities, Rouse & Associates, a Pennsylvania general partnership,
and certain affiliated entities (collectively, the "Predecessor")) and (ii) the
term "Company" includes the Trust and the Operating Partnership.
Except as otherwise indicated, the cross-references in this Prospectus are
to sections hereof. This Prospectus contains or incorporates by reference
forward-looking statements within the meaning of Section 27A of the Securities
Act of 1933, as amended (the "Securities Act"), and Section 21E of the
Securities Exchange Act of 1934, as amended (the "Exchange Act"). The Company's
actual results could differ materially from those set forth in the
forward-looking statements. For a discussion of certain factors that might cause
such a difference, in addition to general investment risks and those factors
incorporated by reference herein, prospective investors should consider, among
others, the following factors:
GENERAL REAL ESTATE INVESTMENT RISKS
Dependence on Tenants; Renewal of Leases and Reletting of Space. The
Company's cash flow from operations will depend upon its ability to lease space
in its portfolio of properties (the "Operating Properties") and in it properties
currently under development (together with the Operating Properties, the
"Properties") on economically favorable terms. Upon the expiration of leases,
such leases may not be renewed, the space may not be relet or the terms of
renewal or reletting (including rental rates, the cost of leasing commissions,
required renovations and concessions to tenants) may be less favorable than
current lease terms. If any or all of these events occur, the Company's cash
flow from operations and ability to make expected distributions to shareholders
could be adversely affected. The Company's cash flow from operations also would
be adversely affected if tenants leasing a significant amount of space fail to
pay rent, become bankrupt or, if for any other reason, such rents could not be
collected. Moreover, to the extent a tenant defaults on a lease, the Company may
experience delays and costs in enforcing its rights as lessor. Further, the
Company may be adversely affected by various facts and events over which the
Company will have no control, such as a change in the demand in the markets in
which the Properties are located, the possible unavailability of prospective
tenants and the possibility of economic or physical decline of the areas in
which the Properties are located or physical damage to the Properties that would
make them less attractive to tenants.
Risks of Acquisition, Development and Construction Activities. The Company
intends to continue acquisition and development of industrial and office
properties. Acquisitions of additional properties and development activities
entail risks that investments will fail to perform in accordance with
expectations. With respect to the Company's development activities, such
development opportunities may be abandoned, construction costs of any property
may exceed original or budgeted estimates (possibly making the property
uneconomical) and construction and lease-up may not be completed on schedule,
resulting in increased debt service expense and construction costs. Development
activities are also subject to risks relating to the inability to obtain, or
delays in obtaining, all necessary zoning, land-use, building, occupancy and
other required governmental permits and authorizations.
The Company anticipates that future acquisitions and developments will be
financed, in whole or in part, under the Company's $325 million credit facility
(the "Credit Facility"), through other forms of secured or unsecured financing
or through utilization of access to capital markets. Such financings may result
in the risk that, upon completion of construction, permanent financing for newly
developed commercial properties may not be available or may be available only on
disadvantageous terms. If financing is not available on acceptable terms for new
acquisitions or developments undertaken without permanent financing, further
acquisitions and development might be curtailed, cash available for distribution
might be adversely affected and foreclosures on newly developed or acquired
properties could occur. Further, if any particular property is not successful,
the Company's losses could exceed its investment in the property.
3
<PAGE> 6
Competition. There are numerous developers and real estate companies that
compete with the Company in seeking land for development, properties for
acquisition and tenants for properties. The Company may be adversely affected by
the fact that the availability of land for development within the Company's
markets continues to diminish, as does the availability of high quality
properties for acquisition within the Company's markets and elsewhere.
Possible Environmental Liabilities. Under various federal, state and local
laws, ordinances and regulations relating to the protection of the environment
(collectively, "Environmental Laws"), a current or previous owner or operator of
real estate may be liable for the cost of removal or remediation of certain
hazardous or toxic substances disposed, stored, released, generated,
manufactured or discharged from, on, at, onto, under or in such property.
Environmental Laws often impose such liability without regard to whether the
owner or operator knew of, or was responsible for, the presence or release of
such hazardous or toxic substances. In addition, the presence of any such
substances, or the failure to properly remediate such substances when present,
released or discharged, may adversely affect the owner's ability to sell or rent
such property or to borrow using such property as collateral. The cost of any
required remediation and the liability of the owner or operator therefor as to
any property is generally not limited under such Environmental Laws and could
exceed the value of the property and/or the aggregate assets of the owner or
operator. In addition to any action required by federal, state or local
authorities, the presence of hazardous or toxic substances on any of the
Properties, or on any properties acquired hereafter, could result in private
plaintiffs bringing claims for personal injury or other causes of action. In
connection with the ownership and operation of the Properties, and of any
properties acquired hereafter, the Company may be potentially liable for
remediation, release or injury. Further, various Environmental Laws impose on
owners or operators the requirement of on-going compliance with rules and
regulations regarding business-related activities that may affect the
environment. Failure to comply with such requirements could result in difficulty
in the lease or sale of any affected Property or the imposition of monetary
penalties and fines in addition to the costs required to attain compliance.
INDEBTEDNESS
Required payments on mortgages and other indebtedness generally are not
reduced if the economic performance of any property declines. If such a decline
occurs, the Company's income, Funds from Operations and cash available for
distribution to shareholders will be adversely affected. If the payments under
such indebtedness cannot be made, the Company could sustain a loss, which may
include foreclosures by or judgments against the Company in favor of mortgagees.
Further, instruments evidencing certain of the Company's indebtedness, including
the Operating Partnership's Exchangeable Subordinated Debentures due 2001 (the
"Exchangeable Subordinated Debentures") and the Credit Facility, contain
cross-default and/or cross-acceleration provisions. Depending on the principal
amount of the Exchangeable Subordinated Debentures that are exchanged for Common
Shares, the Company may not have accumulated sufficient cash to repay the
principal due on the Exchangeable Subordinated Debentures upon their maturity
and may therefore be required to meet its obligations through refinancings.
Additionally, certain of the Company's indebtedness, including indebtedness
under the Credit Facility, bears interest at variable rates and, therefore,
exposes the Company to the risk of increasing interest rates. There can be no
assurance that the Company will be able to refinance this or any other
indebtedness.
RISK OF ENTRY INTO NEW MARKETS
The Company's business strategy contemplates expanding the Company's
operations into additional new markets. In determining whether to enter a new
market, management considers demographics, job growth, employment, real estate
fundamentals and competition. There can be no assurance that the Company will be
successful in its effort to identify new markets that will afford it the
opportunity for favorable results or that the Company will be able to achieve
such results in those markets.
DEPENDENCE ON PRIMARY MARKETS
The Properties are located principally in the Southeastern, Mid-Atlantic
and Mid-Western United States. The Company's performance is, therefore,
dependent upon economic conditions in these geographic
4
<PAGE> 7
areas. Like much of the country, the Southeastern, Mid-Atlantic and Mid-Western
United States have been subject to periods of economic decline.
TAX RISKS
Adverse Consequences of the Failure to Qualify as a REIT. Although the
Company believes that the Company qualifies as a REIT, no assurance can be given
that the Company in fact has qualified, or will remain qualified, as a REIT.
Qualification as a REIT involves the application of highly technical and complex
provisions of the Internal Revenue Code of 1986, as amended (the "Code"), for
which there are only limited judicial or administrative interpretations. The
complexity of these provisions and of the applicable income tax regulations that
have been promulgated under the Code (the "Treasury Regulations") is greater in
the case of a REIT that holds its assets in partnership form. Moreover, no
assurance can be given that new legislation, regulations, administrative
interpretations or court decisions will not significantly alter the tax laws
regarding qualification as a REIT or the federal income tax consequences of such
qualification, possibly with retroactive effect. At the present time however,
the Company has no reason to expect a change in such tax laws that would
significantly and adversely affect the Company's ability to qualify and operate
as a REIT.
If in any taxable year the Company were to fail to qualify as a REIT, the
Company would not be allowed a deduction for distributions to shareholders in
computing its taxable income and would be subject to federal income tax on its
taxable income at regular corporate rates. Moreover, unless entitled to relief
under certain statutory provisions, the Company also would be disqualified from
treatment as a REIT for the four taxable years following the year in which such
qualification was lost, and if the Company subsequently requalified as a REIT,
it may be required to pay a full corporate-level tax on any unrealized gain in
its assets as of the date of requalification and to make distributions at that
time equal to any earnings accumulated during the period of non-REIT status. As
a result, such additional taxes would reduce the funds available for
distribution to shareholders for each of the years involved. In addition, during
the period in which the Company had lost its REIT status, the Company would no
longer be required by the Code to make any distributions to shareholders.
Although the Company intends to continue to operate in a manner designed to
qualify as a REIT, it is possible that future economic, market, legal, tax or
other considerations may cause the Company's trustees, with the consent of the
holders of a majority of the voting interest of all outstanding Common Shares,
to revoke the election for the Company to qualify as a REIT. For further federal
income tax considerations, including a discussion of the qualification of the
Operating Partnership as a partnership for federal income tax purposes, see
"Federal Income Tax Considerations with Respect to the Trust and the Operating
Partnership -- Classification as a Partnership."
Tax Consequences to Certain Officers and Trustees. Certain officers and
trustees of the Company own Units which may be exchanged for Common Shares.
Prior to the exchange of Units for Common Shares, officers and trustees of the
Company who own Units may suffer different and more adverse tax consequences
than holders of Common Shares upon the sale of certain of the Properties, the
refinancing of debt associated with those properties or in connection with a
proposed tender offer or merger involving the Company and, therefore, such
individuals and the Company, as partners in the Operating Partnership, may have
different objectives regarding the appropriate terms of any such transaction.
LIMITATIONS ON CHANGES IN CONTROL
Ownership Limit. In order to protect its status as a REIT, the Company
must satisfy certain conditions, including the condition that no more than 50%
in value of its outstanding shares of beneficial interest may be owned, directly
or indirectly, by five or fewer individuals. To this end, the Company's Amended
and Restated Declaration of Trust (the "Declaration of Trust"), among other
things, prohibits (with certain exceptions applicable to select senior
executives of the Company) any holder from owning more than 5.0% of its
outstanding shares of beneficial interest without the consent of the Board of
Trustees of the Company. This limitation may have the effect of precluding
acquisition of control of the Company by a third party without the consent of
the Board of Trustees of the Company.
5
<PAGE> 8
Staggered Board and Nominating Procedures. The Company's Board of Trustees
has three classes of trustees. The term of office of one class expires each
year. Trustees for each class are elected for three-year terms upon the
expiration of the respective class' term. Any nominee for trustee must have been
selected pursuant to the nominating provisions contained in the Company's
Declaration of Trust and By-Laws. The staggered terms for trustees and such
nominating procedures may affect the shareholders' ability to take control of
the Company, even if a change in control were in the shareholders' interest.
Preferred Shares. The Company's Declaration of Trust authorizes the Board
of Trustees to issue preferred shares and to establish the preferences and
rights of any shares issued. The issuance of preferred shares could have the
effect of delaying or preventing a change of control of the Company, even if a
change in control were in the shareholders' interest.
ADVERSE IMPACT OF INCREASING MARKET INTEREST RATES ON MARKET PRICE
One of the factors that may influence the price of the Common Shares in
public markets is the annual yield on the Common Share price paid from dividend
distributions by the Company. Thus, an increase in market interest rates may
lead purchasers of Common Shares to demand a higher annual yield, which could
adversely affect the market price of the Common Shares.
FORWARD-LOOKING STATEMENTS
The Private Securities Litigation Reform Act of 1995 provides a "safe
harbor" for forward-looking statements. Certain materials filed or to be filed
by the Company with the Commission and incorporated by reference herein contain
statements that are or will be forward-looking, such as statements relating to
acquisitions (including related pro forma financial information) and other
business development activities, future capital expenditures, financing sources
and availability and the effects of regulations (including environmental
regulation) and competition. Such forward-looking information involves important
risks and uncertainties that could significantly affect anticipated results in
the future and, accordingly, such results may differ from those expressed in any
forward-looking statements incorporated by reference herein. These risks and
uncertainties include, but are not limited to, uncertainties affecting real
estate businesses generally (such as entry into new leases, renewals of leases
and dependence on tenants' business operations), risks relating to acquisition,
construction and development activities, possible environmental liabilities,
risks relating to leverage and debt service (including availability of financing
terms acceptable to the Company and sensitivity of the Company's operations to
fluctuations in interest rates), the potential for the use of borrowings to make
distributions necessary to qualify as a REIT, dependence on the primary markets
in which the Properties are located, the existence of complex regulations
relating to status as a REIT and the adverse consequences of the failure to
qualify as a REIT and the potential adverse impact of market interest rates on
the market prices for the Company's securities.
6
<PAGE> 9
THE COMPANY
The Trust is a self-administered and self-managed Maryland real estate
investment trust ("REIT") that was formed to continue and expand the commercial
real estate business of Rouse & Associates, a developer and manager of
commercial real estate in the Southeastern, Mid-Atlantic and West Coast markets,
founded in 1972. The Trust provides leasing, property management, acquisition,
development, construction and design management and other related services to
its portfolio of industrial and office properties.
On a consolidated basis, substantially all of the Trust's assets are owned
directly or indirectly by, and all of the Trust's operations are conducted
directly or indirectly by, the Operating Partnership. The Trust is the sole
general partner and also is a limited partner of the Operating Partnership.
The Company's executive offices are located at 65 Valley Stream Parkway,
Malvern, Pennsylvania 19355. The telephone number is (610) 648-1700. The Company
maintains offices in each of its primary markets.
USE OF PROCEEDS
Unless otherwise provided in the Prospectus Supplement, the net proceeds,
if any, from the sale of the Securities offered hereby will be used for general
corporate purposes, including the acquisition of properties or other assets and
the repayment of indebtedness. Unless otherwise provided in the Prospectus
Supplement, at the date hereof, no specific material proposed purchases have
been identified as probable. The amount of Securities offered from time to time
pursuant to this Prospectus and any Prospectus Supplement, and the precise
amounts and timing of the application of net proceeds from the sale of such
Securities, will depend upon funding requirements of the Company. If the Company
elects at the time of an issuance of Securities to make different or more
specific use of proceeds than set forth herein, such use will be described in
the Prospectus Supplement.
CERTAIN RATIOS
The ratios of earnings to fixed charges of the Company for the nine months
ended September 30, 1997, for the years ended December 31, 1996 and 1995 and for
the period from June 23, 1994 to December 31, 1994 were 1.80, 1.66, 1.47 and
1.85, respectively. The ratios of earnings to combined fixed charges and
preferred share dividends of the Company for the nine months ended September 30,
1997, for the years ended December 31, 1996 and 1995 and for the period from
June 23, 1994 to December 31, 1994 were 1.75, 1.66, 1.47 and 1.85, respectively.
The ratios of earnings to fixed charges and the ratios of earnings to
combined fixed charges and preferred share dividends were computed by dividing
earnings by fixed charges and by combined fixed charges and preferred share
dividends, respectively. For the purpose of such computations, earnings have
been calculated by adding fixed charges (excluding capitalized interest) to
income before minority interest and extraordinary items. Fixed charges consist
of interest costs, whether expensed or capitalized, and amortization of deferred
financing costs. For all periods, other than the nine months ended September 30,
1997, the ratios of earnings to fixed charges of the Company are the same as the
ratios of earnings to combined fixed charges and preferred share dividends,
because no preferred shares were outstanding during such periods.
Prior to the completion of the initial public offering of its Common Shares
on June 23, 1994, the operations of the Company were conducted through its
predecessor, Rouse & Associates, and certain of its affiliates (collectively,
the "Rouse Group"). In connection with completion of the initial public
offering, the Company reorganized the Rouse Group and substantially deleveraged
such predecessor's asset base. As a result of these factors, the Company does
not consider information relating to the ratio of earnings to fixed charges, or
the ratio of earnings to combined fixed charges and preferred share dividends,
for the periods prior to the completion of the public offering to be meaningful.
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DESCRIPTION OF DEBT SECURITIES
The Debt Securities may be issued in one or more series under a senior
indenture (the "Senior Indenture") or a subordinated indenture (the
"Subordinated Indenture" and, together with the Senior Indenture, the
"Indentures"), by and between the Operating Partnership and a Trustee (a
"Trustee"), and in the forms that have been filed as exhibits to the
Registration Statement, subject to the terms of such amendments or supplements
thereto as may be entered into from time to time and filed with the Commission
as exhibits to or incorporated by reference in the Registration Statement. The
following summaries of certain provisions of the Indentures do not purport to be
complete and are subject to, and qualified in their entirety by reference to,
all provisions of the Indentures, including the definitions therein of certain
terms. Wherever particular sections or defined terms of the Indentures are
summarized herein or in a Prospectus Supplement, it is intended that such
sections or defined terms (including, unless otherwise indicated herein,
definitions of terms capitalized in such summaries) shall be incorporated herein
or therein by reference. References to sections contained herein are to the
applicable sections of the Indenture. The following sets forth certain general
terms and provisions of the Debt Securities to which any Prospectus Supplement
may relate. The particular terms of the Debt Securities offered by any
Prospectus Supplement and the extent, if any, to which such general provisions
may apply to the Debt Securities so offered, will be described in the Prospectus
Supplement relating to such Debt Securities. The Operating Partnership is
referred to as the "Issuer" for purposes of the following summary.
The Issuer's rights and the rights of its creditors, including the holders
of the Debt Securities offered hereby, to participate in the assets of any
subsidiary upon the latter's liquidation or recapitalization will be subject to
the prior claims of the subsidiary's creditors except, subject to certain
limitations, to the extent that the Issuer may itself be a creditor with
recognized claims against the subsidiary.
GENERAL
The Indentures do not limit the aggregate principal amount of Debt
Securities that may be issued thereunder and provide that Debt Securities may be
issued from time to time in one or more series. The Debt Securities will be
direct obligations, secured or unsecured, of the Issuer. The Debt Securities
issued under the Senior Indenture ("Senior Debt Securities") will rank on a
parity with all other unsubordinated indebtedness of the Issuer. The Debt
Securities issued under the Subordinated Indenture ("Subordinated Debt
Securities") will be subordinated and junior in right of payment to all Senior
Indebtedness of the Issuer, to the extent and in the manner set forth in the
Subordinated Indenture. To the extent applicable to any particular series of
Debt Securities, the terms that are capitalized herein, but are not defined
herein, shall have the respective meanings ascribed to them in the Indentures
applicable to such Debt Securities. Whenever defined terms of the Indentures are
summarized herein or in a Prospectus Supplement, it is intended that such
defined terms shall be incorporated herein or therein by reference. See "Special
Terms Relating to Subordinated Debt Securities."
Reference is made to the Prospectus Supplement relating to the particular
series of Debt Securities offered thereby for the following terms, to the extent
applicable: (a) the title and series of such Debt Securities; (b) any limit on
the aggregate principal amount of such Debt Securities; (c) the price or prices
(expressed as a percentage of the aggregate principal amount thereof) at which
such Debt Securities will be issued; (d) the date or dates on which such Debt
Securities will mature, or the method or methods, if any, by which such date or
dates shall be determined; (e) the rate or rates (which may be fixed or
variable) per annum at which such Debt Securities will bear interest, if any, or
the method or methods, if any, by which such rate or rates are to be determined;
(f) the date or dates from which such interest, if any, on such Debt Securities
will accrue or the method or methods, if any, by which such date or dates are to
be determined, the dates on which such interest, if any, will be payable, the
date on which payment of such interest, if any, will commence and the Regular
Record Dates for such Interest Payment Dates, if any; (g) the dates, if any, on
which, and the price or prices at which the Debt Securities will, pursuant to
any mandatory sinking fund provisions, or may, pursuant to any optional sinking
fund or purchase fund provisions, be redeemed by the Issuer or otherwise, and
the other detailed terms and provisions of any such sinking fund or purchase
fund; (h) the period or periods within which, the price or prices at which, the
currency or currencies, currency unit
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<PAGE> 11
or units or composite currency or currencies in which, and other terms and
conditions upon which, the Debt Securities may, pursuant to any optional
redemption provisions, be redeemed at the option of the Issuer, the holder
thereof or otherwise and the other detailed terms and provisions of such
optional redemption; (i) the extent to which any of the Debt Securities will be
issuable in temporary or permanent global form with or without coupons and, if
so, the identity of the depositary for such global Debt Security, and the manner
in which any interest payable on a temporary or permanent global Debt Security
will be paid; (j) the denomination or denominations in which such Debt
Securities are authorized to be issued; (k) whether any of the Debt Securities
will be issued in bearer form and, if so, any limitations on the issuance or
conversion of such bearer Debt Securities (including exchange for registered
Debt Securities of the same series); (l) information with respect to book-entry
procedures; (m) whether any of the Debt Securities will be issued as Original
Issue Discount Securities (as defined below); (n) the place or places where,
subject to the terms of the related Indenture, the principal of and interest on,
and any other applicable amounts, payable in respect of such Debt Securities
shall be payable, and where such Debt Securities may be presented for
registration of transfer, exchange or conversion and where notices or demands to
or upon the Issuer in respect of such Debt Securities may be served; (o) the
currencies or currency units in which such Debt Securities are issued and in
which the principal of, interest on and additional amounts, if any, in respect
of such Debt Securities will be payable; (p) whether the amount of payments of
principal of, and interest and additional amounts, if any, on such Debt
Securities may be determined with reference to an index, formula or other method
(which index, formula or method may, but need not be, based on one or more
currencies, currency units or composite currencies, commodities, equity indices
or other indices) and the manner in which such amounts shall be determined; (q)
whether the Issuer or a holder may elect payment of the principal of or interest
on such Debt Securities in a currency or currencies, currency unit or units or
composite currency or currencies other than that in which such Debt Securities
are denominated or stated to be payable, the period or periods within which, and
the terms and conditions upon which, such election may be made, and the time and
manner of determining the exchange rate between the currency or currencies,
currency unit or units or composite currency or currencies in which such Debt
Securities are denominated or stated to be payable and the currency, currencies,
currency unit or units or composite currency or currencies in which such Debt
Securities are to be so payable; (r) the identity of the Trustee, and if other
than the applicable Trustee, the identity of each Security Registrar, Paying
Agent and Authenticating Agent and the designation of the initial Exchange Rate
Agent, if any; (s) if applicable, the defeasance of certain obligations by the
Issuer pertaining to Debt Securities of the series; (t) the person to whom any
interest on any registered Debt Security of the series shall be payable, if
other than the person in whose name that Debt Security (or one or more
predecessor Debt Securities) is registered at the close of business on the
Regular Record Date for such interest, the manner in which, or the person to
whom, any interest on any bearer Debt Security of the series shall be payable,
if otherwise than upon presentation and surrender of the coupons appertaining
thereto as they severally mature, and the extent to which, or the manner in
which, any interest payable on a temporary global Debt Security on an Interest
Payment Date will be paid if other than in the manner provided in the related
Indenture; (u) whether and under what circumstances the Issuer will pay
additional amounts (the term "interest," as used in this Prospectus, shall
include such additional amounts) on such Debt Securities to any holder who is
not a United States person (including any modification to the definition of such
term as contained in the related Indenture as originally executed) in respect of
any tax, assessment or governmental charge and, if so, whether the Issuer will
have the option to redeem such Debt Securities rather than pay such additional
amounts (and the terms of any such option); (v) any deletions from,
modifications of or additions to the Events of Default or covenants of the
Issuer with respect to any of such Debt Securities, whether or not such Events
of Default or Covenants are consistent with Events of Default or Covenants set
forth in the Indenture; (w) whether such Debt Securities shall be convertible
into or exchangeable for other Securities and, if so, the terms of any such
conversion or exchange and the terms of such other Securities; (x) any other
terms of the series (which will not be inconsistent with the provisions of the
applicable Indenture); and (y) the terms of any guaranties, which may be
conditional. The Prospectus Supplement relating to any particular guaranty
offered thereby will include any additional terms of such guaranty, including
the rank in priority and any covenants applicable to such guaranty.
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<PAGE> 12
Debt Securities may be issued as "Original Issue Discount Securities" to be
sold at a discount below their principal amount, which discount may be
substantial. In the event of an acceleration of the maturity of any Original
Issue Discount Security, the amount payable to the holder of such Original Issue
Discount Security upon such acceleration will be determined in accordance with
the applicable Prospectus Supplement, the terms of such Debt Security and the
applicable Indenture, but will be an amount less than the amount payable at the
maturity of such Original Issue Discount Security. All material federal income
tax, accounting and other considerations applicable thereto will be described in
the Prospectus Supplement relating thereto.
Except as described below under "Merger, Consolidation or Sale" or as
indicated in the applicable Prospectus Supplement, the Indentures do not contain
any provisions that would limit the ability of the Issuer to incur indebtedness
or that would afford holders of Debt Securities protection in the event of: (i)
a highly leveraged or similar transaction involving the Issuer, the Trust as the
sole general partner of the Issuer or any affiliate of either such party; (ii) a
change of control; or (iii) a reorganization, restructuring, merger or similar
transaction involving the Company that may adversely affect the holders of Debt
Securities. However, certain restrictions on the ownership and transfer of the
Common Shares and the Preferred Shares designed to preserve the Trust's status
as a REIT may act to prevent or hinder a change of control. The Issuer and its
management have no present intention of engaging in a transaction which would
result in the Issuer being highly leveraged or that would result in a change of
control.
REGISTRATION, TRANSFER, PAYMENT AND PAYING AGENT
Unless otherwise indicated in the applicable Prospectus Supplement, each
series of Debt Securities will be issued in registered form only, without
coupons. The Indentures, however, provide that the Issuer may also issue Debt
Securities in bearer form only, or in both registered and bearer form. Debt
Securities issued in bearer form shall have interest coupons attached, unless
issued as Original Issue Discount Securities. Debt Securities in bearer form
shall not be offered, sold, resold or delivered in connection with their
original issuance in the United States or to any United States person (as
defined below) other than through offices located outside the United States of
certain United States financial institutions. As used herein, "United States
person" means any citizen or resident of the United States, any corporation,
partnership or other entity created or organized in or under the laws of the
United States, or any estate or trust, the income of which is subject to United
States federal income taxation regardless of its source, and "United States"
means the United States of America (including the States and the District of
Columbia), its territories, its possessions and other areas subject to its
jurisdiction. Purchasers of Debt Securities in bearer form will be subject to
certification procedures and may be affected by certain limitations under United
States tax laws. Such procedures and limitations will be described in the
Prospectus Supplement relating to the offering of the Debt Securities in bearer
form.
Unless otherwise indicated in the applicable Prospectus Supplement, Debt
Securities will be issued in denominations of $1,000 or any integral multiple
thereof. No service charge will be made for any transfer, exchange or conversion
of the Debt Securities but the Issuer may require payment of a sum sufficient to
cover any tax or other governmental charge payable in connection therewith.
Unless otherwise described in the Prospectus Supplement relating thereto,
the principal, premium, if any, and interest, if any, of or on the Debt
Securities will be payable, transfer of the Debt Securities will be
registerable, and, if applicable, any Convertible Debt Securities (as defined
below) will be convertible, at the office or agency of the Issuer maintained for
that purpose, as the Issuer may designate from time to time, provided that
payments of interest may be made at the option of the Issuer by check mailed to
the address appearing in the Security Register (as defined below) of the person
in whose name such registered Debt Security is registered at the close of
business on the applicable Regular Record Date(s).
Unless otherwise indicated in the applicable Prospectus Supplement, payment
of principal of, premium, if any, and interest, if any, on, Debt Securities in
bearer form will be made payable, subject to any applicable laws and
regulations, at such office outside the United States as specified in the
Prospectus Supplement and as the Issuer may designate from time to time, at the
option of the holder, by check or by transfer to an account maintained by the
payee with a bank located outside the United States. Unless otherwise indicated
in the
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<PAGE> 13
applicable Prospectus Supplement, payment of interest and certain additional
amounts on Debt Securities in bearer form will be made only against surrender of
the coupon relating to the applicable Interest Payment Date. No payment with
respect to any Debt Security in bearer form will be made at any office or agency
of the Issuer in the United States or by check mailed to any address in the
United States or by transfer to an account maintained with a bank located in the
United States.
MERGER, CONSOLIDATION OR SALE
The Issuer may consolidate with, or sell, lease or convey all or
substantially all of its assets to, or merge with or into any other entity,
provided that in any such case: (i) either the Issuer shall be the continuing
entity, or the successor entity shall be an entity organized and existing under
the laws of the United States or a State thereof and such successor entity shall
expressly assume the due and punctual payment of the principal of (and premium
or Make-Whole Amount, if any) and any interest on all of any series of Debt
Securities, according to their tenor, and the due and punctual performance and
observance of all of the covenants and conditions of the Indentures to be
performed by the Issuer by supplemental indenture, complying with the provisions
of the Indentures relating to supplemental indentures, satisfactory to the
Trustee, executed and delivered to the Trustee by such entity; (ii) immediately
after giving effect to such transaction and treating any indebtedness which
becomes an obligation of the Issuer or any Subsidiary as a result thereof as
having been incurred by the Issuer or such Subsidiary at the time of such
transaction, no Event of Default, and no event which, after notice or the lapse
of time, or both, would become an Event of Default, shall have occurred and be
continuing; and (iii) an officer's certificate and legal opinion covering such
conditions shall be delivered to the Trustee (Sections 801 and 803).
CERTAIN COVENANTS
The Indentures contain various covenants including the following:
Existence. Except as described under "Merger, Consolidation or Sale,"
above, the Issuer will do or cause to be done all things necessary to preserve
and keep in full force and effect its existence, rights (by partnership
agreement and statute) and franchises; provided, however, that the Issuer shall
not be required to preserve any right or franchise if it determines that the
preservation thereof is no longer desirable in the conduct of its business and
that the loss thereof is not disadvantageous in any material respect to the
Holders of Debt Securities (Section 1005).
Maintenance of Properties. The Issuer will cause all of its material
properties used or useful in the conduct of its business or the business of any
Subsidiary (as defined below) to be maintained and kept in good condition,
repair and working order and supplied with all necessary equipment and will
cause to be made all necessary repairs, renewals, replacements, betterments and
improvements thereof, all as in the judgment of the Issuer may be necessary so
that the business carried on in connection therewith may be properly and
advantageously conducted at all times; provided, however, that the Issuer and
its Subsidiaries shall not be prevented from selling or otherwise disposing of
for value their respective properties in the ordinary course of business
(Section 1006).
Insurance. The Issuer will, and will cause each of its Subsidiaries to,
keep all of its insurable properties insured against loss or damage at least
equal to their then full insurable value with insurers of recognized
responsibility and having an A.M. Best policy holder's rating of not less than
A-V (Section 1007).
Payment of Taxes and Other Claims. The Issuer will pay or discharge or
cause to be paid or discharged, before the same shall become delinquent: (i) all
taxes, assessments and governmental charges levied or imposed upon it or any
Subsidiary or upon the income, profits or property of the Issuer or any
Subsidiary; and (ii) all lawful claims for labor, materials and supplies which,
if unpaid, might by law become a lien upon the property of the Issuer or any
Subsidiary; provided, however, that the Issuer shall not be required to pay or
discharge or cause to be paid or discharged any such tax, assessment, charge or
claim whose amount, applicability or validity is being contested in good faith
by appropriate proceedings or for which the Issuer has set apart and maintains
an adequate reserve (Section 1008).
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<PAGE> 14
Provision of Financial Information. Whether or not the Issuer is subject
to Section 13 or 15(d) of the Exchange Act, the Issuer will, to the extent
permitted under the Exchange Act, file with the Commission the annual reports,
quarterly reports and other documents which the Issuer would have been required
to file with the Commission pursuant to such Sections 13 or 15(d) if the Issuer
were so subject (the "Financial Information"), such documents to be filed with
the Commission on or prior to the respective dates (the "Required Filing Dates")
by which the Issuer would have been required so to file such documents if the
Issuer were so subject. The Issuer also will in any event (x) within 15 days of
each Required Filing Date: (i) transmit by mail to all Holders of Debt
Securities, as their names and addresses appear in the Security Register,
without cost to such Holders, copies of the Financial Information; and (ii) file
with the Trustee copies of the Financial Information, and (y) if filing such
documents by the Issuer with the Commission is not permitted under the Exchange
Act, promptly upon written request and payment of the reasonable cost of
duplication and delivery, supply copies of such documents to any prospective
Holder (Section 1009).
As used in the Indentures and the description thereof herein:
"Security Register" means a register maintained at a place of payment for
the registration and transfer of the Debt Securities.
"Subsidiary" means a corporation, partnership or limited liability company,
a majority of the outstanding voting stock, partnership interests or membership
interests, as the case may be, of which is owned or controlled, directly or
indirectly, by the Company or by one or more Subsidiaries of the Company.
Liberty Property Development Corp. and Liberty Property Development Corp.-II are
Subsidiaries for purposes of this definition. For the purposes of this
definition, "voting stock" means stock having the voting power for the election
of directors, general partners, managers or trustees, as the case may be,
whether at all times or only so long as no senior class of stock has such voting
power by reason of any contingency.
ADDITIONAL COVENANTS AND/OR MODIFICATION TO THE COVENANTS DESCRIBED ABOVE
Any additional covenants of the Issuer and/or modifications to the
covenants described above with respect to any Debt Securities or series thereof,
including any covenants relating to limitations on incurrence of indebtedness or
other financial covenants, will be set forth in the applicable Indenture or an
indenture supplemental thereto and described in the Prospectus Supplement
relating thereto.
EVENTS OF DEFAULT, NOTICE AND WAIVER
The term "Event of Default," when used in the Indenture, means any one of
the following events (whatever the reason for such Event of Default and whether
or not it shall be voluntary or involuntary or be effected by operation of law
or pursuant to any judgment, decree or order of any court or any order, rule or
regulation of any administrative or governmental body): (i) default in the
payment of any interest upon any ser Debt Securities issued thereunder when such
interest becomes due and payable, and continuance of such default for a period
of 30 days; (ii) default in the payment of the principal of (or premium or
Make-Whole Amount, if any, on) any Debt Security when it becomes due and payable
at its Maturity Date or by declaration of acceleration, notice of redemption or
otherwise; (iii) default in the performance, or breach, of any covenant or
warranty of the Issuer in the Indentures with respect to any Debt Security
(other than a covenant or warranty a default in whose performance or whose
breach is elsewhere in the relevant section of the Indentures specifically dealt
with), and continuance of such default or breach for a period of 60 days after
there has been given, by registered or certified mail, to the Issuer by the
Trustee, or to the Issuer and the Trustee by the Holders of at least 25% in
principal amount of the Debt Securities of such series, a written notice
specifying such default or breach and requiring it to be remedied and stating
that such notice is a "Notice of Default" under the Indenture; (iv) a default
under any bond, debenture, note or other evidence of indebtedness of the Issuer,
or under any mortgage, indenture or other instrument of the Issuer under which
there may be issued or by which there may be secured any indebtedness of the
Issuer (or by any Subsidiary of the Issuer, the repayment of which the Issuer
has guaranteed or for which the Issuer is directly responsible or liable as
obligor or guarantor on a full recourse basis), whether such indebtedness now
exists or shall hereafter be created, which default shall constitute a failure
to pay an aggregate principal amount exceeding
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<PAGE> 15
$10,000,000 of such indebtedness when due and payable after the expiration of
any applicable grace period with respect thereto and shall have resulted in such
indebtedness in an aggregate principal amount exceeding $10,000,000 becoming or
being declared due and payable prior to the date on which it would otherwise
have become due and payable, without such indebtedness having been discharged,
or such acceleration having been rescinded or annulled, within a period of 10
days after there shall have been given, by registered or certified mail, to the
Issuer by the Trustee, or to the Issuer and the Trustee by the Holders of at
least 10% in principal amount of the outstanding Debt Securities, a written
notice specifying such default and requiring the Issuer to cause such
indebtedness to be discharged or cause such acceleration to be rescinded or
annulled and stating that such notice is a "Notice of Default" under the
Indenture; or (v) certain events of bankruptcy, insolvency or reorganization
(Section 501).
If an Event of Default under the Indentures with respect to any series of
Debt Securities at the time outstanding occurs and is continuing (other than
Events of Default arising in connection with certain events of bankruptcy,
insolvency or reorganization), then in every such case the Trustee or the
Holders of not less than 25% of the principal amount of the outstanding Debt
Securities of such series may declare the principal amount and premium (if any)
and accrued interest on all the Debt Securities of such series to be due and
payable immediately by written notice thereof to the Issuer (and to the Trustee
if given by the Holders). However, at any time after such a declaration of
acceleration with respect to the Debt Securities has been made, but before a
judgment or decree for payment of the money due has been obtained by the
Trustee, the Holders of not less than a majority in principal amount of the
outstanding Debt Securities of such series may rescind and annul such
declaration and its consequences if (a) the Issuer shall have deposited with the
Trustee all required payments of the principal of (and premium or Make-Whole
Amount, if any) and interest on the Debt Securities of such series, plus certain
fees, expenses, disbursements and advances of the Trustee and (b) all Events of
Default with respect to the Debt Securities of such series, other than the
non-payment of principal of (or premium or Make-Whole Amount, if any) or
interest on the Debt Securities of such series which has become due solely by
such declaration of acceleration, have been cured or waived as provided in the
Indenture. In the event of a declaration of acceleration because an Event of
Default as described in clause (iv) of the preceding paragraph has occurred and
is continuing, such declaration shall be automatically rescinded and annulled if
the default triggering such Event of Default (along with any other defaults
caused thereby) shall be remedied or cured by the Issuer or its relevant
Subsidiary or waived by the holders of such indebtedness within 60 days after
such declaration of acceleration. Upon the occurrence of an Event of Default
arising in connection with certain events of bankruptcy, insolvency or
reorganization, the principal of, premium, if any, and accrued interest on all
Debt Securities of such series then outstanding shall immediately become due and
payable without any declaration or other act on the part of the Trustee or any
Holder (Section 502).
