UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(Mark One)
X QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ended June 30, 1999
OR
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
AND EXCHANGE ACT OF 1934
For the transition period from __________________ to __________________
Commission file number: 1-13130 (Liberty Property Trust)
1-13132 (Liberty Property Limited Partnership)
LIBERTY PROPERTY TRUST
LIBERTY PROPERTY LIMITED PARTNERSHIP
(Exact name of registrants as specified in their governing documents)
MARYLAND (Liberty Property Trust) 23-7768996
PENNSYLVANIA (Liberty Property Limited Partnership) 23-2766549
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification Number)
65 Valley Stream Parkway, Suite 100, Malvern, Pennsylvania 19355
(Address of Principal Executive Offices) (Zip Code)
Registrants' Telephone Number, Including Area Code (610)648-1700
Indicate by check mark whether the registrants (1) have filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange
Act of 1934 during the preceding twelve (12) months (or for such shorter
period that the registrants were required to file such reports) and (2)
have been subject to such filing requirements for the past ninety (90)
days. YES X NO
On August 5, 1999, 66,686,706 Common Shares of Beneficial Interest, par
value $.001 per share, of Liberty Property Trust were outstanding.
<PAGE>
LIBERTY PROPERTY TRUST/LIBERTY PROPERTY LIMITED PARTNERSHIP
FORM 10-Q FOR THE PERIOD ENDED JUNE 30, 1999
INDEX
- -----
Part I. Financial Information
- -------------------------------
Item 1. Financial Statements (unaudited) Page
----
Consolidated balance sheets of Liberty Property
Trust at June 30, 1999 and December 31, 1998. 4
Consolidated statements of operations of Liberty
Property Trust for the three months ended June
30, 1999 and June 30, 1998. 5
Consolidated statements of operations of Liberty
Property Trust for the six months ended June
30, 1999 and June 30, 1998. 6
Consolidated statements of cash flows of Liberty
Property Trust for the six months ended June
30, 1999 and June 30, 1998. 7
Notes to consolidated financial statements for
Liberty Property Trust. 8
Consolidated balance sheets of Liberty Property
Limited Partnership at June 30, 1999 and
December 31, 1998. 12
Consolidated statements of operations of Liberty
Property Limited Partnership for the three months
ended June 30, 1999 and June 30, 1998. 13
Consolidated statements of operations of Liberty
Property Limited Partnership for the six months
ended June 30, 1999 and June 30, 1998. 14
Consolidated statements of cash flows of Liberty
Property Limited Partnership for the six months
ended June 30, 1999 and June 30, 1998. 15
Notes to consolidated financial statements for
Liberty Property Limited Partnership. 16
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations. 19
Item 3. Quantitative and Qualitative Disclosures About Market
Risk 27
Part II. Other Information
- ---------------------------
Signatures 30
Exhibit Index 31
- -2-
<PAGE>
- -----------------------------
The Private Securities Litigation Reform Act of 1995 provides a "safe
harbor" for forward-looking statements. Certain information included in
this Quarterly Report on Form 10-Q contain statements that are or will be
forward-looking, such as statements relating to acquisitions,
dispositions and other business development and development activities,
future capital expenditures, the costs and risks associated with the Year
2000 issue, financing sources and availability, and the effects of
regulation (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 made by, or on behalf of, Liberty Property
Trust and Liberty Property Limited Partnership (together, the "Company").
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 Company's 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, the potential
adverse impact of market interest rates on the market price for the
Company's securities and risks relating to the Year 2000 issue.
- -3-
<PAGE>
CONSOLIDATED BALANCE SHEETS OF LIBERTY PROPERTY TRUST
(IN THOUSANDS, EXCEPT SHARE AMOUNTS)
<TABLE>
<CAPTION>
JUNE 30, 1999 DECEMBER 31, 1998
------------------ -----------------
(UNAUDITED)
<S> <C> <C>
ASSETS
Real estate:
Land and land improvements $ 394,392 $ 366,853
Buildings and improvements 2,494,110 2,378,272
Less accumulated depreciation (238,883) (209,023)
---------- ----------
Operating real estate 2,649,619 2,536,102
Development in progress 183,716 207,563
Land held for development 87,479 75,454
---------- ----------
Net real estate 2,920,814 2,819,119
Cash and cash equivalents 33,555 14,391
Accounts receivable 5,780 15,391
Deferred financing and leasing costs,
net of accumulated amortization
(1999, $54,979; 1998, $49,390) 45,298 39,475
Prepaid expenses and other assets 36,958 44,995
---------- ----------
Total assets $3,042,405 $2,933,371
========== ==========
LIABILITIES
Mortgage loans $ 386,150 $ 413,224
Unsecured notes 1,030,000 645,000
Credit facility - 264,000
Convertible debentures 96,729 101,619
Accounts payable 24,125 20,216
Accrued interest 22,728 18,263
Dividend payable 33,907 33,734
Other liabilities 61,964 69,025
---------- ----------
Total liabilities 1,655,603 1,565,081
Minority interest 95,967 101,254
SHAREHOLDERS' EQUITY
8.80% Series A cumulative redeemable preferred
shares, $.001 par value, 5,000,000 shares
authorized, issued and outstanding as of
June 30, 1999 and December 31, 1998 120,814 120,814
Common shares of beneficial interest, $.001
par value, 200,000,000 shares authorized,
66,340,165 and 65,645,340 shares issued
and outstanding as of June 30, 1999
and December 31, 1998, respectively 66 66
Additional paid-in capital 1,182,433 1,168,663
Unearned compensation (1,026) (562)
Dividends in excess of net income (11,452) (21,945)
---------- -----------
Total shareholders' equity 1,290,835 1,267,036
---------- -----------
Total liabilities and shareholders' equity $3,042,405 $2,933,371
========== ===========
</TABLE>
See accompanying notes.
- -4-
<PAGE>
CONSOLIDATED STATEMENTS OF OPERATIONS OF LIBERTY PROPERTY TRUST
(UNAUDITED AND IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<TABLE>
<CAPTION>
THREE THREE
MONTHS ENDED MONTHS ENDED
JUNE 30, 1999 JUNE 30, 1998
-------------- --------------
<S> <C> <C>
REVENUE
Rental $ 84,250 $ 68,018
Operating expense reimbursement 29,510 23,124
Management fees 150 150
Gain (loss) on sale 11,942 (1,048)
Interest and other 1,290 1,164
--------- ---------
Total revenue 127,142 91,408
--------- ---------
OPERATING EXPENSES
Rental property expenses 20,641 16,723
Real estate taxes 10,048 7,518
General and administrative 3,931 3,697
Depreciation and amortization 20,437 16,520
--------- ---------
Total operating expenses 55,057 44,458
--------- ---------
Operating income 72,085 46,950
Interest expense 25,822 18,853
--------- ---------
Income before minority interest 46,263 28,097
Minority interest 3,011 2,061
--------- ---------
Net income 43,252 26,036
Preferred distributions 2,750 2,750
--------- ---------
Income available to common shareholders $ 40,502 $ 23,286
========= =========
Income per common share - basic $ 0.61 $ 0.39
========= =========
Income per common share - diluted $ 0.60 $ 0.39
========= =========
Distributions declared per common share $ 0.45 $ 0.42
========= =========
Weighted average number of common shares
outstanding - basic 66,308 59,715
========= =========
Weighted average number of common shares
outstanding - diluted 71,412 60,049
========= =========
</TABLE>
See accompanying notes.
- -5-
<PAGE>
CONSOLIDATED STATEMENTS OF OPERATIONS OF LIBERTY PROPERTY TRUST
(UNAUDITED AND IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<TABLE>
<CAPTION>
SIX SIX
MONTHS ENDED MONTHS ENDED
JUNE 30, 1999 JUNE 30, 1998
-------------- --------------
<S> <C> <C>
REVENUE
Rental $165,718 $129,033
Operating expense reimbursement 59,033 43,374
Management fees 300 297
Gain (loss) on sale 13,211 (1,048)
Interest and other 2,369 2,371
--------- ---------
Total revenue 240,631 174,027
--------- ---------
OPERATING EXPENSES
Rental property expenses 41,834 31,639
Real estate taxes 19,825 14,537
General and administrative 7,916 7,047
Depreciation and amortization 40,580 30,739
--------- ---------
Total operating expenses 110,155 83,962
--------- ---------
Operating income 130,476 90,065
Interest expense 49,575 35,419
--------- ---------
Income before minority interest 80,901 54,646
Minority interest 5,221 3,870
--------- ---------
Net income 75,680 50,776
Preferred distributions 5,500 5,500
--------- ---------
Income available to common shareholders $ 70,180 $ 45,276
========= =========
Income per common share - basic $ 1.06 $ 0.79
========= =========
Income per common share - diluted $ 1.05 $ 0.78
========= =========
Distributions declared per common share $ 0.90 $ 0.84
========= =========
Weighted average number of common shares
outstanding - basic 66,163 57,509
========= =========
Weighted average number of common shares
outstanding - diluted 71,314 57,870
========= =========
</TABLE>
See accompanying notes.
- -6-
<PAGE>
CONSOLIDATED STATEMENTS OF CASH FLOWS OF LIBERTY PROPERTY TRUST
(UNAUDITED AND IN THOUSANDS)
<TABLE>
<CAPTION>
SIX SIX
MONTHS ENDED MONTHS ENDED
JUNE 30, 1999 JUNE 30, 1998
-------------- --------------
<S> <C> <C>
OPERATING ACTIVITIES
Net income $ 75,680 $ 50,776
Adjustments to reconcile net income to
net cash provided by operating activities:
Depreciation and amortization 40,580 30,739
Amortization of deferred financing costs 3,126 2,193
Minority interest in net income 5,221 3,870
(Gain) loss on sale (13,211) 1,048
Noncash compensation 1,495 996
Changes in operating assets and liabilities:
Accounts receivable 9,611 (1,016)
Prepaid expenses and other assets 7,356 (1,682)
Accounts payable 3,909 6,656
Accrued interest 4,465 5,700
Other liabilities (7,061) 9,278
---------- ---------
Net cash provided by operating activities 131,171 108,558
---------- ---------
INVESTING ACTIVITIES
Investment in properties (41,114) (369,316)
Proceeds from disposition of properties 62,976 12,753
Investment in development in progress (119,035) (141,995)
Investment in land held for development (23,725) (21,642)
Increase in deferred leasing costs (7,464) (6,023)
---------- ---------
Net cash used in investing activities (128,362) (526,223)
---------- ---------
FINANCING ACTIVITIES
Net proceeds from issuance of common shares 1,054 197,616
Proceeds from issuance of unsecured notes 385,000 275,000
Repayments of mortgage loans (30,892) (11,505)
Proceeds from credit facility 83,024 421,000
Repayments on credit facility (347,024) (423,000)
Increase in deferred financing costs (5,264) (530)
Distributions paid on common shares (59,373) (46,008)
Distributions paid on preferred shares (5,500) (5,500)
Distributions paid on units (4,670) (4,145)
---------- ---------
Net cash provided by financing activities 16,355 402,928
Increase (decrease) in cash and cash equivalents 19,164 (14,737)
Cash and cash equivalents at beginning of period 14,391 55,079
---------- ---------
Cash and cash equivalents at end of period $ 33,555 $ 40,342
========== =========
SUPPLEMENTAL DISCLOSURE OF NONCASH TRANSACTIONS
Write-off of fully depreciated property and
deferred costs $ 7,666 $ 2,768
Acquisition of properties (3,818) (82,064)
Assumption of mortgage loans 3,818 63,918
Issuance of operating partnership units - 18,146
Conversion of convertible debentures 4,779 3,831
========== =========
</TABLE>
See accompanying notes.
- -7-
<PAGE>
LIBERTY PROPERTY TRUST
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
JUNE 30, 1999
NOTE 1 - BASIS OF PRESENTATION
- ------------------------------
The accompanying unaudited consolidated financial statements of Liberty
Property Trust (the "Trust") and its subsidiaries, including Liberty
Property Limited Partnership (the "Operating Partnership") (the Trust,
Operating Partnership and their respective subsidiaries referred to
collectively as the "Company"), have been prepared in accordance with
generally accepted accounting principles for interim financial
information and with the instructions to Form 10-Q and Article 10 of
Regulation S-X. Accordingly, they do not include all of the information
and footnotes required by generally accepted accounting principles for
complete financial statements and should be read in conjunction with the
consolidated financial statements and notes thereto included in the
Annual Report on Form 10-K of the Trust and the Operating Partnership for
the year ended December 31, 1998. In the opinion of management, all
adjustments (consisting solely of normal recurring adjustments) necessary
for a fair presentation of the financial statements for these interim
periods have been included. The results of interim periods are not
necessarily indicative of the results to be obtained for a full fiscal
year. Certain amounts from prior periods have been restated to conform
to current period presentation.
The following table sets forth the computation of basic and diluted
income per common share for the three and six month periods ended June
30, 1999 and 1998:
<TABLE>
<CAPTION>
FOR THE THREE MONTHS FOR THE THREE MONTHS
ENDED JUNE 30, 1999 ENDED JUNE 30, 1998
------------------------------------- -------------------------------------
INCOME SHARES PER SHARE INCOME SHARES PER SHARE
(NUMERATOR) (DENOMINATOR) AMOUNT (NUMERATOR) (DENOMINATOR) AMOUNT
----------- ------------- --------- ----------- ------------- ---------
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<S> <C> <C> <C> <C> <C> <C>
Net income $ 43,252 $ 26,036
Less: Preferred
distributions 2,750 2,750
-------- --------
Basic income per
common share
Income available
to common share-
holders 40,502 66,308 $ 0.61 23,286 59,715 $ 0.39
======= =======
Effect of dilutive
securities
Options - 265 - 334
Debentures 2,421 4,839 - -
-------- ------- -------- -------
Diluted income per
common share
Income available
to common share-
holders and assumed
conversions $ 42,923 71,412 $ 0.60 $ 23,286 60,049 $ 0.39
======== ======= ======= ======== ======= =======
</TABLE>
- -8-
<PAGE>
<TABLE>
<CAPTION>
FOR THE SIX MONTHS FOR THE SIX MONTHS
ENDED JUNE 30, 1999 ENDED JUNE 30, 1998
------------------------------------- -------------------------------------
INCOME SHARES PER SHARE INCOME SHARES PER SHARE
(NUMERATOR) (DENOMINATOR) AMOUNT (NUMERATOR) (DENOMINATOR) AMOUNT
----------- ------------- --------- ----------- ------------- ---------
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<S> <C> <C> <C> <C> <C> <C>
Net income $ 75,680 $ 50,776
Less: Preferred
distributions 5,500 5,500
-------- --------
Basic income per
common share
Income available
to common share-
holders 70,180 66,163 $ 1.06 45,276 57,509 $ 0.79
======= =======
Effect of dilutive
securities
Options - 229 - 361
Debentures 4,859 4,922 - -
-------- ------- -------- -------
Diluted income per
common share
Income available
to common share-
holders and assumed
conversions $ 75,039 71,314 $ 1.05 $ 45,276 57,870 $ 0.78
======== ======= ======= ======== ======= =======
</TABLE>
Diluted income per common share includes the weighted average common
shares, the dilutive effect of the outstanding options, and the dilutive
effect of the conversion of the Exchangeable Subordinated Debentures due
2001 of the Operating Partnership (the "Convertible Debentures") into
common shares.
NOTE 2 - ORGANIZATION
- ---------------------
Liberty Property Trust (the "Trust") is a self-administered and self-
managed Maryland real estate investment trust (a "REIT"). Substantially
all of the Trust's assets are owned directly or indirectly, and
substantially all of the Trust's operations are conducted directly or
indirectly, by its subsidiary, Liberty Property Limited Partnership, a
Pennsylvania limited partnership (the "Operating Partnership" and,
together with the Trust, the "Company"). The Trust is the sole general
partner and also a limited partner of the Operating Partnership, with a
combined equity interest in the Operating Partnership of 93.1% at June
30, 1999. The Company provides leasing, property management,
development, acquisition, construction management and design management
for a portfolio of industrial and office properties which are located
principally within the Southeastern, Mid-Atlantic and Midwestern United
States.
In 1998, the Company received $296.3 million in aggregate net proceeds
from the issuance of Common Shares and $292.1 million in aggregate net
proceeds from the issuance of unsecured notes. The Company used the
aggregate net proceeds from the sale of Common Shares and the unsecured
notes to fund the Company's activities, including paying down the Credit
Facility, which funds acquisition and development activity.
On January 15, 1999, the Company closed on a $135 million, two-year
unsecured term loan. The interest rate for the loan is 135 basis points
over LIBOR.
On April 20, 1999, the Company sold $250 million principal amount of
7.75% notes due 2009. The aggregate net proceeds from such issuance was
approximately $246.0 million.
- -9-
<PAGE>
On July 28, 1999, the Company completed a private placement of 3.8
million Series B Cumulative Redeemable Preferred Units of the Operating
Partnership. The Series B Preferred Units are payable at the rate of
9.25% per annum of the $25 liquidation preference, and are redeemable at
the option of the Company at any time on or after July 28, 2004 at $25
per share.
NOTE 3 - SEGMENT INFORMATION
- ----------------------------
Liberty Property Trust operates its portfolio of properties throughout
the Southeastern, Mid-Atlantic and Midwestern United States. The
Company reviews performance of the portfolio on a geographical basis, as
such, the following regions are considered the Company's reportable
segments: Southeastern Pennsylvania; New Jersey; Lehigh Valley,
Pennsylvania; Virginia; the Carolinas; Jacksonville, Florida; Detroit,
Michigan; and all others, which includes Maryland; Tampa, Florida; South
Florida; Minneapolis, Minnesota; and the United Kingdom. The Company's
reportable segments are distinct business units which are each managed
separately in order to concentrate market knowledge within a
geographical area. Within these reportable segments, the Company
derives its revenues from its two product types: industrial properties
and office properties.