The Trustee will be required to give notice to the Holders of the Debt
Securities of such series within 90 days of the occurrence of a default under
the Indentures unless such default shall have been cured or waived; provided,
however, that the Trustee may withhold notice to the Holders of the Debt
Securities of such series of any default (except a default in the payment of the
principal of (or premium or Make-Whole Amount, if any) or interest on the Debt
Securities of such series) if and so long as specified responsible officers of
the Trustee determine in good faith that the withholding of such notice is in
the interest of such Holders; provided, that in the case of any default or
breach of a covenant or warranty under the Indentures as described in clause
(iii) of the first paragraph of this section "Events of Default, Notice and
Waiver," no such notice to Holders shall be given until at least 60 days after
the occurrence thereof. For purposes of this paragraph, the term "default" means
any event which is, or after notice or lapse of time or both would become, an
Event of Default under the Indentures with respect to the Debt Securities of
such series (Section 601).
The Indentures provide that no Holder of Debt Securities may institute any
proceedings, judicial or otherwise, with respect to the Indentures or for any
remedy thereunder, except in the case of failure of the Trustee, for 60 days, to
act after it has received a written request to institute proceedings in respect
of an Event of Default from the Holders of not less than 25% in principal amount
of the outstanding Debt Securities of any series, as well as an offer of
indemnity reasonably satisfactory to it (Section 507). Such provision will not
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<PAGE> 16
prevent, however, any Holder of Debt Securities from instituting suit for the
payment of the principal of (and premium or Make-Whole Amount, if any) and
interest on the Debt Securities of such series on the respective due dates
thereof (Section 508).
Defaults (except a default in the payment of principal of (or premium or
Make-Whole Amount, if any) or interest on the Debt Securities of any series or
default with respect to a covenant or provision which cannot be modified under
the terms of the Indentures without the consent of each Holder affected) may be
waived by the Holders of not less than a majority of principal amount of the
then outstanding Debt Securities of such series, upon the conditions provided in
the Indentures (Section 513).
Subject to provisions in the Indentures relating to its duties in case of
default, the Trustee is under no obligation to exercise any of its rights or
powers under the Indentures at the request or direction of any Holders of any
series of Debt Securities then outstanding under the Indenture, unless such
Holders shall have offered to the Trustee reasonable security or indemnity
(Section 602). The Holders of not less than a majority in principal amount of
the outstanding Debt Securities of any series shall have the right to direct the
time, method and place of conducting any proceeding for any remedy available to
the Trustee or exercising any trust or power conferred upon such Trustee.
However, the Trustee may refuse to follow any direction which is in conflict
with any law or the Indenture, which may involve the Trustee in personal
liability or which may be unduly prejudicial to the Holders of the Debt
Securities of such series not joining therein and the Trustee may take any other
action it deems proper not inconsistent with such direction (Section 512).
Within 120 days after the close of each fiscal year, the Issuer will be
required to deliver to the Trustee a certificate, signed by one of several
specified officers of the Issuer, stating whether or not such officer has
knowledge of any default under the Indentures and, if so, specifying each such
default and the nature and status thereof (Section 1010).
MODIFICATION OF THE INDENTURE
Modifications and amendments of the Indentures may be made only with the
consent of the Holders of not less than a majority in principal amount of all of
the Debt Securities issued under the Indenture; provided, however, that no such
modification or amendment may, without the consent of the Holder of each Debt
Security affected thereby, (a) change the stated maturity of the principal of
(or premium or Make-Whole Amount, if any, on), or any installment of interest
on, any such Debt Security; (b) reduce the principal amount of, or the rate or
amount of interest on, or any premium payable on redemption of Debt Securities,
or adversely affect any right of repayment of the Holder of any Debt Securities;
(c) change the place of payment, or the coin or currency, for payment of
principal or premium, if any, or interest on the Debt Securities; (d) impair the
right to institute suit for the enforcement of any payment on or with respect to
the Debt Securities on or after the stated maturity of any such Debt Security;
(e) reduce the above-stated percentage in principal amount of outstanding Debt
Securities the consent of whose Holders is necessary to modify or amend the
Indenture, for any waiver with respect to the Debt Securities, or to waive
compliance with certain provisions of the Indentures or certain defaults and
consequences thereunder or to reduce the quorum or voting requirements set forth
in the Indenture; or (f) modify any of the foregoing provisions or any of the
provisions relating to the waiver of certain past defaults or certain covenants,
except to increase the required percentage to effect such action or to provide
that certain other provisions of the Indentures may not be modified or waived
without the consent of the Holder of each Debt Security (Section 902).
The Holders of not less than a majority in principal amount of the Debt
Security have the right to waive compliance by the Issuer with certain covenants
in the Indentures (Section 1012).
Modifications and amendments of the Indentures may be permitted to be made
by the Issuer and the Trustee without the consent of any Holder for any of the
following purposes: (i) to evidence the succession of another person to the
Issuer as obligor under the Indenture; (ii) to add to the covenants of the
Issuer for the benefit of the Holders of Debt Securities or to surrender any
right or power conferred upon the Issuer in the Indenture; (iii) to add Events
of Default for the benefit of the Holders of Debt Securities; (iv) to add or
change any provisions of the Indentures to facilitate the issuance of, or to
liberalize certain terms of, Debt Securities in bearer form, or to permit or
facilitate the issuance of Debt Securities in uncertificated form,
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provided that such action shall not adversely affect the interests of the
Holders of Debt Securities in any material respect; (v) to change or eliminate
any provisions of the Indenture, provided that any such change or elimination
shall become effective only when the outstanding Debt Securities are not
entitled to the benefit of such provision; (vi) to secure the Debt Securities;
(vii) to establish the form or terms of the Debt Securities and any related
coupons as permitted by the Indenture; (viii) to evidence and provide for the
acceptance of appointment under the Indentures by a successor Trustee with
respect to the Debt Securities or facilitate the administration of the trust
under the Indentures by more than one Trustee; (ix) to cure any ambiguity,
defect or inconsistency in the Indenture, provided that such action is not
inconsistent with the provisions of the Indentures and shall not adversely
affect the interests of Holders of Debt Securities in any material respect; or
(x) to supplement any of the provisions of the Indentures to the extent
necessary to permit or facilitate defeasance and discharge of Debt Securities,
provided that such action shall not adversely affect the interests of the
Holders of Debt Securities in any material respect (Section 901).
The Indentures contain provisions for convening meetings of the Holders of
the Debt Securities of any series (Section 1501). A meeting will be permitted to
be called at any time by the Trustee, and also, upon request, by the Issuer or
the Holders of at least 10% in principal amount of the outstanding Debt
Securities of such series, in any such case upon notice given as provided in the
Indenture. Except for any consent that must be given by the Holder of each Debt
Security of such series affected by certain modifications and amendments of the
Indenture, any resolution presented at a meeting or adjourned meeting duly
reconvened at which a quorum is present may be adopted by the affirmative vote
of the Holders of a majority in principal amount of the outstanding Debt
Securities of such series; provided, however, that, except as referred to above,
any resolution with respect to any request, demand, authorization, direction,
notice, consent, waiver or other action that may be made, given or taken by the
Holders of a specific percentage, which is less than a majority, in principal
amount of the outstanding Debt Securities of a series may be adopted at a
meeting or adjourned meeting duly reconvened and at which a quorum is present by
the affirmative vote of the Holders of such specified percentage in principal
amount of the outstanding Debt Securities of that series. Any resolution passed
or decision taken at any meeting of Holders of the Debt Securities of any series
duly held in accordance with the Indentures will be binding on all Holders of
Debt Securities of that series. The quorum at any meeting called to adopt a
resolution, and at any reconvened meeting, will be persons entitled to vote a
majority in principal amount of the outstanding Debt Securities of a series;
provided, however, that if any action is to be taken at such meeting with
respect to a consent or waiver which may be given by the Holders of not less
than a specified percentage in principal amount of the outstanding Debt
Securities of a series, the persons entitled to vote such specified percentage
in principal amount of the outstanding Debt Securities of such series will
constitute a quorum (Section 1504).
Notwithstanding the foregoing provisions, the Indentures provide that if
any action is to be taken at a meeting of Holders of Debt Securities of any
series with respect to any request, demand, authorization, direction, notice,
consent, waiver and other action that the Indentures expressly provide may be
made, given or taken by the Holders of a specified percentage in principal
amount of all outstanding Debt Securities affected thereby, or the Holders of
such series and the other series: (i) there shall be no minimum quorum
requirement for such meeting; and (ii) the principal amount of the outstanding
Debt Securities of such series that vote in favor of such request, demand,
authorization, direction, notice, consent, waiver or other action shall be taken
into account in determining whether such request, demand, authorization,
direction, notice, consent, waiver or other action has been made, given or taken
under the Indenture.
DISCHARGE, DEFEASANCE AND COVENANT DEFEASANCE
The Issuer will be permitted under the Indentures to discharge certain
obligations to the Holders of any series of Debt Securities that have not
already been delivered to the Trustee for cancellation by irrevocably depositing
with the Trustee, in trust, funds in the currency in which the Debt Securities
of such series are payable in an amount sufficient to pay the entire
indebtedness on such Debt Securities in respect of principal (and premium or
Make-Whole Amount, if any) and interest to the date of such deposit (if such
Debt Securities have become due and payable) or to the stated Maturity Date or
redemption date, as the case may be.
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The Indentures will also provide that the Issuer may elect either (a) to
defease and be discharged from any and all obligations with respect to such Debt
Securities other than the obligations to register the transfer or exchange of
such Debt Securities, to replace temporary or mutilated, destroyed, lost or
stolen Debt Securities, to maintain an office or agency in respect of such Debt
Securities and to hold moneys for payment in trust ("defeasance") (Section 1402)
or (b) to be released from its obligations with respect to such Debt Securities
under certain sections of Article Ten of the Indentures relating to limitations
on the incurrence of Debt, maintenance of Unencumbered Total Asset Value,
existence of the Issuer, maintenance of the Issuer's properties, insurance,
payment of taxes and other claims and provision of financial information and any
omission to comply with such obligations shall not constitute an Event of
Default with respect to such Debt Securities ("covenant defeasance") (Section
1403), in either case upon the irrevocable deposit by the Issuer with the
Trustee, in trust, of an amount, in the currency in which such Debt Securities
are payable at stated maturity, or Government Obligations (as defined below), or
both, applicable to such Debt Securities which through the scheduled payment of
principal and interest in accordance with their terms will provide money in an
amount sufficient without reinvestment to pay the principal of (and premium or
Make-Whole Amount, if any) and interest on such Debt Securities or analogous
payments thereon, on the scheduled due dates therefor.
Such a trust may only be established if, among other things, the Issuer has
delivered to the Trustee an opinion of counsel (as specified in the Indenture)
to the effect that the Holders of such Debt Securities will not recognize
income, gain or loss for federal income tax purposes as a result of such
defeasance or covenant defeasance and will be subject to federal income tax on
the same amounts, in the same manner and at the same times as would have been
the case if such defeasance or covenant defeasance had not occurred, and such
opinion of counsel, in the case of defeasance, will be required to refer to and
be based upon a ruling of the Internal Revenue Service or a change in applicable
federal income tax law occurring after the date of the Indentures (Section
1404).
"Government Obligations" means securities which are: (i) direct obligations
of the United States of America for the payment of which its full faith and
credit is pledged; or (ii) obligations of a Person controlled or supervised by
and acting as an agency or instrumentality of the United States of America, the
payment of which is unconditionally guaranteed as a full faith and credit
obligation by the United States of America, which, in either case, are not
callable or redeemable at the option of the issuer thereof, and shall also
include a depository receipt issued by a bank or trust Issuer as custodian with
respect to any such Government Obligation or a specific payment of interest on
or principal of any such Government Obligation held by such custodian for the
account of the holder of a depository receipt, provided that (except as required
by law) such custodian is not authorized to make any deduction from the amount
payable to the holder of such depository receipt from any amount received by the
custodian in respect of the Government Obligation or the specific payment of
interest on or principal of the Government Obligation evidenced by such
depository receipt.
In the event the Issuer effects covenant defeasance with respect to any
Debt Securities and such Debt Securities are declared due and payable because of
the occurrence of any Event of Default other than the Event of Default described
in clause (iii) under "Events of Default, Notice and Waiver" with respect to
certain specified sections of Article Ten of the Indentures (which sections
would no longer be applicable to such Debt Securities as a result of such
covenant defeasance) the amount in such currency in which such Debt Securities
are payable, and Government Obligations on deposit with the Trustee, will be
sufficient to pay amounts due on such Debt Securities at the time of their
stated maturity but may not be sufficient to pay amounts due on such Debt
Securities at the time of the acceleration resulting from such Default. However,
the Issuer would remain liable to make payment of such amounts due at the time
of acceleration.
OUTSTANDING DEBT SECURITIES
Unless otherwise indicated in the applicable Prospectus Supplement, in
determining whether the holders of the requisite principal amount of Outstanding
Debt Securities have given any request, demand, authorization, direction,
notice, consent or waiver under the Indentures: (a) the portion of the principal
amount of an Original Issue Discount Security that shall be deemed to be
Outstanding for such purposes shall be that portion of the principal amount
thereof that could be declared to be due and payable pursuant to the terms of
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such Original Issue Discount Security as of the date of such determination; (b)
the principal amount of any Indexed Security shall be the principal face amount
of such Indexed Security determined on the date of its original issuance; and
(c) any Debt Security owned by the Issuer or any obligor on such Debt Security,
or any Affiliate of the Issuer or such other obligor, shall be deemed not to be
outstanding.
MODIFICATION AND WAIVER
The Issuer may amend the Indentures with the written consent of the holders
of a majority in principal amount of the respective Debt Securities outstanding
thereunder. However, without the consent of each Holder affected, an amendment
may not: (a) reduce the amount of Debt Securities whose holders must consent to
an amendment; (b) reduce the rate or change the time of payment of interest on
any Debt Securities; (c) reduce the principal of or change the fixed maturity of
Debt Securities; (d) make any Debt Securities payable in money other than that
stated in the definitive notes representing such Debt Securities; (e) change the
provisions of the respective Indenture regarding the right of a majority of the
Holders to waive defaults under such Indenture or impair the right of any Holder
to institute suit for the enforcement of any payment of principal and interest
on the Debt Securities on and after their respective due dates; (f) make any
change that adversely affects the right to convert or exchange any Convertible
Debt Securities; or (g) make any change to the provisions of the respective
Indenture regarding subordination and seniority of the Debt Securities that
adversely affects the rights of any Holders.
SPECIAL TERMS RELATING TO SUBORDINATED DEBT SECURITIES
Upon any distribution of assets of the Issuer resulting from any
dissolution, winding up, liquidation or reorganization, payments on Subordinated
Debt Securities are to be subordinated, to the extent provided in the
Subordinated Indenture, in right of payment to the prior payment in full of all
Senior Indebtedness, but the obligation of the Issuer to make payments on the
Subordinated Debt Securities will not otherwise be affected. No payment on
Subordinated Debt Securities may be made at any time when there is a default in
the payment of any principal, premium, interest, Additional Amounts or sinking
fund of or on any Senior Indebtedness. Holders of Subordinated Debt Securities
will be subrogated to the rights of holders of Senior Indebtedness to the extent
of payments made on Senior Indebtedness upon any distribution of assets in any
such proceedings out of the distributive shares of Subordinated Debt Securities.
By reason of such subordination, in the event of a distribution of assets upon
insolvency, certain creditors of the Issuer may recover more, ratably, than
holders of Subordinated Debt Securities.
The Prospectus Supplement relating to any Subordinated Debt Securities will
set forth the aggregate amount of Senior Indebtedness outstanding as of the most
recent date practicable and any limitations on the issuance of additional Senior
Indebtedness. As of the date of this Prospectus, there is no limitation on the
amount of Senior Indebtedness that may be issued by the Trust or the Operating
Partnership.
CONVERSION OR EXCHANGE
The holders of Debt Securities of a specified series that are convertible
into or exchangeable for other Securities ("Convertible Debt Securities") will
be entitled at certain times specified in the Prospectus Supplement relating to
such Convertible Debt Securities, subject to prior redemption, exchange,
repayment or repurchase, to convert or exchange any Convertible Debt Securities
of such series into such other Securities, at the conversion price set forth in
such Prospectus Supplement, subject to adjustment and to such other terms as are
set forth in such Prospectus Supplement. Any such conversion or exchange of
Convertible Debt Securities will be further subject to the applicable terms and
conditions set forth in the Indentures, as supplemented or amended from time to
time.
OPTIONAL REDEMPTION
The Debt Securities of any series may be redeemed at any time at the option
of the Issuer, in whole or from time to time in part, at a redemption price
equal to the sum of: (i) the principal amount of the Debt
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Securities being redeemed plus accrued interest thereon to the redemption date;
and (ii) the Make-Whole Amount (as defined below), if any, with respect to such
Debt Securities (the "Redemption Price").
If notice of redemption has been given as provided in the Indentures and
funds for the redemption of any Debt Securities called for redemption shall have
been made available on the redemption date referred to in such notice, such Debt
Securities will cease to bear interest on the date fixed for such redemption
specified in such notice and the only right of the Holders of the Debt
Securities from and after the redemption date will be to receive payment of the
Redemption Price upon surrender of such Debt Securities in accordance with such
notice.
Notice of any optional redemption of any Debt Securities will be given to
Holders at their addresses, as shown in the security register for the Debt
Securities, not more than 60 nor less than 30 days prior to the date fixed for
redemption. The notice of redemption will specify, among other items, the
Redemption Price and principal amount of the Debt Securities held by such Holder
to be redeemed.
If all or less than all of the Debt Securities of any series are to be
redeemed at the option of the Issuer, the Issuer will notify the Trustee at
least 45 days prior to giving notice of redemption (or such shorter period as
may be satisfactory to the Trustee) of the aggregate principal amount of Debt
Securities to be redeemed, if less than all of the Debt Securities of any series
are to be redeemed, and their redemption date. The Trustee shall select, in such
manner as it shall deem fair and appropriate, no less than 60 days prior to the
date of redemption, the Debt Securities to be redeemed in whole or in part.
Neither the Issuer nor the Trustee shall be required to: (i) issue,
register the transfer of or exchange Debt Securities during a period beginning
at the opening of business 15 days before any selection of Debt Securities to be
redeemed and ending at the close of business on the day of mailing of the
relevant notice of redemption; (ii) register the transfer of or exchange any
Debt Securities, or portion thereof, called for redemption, except the
unredeemed portion of any Debt Securities being redeemed in part; or (iii)
issue, register the transfer of or exchange any Debt Securities that has been
surrendered for repayment at the option of the Holder, except the portion, if
any, of such Debt Securities not to be so repaid (Section 305).
As used herein:
"Make-Whole Amount" means, in connection with any optional redemption of
any Debt Securities, the excess, if any, of: (i) the aggregate present value as
of the date of such redemption of each dollar of principal being redeemed and
the amount of interest (exclusive of interest accrued to the date of redemption)
that would have been payable in respect of each such dollar if such redemption
had not been made, determined by discounting, on a semi-annual basis, such
principal and interest at the Reinvestment Rate (as defined below) (determined
on the third Business Day preceding the date notice of such redemption is given)
from the respective dates on which such principal and interest would have been
payable if such redemption had not been made, to the date of redemption, over
(ii) the aggregate principal amount of the Debt Securities being redeemed.
"Reinvestment Rate" means the yield on Treasury securities at a constant
maturity corresponding to the remaining life (as of the date of redemption, and
rounded to the nearest month) to stated maturity of the principal being redeemed
(the "Treasury Yield"), plus 0.25%, unless such percentage is otherwise provided
in the applicable Pricing Supplement. For purposes hereof, the Treasury Yield
shall be equal to the arithmetic mean of the yields published in the Statistical
Release (as defined below) under the heading "Week Ending" for "U.S. Government
Securities -- Treasury Constant Maturities" with a maturity equal to such
remaining life; provided, that if no published maturity exactly corresponds to
such remaining life, then the Treasury Yield shall be interpolated or
extrapolated on a straight-line basis from the arithmetic means of the yields
for the next shortest and next longest published maturities. For purposes of
calculating the Reinvestment Rate, the most recent Statistical Release published
prior to the date of determination of the Make-Whole Amount shall be used. If
the format or content of the Statistical Release changes in a manner that
precludes determination of the Treasury Yield in the above manner, then the
Treasury Yield shall be determined in the manner that most closely approximates
the above manner, as reasonably determined by the Issuer.
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"Statistical Release" means the statistical release designated "H.15(519)"
or any successor publication which is published weekly by the Federal Reserve
System and which reports yields on actively traded United States government
securities adjusted to constant maturities, or, if such statistical release is
not published at the time of any determination under the Indenture, then such
other reasonably comparable index which shall be designated by the Issuer.
GLOBAL DEBT SECURITIES
The Debt Securities of a series may be issued in whole or in part in the
form of one or more global securities ("Global Debt Securities") that will be
deposited with, or on behalf of, a depositary (the "Depositary") identified in
the Prospectus Supplement relating to such series. Global Debt Securities may be
issued in either registered or bearer form and in either temporary or permanent
form. Unless and until it is exchanged in whole or in part for individual
certificates evidencing Debt Securities in definitive form represented thereby,
a Global Debt Security may not be transferred except as a whole by the
Depositary for such Global Debt Security to a nominee of such Depositary or by a
nominee of such Depositary to such Depositary or another nominee of such
Depositary or by such Depositary or any such nominee to a successor of such
Depositary or a nominee of such successor.
The specific terms of the depositary arrangement with respect to a series
of Global Debt Securities, and certain limitations and restrictions relating to
a series of bearer Global Debt Securities, will be described in the Prospectus
Supplement relating to such series.
BOOK-ENTRY SYSTEM
Certain series of Debt Securities may be represented by a single fully
registered note in book-entry form (each, a "Global Note") registered in the
name of a nominee of The Depository Trust Company ("DTC"). The following are
summaries of certain rules and operating procedures of DTC that affect the
payment of principal and interest and transfers in the Global Notes. Upon
issuance, each series of Debt Securities that is represented by a Global Note
will be issued only in the form of a Global Note which will be deposited with,
or on behalf of, DTC and registered in the name of Cede & Co., as nominee of
DTC. Unless and until it is exchanged in whole or in part for Debt Securities of
such series in definitive form under the limited circumstances described below,
a Global Note may not be transferred except as a whole: (i) by DTC to a nominee
of DTC; (ii) by a nominee of DTC to DTC or another nominee of DTC; or (iii) by
DTC or any such nominee to a successor or a nominee of such successor.
Ownership of beneficial interests in a Global Note will be limited to
persons that have accounts with DTC for such Global Note ("participants") or
persons that may hold interests through participants. Upon the issuance of a
Global Note, DTC will credit, on its book-entry registration and transfer
system, the participants' accounts with the respective principal amounts of the
Debt Securities represented by such Global Note beneficially owned by such
participants. Ownership of beneficial interests in such Global Notes will be
shown on, and the transfer of such ownership interests will be effected only
through, records maintained by DTC (with respect to interests of participants)
and on the records of participants (with respect to interests of persons holding
through participants). The laws of some states may require that certain
purchasers of securities take physical delivery of such securities in definitive
form. Such laws may limit or impair the ability to own, transfer or pledge
beneficial interests in the Global Notes.
So long as DTC or its nominee is the registered owner of a Global Note, DTC
or its nominee, as the case may be, will be considered the sole owner or Holder
of the Debt Securities represented by such Global Note for all purposes under
the Indenture. Except as set forth below, owners of beneficial interests in a
Global Note will not be entitled to have Debt Securities represented by such
Global Note registered in their names, will not receive or be entitled to
receive physical delivery of such Debt Securities in certified form and will not
be considered the registered owners or Holders thereof under the Indenture.
Accordingly, each person owning a beneficial interest in a Global Note must rely
on the procedures of DTC and, if such person is not a participant, on the
procedures of the participant through which such person owns its interest, to
exercise any rights of a Holder under the Indenture. The Issuer understands that
under existing industry practices, if the
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Issuer requests any action of Holders or if an owner of a beneficial interest in
a Global Note desires to give or take any action that a Holder is entitled to
give or take under the Indenture, DTC would authorize the participants holding
the relevant beneficial interests to give or take such action, and such
participants would authorize beneficial owners owning through such participants
to give or take such action or would otherwise act upon the instructions of
beneficial owners holding through them.
Principal and interest payments on interests represented by a Global Note
will be made to DTC or its nominee, as the case may be, as the registered owner
of such Global Note. None of the Issuer, the Trustee or any agent of the Trustee
will have any responsibility or liability for any aspect of the records relating
to or payment made on account of beneficial ownership interests in the Global
Notes or for maintaining, supervising or reviewing any records relating to such
beneficial ownership interests.
The Issuer expects that DTC, upon receipt of any payment of principal or
interest in respect of a Global Note, will immediately credit participants'
accounts with payments in amounts proportionate to their respective beneficial
interests in such Global Note as shown on the records of DTC. The Issuer also
expects that payments by participants to owners of beneficial interests in the
Global Notes held through such participants will be governed by standing
customer instructions and customary practice, as is now the case with securities
held for the accounts of customers in bearer form or registered in "street
name," and will be the responsibility of such participants.
If DTC is at any time unwilling or unable to continue as depository for
Debt Securities represented by a Global Note and the Issuer fails to appoint a
successor depository registered as a clearing agency under the Exchange Act
within 90 days, the Issuer will issue such Debt Securities in definitive from in
exchange for the Global Notes. Any Debt Securities issued in definitive form in
exchange for the Global Notes will be registered in such name or names, and will
be issued in denominations of $1,000 and such integral multiples thereof, as DTC
shall instruct the Trustee. It is expected that such instructions will be based
upon directions received by DTC from participants with respect to ownership of
beneficial interests in the Global Notes.
DTC has advised the Issuer of the following information regarding DTC. DTC
is a limited-purpose trust company organized under the Banking Law of the State
of New York, a member of the Federal Reserve System, a "clearing corporation"
within the meaning of the New York Uniform Commercial Code, and a "clearing
agency" registered pursuant to the provisions of Section 17A of the Exchange
Act. DTC was created to hold securities of its participants and to facilitate
the clearance and settlement of transactions among its participants in such
securities through electronic book-entry changes in accounts of the
participants, thereby eliminating the need for physical movement of securities
certificates. DTC's participants include securities brokers and dealers, banks,
trust companies, clearing corporations and certain other organizations, some of
which (and/or their representatives) own DTC. Access to the DTC book-entry
system is also available to others, such as banks, brokers and dealers and trust
companies that clear through or maintain a custodial relationship with a
participant, either directly or indirectly.
DESCRIPTION OF PREFERRED SHARES
GENERAL
The rights, preferences, privileges and restrictions of the Preferred
Shares in respect of which this Prospectus is delivered shall be described in
the Prospectus Supplement relating to such Preferred Shares. Among the terms of
the Preferred Shares which may be specified in the related Prospectus Supplement
are the following: (a) the annual dividend rate, if any, or the means by which
such dividend rate may be calculated (including without limitation the
possibility that the rate of such dividends may bear an inverse relationship to
some index or standard) and the date or dates from which such dividends shall
accrue and the date or dates on which such dividends shall be paid and whether
such dividends shall be cumulative; (b) the price at which and the terms and
conditions on which the shares of such series of Preferred Shares may be
redeemed, including the period of time during which such shares may be redeemed,
any premium to be paid over and above the par value of such Preferred Shares,
whether and to what extent accumulated dividends on such Preferred Shares will
be paid upon the redemption of such shares; (c) the liquidation preference, if
any,
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over and above the par value of such Preferred Shares and whether and to what
extent the holders of such shares shall be entitled to accumulated dividends in
the event of the voluntary or involuntary liquidation, dissolution or winding-up
of the affairs of the Company; (d) whether the Preferred Shares shall be subject
to the operation of a retirement or sinking fund and, if so, a description of
the operation of such retirement or sinking fund; (e) the terms and conditions,
if any, on which the Preferred Shares may be convertible into, or exchangeable
for, shares of any other class or classes of equity interests in the Trust,
including the price or rate of conversion or exchange and the method for
effecting such conversion or exchange, provided that no Preferred Shares will be
convertible into shares of a class that has superior rights or preferences as to
dividends or distribution of assets of the Company upon the voluntary or
involuntary dissolution or liquidation of the Company; (f) a description of the
voting rights, if any, of the Preferred Shares; and (g) other preferences,
rights, qualifications or restrictions or material terms of such Preferred
Shares.
The Maryland Real Estate Investment Trust Law and the Company's Declaration
of Trust provide that no shareholder shall be personally liable for any
obligation of the Company. The Company's Declaration of Trust and By-laws
further provide that the Company shall indemnify each shareholder against any
claim or liability to which such holder may become subject by reason of such
person being or having been a shareholder, and that the Company shall reimburse
each shareholder for all legal or other expenses reasonably incurred by such
person in connection with any such claim or liability. It should be noted,
however, that with respect to tort claims, claims for taxes and certain
statutory liabilities, shareholders may, in some jurisdictions, be personally
liable to the extent that such claims are not satisfied by the Company. Because
the Company will carry public liability insurance in amounts that it considers
adequate, any risk of personal liability to shareholders will be limited to
situations in which the Company's assets, together with its insurance coverage,
would be insufficient to satisfy the claims against the Company and the
shareholders, or in which the claim is not covered by the Company's liability
insurance policies.
The description of the foregoing provisions of the Preferred Shares as set
forth in the related Prospectus Supplement is only a summary, does not purport
to be complete and is subject to, and is qualified in its entirety by, reference
to the definitive Certificate of Amendment to the Company's Declaration of Trust
relating to such series of Preferred Shares. In connection with any offering of
Preferred Shares, such Certificate of Amendment will be filed with the
Commission as an exhibit to or incorporated by reference in the Registration
Statement.
RANK
Unless otherwise specified in the Prospectus Supplement, the Preferred
Shares will, with respect to dividend rights and rights upon liquidation,
dissolution or winding up of the Company, rank (i) senior to all classes or
series of Common Shares of the Company, and to all equity securities ranking
junior to such Preferred Shares; (ii) on a parity with all equity securities
issued by the Company the terms of which specifically provide that such equity
securities rank on a parity with the Preferred Shares; and (iii) junior to all
equity securities issued by the Company the terms of which specifically provide
that such equity securities rank senior to the Preferred Shares. The term
"equity securities" does not include convertible debt securities for this
purpose.
DIVIDENDS
Holders of the Preferred Shares of each series will be entitled to receive,
when, as and if declared by the Board of Trustees of the Company, out of assets
of the Company legally available for payment, cash dividends (or dividends in
kind or in other property if expressly permitted and described in the applicable
Prospectus Supplement) at such rates and on such dates as will be set forth in
the applicable Prospectus Supplement. Each such dividend shall be payable to
holders of record as they appear in the shareholder records of the Company at
the close of business on such record dates as shall be fixed by the Board of
Trustees of the Company.
Dividends on any series of Preferred Shares may be cumulative or
non-cumulative, as provided in the applicable Prospectus Supplement. Dividends,
if cumulative, will be cumulative from and after the date set
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forth in the applicable Prospectus Supplement. If the Board of Trustees of the
Company fails to declare a dividend payable on a dividend payment date on any
series of the Preferred Shares for which dividends are non-cumulative, then the
holders of such series of the Preferred Shares will have no right to receive a
dividend in respect of the dividend period ending on such dividend payment date,
and the Company will have no obligation to pay the dividend accrued for such
period, whether or not dividends on such series are declared payable on any
future dividend payment date.
Unless otherwise specified in the Prospectus Supplement, if any Preferred
Shares of any series are outstanding, no full dividends shall be declared or
paid or set apart for payment on any capital shares of the Company of any other
series ranking, as to dividends, on a parity with or junior to the Preferred
Shares of such series for any period unless (i) if such series of Preferred
Shares has a cumulative dividend, full cumulative dividends have been or
contemporaneously are declared and paid or declared and a sum sufficient for the
payment thereof set apart for such payment on the Preferred Shares of such
series for all past dividend periods and the then current dividend period or
(ii) if such series of Preferred Shares does not have a cumulative dividend,
full dividends for the then current dividend period have been or
contemporaneously are declared and paid or declared and a sum sufficient for the
payment thereof set apart for such payment on the Preferred Shares of such
series. When dividends are not paid in full (or a sum sufficient for such full
payment is not so set apart) upon Preferred Shares of any series and the shares
of any other series of Preferred Shares ranking on a parity as to dividends with
the Preferred Shares of such series, all dividends declared upon Preferred
Shares of such series and any other series of Preferred Shares ranking on a
parity as to dividends with such Preferred Shares shall be declared pro rata so
that the amount of dividends declared per share of Preferred Shares of such
series and such other series of Preferred Shares shall in all cases bear to each
other the same ratio that accrued dividends per share on the Preferred Shares of
such series (which shall not include any accumulation in respect of unpaid
dividends for prior dividend periods if such Preferred Shares do not have a
cumulative dividend) and such other series of Preferred Shares bear to each
other. No interest, or sum of money in lieu of interest, shall be payable in
respect of any dividend payment or payments on Preferred Shares of such series
which may be in arrears.
Except as provided in the immediately preceding paragraph, unless (i) if
such series of Preferred Shares has a cumulative dividend, full cumulative
dividends on the Preferred Shares of such series have been or contemporaneously
are declared and paid or declared and a sum sufficient for the payment thereof
set apart for payment for all past dividend periods and the then current
dividend period, and (ii) if such series of Preferred Shares does not have a
cumulative dividend, full dividends on the Preferred Shares of such series have
been or contemporaneously are declared and paid or declared and a sum sufficient
for the payment thereof set apart for payment for the then current dividend
period, no dividends (other than in Common Shares or other capital shares
ranking junior to the Preferred Shares of such series as to dividends and upon
liquidation) shall be declared or paid or set aside for payment or other
distribution upon the Common Shares, or any other capital shares of the Company
ranking junior to or on a parity with the Preferred Shares of such series as to
dividends or upon liquidation, nor shall any Common Shares, or any other capital
shares of the Company ranking junior to or on a parity with the Preferred Shares
of such series as to dividends or upon liquidation be redeemed, purchased or
otherwise acquired for any consideration (or any moneys be paid to or made
available for a sinking fund for the redemption of any such shares) by the
Company (except by conversion into or exchange for other capital shares of the
Company ranking junior to the Preferred Shares of such series as to dividends
and upon liquidation).
REDEMPTION
If so provided in the applicable Prospectus Supplement, the Preferred
Shares will be subject to mandatory redemption or redemption at the option of
the Company, in whole or in part, in each case upon the terms, at the times and
at the redemption prices set forth in such Prospectus Supplement.
The Prospectus Supplement relating to a series of Preferred Shares that is
subject to mandatory redemption will specify the number of such Preferred Shares
that shall be redeemed by the Company in each year commencing after a date to be
specified, at a redemption price per share to be specified, together with an
amount equal to all accrued and unpaid dividends thereon (which shall not, if
such Preferred Shares do not
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have a cumulative dividend, include any accumulation in respect of unpaid
dividends for prior dividend periods) to the date of redemption. The redemption
price may be payable in cash or other property, as specified in the applicable
Prospectus Supplement. If the redemption price for Preferred Shares of any
series is payable only from the net proceeds of the issuance of capital shares
of the Company, the terms of such Preferred Shares may provide that, if no such
capital shares shall have been issued or to the extent the net proceeds from any
issuance are insufficient to pay in full the aggregate redemption price then
due, such Preferred Shares shall automatically and mandatorily be converted into
the applicable capital shares of the Company pursuant to conversion provisions
specified in the applicable Prospectus Supplement.
Notwithstanding the foregoing, unless (i) if such series of Preferred
Shares has a cumulative dividend, full cumulative dividends on all Preferred
Shares of any series shall have been or contemporaneously are declared and paid
or declared and a sum sufficient for the payment thereof set apart for payment
for all past dividend periods and the current dividend period and (ii) if such
series of Preferred Shares does not have a cumulative dividend, full dividends
of the Preferred Shares of any series have been or contemporaneously are
declared and paid or declared and a sum sufficient for the payment thereof set
apart for payment for the then current dividend period, no Preferred Shares of
any series shall be redeemed unless all outstanding Preferred Shares of such
series are simultaneously redeemed; provided, however, that the foregoing shall
not prevent the purchase or acquisition of Preferred Shares of such series to
preserve the REIT status of the Company or pursuant to a purchase or exchange
offer made on the same terms to holders of all outstanding Preferred Shares of
such series. In addition, unless (i) if such series of Preferred Shares has a
cumulative dividend, full cumulative dividends on all outstanding shares of any
series of Preferred Shares have been or contemporaneously are declared and paid
or declared and a sum sufficient for the payment thereof set apart for payment
for all past dividends periods and the then current dividend period, and (ii) if
such series of Preferred Shares does not have a cumulative dividend, full
dividends on the Preferred Shares of any series have been or contemporaneously
are declared and paid or declared and a sum sufficient for the payment thereof
set apart for payment for the then current dividend period, the Company shall
not purchase or otherwise acquire directly or indirectly any Preferred Shares of
such series (except by conversion into or exchange for capital shares of the
Company ranking junior to the Preferred Shares of such series as to dividends
and upon liquidation); provided, however, that the foregoing shall not prevent
the purchase or acquisition of Preferred Shares of such series to preserve the
REIT status of the Company or pursuant to a purchase or exchange offer made on
the same terms to holders of all outstanding Preferred Shares of such series.
If fewer than all of the outstanding Preferred Shares of any series are to
be redeemed, the number of shares to be redeemed will be determined by the
Company and such shares may be redeemed pro rata from the holders of record of
such shares in proportion to the number of such shares held or for which
redemption is requested by such holder (with adjustments to avoid redemption of
fractional shares) or by lot in a manner determined by the Company.
Notice of redemption will be mailed at least 30 days but not more than 60
days before the redemption date to each holder of record of Preferred Shares of
any series to be redeemed at the address shown on the share transfer books of
the Company. Each notice shall state: (i) the redemption date; (ii) the number
and series of Preferred Shares to be redeemed; (iii) the redemption to be
surrendered for payment of the redemption price; (iv) that dividends on the
shares to be redeemed will cease to accrue on such redemption date; and (v) the
date upon which the holder's conversion rights, if any, as to such shares shall
terminate. If fewer than all of the Preferred Shares of any series are to be
redeemed, the notice mailed to each such holder thereof shall also specify the
number of Preferred Shares to be redeemed from each such holder. If notice of
redemption of any Preferred Shares has been given and if the funds necessary for
such redemption have been set aside by the Company in trust for the benefit of
the holders of any Preferred Shares so called for redemption, then from and
after the redemption date dividends will cease to accrue on such Preferred
Shares, and all rights of the holders of such shares will terminate, except the
right to receive the redemption price.
LIQUIDATION PREFERENCE
Upon any voluntary or involuntary liquidation, dissolution or winding up of
the affairs of the Company, then, before any distribution or payment shall be
made to the holders of any Common Shares or any other
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class or series of capital shares of the Company ranking junior to the Preferred
Shares in the distribution of assets upon any liquidation, dissolution or
winding up of the Company, the holders of each series of Preferred Shares shall
be entitled to receive out of assets of the Company legally available for
distribution to shareholders liquidating distributions in the amount of the
liquidation preference per share (set forth in the applicable Prospectus
Supplement), plus an amount equal to all dividends accrued and unpaid thereon
(which shall not include any accumulation in respect of unpaid dividends for
prior dividend periods if such Preferred Shares do not have a cumulative
dividend). After payment of the full amount of the liquidating distributions to
which they are entitled, the holders of Preferred Shares will have no right or
claim to any of the remaining assets of the Company. In the event that, upon any
such voluntary or involuntary liquidation, dissolution or winding up, the
available assets of the Company are insufficient to pay the amount of the
liquidating distributions on all outstanding Preferred Shares and the
corresponding amounts payable on all shares of other classes or series of
capital shares of the Company ranking on a parity with the Preferred Shares in
the distribution of assets, then the holders of the Preferred Shares and all
other such classes or series of capital shares shall share ratably in any such
distribution of assets in proportion to the full liquidating distributions to
which they would otherwise be respectively entitled.
If liquidating distributions shall have been made in full to all holders of
Preferred Shares, the remaining assets of the Company shall be distributed among
the holders of any other classes or series of capital shares ranking junior to
the Preferred Shares upon liquidation, dissolution or winding up, according to
their respective rights and preferences and in each case according to their
respective number of shares. For such purposes, the consolidation or merger of
the Company with or into any other corporation, trust or entity, or the sale,
lease or conveyance of all or substantially all of the property or business of
the Company, shall not be deemed to constitute a liquidation, dissolution or
winding up of the Company.
VOTING RIGHTS
Holders of Preferred Shares will not have any voting rights except as
indicated in the applicable Prospectus Supplement.
CONVERSION RIGHTS
The terms and conditions, if any, upon which any series of Preferred Shares
is convertible into Common Shares will be set forth in the applicable Prospectus
Supplement relating thereto. Such terms will include the number of Common Shares
into which the Preferred Shares are convertible, the conversion price (or manner
of calculation thereof), the conversion period, provisions as to whether
conversion will be at the option of the holders of the Preferred Shares or the
Company, the events requiring an adjustment of the conversion price and
provisions affecting conversion in the event of the redemption of such series of
Preferred Shares.
SHAREHOLDER LIABILITY
As discussed above under "Description of Preferred Shares -- General,"
applicable Maryland law provides that no shareholder, including holders of
Preferred Shares, shall be personally liable for the acts and obligations of the
Company and that the funds and property of the Company shall be the only
recourse for such acts or obligations.
RESTRICTIONS ON OWNERSHIP
For the Company to qualify as a REIT under the Code, the issued and
outstanding Common Shares and Preferred Shares (together, the "Shares"), taken
as a whole, must be beneficially owned by 100 or more persons during at least
335 days of a taxable year of 12 months (other than the first year) or during a
proportionate part of a shorter taxable year. In addition, not more than 50% of
the value of the issued and outstanding Shares may be owned, directly or
indirectly, by five or fewer individuals (defined in the Code to include as one
individual certain entities) during the last half of a taxable year (other than
the first year) or during a proportionate part of a shorter taxable year.
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Because the Board of Trustees believes it is essential for the Company to
continue to qualify as a REIT, the Company's Declaration of Trust, subject to
certain exceptions, provides that no holder may own, or be deemed to own by
virtue of the attribution provisions of the Code, more than 5.0% (the "Ownership
Limit") of the number or value of the issued and outstanding Shares. The
Company's Board of Trustees, upon receipt of a ruling from the Internal Revenue
Service (the "IRS"), an opinion of counsel, or other evidence satisfactory to
the Board of Trustees, and upon such other conditions as the Board of Trustees
may direct, may also exempt a proposed transferee from the Ownership Limit. As a
condition of such exemption, the intended transferee must give written notice to
the Company of the proposed transfer no later than the fifteenth day prior to
any transfer which, if consummated, would result in the intended transferee
owning Shares in excess of the Ownership Limit. The Board of Trustees of the
Company may require such opinions of counsel, affidavits, undertakings or
agreements as it may deem necessary or advisable in order to determine or ensure
the Company's status as a REIT. Any transfer of Shares that would (i) create a
direct or indirect ownership of Shares in excess of the Ownership Limit, (ii)
result in the Shares being owned by fewer than 100 persons or (iii) result in
the Company being "closely held" within the meaning of Section 856(h) of the
Code, shall be null and void, and the intended transferee will acquire no rights
to the Shares. The foregoing restrictions on transferability and ownership will
not apply if the Board of Trustees determines that it is no longer in the best
interests of the Company to attempt to qualify, or to continue to qualify, as a
REIT.
Any purported transfer of Shares that would (i) result in a person owning
Shares in excess of the Ownership Limit, (ii) cause the Company to become
"closely held" under Section 856(h) of the Code or (iii) cause the Shares to be
owned by fewer than 100 persons and is not otherwise permitted as provided above
will result in those of the transferred Shares which cause any of the events in
clauses (i) through (iii) above to occur to become excess shares ("Excess
Shares"), which will be transferred by operation of law to the Company as
trustee for the exclusive benefit of one or more organizations described in
Sections 170(b)(1)(A) and 170(c) of the Code ("Charitable Beneficiary"). While
these Excess Shares are held in trust, the trustee of the trust will be deemed
to have an irrevocable proxy to vote the Excess Shares for the benefit of the
Charitable Beneficiary and will hold any dividends payable with respect to the
Excess Shares in trust for the Charitable Beneficiary. Subject to the Ownership
Limit, the Excess Shares may be retransferred by the trustee of the trust to any
person (if the Excess Shares would not be Excess Shares in the hands of such
person). If such a transfer is made, the interest of the Charitable Beneficiary
would terminate and proceeds of the sale would be payable to the intended
transferee and to the Charitable Beneficiary. The intended transferee would
receive the lesser of (1) the price paid by the intended transferee or, if the
intended transferee did not give value for such Excess Shares (e.g., a transfer
by gift or devise), the fair market value (as described below) at the time of
the purported transfer that resulted in the Excess Shares and (2) the price per
share received by the trustee from the sale or other disposition of the Excess
Shares held in trust. Any proceeds in excess of the amount payable to the
intended transferee will be payable to the Charitable Beneficiary. In addition,
such Excess Shares held in trust are subject to purchase by the Company at a
purchase price equal to the lesser of the price paid for the Shares by the
intended transferee (or, in the case of a devise or gift, the fair market value
at the time of such devise or gift) and the fair market value of the Shares on
the date the Company exercises its right to purchase. Fair market value shall be
the last reported sales price reported on the NYSE on the trading day
immediately preceding the relevant date, or if not then traded on the NYSE, the
last reported sales price of such Shares on the trading day immediately
preceding the relevant date as reported on any exchange or quotation system over
which such Shares may be traded, or if not then traded over any exchange or
quotation system, then the fair market value of such Shares on the relevant date
as determined in good faith by the Board of Trustees of the Company. The
Company's right to purchase may be exercised during the 90 day period beginning
immediately after the later of the date of the purported transfer which resulted
in the Excess Shares and the date the Board of Trustees determines in good faith
that such a transfer has occurred. From and after the intended transfer to the
intended transferee of the Excess Shares, the intended transferee shall cease to
be entitled to distributions, voting rights and other benefits with respect to
such Shares except the right to payment of the purchase price for the Shares on
the retransfer of Shares as provided above and except for certain distributions
upon liquidation. Any dividends or distribution paid to a proposed transferee on
Excess Shares prior to the discovery by the Company that such Shares have been
transferred in violation of the provisions of the Company's Declaration of Trust
shall be repaid to the
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Company upon demand. Any dividends so disgorged will then be paid over to the
trustee and held in trust for the Charitable Beneficiary. If the foregoing
transfer restrictions are determined to be void or invalid by virtue of any
legal decision, statute, rule or regulation, then the intended transferee of any
Excess Shares may be deemed, at the option of the Company, to have acted as an
agent on behalf of the Company in acquiring such Excess Shares and to hold such
Excess Shares on behalf of the Company.
All certificates representing Shares will bear a legend referring to the
restrictions described above.
All persons who own, directly or by virtue of the attribution provisions of
the Code, more than 5.0% (or such other percentage between 0.5% and 5.0%, as
provided in the rules and regulations promulgated under the Code) of the number
or value of the outstanding Shares must give a written notice to the Company by
January 31 of each year. In addition, each shareholder shall be required upon
demand to disclose to the Company in writing such information with respect to
the direct, indirect and constructive ownership of Shares as the Board of
Trustees deems reasonably necessary to comply with the provisions of the Code
applicable to a REIT, to comply with the requirements of any taxing authority or
governmental agency or to determine any such compliance.
REGISTRAR AND TRANSFER AGENT
The Registrar and Transfer Agent for the Preferred Shares will be set forth
in the applicable Prospectus Supplement.
DEPOSITARY SHARES
The Trust may, at its option, elect to offer fractional Preferred Shares,
rather than full Preferred Shares. In the event such option is exercised, the
Trust will issue receipts for Depositary Shares, each of which will represent a
fraction (to be set forth in the Prospectus Supplement relating to the Preferred
Shares) of a share of such Preferred Shares.
The Preferred Shares represented by Depositary Shares will be deposited
under a Deposit Agreement (the "Deposit Agreement") between the Trust and a bank
or trust company selected by the Trust having its principal office in the United
States and having a combined capital and surplus of at least $50,000,000 (the
"Depositary Shares Depositary"). Subject to the terms of the Deposit Agreement,
each owner of a Depositary Share will be entitled, in proportion to the
applicable fraction of a Preferred Share represented by such Depositary Share,
to all the rights and preferences of the Preferred Share, represented thereby
(including dividend, voting, redemption, conversion and liquidation rights).
The above description of the Depositary Shares is only a summary, is not
complete and is subject to, and is qualified in its entirety by, the description
in the related Prospectus Supplement and the provisions of the Deposit Agreement
(which will contain the form of Depositary Receipt), a copy of which will be
filed with the Commission as an exhibit to or incorporated by reference in the
Registration Statement.
DESCRIPTION OF WARRANTS
The Trust may issue separately, or together with any Preferred Shares or
Common Shares offered by any Prospectus Supplement, Warrants for the purchase of
other Preferred Shares or Common Shares (collectively, "Warrants"). The Warrants
may be issued under warrant agreements (each, a "Warrant Agreement") to be
entered into between the Trust and a bank or trust company, as warrant agent
(the "Warrant Agent"), or may be represented by certificates evidencing the
Warrants (the "Warrant Certificates"), all as set forth in the Prospectus
Supplement relating to the particular series of Warrants. The following
summaries of certain provisions of the Warrants do not purport to be complete
and are subject to, and are qualified in their entirety by reference to, all the
provisions of any related Warrant Agreement and Warrant Certificate,
respectively, including the definitions therein of certain terms. Wherever
defined terms of the Warrant Agreement are summarized herein or in a Prospectus
Supplement, it is intended that such defined terms shall be incorporated herein
or therein by reference. In connection with any offering of Warrants, any such
Warrant Agreement or a
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form of any such Warrant Certificate will be filed with the Commission as an
exhibit to or incorporated by reference in the Registration Statement.
GENERAL
The Prospectus Supplement relating to the particular series of Warrants
offered thereby will describe the terms of the offered Warrants, any related
Warrant Agreement and Warrant Certificate, including the following, to the
extent applicable: (a) if the Warrants are offered for separate consideration,
the offering price and the currency for which Warrants may be purchased; (b) if
applicable, the designation, number, stated value and terms (including, without
limitation, liquidation, dividend, conversion and voting rights) of the
Preferred Shares purchasable upon exercise of Preferred Shares Warrants and the
price at which such number of Preferred Shares may be purchased upon such
exercise; (c) if applicable, the number of shares of Common Shares purchasable
upon exercise of Common Shares Warrants and the price at which such number of
Common Shares may be purchased upon such exercise; (d) the date, if any, on and
after which the offered Warrants and the related Preferred Shares and/or Common
Shares will be separately transferable; (e) the date on which the right to
exercise the offered Warrants shall commence and the date on which such right
shall expire ("Expiration Date"); (f) a discussion of the specific U.S. federal
income tax, accounting and other considerations applicable to the Warrants or to
any Securities purchasable upon the exercise of such Warrants; (g) whether the
offered Warrants represented by Warrant Certificates will be issued in
registered or bearer form, and if registered, where they may be transferred and
registered; (h) any applicable anti-dilution provisions; (i) any applicable
redemption or call provisions; (j) any applicable book-entry provisions; and (k)
any other terms of the offered Warrants.
Warrant Certificates will be exchangeable on the terms specified in the
related Prospectus Supplement for new Warrant Certificates of different
denominations and Warrants may be exercised at the corporate trust office of the
Warrant Agent or any other office indicated in the Prospectus Supplement
relating thereto. Prior to the exercise of their Warrants, holders of Warrants
will not have any of the rights of holders of the Preferred Shares or Common
Shares purchasable upon such exercise, including the right to receive payments
of dividends or distributions of any kind, if any, on the Preferred Shares or
Common Shares, respectively, purchasable upon exercise or to exercise any
applicable right to vote.
EXERCISE OF WARRANTS
Each Warrant will entitle the holder thereof to purchase such number of
Preferred Shares or Common Shares, as the case may be, at such exercise price as
shall in each case be set forth in, or be determinable from, the Prospectus
Supplement relating to such Warrant, by payment of such exercise price in full
in the currency and in the manner specified in such Prospectus Supplement.
Warrants may be exercised at any time up to the close of business on the
Expiration Date (or such later date to which such Expiration Date may be
extended by the Trust); unexercised Warrants will become null and void.
Upon receipt at the corporate trust office of the Warrant Agent or any
other office indicated in the related Prospectus Supplement of (a) payment of
the exercise price and (b) the Warrant Certificate properly completed and duly
executed, the Trust will, as soon as practicable, forward the Preferred Shares
or Common Shares purchasable upon such exercise to the holder of such Warrant.
If less than all of the Warrants represented by such Warrant Certificate are
exercised, a new Warrant Certificate will be issued for the remaining number of
Warrants.
SHAREHOLDER RIGHTS PLAN
On December 17, 1997, the Board of Trustees adopted a shareholder rights
plan (the "Shareholder Rights Plan"). Under the Shareholder Rights Plan, one
Right (as defined in the Shareholder Rights Plan) will be attached to each
outstanding Common Share at the close of business on December 31, 1997, and one
Right will be attached to each Common Share issued thereafter. Each Right
entitles the holder thereof to purchase from the Trust, under certain
conditions, a unit (a "Unit") consisting of one one-thousandth of a Series A
Junior Participating Preferred Share, $0.0001 par value, of the Trust for $100
per Unit, subject to
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adjustment. The Rights may also, under certain conditions, entitle the holders
thereof to receive Common Shares, or common shares of an entity acquiring the
Company, or other consideration, each having a value equal to twice the exercise
price of each Right ($200). The Trust has designated 200,000 Series A Junior
Participating Preferred Shares and has reserved such shares for issuance under
the Shareholder Rights Plan. The Rights are redeemable by the Trust at a price
of $0.0001 per Right. If not exercised or redeemed, all Rights expire on
December 31, 2007. The description and terms of the Rights are set forth in the
Rights Agreement, dated as of December 17, 1997, between the Trust and Bank
Boston, N.A., as Rights Agent.
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FEDERAL INCOME TAX CONSIDERATIONS
WITH RESPECT TO THE TRUST AND THE OPERATING PARTNERSHIP
The following summary of the material federal income tax considerations
with respect to the Trust and the Operating Partnership regarding the offering
of Securities is based on current law, is for general information only and is
not intended as tax advice. The tax treatment of a holder of any of the
Securities will vary depending on the terms of the specific Securities acquired
or held by such holder as well as such holder's particular situation, and this
summary is addressed only to holders that hold Securities as capital assets and
does not attempt to address all aspects of federal income taxation relating to
holders of the Securities. Nor does it discuss all of the aspects of federal
income taxation that may be relevant to certain types of holders (including
insurance companies, tax-exempt entities, financial institutions or
broker-dealers, foreign corporations and persons who are not citizens or
residents of the United States) who are subject to special treatment under the
federal income tax laws.
EACH PROSPECTIVE PURCHASER OF SECURITIES IS ADVISED TO CONSULT HIS OR HER
OWN TAX ADVISOR REGARDING THE SPECIFIC TAX CONSEQUENCES TO HIM OR HER OF THE
PURCHASE, OWNERSHIP AND SALE OF THE SECURITIES AND OF THE TRUST'S ELECTION TO BE
TAXED AS A REAL ESTATE INVESTMENT TRUST, INCLUDING THE FEDERAL, STATE, LOCAL,
FOREIGN AND OTHER TAX CONSEQUENCES OF SUCH PURCHASE, OWNERSHIP, SALE AND
ELECTION AND OF POTENTIAL CHANGES IN APPLICABLE TAX LAWS.
TAXATION OF THE TRUST
Management of the Trust believes that, commencing with the Trust's taxable
year ended December 31, 1994, the Trust has been organized and operated in such
a manner as to qualify as a REIT under Sections 856 through 860 of the Code. The
Trust intends to continue to operate in such a manner as to qualify for taxation
as a REIT in the future, but no assurance can be given that it has or will
remain qualified.
The sections of the Code relating to qualification and operation as a REIT
are highly technical and complex. The following sets forth the material aspects
of the Code sections that govern the federal income taxation of a REIT. This
summary is qualified in its entirety by the applicable Code provisions, rules
and regulations promulgated thereunder, and administrative and judicial
interpretations thereof.
Wolf, Block, Schorr and Solis-Cohen LLP has opined that, commencing with
the Trust's taxable year ended December 31, 1994, the Trust has been organized
and operated in conformity with the requirements for qualification and taxation
as a REIT under the Code, and its proposed method of operation will enable it to
continue to meet the requirements for qualification and taxation as a REIT under
the Code for future taxable periods. It must be emphasized that the opinion of
Wolf, Block, Schorr and Solis-Cohen LLP is based on certain assumptions and
representations made by the Trust and the Operating Partnership as to factual
matters. Moreover, such qualification and taxation as a REIT depend upon the
Trust's future ability to meet, through actual annual operating results, certain
distribution levels, the diversity of stock ownership requirements and the
various other qualification tests imposed under the Code discussed below, the
results of which may not be reviewed by Wolf, Block, Schorr and Solis-Cohen LLP.
Accordingly, no assurance can be given that the actual results of the Trust's
operation for any particular taxable year will satisfy such requirements. For a
discussion of the tax consequences of failure to qualify as a REIT, see
"-- Failure to Qualify."
As a REIT, the Trust generally is not subject to federal corporate income
taxes on its net income that it currently distributes to shareholders. This
treatment substantially eliminates the "double taxation" (at the corporate and
shareholder levels) that generally results from investment in a corporation.
However, the Trust will be subject to federal income or excise tax as follows.
First, the Trust will be taxed at regular corporate rates on any undistributed
real estate investment trust taxable income, including undistributed net capital
gains. Second, under certain circumstances, the Trust may be subject to the
"alternative minimum tax" on its items of tax preference. Third, if the Trust
has (i) net income from the sale or other disposition of "foreclosure property"
(generally property acquired by a REIT upon the default by a debtor with respect
to indebtedness secured by the property or upon the default by a lessee where
the REIT was the lessor) which is held primarily
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for sale to customers in the ordinary course of business or (ii) other
nonqualifying income from foreclosure property, it will be subject to tax at the
highest corporate tax rate on such income. Fourth, if the Trust has net income
from "prohibited transactions" (which are, in general, certain sales or other
dispositions of property held primarily for sale to customers in the ordinary
course of business, other than foreclosure property and, effective for the
Trust's taxable year ending December 31, 1998, dispositions of property that
occur due to involuntary conversion), such income will be subject to a 100% tax.
Fifth, if the Trust should fail to satisfy the 75% gross income test or the 95%
gross income test (discussed below), but has nonetheless maintained its
qualification as a REIT because certain other requirements have been met, it
will be subject to a 100% tax on an amount equal to (i) the gross income
attributable to the greater of the amount by which the Trust fails the 75% test
or the 95% test in the taxable year, multiplied by (ii) a fraction generally
intended to reflect the Trust's profitability. Sixth, if the Trust should fail
to distribute during each calendar year at least the sum of (i) 85% of its REIT
ordinary income for such year, (ii) 95% of its REIT capital gain net income for
such year, and (iii) any undistributed taxable income from prior periods, the
Trust would be subject to a 4% excise tax on the excess of such required
distribution over the amounts actually distributed. Seventh, if the Trust
acquires any asset from a C corporation (i.e., generally a corporation subject
to full corporate-level tax) in a transaction in which the basis of the asset in
the Trust's hands is determined by reference to the basis of the asset (or any
other property) in the hands of such C corporation, and the Trust recognizes
gain on the disposition of such asset during the 10-year period following
acquisition of the asset, then, pursuant to guidelines issued by the Internal
Revenue Service (the "IRS"), to the extent of the "built-in gain" (the excess of
the fair market value of the asset on the date acquired over its adjusted tax
basis at that date), such gain will be subject to tax at the highest regular
corporate rate. The result described above with respect to the recognition of
built-in gain assumes the Trust is eligible to make, and makes, an election
pursuant to IRS Notice 88-19.
REQUIREMENTS FOR QUALIFICATION
The Code defines a REIT as a corporation, trust or association (1) that is
managed by one or more trustees or directors; (2) the beneficial ownership of
which is evidenced by transferable shares, or by transferable certificates of
beneficial interest; (3) that would be taxable as a domestic corporation, but
for Sections 856 through 860 of the Code; (4) that is neither a financial
institution nor an insurance Trust subject to certain provisions of the Code;
(5) the beneficial ownership of which is held by 100 or more persons; (6) during
the last half of each taxable year not more than 50% in value of the outstanding
stock of which is owned, directly or indirectly, by five or fewer individuals
(as defined in the Code to include certain entities as "individuals" for these
purposes); and (7) which meets certain other tests, described below, regarding
the nature of its income and assets. The Code provides that conditions (1) to
(4), inclusive, must be met during the entire taxable year and that condition
(5) must be met during at least 335 days of a taxable year of 12 months, or
during a proportionate part of a taxable year of less than 12 months. For
purposes of determining stock ownership under the rule limiting ownership by
five or fewer individuals, REIT shares held by a pension fund generally are
treated as held proportionately by its beneficiaries and certain other
attribution rules will apply.
The Trust has satisfied and will continue to satisfy conditions (1) through
(6) above. In making the "five or fewer individuals" determination, if treating
interests in the Operating Partnership that can be converted into shares of the
Trust as converted into outstanding shares would cause the Trust to fail that
test, the interests are deemed to have been converted. In addition, the Trust's
Declaration of Trust provides for restrictions regarding transfer of its shares,
in order to assist the Trust in continuing to satisfy the share ownership
requirements described in (5) and (6) above. Such transfer restrictions are
included in the Trust's Registration Statements on Form 8-A, which are
incorporated by reference herein. See "Incorporation of Certain Documents by
Reference."
Code Section 856(i) provides that a corporation which is a "qualified REIT
subsidiary" is not to be treated as a separate corporation, and all assets,
liabilities, and items of income, deduction, and credit of a "qualified REIT
subsidiary" are treated as assets, liabilities, and such items (as the case may
be) of the REIT. A qualified REIT subsidiary is defined as a corporation 100% of
the stock of which is held by the REIT at all times during the existence of the
corporation. Effective for the Trust's taxable year ending December 31,
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1998, a qualified REIT subsidiary will be defined as any corporation 100% of the
stock of which is held by the REIT, regardless of whether the REIT has held such
corporation's stock at all times during its existence. Thus, in applying the
requirements described herein, the Trust's "qualified REIT subsidiaries" are
ignored, and all assets, liabilities, and items of income, deduction, and credit
of such subsidiaries will be treated as assets, liabilities and items of the
Trust.
In the case of a REIT which is a partner in a partnership, Treasury
Regulations provide that the REIT will be deemed to own its proportionate share
of the assets of the partnership and will be deemed to be entitled to the income
of the partnership attributable to such share. In addition, the character of the
assets and gross income of the partnership retain the same character in the
hands of the REIT for purposes of Section 856 of the Code, including satisfying
the gross income tests and the asset tests described below. Thus, the Trust's
proportionate share of the assets, liabilities and items of income of the
Operating Partnership and the other partnerships through which the Trust's
properties are owned (the "Property Partnerships") will be treated as assets,
liabilities and items of income of the Trust for purposes of applying the
requirements described herein. The references to the gross income or assets of
the Trust, as discussed immediately below in "Income Tests" and "Assets Tests,"
include the Trust's proportionate share of the gross income or assets, as the
case may be, of the Operating Partnership and the Property Partnerships.
INCOME TESTS
For the Trust to maintain its qualification as a REIT, the Trust must
satisfy three separate tests based on the nature of the underlying gross income.
These requirements must be satisfied annually. First, at least 75% of the
Trust's gross income (excluding gross income from prohibited transactions) for
each taxable year must consist of income derived directly or indirectly from
investments relating to real property or mortgages on real property (including
"rents from real property" and, in certain circumstances, interest) or certain
types of "qualified temporary investment income." Second, at least 95% of the
Trust's gross income (excluding gross income from prohibited transactions) for
each taxable year must be derived from such real property investments, and from
dividends, other types of interest, and gain from the sale or disposition of
stock or securities or from any combination of the foregoing. Third, for its
taxable years ending on or before December 31, 1997, short-term gain from the
sale or other disposition of stock or securities, gain from prohibited
transactions and gain on the sale or other disposition of real property held for
less than four years (apart from involuntary conversions and sales of
foreclosure property) must represent less than 30% of the Trust's gross income
(including gross income from prohibited transactions) for each taxable year.
Rents received by the Trust will qualify as "rents from real property" in
satisfying the gross income requirements for a REIT described above provided
that several conditions are met. First, the amount of rent must not be based in
whole or in part on the income or profits of any person. However, an amount
received or accrued generally is not excluded from the term "rents from real
property" solely by reason of being based on a fixed percentage or percentages
of receipts or sales. Special rules apply where the tenant is a sublessor with
respect to property which permits a REIT to receive rent determined by reference
to the income or profits of the tenant in some cases. Second, the Code provides
that rents received from a tenant do not qualify as "rents from real property"
in satisfying the gross income tests if the REIT, directly or through the
applicable ownership attribution rules, owns 10% or more of such tenant (a
"Related Party Tenant"). Although the Trust may lease portions of its properties
to tenants that may constitute Related Party Tenants, the Trust does not believe
that the rents attributable to such leases would cause the Trust to fail to
satisfy the 75% or 95% gross income tests. Third, if rent attributable to
personal property leased in connection with a lease of real property is greater
than 15% of the total rent received under the lease, the portion of rent
attributable to such personal property will not qualify as "rents from real
property." The Trust does not anticipate that the rent attributable to the
personal property leased in connection with the real property will be greater
than 15% of the total rent received under the lease or, if it was as to any
particular lease or group of leases, that the rent attributable to the personal
property would cause the Trust to fail to satisfy the 75% or 95% gross income
tests. Finally, in order for rents received to qualify as "rents from real
property," the REIT generally must not operate or manage the property or furnish
or render services to the tenants of such property, other than through an
independent contractor that is adequately compensated and from whom the REIT
derives no revenue;
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provided, however, that the Trust may directly perform services "usually and
customarily" rendered in connection with the rental of space for occupancy only
and that are not otherwise considered "rendered to the occupant" of the
property. The Trust has represented that it does not and will not knowingly (i)
charge rent for any property that is based in whole or in part on the income or
profits of any person or (ii) directly perform services considered to be
rendered to the occupant of property, other than services usually and
customarily rendered in connection with the rental of space for occupancy only.
The Trust is a self-managed REIT; i.e., the Operating Partnership performs
all of the management and leasing functions with respect to the properties it
owns, provided that the services called for do not cause the rents received with
respect to those leases to fail to qualify as "rents from real property." To the
extent that the services provided are not "usual and customary" under the
foregoing rules, the Trust will employ a qualifying independent contractor to
render the services. The Trust may provide property management and leasing
services to third parties and will provide services to an affiliated entity for
a fee.
Effective for the Trust's taxable years beginning on or after January 1,
1998, the Trust may render a de minimis amount of impermissible services to
tenants, or in connection with the management of a property (together,
"Impermissible Services"), without having otherwise qualifying rents from the
property being disqualified as "rents from real property." In order to qualify
for this de minimis exception, the amount received by the Trust for
Impermissible Services with respect to any property for any taxable year may not
exceed 1% of all amounts received or accrued by the Trust during such taxable
year with respect to such property. For purposes of the foregoing, the amount
treated as "received" by the Trust for Impermissible Services will not be less
than 150% of the Trust's direct cost in rendering such service. However, the
amount of any income that the Trust receives for Impermissible Services will not
be treated as "rents from real property" for purposes of the gross income tests.
The Operating Partnership may receive fees in consideration of the performance
of management and administrative services with respect to any properties that
are not owned entirely by the Operating Partnership. Although a portion of such
management and administrative fees generally will not constitute "qualifying
income" for purposes of the 75% and 95% gross income tests, the Trust Management
believes that the aggregate amount of such fees, if any (plus any income from
Impermissible Services and other nonqualifying income), in any taxable year will
not cause the Trust to fail the 75% and 95% gross income tests.
For purposes of the gross income test, the term "interest" generally does
not include any amount received or accrued (directly or indirectly) if the
determination of such amount depends in whole or in part on the net income or
profits of any person. However, an amount received or accrued generally will not
be excluded from the term "interest" solely by reason of being based on a fixed
percentage or percentages of receipts or sales.
Generally, the failure to satisfy either or both of the 75% and 95% gross
income tests will cause the REIT status of the Trust to terminate with the
taxable year in which the failure occurs. Relief from the adverse consequences
of such failure is available if the Trust's failure to meet such tests was due
to reasonable cause and not willful neglect, the Trust attaches a schedule of
the nature and the sources of its gross income to its income tax return, and any
incorrect information set forth on the schedule is not due to fraud with intent
to evade tax. It is not possible to state whether, in all circumstances, the
Trust would be entitled to the benefit of these relief provisions. As discussed
above in "Taxation of the Trust," even if these relief provisions apply, a tax
would be imposed with respect to the excess of 75% or 95% of the Trust's gross
income over the Trust's qualifying income in the relevant category, whichever is
greater.
ASSET TESTS
The Trust, at the close of each quarter of its taxable year, must also
satisfy three tests relating to the nature of its assets. First, at least 75% of
the value of the Trust's total assets must be represented by real estate assets
(including (i) its allocable share of real estate assets held by partnerships in
which the Trust owns an interest or held by "qualified REIT subsidiaries" of the
Trust and (ii) stock or debt instruments held for not more than one year
purchased with the proceeds of a stock offering or long-term (at least five
years) debt offering of the Trust), cash, cash items and governmental
securities. Second, not more than 25% of the Trust's total assets may be
represented by securities other than those in the 75% asset class. Third, of the
investments
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included in the 25% asset class, the value of any one issuer's securities owned
by the Trust may not exceed 5% of the value of the Trust's total assets and the
Trust may not own more than 10% of any one issuer's outstanding voting
securities (other than the stock of a qualified REIT subsidiary, of which the
REIT is required to own all of the stock, or of another real estate investment
trust).
The Operating Partnership owns 8.0% of the voting common stock and 100% of
the non-voting common stock of Liberty Property Development Corp. ("Liberty
Development") and none of the voting common stock and 100% of the non-voting
common stock of Liberty Property Development Corp.-II ("Development-II" and,
together with Liberty Development, the "Development Companies"). By virtue of
its ownership of partnership interests in the Operating Partnership, the Trust
owns its pro rata shares of the common stock of the Development Companies. The
Operating Partnership does not own more than 10% of the voting securities of
either of the Development Companies and, therefore, the Trust will not own more
than 10% of the voting securities of either of the Development Companies. The
IRS could contend that the Trust, through its interest in the Operating
Partnership, should be viewed as owning more than 10% of the voting securities
of either of the Development Companies because of its substantial economic
positions in the Development Companies and because of the close business
relationships between it and each of the two Development Companies. If such
contention were sustained, the Trust would not qualify as a REIT. The Operating
Partnership does not possess the requisite power to elect or designate a member
of the respective Boards of Directors of the Development Companies, and there is
no understanding or arrangement permitting the Trust to exercise voting power or
control over the voting common stock of either of the Development Companies not
owned by it. Accordingly, Wolf, Block, Schorr and Solis-Cohen LLP and the Trust
do not believe that the Trust will be viewed as owning in excess of 10% of the
voting securities of either of the Development Companies. Based on its analysis
of the estimated value of the securities of the subsidiaries to be owned by the
Operating Partnership relative to the estimated value of the other assets to be
owned by the Operating Partnership, the Trust has determined that its respective
pro rata shares of the securities of the Development Companies held by the
Operating Partnership do not exceed 5% of the total value of the Trust's assets.
No independent appraisals will be obtained to support this conclusion and Wolf,
Block, Schorr and Solis-Cohen LLP, in rendering its opinion as to the
qualification of the Trust as a REIT, is relying solely on the representations
of the Trust regarding the values of the Development Companies. The 5%-of-value
requirement must be satisfied each time the Trust increases its ownership of
securities of either of the Development Companies (including as a result of
increasing its interest in the Operating Partnership as its limited partners
exercise their conversion rights). Although the Trust plans to take steps to
insure that it satisfies the 5% value test for any quarter with respect to which
retesting is to occur, there can be no assurance that such steps will always be
successful or will not require a reduction in the Operating Partnership's
overall interest in either of the Development Companies.
After initially meeting the asset tests at the close of any quarter, the
Trust will not lose its status as a REIT for failure to satisfy the asset tests
at the end of a later quarter solely by reason of changes in asset values. If
the failure to satisfy the asset tests results from an acquisition of securities
or other property during a quarter, the failure can be cured by disposition of
sufficient non-qualifying assets within 30 days after the close of any quarter
as may be required to cure any non-compliance.
ANNUAL DISTRIBUTION REQUIREMENTS
To qualify as a REIT, the Trust is required to distribute dividends (other
than capital gain dividends) to its stockholders in an amount at least equal to
(A) the sum of (i) 95% of the "REIT taxable income" of the Trust (computed
without regard to the dividends paid deduction and the Trust's net capital gain)
and (ii) 95% of the net taxable income (after tax), if any, from foreclosure
property, minus (B) the sum of certain items of noncash income. Such
distributions must be paid in the taxable year to which they relate, or in the
following taxable year if declared before the Trust timely files its tax return
for such year and if paid on or before the first regular dividend payment after
such declaration. To the extent the Trust does not distribute all of the net
capital gain or distributes at least 95%, but less than 100%, of its "REIT
taxable income," as adjusted, it will be subject to tax on the undistributed
amount at the regular corporate tax rates applicable to such income.
Furthermore, if the Trust should fail to distribute during each calendar year at
least the sum of (i) 85% of its
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REIT ordinary income for such year, (ii) 95% of its REIT capital gain income for
such year, and (iii) any undistributed taxable income from prior periods, the
Trust would be subject to a 4% excise tax on the excess of such required
distribution over the amounts actually distributed.
The Trust has made, and intends to make, timely distributions to its
shareholders in amounts sufficient to satisfy the annual distribution
requirements. The Operating Partnership, as the general partner of each Property
Partnership, is authorized under the various partnership agreements to cause
distributions to be made to their respective partners of all available cash to
permit the Trust to meet the annual distribution requirement. It is possible
that, from time to time, the Trust may experience timing differences between (i)
the actual receipt of income and actual payment of deductible expenses and (ii)
the inclusion of such income and deduction of such expenses in arriving at REIT
taxable income. Further, it is possible that, from time to time, the Trust may
be allocated a share of net capital gain attributable to the sale of depreciable
property which exceeds its allocable share of cash attributable to that sale. In
such cases, the Trust may have less cash available for distribution than is
necessary to meet the annual 95% distribution requirement or to avoid tax with
respect to the capital gain or the excise tax imposed on certain undistributed
income. To meet the 95% distribution requirement necessary to qualify as a real
estate investment trust or to avoid tax with respect to capital gain or the
excise tax imposed on certain undistributed income, the Trust may find it
appropriate to arrange for short-term (or possibly long-term) borrowings or to
pay distributions in the form of taxable stock dividends. Any such borrowings
for the purpose of making distributions to shareholders of the Trust are
required to be arranged through the Operating Partnership.