The Company evaluates performance of the reportable segments based on
property-level net operating income, which is calculated as rental
revenue and operating expense reimbursement less rental property
expenses and real estate taxes. The accounting policies of the
reportable segments are the same as those for the Company on a
consolidated basis. The operating information by segment is as follows
(in thousands):
<TABLE>
<CAPTION>
FOR THE THREE MONTHS ENDED JUNE 30, 1999
- ------------------------------------------------------------------------------------------------------------------------
SE New Lehigh The
Pennsyl. Jersey Valley Virginia Carolinas Jacksonville Michigan All Others Total
-------- -------- -------- -------- --------- ------------ -------- ---------- --------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Real-estate
related revenues $29,036 $10,671 $10,883 $ 9,991 $ 9,346 $ 9,941 $12,501 $21,391 $113,760
Rental property
expenses and
real estate taxes 7,853 3,131 2,248 1,925 2,677 2,202 4,321 6,332 30,689
-------- -------- -------- -------- -------- -------- -------- -------- --------
Property-level net
operating income 21,183 7,540 8,635 8,066 6,669 7,739 8,180 15,059 83,071
Other income/
expenses, net 36,808
--------
Income before
minority interest 46,263
Minority interest 3,011
Preferred distributions 2,750
--------
Income available
to common shareholders $ 40,502
========
</TABLE>
- -10-
<PAGE>
<TABLE>
<CAPTION>
FOR THE THREE MONTHS ENDED JUNE 30, 1998
- ------------------------------------------------------------------------------------------------------------------------
SE New Lehigh The
Pennsyl. Jersey Valley Virginia Carolinas Jacksonville Michigan All Others Total
-------- -------- -------- -------- --------- ------------ -------- ---------- --------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Real-estate
related revenues $23,059 $ 9,811 $ 9,407 $ 8,705 $ 8,212 $ 9,023 $ 8,943 $13,982 $91,142
Rental property
expenses and
real estate taxes 6,230 2,466 1,802 2,042 2,339 2,053 3,136 4,173 24,241
-------- -------- -------- -------- -------- -------- -------- -------- --------
Property-level net
operating income 16,829 7,345 7,605 6,663 5,873 6,970 5,807 9,809 66,901
Other income/
expenses, net 38,804
--------
Income before
minority interest 28,097
Minority interest 2,061
Preferred distributions 2,750
--------
Income available
to common shareholders $23,286
========
FOR THE SIX MONTHS ENDED JUNE 30, 1999
- ------------------------------------------------------------------------------------------------------
SE New Lehigh The
Pennsyl. Jersey Valley Virginia Carolinas Jacksonville Michigan All Others Total
-------- -------- -------- -------- --------- ------------ -------- ---------- --------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Real-estate
related revenues $55,844 $22,326 $21,622 $19,969 $18,856 $19,822 $24,187 $42,125 $224,751
Rental property
expenses and
real estate taxes 15,703 6,603 4,625 4,189 5,401 4,498 8,058 12,582 61,659
-------- -------- -------- -------- -------- -------- -------- -------- --------
Property-level net
operating income 40,141 15,723 16,997 15,780 13,455 15,324 16,129 29,543 163,092
Other income/
expenses, net 82,191
--------
Income before
minority interest 80,901
Minority interest 5,221
Preferred distributions 5,500
--------
Income available
to common shareholders $ 70,180
========
FOR THE SIX MONTHS ENDED JUNE 30, 1998
- ------------------------------------------------------------------------------------------------------
SE New Lehigh The
Pennsyl. Jersey Valley Virginia Carolinas Jacksonville Michigan All Others Total
-------- -------- -------- -------- --------- ------------ -------- ---------- --------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Real-estate
related revenues $45,779 $17,407 $18,258 $16,672 $14,541 $16,950 $16,875 $25,925 $172,407
Rental property
expenses and
real estate taxes 12,851 4,650 3,545 3,737 4,039 3,797 5,887 7,670 46,176
-------- -------- -------- -------- -------- -------- -------- -------- --------
Property-level net
operating income 32,928 12,757 14,713 12,935 10,502 13,153 10,988 18,255 126,231
Other income/
expenses, net 71,585
--------
Income before
minority interest 54,646
Minority interest 3,870
Preferred distributions 5,500
--------
Income available
to common shareholders $ 45,276
========
</TABLE>
- -11-
<PAGE>
CONSOLIDATED BALANCE SHEETS OF LIBERTY PROPERTY LIMITED PARTNERSHIP
(IN THOUSANDS)
<TABLE>
<CAPTION>
JUNE 30, 1999 DECEMBER 31, 1998
---------------- -----------------
(UNAUDITED)
<S> <C> <C>
ASSETS
Real estate:
Land and land improvements $ 394,392 $ 366,853
Buildings and improvements 2,494,110 2,378,272
Less accumulated depreciation (238,883) (209,023)
---------- ----------
Operating real estate 2,649,619 2,536,102
Development in progress 183,716 207,563
Land held for development 87,479 75,454
---------- ----------
Net real estate 2,920,814 2,819,119
Cash and cash equivalents 33,555 14,391
Accounts receivable 5,780 15,391
Deferred financing and leasing costs,
net of accumulated amortization
(1999, $54,979; 1998, $49,390) 45,298 39,475
Prepaid expenses and other assets 36,958 44,995
---------- ----------
Total assets $3,042,405 $2,933,371
========== ==========
LIABILITIES
Mortgage loans $ 386,150 $ 413,224
Unsecured notes 1,030,000 645,000
Credit facility - 264,000
Convertible debentures 96,729 101,619
Accounts payable 24,125 20,216
Accrued interest 22,728 18,263
Dividend payable 33,907 33,734
Other liabilities 61,964 69,025
---------- ----------
Total liabilities 1,655,603 1,565,081
OWNERS' EQUITY
General partner's equity-preferred units 120,814 120,814
-common units 1,170,021 1,146,222
Limited partners' equity 95,967 101,254
---------- ----------
Total owners' equity 1,386,802 1,368,290
---------- ----------
Total liabilities and owners' equity $3,042,405 $2,933,371
========== ==========
</TABLE>
See accompanying notes.
- -12-
<PAGE>
CONSOLIDATED STATEMENTS OF OPERATIONS OF LIBERTY PROPERTY LIMITED PARTNERSHIP
(UNAUDITED AND IN THOUSANDS)
<TABLE>
<CAPTION>
THREE THREE
MONTHS ENDED MONTHS ENDED
JUNE 30, 1999 JUNE 30, 1998
--------------- --------------
<S> <C> <C>
REVENUE
Rental $ 84,250 $ 68,018
Operating expense reimbursement 29,510 23,124
Management fees 150 150
Gain (loss) on sale 11,942 (1,048)
Interest and other 1,290 1,164
----------- ---------
Total revenue 127,142 91,408
----------- ---------
OPERATING EXPENSES
Rental property expenses 20,641 16,723
Real estate taxes 10,048 7,518
General and administrative 3,931 3,697
Depreciation and amortization 20,437 16,520
----------- ---------
Total operating expenses 55,057 44,458
----------- ---------
Operating income 72,085 46,950
Interest expense 25,822 18,853
----------- ---------
Net income 46,263 28,097
Net income allocated to general partner - preferred units 2,750 2,750
----------- ---------
Net income available to partners - common interest $ 43,513 $ 25,347
=========== =========
Net income allocated to general partner - common units $ 40,502 $ 23,286
=========== =========
Net income allocated to limited partners $ 3,011 $ 2,061
=========== =========
</TABLE>
See accompanying notes.
- -13-
<PAGE>
CONSOLIDATED STATEMENTS OF OPERATIONS OF LIBERTY PROPERTY LIMITED PARTNERSHIP
(UNAUDITED AND IN THOUSANDS)
<TABLE>
<CAPTION>
SIX SIX
MONTHS ENDED MONTHS ENDED
JUNE 30, 1999 JUNE 30, 1998
--------------- -------------
<S> <C> <C>
REVENUE
Rental $165,718 $129,033
Operating expense reimbursement 59,033 43,374
Management fees 300 297
Gain (loss) on sale 13,211 (1,048)
Interest and other 2,369 2,371
----------- ---------
Total revenue 240,631 174,027
----------- ---------
OPERATING EXPENSES
Rental property expenses 41,834 31,639
Real estate taxes 19,825 14,537
General and administrative 7,916 7,047
Depreciation and amortization 40,580 30,739
----------- ---------
Total operating expenses 110,155 83,962
----------- ---------
Operating income 130,476 90,065
Interest expense 49,575 35,419
----------- ---------
Net income 80,901 54,646
Net income allocated to general partner - preferred units 5,500 5,500
----------- ---------
Net income available to partners - common interest $ 75,401 $ 49,146
=========== =========
Net income allocated to general partner - common units $ 70,180 $ 45,276
=========== =========
Net income allocated to limited partners $ 5,221 $ 3,870
=========== =========
</TABLE>
See accompanying notes.
- -14-
<PAGE>
CONSOLIDATED STATEMENTS OF CASH FLOWS OF LIBERTY PROPERTY LIMITED PARTNERSHIP
(UNAUDITED AND IN THOUSANDS)
<TABLE>
<CAPTION>
SIX SIX
MONTHS ENDED MONTHS ENDED
JUNE 30, 1999 JUNE 30, 1998
-------------- --------------
<S> <C> <C>
OPERATING ACTIVITIES
Net income $ 80,901 $ 54,646
Adjustments to reconcile net income to
net cash provided by operating activities:
Depreciation and amortization 40,580 30,739
Amortization of deferred financing costs 3,126 2,193
Gain (loss) on sale (13,211) 1,048
Noncash compensation 1,495 996
Changes in operating assets and liabilities:
Accounts receivable 9,611 (1,016)
Prepaid expenses and other assets 7,356 (1,682)
Accounts payable 3,909 6,656
Accrued interest 4,465 5,700
Other liabilities (7,061) 9,278
---------- ---------
Net cash provided by operating activities 131,171 108,558
---------- ---------
INVESTING ACTIVITIES
Investment in properties (41,114) (369,316)
Proceeds from disposition of properties 62,976 12,753
Investment in development in progress (119,035) (141,995)
Investment in land held for development (23,725) (21,642)
Increase in deferred leasing costs (7,464) (6,023)
---------- ---------
Net cash used in investing activities (128,362) (526,223)
---------- ---------
FINANCING ACTIVITIES
Proceeds from issuance of unsecured notes 385,000 275,000
Repayments of mortgage loans (30,892) (11,505)
Proceeds from credit facility 83,024 421,000
Repayments on credit facility (347,024) (423,000)
Increase in deferred financing costs (5,264) (530)
Capital contributions 1,054 197,616
Distributions to partners (69,543) (55,653)
---------- ---------
Net cash provided by financing activities 16,355 402,928
Increase (decrease) in cash and cash equivalents 19,164 (14,737)
Cash and cash equivalents at beginning of period 14,391 55,079
---------- ---------
Cash and cash equivalents at end of period $ 33,555 $ 40,342
========== =========
SUPPLEMENTAL DISCLOSURE OF NONCASH TRANSACTIONS
Write-off of fully depreciated property and
deferred costs $ 7,666 $ 2,768
Acquisition of properties (3,818) (82,064)
Assumption of mortgage loans 3,818 63,918
Issuance of operating partnership units - 18,146
Conversion of convertible debentures 4,779 3,831
========== =========
</TABLE>
See accompanying notes.
- -15-
<PAGE>
LIBERTY PROPERTY LIMITED PARTNERSHIP
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
JUNE 30, 1999
NOTE 1 - BASIS OF PRESENTATION
- ------------------------------
The accompanying unaudited consolidated financial statements of Liberty
Property Limited Partnership (the "Operating Partnership") and its direct
and indirect subsidiaries have been prepared in accordance with generally
accepted accounting principles for interim financial information and with
the instructions to Form 10-Q and Article 10 of Regulation S-X.
Accordingly, they do not include all of the information and footnotes
required by generally accepted accounting principles for complete
financial statements and should be read in conjunction with the
consolidated financial statements and notes thereto included in the
Annual Report on Form 10-K of the Trust and the Operating Partnership for
the year ended December 31, 1998. In the opinion of management, all
adjustments (consisting solely of normal recurring adjustments) necessary
for a fair presentation of the financial statements for these interim
periods have been included. The results of interim periods are not
necessarily indicative of the results to be obtained for a full fiscal
year. Certain amounts from prior periods have been restated to conform
to current period presentations.
NOTE 2 - ORGANIZATION
- ---------------------
Liberty Property Trust (the "Trust") is a self-administered and self-
managed Maryland real estate investment trust (a "REIT"). Substantially
all of the Trust's assets are owned directly or indirectly, and
substantially all of the Trust's operations are conducted directly or
indirectly, by its subsidiary, Liberty Property Limited Partnership, a
Pennsylvania limited partnership (the "Operating Partnership" and,
together with the Trust and its consolidated subsidiaries, the
"Company"). The Trust is the sole general partner and also a limited
partner of the Operating Partnership, with a combined equity interest in
the Operating Partnership of 93.1% at June 30, 1999. The Company
provides leasing, property management, acquisition, development,
construction management and design management for a portfolio of
industrial and office properties which are located principally within the
Southeastern, Mid-Atlantic and Midwestern United States.
In 1998, the Company received $296.3 million in aggregate net proceeds
from the issuance of Common Shares and $292.1 million in aggregate net
proceeds from the issuance of unsecured notes. The Company used the
aggregate net proceeds from the sale of Common Shares and the unsecured
notes to fund the Company's activities, including paying down the Credit
Facility, which funds acquisition and development activity.
On January 15, 1999, the Company closed on a $135 million, two-year
unsecured term loan. The interest rate for the loan is 135 basis points
over LIBOR.
On April 20, 1999, the Company sold $250 million principal amount of
7.75% notes due 2009. The aggregate net proceeds from such issuance was
approximately $246.0 million.
- -16-
<PAGE>
On July 28, 1999, the Company completed a private placement of 3.8
million Series B Cumulative Redeemable Preferred Units of the Operating
Partnership. The Series B Preferred Units are payable at the rate of
9.25% per annum of the $25 liquidation preference, and are redeemable at
the option of the Company at any time on or after July 28, 2004 at $25
per share.
NOTE 3 - SEGMENT INFORMATION
- ----------------------------
Liberty Property Limited Partnership operates its portfolio of
properties throughout the Southeastern, Mid-Atlantic and Midwestern
United States. The Company reviews performance of the portfolio on a
geographical basis, as such, the following regions are considered the
Company's reportable segments: Southeastern Pennsylvania; New Jersey;
Lehigh Valley, Pennsylvania; Virginia; the Carolinas; Jacksonville,
Florida; Detroit, Michigan; and all others which includes Maryland;
Tampa, Florida; South Florida; Minneapolis, Minnesota; and the United
Kingdom. The Company's reportable segments are distinct business units
which are each managed separately in order to concentrate market
knowledge within a geographical area. Within these reportable segments,
the Company derives its revenues from its two product types: industrial
and office properties.
The Company evaluates performance of the reportable segments based on
property-level net operating income, which is calculated as rental
revenue and operating expense reimbursement less rental property
expenses and real estate taxes. The accounting policies of the
reportable segments are the same as those for the Company on a
consolidated basis. The operating information by segment is as follows
(in thousands):
<TABLE>
<CAPTION>
FOR THE THREE MONTHS ENDED JUNE 30, 1999
- -----------------------------------------------------------------------------------------------------
SE New Lehigh The
Pennsyl. Jersey Valley Virginia Carolinas Jacksonville Michigan All Others Total
-------- -------- -------- -------- --------- ------------ -------- ---------- --------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Real-estate
related revenues $29,036 $10,671 $10,883 $ 9,991 $ 9,346 $ 9,941 $12,501 $21,391 $113,760
Rental property
expenses and
real estate taxes 7,853 3,131 2,248 1,925 2,677 2,202 4,321 6,332 30,689
-------- -------- -------- -------- -------- -------- -------- -------- --------
Property-level net
operating income 21,183 7,540 8,635 8,066 6,669 7,739 8,180 15,059 83,071
Other income/
expenses, net 36,808
--------
Net income 46,263
Net income allocated to general partner - preferred units 2,750
--------
Net income allocated to partners - common interest $ 43,513
========
Net income allocated to general partner - common units $ 40,502
========
Net income allocated to limited partners $ 3,011
========
</TABLE>
- -17-
<PAGE>
<TABLE>
<CAPTION>
FOR THE THREE MONTHS ENDED JUNE 30, 1998
- ------------------------------------------------------------------------------------------------------
SE New Lehigh The
Pennsyl. Jersey Valley Virginia Carolinas Jacksonville Michigan All Others Total
-------- -------- -------- -------- --------- ------------ -------- ---------- -------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Real-estate
related revenues $23,059 $ 9,811 $ 9,407 $ 8,705 $ 8,212 $ 9,023 $ 8,943 $13,982 $91,142
Rental property
expenses and
real estate taxes 6,230 2,466 1,802 2,042 2,339 2,053 3,136 4,173 24,241
-------- -------- -------- -------- -------- -------- -------- -------- --------
Property-level net
operating income 16,829 7,345 7,605 6,663 5,873 6,970 5,807 9,809 66,901
Other income/
expenses, net 38,804
--------
Net income 28,097
Net income allocated to general partner - preferred units 2,750
--------
Net income allocated to partners - common interest $25,347
========
Net income allocated to general partner - common units $23,286
========
Net income allocated to limited partners $ 2,061
========
FOR THE SIX MONTHS ENDED JUNE 30, 1999
- -----------------------------------------------------------------------------------------------------
SE New Lehigh The
Pennsyl. Jersey Valley Virginia Carolinas Jacksonville Michigan All Others Total
-------- -------- -------- -------- --------- ------------ -------- ---------- --------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Real-estate
related revenues $55,844 $22,326 $21,622 $19,969 $18,856 $19,822 $24,187 $42,125 $224,751
Rental property
expenses and
real estate taxes 15,703 6,603 4,625 4,189 5,401 4,498 8,058 12,582 61,659
-------- -------- -------- -------- -------- -------- -------- -------- --------
Property-level net
operating income 40,141 15,723 16,997 15,780 13,455 15,324 16,129 29,543 163,092
Other income/
expenses, net 82,191
--------
Net income 80,901
Net income allocated to general partner - preferred units 5,500
--------
Net income allocated to partners - common interest $ 75,401
========
Net income allocated to general partner - common units $ 70,180
========
Net income allocated to limited partners $ 5,221
========
FOR THE SIX MONTHS ENDED JUNE 30, 1998
- -----------------------------------------------------------------------------------------------------
SE New Lehigh The
Pennsyl. Jersey Valley Virginia Carolinas Jacksonville Michigan All Others Total
-------- -------- -------- -------- --------- ------------ -------- ---------- --------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Real-estate
related revenues $45,779 $17,407 $18,258 $16,672 $14,541 $16,950 $16,875 $25,925 $172,407
Rental property
expenses and
real estate taxes 12,851 4,650 3,545 3,737 4,039 3,797 5,887 7,670 46,176
-------- -------- -------- -------- -------- -------- -------- -------- --------
Property-level net
operating income 32,928 12,757 14,713 12,935 10,502 13,153 10,988 18,255 126,231
Other income/
expenses, net 71,585
--------
Net income 54,646
Net income allocated to general partner - preferred units 5,500
--------
Net income allocated to partners - common interest $ 49,146
========
Net income allocated to general partner - common units $ 45,276
========
Net income allocated to limited partners $ 3,870
========
</TABLE>
- -18-
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
- -----------------------------------------------------------------------
OVERVIEW
The following discussion and analysis is based on a consolidated view of
the Company. Geographic segment data for the three and six month periods
ended June 30, 1999 and 1998 is included in Note 3 of the Notes to the
Liberty Property Trust and Liberty Property Limited Partnership Financial
Statements, respectively.