Under certain circumstances, the Trust may be able to rectify a failure to
meet the distribution requirement for a year by paying "deficiency dividends" to
shareholders in a later year, which may be included in the Trust's deduction for
dividends paid for the earlier year. Thus, the Trust may be able to avoid being
taxed on amounts distributed as deficiency dividends; however, the Trust will be
required to pay interest based upon the amount of any deduction taken for
deficiency dividends.
FAILURE TO QUALIFY
If the Trust fails to qualify for taxation as a REIT in any taxable year
and the relief provisions do not apply, the Trust would be subject to tax
(including any applicable alternative minimum tax) on its taxable income at
regular corporate rates. Distributions to shareholders of the Trust in any year
in which the Trust failed to qualify would not be deductible by the Trust nor
would there be a requirement to make distributions. In such event, to the extent
of current and accumulated earnings and profits, all distributions to
shareholders of the Trust would be taxable as ordinary income, and, subject to
certain limitations of the Code, corporate distributees may be eligible for the
dividends received deduction. Unless entitled to relief under specific statutory
provisions, the Trust would also be disqualified from taxation as a REIT for the
four taxable years following the year in which qualification was lost. It is not
possible to state whether in all circumstances the Trust would be entitled to
such statutory relief.
OTHER TAX CONSIDERATIONS
The Trust may be subject to state or local taxation in various state or
local jurisdictions, including those in which it transacts business. The state
and local tax treatment of the Trust may not conform to the federal income tax
consequences discussed above. Consequently, prospective investors should consult
their own tax advisors regarding the effect of state and local tax laws on an
investment in the Trust.
To the extent that the Trust engages in real estate development activities
in foreign countries or invests in real estate located in foreign countries, the
Trust's profits from such activities or investments will generally be subject to
tax in the countries where such activities are conducted or such properties are
located. The precise nature and amount of such taxation will depend on the laws
of the countries where the activities are conducted or the properties are
located. Although the Trust will attempt to minimize the amount of such foreign
taxation, there can be no assurance as to whether or the extent to which
measures taken to minimize such taxes will be successful. If the Trust satisfies
the annual distribution requirements for qualification as a REIT and is,
therefore, not subject to federal corporate income tax on that portion of its
ordinary income and capital
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gain that is currently distributed to its shareholders, the Trust will generally
not be able to recover the cost of any foreign tax imposed on such profits from
its foreign activities or investments by claiming foreign tax credits against
its federal income tax liability on such profits. Moreover, the Trust will not
be able to pass foreign tax credits through to its shareholders. As a result, to
the extent that the Trust is required to pay taxes in foreign countries, the
cash available for distribution to its shareholders will be reduced accordingly.
The Operating Partnership will receive fees from an affiliated entity as
consideration for services that the Operating Partnership will provide to such
entity in connection with the development and management of the Kings Hill
project in the United Kingdom ("U.K."). The amount of this fee income will not
be qualifying income for purposes of the 75% or 95% gross income tests, although
the Trust does not expect that the revenue derived from such services would
cause it to fail the 75% or 95% gross income tests. The Trust may be subject to
Corporation Tax in the U.K. at the rate of 33% on its share of such fee income
if the Trust is deemed to have a branch or agency in the U.K. as a result of
services that may be performed for such entity in the U.K. In addition, rental
income received by the Trust with respect to leases of real property in the U.K.
would be subject to U.K. withholding tax at the rate of 25%. It is possible that
such rental income (together with any gain arising from the sale or other
disposition of such properties) could instead be subject to Corporation Tax in
the U.K. at the rate of 33% if the U.K. Inland Revenue did not regard the Trust
as holding the properties for purposes of long term investment or if such income
or gain were deemed attributable to a branch or agency of the Trust in the U.K.
Such U.K. taxes will reduce the amount of cash available for distribution by the
Trust to its shareholders out of such income.
TAX ASPECTS OF THE TRUST'S INVESTMENTS IN PARTNERSHIPS
The following discussion summarizes certain federal income tax
considerations applicable solely to the Trust's investment in the Operating
Partnership and the Property Partnerships (collectively, the "Partnerships").
CLASSIFICATION AS A PARTNERSHIP
The Trust will be required to include in its income its distributive share
of the Operating Partnership's income and to deduct its distributive share of
the Operating Partnership's losses, and the Trust and the Operating Partnership
will be required to include in computing their income their respective
distributive shares of the income and losses of the Property Partnerships only
if the Operating Partnership and each of the Property Partnerships is
classified, for federal income tax purposes, as a partnership rather than as an
association taxable as a corporation.
For taxable periods prior to January 1, 1997, an organization formed as a
partnership was treated as a partnership rather than as a corporation for
federal income tax purposes only if it possessed no more than two of the four
corporate characteristics that the Treasury Regulations used to distinguish a
partnership from a corporation. These four characteristics were continuity of
life, centralization of management, limited liability, and free transferability
of interests. Although neither the Operating Partnership nor the Property
Partnerships requested a ruling from the IRS that they would be classified as
partnerships for Federal income tax purposes, rather than as associations
taxable as corporations, Wolf, Block, Schorr and Solis-Cohen LLP had opined
that, based on the provisions of the respective Partnership Agreements of the
Operating Partnership and each Property Partnership, and certain factual
assumptions and representations as to each of them, the Operating Partnership
and each Property Partnership will be treated as partnerships for federal income
tax purposes and not as associations taxable as corporations. Effective January
1, 1997, newly promulgated Treasury Regulations eliminated the four-factor test
described above and, instead, permit partnerships and other non-corporate
entities to be taxed as partnerships for federal income tax purposes without
regard to the number of corporate characteristics possessed by such entity.
Under those Regulations, both the Operating Partnership and each of the Property
Partnerships will be classified as partnerships for federal income tax purposes
unless an affirmative election is made by the entity to be taxed as a
corporation. The Trust has represented that no such election has been made, or
is anticipated to be made, on behalf of the Operating Partnership or any of the
Property Partnerships. Under a special transitional rule in the Regulations, the
IRS will not challenge the classification of an existing entity such as the
Operating Partnership or a Property Partnership for periods prior
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to January 1, 1997 if: (i) the entity has a "reasonable basis" for its
classification; (ii) the entity and each of its members recognized the federal
income tax consequences of any change in classification of the entity made
within the 60 months prior to January 1, 1997; and (iii) neither the entity nor
any of its members had been notified in writing on or before May 8, 1996 that
its classification was under examination by the IRS. Neither the Partnership nor
any of the Property Partnerships changed their classification within the 60
month period preceding May 8, 1996, nor was any one of them notified that their
classification as a partnership for federal income tax purposes was under
examination by the IRS. Therefore, in reliance on the opinion previously
rendered by Wolf, Block, Schorr and Solis-Cohen LLP, the Operating Partnership
and each of the Property Partnerships should continue to be taxed as
partnerships for federal tax purposes.
If for any reason the Operating Partnership or a Property Partnership were
taxable as a corporation rather than as a partnership for federal income tax
purposes, the Trust would not be able to satisfy the income and asset
requirements for status as a REIT. In addition, any change in the Operating
Partnership's status or that of a Property Partnership for tax purposes might be
treated as a taxable event, in which case the Trust might incur a tax liability
without any related cash distribution. See "-- Taxation of the Trust," above.
Further, items of income and deduction for the Operating Partnership or a
Property Partnership would not pass through to the respective partners, and the
partners would be treated as stockholders for tax purposes. Each Partnership
would be required to pay income tax at regular corporate tax rates on its net
income and distributions to partners would constitute dividends that would not
be deductible in computing the Partnership's taxable income.
INCOME TAXATION OF THE PARTNERSHIPS
Partners, Not the Operating Partnership or Property Partnerships, Subject to
Tax
A partnership is not a taxable entity for federal income tax purposes.
Rather, the Trust will be required to take into account its allocable share of
the income, gains, losses, deductions and credits of each of the Operating
Partnership and the Property Partnerships for any taxable year of such
Partnerships ending within or with the taxable year of the Trust, without regard
to whether the Trust has received or will receive any cash distributions. The
same will be true for the Operating Partnership with respect to its allocable
share of the income, gains, losses, deductions and credits of each of the
Property Partnerships.
Partnership Allocations
Although a partnership agreement generally will determine the allocation of
income and losses among partners, the allocations provided in the partnership
agreement will be disregarded for tax purposes if they do not comply with the
provisions of Section 704(b) of the Code and the Treasury Regulations
promulgated thereunder.
If an allocation is not recognized for federal income tax purposes, the
item subject to the allocation will be reallocated in accordance with the
partners' interests in the partnership, which will be determined by taking into
account all of the facts and circumstances relating to the economic arrangement
of the partners with respect to such item. The allocations of taxable income and
loss of each of the Operating Partnership and the Property Partnerships are
intended to comply with the requirements of Section 704(b) of the Code and the
Treasury Regulations promulgated thereunder.
Tax Allocations With Respect to Pre-Contribution Gain
Pursuant to Section 704(c) of the Code, income, gain, loss, and deduction
attributable to appreciated property that is contributed to a partnership in
exchange for an interest in the partnership must be allocated for federal income
tax purposes in a manner such that the contributor is charged with the
unrealized gain associated with the property at the time of the contribution.
The amount of such unrealized gain is generally equal to the difference between
the fair market value of the contributed property at the time of contribution
and the adjusted tax basis of such property at the time of contribution (the
"Book-Tax Difference"). In general, the fair market value of the properties
owned (directly or indirectly) by the Trust and interests in Property
Partnerships contributed to the Operating Partnership has been substantially in
excess of their
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respective adjusted tax bases. The Partnership Agreements of each of the
Operating Partnership and the Property Partnerships require that allocations
attributable to each item of contributed property be made so as to allocate the
tax depreciation available with respect to such property first to the partners
other than the partner that contributed the property, to the extent of, and in
proportion to, their book depreciation, and then, if any tax depreciation
remains, to the partner that contributed the property. Upon the disposition of
any item of contributed property, any gain attributable to the "built-in" gain
of the property at the time of contribution would be allocated for tax purposes
to the contributing partner. These allocations are intended to be consistent
with the Treasury Regulations under Section 704(c) of the Code.
In general, participants in the formation of the Trust (and the
Partnerships) have been allocated disproportionately lower amounts of
depreciation deductions for tax purposes relative to their percentage interests
in the Operating Partnership, and disproportionately greater shares relative to
their percentage interests in the Operating Partnership of the gain on the sale
by the Partnerships of one or more of the contributed properties. These tax
allocations will tend to reduce or eliminate the Book-Tax Difference over the
life of the Partnerships. Because the Partnership Agreements of the Partnerships
adopt the "traditional method" in obtaining items allocable under Section 704(c)
of the Code, the amounts of the special allocations of depreciation and gain
under the special allocation rules of Section 704(c) of the Code may be limited
by the so-called "ceiling rule" and may not always eliminate the Book-Tax
Difference on an annual basis or with respect to a specific transaction such as
a sale. Thus, the carryover basis of the contributed assets in the hands of the
Partnerships may cause the Trust to be allocated less depreciation than would be
available for newly purchased properties.
The foregoing principles also apply in determining the earnings and profits
of the Trust. The application of these rules may result in a larger share of the
distributions from the Trust being taxable to shareholders as dividends.
Basis in Operating Partnership Interest
The Trust's adjusted tax basis in its partnership interest in the Operating
Partnership generally (i) will be equal to the amount of cash and the basis of
any other property contributed to the Operating Partnership by the Trust plus
the fair market value of the Shares it issues or cash it pays upon conversion of
interests in the Operating Partnership, (ii) has been, and will be, increased by
(a) its allocable share of the Operating Partnership's income and (b) its
allocable share of indebtedness of the Operating Partnership and of the Property
Partnerships and (iii) has been, and will be, reduced (but not below zero) by
the Trust's allocable share of (a) the Operating Partnership's loss and (b) the
amount of cash distributed to the Trust, and by constructive distributions
resulting from a reduction in the Trust's share of indebtedness of the Operating
Partnership and the Property Partnerships.
If the allocation of the Trust's distributive share of the Operating
Partnership's loss would reduce the adjusted tax basis of the Trust's
partnership interest in the Operating Partnership below zero, the loss is
deferred until such time as the recognition of such loss would not reduce the
Trust's adjusted tax basis below zero. To the extent that the Operating
Partnership's distributions, or any decrease in the Trust's share of the
indebtedness of the Operating Partnership or a Property Partnership (each such
decrease being considered a constructive cash distribution to the partners),
would reduce the Trust's adjusted tax basis below zero, such distributions
(including such constructive distributions) would be includible as taxable
income to the Trust in the amount of such excess. Such distributions and
constructive distributions would normally be characterized as capital gain, and
if the Trust's partnership interest in the Operating Partnership has been held
for longer than the long-term capital gain holding period (currently, one year),
the distributions and constructive distributions would constitute long-term
capital gain. Based on Treasury Regulations to be issued, the tax rates
applicable to such capital gain will likely vary depending on the precise amount
of time such interest has been held by the Trust and the nature of the Operating
Partnership's property. Based on certain undertakings by limited partners of the
Operating Partnership, the Exchangeable Subordinated Debentures issued by the
Operating Partnership are allocated for purposes of Section 752 of the Code
disproportionately in favor of certain limited partners.
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SALE OF THE PARTNERSHIPS' PROPERTY
Generally, any gain realized by the Operating Partnership or a Property
Partnership on the sale of property held by the Operating Partnership or a
Property Partnership, or on the sale of partnership interests in the Property
Partnerships, if the property or partnership interests are held for more than
one year, will be long-term capital gain (except for any portion of such gain
that is treated as depreciation or cost recovery recapture), and may result in
capital gain distributions to the shareholders. See "-- Taxation of Taxable
Domestic Shareholders," below.
The Trust's share of any gain realized on the sale of any property held by
the Operating Partnership or a Property Partnership as inventory or other
property held primarily for sale to customers in the ordinary course of the
trade or business of any of the Operating Partnership or the Property
Partnerships will, however, be treated as income from a prohibited transaction
that is subject to a 100% penalty tax. Under existing law, whether property is
held as inventory or primarily for sale to customers in the ordinary course of a
trade or business is a question of fact that depends on all the facts and
circumstances with respect to the particular transaction. The Operating
Partnership and the Property Partnerships intend to hold their properties for
investment with a view to long-term appreciation, to engage in the business of
acquiring, developing, owning and operating their properties and to make such
occasional sales of such properties, including peripheral land, as are
consistent with the investment objectives of the Trust and the Operating
Partnership. Complete assurance cannot be given, however, that the Trust will be
able to avoid owning property that may be characterized as property held
"primarily for sale to customers in the ordinary course of business."
TAXATION OF TAXABLE DOMESTIC SHAREHOLDERS
As long as the Trust qualifies as a REIT, distributions made to the Trust's
taxable U.S. shareholders out of current or accumulated earnings and profits
(and not designated as capital gain dividends) will be taken into account by
such U.S. shareholders as ordinary income and will not be eligible for the
dividends received deduction for corporations. Distributions that are designated
as capital gain dividends will be taxed as gain from the sale or exchange of a
capital asset held for more than one year (to the extent they do not exceed the
Trust's actual net capital gain for the taxable year) without regard to the
period for which the shareholder has held its stock. Subject to certain
limitations, the Trust may further designate capital gain dividends as a "20%
rate gain distribution," an "unrecaptured section 1250 gain distribution," or a
"28% rate gain distribution," in which case such dividends will be taxable to
recipient individual shareholders when received at tax rates of 20%, 25% and
28%, respectively. If no additional designation is made regarding a capital gain
distribution, it will be treated as a 28% rate gain distribution. Corporate
shareholders may be required to treat up to 20% of certain capital gain
dividends as ordinary income.
Distributions in excess of current and accumulated earnings and profits
will not be taxable to a shareholder to the extent that they do not exceed the
adjusted basis of the shareholder's shares, but rather will reduce the adjusted
basis of such shares. To the extent that such distributions exceed the adjusted
basis of a shareholder's shares, they will be included in income as short-term,
mid-term or long-term capital gain (depending on the length of time the shares
have been held) assuming the shares are a capital asset in the hands of the
shareholder. In addition, any dividend declared by the Trust in October,
November or December of any year payable to a shareholder of record on a
specified date in any such month shall be treated as both paid by the Trust and
received by the shareholder on December 31 of such year, provided that the
dividend is actually paid by the Trust during January of the following calendar
year. Shareholders may not include in their individual income tax returns any
net operating losses or capital losses of the Trust.
In general, a domestic shareholder will realize capital gain or loss on the
disposition of Common Shares equal to the difference between (i) the amount of
cash and the fair market value of any property received on such disposition, and
(ii) the shareholder's adjusted basis of such Common Shares. Subject to certain
exceptions, the maximum rate of tax on net capital gains of individuals, trusts
and estates from the sale or exchange of capital assets is 28% in respect of
capital assets held for more than one year but not more than 18 months and is
20% in respect of capital assets held for more than 18 months. Any loss upon a
sale or exchange of shares by a shareholder who has held such shares for six
months or less (after applying certain
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holding-period rules) will be treated as a long-term capital loss to the extent
of distributions from the Trust required to be treated by such shareholder as
long-term capital gain.
Effective for its taxable years beginning on or after January 1, 1998, the
Trust may elect to retain its net long-term capital gains recognized during a
taxable year ("Retained Gains") and pay a corporate-level tax on such Retained
Gains. Corporations are currently subject to a maximum 35 percent tax on
recognized capital gains. A shareholder owning the Trust's shares of beneficial
interest on December 31 of any taxable year in which the Trust has Retained
Gains would be required to include in gross income such shareholder's
proportionate share of the Retained Gains (as designated by the Trust in a
notice mailed to shareholders within 60 days following the end of the taxable
year). The amount of any corporate-level tax paid by the Trust in respect of the
Retained Gains (the "Trust Tax") would be treated as having been paid by the
shareholders of the Trust and each shareholder would receive a credit for such
shareholder's share of the Trust Tax. A shareholder's basis in his shares of
beneficial interest would increase by the excess of such shareholder's
proportionate share of the Retained Gains over the shareholder's share of the
Trust Tax. Unless the Retained Gains were treated as actually distributed, it is
possible that the Retained Gains might be subject to the Excise Tax.
BACKUP WITHHOLDING
The Trust will report to its U.S. shareholders and the IRS the amount of
distributions paid during each calendar year, and the amount of tax withheld, if
any. Under the backup withholding rules, a shareholder may be subject to backup
withholding at the rate of 31% with respect to distributions paid unless such
shareholder (a) is a corporation or comes within certain other exempt categories
and, when required, demonstrates this fact or (b) provides a taxpayer
identification number, certifies as to no loss of exemption from backup
withholding, and otherwise complies with applicable requirements of the backup
withholding rules. A shareholder that does not provide the Trust with his
correct taxpayer identification number may also be subject to penalties imposed
by the IRS. Any amount paid as backup withholding will be creditable against the
shareholder's income tax liability. In addition, the Trust may be required to
withhold a portion of capital gain distributions to shareholders who fail to
certify their non-foreign status to the Trust. The United States Treasury has
recently issued final regulations (the "Final Regulations") which affect the
procedures regarding the withholding and information reporting rules discussed
above. In general, the Final Regulations do not alter the substantive
withholding and information reporting requirements but unify current
certification procedures and forms and clarify and modify reliance standards.
The Final Regulations are generally effective for payments made on or after
January 1, 1999, subject to certain transition rules. Prospective investors
should consult their own tax advisors concerning the adoption of the Final
Regulations and the potential effect on their ownership of Common Shares. See
"-- Taxation of Foreign Shareholders."
TAXATION OF TAX-EXEMPT SHAREHOLDERS
Generally, distributions to a tax-exempt entity from a real estate
investment trust do not constitute unrelated business taxable income, as defined
in Section 512(a) of the Code ("UBTI"), provided that the tax-exempt entity has
not financed its acquisition of its shares with "acquisition indebtedness"
within the meaning of the Code and the shares are not otherwise used in an
unrelated trade or business of the tax-exempt entity. Thus, distributions by the
Trust to shareholders that are tax-exempt should not be taxable as UBTI,
provided that no acquisition indebtedness was incurred with respect to such
shares.
Some or all of the distributions by a real estate investment trust to a
tax-exempt employee's pension fund that owns more than 10% in value of the real
estate investment trust are treated as UBTI if the real estate investment trust
constitutes a "pension-held REIT" and if other conditions are met. In order to
constitute a "pension-held REIT" the real estate investment trust must meet the
test for classification as a real estate investment trust only because
tax-exempt pension funds are not treated as a single individual for purposes of
the "five-or-fewer" rule (see "Risk Factors -- Limitations on Changes in
Control -- Ownership Limit") and either (A) one pension fund owns more than 25%
in value of the real estate investment trust or (B) one or more pension funds
(holding at least 10% in value of the real estate investment trust each) own, in
the aggregate, more than 50% of the value of the real estate investment trust.
In addition, the gross income of the
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real estate investment trust derived from activities that would constitute
unrelated trades or businesses, computed as if the REIT was a "qualified trust,"
must be at least five percent of the gross income of the real estate investment
trust in the taxable year in which the distributions are made. The ownership
limitations in the Trust's Declaration of Trust (assuming no waiver by the Board
of Trustees) would prevent the Trust from being classified as a "pension-held
REIT."
TAXATION OF FOREIGN SHAREHOLDERS
The rules governing United States federal income taxation of nonresident
alien individuals, foreign corporations, foreign partnerships and other foreign
shareholders (collectively, "Non-U.S. Shareholders") are complex, and no attempt
will be made herein to provide more than a summary of the rules. Prospective
Non-U.S. Shareholders should consult with their own tax advisors to determine
the impact of federal, state and local income tax laws with regard to an
investment in the Common Shares offered hereby, including any reporting
requirements, as well as the tax treatment of such an investment under their
home country laws. If income from the investment in the Common Shares offered
hereby is treated as "effectively connected" with the Non-U.S. Shareholder's
conduct of a United States trade or business, the Non-U.S. Shareholder generally
will be subject to a tax at graduated rates, in the same manner as U.S.
shareholders are taxed with respect to the dividends (and may also be subject to
the 30% "branch profits" tax in the case of a shareholder that is a foreign
corporation). The remainder of this discussion assumes that the distributions do
not constitute "effectively connected" income. Prospective investors whose
investment in Common Shares may be "effectively connected" with the conduct of a
United States trade or business should consult their own tax advisors as to the
tax consequences thereof.
Distributions by the Trust that are not attributable to gain from sales or
exchanges by the Trust of United States real property interests and not
designated by the Trust as capital gains dividends will be treated as dividends
of ordinary income to the extent that they are made out of current or
accumulated earnings and profits of the Trust. Such distributions, ordinarily,
will be subject to a withholding tax equal to 30% of the gross amount of the
distribution unless an applicable tax treaty reduces or eliminates that tax.
Distributions in excess of current and accumulated earnings and profits of the
Trust will not be taxable to a shareholder to the extent that such distributions
do not exceed the adjusted basis of the shareholder's shares, but rather will
reduce the adjusted basis of such shares. To the extent that distributions in
excess of current accumulated earnings and profits exceed the adjusted basis of
a Non-U.S. Shareholder's shares, such distributions will give rise to tax
liability if the Non-U.S. Shareholder would otherwise be subject to tax on any
gain from the sale or disposition of his shares in the Trust, as described
below. The Trust expects to withhold United States income tax at the rate of 30%
on the gross amount of any distributions made to a Non-U.S. Shareholder unless
(i) a lower treaty rate applies and the Non-U.S. Shareholder files all necessary
forms required to establish eligibility for the lower rate and provides
certification as to such eligibility, if necessary, or (ii) the Non-U.S.
Shareholder files an IRS Form 4224 with the Trust certifying that the investment
to which the distribution relates is "effectively connected" to a United States
trade or business of such Non-U.S. Shareholder. Lower treaty rates generally
applicable to dividend income may not necessarily apply to distributions from a
REIT, such as the Trust. If it cannot be determined at the time a distribution
is made whether or not such distribution will be in excess of current and
accumulated earnings and profits, the distributions will be subject to
withholding at the same rate as dividends. Pursuant to recently enacted
legislation, effective for distributions made after August 20, 1996, the Trust
is obligated to withhold 10% of the amount of any distribution in excess of the
Trust's current and accumulated earnings and profits. However, amounts withheld
are refundable if it is subsequently determined that the distribution was in
excess of current and accumulated earnings and profits of the Trust and the
amount withheld exceeded the Non-U.S. Shareholders' United States tax liability,
if any.
For any year in which the Trust qualifies as a REIT, distributions that are
attributable to gain from sales or exchanges by the Trust of United States real
property interests will be taxed to a Non-U.S. Shareholder under the provisions
of the Foreign Investment in Real Property Tax Act of 1980 ("FIRPTA"). Under
FIRPTA, these distributions are taxed to a Non-U.S. Shareholder as if the gain
were "effectively connected" with a United States business. Non-U.S.
Shareholders would be taxed at the normal capital gain rates
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applicable to domestic shareholders (subject to applicable alternative minimum
tax and a special alternative minimum tax in the case of nonresident alien
individuals), without regard to whether such distributions are designated by the
Trust as capital gain dividends. Also, distributions subject to FIRPTA may be
subject to a 30% "branch profits" tax in the hands of a foreign corporate
shareholder not entitled to treaty exemption. The Trust is required by
applicable income tax regulations that have been promulgated under the Code (the
"Treasury Regulations") to withhold 35% of any distribution that could be
designated by the Trust as a capital gains dividend. This amount is creditable
against the Non-U.S. Shareholder's FIRPTA tax liability.
Gain recognized by a Non-U.S. Shareholder upon a sale of shares generally
will not be taxed under FIRPTA if the Trust is a "domestically controlled REIT,"
defined generally as a REIT in which at all times during a specified testing
period less than 50% in value of the stock was held directly or indirectly by
foreign persons. The Trust currently is a "domestically controlled REIT," and
anticipates continuing to be so classified, and therefore the sale of the Common
Shares offered hereby should not be subject to taxation under FIRPTA. However,
because the Common Shares will be publicly traded, no assurance can be given
that the Trust will continue to so qualify. Notwithstanding the foregoing, any
gain not otherwise subject to FIRPTA will be taxable to a Non-U.S. Shareholder
if (i) investment in the shares is effectively connected with the Non-U.S.
Shareholder's United States trade or business, in which case the Non-U.S.
Shareholder will be subject to the same treatment as U.S. shareholders with
respect to the gain (a shareholder that is a foreign corporation may also be
subject to the 30% "branch profits" tax), or (ii) the Non-U.S. Shareholder is a
nonresident alien individual who was present in the United States for 183 days
or more during the taxable year and has a "tax home" in the United States, in
which case the nonresident alien individual will be subject to a 30% tax on the
individual's capital gains. If the gain on the sale of shares were to be subject
to taxation under FIRPTA, the Non-U.S. Shareholder will be subject to the same
treatment as U.S. shareholders with respect to the gain (subject to applicable
alternative minimum tax and a special alternative minimum tax in the case of
nonresident alien individuals and, in the case of foreign corporations, subject
to the possible application of the 30% "branch profits" tax).
If the proceeds of a disposition of Common Shares are paid by or through a
United States office of a broker, the payment is subject to information
reporting requirements and to backup withholding unless the disposing Non-U.S.
Shareholder certifies as to his name, address, and non-United States status or
otherwise establishes an exemption. Generally, United States information
reporting and backup withholding will not apply to the payment of disposition
proceeds if the payment is made outside the United States through a non-United
States broker. United States information reporting (but not backup withholding)
will apply, however, to a payment of disposition proceeds outside the United
States if (i) the payment is made through an office outside the United States
that is either (a) a United States person, (b) a foreign person that derives 50%
or more of its gross income for certain periods from the conduct of a trade or
business in the United States or (c) a "controlled foreign corporation" for
United States federal income tax purposes, and (ii) the broker fails to obtain
documentary evidence that the Shareholder is a Non-U.S. Shareholder and that
certain conditions are met or that the Non-U.S. Shareholder is otherwise
entitled to an exemption. The Final Regulations, issued by the United States
Treasury on October 6, 1997, affect the rules applicable to payments to foreign
persons. In general, the Final Regulations do not alter the substantive
withholding and information reporting requirements but unify current
certification procedures and forms and clarify and modify reliance standards.
The Final Regulations also address certain issues relating to intermediary
certification procedures designed to simplify compliance by withholding agents.
The Final Regulations are generally effective for payments made on or after
January 1, 1999, subject to certain transition rules. Prospective investors
should consult their own tax advisors concerning the adoption of the Final
Regulations and the potential effect on their ownership of Common Shares.
TAXATION OF HOLDERS OF DEBT SECURITIES
As used herein, the term "U.S. Holder" means a holder of a Debt Security
who (for United States Federal income tax purposes) is (i) a citizen or resident
of the United States, (ii) a domestic corporation, (iii) an estate, the income
of which is subject to United States federal income tax without regard to its
source, (iv) a Trust if a court within the United States is able to exercise
primary supervision over the administration
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of the Trust and one or more United States persons have the authority to control
all substantial decisions of the Trust, or (v) any other person who is subject
to United States Federal income taxation on a net income basis with respect to a
Debt Security and "U.S. Alien Holder" means a holder of a Debt Security who is
not a U.S. Holder. In the case of a holder of a Debt Security that is a
partnership for United States tax purposes, and each partner will take into
account its allocable share of income or loss from the Debt Security, and will
take such income or loss into account under the rules of taxation applicable to
such partner, taking into account the partnership and the partner.
U.S. HOLDERS
Payments of Interest
Interest on a Debt Security will be taxable to a U.S. Holder as ordinary
income at the time it is received or accrued, depending on the U.S. Holder's
method of accounting for tax purposes.
Purchase, Sale and Retirement of the Debt Securities
A U.S. Holder's tax basis in a Debt Security will generally be its U.S.
dollar cost.
A U.S. Holder will generally recognize gain or loss on the sale or
retirement of a Debt Security equal to the difference between the amount
realized on the sale or retirement and the U.S. Holder's tax basis in the Debt
Security. Except to the extent attributable to accrued but unpaid interest, gain
or loss recognized on the sale or retirement of a Debt Security will be capital
gain or loss, will be a long-term capital gain or loss if the Debt Security was
held for more than one year and may be eligible for a reduced rate of tax if the
Debt Security was held for more than 18 months and in certain other
circumstances.
U.S. ALIEN HOLDERS
This discussion assumes that the Debt Security is not subject to the rules
of Section 871(h)(4)(A) of the Code (relating to interest payments that are
determined by reference to the income, profits, changes in the value of property
or other attributes of the debtor or a related party).
Under present United States Federal income and estate tax law, and subject
to the discussion of backup withholding above:
(i) payments of principal, premium (if any) and interest by the
Operating Partnership or any of its paying agents to any holder of a Debt
Security that is a U.S. Alien Holder will not be subject to United States
Federal withholding tax if, in the case of interest (a) the beneficial
owner of the Debt Security does not actually or constructively own 10% or
more of the capital or profits interest in the Operating Partnership, (b)
the beneficial owner of the Debt Security is not a controlled foreign
corporation that is related to the Operating Partnership through stock
ownership, and (c) either (A) the beneficial owner of the Debt Security
certifies to the Operating Partnership or its agent, under penalties of
perjury, that it is not a U.S. person and provides its name and address or
(B) a securities clearing organization, bank or other financial institution
that holds customers' securities in the ordinary course of its trade or
business (a "financial institution") and holds the Debt Security certifies
to the Operating Partnership or its agent under penalties of perjury that
such statement has been received from the beneficial owner by it or by a
financial institution between it and the beneficial owner and furnishes the
payor with a copy thereof;
(ii) a U.S. Alien Holder of a Debt Security will not be subject to
United States Federal withholding tax on any gain realized on the sale or
exchange of a Debt Security; and
(iii) a Debt Security held by an individual who at death is not a
citizen or resident of the United States will not be includible in the
individual's gross estate for purposes of the United States Federal estate
tax as a result of the individual's death if (a) the individual did not
actually or constructively own 10% or more of the capital or profits
interest in the Operating Partnership, and (b) the income on the Debt
Security would not have been effectively connected with a United States
trade or business of the individual at the time of the individual's death.
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Special rules may apply in the case of U.S. Alien Holders (i) that are
engaged in a United States trade or business, (ii) that are former citizens or
long term residents of the United States, "controlled foreign corporations,"
"foreign personal holding companies," corporations which accumulate earnings to
avoid United States Federal income tax, and certain foreign charitable
organizations, each within the meaning of the Code, or (iii) certain
non-resident alien individuals who are present in the United States for 183 days
of more during a taxable year. Such persons are urged to consult their own tax
advisors before purchasing a Debt Security.
PLAN OF DISTRIBUTION
The Trust and/or the Operating Partnership, as the case may be, may sell
the Securities being offered hereby: (a) directly to purchasers; (b) through
agents; (c) through underwriters; (d) through dealers; or (e) through a
combination of any such methods of sale. The Securities may also be used as all
or part of the consideration to be paid by the Trust or the Operating
Partnership for the acquisition of non-operating assets for which financial
statements would not be required to be filed with the Commission, or in exchange
for units of limited partnership interest of the Operating Partnership. In
addition, Common Shares may be offered hereby in exchange for certain debt
securities of the Operating Partnership that are exchangeable for such Common
Shares.
The distribution of the Securities may be effected from time to time in one
or more transactions: (a) at a fixed price or at final prices, which may be
changed; (b) at market prices prevailing at the time of sale; (c) at prices
related to such prevailing market prices; or (d) at negotiated prices. Offers to
purchase Securities may be solicited directly by the Trust or the Operating
Partnership, as the case may be, or by agents designated by the Trust or the
Operating Partnership, as the case may be, from time to time. Any such agent,
which may be deemed to be an underwriter as that term is defined in the
Securities Act, involved in the offer or sale of the Securities in respect of
which this Prospectus is delivered will be named, and any commissions payable by
the Trust or the Operating Partnership, as the case may be, to such agent will
be set forth, in the applicable Prospectus Supplement.
If an underwriter is, or underwriters are, utilized in the offer and sale
of Securities in respect of which this Prospectus and the accompanying
Prospectus Supplement are delivered, the Trust and/or the Operating Partnership
will execute an underwriting agreement with such underwriter(s) for the sale to
it or them and the name(s) of the underwriter(s) and the terms of the
transaction will be set forth in such Prospectus Supplement, which will be used
by the underwriter(s) to make resales of the Securities in respect of which this
Prospectus and such Prospectus Supplement are delivered to the public.
If a dealer is utilized in the sale of the Securities in respect of which
this Prospectus is delivered, the Trust and/or the Operating Partnership will
sell such Securities to the dealer, as principal. The dealer may then resell
such Securities to the public at varying prices to be determined by such dealer
at the time of resale.
Certain of the underwriters, dealers or agents utilized by the Trust and/or
the Operating Partnership in any offering hereby may be customers of, including
borrowers from, engage in transactions with, and perform services for, the Trust
and/or the Operating Partnership or one or more of their respective affiliates
in the ordinary course of business. Underwriters, dealers, agents and other
persons may be entitled, under agreements which may be entered into with the
Trust or the Operating Partnership, as the case may be, to indemnification
against certain civil liabilities, including liabilities under the Securities
Act.
Until the distribution of the Securities is completed, rules of the
Commission may limit the ability of the underwriters and certain selling group
members, if any, to bid for and purchase the Securities. As an exception to
these rules, the representatives of the underwriters, if any, are permitted to
engage in certain transactions that stabilize the price of the Securities. Such
transactions may consist of bids or purchases for the purpose of pegging, fixing
or maintaining the price of the Securities.
If underwriters create a short position in the Securities in connection
with the offering thereof, (i.e., if they sell more Securities than are set
forth on the cover page of the applicable Prospectus Supplement), the
representatives of such underwriters may reduce that short position by
purchasing Securities in the open market. Any such representatives also may
elect to reduce any short position by exercising all or part of the
over-allotment option described in the applicable Prospectus Supplement.
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Any such representatives also may impose a penalty bid on certain
underwriters and selling group members. This means that if the representatives
purchase Securities in the open market to reduce the underwriters' short
position or to stabilize the price of the Securities, they may reclaim the
amount of the selling concession from the underwriters and selling group members
who sold those shares as part of the offering thereof.
In general, purchases of a security for the purpose of stabilization or to
reduce a syndicate short position could cause the price of the security to be
higher than it might otherwise be in the absence of such purchases. The
imposition of a penalty bid might have an effect on the price of a security to
the extent that it were to discourage resales of the security by purchasers in
the offering.
Neither the Company nor any of the underwriters, if any, makes any
representation or prediction as to the direction or magnitude of any effect that
the transactions described above may have on the price of the Securities. In
addition, neither the Company nor any of the underwriters, if any, makes any
representation that the representatives of the underwriters, if any, will engage
in such transactions or that such transactions, once commenced, will not be
discontinued without notice.
LEGAL OPINIONS
Wolf, Block, Schorr and Solis-Cohen LLP, Philadelphia, Pennsylvania, has
rendered an opinion with respect to the legality of the Securities to be issued
by the Operating Partnership. Weinberg & Green LLC, Baltimore, Maryland, has
rendered an opinion with respect to the legality of the Securities to be issued
by the Trust. The statements in this Prospectus under the caption "Federal
Income Tax Considerations with Respect to the Trust and the Operating
Partnership" and the other statements herein relating to the Trust's
qualification as a real estate investment trust will be passed upon for the
Trust by Wolf, Block, Schorr and Solis-Cohen LLP, although such firm has
rendered no opinion as to matters involving the imposition of non-U.S. taxes on
the operations of, and distributions of payments from, its United Kingdom
affiliate. Michael M. Dean, a partner of Wolf, Block, Schorr and Solis-Cohen
LLP, is the sole trustee of irrevocable trusts established by three of the
Trust's senior executives for the benefit of their respective children. Each of
such trusts received limited partnership interests in the Operating Partnership
in connection with the Company's formation in exchange for interests in the
Rouse Group owned by such trusts.
EXPERTS
The consolidated financial statements of the Trust and the Operating
Partnership for the years ended December 31, 1996 and 1995 and the period from
June 23, 1994 through December 31, 1994 and the combined financial statements of
the Rouse Group for the period January 1, 1994 through June 22, 1994, appearing
in the Annual Reports (Form 10-K) of the Trust and the Operating Partnership for
the year ended December 31, 1996, have been audited by Ernst & Young LLP,
independent auditors, as set forth in their reports thereon included therein and
incorporated herein by reference. Such consolidated financial statements are
incorporated herein by reference in reliance upon such reports given upon the
authority of such firm as experts in accounting and auditing.
The statements of operating revenues and certain operating expenses of (i)
650-660 E. Swedesford Road, (ii) the Minnesota Properties, (iii) the South
Carolina Properties, (iv) the Detroit Properties, (v) 4198 Cox Road, (vi) 4510
Cox Road, (vii) the Patuxent Woods Properties, (viii) the Horsham Properties and
(ix) the Greenville Properties, each of such capitalized terms as defined in the
respective Current Reports (Form 8-K) of the Company and the Operating
Partnership relating thereto, all of such statements for the year ended December
31, 1996 and appearing in the respective Current Reports (Form 8-K) of the
Company and the Operating Partnership, filed on February 13, 1997, March 5,
1997, March 5, 1997, June 25, 1997, November 4, 1997, November 4, 1997, November
13, 1997, November 19, 1997 and December 11, 1997, respectively, have been
audited by Fegley & Associates, independent auditors, as set forth in their
reports thereon included in the respective Current Reports (Form 8-K) and
incorporated herein by reference. Such statements of operating revenues and
certain operating expenses are incorporated herein by reference in reliance upon
such reports given upon the authority of such firm as experts in accounting and
auditing.
44
<PAGE> 47
AVAILABLE INFORMATION
The Trust and the Operating Partnership are subject to the informational
requirements of the Exchange Act, and, in accordance therewith, file reports and
other information with the Commission, including proxy statements in the case of
the Trust. Such reports and other information can be inspected and copied at the
public reference facilities maintained by the Commission at 450 Fifth Street,
N.W., Room 1024, Washington, D.C. 20549, and at the Commission's regional
offices at Seven World Trade Center, Suite 1300, New York, New York 10048 and
500 West Madison Street, Suite 1400, Chicago, Illinois 60661. Copies of such
material also may be obtained from the Public Reference Section of the
Commission at 450 Fifth Street, N.W., Room 1024, Washington, D.C. 20549, at
prescribed rates. Electronic filings made through the Commission's Electronic
Data Gathering, Analysis and Retrieval System ("EDGAR") are publicly available
through the Commission's Web site (http://www.sec.gov). The Common Shares are
listed on the NYSE, and reports, proxy statements and other information
regarding the Trust and the Operating Partnership may also be inspected at the
offices of the NYSE at 20 Broad Street, New York, New York 10005.
The Trust and the Operating Partnership have filed with the Commission a
Registration Statement on Form S-3 (together with any amendments thereto, the
"Registration Statement") under the Securities Act with respect to the
Securities offered hereby. This Prospectus constitutes a part of the
Registration Statement. As permitted by the rules and regulations of the
Commission, this Prospectus and the applicable Prospectus Supplement do not
contain all of the information set forth in the Registration Statement and the
exhibits and schedules thereto. Statements contained in this Prospectus, the
applicable Prospectus Supplement or in any document incorporated by reference in
this Prospectus as to the contents of any contract or other document referred to
in this Prospectus or the applicable Prospectus Supplement are not necessarily
complete and, in each instance where such contract or document has been filed as
an exhibit to the Registration Statement or other document incorporated by
reference, reference is made to the copy of such contract or other document,
each such statement being qualified in all respects by such reference. The
Registration Statement, together with exhibits thereto, may be inspected at the
Commission's public reference facilities in Washington, D.C., and copies of all
or any part thereof may be obtained from the Commission upon the payment of
prescribed fees.
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
The following documents filed with the Commission under the Exchange Act
are hereby incorporated by reference herein as of their respective dates:
(a) The Annual Report on Form 10-K of the Trust and the Operating
Partnership for the fiscal year ended December 31, 1996;
(b) The Quarterly Reports on Form 10-Q of the Trust and the Operating
Partnership for the fiscal quarters ended March 31, 1997, June 30,
1997 and September 30, 1997;
(c) The Current Reports on Form 8-K of the Trust and the Operating
Partnership filed February 13, 1997, March 5, 1997, March 21, 1997,
June 25, 1997, July 7, 1997, August 6, 1997, August 11, 1997, August
16, 1997, November 4, 1997, November 13, 1997, November 19, 1997,
November 20, 1997, December 11, 1997, December 15, 1997 and December
18, 1997 (as amended on December 23, 1997); and
(d) The description of the Common Shares contained in the Registration
Statement on Form 8-A of the Trust registering such securities under
Section 12 of the Exchange Act.
All documents and reports filed by the Trust or the Operating Partnership
pursuant to Sections 13(a), 13(c), 14 or 15(d) of the Exchange Act after the
date of this Prospectus and prior to termination of the offering described
herein shall be deemed to be incorporated by reference in this Prospectus and to
be a part hereof from the respective dates of filing of such documents or
reports, except as to any portion of any future annual or quarterly report to
the holders of securities of the Trust or the Operating Partnership or any proxy
or information statement which is not deemed to be filed under such provisions.
45
<PAGE> 48
Any statement contained herein or in a document incorporated or deemed to
be incorporated by reference herein shall be deemed to be modified or superseded
for purposes of the Registration Statement, this Prospectus and the applicable
Prospectus Supplement to the extent that a statement contained herein, in the
applicable Prospectus Supplement or in any other subsequently filed document
which also is or is deemed to be incorporated by reference in the Registration
Statement or this Prospectus modifies or supersedes such statement. Any such
statement so modified or superseded, except as so modified or superseded, shall
not be deemed to constitute a part of this Prospectus or the applicable
Prospectus Supplement.
The Company will provide without charge to each person to whom a copy of
this Prospectus or the applicable Prospectus Supplement has been delivered, upon
written or oral request of such person, a copy of any or all of the documents
incorporated herein by reference, other than exhibits to such documents unless
such exhibits are specifically incorporated by reference into such documents.
Requests for such copies should be directed to the Company at 65 Valley Stream
Parkway, Malvern, Pennsylvania 19355, Attention: Investor Relations; telephone
(610) 648-1700.
46
<PAGE> 49
PART II.
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 14. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION.
The following table sets forth the costs and expenses of the sale and
distribution of the Securities being registered, all of which are being borne by
the Company. Such costs and expenses do not include amounts that may be incurred
upon the issuance of certain types of securities represented hereunder.
<TABLE>
<S> <C>
Securities and Exchange Commission registration fee.............. $ 442,500
NASD Filing Fee.................................................. 30,500
Printing and engraving........................................... 650,000
Blue Sky fees and expenses....................................... 10,000
Trustees' fees and expenses...................................... 10,000
Rating agency fees and expenses.................................. 722,500
Legal and accounting fees and expenses........................... 1,325,000
Miscellaneous.................................................... 225,000
----------
Total.......................................................... $3,415,500
==========
</TABLE>
All expenses, except the Securities and Exchange Commission registration
fee and the NASD filing fee, are estimated.
ITEM 15. INDEMNIFICATION OF DIRECTORS AND OFFICERS.
The Trust
Under Section 8-301(15) and 2-418 of the Maryland General Corporation Law,
as amended, the Trust has the power to indemnify trustees and officers under
certain prescribed circumstances (including when authorized by a majority vote
of a quorum of disinterested trustees, by a majority vote of a committee of two
or more disinterested trustees, by independent legal counsel, or by
shareholders) and, subject to certain limitations (including, unless otherwise
determined by the proper court, when such trustee or officer is adjudged liable
to the Trust), against certain costs and expenses, including attorneys' fees
actually and reasonably incurred in connection with any action, suit or
proceeding, whether civil, criminal, administrative or investigative, to which
any of them is a party by reason of his or her being a trustee or officer of the
Trust if it is determined that he or she acted in accordance with the applicable
standard of conduct set forth in such statutory provisions including when such
trustee or officer acted in good faith and in a manner he or she reasonably
believed to be in or not opposed to the Trust's best interests, and, with
respect to any criminal action or proceeding, had no reasonable cause to believe
his or her conduct was unlawful.
Article XII of the Trust's By-laws provides that the Trust has the power to
indemnify trustees, officers and shareholders of the Trust against expenses
(including legal fees) reasonably incurred by any of them in connection with the
successful defense of a proceeding to which such person was made a party by
reason of such status, whether the success of such defense was on the merits or
otherwise, to the maximum extent permitted by law. The trustees, officers and
shareholders of the Trust also have the right, in certain circumstances, to be
paid in advance for expenses incurred in connection with any such proceedings.
The Operating Partnership
Section 8570 of the Pennsylvania Revised Uniform Limited Partnership Act
authorizes the Operating Partnership to indemnify any partner or other person
from and against any and all claims and demands whatsoever, unless it is
determined by a court that the act or omission giving rise to the claim of
indemnification constituted willful misconduct or recklessness.
Reference is made to Section 7.8 of the Operating Partnership's Second
Restated and Amended Limited Partnership Agreement, as amended to the date
hereof (the "Partnership Agreement"), a copy of which is
II-1
<PAGE> 50
filed as Exhibit 3.1.2 to the Registration Statement, which provides for
indemnification of the general partners and others. Section 7.8(d) of the
Partnership Agreement authorizes the Operating Partnership to purchase and
maintain insurance on behalf of the general partner and others against any
liability that may be asserted against or expenses that may be incurred by such
person regardless of whether the Operating Partnership would have the power to
indemnify such person against liability under the Partnership Agreement.
Reference is made to Section 7.9 of the Partnership Agreement which limits
the general partner's liability for monetary or other damages.
ITEM 16. EXHIBITS.
<TABLE>
<CAPTION>
ITEM DESCRIPTION
- ----- --------------------------------------------------------------------------------------
<C> <S>
1 Form of Underwriting Agreement.
4.1 Form of Senior Indenture by and between the Operating Partnership and the First
National Bank of Chicago. (Incorporated by reference to Exhibit 4.1 filed with the
Registrants' Quarterly Report on Form 10-Q for the fiscal quarter ended June 30,
1997).
4.2 Form of Subordinated Indenture by and between the Operating Partnership and the First
National Bank of Chicago. (Incorporated by reference to Exhibit 10.6 filed with the
Registrants' Quarterly Report on Form 10-Q for the fiscal quarter ended September 30,
1997).
4.3 Form of Supplemental Indenture.
4.4 Rights Agreement, dated as of December 17, 1997, by and between the Trust and the
Rights Agent (including as Exhibit A thereto the Form of Articles Supplementary
Relating to Designation, Preferences, and Rights of Series A Junior Participating
Preferred Shares of Liberty Property Trust, as Exhibit B thereto the Form of Rights
Certificate and as Exhibit C thereto the Summary of Rights to Purchase Series A Junior
Participating Preferred Shares). (Incorporated by reference to Exhibit 1 filed with
the Trust's Registration Statement on Form 8-A filed with Commission on December 23,
1997).
5.1 Opinion and Consent of Wolf, Block, Schorr and Solis-Cohen LLP.
5.2 Opinion and Consent of Weinberg & Green LLC.
12.1 Statements regarding computation of certain ratios.
23.1 Consent of Ernst & Young LLP.
23.2 Consent of Fegley & Associates.
23.3 Consent of Wolf, Block, Schorr and Solis-Cohen LLP (included in Exhibit 5.1).
23.4 Consent of Weinberg & Green LLC (included in Exhibit 5.2).
24.1 Powers of Attorney (included on signature pages included in this Registration
Statement).
</TABLE>
Additional exhibits to the Registration Statement will be filed with or
incorporated by reference in the Registration Statement in connection with the
future amendments or supplements to the prospectus forming a part of the
Registration Statement.
ITEM 17. UNDERTAKINGS.
(a) The undersigned Registrants hereby undertake:
(1) To file, during any period in which offers or sales are being
made, a post-effective amendment to this Registration Statement:
(i) To include any prospectus required by Section 10(a)(3) of the
Securities Act;
(ii) To reflect in the Prospectus any facts or events arising after
the effective date of the Registration Statement (or the most recent
post-effective amendment thereof) which, individually or in the
aggregate, represent a fundamental change in the information set forth
in the Registration Statement. Notwithstanding the foregoing, any
increase or decrease in volume of securities offered (if the total
dollar
II-2
<PAGE> 51
value of securities offered would not exceed that which was registered)
and any deviation from the low or high and of the estimated maximum
offering range may be reflected in the form of prospectus filed with the
Commission pursuant to Rule 424(b) if, in the aggregate, the changes in
volume and price represent no more than a 20 percent change in the
maximum aggregate offering price set forth in the "Calculation of
Registration Fee" table in the effective Registration Statement;
(iii) To include any material information with respect to the plan
of distribution not previously disclosed in the Registration Statement
or any material change to such information in the Registration
Statement;
provided, however, that paragraphs (i) and (ii) of this paragraph do not
apply if the information required to be included in a post-effective
amendment by those paragraphs is contained in periodic reports filed with
or furnished to the Commission by the Registrants pursuant to Section 13 or
Section 15(d) of the Exchange Act that are incorporated by reference in the
Registration Statement.
(2) That, for the purpose of determining any liability under the
Securities Act, each such post-effective amendment shall be deemed to be a
new registration statement relating to the securities offered therein, and
the offering of such securities at that time shall be deemed to be the
initial bona fide offering thereof.
(3) To remove from registration by means of a post-effective amendment
any of the securities being registered which remain unsold at the
termination of the offering.
(b) The undersigned Registrants hereby undertake that, for purposes of
determining any liability under the Securities Act, each filing of the
Registrants' annual report pursuant to Section 13(a) or Section 15(d) of the
Exchange Act that is incorporated by reference in the Registration Statement
shall be deemed to be a new registration statement relating to the securities
offered therein, and the offering of such securities at that time shall be
deemed to be the initial bona fide offering thereof.
(c) Insofar as indemnification for liabilities arising under the Securities
Act may be permitted to trustees, officers or controlling persons of the
Registrants pursuant to the foregoing provisions, or otherwise, the Registrants
have been advised that in the opinion of the Commission such indemnification is
against public policy as expressed in the Securities Act and is, therefore,
unenforceable. In the event that a claim for indemnification against such
liabilities (other than the payment by the Registrants of expenses incurred or
paid by a trustee, officer or controlling person of either Registrant in the
successful defense of any action, suit or proceeding) is asserted by such
trustee, officer or controlling person in connection with the securities being
registered, the Registrants will, unless in the opinion of their counsel the
matter has been settled by controlling precedent, submit to a court of
appropriate jurisdiction the question whether such indemnification by either of
them is against public policy as expressed in the Act and will be governed by
the final adjudication of such issue.
(d) The undersigned Registrants hereby undertake that:
(1) For purposes of determining any liability under the Securities
Act, the information omitted from the form of prospectus filed as part of
this Registration Statement in reliance upon Rule 430A under the Securities
Act and contained in a form of prospectus filed by the Registrants pursuant
to Rule 424(b)(1) or (4) or 497(h) under the Securities Act shall be deemed
to be part of this Registration Statement as of the time it was declared
effective.
(2) For the purpose of determining any liability under the Securities
Act, each post-effective amendment that contains a form of prospectus shall
be deemed to be a new registration statement relating to the securities
offered therein, and the offering of such securities at that time shall be
deemed to be the initial bona fide offering thereof.
(e) The undersigned Registrants hereby undertake to file an application for
the purpose of determining the eligibility of the trustee to act under
subsection (a) of Section 310 of the Trust Indenture Act of 1939 as amended (the
"TIA") in accordance with the rules and regulations prescribed by the Commission
under Section 305(b)(2) of the TIA.
II-3
<PAGE> 52
SIGNATURES AND POWERS OF ATTORNEY
Pursuant to the requirements of the Securities Act of 1933, as amended, the
undersigned Registrant certifies that it has reasonable grounds to believe that
it meets all of the requirements for filing on Form S-3 and has duly caused this
Registration Statement to be signed on its behalf by the undersigned, thereunto
duly authorized, in the City of Malvern, Commonwealth of Pennsylvania, on the
23rd day of December, 1997.
LIBERTY PROPERTY TRUST
By: /s/ WILLARD G. ROUSE III
------------------------------------
Willard G. Rouse III
Chief Executive Officer
KNOW ALL MEN BY THESE PRESENTS, that each person whose signature appears
below hereby constitutes and appoints Willard G. Rouse III, Joseph P. Denny and
George J. Alburger, Jr., his or her true and lawful attorneys-in-fact and
agents, with full power of substitution and resubstitution, for him or her and
in his or her name, place and stead, in any and all capacities, to sign any and
all amendments to this Registration Statement, and any additional related
registration statement filed pursuant to Rule 462(b) under the Securities Act of
1933, as amended (including post-effective amendments to the Registration
Statement and any such related registration statements), and to file the same,
with all exhibits thereto, and any other documents in connection therewith,
granting unto said attorneys-in-fact and agents full power and authority to do
and perform each and every act and thing requisite and necessary to be done in
and about the premises, as fully to all intents and purposes as he or she might
or could do in person, hereby ratifying and confirming all that said
attorneys-in-fact and agents, or their substitute or substitutes, may lawfully
do or cause to be done by virtue hereof.
Pursuant to the requirements of the Securities Act of 1933, as amended,
this Registration Statement has been signed below by the following persons in
the capacities with the above Registrant and on the dates indicated.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
- ------------------------------------------ -------------------------- ------------------
<C> <S> <C>
/s/ WILLARD G. ROUSE III Chairman of the Board of December 23, 1997
- ------------------------------------------ Trustees and Chief
Willard G. Rouse III Executive Officer
(Principal Executive
Officer)
/s/ GEORGE J. ALBURGER, JR. Chief Financial Officer December 23, 1997
- ------------------------------------------ (Principal Financial and
George J. Alburger, Jr. Accounting Officer)
/s/ FREDERICK F. BUCHHOLZ Trustee December 23, 1997
- ------------------------------------------
Frederick F. Buchholz
/s/ GEORGE F. CONGDON Trustee December 23, 1997
- ------------------------------------------
George F. Congdon
/s/ JOSEPH P. DENNY Trustee December 23, 1997
- ------------------------------------------
Joseph P. Denny
/s/ J. ANTHONY HAYDEN Trustee December 23, 1997
- ------------------------------------------
J. Anthony Hayden
</TABLE>
II-4
<PAGE> 53
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
- ------------------------------------------ -------------------------- ------------------
<C> <S> <C>
/s/ M. LEANNE LACHMAN Trustee December 23, 1997
- ------------------------------------------
M. Leanne Lachman
/s/ DAVID L. LINGERFELT Trustee December 23, 1997
- ------------------------------------------
David L. Lingerfelt
/s/ JOHN A. MILLER Trustee December 23, 1997
- ------------------------------------------
John A. Miller
/s/ STEPHEN B. SIEGEL Trustee December 23, 1997
- ------------------------------------------
Stephen B. Siegel
</TABLE>
II-5
<PAGE> 54
SIGNATURES AND POWERS OF ATTORNEY
Pursuant to the requirements of the Securities Act of 1933, as amended, the
undersigned Registrant certifies that it has reasonable grounds to believe that
it meets all of the requirements for filing on Form S-3 and have duly caused
this Registration Statement to be signed on its behalf by the undersigned,
thereunto duly authorized, in the City of Malvern, Commonwealth of Pennsylvania,
on the 23rd day of December, 1997.
LIBERTY PROPERTY LIMITED PARTNERSHIP
BY: Liberty Property Trust, as its sole
general partner
By: /s/ WILLARD G. ROUSE III
-------------------------------------
Willard G. Rouse III
Chief Executive Officer
KNOW ALL MEN BY THESE PRESENTS, that each person whose signature appears
below hereby constitutes and appoints Willard G. Rouse III, Joseph P. Denny and
George J. Alburger, Jr., his or her true and lawful attorneys-in-fact and
agents, with full power of substitution and resubstitution, for him or her and
in his or her name, place and stead, in any and all capacities, to sign any and
all amendments to this Registration Statement, and any additional related
registration statement filed pursuant to Rule 462(b) under the Securities Act of
1933, as amended (including post-effective amendments to the Registration
Statement and any such related registration statements), and to file the same,
with all exhibits thereto, and any other documents in connection therewith,
granting unto said attorneys-in-fact and agents full power and authority to do
and perform each and every act and thing requisite and necessary to be done in
and about the premises, as fully to all intents and purposes as he or she might
or could do in person, hereby ratifying and confirming all that said
attorneys-in-fact and agents, or their substitute or substitutes, may lawfully
do or cause to be done by virtue hereof.
Pursuant to the requirements of the Securities Act of 1933, as amended,
this Registration Statement has been signed below by the following persons in
the capacities indicated with the sole general partner of the above Registrant
and on the dates indicated.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
- ------------------------------------------ ---------------------------- ------------------
<C> <S> <C>
/s/ WILLARD G. ROUSE III Chairman of the Board of December 23, 1997
- ------------------------------------------ Trustees and Chief
Willard G. Rouse III Executive Officer
(Principal Executive
Officer)
/s/ GEORGE J. ALBURGER, JR. Chief Financial Officer December 23, 1997
- ------------------------------------------ (Principal Financial and
George J. Alburger, Jr. Accounting Officer)
/s/ FREDERICK F. BUCHHOLZ Trustee December 23, 1997
- ------------------------------------------
Frederick F. Buchholz
/s/ GEORGE F. CONGDON Trustee December 23, 1997
- ------------------------------------------
George F. Congdon
</TABLE>
II-6
<PAGE> 55
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
- ------------------------------------------ ---------------------------- ------------------
<C> <S> <C>
/s/ JOSEPH P. DENNY Trustee December 23, 1997
- ------------------------------------------
Joseph P. Denny
/s/ J. ANTHONY HAYDEN Trustee December 23, 1997
- ------------------------------------------
J. Anthony Hayden
/s/ M. LEANNE LACHMAN Trustee December 23, 1997
- ------------------------------------------
M. Leanne Lachman
/s/ DAVID L. LINGERFELT Trustee December 23, 1997
- ------------------------------------------
David L. Lingerfelt
/s/ JOHN A. MILLER Trustee December 23, 1997
- ------------------------------------------
John A. Miller
/s/ STEPHEN B. SIEGEL Trustee December 23, 1997
- ------------------------------------------
Stephen B. Siegel
</TABLE>
II-7
<PAGE> 1
Exhibit 1
_______________ SHARES
LIBERTY PROPERTY TRUST
Common Shares of Beneficial Interest
UNDERWRITING AGREEMENT
____________, 199__
[UNDERWRITERS]
Dear Sirs:
Liberty Property Trust, a Maryland real estate investment trust (the "Company"),
and Liberty Property Limited Partnership, a Pennsylvania limited partnership
(the "Operating Partnership" and, together with the Company, the "Transaction
Entities"), each wish to confirm as follows its agreement with [NAMES OF
UNDERWRITERS], as the representatives (the "Representatives") of the several
underwriters named in Schedule 1 (the "Underwriters," which term shall also
include any underwriter substituted as hereinafter provided in Section 9 of this
Agreement), with respect to the sale by the Company and the purchase by the
Underwriters, acting severally and not jointly, of an aggregate of
_________________ shares (the "Firm Shares") of the Company's common shares of
beneficial interest, par value $.001 per share (the "Common Shares"). In
addition, the Company proposes to grant to the Underwriters an option to
purchase up to an additional _________________ Common Shares on the terms and
for the purposes set forth in Section 2 (the "Option Shares"). The Firm Shares
and the Option Shares, if purchased, are hereinafter collectively called the
"Shares."
Capitalized terms used but not otherwise defined herein shall have the meanings
given to those terms in the Prospectus (as defined below).
1. REPRESENTATIONS, WARRANTIES AND AGREEMENTS OF THE
TRANSACTION ENTITIES. Each of the Transaction Entities, jointly and severally,
represents, warrants and agrees that, as of the date hereof:
(a) A registration statement on Form S-3 (No. ____________), and any
amendments thereto, with respect to the Shares have (i) been prepared by the
Company in conformity with the requirements of the United States Securities Act
of 1933, as amended (the "Securities Act") and the rules and regulations (the
"Rules and Regulations") of the United States Securities and Exchange Commission
(the "Commission") thereunder, (ii) been filed with the Commission under the
Securities Act and (iii) become effective under the Securities Act. Copies of
such registration statements and any amendments thereto have been delivered by
the Company to you. As used in this Agreement, "Effective Time" means the date
and the time as of which such registration statement, or the most recent
post-effective amendment thereto, if any, was declared effective by the
Commission; "Effective Date" means the date of the Effective Time; "Preliminary
Prospectus" means each prospectus included in each such registration statement,
or amendments thereto, before it became effective under the Securities Act and
any prospectus filed with the Commission by the Company with the consent of the
Representatives pursuant to Rule 424(a) of the Rules and Regulations;
"Registration Statement" means such registration statement, as amended at the
Effective Time, including any documents incorporated by reference therein at
<PAGE> 2
such time and all information contained in the final prospectus filed with the
Commission pursuant to Rule 424(b) of the Rules and Regulations and deemed to be
a part of such registration statement as of the Effective Time pursuant to
paragraph (b) of Rule 430A of the Rules and Regulations, and shall include any
registration statement filed pursuant to Rule 462(b) of the Rules and
Regulations; and "Prospectus" means such final prospectus, as first filed with
the Commission pursuant to Rule 424(b) of the Rules and Regulations. Any
reference herein to the Registration Statement, the Prospectus or a Preliminary
Prospectus shall be deemed to include the documents incorporated or deemed to be
incorporated by reference therein which were filed under the Securities and
Exchange Act of 1934, as amended (the "Exchange Act"). For purposes of this
Agreement, all references to the Registration Statement, any Preliminary
Prospectus or the Prospectus or any amendment or supplement to any of the
foregoing shall be deemed to include the copy filed with the Commission pursuant
to its Electronic Data Gathering, Analysis and Retrieval system ("EDGAR").
(b) Each Preliminary Prospectus included as part of the Registration
Statement as originally filed or as part of any amendment or supplement thereto,
or filed pursuant to Rule 424 under the Rules and Regulations, complied when so
filed in all material respects with the provisions of the Securities Act, and
each Preliminary Prospectus delivered to the Underwriters for use in connection
with this offering was identical to the electronically transmitted copies
thereof filed with the Commission pursuant to EDGAR, except to the extent
permitted by Regulation S-T.
(c) The Registration Statement conforms in all material respects, and
the Prospectus and any further amendments or supplements to the Registration
Statement or the Prospectus will, when they become effective or are filed with
the Commission, as the case may be, conform in all material respects to the
requirements of the Securities Act and the Rules and Regulations, and do not and
will not, as of the Effective Date (as to the Registration Statement and any
amendment thereto) and as of the applicable filing date and at the First
Delivery Date (as defined below) (as to the Prospectus and any amendment or
supplement thereto) contain an untrue statement of a material fact or omit to
state a material fact required to be stated therein or necessary to make the
statements therein not misleading (with respect to the Prospectus, in light of
the circumstances under which they were made); provided that no representation
or warranty is made as to information contained in or omitted from the
Registration Statement or the Prospectus in reliance upon and in conformity with
written information furnished to the Company through the Representatives by or
on behalf of any Underwriter specifically for inclusion therein. The Prospectus
delivered to the Underwriters for use in connection with this offering was
identical to the electronically transmitted copies thereof filed with the
Commission pursuant to EDGAR, except to the extent permitted by Regulation S-T.
(d) The documents incorporated or deemed to be incorporated by
reference in the Registration Statement as of the Effective Date, the Prospectus
as of its date or any Preliminary Prospectus as of its date, complied in all
material respects with the Exchange Act and the rules and regulations
thereunder, and none of such documents, at such dates, contained an untrue
statement of a material fact or omitted to state a material fact required to be
stated therein or necessary to make the statements therein, in the light of the
circumstances under which they were made, not misleading.
(e) No stop order suspending the effectiveness of the Registration
Statement or any part thereof has been issued and no proceeding for that purpose
has been instituted or, to the knowledge of either of the Transaction Entities,
threatened by the Commission or by the state securities authority of any
jurisdiction. No order preventing or suspending the use of any
<PAGE> 3
Preliminary Prospectus or the Prospectus has been issued and no proceeding for
that purpose has been instituted or, to the knowledge of either of the
Transaction Entities, after due inquiry of the Commission, threatened by the
Commission or by the state securities authority of any jurisdiction.
(f) The Company has been duly formed and is validly existing as a real
estate investment trust in good standing under the laws of the State of
Maryland, is duly qualified to do business and is in good standing in each
jurisdiction in which its ownership or lease of property or the conduct of its
business requires such qualification, and has all power and authority necessary
to own or hold its properties, to conduct the business in which it is engaged
and to enter into and perform its obligations under this Agreement. None of the
subsidiaries of the Company (other than the Operating Partnership, Liberty
Property Development Corp. ("Development Corp."), Liberty Property Development
Corp.-II ("Development-II") and Liberty Special Purpose Corp. ("SP Corp.")) is a
"significant subsidiary," as such term is defined in Rule 405 of the Rules and
Regulations. Except as described in the Prospectus and other than the Property
Affiliates (as defined below) and the Operating Partnership, Development Corp.,
Development-II and SP Corp., the Company owns no direct or indirect equity
interest in any entity, except for such interests as, in the aggregate, are not
material to the condition, financial or otherwise, or the earnings, assets,
business affairs or business prospects of the Company and its subsidiaries
considered as a single enterprise.
(g) The Company has an authorized capitalization as set forth in the
Prospectus under the caption "Capitalization," and all of the issued shares of
beneficial interest of the Company have been duly and validly authorized and
issued, are fully paid and non-assessable and conform to the description thereof
contained in the Prospectus. Except as disclosed in the Prospectus, no shares of
beneficial interest of the Company are reserved for any purpose and except for
the equity interests in the Operating Partnership ("Units") and the Operating
Partnership's Exchangeable Subordinated Debentures due 2001, there are no
outstanding securities convertible into or exchangeable for any shares of
beneficial interest of the Company. Except for transactions described in the
Prospectus and transactions in connection with stock option and other benefit
plans, there are no outstanding options, rights (preemptive or otherwise) or
warrants to purchase or subscribe for shares of beneficial interest or any other
securities of the Company.
(h) The Operating Partnership has been duly formed and is validly
existing as a limited partnership in good standing under the laws of the
Commonwealth of Pennsylvania, is duly qualified to do business and is in good
standing as a foreign limited partnership in each jurisdiction in which its
ownership or lease of property or the conduct of its business requires such
qualification, and has all partnership power and authority necessary to own or
hold its properties, to conduct the business in which it is engaged and to enter
into and perform its obligations under this Agreement. The Company is the sole
general partner of the Operating Partnership. The agreement of limited
partnership of the Operating Partnership, as amended to date (the "Operating
Partnership Agreement") is in full force and effect, and the aggregate
percentage interests of the Company and the limited partners in the Operating
Partnership are as set forth in the Prospectus; provided that to the extent any
portion of the over-allotment option described in Section 2 hereof is exercised
at the First Delivery Date, the percentage interest of such partners in the
Operating Partnership will be adjusted accordingly. Additionally, to the extent
any portion of such over-allotment option is exercised subsequent to the First
Delivery Date, the Company will contribute the proceeds from the sale of the
Option Shares to the Operating Partnership in exchange for an increase in the
Company's interest in the Operating Partnership consistent with the number of
Option Shares issued.
<PAGE> 4
(i) Development Corp. has been duly organized and is validly existing
as a corporation in good standing under the laws of the Commonwealth of
Pennsylvania, is duly qualified to do business and is in good standing in each
jurisdiction in which its ownership or lease of property or the conduct of its
business requires such qualification, and has all corporate power and authority
necessary to own or hold its properties and to conduct the business in which it
is engaged. All of the issued and outstanding capital stock of Development Corp.
has been duly authorized and validly issued and is fully paid and
non-assessable, has been offered and sold in compliance with all applicable laws
(including, without limitation, federal or state securities laws) and all of the
capital stock of Development Corp. owned by the Operating Partnership, as
described in the Prospectus, is owned free and clear of any security interest,
mortgage, pledge, lien, encumbrance, claim, restriction or equities. No shares
of capital stock of Development Corp. are reserved for any purpose, and there
are no outstanding securities convertible into or exchangeable for any capital
stock of Development Corp., and no outstanding options, rights (preemptive or
otherwise) or warrants to purchase or to subscribe for shares of such capital
stock or any other securities of Development Corp.
(j) Development-II has been duly organized and is validly existing as a
corporation in good standing under the laws of the Commonwealth of Pennsylvania,
is duly qualified to do business and is in good standing in each jurisdiction in
which its ownership or lease of property or the conduct of its business requires
such qualification, and has all corporate power and authority necessary to own
or hold its properties and to conduct the business in which it is engaged. All
of the issued and outstanding capital stock of Development-II has been duly
authorized and validly issued and is fully paid and non-assessable, has been
offered and sold in compliance with all applicable laws (including, without
limitation, federal or state securities laws) and all of the capital stock of
Development-II owned by the Operating Partnership, as described in the
Prospectus, is owned free and clear of any security interest, mortgage, pledge,
lien, encumbrance, claim, restriction or equities. No shares of capital stock of
Development-II are reserved for any purpose, and there are no outstanding
securities convertible into or exchangeable for any capital stock of
Development-II, and no outstanding options, rights (preemptive or otherwise) or
warrants to purchase or to subscribe for shares of such capital stock or any
other securities of Development-II.
(k) SP Corp. has been duly organized and is validly existing as a
corporation in good standing under the laws of the Commonwealth of Pennsylvania,
is duly qualified to do business and is in good standing as a foreign
corporation in each jurisdiction in which its ownership or lease of property or
the conduct of its business requires such qualification, and has all corporate
power and authority necessary to own or hold its properties and to conduct the
business in which it is engaged. All of the issued and outstanding capital stock
of SP Corp. has been duly authorized and validly issued and is fully paid and
non-assessable, has been offered and sold in compliance with all applicable laws
(including, without limitation, federal or state securities laws) and all of the
capital stock of SP Corp. is owned by the Company free and clear of any security
interest, mortgage, pledge, lien, encumbrance, claim, restriction or equities.
No shares of capital stock of SP Corp. are reserved for any purpose, and there
are no outstanding securities convertible into or exchangeable for any capital
stock of SP Corp. and no outstanding options, rights (preemptive or otherwise)
or warrants to purchase or to subscribe for shares of such capital stock or any
other securities of SP Corp.
(l) Each of those certain partnerships, limited liability companies or
other entities holding title to one or more of the Properties (the "Property
Affiliates") are the only entities other than the Operating Partnership through
which the Company and the Operating Partnership own interests in the Properties.
Each of the Property Affiliates has been duly organized and is validly
<PAGE> 5
existing as a limited partnership, limited liability company or other entity in
good standing under the laws of the jurisdiction in which it is organized, is
duly qualified to do business and is in good standing as a foreign entity in
each jurisdiction in which its ownership or lease of property or the conduct of
its business requires such qualification, and has all power and authority
necessary to own or hold its properties and to conduct the business in which it
is engaged. Except as set forth in the Prospectus, all of the ownership
interests of each Property Affiliate have been duly and validly authorized and
issued, are fully paid and non-assessable and all of the ownership interests
owned directly or indirectly by the Company and the Operating Partnership, as
described in the Prospectus, are owned free and clear of any security interest,
mortgage, pledge, lien, encumbrance, claim, restriction or equities.
(m) The Shares have been duly and validly authorized and, when issued
and delivered against payment therefor as provided herein, will be duly and
validly issued, fully paid and non-assessable. Upon payment of the purchase
price and delivery of the Shares in accordance herewith, each of the
Underwriters will receive good, valid and marketable title to the Shares, free
and clear of all security interests, mortgages, pledges, liens, encumbrances,
claims, restrictions and equities. The terms of the Shares conform in substance
to all statements and descriptions related thereto contained in the Prospectus.
The form of the certificates to be used to evidence the Shares will at the First
Delivery Date be in due and proper form and will comply with all applicable
legal requirements. The issuance of the Shares is not subject to any preemptive
or other similar rights.
(n) (A) This Agreement has been duly and validly authorized, executed
and delivered by each of the Transaction Entities, and assuming due
authorization, execution and delivery by the Underwriters, is a valid and
binding agreement of each of the Transaction Entities, enforceable against the
Transaction Entities in accordance with its terms; and (B) the Operating
Partnership Agreement and the partnership agreement of each Property Affiliate,
has been duly and validly authorized, executed and delivered by the parties
thereto and is a valid and binding agreement of the parties thereto, enforceable
against such parties in accordance with its terms.
(o) The execution, delivery and performance of this Agreement by each
of the Transaction Entities and the consummation of the transactions
contemplated hereby will not conflict with or result in a breach or violation of
any of the terms or provisions of, or constitute a default under, any indenture,
mortgage, deed of trust, loan agreement or other agreement or instrument to
which either of the Transaction Entities is a party or by which either of the
Transaction Entities is bound or to which any of the Properties or other assets
of either of the Transaction Entities is subject, nor will such actions result
in any violation of the provisions of the charter, by-laws, certificate of
limited partnership or agreement of limited partnership of either of the
Transaction Entities, or any statute or any order, rule or regulation of any
court or governmental agency or body having jurisdiction over either of the
Transaction Entities or any of their properties or assets; and except for the
registration of the Shares under the Securities Act and such consents,
approvals, authorizations, registrations or qualifications as may be required
under the Exchange Act and applicable state securities laws in connection with
the purchase and distribution of the Shares by the Underwriters, no consent,
approval, authorization or order of, or filing or registration with, any such
court or governmental agency or body is required for the xecution, delivery and
performance of this Agreement by the Transaction Entities and the consummation
of the transactions contemplated hereby.