In 1999, the Company has continued to pursue development and acquisition
opportunities and has continued to focus on increasing the cash flow from
its Properties in Operation by increasing property occupancy and
increasing rental rates.
The composition of the Company's properties in operation as of June 30,
1999 and 1998 is as follows (in thousands):
<TABLE>
<CAPTION>
TOTAL PERCENT OF TOTAL
SQUARE FEET SQUARE FEET PERCENT OCCUPIED
----------------- ---------------- -----------------
JUNE 30, JUNE 30, JUNE 30,
TYPE 1999 1998 1999 1998 1999 1998
- ------------------------- ------- ------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C> <C>
Industrial - Distribution 19,228 17,556 42.2% 44.5% 94.8% 95.2%
Industrial - Flex 13,032 10,934 28.6% 27.7% 94.6% 93.5%
Office 13,267 10,990 29.2% 27.8% 93.5% 96.3%
------- ------ ------- ------- ------- -------
Total 45,527 39,480 100.0% 100.0% 94.4% 95.0%
====== ====== ====== ====== ====== ======
</TABLE>
The expiring square feet and annual base rent by year for the properties
in operation as of June 30, 1999 are as follows (in thousands):
<TABLE>
<CAPTION>
INDUSTRIAL-
DISTRIBUTION INDUSTRIAL-FLEX OFFICE TOTAL
------------------ ------------------ ------------------ ------------------
SQUARE ANNUAL SQUARE ANNUAL SQUARE ANNUAL SQUARE ANNUAL
YEAR FEET BASE RENT FEET BASE RENT FEET BASE RENT FEET BASE RENT
- ---------- ------ --------- ------ --------- ------ --------- ------ ---------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
1999 1,575 $ 7,278 1,448 $ 10,528 1,207 $ 12,826 4,230 $ 30,632
2000 1,725 7,893 2,442 18,188 1,908 23,367 6,075 49,448
2001 2,925 13,118 2,086 14,680 1,552 19,835 6,563 47,633
2002 3,398 14,406 1,633 12,779 1,251 15,130 6,282 42,315
2003 1,687 7,861 1,930 17,910 1,240 16,698 4,857 42,469
2004 1,347 6,542 878 8,328 888 12,860 3,113 27,730
Thereafter 5,569 27,982 1,915 20,798 4,363 64,838 11,847 113,618
------ ------- ------ --------- ------ --------- ------ --------
Total 18,226 $85,080 12,332 $103,211 12,409 $165,554 42,967 $353,845
====== ======= ====== ========= ====== ========= ====== ========
</TABLE>
- -19-
<PAGE>
The scheduled deliveries of the 2.8 million square feet of properties
under development as of June 30, 1999 are as follows (in thousands):
<TABLE>
<CAPTION>
SQUARE FEET
-----------------------------
SCHEDULED IND- IND- PERCENT PRE-LEASED
IN-SERVICE DATE DIST. FLEX OFFICE TOTAL JUNE 30, 1999 TOTAL INVESTMENT
- ---------------- ------ ------ ------- ------ ------------------ ----------------
<S> <C> <C> <C> <C> <C> <C>
3rd Quarter 1999 250 157 187 594 91.3% $ 38,833
4th Quarter 1999 171 - 517 688 78.7% 90,068
1st Quarter 2000 - - 297 297 100.0% 39,775
2nd Quarter 2000 - 99 154 253 21.4% 28,449
Thereafter 522 85 339 946 13.4% 64,780
------ ------ ------- ------ ------ ----------
Total 943 341 1,494 2,778 56.2% $261,905
====== ====== ======= ====== ====== ==========
</TABLE>
RESULTS OF OPERATIONS
- ---------------------
The following discussion is based on the consolidated financial
statements of the Company. It compares the results of operations of the
Company for the three and six months ended June 30, 1999 (unaudited) with
the results of operations of the Company for the three and six months
ended June 30, 1998 (unaudited). As a result of the significant level of
acquisition, disposition and development activities by the Company in
1999 and 1998, the overall operating results of the Company during such
periods are not directly comparable. However, certain data, including
the "Same Store" comparison, do lend themselves to direct comparison. As
used herein, the term "Company" includes the Trust, the Operating
Partnership and their subsidiaries.
This information should be read in conjunction with the accompanying
consolidated financial statements and notes included elsewhere in this
report.
For the three and six months ended June 30, 1999 compared to the three
and six months ended June 30, 1998.
- -----------------------------------------------------------------------
Total revenue (principally rental revenue and operating expense
reimbursement) increased to $127.1 million from $91.4 million for the
three months ended June 30, 1999 compared to 1998, and increased to
$240.6 million from $174.0 million for the six months ended June 30, 1999
compared to 1998. These increases are primarily due to the increase in
the number of properties in operation during the respective periods. As
of June 30, 1998, the Company had 540 properties in operation and, as of
June 30, 1999, the Company had 627 properties in operation. From January
1, 1998 through March 31, 1998, and from April 1, 1998 through June 30,
1998, the Company acquired or completed the development on 55 properties
and 48 properties, respectively, for Total Investments (as defined below)
of approximately $301.6 million and $224.8 million, respectively. From
January 1, 1999 through March 31, 1999, and from April 1, 1999 through
June 30, 1999, the Company acquired or completed the development on 19
properties and 15 properties, respectively, for Total Investments of
approximately $71.2 million and $120.0 million, respectively. Offsetting
the increases in the number of properties acquired and developed and the
related Total Investments during the periods were property dispositions.
From January 1, 1998 through March 31, 1998, the Company did not sell any
properties. From April 1, 1998 through June 30, 1998, the Company sold 5
properties for net proceeds of approximately $11.7 million. From January
1, 1999 through March 31, 1999, and from April 1, 1999 through June 30,
- -20-
<PAGE>
1999, the Company sold 2 and 14 properties, respectively, for net
proceeds of approximately $8.7 million and $51.3 million, respectively.
The "Total Investment" for a property is defined as the property's
purchase price plus closing costs and management's estimate, as
determined at the time of acquisition, of the cost of necessary building
improvements in the case of acquisitions, or land costs and land and
building improvement costs in the case of development projects, and where
appropriate, other development costs and carrying costs required to reach
rent commencement.
Rental property and real estate tax expenses increased to $30.7 million
from $24.2 million for the three months ended June 30, 1999 compared to
1998, and to $61.7 million from $46.2 million for the six months ended
June 30, 1999 compared to 1998. These increases are due to the increase
in the number of properties owned during the respective periods.
Property-level operating income for the "Same Store" properties
(properties owned as of January 1, 1998) increased to $110.5 million for
the six months ended June 30, 1999 from $106.9 million for the six months
ended June 30, 1998, with straightlining (which recognizes rental revenue
evenly over the life of the lease), and increased to $109.0 million for
the six months ended June 30, 1999 from $104.8 million for the six months
ended June 30, 1998, without straightlining. These increases of 3.3% and
3.9%, respectively, are due to increases in the rental rates for the
properties.
Set forth below is a schedule comparing the property-level operating
income for the Same Store properties for the six month periods ended June
30, 1999 and 1998 (in thousands).
<TABLE>
<CAPTION>
WITH STRAIGHTLINING WITHOUT STRAIGHTLINING
----------------------------- -----------------------------
SIX MONTHS ENDED SIX MONTHS ENDED
----------------------------- -----------------------------
JUNE 30, 1999 JUNE 30, 1998 JUNE 30, 1999 JUNE 30, 1998
------------- ------------- ------------- --------------
<S> <C> <C> <C> <C>
Rental Revenue $112,797 $109,361 $111,238 $107,258
Operating expense reimbursement 40,749 36,699 40,749 36,699
-------- -------- -------- --------
153,546 146,060 151,987 143,957
Rental property expenses 29,755 27,156 29,755 27,156
Real estate taxes 13,274 11,957 13,274 11,957
-------- -------- -------- --------
Property level operating income $110,517 $106,947 $108,958 $104,844
======== ======== ======== ========
</TABLE>
General and administrative expenses increased to $3.9 million for the
three months ended June 30, 1999 from $3.7 million for the three months
ended June 30, 1998, and to $7.9 million for the six months ended June
30, 1999 from $7.0 million for the six months ended June 30, 1998, due to
the increase in personnel and other related overhead costs necessitated
by the increase in the number of properties owned during the respective
periods. These increases are somewhat mitigated by the benefit of
certain economies of scale experienced by the Company in owning and
operating the increased number of properties.
Depreciation and amortization expense increased to $20.4 million for the
three months ended June 30, 1999 from $16.5 million for the three months
ended June 30, 1998, and to $40.6 million for the six months ended June
30, 1999 from $30.7 million for the six months ended June 30, 1998.
- -21-
<PAGE>
These increases are due to an increase in the number of properties owned
during the respective periods.
Interest expense increased to $25.8 million for the three months ended
June 30, 1999 from $18.9 million for the three months ended June 30,
1998, and to $49.6 million for the six months ended June 30, 1999 from
$35.4 million for the six months ended June 30, 1998. These increases
are due to an increase in the average debt outstanding for the respective
periods which was $1,497.2 million for the second quarter of 1999
compared to $1,220.3 million for the second quarter of 1998, and $1,472.7
million for the first six months of 1999 compared to $1,133.6 million for
the first six months of 1998. These increases are offset by decreases in
the weighted average interest rates for the periods, to 7.2% for the
second quarter June 30, 1999 from 7.3% for the second quarter June 30,
1998, and to 7.2% for the first six months of 1999 from 7.3% for the
first six months of 1998.
As a result of the foregoing, the Company's operating income increased to
$72.1 million for the three months ended June 30, 1999 from $47.0 million
for the three months ended June 30, 1998, and to $130.5 million for the
six months ended June 30, 1999 from $90.1 million for the six months
ended June 30, 1998. In addition, income before minority interest
increased to $46.3 million for the three months ended June 30, 1999 from
$28.1 million for the three months ended June 30, 1998, and to $80.9
million for six months ended June 30, 1999 from $54.6 million for the six
months ended June 30, 1998.
LIQUIDITY AND CAPITAL RESOURCES
As of June 30, 1999, the Company had cash and cash equivalents of $33.6
million.
Net cash flow provided by operating activities increased to $131.2
million for the six months ended June 30, 1999 from $108.6 million for
the six months ended June 30, 1998. This $22.6 million increase was
primarily due to the cash provided by the additional Operating Properties
in service during the latter period.
Net cash used in investing activities decreased to $128.4 million for the
six months ended June 30, 1999 from $526.2 million for the six months
ended June 30, 1998. This decrease primarily resulted from
decreased acquisition activity in 1999, and an increase in property
dispositions.
Net cash provided by financing activities decreased to $16.4 million for
the six months ended June 30, 1999 from $402.9 million for the six months
ended June 30, 1998. This decrease is due to a decrease in the Company's
financing requirements consistent with its decrease in investing
activities.
The Company believes that its undistributed cash flow from operations is
adequate to fund its short-term liquidity requirements.
The Company funds its acquisitions and completed development with long-
term capital sources. These activities may be funded on a temporary
basis through its $325.0 million unsecured line of credit (the "Credit
Facility"), which matures May 2000.
The interest rate on borrowings under the Credit Facility fluctuates
based upon the Company's leverage levels or ratings from Moody's Investor
Services, Inc. ("Moody's") and Standard & Poor's Rating's Group
- -22-
<PAGE>
("Standard & Poor's"). Moody's and Standard & Poor's have assigned senior
debt ratings to the Company of Baa3 and BBB-, respectively. At these
ratings, the interest rate for borrowings under the Credit Facility is
110 basis points over LIBOR.
As of June 30, 1999, $386.2 million in mortgage loans, $895.0 million in
unsecured notes and $135.0 million in an unsecured term loan were
outstanding. The interest rates on $376.8 million of mortgage loans and
unsecured notes are fixed and range from 5.0% to 9.1%. Interest rates on
$9.4 million of mortgage loans and the unsecured term loan float with
LIBOR or a municipal bond index, $2.8 million of which is subject to a
cap. The weighted average remaining term for the mortgage loans,
unsecured notes and the unsecured term loan is 7.8 years. The scheduled
maturities of principal amortization of the Company's mortgage loans,
unsecured notes and the unsecured term loan outstanding and the related
weighted average interest rates are as follows (in thousands):
<TABLE>
<CAPTION>
MORTGAGES UNSECURED WEIGHTED
-------------------------- NOTES AND AVERAGE
AMORTIZATION MATURITIES TERM LOAN TOTAL INTEREST RATE
------------ ---------- ---------- ---------- --------------
<S> <C> <C> <C> <C> <C>
1999 $ 4,751 $ 3,818 $ - $ 8,569 6.9%
2000 9,053 26,377 - 35,430 8.4%
2001 8,724 20,122 135,000 163,846 6.5%
2002 7,584 - 100,000 107,584 6.7%
2003 7,521 26,606 50,000 84,127 7.3%
2004 7,553 15,910 100,000 123,463 7.0%
2005 6,728 99,018 - 105,746 7.6%
2006 5,414 30,078 100,000 135,492 7.2%
2007 4,992 - 100,000 104,992 7.3%
2008 4,714 28,835 - 33,549 7.2%
2009 2,419 42,096 270,000 314,515 7.8%
2010 1,426 - - 1,426 7.7%
2011 1,168 3,303 - 4,471 7.7%
2012 266 17,674 - 17,940 7.7%
2013 - - 75,000 (1) 75,000 6.4%
2018 - - 100,000 100,000 7.5%
--------- --------- ---------- ---------- -------
$ 72,313 $313,837 $1,030,000 $1,416,150 7.2%
========= ========= ========== ========== =======
</TABLE>
(1) Callable 2003.
General
The Company believes that its existing sources of capital will provide
sufficient funds to finance its continued development and acquisition
activities. The Company's need for capital has been somewhat reduced by
a decline in acquisition activity throughout the year, resulting from a
general marketplace decline in initial returns on acquisitions. The
Company's existing sources of capital include the public debt and equity
markets, proceeds from property dispositions and net cash provided from
its operating activities. Additionally, the Company expects to incur
variable rate debt, including borrowings under the Credit Facility, from
time to time.
In 1998, the Company received $296.3 million in aggregate net proceeds
from the issuance of Common Shares and $292.1 million in aggregate net
proceeds from the issuance of unsecured notes. The Company used the
aggregate net proceeds from the sale of Common Shares and the unsecured
notes to fund the Company's activities, including paying down the Credit
Facility, which funds acquisition and development activity.
- -23-
<PAGE>
On January 15, 1999, the Company closed a $135 million, two-year
unsecured term loan. The interest rate for the loan is 135 basis points
over LIBOR.
On April 20, 1999, the Company sold $250 million principal amount of
7.75% notes due 2009. The aggregate net proceeds from such issuance was
approximately $246.0 million.
On July 28, 1999, the Company completed a private placement of 3.8
million 9.25% Series B Cumulative Redeemable Preferred Units of the
Operating Partnership at a price of $25 per unit. The Company used the
aggregate net proceeds of approximately $93.0 million from the sale of
the preferred units to repay outstanding borrowings under the Company's
term loan and to fund the Company's activities including paying down the
Credit Facility which funds acquisitions and development activity.
The Company has an effective S-3 shelf registration statement on file
with the Securities and Exchange Commission. As of July 30, 1999, the
Company had the capacity pursuant to the Shelf Registration Statement to
issue $688.4 million in equity securities and the Operating Partnership
has the capacity to issue $108.0 million in debt securities.
Calculation of Funds from Operations
Management generally considers funds from operations (as defined below) a
useful financial performance measure of the operating performance of an
equity REIT, because, together with net income and cash flows, funds from
operations provides investors with an additional basis to evaluate the
ability of a REIT to incur and service debt and to fund acquisitions and
capital expenditures. Funds from operations is defined by NAREIT as net
income or loss after preferred distributions (computed in accordance with
generally accepted accounting principles ("GAAP")), excluding gains (or
losses) from debt restructuring and sales of property, plus real estate-
related depreciation and amortization and minority interest and excluding
significant nonrecurring events that materially distort the comparative
measurement of the Company's performance over time. Funds from
operations does not represent net income or cash flows from operations as
defined by GAAP and does not necessarily indicate that cash flows will be
sufficient to fund cash needs. It should not be considered as an
alternative to net income as an indicator of the Company's operating
performance or to cash flows as a measure of liquidity. Funds from
operations also does not represent cash flows generated from operating,
investing or financing activities as defined by GAAP. Funds from
operations for the three and six months ended June 30, 1999 and June 30,
1998 are as follows (in thousands):
<TABLE>
<CAPTION>
THREE MONTHS ENDED SIX MONTHS ENDED
(IN THOUSANDS) (IN THOUSANDS)
---------------------- ---------------------
JUNE 30, JUNE 30, JUNE 30, JUNE 30,
1999 1998 1999 1998
---------- ---------- ---------- ---------
<S> <C> <C> <C> <C>
Income available to common
shareholders $ 40,502 $ 23,286 $ 70,180 $ 45,276
Addback:
Minority interest 3,011 2,061 5,221 3,870
Depreciation and amortization 20,064 16,199 39,898 30,279
(Gain) loss on sale (11,942) 1,048 (13,211) 1,048
======== ======== ========= =========
Funds from operations $ 51,635 $ 42,594 $102,088 $ 80,473
======== ======== ========= =========
</TABLE>
- -24-
<PAGE>
YEAR 2000
Background
In the past, many computer software programs were written using two
digits rather than four to define the applicable year. As a result,
date-sensitive computer software may recognize a date using "00" as the
year 1900 rather than the year 2000. This is generally referred to as
the Year 2000 issue. If this situation occurs, the potential exists for
computer system failures or miscalculations by computer programs, which
could disrupt operations.
Approach
The Company has established a group to coordinate the Company's response
to the Year 2000 issue. This group, which reports to the President and
Chief Operating Officer, includes the Company's MIS Director, a Vice-
President-Property Management and its General Counsel, as well as
support staff. The Company is in the process of implementing a Year
2000 compliance program at the Company's offices and properties
consisting of the following phases:
PHASE 1 Compilation of an inventory of information technology
(IT) and non-IT systems that may be sensitive to the Year 2000 problem.
PHASE 2 Identification and prioritization of the critical systems
from the systems inventory compiled in Phase 1 and inquiries of third
parties with whom the Company does significant business (i.e., vendors,
service providers and certain tenants) as to the state of their Year
2000 readiness.
PHASE 3 Analysis of critical systems to determine which systems
are not Year 2000 compliant and evaluation of the costs to repair or
replace those systems.
PHASE 4 Repair or replace noncompliant systems and testing of
critical systems, where applicable.
Status
The Company's property management and accounting system uses four-digit
year fields and consequently is believed to be Year 2000 compliant.
Phases 1, 2, 3 and 4 are substantially complete but for the process of
making inquiries of significant third parties as to their Year 2000
readiness and testing of critical systems, which is ongoing.
Based upon the analysis conducted to date, the Company believes the
major critical systems at the Company's properties are currently
compliant.
Costs
The total cost to the Company of making its systems Year 2000 compliant
is currently estimated to be in the range of $200,000-$300,000. The
majority of this cost relates to repairing certain software, testing
systems and retrofitting or replacing energy management systems at
certain of the properties. The cost for the replacement of the
equipment and the software will be capitalized and depreciated over
their expected useful life. To the extent existing hardware or software
is replaced, the Company will expense the cost as incurred. This
- -25-
<PAGE>
expense is included in the above cost estimate. Furthermore, all costs
related to software modification, as well as all costs associated with
the Company's administration of its Year 2000 project, are being
expensed as incurred and are likewise included in the cost estimate
above.
Risks Associated with the Year 2000 Problem
The Company utilizes computer systems in many aspects of its business.
As noted, the Company's property management and accounting systems use
four-digit year fields and are believed to be Year 2000 compliant.
Additionally, with respect to the hardware and software systems utilized
by the Company in its management information systems, the Company's
assessment to date indicates that these systems are Year 2000 compliant
or can readily be made Year 2000 compliant on a stand-alone basis.
Testing of the operation of these systems together is ongoing.
The Company's also utilizes microprocessors which are imbedded in
systems which are part of the building operations (e.g., microprocessors
contained within the buildings' energy management systems or fire and
life safety systems). In particular, Year 2000 problems in the HVAC,
elevator, security or other such systems at the properties could disrupt
operations at the affected properties. The properties generally consist
of suburban office and industrial properties. The properties are also
principally single-story and low-rise buildings. The Company has
reviewed its building operating systems on a building-by-building basis.
At this point, based on the status of its assessment, the Company does
not believe a material number of these systems will be non-compliant.
Additionally, many of these systems, which operate automatically, can be
operated manually and consequently in the event these systems experience
a failure as a result of the Year 2000 problem, the disruption caused by
such failure should not be material to the Company's operations.
The Company is also exposed to the risk that one or more of its vendors
or service providers could experience Year 2000 problems that impact the
ability of such vendor or service provider to provide goods and
services. Though this is not considered as significant a risk with
respect to the suppliers of goods, due to the availability of
alternative suppliers, the disruption of certain services, such as
utilities, could, depending upon the extent of the disruption, have a
material adverse impact on the Company's operations. To date, the
Company is not aware of any vendor or service provider Year 2000 issue
that management believes would have a material adverse impact on the
Company's operations. However, the Company has no means of ensuring
that its vendors or service providers will be Year 2000 ready. The
inability of vendors or service providers to complete their Year 2000
resolution process in a timely fashion could have a adverse impact on
the Company. The effect of non-compliance by vendors or service
providers is not determinable at this time.
In addition, the Company is exposed to the risk that one or more of its
tenants could experience Year 2000 problems that impact the ability of
such tenant to pay its rent to the Company in a timely fashion. The
Company does not believe that such a problem is likely to affect enough
tenants to pose a material problem for the Company. To date, the
Company is not aware of any tenant Year 2000 issue that would have a
material adverse impact on the Company's operations. However, the
Company has no means of ensuring that its tenants will be Year 2000
ready. The inability of tenants to complete their Year 2000 resolution
process in a timely fashion could have an adverse impact on the Company.
- -26-
<PAGE>
The effect of non-compliance by tenants is not determinable at this
time.
Widespread disruptions in the national or international economy,
including disruptions affecting the financial markets, resulting from
Year 2000 issues, or in certain industries, such as commercial or
investment banks, could also have an adverse impact on the Company. The
likelihood and effect of such disruptions is not determinable at this
time.
Readers are cautioned that forward-looking statements contained in the
Year 2000 discussion should be read in conjunction with the Company's
disclosures regarding forward-looking statements previously disclosed.
INFLATION
- ---------
Inflation has remained relatively low during the last three years, and as
a result, it has not had a significant impact on the Company during this
period. The Credit Facility bears interest at a variable rate; therefore,
the amount of interest payable under the Credit Facility will be
influenced by changes in short-term interest rates, which tend to be
sensitive to inflation. To the extent an increase in inflation would
result in increased operating costs, such as in insurance, real estate
taxes and utilities, substantially all of the tenants' leases require the
tenants to absorb these costs as part of their rental obligations. In
addition, inflation also may have the effect of increasing market rental
rates.
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
- -------------------------------------------------------------------
There have been no material changes to the Company's exposure to market
risk since its Annual Report on Form 10-K for 1998.
- -27-
<PAGE>
PART II: OTHER INFORMATION
- --------------------------
Item 1. Legal Proceedings
None
Item 2. Changes in Securities and Use of Proceeds
On July 28, 1999, the Operating Partnership issued 3.8 million
9.25% Series B Cumulative Redeemable Preferred Units of Limited
Partnership Interest (the "Units"). The aggregate sale price of the
Units was $95.0 million. The Units were sold to two institutional
investors in a private placement in reliance on the exemption from
registration under Section 4(2) of the Securities Act of 1933, as
amended. The Units are convertible after ten years (or, under limited
circumstances, a shorter period of time), on a one-for-one basis, into
the 9.25% Series B Cumulative Redeemable Preferred Shares of Beneficial
Interest of the Trust (the "Preferred Shares"), which were authorized
for issuance by the Trust in connection with this transaction. The
Units have identical rights, preferences and privileges as the Preferred
Shares. The Units do not include any mandatory redemption or sinking
fund provisions. The holders of the Units have certain rights to cause
the Trust to register the Preferred Shares pursuant to the terms of a
registration rights agreement entered into in connection with this
private placement.
The net proceeds of the sale of the units, approximately $93.0
million, was used to repay the Company's term loan and to fund other
Company activities, including paying down the outstanding balance under
the Credit Facility.
In connection with the sale of the Units, the Operating
Partnership amended its Second Restated and Amended Agreement of Limited
Partnership pursuant to the First Amendment thereto, filed as Exhibit
3.1.1 to this Report. The Articles Supplementary to the Amended and
Restated Declaration of Trust of the Trust creating the Preferred Shares
are filed as Exhibit 3.1.2 to this Report.
The Units are pari passu with the 8.80% Series A Cumulative
Redeemable Preferred Units of Limited Partnership of the Operating
Partnership, and senior to all other units of limited partnership
interest of the Operating Partnership. The Preferred Shares are pari
passu with the 8.80% Series A Cumulative Redeemable Preferred Shares of
Beneficial Interest of the Trust, and senior to the Common Shares of
Beneficial Interest of the Trust.
Item 3. Defaults upon Senior Securities
None
Item 4. Submission of Matters to a Vote of Security Holders
The 1999 Annual Meeting of Shareholders of the Trust was held on
May 19, 1999.
A. Election of Trustees.
At the meeting, management's nominees, Frederick F.
Buchholz, Stephen B. Siegel and Thomas C. DeLoach, Jr., were elected to
fill the three available positions as Class II trustees. Voting
- -28-
<PAGE>
(expressed in number of shares) was as follows: Mr. Buchholz: 55,773,235
for, 245,855 against or withheld and no abstentions or broker non-votes;
Mr. Siegel: 48,506,298 for, 7,512,792 against or withheld and no
abstentions or broker non-votes; and Mr. DeLoach: 55,773,449 for, 245,641
against or withheld and no abstentions or broker non-votes.
B. Amendment to Share Incentive Plan.
At the meeting, the Trust's shareholders also approved an
amendment to the Trust's Amended and Restated Share Incentive Plan (the
"Plan") which increased the number of the Trust's shares of beneficial
interest available for awards pursuant to the Plan from 4,033,535 to
6,500,000. Voting (expressed in number of shares) was as follows:
38,544,228 for; 16,899,517 against; 575,345 abstained; and no broker non-
votes.
Item 5. Other Information
None.
Item 6. Exhibits and Reports on Form 8-K
a. Exhibits
3.1.l First Amendment to Second Restated and Amended
Agreement of Limited Partnership of the Operating Partnership.
3.1.2 Articles Supplementary to the Amended and Restated
Declaration of Trust of the Trust relating to the 9.25% Series B
Cumulative Redeemable Preferred Shares of Beneficial Interest.
4.1 Third Supplemental Indenture, dated as of April 20,
1999, between the Operating Partnership, as Issuer, and First Chicago, as
Trustee, supplementing the Senior Indenture, dated as of October 24,
1997, between the Operating Partnership, as Obligor, and First Chicago,
as Trustee.
10.1 Liberty Property Trust Amended and Restated Share
Incentive Plan.
27 Financial Data Schedule (EDGAR VERSION ONLY)
b. Reports on Form 8-K
During the quarter ended June 30, 1999, the Registrants
filed one Current Report on Form 8-K:
(i) report dated April 19, 1999 reporting Items 5 and 7
and containing as an Exhibit the Underwriting Agreement dated April 15,
1999 among the Registrants and the Underwriters (as defined therein) and
the Statement Re: Computation of Earnings to Combined Fixed Charges and
Ratio of Earnings to Fixed Charges.
- -29-
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, each
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
LIBERTY PROPERTY TRUST
/s/ JOSEPH P. DENNY August 6, 1999
- ------------------------------ --------------------------------
Joseph P. Denny Date
President
/s/ GEORGE J. ALBURGER, JR. August 6, 1999
- ------------------------------ --------------------------------
George J. Alburger, Jr. Date
Chief Financial Officer
LIBERTY PROPERTY LIMITED PARTNERSHIP
By: LIBERTY PROPERTY TRUST, GENERAL PARTNER
/s/ JOSEPH P. DENNY August 6, 1999
- ------------------------------ --------------------------------
Joseph P. Denny Date
President
/s/ GEORGE J. ALBURGER, JR. August 6, 1999
- ------------------------------ --------------------------------
George J. Alburger, Jr. Date
Chief Financial Officer
- -30-
<PAGE>
EXHIBIT INDEX
EXHIBIT NO. DESCRIPTION
- ----------- -----------------------------------------------------
3.1.l First Amendment to Second Restated and Amended
Agreement of Limited Partnership of the Operating
Partnership.
3.1.2 Articles Supplementary to the Amended and Restated
Declaration of Trust of the Trust relating to the
9.25% Series B Cumulative Redeemable Preferred Shares
of Beneficial Interest.
4.1 Third Supplemental Indenture, dated as of April 20,
1999, between the Operating Partnership, as Issuer,
and First Chicago, as Trustee, supplementing the
Senior Indenture, dated as of October 24, 1997,
between the Operating Partnership, as Obligor, and
First Chicago, as Trustee.
10.1 Liberty Property Trust Amended and Restated Share
Incentive Plan.
27 Financial Data Schedule (EDGAR VERSION ONLY)
- -31-
Exhibit 3.1.1
FIRST AMENDMENT
TO
SECOND RESTATED AND AMENDED
AGREEMENT OF LIMITED PARTNERSHIP
OF
LIBERTY PROPERTY LIMITED PARTNERSHIP
THIS FIRST AMENDMENT TO THE SECOND RESTATED AND AMENDED AGREEMENT
OF LIMITED PARTNERSHIP (this "Amendment") dated as of July 28, 1999, is
entered into by LIBERTY PROPERTY TRUST, a Maryland real estate
investment trust, as general partner (the "General Partner") of LIBERTY
PROPERTY LIMITED PARTNERSHIP (the "Partnership"), for itself and on
behalf of the limited partners of the Partnership, and BELAIR REAL
ESTATE CORPORATION ("Belair") and BELCREST REALTY CORPORATION
("Belcrest").
WHEREAS, Section 4.2(a) of the Second Restated and Amended
Agreement of Limited Partnership of the Partnership (the "Partnership
Agreement") authorizes the General Partner to cause the Partnership to
issue additional Partnership Units in one or more classes or series,
with such designations, preferences and relative, participating,
optional or other special rights, powers and duties as shall be
determined by the General Partner, subject to the provisions of such
section; and
WHEREAS, pursuant to the authority granted to the General Partner
pursuant to Sections 4.2(a) and 14.1(b) of the Partnership Agreement,
the General Partner desires to amend the Partnership Agreement (i) to
establish a new class of Partnership Units, the Series B Preferred
Units (as hereinafter defined), and to set forth the designations,
rights, powers, preferences and duties of such Series B Preferred
Units, (ii) to issue the Series B Preferred Units to Belair and
Belcrest and admit Belair and Belcrest as Additional Limited Partners
and (iii) to make certain other changes to the Partnership Agreement.
NOW, THEREFORE, in consideration of good and valuable consideration,
the receipt and sufficiency of which hereby are acknowledged, the
General Partner hereby amends the Partnership Agreement as follows:
Section 1. Definitions. For purposes of this Amendment, the term
"Parity Preferred Units" shall be used to refer to any class or series
of Partnership Interests of the Partnership now or hereafter
authorized, issued or outstanding expressly designated by the
Partnership to rank on a parity with Series B Preferred Units with
respect to distributions and rights upon voluntary or involuntary
liquidation, winding-up or dissolution of the Partnership including,
without limitation, the "8.80% Series A Cumulative Redeemable Preferred
Partnership Interests". The term "Priority Return" shall mean, an
amount equal to 9.25% per annum, as the same may be adjusted pursuant
to Section 3(a) below, determined on the basis of a 360 day year of
twelve 30 day months (and for any period shorter than a full quarterly
period for which distributions are computed, the amount of the
distribution payable will be computed based on the ratio of the actual
number of days elapsed in such period to ninety (90) days), cumulative
to the extent not distributed for any given distribution period
pursuant to Section 6.2 of the Partnership Agreement, of the stated
value of $ 25 per Series B Preferred Unit, commencing on the date of
issuance of such Series B Preferred Unit. The term "Subsidiary" shall
mean with respect to any person, any corporation, partnership, limited
liability company, joint venture or other entity of which a majority of
(i) voting power of the voting equity securities or (ii) the
outstanding equity interests, is owned, directly or indirectly, by such
person. The term "PTP" shall mean a "publicly traded partnership"
within the meaning of Section 7704 of the Code. Capitalized terms used
herein and not otherwise defined herein shall have the meanings
ascribed to them in the Partnership Agreement.
Section 2. Designation and Number. A series of Partnership
Interests in the Partnership designated as the "9.25% Series B
Cumulative Redeemable Preferred Partnership Interests" (the "Series B
Preferred Units") is hereby established. The maximum number of Series
B Preferred Units shall be 3,800,000.
Section 3.
(a) Payment of Distributions.
(i) Subject to the rights of holders of Parity Preferred
Units and holders of Partnership Interests ranking senior to the Series
B Preferred Units as to payment of distributions, pursuant to Section
6.2 of the Partnership Agreement, holders of Series B Preferred Units
will be entitled to receive, when, as and if declared by the
Partnership acting through the General Partner, out of Net Operating
Cash Flow, cumulative preferential cash distributions at the rate per
annum of 9.25% of the original Capital Contribution per Series B
Preferred Unit (the "Issuance Rate").
(ii) In the event that on or prior to March 31, 2000 the
General Partner's outstanding preferred stock shall have either an
unconditional, published (A) rating by Standard and Poor's Rating Group
("Standard and Poor's") of at least "BBB-" or (B) rating by Moody's
Investors Service, Inc. ("Moody's") of at least "baa3", then, beginning
on the date on which either of such foregoing conditions is met, the
rate per annum of the cumulative preferential cash distribution on the
Series B Preferred Units shall be 8.95% of the original Capital
Contribution per Series B Preferred Unit (the "Revised Rate"), in which
case the designation of the Series B Preferred Units will change
accordingly to reflect such new distribution rate; provided, that, if
neither (A) Standard & Poor's unconditional published rating of at
least "BBB-" nor (B) Moody's rating of at least "baa3" shall remain in
effect on March 31, 2000, then the Revised Rate herein provided shall
be void ab initio and the Partnership shall pay on March 31, 2000, in
addition to the distribution then due to the holders of the Series B
Preferred Units, the difference between (1) the distribution that would
have accrued at the Issuance Rate during the current and any prior
quarterly distribution period and (2) the distribution that actually
accrued during such distribution periods at the voided Revised Rate
and, if applicable the Second Revised Rate (as defined below).