(p) Other than as described in the Prospectus and other than rights of
persons whose securities are already registered under the Securities Act, there
are no contracts, agreements or understandings between the Company and any
person granting such person the right to require
<PAGE> 6
the Company to file a registration statement under the Securities Act with
respect to any securities of the Company owned or to be owned by such person or
to require the Company to include such securities in the securities registered
pursuant to the Registration Statement or in any securities being registered
pursuant to any other registration statement filed by the Company under the
Securities Act.
(q) Except as described or contemplated in the Prospectus, neither
Transaction Entity has sold or issued any securities during the six-month period
preceding the date of the Prospectus, including any sales pursuant to Rule 144A
under, or Regulations D or S of, the Securities Act.
(r) Neither of the Transaction Entities nor any of the Properties has
sustained, since the date of the latest audited financial statements included in
the Prospectus, any material loss or interference with its business from fire,
explosion, flood or other calamity, whether or not covered by insurance, or from
any labor dispute or court or governmental action, order or decree, other than
as set forth or contemplated in the Prospectus; and, since such date, there has
not been any material change in the capital stock or long-term debt of either of
the Transaction Entities or any material adverse change, or any development
involving a prospective material adverse change, in or affecting any of the
Properties or the general affairs, management, financial position, shareholders'
equity or results of operations of either of the Transaction Entities, other
than as set forth or contemplated in the Prospectus.
(s) The financial statements (including the related notes and
supporting schedules) filed as part of, or incorporated by reference in, the
Registration Statement and the Prospectus present fairly the financial condition
and results of operations of the entities purported to be shown thereby, at the
dates and for the periods indicated, and have been prepared in conformity with
generally accepted accounting principles applied on a consistent basis
throughout the periods involved. The Company's ratios of earnings to fixed
charges (actual and, if any, pro forma) included in the Prospectus under the
captions "Ratios of Earnings to Fixed Charges" and in Exhibit 12.1 to the
Registration Statement have been calculated in compliance with Item 503(d) of
Regulation S-K of the Commission. Pro forma financial information included in or
incorporated by reference in the Registration Statement and the Prospectus has
been prepared in accordance with the applicable requirements of the Securities
Act, the Rules and Regulations and AICPA guidelines with respect to pro forma
financial information and includes all adjustments necessary to present fairly
the pro forma financial position of the Company at the respective dates
indicated and the results of operations for the respective periods specified.
(t) Ernst & Young LLP, who have certified certain financial statements
of the Company, whose reports appear in the Prospectus or are incorporated by
reference therein and who have delivered the initial letter referred to in
Section 7(f) hereof, are independent public accountants as required by the
Securities Act and the Rules and Regulations.
(u) (A) The Operating Partnership and the Property Affiliates have good
and marketable title to each of the Properties, free and clear of all liens,
encumbrances, claims, security interests and defects, other than those referred
to in the Prospectus or those which are not material in amount or those which
would not have a material adverse effect on the business, operations, use or
value of any of the Properties; (B) all liens, charges, encumbrances, claims or
restrictions on or affecting any of the Properties and the assets of any
Transaction Entity which are required to be disclosed in the Prospectus are
disclosed therein; (C) except as otherwise described in the Prospectus, neither
Transaction Entity and, to the knowledge of the Transaction Entities, no tenant
of any of the Properties is in default under (i) any space leases (as lessor or
<PAGE> 7
lessee, as the case may be) relating to the Properties, or (ii) any of the
mortgages or other security documents or other agreements encumbering or
otherwise recorded against the Properties, which individually or in the
aggregate would have a material adverse effect on the Company and its
subsidiaries taken together as a whole, and neither Transaction Entity knows of
any event which, but for the passage of time or the giving of notice, or both,
would constitute such a default under any of such documents or agreements; (D)
each of the Properties complies with all applicable codes, laws and regulations
(including, without limitation, building and zoning codes, laws and regulations
and laws relating to access to the Properties), except for such failures to
comply that would not have a material adverse effect on the business operations,
use or value of such Property; and (E) neither Transaction Entity has knowledge
of any pending or threatened condemnation proceedings, zoning change or other
proceeding or action that will in any material manner adversely affect the size
of, use of, improvements on, construction on or access to the Properties.
(v) Except as described in the Prospectus, the mortgages and deeds of
trust which encumber the Properties are not convertible into equity securities
of the entity owning such Property and said mortgages and deeds of trust are not
cross-defaulted or cross-collateralized with any property other than other
Properties.
(w) Except as described in the Prospectus, the Operating Partnership
and the Property Affiliates have obtained title insurance on the fee or
leasehold interests in each of the Properties, n an amount at least equal to the
greater of (A) the mortgage indebtedness of each such Property or (B) the
purchase price of each such Property.
(x) Except as disclosed in the Prospectus and except such as in each
case would not have a material adverse effect on any Property, Property
Affiliate, or Transaction Entity or any of their subsidiaries, taken together as
a whole; (A) to the knowledge of the Transaction Entities, after due inquiry,
the operations of the Company, the Operating Partnership, Development Corp.,
Development-II, SP Corp., and the Properties are in compliance with all
Environmental Laws (as defined below) and all requirements of applicable
permits, licenses, approvals and other authorizations issued pursuant to
Environmental Laws; (B) to the knowledge of the Transaction Entities, after due
inquiry, none of the Transaction Entities, the Property Affiliates or any
Property has caused or suffered to occur any Release (as defined below) of any
Hazardous Substance (as defined below) into the Environment (as defined below)
on, in, under or from any Property, and no condition exists on, in, under or
adjacent to any Property that could result in the incurrence of liabilities
under, or any violations of, any Environmental Law or give rise to the
imposition of any Lien (as defined below), under any Environmental Law; (C) none
of the Transaction Entities or Property Affiliates has received any written
notice of a claim under or pursuant to any Environmental Law or under common law
pertaining to Hazardous Substances on, in, under or originating from any
Property; (D) neither of the Transaction Entities has actual knowledge of, or
received any written notice from any Governmental Authority (as defined below)
claiming, any violation of any Environmental Law or a determination to undertake
and/or request the investigation, remediation, clean-up or removal of any
Hazardous Substance released into the Environment on, in, under or from any
Property; and (E) no Property is included or, to the knowledge of the
Transaction Entities, after due inquiry, proposed for inclusion on the National
Priorities List issued pursuant to CERCLA (as defined below) by the United
States Environmental Protection Agency (the "EPA") or on the Comprehensive
Environmental Response, Compensation, and Liability Information System database
maintained by the EPA, and neither of the Transaction Entities has actual
knowledge that any Property has otherwise been identified in a published writing
by the EPA as a potential CERCLA removal, remedial or response site or, to the
knowledge of the Transaction Entities, is included on any similar list of
<PAGE> 8
potentially contaminated sites pursuant to any other Environmental Law.
As used herein, "Hazardous Substance" shall include any hazardous substance,
hazardous waste, toxic substance, pollutant or hazardous material, including,
without limitation, oil, petroleum or any petroleum-derived substance or waste,
asbestos or asbestos-containing materials, PCBs, pesticides, explosives,
radioactive materials, dioxins, urea formaldehyde insulation or any constituent
of any such substance, pollutant or waste which is subject to regulation under
any Environmental Law (including, without limitation, materials listed in the
United States Department of Transportation Optional Hazardous Material Table, 49
C.F.R. #172.101, or in the EPA's List of Hazardous Substances and Reportable
Quantities, 40 C.F.R. Part 302); "Environment" shall mean any surface water,
drinking water, ground water, land surface, subsurface strata, river sediment,
buildings, structures, and ambient, workplace and indoor and outdoor air;
"Environmental Law" shall mean the Comprehensive Environmental Response,
Compensation and Liability Act of 1980, as amended (42 U.S.C. #9601 et seq.)
("CERCLA"), the Resource Conservation and Recovery Act of 1976, as amended (42
U.S.C. #6901, et seq.), the Clean Air Act, as amended (42 U.S.C. #7401, et
seq.), the Clean Water Act, as amended (33 U.S.C. #1251, et seq.), the Toxic
Substances Control Act, as amended (15 U.S.C. #2601, et seq.), the Occupational
Safety and Health Act of 1970, as amended (29 U.S.C. #651, et seq.), the
Hazardous Materials Transportation Act, as amended (49 U.S.C. #1801, et seq.),
and all other federal, state and local laws, ordinances, regulations, rules and
orders relating to the protection of the Environment or of human health from
environmental effects; "Governmental Authority" shall mean any federal, state or
local governmental office, agency or authority having the duty or authority to
promulgate, implement or enforce any Environmental Law; "Lien" shall mean, with
respect to any Property, any lien, encumbrance, penalty, fine, charge,
assessment, judgment or other liability in, on or affecting such Property; and
"Release" shall mean any spilling, leaking, pumping, pouring, emitting,
emptying, discharging, injecting, escaping, leaching, dumping, emanating or
disposing of any Hazardous Substance into the Environment, including, without
limitation, the abandonment or discard of barrels, containers, tanks (including,
without limitation, underground storage tanks) or other receptacles containing
or previously containing any Hazardous Substance.
(y) Each Transaction Entity and their subsidiaries, and each Property
carries, or is covered by, insurance in such amounts and covering such risks as
is adequate for the conduct of its business and the value of such Property and
as is customary for companies engaged in similar businesses in similar
industries.
(z) Each Transaction Entity owns or possesses adequate rights to use
all material patents, patent applications, trademarks, service marks, trade
names, trademark registrations, service mark registrations, copyrights and
licenses necessary for the conduct of its business and has no reason to believe
that the conduct of its business will conflict with, and has not received any
notice of any claim of conflict with, any such rights of others.
(aa) Except as described in the Prospectus, there are no legal or
governmental proceedings pending to which either Transaction Entity or their
subsidiaries is a party or of which any property or assets of either Transaction
Entity or their subsidiaries is the subject which, if determined adversely to
such Transaction Entity or subsidiary, could reasonably be expected to have a
material adverse effect on the consolidated financial position, shareholders'
equity, results of operations, business or prospects of the Company; and to the
best knowledge of the Transaction Entities, no such proceedings are threatened
or contemplated by governmental authorities or threatened by others.
<PAGE> 9
(bb) There are no contracts or other documents which are required to be
described in the Prospectus or filed as exhibits to the Registration Statement
by the Securities Act or by the Rules and Regulations which have not been
described in the Prospectus or filed as exhibits to the Registration Statement
or incorporated therein by reference as permitted by the Rules and Regulations.
(cc) No relationship, direct or indirect, exists between or among
either of the Transaction Entities on the one hand, and the trustees, officers,
shareholders, customers or suppliers of the Transaction Entities on the other
hand, that is required to be described in the Prospectus that is not so
described.
(dd) No labor disturbance by the employees of either Transaction Entity
exists or, to the knowledge of the Transaction Entities, is imminent which might
be expected to have a material adverse effect on the consolidated financial
position, shareholders' equity, results of operations, business or prospects of
such Transaction Entity.
(ee) Each Transaction Entity is in compliance in all material respects
with all presently applicable provisions of the Employee Retirement Income
Security Act of 1974, as amended, including the regulations and published
interpretations thereunder ("ERISA"); no "reportable event" (as defined in
ERISA) has occurred with respect to any "pension plan" (as defined in ERISA) for
which either Transaction Entity would have any liability; neither Transaction
Entity has incurred or expects to incur liability under (i) Title IV of ERISA
with respect to termination of, or withdrawal from, any "pension plan" or (ii)
sections 412 or 4971 of the Internal Revenue Code of 1986, as amended, including
the regulations and published interpretations thereunder (the "Code"); and each
"pension plan" for which either Transaction Entity would have any liability that
is intended to be qualified under section 401(a) of the Code is so qualified in
all material respects and nothing has occurred, whether by action or by failure
to act, which would cause the loss of such qualification.
(ff) Each Transaction Entity and their subsidiaries has filed all
federal, state and local income and franchise tax returns required to be filed
through the date hereof and has paid all taxes due thereon, and no material tax
deficiency has been determined adversely to either Transaction Entity or their
subsidiaries which has had (nor does either Transaction Entity have any
knowledge of any tax deficiency which, if determined adversely to it might have)
a material adverse effect on the financial position, shareholders' equity,
results of operations, business or prospects of such Transaction Entity or
subsidiary.
(gg) At all times since June 16, 1994, the Company, the Operating
Partnership, Development Corp., Development-II and SP Corp. have been and, upon
the sale of the Shares, will continue to be, organized and operated in
conformity with the requirements for qualification of the Company as a real
estate investment trust under the Code and the proposed method of operation of
the Company, the Operating Partnership, Development Corp., Development-II and SP
Corp. will enable the Company to continue to meet the requirements for
qualification and taxation as a real estate investment trust under the Code.
(hh) Since the date as of which information is given in the Prospectus
through the date hereof, and except as may otherwise be disclosed or
contemplated in the Prospectus, neither Transaction Entity has (i) issued or
granted any securities, (ii) incurred any liability or obligation, direct or
contingent, other than liabilities and obligations which were incurred in the
ordinary course of business, (iii) entered into any transaction not in the
ordinary course of
<PAGE> 10
business nor (iv) declared or paid any dividend on its capital stock (other than
regular quarterly dividends).
(ii) Each Transaction Entity and their subsidiaries (i) makes and keeps
accurate books and records and (ii) maintains internal accounting controls which
provide reasonable assurance that (A) transactions are executed in accordance
with management's authorization, (B) transactions are recorded as necessary to
permit preparation of its financial statements and to maintain accountability
for its assets, (C) access to its assets is permitted only in accordance with
management's authorization and (D) the reported accountability for its assets is
compared with existing assets at reasonable intervals.
(jj) No Transaction Entity or any of their subsidiaries (i) is in
violation of its charter, by-laws, certificate of limited partnership, agreement
of limited partnership or other similar organizational document, (ii) is in
default in any material respect, and no event has occurred which, with notice or
lapse of time or both, would constitute such a default, in the due performance
or observance of any term, covenant or condition contained in any material
indenture, mortgage, deed of trust, loan agreement or other agreement or
instrument to which it is a party or by which it is bound or to which any of the
Properties or any of its other properties or assets is subject or (iii) is in
violation in any material respect of any law, ordinance, governmental rule,
regulation or court decree to which it or the Properties or any of its other
properties or assets may be subject or has failed to obtain any material
license, permit, certificate, franchise or other governmental authorization or
permit necessary to the ownership of the Properties or any of its other
properties or assets or to the conduct of its business.
(kk) Neither Transaction Entity, nor any trustee, officer, agent,
employee or other person associated with or acting on behalf of either
Transaction Entity, has used any corporate funds for any unlawful contribution,
gift, entertainment or other unlawful expense relating to political activity;
made any direct or indirect unlawful payment to any foreign or domestic
government official or employee from corporate funds; violated or is in
violation of any provision of the Foreign Corrupt Practices Act of 1977; or made
any bribe, rebate, payoff, influence payment, kickback or other unlawful
payment.
(ll) Neither Transaction Entity or any of their subsidiaries is an
"investment company" within the meaning of such term under the Investment
Company Act of 1940 and the rules and regulations of the Commission thereunder.
(mm) The Shares will be listed on the New York Stock Exchange on the
First Delivery Date.
(nn) Other than this Agreement and as set forth in the Prospectus under
the heading "Underwriting," there are no contracts, agreements or understandings
between either Transaction Entity and any person that would give rise to a valid
claim against either Transaction Entity or any Underwriter for a brokerage
commission, finder's fee or other like payment with respect to the consummation
of the transactions contemplated by this Agreement.
(oo) Each Transaction Entity has complied with all applicable
provisions of Florida Statutes #517.075, relating to issuers doing business with
Cuba.
2. PURCHASE OF THE SHARES BY THE UNDERWRITERS. On the basis of the
representations and warranties contained in, and subject to the terms and
conditions of, this Agreement, the Company agrees to sell _________ Firm Shares,
to the several Underwriters and
<PAGE> 11
each of the Underwriters, severally and not jointly, agrees to purchase the
number of Firm Shares set forth opposite that Underwriter's name in Schedule 1
hereto. The respective purchase obligations of the Underwriters with respect to
the Firm Shares shall be rounded among the Underwriters to avoid fractional
shares, as the Representatives may determine.
In addition, the Company grants to the Underwriters an option to
purchase up to _________ Option Shares. Such option is granted solely for the
purpose of covering over-allotments in the sale of Firm Shares and is
exercisable as provided in Section 4 hereof. Option Shares shall be purchased
severally for the account of the Underwriters in proportion to the number of
Firm Shares set forth opposite the names of such Underwriters in Schedule 1
hereto. The respective purchase obligations of each Underwriter with respect to
the Option Shares shall be adjusted by the Representatives so that no
Underwriter shall be obligated to purchase Option Shares other than in 100-share
amounts. The price of both the Firm Shares and any Option Shares shall be
$_______ per share.
The Company shall not be obligated to deliver any of the Shares to be
delivered on the First Delivery Date or the Second Delivery Date (as defined
below), as the case may be, except upon payment for all the Shares to be
purchased on such Delivery Date as provided herein.
3. OFFERING OF SHARES BY THE UNDERWRITERS. Upon authorization by the
Representatives of the release of the Firm Shares, the several Underwriters
propose to offer the Firm Shares for sale upon the terms and conditions set
forth in the Prospectus.
4. DELIVERY OF AND PAYMENT FOR THE SHARES. Delivery of and payment for the Firm
Shares shall be made at the office of _____________________________, at _____
A.M., New York City time, on the third full business day following the date of
this Agreement or on the fourth full business day if this Agreement is executed
after the daily closing time of the New York Stock Exchange (unless postponed in
accordance with the provisions of Section 9 hereof), or at such other date or
place as shall be determined by agreement between the Representatives and the
Company. This date and time are sometimes referred to as the "First Delivery
Date." On the First Delivery Date, the Company shall deliver or cause to be
delivered certificates representing the Firm Shares to the Representatives for
the account of each Underwriter against payment to or upon the order of the
Company of the purchase price by certified or official bank check or checks
payable in same day funds or, at the discretion of the Company, by wire transfer
in same day funds. Time shall be of the essence, and delivery at the time and
place specified pursuant to this Agreement is a further condition of the
obligation of each Underwriter hereunder. Upon delivery, the Firm Shares shall
be registered in such names and in such denominations as the Representatives
shall request in writing not less than two full business days prior to the First
Delivery Date. For the purpose of expediting the checking and packaging of the
certificates for the Firm Shares, the Company shall make the certificates
representing the Firm Shares available for inspection by the Representatives in
New York, New York, not later than 2:00 P.M., New York City time, on the
business day prior to the First Delivery Date.
At any time on or before the thirtieth day after the date of this
Agreement, the option granted in Section 2 may be exercised in whole or in part
by written notice being given to the Company by the Representatives. Such notice
shall set forth the aggregate number of Option Shares as to which the option is
being exercised, the names in which the Option Shares are to be registered, the
denominations in which the Option Shares are to be issued and the date and time,
as determined by the Representatives, when the Option Shares are to be
delivered; provided, however, that this date and time shall not be earlier than
the First Delivery Date nor earlier than the second business day after the date
on which the option shall have been exercised nor later
<PAGE> 12
than the fifth business day after the date on which the option shall have been
exercised. The date and time the Option Shares are delivered are sometimes
referred to as the "Second Delivery Date" and the First Delivery Date and the
Second Delivery Date are sometimes each referred to as a "Delivery Date."
Delivery of and payment for the Option Shares shall be made at the
place specified in the first sentence of the first paragraph of this Section 4
(or at such other place as shall be determined by agreement between the
Representatives and the Company) at 10:00 A.M., New York City time, on the
Second Delivery Date. On the Second Delivery Date, the Company shall deliver or
cause to be delivered the certificates representing the Option Shares to the
Representatives for the account of each Underwriter against payment to or upon
the order of the Company of the purchase price by certified or official bank
check or checks payable in same day funds or, at the discretion of the Company,
by wire transfer in same day funds. Time shall be of the essence, and delivery
at the time and place specified pursuant to this Agreement is a further
condition of the obligation of each Underwriter hereunder. Upon delivery, the
Option Shares shall be registered in such names and in such denominations as the
Representatives shall request in the aforesaid written notice. For the purpose
of expediting the checking and packaging of the certificates for the Option
Shares, the Company shall make the certificates representing the Option Shares
available for inspection by the Representatives in New York, New York, not later
than 2:00 P.M., New York City time, on the business day prior to the Second
Delivery Date.
5. FURTHER AGREEMENTS OF THE TRANSACTION ENTITIES. Each of the
Transaction Entities jointly and severally agrees:
(a) To prepare the Prospectus in a form approved by the Representatives
and to file such Prospectus pursuant to Rule 424(b) under the Securities Act not
later than the Commission's close of business on the second business day
following the execution and delivery of this Agreement or, if applicable, such
earlier time as may be required by Rule 430A(a)(3) under the Securities Act; to
make no further amendment or any supplement to the Registration Statement or to
the Prospectus except in accordance with Section 5(e) hereof; to advise the
Representatives, promptly after it receives notice thereof, of the time when any
amendment to the Registration Statement has been filed or becomes effective or
any supplement to the Prospectus or any amended Prospectus has been filed and to
furnish the Representatives with copies thereof; to advise the Representatives,
promptly after it receives notice thereof, of the issuance by the Commission of
any stop order or of any order preventing or suspending the use of any
Preliminary Prospectus or the Prospectus, of the suspension of the qualification
of the Shares for offering or sale in any jurisdiction, of the initiation or
threatening of any proceeding for any such purpose, or of any request by the
Commission for the amending or supplementing of the Registration Statement or
the Prospectus or for additional information; and, in the event of the issuance
of any stop order or of any order preventing or suspending the use of any
Preliminary Prospectus or the Prospectus or suspending any such qualification,
to use promptly its best efforts to obtain its withdrawal;
(b) To furnish promptly to the Representatives and to counsel for the
Underwriters such number of conformed copies as the Underwriters shall
reasonably request of the Registration Statement as originally filed with the
Commission, and each amendment thereto filed with the Commission, including all
consents and exhibits filed therewith or incorporated by reference therein and
all documents incorporated by reference therein;
(c) To deliver promptly to the Representatives such number of the
following documents as the Representatives shall reasonably request: (i)
conformed copies of the
<PAGE> 13
Registration Statement as originally filed with the Commission and each
amendment thereto (in each case excluding exhibits other than this Agreement)
and (ii) each Preliminary Prospectus, the Prospectus and any amended or
supplemented Prospectus; and, if the delivery of a prospectus is required at any
time after the Effective Time in connection with the offering or sale of the
Shares or any other securities relating thereto and if at such time any events
shall have occurred as a result of which the Prospectus as then amended or
supplemented would include an untrue statement of a material fact or omit to
state any material fact necessary in order to make the statements therein, in
the light of the circumstances under which they were made when such Prospectus
is delivered, not misleading, or, if for any other reason it shall be necessary
to amend or supplement the Prospectus in order to comply with the Securities Act
or the Exchange Act, to notify the Representatives and, upon their request, to
file such document and to prepare and furnish without charge to each Underwriter
and to any dealer in securities as many copies as the Underwriters may from time
to time reasonably request of an amended or supplemented Prospectus which will
correct such statement or omission or effect such compliance. The aforementioned
documents furnished to the Underwriters will be identical to the electronically
transmitted copies thereof filed with the Commission pursuant to EDGAR, except
to the extent permitted by Regulation S-T.
(d) To file promptly with the Commission any amendment to the
Registration Statement or the Prospectus or any supplement to the Prospectus
that may, in the judgment of the Company or counsel for the Underwriters, be
required by the Securities Act or requested by the Commission;
(e) Prior to filing with the Commission any amendment to the
Registration Statement or supplement to the Prospectus or any Prospectus
pursuant to Rule 424 of the Rules and Regulations, to furnish a copy thereof to
the Underwriters and counsel for the Underwriters within a reasonable period of
time prior to the filing thereof, and that filing thereof shall not occur if the
Representatives shall have objected in good faith thereto;
(f) The Company will make generally available to its security holders
as soon as practicable but no later than 60 days after the close of the period
covered thereby an earnings statement (in form complying with the provisions of
Section 11(a) of the Securities Act and Rule 158 of the Rules and Regulations),
which need not be certified by independent certified public accountants unless
required by the Securities Act or the Rules and Regulations, covering a
twelve-month period commencing after the "effective date" (as defined in said
Rule 158) of the Registration Statement;
(g) For a period of five years following the Effective Date, to furnish
to the Representatives copies of all materials furnished by the Company to its
shareholders and all public reports and all reports and financial statements
furnished by the Company to the principal national securities exchange upon
which the Common Shares may be listed pursuant to requirements of or agreements
with such exchange or to the Commission pursuant to the Exchange Act or any rule
or regulation of the Commission thereunder;
(h) Promptly from time to time to take such action as the
Representatives may reasonably request to qualify the Shares for offering and
sale under the securities, real estate syndication or Blue Sky laws of such
jurisdictions as the Representatives may request and to comply with such laws so
as to permit the continuance of sales and dealings therein in such jurisdictions
for as long as may be necessary to complete the distribution of the Shares,
except that the Company shall not be required in connection therewith to qualify
as a foreign corporation or to execute a consent to service of process in any
jurisdiction;
<PAGE> 14
(i) For a period of 90 days from the date of the Prospectus, the
Company will not, directly or indirectly, (1) offer for sale, contract to sell,
sell, pledge or otherwise dispose of (or enter into any transaction or device
which is designed to, or could be expected to, result in the disposition by any
person at any time in the future of) any Common Shares or securities convertible
into or exercisable or exchangeable for Common Shares in an underwritten
offering to the public (other than the Shares and any Units or Common Shares
that may be issued in connection with any acquisition of a property or pursuant
to customary compensation arrangements and employee benefit plans), or sell or
grant options, rights or warrants with respect to any Common Shares or
securities convertible into or exercisable or exchangeable for Common Shares
(except pursuant to customary compensation arrangements and employee benefit
plans), or (2) enter into any swap or other derivatives transaction that
transfers to another, in whole or in part, any of the economic benefits or risks
of ownership of such Common Shares, whether any such transaction described in
clause (1) or (2) above is to be settled by delivery of Common Shares or other
securities, in cash or otherwise, in each case without the prior written consent
of _______________; and to cause ___________________________, who each own Units
or Common Shares, to furnish to the Underwriters, prior to the First Delivery
Date, a letter or letters, in form and substance satisfactory to counsel for the
Underwriters, pursuant to which each such person shall agree not to, directly or
indirectly, (1) offer for sale, sell, pledge, contract to sell or otherwise
dispose of (or enter into any transaction or device which is designed to, or
could be expected to, result in the disposition by any person at any time in the
future of) any Units or Common Shares or securities convertible into or
exercisable or exchangeable for Common Shares or (2) enter into any swap or
other derivatives transaction that transfers to another, in whole or in part,
any of the economic benefits or risks of ownership of such Units or Common
Shares, whether any such transaction described in clause (1) or (2) above is to
be settled by delivery of Units, Common Shares or other securities, in cash or
otherwise, in each case for a period of 90 days from the date of the Prospectus,
without the prior written consent of ________________________________;
(j) The Company will file with the New York Stock Exchange, Inc. all
documents and notices required by such exchange of companies that have
securities listed on such exchange and will use its best efforts to maintain the
listing of the Shares thereon;
(k) To apply the net proceeds from the sale of the Shares in accordance
with the description set forth in the Prospectus under the caption "Use of
Proceeds";
(l) To take such steps as shall be necessary to ensure that neither the
Company nor any of its subsidiaries shall become an "investment company" within
the meaning of such term under the Investment Company Act of 1940 and the rules
and regulations of the Commission thereunder;
(m) Except as stated in this Agreement and in the Preliminary
Prospectus and Prospectus, neither Transaction Entity has taken, nor will take,
directly or indirectly, any action designed to or that might reasonably be
expected to cause or result in stabilization or manipulation of the price of the
Common Shares to facilitate the sale or resale of the Shares;
(n) The Company will use its best efforts to continue to meet the
requirements to qualify as a "real estate investment trust" under the Code; and
(o) If this Agreement shall be terminated by the Underwriters because
of any failure or refusal on the part of the Transaction Entities to comply with
the terms or fulfill any of the
<PAGE> 15
conditions of this Agreement, the Transaction Entities jointly and severally
agree to reimburse the Underwriters for all reasonable out-of-pocket expenses
(including fees and expenses of counsel for the Underwriters) incurred by the
Underwriters in connection herewith.
6. EXPENSES. The Transaction Entities jointly and severally agree to pay (a) the
costs incident to the authorization, issuance, sale and delivery of the Shares
and any taxes payable in that connection; (b) the costs incident to the
preparation, printing and filing under the Securities Act of the Registration
Statement and any amendments and exhibits thereto; (c) the costs of distributing
the Registration Statement as originally filed and each amendment thereto and
any post-effective amendments thereof (including, in each case, exhibits), any
Preliminary Prospectus, the Prospectus and any amendment or supplement to the
Prospectus, all as provided in this Agreement; (d) the costs of producing and
distributing this Agreement and any other related documents in connection with
the offering, purchase, sale and delivery of the Shares; (f) the filing fees
incident to securing any required review by the National Association of
Securities Dealers, Inc. of the terms of sale of the Shares; (g) any applicable
listing or other fees; (h) the fees and expenses of qualifying the Shares under
the securities laws of the several jurisdictions as provided in Section 5(h) and
of preparing, printing and distributing a Blue Sky Memorandum (including related
fees and expenses of counsel to the Underwriters); and (j) all other costs and
expenses incident to the performance of the obligations of the Transaction
Entities under this Agreement; provided that, except as provided in this Section
6 and in Section 12, the Underwriters shall pay their own costs and expenses,
including the costs and expenses of their counsel, any transfer taxes on the
Shares which they may sell and the expenses of advertising any offering of the
Shares made by the Underwriters.
7.CONDITIONS OF UNDERWRITERS' OBLIGATIONS. The respective obligations of the
Underwriters hereunder are subject to the accuracy, when made and on each
Delivery Date, of the representations and warranties of the Transaction Entities
contained herein, to the performance by each Transaction Entity of its
obligations hereunder, and to each of the following additional terms and
conditions:
(a) If, at the time this Agreement is executed and delivered, it is
necessary for the Registration Statement or a post-effective amendment thereto
to be declared effective before the offering of the Shares may commence, the
Registration Statement or such post-effective amendment shall have become
effective not later than 5:30 P.M., New York City time, on the date hereof, or
at such later date and time as shall be consented to in writing by you, and all
filings, if any, required to have been made by such time by Rules 424 and 430A
under the Rules and Regulations shall have been timely made; no stop order
suspending the effectiveness of the Registration Statement shall have been
issued and no proceeding for that purpose shall have been instituted or, to the
knowledge of the Transaction Entities or any Underwriter, threatened by the
Commission, and any request of the Commission for additional information (to be
included in the Registration Statement or the Prospectus or otherwise) shall
have been complied with to the satisfaction of the Underwriters.
(b) Subsequent to the effective date of this Agreement, there shall not
have occurred (i) any change, or any development involving a prospective change,
in or affecting the condition, financial or otherwise, business, properties, net
worth, or results of operations of either Transaction Entity or any of their
subsidiaries or any Property not contemplated by the Prospectus, which in the
opinion of the Underwriters, would materially adversely affect the market for
the Shares, or (ii) any event or development relating to or involving either
Transaction Entity, or any partner, officer, director or trustee of either
Transaction Entity, which makes any statement of a material fact made in the
Prospectus untrue or which, in the opinion of
<PAGE> 16
the Company and its counsel or the Underwriters and their counsel, requires the
making of any addition to or change in the Prospectus in order to state a
material fact required by the Securities Act or any other law to be stated
therein or necessary in order to make the statements therein not misleading, if
amending or supplementing the Prospectus to reflect such event or development
would, in your opinion, materially adversely affect the market for the Shares.
(c) All corporate proceedings and other legal matters incident to the
authorization, form and validity of this Agreement, the Shares, the Registration
Statement and the Prospectus, and all other legal matters relating to this
Agreement and the transactions contemplated hereby shall be reasonably
satisfactory in all material respects to counsel for the Underwriters, and the
Company shall have furnished to such counsel all documents and information that
they may reasonably request to enable them to pass upon such matters.
(d) (A) Wolf, Block, Schorr and Solis-Cohen LLP shall have furnished to
the Representatives its written opinion, as counsel to the Company, addressed to
the Underwriters and dated such Delivery Date, in form and substance reasonably
satisfactory to the Representatives, to the effect that:
(i) The Company is in good standing as a foreign trust or
corporation in those jurisdictions listed in such opinion.
(ii) The Operating Partnership has been duly formed and is
validly existing as a limited partnership under the laws of the Commonwealth of
Pennsylvania, is duly qualified to do business as a foreign limited partnership
in Delaware, Florida, Maryland, Michigan, Minnesota, New Jersey, North Carolina,
South Carolina, Tennessee, Texas and Virginia, and has all partnership power and
authority necessary to own or hold its properties, to conduct the business in
which it is engaged as described in the Registration Statement and the
Prospectus, and to enter into and perform its obligations under this Agreement.
The Company is the sole general partner of the Operating Partnership. The
Operating Partnership Agreement is in full force and effect, and the aggregate
percentage interests of the Company and the limited partners in the Operating
Partnership are as set forth in the Prospectus.
(iii) Development Corp. has been duly formed and is validly
existing as a corporation in good standing under the laws of the Commonwealth of
Pennsylvania, is duly qualified to do business and is in good standing as a
foreign corporation in Delaware, Florida, Maryland, New Jersey and North
Carolina, and has all corporate power and authority necessary to own or hold its
properties and to conduct the business in which it is engaged as described in
the Registration Statement and the Prospectus. All of the issued and outstanding
capital stock of Development Corp. has been duly authorized and validly issued
and is fully paid and non-assessable, has been offered and sold in compliance
with all applicable laws (including, without limitation, federal or state
securities laws) and all of the capital stock of Development Corp. owned by the
Operating Partnership, as described in the Prospectus, is owned free and clear
of any security interest, mortgage, pledge, lien, encumbrance, claim,
restriction or equities.
(iv) Development-II has been duly formed and is validly
existing as a corporation in good standing under the laws of the Commonwealth of
Pennsylvania, and has all corporate power and authority necessary to own or hold
its properties and to conduct the business in which it is engaged as described
in the Registration Statement and the Prospectus. All of the issued and
outstanding capital stock of Development-II has been duly authorized and validly
issued and is fully paid and non-assessable, has been offered and sold in
compliance with all applicable laws (including, without limitation, federal or
state securities laws) and all of the
<PAGE> 17
capital stock of Development-II owned by the Operating Partnership, as described
in the Prospectus, is owned free and clear of any security interest, mortgage,
pledge, lien, encumbrance, claim, restriction or equities.
(v) SP Corp. has been duly formed and is validly existing as a
corporation in good standing under the laws of the Commonwealth of Pennsylvania
and has all corporate and authority necessary to own or hold its properties and
to conduct the business in which it is engaged as described in the Registration
Statement and the Prospectus. All of the issued and outstanding capital stock of
SP Corp. has been duly authorized and validly issued and is fully paid and
non-assessable, is owned by the Company free and clear of any security interest,
mortgage, pledge, lien, encumbrance, claim, restriction or equities and has been
offered and sold in compliance with all applicable laws (including, without
limitation, federal or state securities laws).
(vi) Each of the Property Affiliates has been duly organized
and is validly existing as a limited partnership, limited liability company or
other entity in good standing under the laws of the jurisdiction in which it is
organized, and has all power and authority necessary to own or hold its
properties and to conduct the business in which it is engaged. Except as set
forth in the Prospectus, all of the partnership interests, membership interests
or other equity interests, as the case may be, of each Property Affiliate have
been duly and validly authorized and issued, are fully paid and non-assessable
and all of such interests owned directly or indirectly by the Company and the
Operating Partnership, as described in the Prospectus, are owned free and clear
of any security interest, mortgage, pledge, lien, encumbrance, claim,
restriction or equities.
(vii) (A) This Agreement has been duly and validly authorized,
executed and delivered by the Operating Partnership, and has been duly and
validly executed and delivered by the Company, and assuming due authorization,
execution and delivery by the Underwriters and due authorization by the Company,
is a valid and binding agreement of the Operating Partnership; and (B) the
partnership agreement of each Property Affiliate has been duly and validly
authorized, executed and delivered by the Operating Partnership, and each such
agreement and the Operating Partnership Agreement have been duly and validly
executed and delivered by the Company, and assuming due authorization by the
Company, each such agreement is a valid and binding agreement of the parties
thereto, enforceable against such parties in accordance with its terms.
(viii) To the knowledge of such counsel, the execution,
delivery and performance of this Agreement by each of the Transaction Entities
and the consummation of the transactions contemplated hereby will not (i)
conflict with or result in a breach or violation of any of the terms or
provisions of, or constitute a default under, any indenture, mortgage, deed of
trust, loan agreement or other agreement or instrument to which either of the
Transaction Entities or their subsidiaries is a party or by which either of the
Transaction Entities or their subsidiaries is bound or to which any of the
Properties or other assets of either of the Transaction Entities or their
subsidiaries is subject, or (ii) conflict with or result in any violation of the
provisions of any statute or any order, rule or regulation of any court or
governmental agency or body having jurisdiction over either of the Transaction
Entities or their subsidiaries or any of their properties or assets; and except
for the registration of the Shares under the Securities Act and such consents,
approvals, authorizations, registrations or qualifications as may be required
under the Exchange Act and applicable state securities laws in connection with
the purchase and distribution of the Shares by the Underwriters, no consent,
approval, authorization or order of, or filing or registration with, any such
court or governmental agency or body is required for the execution, delivery and
performance of this Agreement by the Transaction Entities and the
<PAGE> 18
consummation of the transactions contemplated hereby.