(iii) In the event that on or prior to March 31, 2000 the General
Partner's outstanding preferred stock shall have both an unconditional,
published (A) Standard & Poor's rating of at least "BBB-" and (B)
Moody's rating of at least "baa3", then beginning on the date on which
each of such foregoing conditions are met, the rate per annum of the
cumulative preferential cash distributions on the Series B Preferred
Shares shall be 8.75% of the original Capital Contribution per Series B
Preferred Unit (the "Second Revised Rate"), in which case the
designation of the Series B Preferred Units will change accordingly to
reflect such new distribution rate; provided, that, if either (A)
Standard & Poor's unconditional published rating of at least "BBB-" or
(B) Moody's rating of at least "baa3", shall no longer be in effect on
March 31, 2000, then the Second Revised Rate herein provided shall be
void ab initio and the Partnership shall pay on March 31, 2000, in
addition to the distribution then due to the holders of the Series B
Preferred Units, the difference between (1) the distribution that would
have accrued at the Issuance Rate (or, if in effect on March 31, 2000
pursuant to Section 3(a)(ii) above, the Revised Rate) during the
current and any prior quarterly distribution period and (2) the
distribution that actually accrued during such distribution periods at
the voided Second Revised Rate.
(iv) Promptly after April 1, 2000 the parties hereto shall
execute, acknowledge and deliver or cause to be executed acknowledged
and delivered all instruments and documents as may be reasonably
necessary or desirable to memorialize distribution rate revised in
accordance with Sections 3(a)(ii) and 3(a)(iii) above and in effect on
the effective date of the change.
(v) All distributions shall be cumulative, shall accrue from
the original date of issuance and will be payable (i) quarterly in
arrears, on or before March 31, June 30, September 30 and December 31
of each year commencing on September 30, 1999 for the quarterly period
then ended, and, (ii), in the event of (A) an exchange of Series B
Preferred Units into Series B Preferred Shares, or (B) a redemption of
Series B Preferred Units, on the exchange date or redemption date, as
applicable (each a "Preferred Unit Distribution Payment Date"). The
amount of the distribution payable for any period will be computed on
the basis of a 360-day year of twelve 30-day months and for any period
shorter than a full quarterly period for which distributions are
computed, the amount of the distribution payable will be computed based
on the ratio of the actual number of days elapsed in such period to
ninety (90) days. If any date on which distributions are to be made on
the Series B Preferred Units is not a Business Day (as defined herein),
then payment of the distribution to be made on such date will be made
on the next succeeding day that is a Business Day (and without any
interest or other payment in respect of any such delay) except that, if
such Business Day is in the next succeeding calendar year, such payment
shall be made on the immediately preceding Business Day, in each case
with the same force and effect as if made on such date. Distributions
on the Series B Preferred Units will be made to the holders of record
of the Series B Preferred Units on the relevant record dates to be
fixed by the Partnership acting through the General Partner, which
record dates shall in no event exceed fifteen (15) Business Days prior
to the relevant Preferred Unit Distribution Payment Date (the
"Preferred Unit Partnership Record Date").
The term "Business Day" shall mean each day, other than a
Saturday or a Sunday, which is not a day on which banking institutions
in New York, New York are authorized or required by law, regulation or
executive order to close.
(b) Distributions Cumulative. Distributions on the Series B
Preferred Units will accrue whether or not the terms and provisions of
any agreement of the Partnership, including any agreement relating to
its indebtedness at any time prohibit the declaration, setting aside
for payment or current payment of distributions, whether or not the
Partnership has earnings, whether or not there are funds legally
available for the payment of such of such distributions and whether or
not such distributions are authorized. Accrued but unpaid
distributions on the Series B Preferred Units will accumulate as of the
Preferred Unit Distribution Payment Date on which they first become
payable. Distributions on account of arrears for any past distribution
periods may be declared and paid at any time, without reference to a
regular Preferred Unit Distribution Payment Date to holders of record
of the Series B Preferred Units on the record date fixed by the
Partnership acting through the General Partner, which date shall not
exceed fifteen (15) Business Days prior to the payment date.
Accumulated and unpaid distributions will not bear interest.
(c) Priority as to Distributions.
(i) So long as any Series B Preferred Units are outstanding,
no distribution of cash or other property shall be authorized,
declared, paid or set apart for payment on or with respect to any class
or series of Partnership Interest of the Partnership ranking junior as
to the payment of distributions or rights upon a voluntary or
involuntary liquidation, dissolution or winding-up of the Partnership
to the Series B Preferred Units (collectively, "Junior Units"), nor
shall any cash or other property be set aside for or applied to the
purchase, redemption or other acquisition for consideration of any
Series B Preferred Units, any Parity Preferred Units or any Junior
Units, unless, in each case, all distributions accumulated on all
Series B Preferred Units and all classes and series of outstanding
Parity Preferred Units have been paid in full or a sum sufficient for
such full payment has been irrevocably deposited in trust for immediate
payment. The foregoing sentence will not prohibit (a) distributions
payable solely in Junior Units, (b) the conversion of Junior Units or
Parity Preferred Units into Partnership Interests of the Partnership
ranking junior to the Series B Preferred Units as to distributions and
rights upon the voluntary or involuntary liquidation, dissolution or
winding up of the Partnership, (c) the redemption of Partnership
Interests corresponding to any Series B Preferred Shares, Parity
Preferred Shares with respect to distributions or Junior Shares to be
purchased by the General Partner pursuant to Article VII of the Amended
and Restated Declaration of Trust of the General Partner (as amended
and modified through the date hereof, the "Charter") to preserve the
General Partner's status as a real estate investment trust, provided
that such redemption shall be upon the same terms as the corresponding
purchase pursuant to Article VII of the Charter or (d) the foreclosure
by the Partnership on the Partnership Interests constituting the
Indemnity Collateral and/or the Special Indemnity Collateral (as
defined in Section 13.3 of the Partnership Agreement).
(ii) So long as distributions have not been paid in full (or
a sum sufficient for such full payment is not irrevocably deposited in
trust for immediate payment) upon the Series B Preferred Units, all
distributions authorized and declared on the Series B Preferred Units
and all classes or series of outstanding Parity Preferred Units shall
be authorized and declared so that the amount of distributions
authorized and declared per Series B Preferred Unit and such other
classes or series of Parity Preferred Units shall in all cases bear to
each other the same ratio that accrued distributions per Series B
Preferred Unit and such other classes or series of Parity Preferred
Units (which shall not include any accumulation in respect of unpaid
distributions for prior distribution periods if such class or series of
Parity Preferred Units do not have cumulative distribution rights) bear
to each other. No interest or any sum of money in lieu of interest
shall be payable in respect of any distribution, payment or payments on
Series B Preferred Units which may be in arrears.
(d) No Further Rights. Holders of Series B Preferred Units shall
not be entitled to any distributions, whether payable in cash, other
property or otherwise, in excess of the full cumulative distributions
described herein.
Section 4. Allocations. Section 1 of Exhibit C to the
Partnership Agreement is hereby deleted and replaced by the following:
(a) Net Income. Except as otherwise provided herein, Net Income
for any fiscal year or other applicable period shall be allocated in
the following order and priority:
(i) first, to the General Partner to the extent of Net Loss
previously allocated to the General Partner pursuant to Section
1(b)(iii) below for all prior fiscal years or other applicable periods
exceed Net Income previously allocated to the General Partner pursuant
to this Section 1(a)(i) for all prior fiscal years or other applicable
periods,
(ii) second, to Partners holding any Partnership Interests
that are entitled to any preference in distribution to the extent that
Net Loss previously allocated to such holders pursuant to Section
1(b)(ii) below for all prior fiscal years or other applicable periods
exceeds Net Income previously allocated to such Partners pursuant to
this Section 1(a)(ii) for all prior fiscal years or other applicable
periods,
(iii) third, to Partners holding Partnership Interests of a
class not entitled to preference in distribution to the extent that Net
Loss previously allocated to such holders pursuant to Section 1(b)(i)
below for all prior fiscal years or other applicable periods exceeds
Net Income previously allocated to such holders pursuant to this
Section 1(a)(iii) for all prior fiscal years or other applicable
periods,
(iv) fourth, to Partners holding any Partnership Interests
that are entitled to any preference in distribution in accordance with
the rights of any such class of Partnership Interests until each such
Partnership Interest has been allocated, Net Income equal to the excess
of (x) the cumulative amount of preferred distributions such Partners
are entitled to receive to the last day of the current fiscal year or
other applicable period or to the date of redemption, to the extent
such Partnership Interests are redeemed during such period, over (y)
the cumulative Net Income allocated to such Partners, pursuant to this
Section 1(a)(iv) for all prior fiscal years or other applicable periods
(and, within each such class, pro rata in proportion to the respective
share of such Partnership Interests each Partner holds as of the last
day of the period for which such allocation is being made), and
(v) fifth, with respect to Partnership Interests that are
not entitled to any preference in the allocation of Net Income, pro
rata to each such class in accordance with the terms of such class
(and, within each such class, pro rata in proportion to each Partner's
respective share of such Partnership Interests as of the last day of
the period for which such allocation is being made).
B. Net Loss. Except as otherwise provided herein, Net Loss for
any fiscal year or other applicable period shall be allocated in the
following order and priority:
(i) first, with respect to classes of Partnership Interests
that are not entitled to any preference in distribution (including the
General Partner Interest), pro rata to each such class in accordance
with the terms of such class (and, within such class, pro rata in
proportion to each Partner's respective share of such Partnership
Interests as of the last day of the period for which such allocation is
being made) until the Adjusted Capital Account (ignoring for this
purpose any amounts a Partner is obligated to contribute to the capital
of the Partnership or is deemed obligated to contribute pursuant to
Regulations Section 1.704-1(b)(2)(ii)(c)(2)) of each Partner with
respect to such Partnership Interests is reduced to zero,
(ii) second, to the Partners holding any Partnership
Interests that are entitled to any preference in distribution in
accordance with the rights of any such class of Partnership Interests
(and, if there is more than one class of such Partnership Interests,
then in the reverse order of their preference in distribution), until
the Adjusted Capital Account (modified in the same manner as in clause
(i)) of each such Partner with respect to such Partnership Interests is
reduced to zero, and
(iii) third, to the General Partner.
To the extent permitted under Section 704 of the Code, solely
for purposes of allocating Net Income or Net Loss in any taxable year
(or a portion thereof) to Partners holding Series B Preferred Units
pursuant to Section 1 hereof, items of Net Income or Net Loss, as the
case may be, shall not include Depreciation with respect to properties
that are "ceiling limited" in respect of holders of Series B Preferred
Units. For purposes of the preceding sentence, Partnership property
shall be considered "ceiling limited" in respect of a holder of Series
B Preferred Units if Depreciation attributable to such Partnership
property which would otherwise be allocable to such Partner, without
regard to this paragraph, exceeds depreciation determined for federal
income tax purposes attributable to such Partnership property which
would otherwise be allocable to such holder by more than 5%.
Notwithstanding the foregoing sentences in this paragraph, in applying
this paragraph, the General Partner may, in its discretion for
administrative ease and convenience, calculate Net Income or Net Loss
in any taxable year (or a portion thereof) allocable to the Partners
holding Series B Preferred Units by excluding Depreciation with respect
to all properties of the Partnership.
It is the intention of the parties hereunder that the
aggregate Capital Account balance of the holders of Series B Preferred
Units at any date shall not exceed the amount of the original Capital
Contribution of such holder plus the cumulative Priority Return,
whether or not declared, to the extent not previously distributed.
Section 5. Liquidation Proceeds.
(a) Upon any voluntary or involuntary liquidation, dissolution or
winding-up of the affairs of the Partnership, distributions on the
Series B Preferred Units shall be made in accordance with Section 8.2
of the Partnership Agreement, as hereby amended by inserting the
following at the end of Section 8.2(c):
"Immediately prior to the foregoing distributions, the
General Partner shall have made adjustments to Capital Accounts of the
Partners to reflect the fair market value of the Partnership assets as
of the date of the Partnership's liquidation in a manner consistent
with Treasury regulations Section 1.704-1(b)(2)(iv)(f)."
(b) Notice. Written notice of any such voluntary or involuntary
liquidation, dissolution or winding-up of the Partnership, stating the
payment date or dates when, and the place or places where, the amounts
distributable in such circumstances shall be payable, shall be given by
(i) fax and (ii) by first class mail, postage pre-paid, not less than
twenty [20] and not more than sixty (60) days prior to the payment date
stated therein, to each record holder of the Series B Preferred Units
at the respective addresses of such holders as the same shall appear on
the transfer records of the Partnership.
(c) No Further Rights. After payment of the full amount of the
liquidating distributions to which they are entitled, the holders of
Series B Preferred Units will have no right or claim to any of the
remaining assets of the Partnership.
(d) Consolidation, Merger or Certain Other Transactions. The
consolidation or merger of the Partnership with or into any other
corporation, trust, partnership, limited liability company or other
entity (or of any other corporation, trust, partnership, limited
liability company or other entity with or into the Partnership), or the
sale, lease, exchange, transfer or conveyance of all or substantially
all of the property or business of the Partnership shall not be deemed
to constitute a liquidation, dissolution or winding-up of the
Partnership.
Section 6. Optional Redemption.
(a) Right of Optional Redemption. The Series B Preferred Units
may not be redeemed prior to the fifth (5th) anniversary of the issuance
date. On or after such date, the Partnership at its sole option shall
have the right to redeem the Series B Preferred Units, in whole or in
part, at any time or from time to time, upon not less than thirty (30)
nor more than sixty (60) days' written notice, at a redemption price,
payable in cash, equal to the Capital Account balance of the holders of
Series B Preferred Units (the "Series B Redemption Price"); provided,
however, that no redemption pursuant to this Section 6 will be
permitted if the Redemption Price does not equal or exceed the original
Capital Contribution of such holder plus the cumulative Priority
Return, whether or not declared, to the redemption date to the extent
not previously distributed. If fewer than all of the outstanding
Series B Preferred Units are to be redeemed, the Series B Preferred
Units to be redeemed shall be selected pro rata (as nearly as
practicable without creating fractional units).
(b) Limitation on Redemption.
(i) The Redemption Price of the Series B Preferred Units
(other than the portion thereof consisting of accumulated but unpaid
distributions) will be payable solely out of the sale proceeds of
capital stock of the General Partner, which will be contributed by the
General Partner to the Partnership as additional capital contribution,
or out of the sale of limited partner interests in the Partnership and
from no other source. For purposes of the preceding sentence, "capital
stock" means any equity securities (including Common Shares and
Preferred Shares (as such terms are defined in the Charter)), shares,
participation or other ownership interests (however designated) and any
rights (other than debt securities convertible into or exchangeable for
equity securities) or options to purchase any of the foregoing.
(ii) The Partnership may not redeem fewer than all of the
outstanding Series B Preferred Units unless all accumulated and unpaid
distributions have been paid or contemporaneously are authorized and
paid (or authorized and a sum sufficient for the full payment thereof
is irrevocably deposited in trust for immediate payment) on all Series
B Preferred Units for all quarterly distribution periods terminating on
or prior to the date of redemption.
(c) Procedures for Redemption.
(i) Notice of redemption will be (A) faxed, and (B) mailed
by the Partnership, by certified mail, postage prepaid, not less than
thirty (30) nor more than sixty (60) days prior to the redemption date,
addressed to the respective holders of record of the Series B Preferred
Units at their respective addresses as they appear on the records of
the Partnership. No failure to give or defect in such notice or in the
transmission thereof shall affect the validity of the proceedings for
the redemption of any Series B Preferred Units except as to the holder
to whom such notice was defective or not given or received. In
addition to any information required by law, each such notice shall
state: (1) the redemption date, (2) the Redemption Price, (3) the
aggregate number of Series B Preferred Units to be redeemed and if
fewer than all of the outstanding Series B Preferred Units are to be
redeemed, the number of Series B Preferred Units to be redeemed held by
such holder, which number shall equal such holder's pro rata share
(based on the percentage of the aggregate number of outstanding Series
B Preferred Units the total number of Series B Preferred Units held by
such holder represents) of the aggregate number of Series B Preferred
Units to be redeemed, (4) the place or places where the Series B
Preferred Units are to be surrendered for payment of the Redemption
Price, (5) that distributions on the Series B Preferred Units to be
redeemed will cease to accumulate on such redemption date and (6) that
payment of the Redemption Price will be made upon presentation and
surrender of such Series B Preferred Units.
(ii) If the Partnership gives a notice of redemption in
respect of Series B Preferred Units (which notice will be irrevocable)
then, by 12:00 noon, New York City time, on the redemption date, the
Partnership will deposit irrevocably in trust for the benefit of the
Series B Preferred Units being redeemed funds sufficient to pay the
applicable Redemption Price and will give irrevocable instructions and
authority to pay such Redemption Price to the holders of the Series B
Preferred Units upon surrender of the Series B Preferred Units by such
holders at the place designated in the notice of redemption. If the
Series B Preferred Units are evidenced by a certificate and if fewer
than all Series B Preferred Units evidenced by any certificate are
being redeemed, a new certificate shall be issued upon surrender of the
certificate evidencing all Series B Preferred Units, evidencing the
unredeemed Series B Preferred Units without cost to the holder thereof.
On and after the date of redemption, distributions will cease to
accumulate on the Series B Preferred Units or portions thereof called
for redemption, unless the Partnership defaults in the payment thereof.
If any date fixed for redemption of Series B Preferred Units is not a
Business Day, then payment of the Redemption Price payable on such date
will be made on the next succeeding day that is a Business Day (and
without any interest or other payment in respect of any such delay)
except that, if such Business Day falls in the next calendar year, such
payment will be made on the immediately preceding Business Day, in each
case with the same force and effect as if made on such date fixed for
redemption. If payment of the Redemption Price is improperly withheld
or refused and not paid by the Partnership, distributions on such
Series B Preferred Units will continue to accumulate from the original
redemption date to the date of payment, in which case the actual
payment date will be considered the date fixed for redemption for
purposes of calculating the applicable Redemption Price.
Section 7. Voting Rights.
(a) General. Holders of the Series B Preferred Units will not
have any voting rights or right to consent to any matter requiring the
consent or approval of the Limited Partners, except as set forth below.
(b) Certain Voting Rights. So long as any Series B Preferred
Units remain outstanding, the Partnership shall not, without the
affirmative vote of the holders of at least two-thirds of the Series B
Preferred Units outstanding at the time (i) (A) authorize or create, or
increase the authorized or issued amount of, any class or series of
Partnership Interests senior to the Series B Preferred Units with
respect to payment of distributions or rights upon liquidation,
dissolution or winding-up, (B) reclassify any Partnership Interests of
the Partnership into any such senior Partnership Interest, or (C)
create, authorize or issue any obligations or security convertible into
or evidencing the right to purchase any such senior Partnership
Interests, (ii) (A) authorize or create, or increase the authorized or
issued amount of any Parity Preferred Units, (B) reclassify any
Partnership Interest into a Parity Preferred Unit, or (C) create,
authorize or issue any obligations or security convertible into or
evidencing the right to purchase any Parity Preferred Unit; provided,
that restrictions contained in this clause (ii) of this Paragraph (b)
shall apply only to Parity Preferred Units that are issued to an
Affiliate of the Partnership other than on arm's length terms; and to
no other issuance, including, without limitation, an issuance to the
General Partner, the purpose of which is to allow the General Partner
to issue corresponding preferred Shares to persons who are not
Affiliates of the Partnership or (iii) either (A) consolidate or merge
into or with any corporation or other entity or (B) amend, alter or
repeal the provisions of the Partnership Agreement, whether by merger
or consolidation or otherwise, in such a way that would materially and
adversely affect the powers, special rights, preferences, privileges or
voting power of the Series B Preferred Units or the holders thereof;
provided, however, that with respect to the occurrence of a merger or
consolidation, so long as (1) the Partnership is the surviving entity
and the Series B Preferred Units remain outstanding with the terms
thereof unchanged, or (2) the resulting, surviving or transferee entity
is a partnership, limited liability company or other pass-through
entity organized under the laws of any state, and such entity
substitutes for the Series B Preferred Units other interests in such
entity having substantially the same terms and rights as the Series B
Preferred Units, including with respect to distributions, voting rights
and rights upon liquidation, dissolution or winding-up, then the
occurrence of any such event shall not be deemed to materially and
adversely affect the rights, privileges or voting powers of the holders
of the Series B Preferred Units; provided, further, that any increase
in the amount of Partnership Interests or the creation or issuance of
any other class or series of Partnership Interests, shall not be deemed
to materially and adversely affect the rights, preferences, privileges
or voting powers of the Series B Preferred Units, if such Partnership
Units rank (y) junior to the Series B Preferred Units with respect to
payment of distributions or the distribution of assets upon
liquidation, dissolution or winding up, or (z) on a parity with the
Series B Preferred Units with respect to payment of distributions or
the distribution of assets upon liquidation, dissolution or winding-up;
provided, that any Preferred Units issued in reliance on the preceding
clause (z) shall have been issued to an Affiliate of the Partnership on
arm's length terms, or to the General Partner in order to allow the
General Partner to issue corresponding preferred Shares to persons who
are not Affiliates of the Partnership. In the event of any conflict or
inconsistency between this Section 7 and Article XIV of the Partnership
Agreement, this Section 7 shall control.
Section 8. Transfer Restrictions. The Series B Preferred Units
shall be subject to the provisions of Article IX of the Partnership
Agreement, provided, however that (a) the General Partner shall act
reasonably in exercising its discretion pursuant to the provisions of
Sections 9.2(a) and 9.2(c) and shall not withhold its consent to any
transfer to any Person, and the admission of such Person as a
Substituted Limited Partner, which Person does not violate the
requirements of Section 9.3 and such transfers do not cause the total
number of holders of Series B Preferred Units which would be considered
partners under Treasury Regulation Section 1.7704-1(h)(3), at any time
the Partnership is satisfying the private placement safe harbor of
Treasury Regulation Section 1.7704-1(h) to exceed the lesser of (i)
(A) four (4) through December 31, 1999 and (B) six (6) after December
31, 1999 and (ii) the maximum number that would permit the Partnership
to continue to satisfy such safe harbor (but substituting "90" for
"100" in assessing the status of such safe harbor) and (b) the term
"transfer" when used in Article IX shall not be deemed to include any
exchange pursuant to Section 9 below.
Section 9. Exchange Rights.
(a) Right to Exchange.
(i) Series B Preferred Units will be exchangeable in whole
or in part at anytime on or after the tenth (10th) anniversary of the
date of issuance, at the option of the holders thereof, for authorized
but previously unissued shares of 9.25% Series B Cumulative Redeemable
Preferred Shares of the General Partner (the "Series B Preferred
Shares") at an exchange rate of one Series B Preferred Share for one
Series B Preferred Unit, subject to adjustment as described below (the
"Exchange Price"), provided that the Series B Preferred Units will
become exchangeable at any time, in whole or in part, at the option of
the holders of Series B Preferred Units for Series B Preferred Shares
if (x) at any time full distributions shall not have been timely made
on any Series B Preferred Unit with respect to six (6) prior quarterly
distribution periods, whether or not consecutive, provided, however,
that a distribution in respect of Series B Preferred Units shall be
considered timely made if made within two (2) Business Days after the
applicable Preferred Unit Distribution Payment Date if at the time of
such late payment there shall not be any prior quarterly distribution
periods in respect of which full distributions were not timely made or
upon receipt by a holder or holders of Series B Preferred Units of (1)
notice from the General Partner that the General Partner or a
Subsidiary of the General Partner has taken the position that the
Partnership is, or upon the occurrence of a defined event in the
immediate future will be, a PTP and (2) an opinion rendered by an
outside nationally recognized independent counsel familiar with such
matters addressed to a holder or holders of Series B Preferred Units,
that the Partnership is or likely is, or upon the occurrence of a
defined event in the immediate future will be or likely will be, a PTP.
In addition, the Series B Preferred Units may be exchanged for Series B
Preferred Shares, in whole or in part, at the option of any holder
prior to the tenth (10th) anniversary of the issuance date and after
the third (3rd) anniversary thereof if such holder of a Series B
Preferred Units shall deliver to the General Partner either (i) a
private letter ruling addressed to such holder of Series B Preferred
Units or (ii) an opinion of independent counsel reasonably acceptable
to the General Partner based on the enactment of temporary or final
Treasury Regulations or the publication of a Revenue Ruling, in either
case to the effect that an exchange of the Series B Preferred Units at
such earlier time would not cause the Series B Preferred Units to be
considered "stock and securities" within the meaning of section 351(e)
of the Code for purposes of determining whether the holder of such
Series B Preferred Units is an "investment company" under
section 721(b) of the Code if an exchange were to occur at such time.
Furthermore, the Series B Preferred Units may be exchanged in whole but
not in part by any holder thereof which is a real estate investment
trust within the meaning of Sections 856 through 859 of the Code for
Series B Preferred Shares (but only if the exchange in whole may be
accomplished consistently with the ownership limitations set forth
under Article VII of the Charter (taking into account exceptions
thereto and exemptions therefrom)) if at any time, (i) the Partnership
reasonably determines that the assets and income of the Partnership for
a taxable year after 1999 would not satisfy the income and assets tests
of Section 856 of the Code for such taxable year if the Partnership
were a real estate investment trust within the meaning of the Code or
(ii) any such holder of Series B Preferred Units shall deliver to the
Partnership and the General Partner an opinion of independent counsel
reasonably acceptable to the General Partner to the effect that, based
on the assets and income of the Partnership for a taxable year after
1999, the Partnership would not satisfy the income and assets tests of
Section 856 of the Code for such taxable year if the Partnership were a
real estate investment trust within the meaning of the Code and that
such failure would create a meaningful risk that a holder of the Series
B Preferred Units would fail to maintain qualification as a real estate
investment trust.
(ii) Notwithstanding anything to the contrary set forth in
Section 9(a)(i) hereof, if an Exchange Notice (as defined herein) has
been delivered to the General Partner, then the General Partner may, at
its option, elect to redeem or cause the Partnership to redeem all or a
portion of the outstanding Series B Preferred Units for cash in an
amount equal to the original Capital Contribution per Series B
Preferred Unit plus all accrued and unpaid distributions thereon to the
date of redemption. The General Partner may exercise its option to
redeem the Series B Preferred Units for cash pursuant to this Section
9(a)(ii) hereof by giving each holder of record of Series B Preferred
Units notice of its election to redeem for cash, within ten (10)
Business Days after receipt of the Exchange Notice, by (m) fax, and (n)
registered mail, postage paid, at the address of each holder as it may
appear on the records of the Partnership stating (A) the redemption
date, which shall be no later than sixty (60) days following the
receipt of the Exchange Notice, (B) the redemption price, (C) the place
or places where the Series B Preferred Units are to be surrendered for
payment of the redemption price, (D) that distributions on the Series B
Preferred Units will cease to accrue on such redemption date; (E) that
payment of the redemption price will be made upon presentation and
surrender of the Series B Preferred Units and (F) the aggregate number
of Series B Preferred Units to be redeemed, and if fewer than all of
the outstanding Series B Preferred Units are to be redeemed, the number
of Series B Preferred Units to be redeemed held by such holder, which
number shall equal such holder's pro-rata share (based on the
percentage of the aggregate number of outstanding Series B Preferred
Units the total number of Series B Preferred Units held by such holder
represents) of the aggregate number of Series B Preferred Units being
redeemed.
(iii) In the event an exchange of all or a portion of Series
B Preferred Units pursuant to Section 9(a)(i) hereof would violate the
provisions on ownership limitation of the General Partner set forth in
Article VII of the Charter with respect to the Series B Preferred
Shares, the General Partner shall give written notice thereof to each
holder of record of Series B Preferred Units, within five (5) Business
Days following receipt of the Exchange Notice, by (m) fax, and (n)
registered mail, postage prepaid, at the address of each such holder
set forth in the records of the Partnership. In such event, each
holder of Series B Preferred Units shall be entitled to exchange,
pursuant to the provision of Section 9(b) a number of Series B
Preferred Units which would comply with the provisions on the ownership
limitation of the General Partner set forth in Article VII of the
Charter and any Series B Preferred Units not so exchanged (the "Excess
Units") shall be redeemed by the Partnership for cash in an amount
equal to the original Capital Contribution per Excess Unit, plus any
accrued and unpaid distributions thereon, whether or not declared, to
the date of redemption. The written notice of the General Partner
shall state (A) the number of Excess Units held by such holder, (B) the
redemption price of the Excess Units, (C) the date on which such Excess
Units shall be redeemed, which date shall be no later than sixty (60)
days following the receipt of the Exchange Notice, (D) the place or
places where such Excess Units are to be surrendered for payment of the
Redemption Price, (E) that distributions on the Excess Units will cease
to accrue on such redemption date, and (F) that payment of the
redemption price will be made upon presentation and surrender of such
Excess Units. In the event an exchange would result in Excess Units,
as a condition to such exchange, each holder of such units agrees to
provide representations and covenants reasonably requested by the
General Partner relating to (1) the widely held nature of the interests
in such holder, sufficient to assure the General Partner that the
holder's ownership of shares of beneficial interest of the General
Partner (without regard to the limits described above) will not cause
any individual to Beneficially Own in excess of the Ownership Limit
(all as defined in the Charter); and (2) to the extent such holder can
so represent and covenant without obtaining information from its
owners, the holder's ownership of tenants of the Partnership and its
affiliates.
(iv) The redemption of Series B Preferred Units described in
Sections 9(a)(ii) and (iii) hereof shall be subject to the provisions
of Sections 6(b)(i) and 6(c)(ii) hereof; provided, however, that the
term "Redemption Price" in such Section shall be read to mean the
original Capital Contribution per Series B Preferred Unit being
redeemed plus all accrued and unpaid distributions to the redemption
date.
(b) Procedure for Exchange.
(i) Any exchange shall be exercised pursuant to a notice of
exchange (the "Exchange Notice") delivered to the General Partner by
the holder who is exercising such exchange right, by (A) fax and (B) by
certified mail postage prepaid. The exchange of Series B Preferred
Units, or a specified portion thereof, may be effected after the fifth
(5th) Business Day following receipt by the General Partner of the
Exchange Notice by delivering certificates, if any, representing such
Series B Preferred Units to be exchanged together with, if applicable,
written notice of exchange and a proper assignment of such Series B
Preferred Units to the office of the General Partner maintained for
such purpose. Currently, such office is 65 Valley Stream Parkway,
Malvern, Pennsylvania 19355. Each exchange will be deemed to have been
effected immediately prior to the close of business on the date on
which such Series B Preferred Units to be exchanged (together with all
required documentation) shall have been surrendered and notice shall
have been received by the General Partner as aforesaid and the Exchange
Price shall have been paid. Any Series B Preferred Shares issued
pursuant to this Section 9 shall be delivered as shares which are duly
authorized, validly issued, fully paid and nonassessable, free of
pledge, lien, encumbrance or restriction other than those provided in
the Charter, the Bylaws of the General Partner, the Securities Act and
relevant state securities or blue sky laws.
(ii) In the event of an exchange of Series B Preferred Units
for shares of Series B Preferred Shares, an amount equal to the accrued
and unpaid distributions, whether or not declared, to the date of
exchange on any Series B Preferred Units tendered for exchange shall
(A) accrue on the Series B Preferred Shares into which such Series B
Preferred Units are exchanged, and (B) continue to accrue on such
Series B Preferred Units, which shall remain outstanding following such
exchange, with the General Partner as the holder of such Series B
Preferred Units. Notwithstanding anything to the contrary set forth
herein, in no event shall a holder of a Series B Preferred Unit that
was validly exchanged into Series B Preferred Shares pursuant to this
Section 9 (other than the General Partner now holding such Series B
Preferred Unit), receive a cash distribution out of Available Cash of
the Partnership, if such holder, after exchange, is entitled to receive
a distribution out of Available Cash with respect to the Series B
Preferred Shares for which such Series B Preferred Unit was exchanged
or redeemed.
(iii) Fractional shares of Series B Preferred Shares are not
to be issued upon exchange but, in lieu thereof, the General Partner
will pay a cash adjustment based upon the fair market value of the
Series B Preferred Shares on the day prior to the exchange date as
determined in good faith by the Board of Directors of the General
Partner.
(c) Adjustment of Exchange Price.
(i) The Exchange Price is subject to adjustment upon certain
events, including, (A) subdivisions, combinations and reclassification
of the Series B Preferred Shares, and (B) distributions to all holders
of Series B Preferred Shares of evidence of indebtedness of the General
Partner or assets (including securities, but excluding dividends and
distributions paid in cash out of equity applicable to Series B
Preferred Shares).
(ii) In case the General Partner shall be a party to any
transaction (including, without limitation, a merger, consolidation,
statutory share exchange, tender offer for all or substantially all of
the General Partner's capital stock or sale of all or substantially all
of the General Partner's assets), in each case as a result of which the
Series B Preferred Shares will be converted into the right to receive
shares of capital stock, other securities or other property (including
cash or any combination thereof), each Series B Preferred Unit will
thereafter be exchangeable into the kind and amount of shares of
capital stock and other securities and property receivable (including
cash or any combination thereof) upon the consummation of such
transaction by a holder of that number of Series B Preferred Shares or
fraction thereof into which one Series B Preferred Unit was
exchangeable immediately prior to such transaction. The General
Partner may not become a party to any such transaction unless the terms
thereof are consistent with the foregoing.
(d) No Rights Under Article XI. Holders of Series B Preferred
Units shall not be entitled to any "Rights" provided to Limited
Partners pursuant to Article XI of the Partnership Agreement.
Section 10. No Conversion Rights. The holders of the Series B
Preferred Units shall not have any rights to convert such shares into
shares of any other class or series of shares or into any other
securities of, or interest in, the Partnership.
Section 11. No Sinking Fund. No sinking fund shall be
established for the retirement or redemption of Series B Preferred
Units.
Section 12. Admission of Limited Partners; Exhibits to
Partnership. In accordance with Section 4.1 of the Partnership
Agreement, Belair and Belcrest are hereby admitted as Additional
Partners. Exhibit A to the Partnership Agreement is hereby amended to
reflect the issuance of the Series B Preferred Units provided for
herein.
Section 13. Miscellaneous. The parties hereto agree that the
holders of Series B Preferred Units shall not be deemed "Limited
Partners" for the purpose of calculating the ownership level of limited
partners as contemplated by Section 7.2 of the Partnership Agreement.
Section 14. Reaffirmation. Except as modified herein, all terms
and conditions of the Partnership Agreement shall remain in full force
and effect, which terms and conditions the General Partner hereby
ratifies and affirms.
IN WITNESS WHEREOF, this Amendment has been executed as of the
date first above written.
LIBERTY PROPERTY TRUST
By: /s/ George J. Alburger, Jr.
---------------------------------------
Name: George J. Alburger, Jr.
Title: Chief Financial Officer
BELCREST REALTY CORPORATION
By: /s/ Thomas E. Faust, Jr.
--------------------------------------
Name: Thomas E. Faust, Jr.
Title: Executive Vice President
BELAIR REAL ESTATE CORPORATION
By: /s/ Thomas E. Faust, Jr.
--------------------------------------
Name: Thomas E. Faust, Jr.
Title: Executive Vice President
Exhibit 3.1.2
LIBERTY PROPERTY TRUST
ARTICLES SUPPLEMENTARY
3,800,000 SHARES
9.25% SERIES B CUMULATIVE REDEEMABLE PREFERRED SHARES
OF BENEFICIAL INTEREST
Liberty Property Trust, a Maryland real estate investment trust
(the "Company"), hereby certifies to the State Department of
Assessments and Taxation of Maryland (the "Department") that:
FIRST: Pursuant to the authority expressly vested in the Board of
Trustees of the Company by Sections 3.2(e), 6.1 and 6.3 of the Amended
and Restated Declaration of Trust of the Company filed with the
Department on May 29, 1997, as supplemented by the Articles
Supplementary accepted for record by the Department on August 7, 1997
and by the Articles Supplementary accepted for record by the Department
on December 23, 1997 (the "Charter") and Section 8-203 of the
Corporations and Associations Article of the Annotated Code of
Maryland, the Board of Trustees of the Company (the "Board"), by
resolutions duly adopted on July 15, 1999, has classified 3,800,000
shares of the 195,000,000 authorized but unissued shares of beneficial
interest in the Company as a series designated the 9.25% Series B
Cumulative Redeemable Preferred Shares of Beneficial Interest with the
following preferences, conversion and other rights, voting powers,
restrictions, limitations as to dividends, qualifications, terms and
conditions of redemption and other terms and conditions:
Section 1. Designation and Number. A series of preferred shares
of beneficial interest of the Company, designated the "9.25% Series B
Cumulative Redeemable Preferred Shares of Beneficial Interest" (the
"Series B Preferred Shares") is hereby established. The number of
Series B Preferred Shares shall be 3,800,000.