(ix) The execution, delivery and performance of this Agreement
by each of the Transaction Entities and the consummation of the transactions
contemplated hereby will not conflict with or result in any violation of the
provisions of the charter, by-laws, certificate of limited partnership or
agreement of limited partnership of either of the Transaction Entities or their
subsidiaries.
(x) To the knowledge of such counsel, other than as set forth
in the Prospectus and other than rights of persons whose securities are already
registered under the Securities Act, there are no contracts, agreements or
understandings between the Company and any person granting such person the right
to require the Company to file a registration statement under the Securities Act
with respect to any securities of the Company owned or to be owned by such
person or to require the Company to include such securities in the securities
registered pursuant to the Registration Statement or in any securities being
registered pursuant to any other registration statement filed by the Company
under the Securities Act.
(xi) To the knowledge of such counsel, there are no legal or
governmental proceedings pending to which either Transaction Entity or their
subsidiaries is a party or of which any property or assets of either Transaction
Entity or their subsidiaries is the subject which are not disclosed in the
Prospectus and which, if determined adversely to such Transaction Entity or
subsidiary, might reasonably be expected to have a material adverse effect on
the consolidated financial position, shareholders' equity, results of
operations, business or prospects of the Company; and to the knowledge of such
counsel no such proceedings are threatened or contemplated by governmental
authorities or threatened by others.
(xii) To the knowledge of such counsel, there are no contracts
or other documents which are required to be described in the Prospectus or filed
as exhibits to the Registration Statement by the Securities Act or by the Rules
and Regulations which have not been described in the Prospectus or filed as
exhibits to the Registration Statement or incorporated therein by reference as
permitted by the Rules and Regulations.
(xiii) To the knowledge of such counsel, no relationship,
direct or indirect, exists between or among either of the Transaction Entities
on the one hand, and the trustees, officers, shareholders, customers or
suppliers of the Transaction Entities on the other hand, which is required to be
described in the Prospectus which is not so described.
(xiv) To the knowledge of such counsel, each Transaction
Entity is in compliance In all material respects with all presently applicable
provisions of ERISA; to the knowledge of such counsel, no "reportable event" (as
defined in ERISA) has occurred with respect to any "pension plan" (as defined in
ERISA) for which either Transaction Entity would have any liability; neither
Transaction Entity has incurred or to the knowledge of such counsel, expects to
incur, liability under (i) Title IV of ERISA with respect to termination of, or
withdrawal from, any "pension plan" or (ii) section 412 or 4971 of the Code; and
each "pension plan" for which either Transaction Entity would have any liability
that is intended to be qualified under section 401(a) of the Code is so
qualified in all material respects and nothing has occurred, whether by action
or by failure to act, which would cause the loss of such qualification.
(xv) To the knowledge of such counsel, no Transaction Entity
or Property Affiliate is in violation of its charter, by-laws, certificate of
limited partnership, agreement of limited partnership, or other similar
organizational document, or, to the knowledge of such
<PAGE> 19
counsel, has a default been asserted in any respect, and it has not been
asserted that any event has occurred which, with notice or lapse of time or
both, would constitute such a default, in the due performance or observance of
any term, covenant or condition contained in any material indenture, mortgage,
deed of trust, loan agreement or other material agreement or instrument to which
it is a party or by which it is bound or to which any of the Properties or any
of its other properties or assets is subject.
(xvi) No consent, approval, authorization or other order of,
or registration or filing with, any court, regulatory body, administrative
agency or other governmental body, agency, or official is required on the part
of the Company (except as have been obtained or made under the Securities Act
and the Exchange Act or such as may be required under state securities, real
estate syndication or Blue Sky laws governing the purchase and distribution of
the Shares) for the valid issuance and sale of the Shares to the Underwriters as
contemplated by this Agreement.
(xvii) Neither Transaction Entity or their subsidiaries is an
"investment company" within the meaning of such term under the Investment
Company Act of 1940 and the rules and regulations of the Commission thereunder.
The Shares have been approved for listing on the New York Stock Exchange upon
notice of issuance.
(xviii) The documents incorporated or deemed to be
incorporated by reference in the Prospectus pursuant to Item 12 of Form S-3
under the Securities Act (other than the financial statements and related
schedules and financial information and data included therein, as to which no
opinion need be rendered), at the time they were filed with the Commission,
complied as to form in all material respects with the requirements of the
Exchange Act and the rules and regulations thereunder.
(xix) The Registration Statement was declared effective under
the Securities Act as of the date and time specified in such opinion, the
Prospectus was filed with the Commission pursuant to the subparagraph of Rule
424(b) of the Rules and Regulations specified in such opinion on the date
specified therein and, to the knowledge of such counsel, no stop order
suspending the effectiveness of the Registration Statement has been issued and,
to the knowledge of such counsel, no proceeding for that purpose is pending or
threatened by the Commission.
(xx) The Registration Statement and the Prospectus and any
further amendments or supplements thereto made by the Company prior to such
Delivery Date (other than the financial statements and related schedules and
other financial and statistical data included therein, as to which such counsel
need express no opinion) comply as to form in all material respects with the
requirements of the Securities Act and the Rules and Regulations.
(xxi) The statements contained in the Prospectus under the
captions "The Properties," "Management," "Federal Income Tax Considerations for
Shareholders," "Risk Factors," "Description of Debt Securities," "Description of
Preferred Shares," "Description of Warrants," and "Federal Income Tax
Considerations with Respect to the Trust and the Operating Partnership," insofar
as those statements are descriptions of contracts, agreements or other legal
documents, or they describe federal statutes, rules and regulations, and except
to the extent such statements are statistics or calculations constitute a fair
summary thereof.
<PAGE> 20
Such counsel shall state that ___________________, counsel for the
Agents, may rely on its opinion in Section 7(d)(A)(ii) with regard to the
formation of the Operating Partnership for the purpose of rendering its opinion
as required by Section 7(e).
In rendering such opinion, such counsel may (i) state that its opinion is
limited to matters governed by the Federal laws of the United States of America,
the laws of the Commonwealth of Pennsylvania and the laws of the State of
Maryland; (ii) as to matters of Maryland law, state that its opinion is given
solely in reliance upon the opinion of Weinberg & Green LLC; (iii) state that
its opinion does not address (A) Federal Reserve Board margin regulations; (B)
Federal or state antitrust and unfair competition laws and regulations; (C)
Local Laws (as defined in The Legal Opinion Accord of the ABA Section of
Business Law (1991); (D) compliance with fiduciary duty requirements; (E)
Federal and state racketeering laws and regulations; (F) Federal and state
health and safety laws and regulations; and (G) Federal and state laws,
regulations and policies concerning (x) national and local emergency, (y)
possible judicial deference to acts of foreign states, and (z) criminal and
civil forfeiture laws; and (iv) in giving the opinion referred to in subclause
(B) in Section 7(d)(A)(vii), state that such opinion with respect to the
enforceability of such documents may be limited by bankruptcy, fraudulent
conveyance, insolvency, reorganization, moratorium, and other laws relating to
or affecting creditors' rights generally and by general equitable principles.
Such counsel shall also have furnished to the Underwriters a written statement,
addressed to the Underwriters and dated such Delivery Date, in form and
substance satisfactory to the Representatives, to the effect that (x) such
counsel has acted as counsel to the Company in connection with the preparation
of the Registration Statement and the Prospectus, and (y) based on the
foregoing, no facts have come to the attention of such counsel which lead it to
believe that the Registration Statement, as of the Effective Date, contained any
untrue statement of a material fact or omitted to state a material fact required
to be stated therein or necessary in order to make the statements therein not
misleading, or that the Prospectus contains any untrue statement of a material
fact or omits to state a material fact required to be stated therein or
necessary in order to make the statements therein, in light of the circumstances
under which they were made, not misleading. The foregoing opinion and statement
may be qualified by a statement to the effect that such counsel does not assume
any responsibility for the accuracy, completeness or fairness of the statements
contained in the Registration Statement or the Prospectus except to the extent
of the opinion contained in Section 7(d)(A)(xx), and may state that such counsel
expresses no belief with respect to the financial statements and notes thereto
and other financial and statistical data included or incorporated by reference
in, or omitted from, the Registration Statement or the Prospectus.
(B) Weinberg & Green LLC shall have furnished to the Representatives
its written opinion, as Maryland counsel to the Company, addressed to the
Underwriters and dated such Delivery Date, in form and substance reasonably
satisfactory to the Representatives, to the effect that:
(i) The Company has been duly formed and is validly existing
as a real estate investment trust in good standing under and by virtue of the
laws of the State of Maryland, and has all trust power and authority necessary
to own or hold its properties and to conduct the business in which it is engaged
as described in the Registration Statement and the Prospectus, and to enter into
and perform its obligations under this Agreement.
(ii) The Company has an authorized capitalization as set forth
in the Prospectus under the caption "Capitalization," and all of the issued
shares of beneficial interest of the Company (other than the Shares) have been
duly and validly authorized and issued, are
<PAGE> 21
fully paid and non-assessable and conform in all material respects to the
description thereof contained in the Prospectus.
(iii) The Shares have been duly and validly authorized and,
when issued and delivered against payment therefor as provided herein, will be
duly and validly issued, fully paid and non-assessable. Upon payment of the
purchase price and delivery of the Shares in accordance herewith, each of the
Underwriters will receive good, valid and, subject to the excess share
restrictions set forth in Article VII of the Company's Declaration of Trust,
marketable title to the Shares, free and clear of all security interests,
mortgages, pledges, liens, encumbrances, claims, restrictions and equities. The
terms of the Shares conform in all material respects to all statements and
descriptions related thereto contained in the Prospectus. The form of the
certificates to be used to evidence the Shares are in due and proper form and
comply with all applicable legal requirements. The issuance of the Shares is not
subject to any preemptive or other similar rights arising under the Declaration
of Trust or by-laws of the Company, Title 8 of the Corporations and Associations
Article of the Annotated Code of Maryland, as amended, or any agreement or other
instrument to which the Company is a party known to such counsel.
(iv) This Agreement has been duly and validly authorized,
executed and delivered by the Company, and assuming due authorization, execution
and delivery by the Underwriters and the Operating Partnership, is a valid and
binding agreement of the Company.
(v) To the knowledge of such counsel, the execution, delivery
and performance of this Agreement by the Company and the consummation of the
transactions contemplated hereby will not conflict with or result in any
violation of the provisions of any statute or any order, rule or regulation of
any court or governmental agency or body of the State of Maryland that has
jurisdiction over the Company or any of its properties or assets.
(vi) The execution, delivery and performance of this Agreement
by the Company and the consummation of the transactions contemplated hereby will
not conflict with or result in any violation of the provisions of the
Declaration of Trust or by-laws of the Company.
(vii) To the knowledge of such counsel, there are no legal or
governmental proceedings pending to which the Company is a party or of which any
property or assets of the Company is the subject which are not disclosed in the
Prospectus and which, if determined adversely to the Company, might reasonably
be expected to have a material adverse effect on the consolidated financial
position, shareholders' equity, results of operations, business or prospects of
the Company; and to the knowledge of such counsel no such proceedings are
threatened or contemplated by governmental authorities or threatened by others.
(viii) No consent, approval, authorization or other order of,
or registration or filing with, any court, regulatory body, administrative
agency or other governmental body, agency, or official in the State of Maryland
is required on the part of the Company (except as may be required under state
securities laws) for the valid issuance and sale of the Shares to the
Underwriters as contemplated by this Agreement.
Such counsel shall state that _________________, counsel for the Underwriters,
may rely on its opinion.
(e) The Representatives shall have received from ________________,
counsel for the Underwriters, such opinion or opinions, dated such Delivery
Date, with respect to the issuance
<PAGE> 22
and sale of the Shares, the Registration Statement, the Prospectus and other
related matters as the Representatives may reasonably require, and the Company
shall have furnished to such counsel such documents as they reasonably request
for the purpose of enabling them to pass upon such matters.
(f) At the time of execution of this Agreement, the Representatives
shall have received from Ernst & Young LLP a letter, in form and substance
satisfactory to the Representatives, addressed to the Underwriters and dated the
date hereof (i) confirming that they are independent public accountants within
the meaning of the Securities Act and are in compliance with the applicable
requirements relating to the qualification of accountants under Rule 2-01 of
Regulation S-X of the Commission, and (ii) stating, as of the date hereof (or,
with respect to matters involving changes or developments since the respective
dates as of which specified financial information is given in, or incorporated
by reference in, the Prospectus, as of a date not more than five days prior to
the date hereof), the conclusions and findings of such firm with respect to the
financial information and other matters ordinarily covered by accountants'
"comfort letters" to underwriters in connection with registered public
offerings.
(g) With respect to the letter of Ernst & Young LLP referred to in the
preceding paragraph and delivered to the Representatives concurrently with the
execution of this Agreement (the "initial letter"), the Company shall have
furnished to the Representatives a letter (the "bring-down letter") of such
accountants, addressed to the Underwriters and dated such Delivery Date (i)
confirming that they are independent public accountants within the meaning of
the Securities Act and are in compliance with the applicable requirements
relating to the qualification of accountants under Rule 2-01 of Regulation S-X
of the Commission, (ii) stating, as of the date of the bring-down letter (or,
with respect to matters involving changes or developments since the respective
dates as of which specified financial information is given in the Prospectus, as
of a date not more than five days prior to the date of the bring-down letter),
the conclusions and findings of such firm with respect to the financial
information and other matters covered by the initial letter and (iii) confirming
in all material respects the conclusions and findings set forth in the initial
letter.
(h) The Transaction Entities shall have furnished to the
Representatives a certificate, dated such Delivery Date, of the Chairman of the
Board, Chief Executive Officer, President or a Vice President of the Company and
the chief financial officer of the Company (in each case, for the Company and
for the Company as general partner of the Operating Partnership) stating that:
(i) The representations, warranties and agreements of the
Transaction Entities in Section 1 are true and correct as of such Delivery Date;
the Transaction Entities complied with all of their agreements contained herein;
and the conditions set forth in Sections 7(a) and 7(i) have been fulfilled; and
(ii) They have carefully examined the Registration Statement
and the Prospectus and, in their opinion (A) as of the Effective Date, the
Registration Statement and Prospectus did not include any untrue statement of a
material fact and did not omit to state a material fact required to be stated
therein or necessary to make the statements therein not misleading (with respect
to the Prospectus, in light of the circumstances in which they were made), and
(B) since the Effective Date no event has occurred which should have been set
forth in a supplement or amendment to the Registration Statement or the
Prospectus.
(i) (i) None of the Transaction Entities or their subsidiaries or any
Property shall have sustained since the date of the latest audited financial
statements included in the Prospectus
<PAGE> 23
any loss or interference with its business from fire, explosion, flood or other
calamity, whether or not covered by insurance, or from any labor dispute or
court or governmental action, order or decree, otherwise than as set forth or
contemplated in the Prospectus or (ii) since such date there shall not have been
any change in the capital stock or long-term debt of either Transaction Entity
or any change, or any development involving a prospective change, in or
affecting any Property Affiliate or Property or the general affairs, management,
financial position, shareholders' equity or results of operations of either
Transaction Entity, otherwise than as set forth or contemplated in the
Prospectus, the effect of which, in any such case described in clause (i) or
(ii), is, in the judgment of the Representatives, so material and adverse as to
make it impracticable or inadvisable to proceed with the public offering or the
delivery of the Shares being delivered on such Delivery Date on the terms and in
the manner contemplated in the Prospectus.
(j) Subsequent to the execution and delivery of this Agreement there
shall not have occurred any of the following: (i) trading in securities
generally on the New York Stock Exchange or the American Stock Exchange or in
the over-the-counter market, or trading in any securities of the Company on any
exchange or in the over-the-counter market, shall have been suspended or minimum
prices shall have been established on any such exchange or such market by the
Commission, by such exchange or by any other regulatory body or governmental
authority having jurisdiction, (ii) a banking moratorium shall have been
declared by Federal or state authorities, (iii) the United States shall have
become engaged in hostilities, there shall have been an escalation in
hostilities involving the United States or there shall have been a declaration
of a national emergency or war by the United States or (iv) there shall have
occurred such a material adverse change in general economic, political or
financial conditions (or the effect of international conditions on the financial
markets in the United States shall be such) as to make it, in the judgment of a
majority in interest of the several Underwriters, impracticable or inadvisable
to proceed with the public offering or delivery of the Shares being delivered on
such Delivery Date on the terms and in the manner contemplated in the
Prospectus.
(k) The New York Stock Exchange, Inc. shall have approved the Shares
for listing, subject only to official notice of issuance.
(l) The Transaction Entities shall not have failed at or prior to such
Delivery Date to have performed or complied with any of their agreements herein
contained and required to be performed or complied with by them hereunder at or
prior to such Delivery Date.
(m) On the First Delivery Date, counsel for the Underwriters shall have
been furnished with such documents and opinions as they may require for the
purpose of enabling them to pass upon the issuance and sale of the Shares as
herein contemplated and related proceedings, or in order to evidence the
accuracy of any of the representations or warranties, or the fulfillment of any
of the conditions, herein contained; and all proceedings taken by the
Transaction Entities in connection with the issuance and sale of the Shares as
herein contemplated shall be satisfactory in form and substance to the
Underwriters and counsel for the Underwriters.
(n) The Representatives shall have been furnished with the written
agreements referred to in Section 5(i) hereof.
(o) The Company shall have furnished or caused to be furnished to the
Representatives such further certificates and documents as the Underwriters
shall have reasonably requested.
<PAGE> 24
(p) In the event that the Underwriters exercise their option provided
in Section 2 hereof to purchase all or any portion of the Option Shares, the
representations and warranties of the Transaction Entities contained herein and
the statements in any certificates furnished by the Transaction Entities
hereunder shall be true and correct as of each Date of Delivery and, at the
relevant Date of Delivery, the Underwriters shall have received:
(i) A certificate, dated such Date of Delivery, of the
Chairman of the Board, Chief Executive Officer, President or a Vice President of
the Company and of the chief financial officer of the Company (in each case, for
the Company and for the Company as the general partner of the Operating
Partnership) confirming that the certificate delivered on the First Delivery
Date pursuant to Section 7(h) hereof remains true and correct as of such Date of
Delivery.
(ii) The favorable opinions of Wolf, Block, Schorr and
Solis-Cohen LLP, counsel for the Transaction Entities, and Weinberg & Green LLC,
Maryland counsel for the Company, in form and substance satisfactory to counsel
for the Underwriters, dated such Date of Delivery, relating to the Option Shares
to be purchased on such Date of Delivery and otherwise to the same effect as the
opinions required by Section 7(d) hereof.
(iii) The favorable opinion of _________________, counsel for
the Underwriters, dated such Date of Delivery, relating to the Option Shares to
be purchased on such Date of Delivery and otherwise to the same effect as the
opinion required by Section (e) hereof.
(iv) A letter from Ernst & Young LLP, in form and substance
satisfactory to the Underwriters and dated such Date of Delivery, substantially
the same in form and substance as the letters furnished to the Underwriters
pursuant to Section 7(f) hereof.
All opinions, letters, evidence and certificates mentioned above or
elsewhere in this Agreement shall be deemed to be in compliance with the
provisions hereof only if they are in form and substance reasonably satisfactory
to counsel for the Underwriters.
Any certificate or document signed by any officer of the Transaction
Entities and delivered to the Underwriters, or to counsel for the Underwriters,
shall be deemed a representation and warranty by the Transaction Entities to
each Underwriter as to the statements made therein.
The several obligations of the Underwriters to purchase Option Shares
hereunder are subject to the satisfaction on and as of any Date of Delivery of
the conditions set forth in this Section 7, except that, if any Date of Delivery
is other than the First Delivery Date, the certificates, opinions and letters
referred to in Sections 7(d) through 7(h) hereof shall be dated the Date of
Delivery in question and the opinions called for by Sections 7(d) and 7(e)
hereof shall be revised to reflect the sale of Option Shares.
8. EFFECTIVE DATE OF AGREEMENT. This Agreement shall become effective: (i) upon
the execution hereof by the parties hereto; or (ii) if, at the time this
Agreement is executed and delivered, it is necessary for the Registration
Statement or a post-effective amendment thereto to be declared effective before
the offering of the Shares may commence, when notification of the effectiveness
of the Registration Statement or such post-effective amendment has been released
by the Commission.
<PAGE> 25
9. DEFAULT BY ONE OR MORE OF THE UNDERWRITERS. If, on either Delivery Date, any
Underwriter defaults in the performance of its obligations under this Agreement,
the remaining non-defaulting Underwriters shall be obligated to purchase the
Shares which the defaulting Underwriter agreed but failed to purchase on such
Delivery Date in the respective proportions which the number of Firm Shares set
forth opposite the name of each remaining non-defaulting Underwriter in Schedule
1 hereto bears to the total number of Firm Shares set forth opposite the names
of all the remaining non-defaulting Underwriters in Schedule 1 hereto; provided,
however, that the remaining non-defaulting Underwriters shall not be obligated
to purchase any of the Shares on such Delivery Date if the total number of
Shares which the defaulting Underwriter or Underwriters agreed but failed to
purchase on such date exceeds 9.09% of the total number of Shares to be
purchased on such Delivery Date, and any remaining non-defaulting Underwriter
shall not be obligated to purchase more than 110% of the number of Shares which
it agreed to purchase on such Delivery Date pursuant to the terms of Section 2.
If the foregoing maximums are exceeded, the remaining non-defaulting
Underwriters, or those other underwriters satisfactory to the Representatives
who so agree, shall have the right, but shall not be obligated, to purchase, in
such proportion as may be agreed upon among them, all the Shares to be purchased
on such Delivery Date. If the remaining Underwriters or other underwriters
satisfactory to the Representatives do not elect to purchase the Shares which
the defaulting Underwriter or Underwriters agreed but failed to purchase on such
Delivery Date, this Agreement (or, with respect to the Second Delivery Date, the
obligation of the Underwriters to purchase, and of the Company to sell, the
Option Shares) shall terminate without liability on the part of any
non-defaulting Underwriter or the Transaction Entities, except that the
Transaction Entities will continue to be liable for the payment of expenses to
the extent set forth in Sections 6 and 12. As used in this Agreement, the term
"Underwriter" includes, for all purposes of this Agreement unless the context
requires otherwise, any party not listed in Schedule 1 hereto who, pursuant to
this Section 9, purchases Initial Shares which a defaulting Underwriter agreed
but failed to purchase.
Nothing contained herein shall relieve a defaulting Underwriter of any
liability it may have to the Transaction Entities for damages caused by its
default. If other underwriters are obligated or agree to purchase the Shares of
a defaulting or withdrawing Underwriter, either the Representatives or the
Company may postpone the Delivery Date for up to seven full business days in
order to effect any changes that in the opinion of counsel for the Company or
counsel for the Underwriters may be necessary in the Registration Statement, the
Prospectus or in any other document or arrangement.
10. INDEMNIFICATION AND CONTRIBUTION.
(a) The Transaction Entities jointly and severally, shall indemnify and
hold harmless each Underwriter, its officers and employees and each person, if
any, who controls any Underwriter within the meaning of the Securities Act, from
and against any loss, claim, damage or liability, joint or several, or any
action in respect thereof (including, but not limited to, any loss, claim,
damage, liability or action relating to purchases and sales of Shares), to which
that Underwriter, officer, employee or controlling person may become subject,
under the Securities Act or otherwise, insofar as such loss, claim, damage,
liability or action arises out of, or is based upon, (i) any untrue statement or
alleged untrue statement of a material fact contained (A) in any Preliminary
Prospectus, the Registration Statement or the Prospectus or in any amendment or
supplement thereto or (B) in any blue sky application or other document prepared
or executed by the Company (or based upon any written information furnished by
the Company) specifically for the purpose of qualifying any or all of the Shares
under the securities laws of any state or other jurisdiction (any such
application, document or information being hereinafter called a "Blue Sky
<PAGE> 26
Application"), (ii) the omission or alleged omission to state in any Preliminary
Prospectus, the Registration Statement or the Prospectus, or in any amendment or
supplement thereto, or in any Blue Sky Application any material fact required to
be stated therein or necessary to make the statements therein not misleading
(with respect to the Prospectus, in light of the circumstances under which they
were made), or (iii) any act or failure to act or any alleged act or failure to
act by any Underwriter in connection with, or relating in any manner to, the
Shares or the offering contemplated hereby, and which is included as part of or
referred to in any loss, claim, damage, liability or action arising out of or
based upon matters covered by clause (i) or (ii) above (provided that the
Transaction Entities shall not be liable under this clause (iii) to the extent
that it is determined in a final judgment by a court of competent jurisdiction
that such loss, claim, damage, liability or action resulted directly from any
such acts or failures to act undertaken or omitted to be taken by such
Underwriter through its gross negligence or willful misconduct), and shall
reimburse each Underwriter and each such officer, employee or controlling person
for any legal or other expenses reasonably incurred by that Underwriter,
officer, employee or controlling person in connection with investigating or
defending or preparing to defend against any such loss, claim, damage, liability
or action as such expenses are incurred; provided, however, that the Transaction
Entities shall not be liable in any such case to the extent that any such loss,
claim, damage, liability or action arises out of, or is based upon, any untrue
statement or alleged untrue statement or omission or alleged omission made in
any Preliminary Prospectus, the Registration Statement or the Prospectus, or in
any such amendment or supplement, or in any Blue Sky Application, in reliance
upon and in conformity with written information concerning such Underwriter
furnished to the Company through the Representatives by or on behalf of any
Underwriter specifically for inclusion therein. The foregoing indemnity
agreement is in addition to any liability which the Transaction Entities may
otherwise have to any Underwriter or to any officer, employee or controlling
person of that Underwriter.
(b) Each Underwriter, severally and not jointly, shall indemnify and
hold harmless each Transaction Entity, its officers and employees, each of its
trustees, and each person, if any, who controls each Transaction Entity within
the meaning of the Securities Act, from and against any loss, claim, damage or
liability, joint or several, or any action in respect thereof, to which each
Transaction Entity or any such trustee, officer or controlling person may become
subject, under the Securities Act or otherwise, insofar as such loss, claim,
damage, liability or action arises out of, or is based upon, (i) any untrue
statement or alleged untrue statement of a material fact contained (A) in any
Preliminary Prospectus, the Registration Statement or the Prospectus or in any
amendment or supplement thereto, or (B) in any Blue Sky Application or (ii) the
omission or alleged omission to state in any Preliminary Prospectus, the
Registration Statement or the Prospectus, or in any amendment or supplement
thereto, or in any Blue Sky Application any material fact required to be stated
therein or necessary to make the statements therein not misleading, but in each
case only to the extent that the untrue statement or alleged untrue statement or
omission or alleged omission was made in reliance upon and in conformity with
written information concerning such Underwriter furnished to the Company through
the Representatives by or on behalf of that Underwriter specifically for
inclusion therein, and shall reimburse each Transaction Entity and any such
trustee, officer or controlling person for any legal or other expenses
reasonably incurred by each Transaction Entity or any such trustee, officer or
controlling person in connection with investigating or defending or preparing to
defend against any such loss, claim, damage, liability or action as such
expenses are incurred. The foregoing indemnity agreement is in addition to any
liability which any Underwriter may otherwise have to each Transaction Entity or
any such trustee, officer, employee or controlling person.
<PAGE> 27
(c) Promptly after receipt by an indemnified party under this Section
10 of notice of any claim or the commencement of any action, the indemnified
party shall, if a claim in respect thereof is to be made against the
indemnifying party under this Section 10, notify the indemnifying party in
writing of the claim or the commencement of that action; provided, however, that
the failure to notify the indemnifying party shall not relieve it from any
liability which it may have under this Section 10 except to the extent it has
been materially prejudiced by such failure and, provided further, that the
failure to notify the indemnifying party shall not relieve it from any liability
which it may have to an indemnified party otherwise than under this Section 10.
If any such claim or action shall be brought against an indemnified party, and
it shall notify the indemnifying party thereof, the indemnifying party shall be
entitled to participate therein and, to the extent that it wishes, jointly with
any other similarly notified indemnifying party, to assume the defense thereof
with counsel reasonably satisfactory to the indemnified party. After notice from
the indemnifying party to the indemnified party of its election to assume the
defense of such claim or action, the indemnifying party shall not be liable to
the indemnified party under this Section 10 for any legal or other expenses
subsequently incurred by the indemnified party in connection with the defense
thereof other than reasonable costs of investigation; provided, however, that
the indemnified party shall have the right to employ its own counsel, with such
counsel, in the case of the Underwriters, to represent jointly the Underwriters
and their respective officers, employees and controlling persons who may be
subject to liability arising out of any claim in respect of which indemnity may
be sought by the Underwriters against the Transaction Entities under this
Section 10 if, in the reasonable judgment of the Representatives, it is
advisable for the Underwriters and those officers, employees and controlling
persons to be jointly represented by separate counsel, and in that event the
fees and expenses of such separate counsel shall be paid by the Transaction
Entities. No indemnifying party shall (i) without the prior written consent of
the indemnified parties (which consent shall not be unreasonably withheld),
settle or compromise or consent to the entry of any judgment with respect to any
pending or threatened claim, action, suit or proceeding in respect of which
indemnification or contribution may be sought hereunder (whether or not the
indemnified parties are actual or potential parties to such claim or action)
unless such settlement, compromise or consent includes an unconditional release
of each indemnified party from all liability arising out of such claim, action,
suit or proceeding, or (ii) be liable for any settlement of any such action
effected without its written consent (which consent shall not be unreasonably
withheld), but if settled with the consent of the indemnifying party or if there
be a final judgment of the plaintiff in any such action, the indemnifying party
agrees to indemnify and hold harmless any indemnified party from and against any
loss or liability by reason of such settlement or judgment.
(d) If the indemnification provided for in this Section 10 shall for
any reason be unavailable to or insufficient to hold harmless an indemnified
party under Section 10(a) or 10(c) in respect of any loss, claim, damage or
liability, or any action in respect thereof, referred to therein, then each
indemnifying party shall, in lieu of indemnifying such indemnified party,
contribute to the amount paid or payable by such indemnified party as a result
of such loss, claim, damage or liability, or action in respect thereof, (i) in
such proportion as shall be appropriate to reflect the relative benefits
received by the Transaction Entities on the one hand and the Underwriters on the
other from the offering of the Shares or (ii) if the allocation provided by
clause (i) above is not permitted by applicable law, in such proportion as is
appropriate to reflect not only the relative benefits referred to in clause (i)
above but also the relative fault of the Transaction Entities on the one hand
and the Underwriters on the other with respect to the statements or omissions
which resulted in such loss, claim, damage or liability, or action in respect
thereof, as well as any other relevant equitable considerations. The relative
benefits received by the Transaction Entities on the one hand and the
Underwriters on the other
<PAGE> 28
with respect to such offering shall be deemed to be in the same proportion as
the total net proceeds from the offering of the Shares purchased under this
Agreement (before deducting expenses) received by the Transaction Entities, on
the one hand, and the total underwriting discounts and commissions received by
the Underwriters with respect to the Shares purchased under this Agreement, on
the other hand, bear to the total gross proceeds from the offering of the Shares
under this Agreement, in each case as set forth in the table on the cover page
of the Prospectus. The relative fault shall be determined by reference to
whether the untrue or alleged untrue statement of a material fact or omission or
alleged omission to state a material fact relates to information supplied by the
Transaction Entities or the Underwriters, the intent of the parties and their
relative knowledge, access to information and opportunity to correct or prevent
such statement or omission. The Transaction Entities and the Underwriters agree
that it would not be just and equitable if contributions pursuant to this
Section were to be determined by pro rata allocation (even if the Underwriters
were treated as one entity for such purpose) or by any other method of
allocation which does not take into account the equitable considerations
referred to herein. The amount paid or payable by an indemnified party as a
result of the loss, claim, damage or liability, or action in respect thereof,
referred to above in this Section shall be deemed to include, for purposes of
this Section 10(d), any legal or other expenses reasonably incurred by such
indemnified party in connection with investigating or defending any such action
or claim. Notwithstanding the provisions of this Section 10(d), no Underwriter
shall be required to contribute any amount in excess of the amount by which the
total price at which the Shares underwritten by it and distributed to the public
was offered to the public exceeds the amount of any damages which such
Underwriter has otherwise paid or become liable to pay by reason of any untrue
or alleged untrue statement or omission or alleged omission. No person guilty of
fraudulent misrepresentation (within the meaning of section 11(f) of the
Securities Act) shall be entitled to contribution from any person who was not
guilty of such fraudulent misrepresentation. The Underwriters' obligations to
contribute as provided in this Section 10(d) are several in proportion to their
respective underwriting obligations and not joint.
(e) The Underwriters severally confirm and each Transaction Entity
acknowledges that the statements with respect to the public offering of the
Shares by the Underwriters set forth on the cover page of, the legend concerning
stabilization on the inside front cover of, the concession and reallowance
figures appearing under the caption "Underwriting" and, pursuant to Item 508 of
Regulation S-K of the Securities Act, the seventh, eighth and ninth paragraphs
of the section captioned "Plan of Distribution" in, the Preliminary Prospectus
and the comparable material in the Prospectus are correct and constitute the
only information concerning such Underwriters furnished in writing to the
Company by or on behalf of the Underwriters specifically for inclusion in the
Registration Statement, the Preliminary Prospectus and the Prospectus.
11. TERMINATION. The obligations of the Underwriters hereunder may be terminated
by the Representatives by notice given to and received by the Company prior to
delivery of and payment for the Firm Shares if, prior to that time, any of the
events described in Sections 7(i), 7(j) or 7(l), shall have occurred or if the
Underwriters shall decline to purchase the Shares for any reason permitted under
this Agreement.
12. REIMBURSEMENT OF UNDERWRITERS' EXPENSES. If the Company shall fail to
tender the Shares for delivery to the Underwriters by reason of any failure,
refusal or inability on the part of the Transaction Entities to perform any
agreement on their part to be performed, or because any other condition of the
Underwriters' obligations hereunder required to be fulfilled by the Transaction
Entities is not fulfilled, the Transaction Entities will reimburse the
Underwriters for all reasonable out-of-pocket expenses (including fees and
disbursements of counsel) incurred
<PAGE> 29
by the Underwriters in connection with this Agreement and the proposed purchase
of the Shares, and upon demand the Transaction Entities shall pay the full
amount thereof to the Representatives. If this Agreement is terminated pursuant
to Section 9 by reason of the default of one or more Underwriters, the
Transaction Entities shall not be obligated to reimburse any defaulting
Underwriter on account of those expenses.
13. NOTICES, etc. All statements, requests, notices and agreements hereunder
shall be in writing, and:
(a) if to the Underwriters, shall be delivered or sent by mail, telex
or facsimile transmission to ____________________________________;
(b) if to the Transaction Entities shall be delivered or sent by mail,
telex or facsimile transmission to the Company, 65 Valley Stream Parkway,
Malvern, PA 19355, Attention:
General Counsel (Fax: 610-644-2175);
provided, however, that any notice to an Underwriter pursuant to Section 10(c)
shall be delivered or sent by mail, telex or facsimile transmission to such
Underwriter at its address set forth in its acceptance telex to the
Representatives, which address will be supplied to any other party hereto by the
Representatives upon request. Any such statements, requests, notices or
agreements shall take effect at the time of receipt thereof. The Transaction
Entities shall be entitled to act and rely upon any request, consent, notice or
agreement given or made on behalf of the Underwriters by _________________.
14. PERSONS ENTITLED TO BENEFIT OF AGREEMENT. This Agreement shall inure to the
benefit of and be binding upon the Underwriters, the Transaction Entities and
their respective personal representatives and successors. This Agreement and the
terms and provisions hereof are for the sole benefit of only those persons,
except that (A) the representations, warranties, indemnities and agreements of
the Transaction Entities contained in this Agreement shall also be deemed to be
for the benefit of the person or persons, if any, who control any Underwriter
within the meaning of Section 15 of the Securities Act and (B) the indemnity
agreement of the Underwriters contained in Section 10(b) of this Agreement shall
be deemed to be for the benefit of trustees of the Company, officers of the
Company who have signed the Registration Statement and any person controlling
the Transaction Entities within the meaning of section 15 of the Securities Act.
Nothing in this Agreement is intended or shall be construed to give any person,
other than the persons referred to in this Section 14, any legal or equitable
right, remedy or claim under or in respect of this Agreement or any provision
contained herein.
15. SURVIVAL. The respective indemnities, representations, warranties and
agreements of the Transaction Entities and the Underwriters contained in this
Agreement or made by or on behalf on them, respectively, pursuant to this
Agreement, shall survive the delivery of and payment for the Shares and shall
remain in full force and effect, regardless of any investigation made by or on
behalf of any of them or any person controlling any of them.
16. DEFINITION OF THE TERMS "BUSINESS DAY" AND "SUBSIDIARY". For
purposes of this Agreement, (a) "business day" means any day on which the New
York Stock Exchange, Inc. is open for trading and (b) "subsidiary" has the
meaning set forth in Rule 405 of the Rules and Regulations.
<PAGE> 30
17. GOVERNING LAW. This Agreement shall be governed by and construed in
accordance with the laws of New York.
18. COUNTERPARTS. This Agreement may be executed in one or more counterparts
and, if executed in more than one counterpart, the executed counterparts shall
each be deemed to be an original but all such counterparts shall together
constitute one and the same instrument.
19. HEADINGS. The headings herein are inserted for convenience of reference only
and are not intended to be part of, or to affect the meaning or interpretation
of, this Agreement.
If the foregoing correctly sets forth the agreement between the Company and the
Underwriters, please indicate your acceptance in the space provided for that
purpose below.