Section 2. Rank. The Series B Preferred Shares will, with
respect to distributions and rights upon voluntary or involuntary
liquidation, winding-up or dissolution of the Company, rank senior to
all classes or series of Common Shares (as defined in the Charter) and
to all classes or series of equity securities of the Company now or
hereafter authorized, issued or outstanding including, without
limitation, the "Series A Junior Participating Preferred Shares," other
than any class or series of equity securities of the Company expressly
designated as ranking on a parity with or senior to the Series B
Preferred Shares as to distributions and rights upon voluntary or
involuntary liquidation, winding-up or dissolution of the Company. For
purposes of these Articles Supplementary, the term "Parity Preferred
Shares" shall be used to refer to any class or series of equity
securities of the Company now or hereafter authorized, issued or
outstanding expressly designated by the Company to rank on a parity
with Series B Preferred Shares with respect to distributions and rights
upon voluntary or involuntary liquidation, winding-up or dissolution of
the Company including, without limitation, the "8.80% Series A
Cumulative Redeemable Preferred Shares of Beneficial Interest". The
term "equity securities" does not include debt securities, which will
rank senior to the Series B Preferred Shares prior to conversion.
Section 3. Distributions.
(a) Payment of Distributions.
(i) Subject to the rights of holders of Parity Preferred
Shares and holders of equity securities ranking senior to the Series B
Preferred Shares as to payment of distributions, holders of Series B
Preferred Shares will be entitled to receive, when, as and if declared
by the Board of Trustees of the Company, out of funds legally available
for the payment of distributions, cumulative preferential cash
distributions at the rate per annum of 9.25% of the $25 liquidation
preference per Series B Preferred Share (the "Issuance Rate").
(ii) In the event that on or prior to March 31, 2000 the
Company's outstanding preferred stock shall have either an
unconditional, published (A) rating by Standard & Poor's Ratings Group
("Standard & Poor's") of at least "BBB-" or (B) rating by Moody's
Investors Service, Inc. ("Moody's") of at least "baa3", then, beginning
on the date on which either of such foregoing conditions is met, the
rate per annum of the cumulative preferential cash distributions on the
Series B Preferred Shares shall be 8.95% of the $25 liquidation
preference per Series B Preferred Share (the "Revised Rate"), in which
case the designation of the Series B Preferred Shares will change
accordingly to reflect such new distribution rate; provided, that, if
neither (i) Standard & Poor's unconditional published rating of at
least "BBB-" nor (ii) Moody's rating of at least "baa3" shall remain in
effect on March 31, 2000, then the Revised Rate herein provided shall
be void ab initio and the Company shall pay on March 31, 2000, in
addition to the dividend then due to the holders of the Series B
Preferred Shares, the difference between (1) the dividend that would
have accrued at the Issuance Rate during the current and any prior
quarterly distribution period and (2) the dividend that actually
accrued during such distribution periods at the voided Revised Rate
and, if applicable, the Second Revised Rate (as defined below).
(iii) In the event that on or prior to March 31, 2000 the
Company's outstanding preferred stock shall have both an unconditional,
published (A) Standard & Poor's rating of at least "BBB-" and (B)
Moody's rating of at least "baa3", then, beginning on the date on which
each of such foregoing conditions are met, the rate per annum of the
cumulative preferential cash distribution of the Series B Preferred
Shares shall be 8.75% of the $25 liquidation preference per Series B
Preferred Share (the "Second Revised Rate"), in which case the
designation of the Series B Preferred Shares will change accordingly to
reflect such new distribution rate; provided, that, if either (i)
Standard & Poor's unconditional published rating of at least "BBB-" or
(ii) Moody's rating of at least "baa3" shall no longer be in effect on
March 31, 2000, then the Second Revised Rate herein provided shall be
void ab initio and the Company shall pay on March 31, 2000, in addition
to the dividend then due to the holders of the Series B Preferred
Shares, the difference between (1) the dividend that would have accrued
at the Issuance Rate (or, if in effect on December 31, 1999 pursuant to
Section 3(a)(ii) above, the Revised Rate) during the current and any
prior quarterly distribution period and (2) the dividend that actually
accrued during such distribution periods at the voided Second Revised
Rate.
(iv) Promptly after April 1, 2000 the parties hereto shall
execute, acknowledge and deliver, or cause to be executed, acknowledged
and delivered, all instruments and documents as may be reasonably
necessary or desirable to memorialize the revision of the distribution
rate in accordance with Sections 3(a)(ii) and 3(a)(iii) above and in
effect on the effective date of the change.
(v) All distributions shall be cumulative, shall accrue from
the original date of issuance and will be payable (i) quarterly in
arrears, on March 31, June 30, September 30 and December 31 of each
year, commencing on the first of such dates to occur after the original
date of issuance and, (ii) in the event of a redemption, on the
redemption date (each a "Preferred Shares Distribution Payment Date").
The amount of the distribution payable for any period will be computed
on the basis of a 360-day year of twelve 30-day months and for any
period shorter than a full quarterly period for which distributions are
computed, the amount of the distribution payable will be computed based
on the ratio of the actual number of days elapsed in such period to
ninety (90) days. If any date on which distributions are to be made on
the Series B Preferred Shares is not a Business Day (as defined
herein), then payment of the distribution to be made on such date will
be made on the next succeeding day that is a Business Day (and without
any interest or other payment in respect of any such delay) except
that, if such Business Day is in the next succeeding calendar year,
such payment shall be made on the immediately preceding Business Day,
in each case with the same force and effect as if made on such date.
Distributions on the Series B Preferred Shares will be made to the
holders of record of the Series B Preferred Shares on the relevant
record dates, which, unless otherwise provided by the Company with
respect to any distribution, will be fifteen (15) Business Days prior
to the relevant Preferred Shares Distribution Payment Date (each a
"Distribution Record Date"). Notwithstanding anything to the contrary
set forth herein, each Series B Preferred Share shall also continue to
accrue all accrued and unpaid distributions up to the exchange date on
any Series B Preference Unit (as defined in the Second Restated and
Amended Agreement of Limited Partnership of Liberty Property Limited
Partnership, dated as of October 22, 1997 as amended by First
Amendment, dated as of July 28, 1999 (as amended, the "Partnership
Agreement")) validly exchanged into such Series B Preferred Share in
accordance with the provisions of such Partnership Agreement.
(vi) "Business Day" shall mean each day, other than a
Saturday or a Sunday, which is not a day on which banking institutions
in New York, New York are authorized or required by law, regulation or
executive order to close.
(b) Limitation on Distributions. No distributions on the Series
B Preferred Shares shall be declared or paid or set apart for payment
by the Company at such time as the terms and provisions of any
agreement of the Company, including any agreement relating to its
indebtedness, prohibits such declaration, payment or setting apart for
payment or provides that such declaration, payment or setting apart for
payment would constitute a breach thereof or a default thereunder, or
if such declaration, payment or setting apart for payment shall be
restricted or prohibited by law.
(c) Distributions Cumulative. Notwithstanding the foregoing,
distributions on the Series B Preferred Shares will accrue whether or
not the terms and provisions set forth in Section 3(b) hereof at any
time prohibit the current payment of distributions, whether or not the
Company has earnings, whether or not there are funds legally available
for the payment of such of such distributions and whether or not such
distributions are authorized or declared. Accrued but unpaid
distributions on the Series B Preferred Shares will accumulate as of
the Preferred Shares Distribution Payment Date on which they first
become payable. Accumulated and unpaid distributions will not bear
interest.
(d) Priority as to Distributions.
(i) So long as any Series B Preferred Shares are
outstanding, no distribution of cash or other property shall be
authorized, declared, paid or set apart for payment on or with respect
to any class or series of Common Shares or any class or series of other
Shares of the Company ranking junior as to the payment of distributions
to the Series B Preferred Shares (such Common Shares or other junior
shares including, without limitation, Series A Junior Participating
Preferred Shares authorized pursuant to Articles Supplementary filed
with the Department on December 23, 1997, collectively, "Junior
Shares"), nor shall any cash or other property be set aside for or
applied to the purchase, redemption or other acquisition for
consideration of any Series B Preferred Shares, any Parity Preferred
Shares with respect to distributions or any Junior Shares, unless, in
each case, all distributions accumulated on all Series B Preferred
Shares and all classes and series of outstanding Parity Preferred
Shares as to payment of distributions have been paid in full. The
foregoing sentence will not prohibit (i) distributions payable solely
in Junior Shares, (ii) the conversion of Junior Shares or Parity
Preferred Shares into Shares of the Company ranking junior to the
Series B Preferred Shares as to distributions and upon liquidation,
winding-up or dissolution, and (iii) purchase by the Company of such
Series B Preferred Shares, Parity Preferred Shares with respect to
distributions or Junior Shares pursuant to Article VII of the Charter
to the extent required to preserve the Company's status as a real
estate investment trust.
(ii) So long as distributions have not been paid in full (or
a sum sufficient for such full payment is not irrevocably deposited in
trust for immediate payment) upon the Series B Preferred Shares and the
Shares of any class or series of outstanding Parity Preferred Shares,
all distributions authorized and declared on the Series B Preferred
Shares and all classes or series of outstanding Parity Preferred Shares
with respect to distributions shall be authorized and declared pro rata
so that the amount of distributions authorized and declared per share
of Series B Preferred Shares and such other classes or series of Parity
Preferred Shares shall in all cases bear to each other the same ratio
that accrued distributions per share on the Series B Preferred Shares
and such other classes or series of Parity Preferred Shares (which
shall not include any accumulation in respect of unpaid distributions
for prior distribution periods if such class or series of Parity
Preferred Shares do not have cumulative distribution rights) 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 Series B
Preferred Shares or any other Parity Preferred Shares which may be in
arrears.
(e) If, for any taxable year, the Company elects to designate as
"capital gain dividends" (as defined in Section 857 of the Internal
Revenue Code of 1986, as amended (the "Code")) any portion (the
"Capital Gains Amount") of the dividends (within the meaning of the
Code) paid or made available for the year to holders of all classes of
shares of beneficial interest in the Company (the "Total Dividends"),
then the portion of the Capital Gains Amount that will be allocable to
the holders of the Series B Preferred Units will be the Capital Gains
Amount multiplied by a fraction, the numerator of which will be the
total dividends (within the meaning of the Code) paid or made available
to the holders of the Series B Preferred Units for the year and the
denominator of which shall be the Total Dividends.
(f) No Further Rights. Holders of Series B Preferred Shares
shall not be entitled to any distributions, whether payable in cash,
other property or otherwise, in excess of the full cumulative
distributions described herein.
Section 4. Liquidation Preference.
(a) Payment of Liquidating Distributions. Subject to the rights
of holders of Parity Preferred Shares with respect to rights upon any
voluntary or involuntary liquidation, dissolution or winding-up of the
Company and subject to equity securities ranking senior to the Series B
Preferred Shares with respect to rights upon any voluntary or
involuntary liquidation, dissolution or winding-up of the Company, the
holders of Series B Preferred Shares shall be entitled to receive out
of the assets of the Company legally available for distribution or the
proceeds thereof, after payment or provision for debts and other
liabilities of the Company, but before any payment or distributions of
the assets shall be made to holders of Common Shares or any other class
or series of shares of the Company that ranks junior to the Series B
Preferred Shares as to rights upon liquidation, dissolution or winding-
up of the Company, an amount equal to the sum of (i) a liquidation
preference of $25 per share of Series B Preferred Shares, and (ii) an
amount equal to any accumulated and unpaid distributions thereon,
whether or not declared, to the date of payment. In the event that,
upon such voluntary or involuntary liquidation, dissolution or winding-
up, there are insufficient assets to permit full payment of liquidating
distributions to the holders of Series B Preferred Shares and any
Parity Preferred Shares as to rights upon liquidation, dissolution or
winding-up of the Company, all payments of liquidating distributions on
the Series B Preferred Shares and such Parity Preferred Shares shall be
made so that the payments on the Series B Preferred Shares and such
Parity Preferred Shares shall in all cases bear to each other the same
ratio that the respective rights of the Series B Preferred Shares and
such other Parity Preferred Shares (which shall not include any
accumulation in respect of unpaid distributions for prior distribution
periods if such Parity Preferred Shares do not have cumulative
distribution rights) upon liquidation, dissolution or winding-up of the
Company bear to each other.
(b) Notice. Written notice of any such voluntary or involuntary
liquidation, dissolution or winding-up of the Company, stating the
payment date or dates when, and the place or places where, the amounts
distributable in such circumstances shall be payable, shall be given by
(i) fax and (ii) by first class mail, postage pre-paid, not less than
30 and not more than sixty (60) days prior to the payment date stated
therein, to each record holder of the Series B Preferred Shares at the
respective addresses of such holders as the same shall appear on the
share transfer records of the Company.
(c) No Further Rights. After payment of the full amount of the
liquidating distributions to which they are entitled, the holders of
Series B Preferred Shares will have no right or claim to any of the
remaining assets of the Company.
(d) Consolidation, Merger or Certain Other Transactions. The
voluntary sale, conveyance, lease, exchange or transfer (for cash,
shares of stock, securities or other consideration) of all or
substantially all of the property or assets of the Company to, or the
consolidation or merger or other business combination of the Company
with or into any corporation, trust or other entity (or of any
corporation, trust or other entity with or into the Company) shall not
be deemed to constitute a liquidation, dissolution or winding-up of the
Company.
Section 5. Optional Redemption.
(a) Right of Optional Redemption. The Series B Preferred Shares
may not be redeemed prior to July 28, 2004. However, in order to
ensure that the Company remains a qualified real estate investment
trust ("REIT") for federal income tax purposes, the Series B Preferred
Shares shall be subject to the provisions of Article VII of the Charter
pursuant to which Series B Preferred Shares owned by a shareholder in
excess of the Ownership Limit (as defined in the Charter) will
automatically be exchanged for Excess Shares (as defined in the
Charter) and the Company will have the right to purchase Excess Shares
from the holder. On or after July 28, 2004, the Company shall have the
right to redeem the Series B Preferred Shares, in whole or in part, at
any time or from time to time, upon not less than 30 nor more than 60
days' written notice, at a redemption price, payable in cash, equal to
$25 per Series B Preferred Share plus accumulated and unpaid
distributions, whether or not declared, to the date of redemption. If
fewer than all of the outstanding Series B Preferred Shares are to be
redeemed, the Series B Preferred Shares to be redeemed shall be
selected pro rata (as nearly as practicable without creating fractional
units).
(b) Limitation on Redemption.
(i) The redemption price of the Series B Preferred Shares
(other than the portion thereof consisting of accumulated but unpaid
distributions) will be payable solely out of the sale proceeds of
capital stock of the Company and from no other source. For purposes of
the preceding sentence, "capital stock" means any equity securities
(including Common Shares and Preferred Shares), shares, participation
or other ownership interests (however designated) and any rights (other
than debt securities convertible into or exchangeable for equity
securities) or options to purchase any of the foregoing.
(ii) The Company may not redeem fewer than all of the
outstanding Series B Preferred Shares unless all accumulated and unpaid
distributions have been paid in full (or a sum sufficient for such
payment has been irrevocably deposited in trust for immediate payment)
on all outstanding Series B Preferred Shares for all quarterly
distribution periods, including the current period, terminating on or
prior to the date of redemption provided, however, that the foregoing
shall not prevent the purchase by the Company of Excess Shares in order
to ensure that the Company remains qualified as a REIT for federal
income tax purposes or the purchase or acquisition of Series B
Preferred Shares pursuant to a purchase or exchange offer made on the
same terms to holders of all outstanding Series B Preferred Shares.
(c) Procedures for Redemption.
(i) Notice of redemption will be (i) faxed, and (ii) mailed
by the Company, postage prepaid, not less than thirty (30) nor more
than sixty (60) days prior to the redemption date, addressed to the
respective holders of record of the Series B Preferred Shares to be
redeemed at their respective addresses as they appear on the transfer
records of the Company. No failure to give or defect in such notice
shall affect the validity of the proceedings for the redemption of any
Series B Preferred Shares except as to the holder to whom such notice
was defective or not given. In addition to any information required by
law or by the applicable rules of any exchange upon which the Series B
Preferred Shares may be listed or admitted to trading, each such notice
shall state: (i) the redemption date, (ii) the redemption price,
(iii) the number of Series B Preferred Shares to be redeemed, (iv) the
place or places where such Series B Preferred Shares are to be
surrendered for payment of the redemption price, (v) that distributions
on the Series B Preferred Shares to be redeemed will cease to
accumulate on such redemption date and (vi) that payment of the
redemption price and any accumulated and unpaid distributions will be
made upon presentation and surrender of such Series B Preferred Shares.
If fewer than all of the Series B Preferred Shares held by any holder
are to be redeemed, the notice mailed to such holder shall also specify
the number of Series B Preferred Shares held by such holder to be
redeemed.
(ii) If the Company gives a notice of redemption in respect
of Series B Preferred Shares (which notice will be irrevocable) then,
by 12:00 noon, New York City time, on the redemption date, the Company
will deposit irrevocably in trust for the benefit of the Series B
Preferred Shares being redeemed funds sufficient to pay the applicable
redemption price, plus any accumulated and unpaid distributions, if
any, on such shares to the date fixed for redemption, without interest,
and will give irrevocable instructions and authority to pay such
redemption price and any accumulated and unpaid distributions, whether
or not declared, if any, on such shares to the holders of the Series B
Preferred Shares upon surrender of the Series B Preferred Shares by
such holders at the place designated in the notice of redemption. If
fewer than all Series B Preferred Shares evidenced by any certificate
is being redeemed, a new certificate shall be issued upon surrender of
the certificate evidencing all Series B Preferred Shares, evidencing
the unredeemed Series B Preferred Shares without cost to the holder
thereof. On and after the date of redemption, distributions will cease
to accumulate on the Series B Preferred Shares or portions thereof
called for redemption, unless the Company defaults in the payment
thereof. If any date fixed for redemption of Series B Preferred Shares
is not a Business Day, then payment of the redemption price payable on
such date will be made on the next succeeding day that is a Business
Day (and without any interest or other payment in respect of any such
delay) except that, if such Business Day falls in the next calendar
year, such payment will be made on the immediately preceding Business
Day, in each case with the same force and effect as if made on such
date fixed for redemption. If payment of the redemption price or any
accumulated or unpaid distributions in respect of the Series B
Preferred Shares is improperly withheld or refused and not paid by the
Company, distributions on such Series B Preferred Shares will continue
to accumulate from the original redemption date to the date of payment,
in which case the actual payment date will be considered the date fixed
for redemption for purposes of calculating the applicable redemption
price and any accumulated and unpaid distributions.