Very truly yours,
LIBERTY PROPERTY TRUST
By:
------------------------------
Name:
Title:
LIBERTY PROPERTY LIMITED PARTNERSHIP
By: Liberty Property Trust,
its sole general partner
By:
------------------------------
Name:
Title:
Accepted:
[NAMES OF UNDERWRITERS]
For themselves and as Representatives
of the several Underwriters named
in Schedule 1 hereto
By:
<PAGE> 31
By:
------------------------------
Authorized Representative
<PAGE> 32
SCHEDULE 1
Underwriters Number of Shares
- ----------------- -----------------------
[NAMES OF UNDERWRITERS]
Total
=========
<PAGE> 1
LIBERTY PROPERTY LIMITED PARTNERSHIP
ISSUER
TO
THE FIRST NATIONAL BANK OF CHICAGO
TRUSTEE
-----------
FORM OF SUPPLEMENTAL INDENTURE
DATED AS OF ________________, 1997
-----------
-----------
SUPPLEMENT TO INDENTURE,
DATED AS OF ______________, 1997, BETWEEN
LIBERTY PROPERTY LIMITED PARTNERSHIP AND
THE FIRST NATIONAL BANK OF CHICAGO
1
<PAGE> 2
FIRST SUPPLEMENTAL INDENTURE, dated as of _________________,
between LIBERTY PROPERTY LIMITED PARTNERSHIP, a Pennsylvania limited partnership
(the "Issuer"), having its principal offices at 65 Valley Stream Parkway,
Malvern, Pennsylvania 19355, and THE FIRST NATIONAL BANK OF CHICAGO, a national
banking association organized under the laws of the United States of America, as
trustee (the "Trustee"), having its Corporate Trust Office at One First National
Plaza, Suite 0126, Chicago, Illinois 60670-0126.
RECITALS
WHEREAS, the Issuer executed and delivered its Indenture (the
"Original Indenture"), dated as of _____________, 1997, to the Trustee to issue
from time to time for its lawful purposes debt securities evidencing its
unsecured indebtedness.
WHEREAS, the Original Indenture provides that by means of a
supplemental indenture, the Issuer may create one or more series of its debt
securities and establish the form and terms and conditions thereof.
WHEREAS, the Issuer intends by this Supplemental Indenture to
(i) create a series of debt securities, in an aggregate principal amount not to
exceed $_________; and (ii) establish the form and the terms and conditions of
such securities.
WHEREAS, the Board of Trustees of Liberty Property Trust, the
general partner of the Issuer, has approved the creation of the Notes and the
form, terms and conditions thereof.
WHEREAS, the consent of Holders to the execution and delivery
of this Supplemental Indenture is not required, and all other actions required
to be taken under the Original Indenture with respect to this Supplemental
Indenture have been taken.
NOW, THEREFORE IT IS AGREED:
ARTICLE ONE
DEFINITIONS, CREATION, FORM AND TERMS AND CONDITIONS OF THE DEBT SECURITIES
SECTION 1.01 DEFINITIONS. Capitalized terms used in this Supplemental
Indenture and not otherwise defined shall have the meanings ascribed to them in
the Original Indenture. In addition, the following terms shall have the
following meanings to be equally applicable to both the singular and the plural
forms of the terms defined:
"GLOBAL NOTE" means a single fully-registered global note in
book-entry form, without coupons, substantially in the form of Exhibit A or
Exhibit B attached hereto.
"INDENTURE" means the Original Indenture as supplemented by
this First Supplemental Indenture.
2
<PAGE> 3
"INTERCOMPANY DEBT" means Debt to which the only parties are
the Trust, any of its subsidiaries, the Issuer and any Subsidiary, or Debt owed
to the Trust arising from routine cash management practices, but only so long as
such Debt is held solely by any of the Trust, any of its subsidiaries, the
Issuer and any Subsidiary.
"NOTES" means the ________________.
SECTION 1.02 CREATION OF THE DEBT SECURITIES. In accordance with
Section 301 of the Original Indenture, the Issuer hereby creates each of the
____________ as separate series of its debt securities issued pursuant to the
Indenture. The _________ shall be issued in an aggregate principal amount not to
exceed $100,000,000.
SECTION 1.03 FORM OF THE DEBT SECURITIES. Each series of Notes will be
represented by a single fully-registered global note in book-entry form, without
coupons, registered in the name of the nominee of DTC. The _______ shall be in
the form of Exhibit A attached hereto. So long as DTC, or its nominee, is the
registered owner of a Global Note, DTC or its nominee, as the case may be, will
be considered the sole owner or holder of the notes represented by such Global
Note for all purposes under the Indenture. Ownership of beneficial interests in
the Global Notes will be shown on, and transfers thereof will be effected only
through, records maintained by DTC (with respect to beneficial interests of
participants) or by participants or persons that hold interests through
participants (with respect to beneficial interests of beneficial owners).
SECTION 1.04 TERMS AND CONDITIONS OF THE DEBT SECURITIES. The Notes
shall be governed by all the terms and conditions of the Original Indenture, as
supplemented by this First Supplemental Indenture, and in particular, the
following provisions shall be terms of the Notes:
(a) Optional Redemption. The Issuer may redeem the Notes of either or
both series at any time at the option of the Issuer, in whole or from time to
time in part, at a redemption price equal to the Redemption Price.
If notice of redemption has been given as provided in the Original
Indenture and funds for the redemption of any Notes called for redemption shall
have been made available on the Redemption Date referred to in such notice, such
Notes will cease to bear interest on the date fixed for such redemption
specified in such notice and the only right of the Holders of such Notes from
and after the Redemption Date will be to receive payment of the Redemption Price
upon surrender of such Notes in accordance with such notice.
Notice of any optional redemption of any Notes will be given to Holders
at their addresses, as shown in the security register for the Notes, not more
than 60 nor less than 30 days prior to the date fixed for redemption. The notice
of redemption will specify, among other items, the Redemption Price and the
principal amount of the Notes held by such Holder to be redeemed.
3
<PAGE> 4
If all or less than all of the Notes of any series are to be redeemed
at the option of the Issuer, the Issuer will notify the Trustee at least 45 days
prior to giving notice of redemption (or such shorter period as is satisfactory
to the Trustee) of the aggregate principal amount of Notes to be redeemed, if
less than all of the Notes of any series are to be redeemed, and their
Redemption Date. The Trustee shall select, in such manner as it shall deem fair
and appropriate, no less than 60 days prior to the date of redemption, the Notes
to be redeemed in whole or in part.
(b) Payment of Principal and Interest. Principal and interest payments
on interests represented by a Global Note will be made to DTC or its nominee, as
the case may be, as the registered owner of such Global Note. All payments of
principal and interest in respect of the Notes will be made by the Issuer in
immediately available funds.
(c) Applicability of Defeasance or Covenant Defeasance. The provisions
of Article 14 of the Original Indenture shall apply to the Notes.
ARTICLE TWO
ADDITIONAL COVENANTS
The Notes shall be governed by all the covenants contained in the
Original Indenture, as supplemented by this First Supplemental Indenture, and in
particular, this First Supplemental Indenture amends Section 1004 of the
Original Indenture to read as follows:
"SECTION 1004. Limitations on Incurrence of Debt.
(a) The Issuer will not, and will not permit any Subsidiary to, incur
any Debt, other than Intercompany Debt, that is subordinate in right of payment
to the Notes, if, immediately after giving effect to the incurrence of such Debt
and the application of the proceeds thereof, the aggregate principal amount of
all outstanding Debt of the Issuer and its Subsidiaries on a consolidated basis
determined in accordance with GAAP is greater than __% of the sum of (i) the
Issuer's Adjusted Total Assets as of the end of the most recent fiscal quarter
prior to the incurrence of such additional Debt and (ii) the increase in
Adjusted Total Assets since the end of such quarter (including any increase
resulting from the incurrence of additional Debt).
(b) The Issuer will not, and will not permit any Subsidiary to, incur
any Debt if the ratio of Consolidated Income Available for Debt Service to the
Annual Service Charge on the date on which such additional Debt is to be
incurred would have been less than ___ to __, on a pro forma basis, after giving
effect to the incurrence of such Debt and to the application of the proceeds
thereof.
(c) The Issuer will not, and will not permit any Subsidiary to, incur
any Debt secured by any mortgage, lien, charge, pledge, encumbrance or security
interest of any kind upon any of the properties of the Issuer or any Subsidiary
("Secured Debt"), whether owned at the date hereof or hereafter acquired, if,
immediately after giving effect to the incurrence of such Secured Debt and the
application of the proceeds thereof, the aggregate principal amount of all
outstanding Secured Debt of the Issuer and its Subsidiaries on a consolidated
basis is greater than
4
<PAGE> 5
___% of the sum of (i) the Issuer's Adjusted Total Assets as of the end of the
most recent fiscal quarter prior to the incurrence of such additional Debt and
(ii) the increase in Adjusted Total Assets since the end of such quarter
(including any increase resulting from the incurrence of additional Debt).
(d) The Issuer will at all time maintain an Unencumbered Total Asset
Value in an amount not less than ____% of the aggregate principal amount of all
outstanding unsecured Debt of the Issuer and its Subsidiaries on a consolidated
basis.
For purposes of the foregoing provisions regarding the
limitation on the incurrence of Debt, Debt shall be deemed to be "incurred" by
the Issuer or a Subsidiary whenever the Issuer or such Subsidiary shall create,
assume, guarantee or otherwise become liable in respect thereof."
ARTICLE THREE
TRUSTEE
SECTION 3.01 TRUSTEE. The Trustee shall not be responsible in any
manner whatsoever for or in respect of the validity or sufficiency of this
Supplemental Indenture or the due execution thereof by the Issuer. The recitals
of fact contained herein shall be taken as the statements solely of the Issuer,
and the Trustee assumes no responsibility for the correctness thereof.
ARTICLE FOUR
MISCELLANEOUS PROVISIONS
SECTION 4.01 RATIFICATION OF ORIGINAL INDENTURE. This Supplemental
Indenture is executed and shall be construed as an indenture supplemental to the
Original Indenture, and as supplemented and modified hereby, the Original
Indenture is in all respects ratified and confirmed, and the Original Indenture
and this Supplemental Indenture shall be read, taken and construed as one and
the same instrument.
SECTION 4.02 EFFECT OF HEADINGS. The Article and Section headings
herein are for convenience only and shall not affect the construction hereof.
SECTION 4.03 SUCCESSORS AND ASSIGNS. All covenants and agreements in
this Supplemental Indenture by the Issuer shall bind its successors and assigns,
whether so expressed or not.
SECTION 4.04 SEPARABILITY CLAUSE. In case any one or more of the
provisions contained in this Supplemental Indenture shall for any reason be held
to be invalid, illegal or unenforceable in any respect, the validity, legality
and enforceability of the remaining provisions shall not in any way be affected
or impaired thereby.
5
<PAGE> 6
SECTION 4.05 GOVERNING LAW. This Supplemental Indenture shall be
governed by and construed in accordance with the laws of the State of New York.
This Supplemental Indenture is subject to the provisions of the Trust Indenture
Act, that are required to be part of this Supplemental Indenture and shall, to
the extent applicable, be governed by such provisions.
SECTION 4.06 COUNTERPARTS. This Supplemental Indenture may be executed
in any number of counterparts, and each of such counterparts shall for all
purposes be deemed to be an original, but all such counterparts shall together
constitute one and the same instrument.
6
<PAGE> 7
IN WITNESS WHEREOF, the parties hereto have caused this Supplemental
Indenture to be duly executed, and their respective corporate seals to be
hereunto affixed and attested, all as of the date first above written.
LIBERTY PROPERTY LIMITED PARTNERSHIP
By: Liberty Property Trust,
as its sole General Partner
By:
-----------------------------------
Name:
Title:
Attest:
- ----------------------------------
Name:
Title:
THE FIRST NATIONAL BANK OF CHICAGO,
as Trustee
By:
--------------------------------------
Name:
Title:
Attest:
- -----------------------------------
Name:
Title:
7
<PAGE> 8
STATE OF ___________ )
) ss:
COUNTY OF __________ )
On the ___________ day of August 1997, before me personally came
____________________, to me known, who, being by me duly sworn, did depose and
say that he/she resides at _____________________________________, that he/she is
________________ of LIBERTY PROPERTY TRUST, the sole general partner of LIBERTY
PROPERTY LIMITED PARTNERSHIP, one of the parties described in and which executed
the foregoing instrument, and that he/she signed his/her name thereto by
authority of the Board of Trustees.
[Notarial Seal]
---------------------------------------------
Notary Public
COMMISSION EXPIRES
8
<PAGE> 9
STATE OF ____________ )
) ss:
COUNTY OF ____________ )
On the __________ day of August 1997, before me personally came
____________________, to me known, who, being by me duly sworn, did depose and
say that he/she resides at _____________________________________, that he/she is
a _______________ of THE FIRST NATIONAL BANK OF CHICAGO, one of the parties
described in and which executed the foregoing instrument, and that he/she signed
his/her name thereto by authority of the Board of Directors.
[Notarial Seal]
--------------------------------------------
Notary Public
COMMISSION EXPIRES
9
<PAGE> 1
Exhibit 5.1
Law Offices
WOLF, BLOCK, SCHORR and SOLIS-COHEN LLP
Twelfth Floor Packard Building
111 South 15th Street
Philadelphia, Pennsylvania 19102-2678
(215) 977-2000
Facsimile: (215) 977-2334
December 23, 1997
Liberty Property Limited Partnership
65 Valley Stream Parkway
Malvern, PA 19355
RE: Liberty Property Limited Partnership
Registration Statement on Form S-3
Dear Ladies and Gentlemen:
As counsel for Liberty Property Limited Partnership, a
Pennsylvania limited partnership (the "Partnership"), we have assisted in the
preparation of a Registration Statement on Form S-3 (the "Registration
Statement") to be filed with the Securities and Exchange Commission (the
"Commission") jointly by the Partnership and Liberty Property Trust, a Maryland
real estate investment trust (the "Trust"). The Registration Statement relates
to the issuance and sale, from time to time, pursuant to Rule 415 of the General
Rules and Regulations of the Commission promulgated under the Securities Act of
1933, as amended (the "Securities Act"), of securities with an aggregate initial
public offering price of up to $1,500,000,000 or the equivalent thereof in one
or more foreign currencies or composite currencies, consisting of debt
securities of the Partnership with an aggregate initial public offering price up
to $600,000,000 or the equivalent thereof in one or more foreign currencies or
composite currencies (the "Partnership Debt Securities") and securities of the
Trust with an aggregate initial public offering price of up to $900,000,000 or
the equivalent thereof in one or more foreign currencies or composite
currencies. The Partnership Debt Securities may be any of senior secured debt
securities, senior unsecured debt securities, subordinated secured debt
securities or subordinated unsecured debt securities, in one or more series,
which in each case are to be issued under either a senior indenture (the "Senior
Indenture") or a subordinated indenture (the "Subordinated Indenture" and,
together with the Senior Indenture, the "Indentures") to be entered into by the
Partnership and The First National Bank of Chicago (the "Trustee" and,
collectively with the trustees, if any, under other Indentures, the "Trustees")
and, if such Partnership Debt Securities
<PAGE> 2
Liberty Property Limited Partnership
December 23, 1997
Page 2
are to be issued with "Trust Guaranties," as defined in the Registration
Statement (the "Trust Guaranties"), the Trust.
This opinion is being delivered in accordance with the
requirements of Item 601(b)(5) of Regulation S-K promulgated under the
Securities Act.
For the purpose of rendering this opinion, we have examined
(i) the Registration Statement; (ii) the form of Senior Indenture being
incorporated by reference as an exhibit to the Registration Statement (the "Base
Senior Indenture"); (iii) the form of Subordinated Indenture being incorporated
by reference as an exhibit to the Registration Statement (the "Base Subordinated
Indenture"); (iv) the Certificate of Limited Partnership of the Partnership, as
amended to date (the "Certificate of Limited Partnership"); (iv) the Second
Amended and Restated Agreement of Limited Partnership of the Partnership, as
amended to date (the "Agreement of Limited Partnership"); and (v) certain
resolutions adopted by the Board of Trustees of the Trust (the "Board of
Trustees"), in the Trust's capacity as the sole general partner of the
Partnership, relating to the Partnership Debt Securities. We have also examined
originals or copies, certified or otherwise identified to our satisfaction, of
such records of the Partnership and the Trust and such agreements, certificates
of public officials, certificates of officers or other representatives of the
Partnership and the Trust and others and such other documents, certificates and
records as we have deemed necessary or appropriate as a basis for the opinions
set forth herein.
In our examination, we have assumed without independent
verification (i) the legal capacity of all natural persons; (ii) the genuineness
of all signatures; (iii) the authenticity of all documents submitted to us as
originals; (iv) the conformity to original documents of all documents submitted
to us as certified, conformed or photostatic copies and the authenticity of the
originals of such latter documents; and (v) the power and authority of all
persons other than the Partnership signing such documents to execute, deliver
and perform such documents, and the valid authorization, execution and delivery
of such documents by such other persons. As to any facts material to the
opinions expressed herein which have not been independently established or
verified, we have relied upon oral or written statements and representations of
officers or other representatives of the Partnership, the Trust and others.
We do not express any opinion as to the laws of any
jurisdiction other than the Commonwealth of Pennsylvania and the federal laws of
the United States of America to the extent referred to specifically herein. The
Partnership Debt Securities may be issued from time to time on a delayed or
continuous basis, and this opinion is limited to the laws, including applicable
rules and regulations, in effect on the date hereof. We assume no obligation to
update this opinion.
<PAGE> 3
Liberty Property Limited Partnership
December 23, 1997
Page 3
Based upon and subject to the foregoing, such examinations of
law and such other matters as we have deemed relevant under the circumstances,
we are of the opinion that, as of the date hereof:
1. The respective forms of the Base Senior Indenture and
the Base Subordinated Indenture (collectively, the
"Base Indentures") have been duly authorized by the
Partnership through the action of the Trust, by the
Board of Trustees, in the Trust's capacity as the
sole general partner of the Partnership. Each of the
Base Indentures, and each other Indenture in the form
of either of the Base Indentures, as modified by the
Trust in accordance with duly adopted resolutions of
the Board of Trustees, in the Trust's capacity as the
sole general partner of the Partnership, to reflect
the additional terms applicable to the Partnership
Debt Securities to which such Indenture relates, when
executed and delivered by the Partnership and duly
executed and delivered by the Trustee thereunder,
will be a valid and binding agreement, enforceable
against the Partnership in accordance with its terms,
except to the extent that enforcement thereof may be
limited by (a) bankruptcy, insolvency,
reorganization, fraudulent transfer, moratorium or
other similar laws now or hereafter in effect
relating to or affecting creditors' rights generally,
(b) general principles of equity (regardless of
whether enforceability is considered in a proceeding
at law or in equity), (c) requirements that a claim
with respect to any Partnership Debt Securities
denominated other than in United States dollars (or a
judgment denominated other than in United States
dollars in respect of such claim) be converted into
United States dollars at a rate of exchange
prevailing on a date determined pursuant to
applicable law, and (d) governmental authority to
limit, delay or prohibit the making of payments
outside the United States or in foreign currency or
composite currency.
2. With respect to any Partnership Debt Securities, when
(i) if such Partnership Debt Securities are to be
sold pursuant to a firm commitment underwritten
offering, the underwriting agreement with respect to
such Partnership Debt Securities (the "Underwriting
Agreement") has been duly authorized, executed and
delivered by the Partnership through the action of
the Trust in its capacity as the sole general partner
of the Partnership and the other party or parties
thereto; (ii) if such Partnership Debt Securities are
to be sold on an agency basis, the distribution
agreement with respect to such Partnership Debt
Securities (the "Distribution Agreement") or any
other applicable purchase agreement
<PAGE> 4
Liberty Property Limited Partnership
December 23, 1997
Page 4
has been duly authorized, executed and delivered by
the Partnership through the action of the Trust in
its capacity as the sole general partner of the
Partnership and the other party or parties thereto;
(iii) the Board of Trustees, including any
appropriate committee appointed thereby, acting for
the Trust in the Trust's capacity as the sole general
partner of the Partnership, and the appropriate
officers of the Partnership and the Trust, have taken
all necessary Partnership or Trust action, as the
case may be, to approve the issuance and terms of
such Partnership Debt Securities and related matters;
(iv) the terms of such Partnership Debt Securities
and of their issuance and sale have been duly
established in conformity with the Indenture relating
thereto so as not to violate any applicable law, the
Certificate of Limited Partnership or the Agreement
of Limited Partnership or result in a default under
or breach of any agreement or instrument binding upon
the Partnership, and so as to comply with any
requirement or restriction imposed by any court or
governmental body having jurisdiction over the
Partnership; (v) the applicable Indenture has been
duly executed and delivered by the Partnership,
through the action of the Trust in its capacity as
the sole general partner of the Partnership, and the
Trustee thereunder; and (vi) such Partnership Debt
Securities have been duly executed and authenticated
in accordance with the provisions of the applicable
Indenture and duly delivered to the purchasers
thereof upon payment of the agreed-upon consideration
therefor, such Partnership Debt Securities, when
issued and sold in accordance with the applicable
Indenture and the related Underwriting Agreement or
Distribution Agreement, if any, or any other duly
authorized, executed and delivered applicable
purchase agreement, will be valid and binding
obligations of the Partnership, enforceable against
the Partnership in accordance with their respective
terms, except to the extent that enforcement thereof
may be limited by (a) bankruptcy, insolvency,
reorganization, fraudulent transfer, moratorium or
other similar laws now or hereafter in effect
relating to or affecting creditors' rights generally,
(b) general principles of equity (regardless of
whether enforceability is considered in a proceeding
at law or in equity), (c) requirements that a claim
with respect to any Partnership Debt Securities
denominated other than in United States dollars (or a
judgment denominated other than in United States
dollars in respect of such claim) be converted into
United States dollars at a rate of exchange
prevailing on a date determined pursuant to
applicable law, and (d) governmental authority to
limit, delay or prohibit the making of
<PAGE> 5
Liberty Property Limited Partnership
December 23, 1997
Page 5
payments outside the United States or in foreign
currency or composite currency.
We note that, as of the date hereof, a judgment for money in
an action based on a Partnership Debt Security denominated in a foreign
currency, currency unit or composite currency in a federal or state court in the
United States ordinarily would be enforced in the United States only in United
States dollars. The date used to determine the rate of conversion of the foreign
currency, currency unit or composite currency in which a particular Partnership
Debt Security is denominated into United States dollars will depend upon various
factors, including which court renders the judgment.
We hereby consent to the filing of this opinion with the
Commission as an exhibit to the Registration Statement. We also consent to the
reference to our firm under the heading "Legal Opinions" in the Registration
Statement. In giving this consent, we do not admit that we are in the category
of persons whose consent is required under Section 7 of the Securities Act or
the Rules and Regulations of the Commission.
Very truly yours,
/s/ Wolf, Block, Schorr and Solis-Cohen LLP
Wolf, Block, Schorr and Solis-Cohen LLP
<PAGE> 1
Exhibit 5.2
WEINBERG & GREEN LLC
--------------
Attorneys at Law
100 South Charles Street
Baltimore, Maryland 21201-2773
--------------
Telephone 410/332 8600
Washington Area 301/470 7400
Facsimile 410/332 8862
ROBERT A. SNYDER, JR.
410/332 8824 42430.16
December 23, 1997
Liberty Property Trust
65 Valley Stream Parkway, Suite 100
Malvern, Pennsylvania 19355
Re: Liberty Property Trust - Registration Statement on Form S-3
Ladies and Gentlemen:
We have acted as Maryland counsel for Liberty Property Trust, a
Maryland real estate investment trust (the "Company"), in connection with
certain matters of Maryland law arising out of the shelf registration of up to
U.S. $900,000,000 (or the equivalent) of Preferred Shares, Depositary Shares,
Common Shares, Preferred Shares Warrants, Common Shares Warrants, and Trust
Guaranties (each as defined in the above-referenced S-3 Registration Statement)
(collectively referred to as the "Trust Securities") proposed to be offered by
the Company from time to time and up to U.S. $600,000,000 (or the equivalent) of
certain debt securities proposed to be offered by Liberty Property Limited
Partnership, a Pennsylvania limited partnership, from time to time, in one or
more series, together or separately, at prices and on terms to be determined at
the time of offering pursuant to a Registration Statement on Form S-3 (the "S-3
Registration Statement"), a Prospectus and one or more Prospectus supplements.
(The Preferred Shares Warrants and Common Shares Warrants are referred to
collectively as the "Trust Warrants.")
In connection with our representation of the Company and as a basis
for the opinions hereinafter set forth, we have examined originals or
photostatic copies of the following documents (hereinafter collectively
referred to as the "Documents"):
a. A copy of the S-3 Registration Statement, as filed by the Company
with the Securities and Exchange Commission (the "Commission")
under the Securities Act of 1933 (the "Act");
b. The prospectus contained in the S-3 Registration Statement (the
"S-3 Prospectus");
<PAGE> 2
Liberty Property Trust
December 23, 1997
Page 2
c. The Amended and Restated Declaration of Trust of the Company (the
"Declaration of Trust");
d. Articles Supplementary of the Company recorded on August 7, 1997;
e. The Bylaws of the Company;
f. Resolutions adopted by the Board of Trustees of the Company dated
December 12, 1997; and
g. Such other documents and matters as we have deemed necessary and
appropriate to express the opinions set forth in this letter, subject to
the limitations, assumptions and qualifications noted below.
In expressing the opinions set forth below, we have assumed, and so far as
is known to us there are no facts inconsistent with, the following:
1. Each of the parties (other than the Company) executing any of the
Documents has duly and validly executed and delivered each of the Documents to
which such party is a signatory, and such party's obligations set forth therein
are legal, valid and binding and are enforceable in accordance with all stated
terms except as limited (a) by bankruptcy, insolvency, reorganization,
moratorium, fraudulent conveyance or other laws relating to or affecting the
enforcement of creditors' rights or (b) by general equitable principles;
2. Each individual executing any of the Documents on behalf of a party is
duly authorized and legally competent to do so;
3. All Documents submitted to us as originals are authentic. All Documents
submitted to us as certified or photostatic copies conformed to the original
documents. All signatures on all such documents are genuine. All public records
reviewed or relied upon by us or on our behalf are true and complete. All
statements and information contained in the Documents are true and complete;
4. Liberty Property Limited Partnership (the "Partnership") is a limited
partnership validly existing and in good standing under the laws of its state of
formation;
5. There will be no changes in applicable law between the date of this
opinion and any date of issuance or delivery of the Trust Securities, including
without limitation, any Trust Securities that may be issued upon conversion or
exchange of any of the Trust Securities;
<PAGE> 3
Liberty Property Trust
December 23, 1997
Page 3
6. At the time of delivery of the Trust Securities, all contemplated
additional actions shall have been taken and the authorization of the issuance
of the Trust Securities will not have been modified or rescinded;
7. The terms of all Trust Securities to be established subsequent to the
date of this opinion; the issuance, execution and delivery of the Trust
Securities; and the compliance by the Company with the terms of the Trust
Securities, will not violate any then-applicable law or result in a default
under, breach of, or violation of any provision of any instrument or agreement
then binding on the Company, or any restriction imposed by any court or
governmental body having jurisdiction over the Company;
8. The consideration received or proposed to be received for the
issuance and sale or reservation for issuance of any offering of common shares
of the Company as contemplated by each of the S-3 Registration Statement, the
S-3 Prospectus, and the applicable supplement or supplements to the S-3
Prospectus is not less than the par value per share; and
9. The aggregate number of shares of the Company which would be
outstanding after the issuance or reservation for issuance of any preferred
shares or common shares of the Company, whether to effect an issuance of Common
Shares, Preferred Shares, Depositary Shares, Trust Warrants, or other Trust
Securities or Partnership Debt Securities exchangeable or convertible into
common shares or preferred shares, and any other contemporaneously issued or
reserved common shares or preferred shares, together with the number of common
shares and preferred shares previously issued and outstanding and the number of
common shares and preferred shares previously reserved for issuance upon the
conversion or exchange of other Trust Securities, does not exceed the number of
then-authorized shares of the Company.
On the basis of the foregoing, and subject to the qualifications and
limitations stated herein, it is our opinion that:
1. When and if (a) the definitive terms of any particular series of
Preferred Shares, other than the Depositary Shares, have been duly established,
in accordance with resolutions of the trustees of the Company ("Trustees")
authorizing the issuance and sale of that particular series of Preferred
Shares, (b) articles supplementary regarding that particular series of
Preferred Shares that conform to the Declaration of Trust and Maryland law have
been filed with the State Department of Assessments and Taxation of the State
of Maryland, and (c) those Preferred Shares have been duly issued or delivered
in the manner and for the consideration contemplated by each of the S-3
Registration Statement, the S-3 Prospectus and the applicable supplement or
supplements to the S-3 Prospectus, and in accordance with the terms of the
particular series as established by the Trustees in the applicable articles
supplementary, those Preferred Shares will be validly issued, fully paid and
nonassessable.
<PAGE> 4
Liberty Property Trust
December 23, 1997
Page 4
2. When and if (a) the deposit agreement relating to the Preferred Shares
represented by Depositary Shares has been duly executed and delivered by the
Company and the depositary in accordance with resolutions of the Trustees, (b)
the terms of the Preferred Shares represented by Depositary Shares and of their
issuance and sale have been duly established in conformity with the deposit
agreement, (c) the Preferred Shares which are represented by the Depositary
Shares are validly issued and delivered (as contemplated above) to the
depositary, (d) the depositary receipts evidencing the Depositary Shares are
duly issued against the deposit of the Preferred Shares in accordance with the
deposit agreement, and (e) the Preferred Shares represented by Depositary
Shares are issued in the manner contemplated by each of the S-3 Registration
Statement, the S-3 Prospectus and the applicable supplement or supplements to
the S-3 Prospectus, the Preferred Shares represented by Depositary Shares will
be validly issued.
3. When and if (a) the definitive terms of any offering of Common Shares
have been duly established, in accordance with resolutions of the Trustees
authorizing the issuance and sale of the Common Shares, and (b) those Common
Shares so offered have been duly issued or delivered in the manner and for the
consideration contemplated by each of the S-3 Registration Statement, the S-3
Prospectus and the applicable supplement or supplements to the S-3 Prospectus,
those Common Shares will be validly issued, fully paid and nonassessable.
4. When and if (a) the Trust Warrants have been duly executed and
delivered in the form and in the manner contemplated in each of the S-3
Registration Statement, the S-3 Prospectus and the applicable supplement or
supplements to the S-3 Prospectus, (b) the terms of the Trust Warrants as
executed and delivered are as described in each of the S-3 Registration
Statement, the S-3 Prospectus and the applicable supplement or supplements to
the S-3 Prospectus, and (c) the Trust Warrants are then issued and sold as
contemplated in each of the S-3 Registration Statement, the S-3 Prospectus and
the applicable supplement or supplements to the S-3 Prospectus, the Trust
Warrants will constitute valid and legally binding obligations of the Company.
5. When and if (a) the terms of the Trust Guaranties relating to certain
debt securities of the Partnership (the "Partnership Debt Securities") have
been duly established, (b) the instruments relating to the Trust Guaranties
have been authorized, executed and delivered by the Trustees of the Company,
(c) the Partnership Debt Securities to which the Trust Guaranties relate have
been duly issued and sold and the purchase price therefor has been received by
the Partnership, and (d) the consideration, if any, separately payable for the
Trust Guaranties has been received, the Trust Guaranties will constitute valid
and legally binding obligations of the Company.
<PAGE> 5
Liberty Property Trust
December 23, 1997
Page 5
6. When and if (a) any common shares or preferred shares of the
Company ("Underlying Trust Securities") issuable upon conversion or exchange of
any legally issued convertible or exchangeable Trust Securities or Partnership
Debt Securities (which have been surrendered to the Company in accordance with
their respective terms) are duly issued from shares or other units of those
Underlying Trust Securities reserved in accordance with the resolutions of the
Trustees, (b) the Trustees have duly authorized the issuance of those
Underlying Trust Securities, and (c) those Underlying Trust Securities are duly
issued or delivered in the manner and for the consideration contemplated by
each of the S-3 Registration Statement, the S-3 Prospectus and the applicable
supplement or supplements to the S-3 Prospectus, the Underlying Trust
Securities will be validly issued, fully paid and nonassessable.
The foregoing opinions are limited to the laws of the State of
Maryland and we do not express any opinion herein concerning any other law. We
assume no obligation to supplement this opinion if any applicable law changes
after the date hereof or if we become aware of any facts that might change the
opinions expressed herein after the date hereof.
We hereby consent to the filing of this opinion as an exhibit to the
S-3 Registration Statement and to the use of the name of our firm therein. In
giving this consent, we do not admit that we are within the category of persons
whose consent is required by Section 7 of the Securities Act of 1933.
Very truly yours,
WEINBERG & GREEN LLC
By: /s/ Robert A. Snyder, Jr.
---------------------------
Robert A. Snyder, Jr.
<PAGE> 1
Exhibit 12.1
EXHIBIT 12.1 - STATEMENT RE: COMPUTATION OF RATIO
OF EARNINGS TO COMBINED FIXED CHARGES AND PREFERRED SHARE DIVIDENDS
AND COMPUTATION OF RATIO OF EARNINGS TO FIXED CHARGES
<TABLE>
<CAPTION>
Period from
9 Months Ended Year Ended Year Ended June 23, 1994 to
September 30, 1997 December 31, 1996 December 31, 1995 December 31, 1994
-------------------- ------------------- ------------------- -------------------
<S> <C> <C> <C> <C>
Earnings before fixed charges:
Income before
extraordinary item $41,300 $37,631 $22,309 $10,868
Add: Interest expense 33,818 33,967 32,819 11,326
Depreciation Expense on 375 502 450 200
Cap'd Interest
Amortization of deferred
financing costs, net 6,353 4,561 4,869 1,250
-------------------- ------------------ ------------------ ------------------
Earnings before fixed charges $81,846 $76,661 $60,447 $23,644
==================== ================== ================== ==================
Fixed charges:
Interest expense 33,818 33,967 32,819 11,326
Amortization of Deferred
Financing Charges 3,434 4,561 4,869 1,250
Capitalized Interest 8,143 7,708 3,475 190
Preferred Dividends 1,497 -- -- --
-------------------- ------------------ ------------------ ------------------
Fixed charges $46,892 $48,236 $41,163 $12,766
==================== ================== ================== ==================
Ratio of earnings to
combined fixed charges
and preferred share
dividends 1.75 1.66 1.47 1.85
==================== ================== ================== ==================
Ratio of earnings to
fixed charges 1.80 1.66 1.47 1.85
==================== ================== ================== ==================
</TABLE>
<PAGE> 1
Exhibit 23.1
Consent of Independent Auditors
We consent to the reference to our firm under the caption "Experts" in the
Registration Statement (Form S-3 No. 333-00000) and related Prospectus of
Liberty Property Trust and Liberty Property Limited Partnership and to the
incorporation by reference therein of our reports dated February 17, 1997, with
respect to the consolidated financial statements and schedule of Liberty
Property Trust and Liberty Property Limited Partnership included in the Annual
Reports (Form 10-K) of Liberty Property Trust and Liberty Property Limited
Partnership for the year ended December 31, 1996, filed with the Securities and
Exchange Commission.
/s/ Ernst & Young LLP
Philadelphia, Pennsylvania
December 22, 1997
<PAGE> 1
Exhibit 23.2
Consent of Independent Auditors
We consent to the reference to our firm under the caption "Experts" in the
Registration Statement (Form S-3, No. 333-00000) and related Prospectus of
Liberty Property Trust and Liberty Property Limited Partnership and to the
incorporation by reference therein of (i) our report dated February 3, 1997 with
respect to the Statement of Operating Revenues and Certain Operating Expenses
for 650-660 E. Swedesford Road, included in the Current Report on Form 8-K of
Liberty Property Trust and Liberty Property Limited Partnership filed with the
Securities and Exchange Commission (the "Commission") on February 13, 1997, (ii)
our report dated January 28, 1997 with respect to the Statement of Operating
Revenues and Certain Operating Expenses for the South Carolina Properties,
included in the Current Report on Form 8-K of Liberty Property Trust and Liberty
Property Limited Partnership filed with the Commission on March 5, 1997, (iii)
our report dated February 24, 1997 with respect to the Statement of Operating
Revenues and Certain Operating Expenses for the Minnesota Properties, included
in the Current Report on Form 8-K of Liberty Property Trust and Liberty Property
Limited Partnership filed with the Commission on March 5, 1997, (iv) our report
dated June 5, 1997 with respect to the Statement of Operating Revenues and
Certain Operating Expenses for the Detroit Properties, included in the Current
Report on Form 8-K of Liberty Property Trust and Liberty Property Limited
Partnership, filed with the Commission on June 25, 1997, (v) our reports dated
November 3, 1997 with respect to the Statements of Operating Revenues and
Certain Operating Expenses for 4198 Cox Road and 4510 Cox Road, included in the
Current Report on Form 8-K of Liberty Property Trust and Liberty Property
Limited Partnership filed with the Commission on November 4, 1997, (vi) our
report dated November 13, 1997 with respect to the Statement of Operating
Revenues and Certain Operating Expenses for the Patuxent Woods Properties,
included in the Current Report on Form 8-K of Liberty Property Trust and Liberty
Property Limited Partnership filed with the Commission on November 13, 1997,
(vii) our report dated November 19, 1997 with respect to the Statement of
Operating Revenues and Certain Operating Expenses for the Horsham Properties,
included in the Current Report on Form 8-K of Liberty Property Trust and Liberty
Property Limited Partnership filed with the Commission on November 19, 1997 and
(viii) our report dated December 11, 1997 with respect to the Statement of
Operating Revenues and Certain Operating Expenses for the Greenville Properties,
included in the Current Report on Form 8-K of Liberty Property Trust and Liberty
Property Limited Partnership filed with the Commission on December 11, 1997.
/s/ Fegley & Associates
Plymouth Meeting, Pennsylvania
December 23, 1997