(d) Application of Article VII. The Series B Preferred Shares
are subject to the provisions of Article VII of the Charter, including,
without limitation, the provision for the redemption of Excess Shares.
Notwithstanding the provisions of Article IX of the Charter, Series B
Preferred Shares which have been exchanged pursuant to the Charter for
Excess Shares may be redeemed, in whole or in part, at any time or from
time to time, for cash at a redemption price of $25.00 per share, plus
all accrued and unpaid distributions thereon to the date of redemption,
without interest. If less than all of the outstanding Excess Shares
are to be redeemed, the Excess Shares to be redeemed shall be selected
pro rata (as nearly as may be practicable without creating fractional
shares).
(e) Status of Redeemed Shares. Any Series B Preferred Shares
that shall at any time have been redeemed shall after such redemption,
have the status of authorized but unissued Preferred Shares, without
designation as to class or series until such shares are once more
designated as part of a particular class or series by the Board.
Section 6. Voting Rights.
(a) General. Holders of the Series B Preferred Shares will not
have any voting rights, except as set forth below.
(b) Right to Elect Trustees.
(i) If at any time full distributions shall not have been
timely made on any Series B Preferred Shares with respect to any six
(6) prior quarterly distribution periods, whether or not consecutive,
(a "Preferred Distribution Default"), the holders such Series B
Preferred Shares, voting together as a single class with the holders of
each class or series of Parity Preferred Shares upon which like voting
rights have been conferred and are exercisable, will have the right to
elect two (2) additional trustees to serve on the Company's Board (the
"Preferred Shares Trustees") at a special meeting called in accordance
with Section 6(b)(ii) (unless such request is received less than ninety
(90) days before the date fixed for the next annual meeting) or at the
next annual meeting of shareholders, and at each subsequent annual
meeting of shareholders or special meeting held in place thereof, until
all such distributions in arrears and distributions for the current
quarterly period on the Series B Preferred Shares and each such class
or series of Parity Preferred Shares have been paid in full or an
amount sufficient for such payment has been irrevocably deposited in
trust for immediate payment.
(ii) At any time when such voting rights shall have vested,
a proper officer of the Company shall call or cause to be called, upon
written request of holders of record of at least 20% of the outstanding
Series B Preferred Shares, a special meeting of the holders of Series B
Preferred Shares and all the series of Parity Preferred Shares upon
which like voting rights have been conferred and are exercisable
(collectively, the "Parity Securities") by mailing or causing to be
mailed to such holders a notice of such special meeting to be held not
less than ten and not more than 45 days after the date such notice is
given. The record date for determining holders of the Parity
Securities entitled to notice of and to vote at such special meeting
will be the close of business on the third Business Day preceding the
day on which such notice is mailed. At any such special meeting, all
of the holders of the Parity Securities, by plurality vote, voting
together as a single class without regard to series will be entitled to
elect two directors on the basis of one vote per $25.00 of liquidation
preference to which such Parity Securities are entitled by their terms
(excluding amounts in respect of accumulated and unpaid dividends) and
not cumulatively. The holder or holders of one-third of the Parity
Securities then outstanding, present in person or by proxy, will
constitute a quorum for the election of the Preferred Shares Trustees
except as otherwise provided by law. Notice of all meetings at which
holders of the Series B Preferred Shares shall be entitled to vote will
be given to such holders at their addresses as they appear in the
transfer records. At any such meeting or adjournment thereof in the
absence of a quorum, subject to the provisions of any applicable law, a
majority of the holders of the Parity Securities present in person or
by proxy shall have the power to adjourn the meeting for the election
of the Preferred Shares Trustees, without notice other than an
announcement at the meeting, until a quorum is present. If a Preferred
Distribution Default shall terminate after the notice of a special
meeting has been given but before such special meeting has been held,
the Company shall, as soon as practicable after such termination, mail
or cause to be mailed notice of such termination to holders of the
Series B Preferred Shares that would have been entitled to vote at such
special meeting.
(iii) If and when all accumulated distributions and the
distribution for the current distribution period on the Series B
Preferred Shares shall have been paid in full or a sum sufficient for
such payment is irrevocably deposited in trust for payment, the holders
of the Series B Preferred Shares shall be divested of the voting rights
set forth in Section 6(b) herein (subject to revesting in the event of
each and every Preferred Distribution Default) and, if all
distributions in arrears and the distributions for the current
distribution period have been paid in full or set aside for payment in
full on all other classes or series of Parity Preferred Shares upon
which like voting rights have been conferred and are exercisable, the
term and office of each Preferred Shares Trustees so elected shall
terminate. Any Preferred Shares Trustees may be removed at any time
with or without cause by the vote of, and shall not be removed
otherwise than by the vote of, the holders of record of a majority of
the outstanding Series B Preferred Shares when they have the voting
rights set forth in Section 6(b) (voting separately as a single class
with all other classes or series of Parity Preferred Shares upon which
like voting rights have been conferred and are exercisable). So long
as a Preferred Distribution Default shall continue, any vacancy in the
office of a Preferred Shares Trustees may be filled by written consent
of the Preferred Shares Trustees remaining in office, or if none
remains in office, by a vote of the holders of record of a majority of
the outstanding Series B Preferred Shares when they have the voting
rights set forth in Section 6(b) (voting separately as a single class
with all other classes or series of Parity Preferred Shares upon which
like voting rights have been conferred and are exercisable). The
Preferred Shares Director shall each be entitled to one vote per
director on any matter.
(c) Certain Voting Rights. So long as any Series B Preferred
Shares remain outstanding, the Company shall not, without the
affirmative vote of the holders of at least two thirds of the Series B
Preferred Shares outstanding at the time (i) (A) designate or create,
or increase the authorized or issued amount of, any class or series of
shares ranking senior to the Series B Preferred Shares with respect to
payment of distributions or rights upon liquidation, dissolution or
winding-up, (B) reclassify any authorized shares of the Company into
any such shares, or (C) create, authorize or issue any obligations or
security convertible into or evidencing the right to purchase any such
shares, (ii) (A) designate or create, or increase the authorized or
issued amount of, any Parity Preferred Shares, (B) reclassify any
authorized shares of the Company into a Parity Preferred Shares or (C)
create, authorize or issue any obligations or security convertible into
or evidencing the right to purchase any Parity Preferred Share;
provided, that restrictions contained in the clause (ii) of this
Paragraph (c) shall apply only to Parity Preferred Shares that are
issued to an Affiliate of the Company other than on arm's length terms,
or (iii) either (A) consolidate, or merge into or with, any corporation
or other entity, or (B) amend, alter or repeal the provisions of the
Company's Charter (including these Articles Supplementary) or By-laws,
whether by merger, consolidation or otherwise, in such a way that would
materially and adversely affect the powers, special rights,
preferences, privileges or voting power of the Series B Preferred
Shares or the holders thereof; provided, however, that with respect to
the occurrence of a merger or consolidation, so long as (a) the Company
is the surviving entity and the Series B Preferred Shares remains
outstanding with the terms thereof unchanged, or (b) the resulting,
surviving or transferee entity is a corporation organized under the
laws of any state and substitutes for the Series B Preferred Shares
other Preferred Shares having substantially the same terms and same
rights as the Series B Preferred Shares, including with respect to
distributions, voting rights and rights upon liquidation, dissolution
or winding-up, then the occurrence of any such event shall not be
deemed materially and adversely affect the rights, privileges or voting
powers of the holders of the Series B Preferred Shares; provided
further, that any increase in the amount of authorized Preferred Shares
or the creation or issuance of any other class or series of Preferred
Shares or any increase in an amount of authorized shares of each class
or series, shall not be deemed to materially and adversely affect the
rights, preferences, privileges or voting powers of the Series B
Preferred Shares, if such Series B Preferred Shares rank (y) junior to
the Series B Preferred Shares with respect to payment of distributions
or the distribution of assets upon liquidation, dissolution or winding-
up, or (z) on a parity with the Series B Preferred Shares with respect
to payment of distributions or the distribution of assets upon
liquidation, dissolution or winding-up; provided, that any Series B
Preferred Shares issued in reliance on the preceding clause (z) shall
not have been issued to an Affiliate of the Company or are issued to
such Affiliate on arm's length terms. In the event of any conflict or
inconsistency between this Section 6 and Sections 8.2, 10.1 and 10.3 of
the Charter, this Section 6 shall control.
Section 7. Transfer Restrictions. The Series B Preferred Shares
shall be subject to the provisions of Article VII of the Charter.
Section 8. No Conversion Rights. The holders of the Series B
Preferred Shares shall not have any rights to convert such shares into
shares of any other class or series of shares or into any other
securities of, or interest in, the Company except that the Series B
Preferred Shares may be exchanged by the Company for Excess Shares, in
accordance with the Charter.
Section 9. No Sinking Fund. No sinking fund shall be established
for the retirement or redemption of Series B Preferred Shares.
Section 10. No Preemptive Rights. No holder of the Series B
Preferred Shares of the Company shall, as such holder, have any
preemptive rights to purchase or subscribe for additional Shares of the
Company or any other security of the Company which it may issue or
sell.
FOURTH: The Series B Preferred Shares have been classified and
designated by the Board under the authority contained in the Charter.
FIFTH: These Articles Supplementary have been approved by the
Board in the manner and by the vote required by law.
SIXTH: These Articles Supplementary shall be effective at the
time the State Department of Assessments and Taxation of Maryland
accepts these Articles Supplementary for record.
SEVENTH: The undersigned Chairman of the Board of Trustees and
Chief Executive Officer of the Company acknowledges these Articles
Supplementary to be the corporate act of the Company and, as to all
matters or facts required to be verified under oath, the undersigned
Chairman of the Board of Trustees and Chief Executive Officer
acknowledges that to the best of his knowledge, information and belief,
these matters and facts are true in all material respects and that this
statement is made under the penalties for perjury.
IN WITNESS WHEREOF, the Company has caused these Articles
Supplementary to be executed under seal in its name and on its behalf
by its President and Chief Operating Officer and attested to by its
Assistant Secretary on this 28th day of July, 1999.
LIBERTY PROPERTY TRUST
By: /s/ Joseph P. Denny
------------------------------------
Name: Joseph P. Denny
Title: President and Chief Operating
Officer
[SEAL]
ATTEST:
/s/ Christine Babich
- -------------------------------------
Name: Christine Babich
Title: Assistant Secretary
DSB:652182.1
Exhibit 4.1
LIBERTY PROPERTY LIMITED PARTNERSHIP
ISSUER
TO
THE FIRST NATIONAL BANK OF CHICAGO
TRUSTEE
THIRD SUPPLEMENTAL INDENTURE
DATED AS OF APRIL 20, 1999
7.75% SENIOR NOTES DUE 2009
SUPPLEMENT TO INDENTURE,
DATED AS OF OCTOBER 24, 1997, BETWEEN
LIBERTY PROPERTY LIMITED PARTNERSHIP AND
THE FIRST NATIONAL BANK OF CHICAGO
THIRD SUPPLEMENTAL INDENTURE, dated as of April 20, 1999, between
LIBERTY PROPERTY LIMITED PARTNERSHIP, a Pennsylvania limited partnership
(the "Company"), 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 Company executed and delivered its Indenture (the
"Original Indenture"), dated as of October 24, 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 Company may create one or more series of its
debt securities and establish the form and terms and conditions thereof.
WHEREAS, the Company intends by this Third Supplemental Indenture
to (i) create a series of debt securities to be issued from time to time
in an unlimited principal amount entitled "Liberty Property Limited
Partnership 7.75% Senior Notes due 2009" (the "Notes"); and (ii)
establish the forms and the terms and conditions of such Notes.
WHEREAS, the Board of Trustees of Liberty Property Trust (the
"Trust"), the general partner of the Company, 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 Third Supplemental Indenture is not required, and all other actions
required to be taken under the Original Indenture with respect to this
Third 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 Third
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:
"Closing Date" means April 20, 1999.
"Global Note" means a single fully-registered global note in book
entry form, without coupons, substantially in the form of Exhibit A
attached hereto.
"Indenture" means the Original Indenture as supplemented by this
Third Supplemental Indenture.
"Intercompany Debt" means Debt to which the only parties are the
Trust, any of its subsidiaries, the Company 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 Company and any Subsidiary.
SECTION 1.02 Creation of the Debt Securities. In accordance with
Section 301 of the Original Indenture, the Company hereby creates the
Notes as a separate series of its debt securities issued pursuant to the
Indenture. The Notes shall be issued in an aggregate principal amount
initially limited to $250,000,000.
The Company may issue, in addition to the Notes originally issued
on the Closing Date, additional Notes. The Notes originally issued on
the Closing Date and any additional Notes originally issued subsequent
to the Closing Date shall be a single series for all purposes under the
Indenture.
SECTION 1.03 Form of the Debt Securities. The Notes will be
represented by one or more fully-registered global notes in book-entry
form, without coupons, registered in the name of the nominee of DTC. The
Notes 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
Note 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 Third Supplemental Indenture, and in
particular, the following provisions shall be the terms of the Notes:
(a) Optional Redemption. The Issuer may redeem the Notes 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 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.
If all or less than all of the Notes 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 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 Third Supplemental
Indenture, and in particular, this Third Supplemental Indenture amends
Section 1004 of the Original Indenture to read as follows:
"SECTION 1004. Limitations on Incurrence of Debt.
(a) The Company 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 Company
and its Subsidiaries on a consolidated basis determined in accordance
with GAAP is greater than 60% of the sum of (i) the Company'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 Company 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, on a pro forma basis, after giving
effect to the incurrence of such Debt and to the application of the
proceeds thereof would have been less than 1.5 to 1.
(c) The Company 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 Company 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 Company and its Subsidiaries on a consolidated basis
is greater than 40% of the sum of (i) the Company'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 Company will at all time maintain an Unencumbered Total
Asset Value in an amount not less than 150% of the aggregate principal
amount of all outstanding unsecured Debt of the Company 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 Company or a Subsidiary whenever the Company 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 Third Supplemental Indenture or the due execution thereof by the
Company. The recitals of fact contained herein shall be taken as the
statements solely of the Company, and the Trustee assumes no
responsibility for the correctness thereof.
ARTICLE FOUR
Miscellaneous Provisions
SECTION 4.01 Ratification of Original Indenture. This Third
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 Third 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 Third Supplemental Indenture by the Company 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 Third 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.
SECTION 4.05 Governing Law. This Third Supplemental Indenture
shall be governed by and construed in accordance with the laws of the
State of New York. This Third Supplemental Indenture is subject to the
provisions of the Trust Indenture Act, that are required to be part of
this Third Supplemental Indenture and shall, to the extent applicable,
be governed by such provisions.
SECTION 4.06 Counterparts. This Third 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.
IN WITNESS WHEREOF, the parties hereto have caused this Third
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: /s/ George J. Alburger, Jr.
--------------------------------
Name: George J. Alburger, Jr.
Title: Chief Financial Officer
Attest:
/s/ James J. Bowes
- ----------------------------
Name: James J. Bowes
Title: General Counsel and Secretary
THE FIRST NATIONAL BANK OF CHICAGO,
as Trustee
By: /s/ Mark J. Frye
------------------------------------------
Name: Mark J. Frye
Title: Asst. Vice President
Attest:
/s/ Jeffrey L. Kinney
- ------------------------------
Name: Jeffrey L. Kinney
Title: Vice President
STATE OF Pennsylvania )
) ss:
COUNTY OF Chester )
On the 19th day of April 1999, before me personally came
George J. Alburger, Jr., to me known, who, being by me duly sworn, did
depose and say that he/she resides at 65 Valley Stream Parkway, that
he/she is Chief Financial Officer 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]
/s/ Christina Kane
----------------------------------
Notary Public
COMMISSION EXPIRES
STATE OF Illinois )
) ss:
COUNTY OF Cook )
On the 20th day of April 1999, before me personally came Mark J.
Frye, to me known, who, being by me duly sworn, did depose and say that
he/she resides at 15031 S. Ridgewood Drive, Oak Forest, that he/she is a
Asst. Vice President 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]
/s/ Maria C. Birrueta
-------------------------------------
Notary Public
COMMISSION EXPIRES
Exhibit A
[FACE OF NOTE]
THIS NOTE IS A GLOBAL SECURITY WITHIN THE MEANING OF THE INDENTURE
HEREINAFTER REFERRED TO. UNLESS THIS CERTIFICATE IS PRESENTED BY AN
AUTHORIZED REPRESENTATIVE OF THE DEPOSITORY TRUST COMPANY, A NEW YORK
CORPORATION ("DTC"), TO THE ISSUER OR ITS AGENT FOR REGISTRATION OF
TRANSFER, EXCHANGE OR PAYMENT AND ANY CERTIFICATE ISSUED IS REGISTERED
IN THE NAME OF CEDE & CO. OR IN SUCH OTHER NAME AS IS REQUESTED BY AN
AUTHORIZED REPRESENTATIVE OF DTC AND ANY PAYMENT IS MADE TO CEDE & CO.
OR TO SUCH OTHER ENTITY AS IS REQUESTED BY AN AUTHORIZED REPRESENTATIVE
OF DTC, ANY TRANSFER, PLEDGE, OR OTHER USE HEREOF FOR VALUE OR OTHERWISE
BY OR TO ANY PERSON IS WRONGFUL INASMUCH AS THE REGISTERED OWNER HEREOF,
CEDE & CO., HAS AN INTEREST HEREIN.
UNLESS AND UNTIL THIS CERTIFICATE IS EXCHANGED IN WHOLE OR IN PART FOR
NOTES IN CERTIFICATED FORM, THIS CERTIFICATE MAY NOT BE TRANSFERRED
EXCEPT AS A WHOLE BY DTC TO A NOMINEE THEREOF OR BY A NOMINEE THEREOF TO
DTC OR ANOTHER NOMINEE OF DTC OR BY DTC OR ANY SUCH NOMINEE TO A
SUCCESSOR OF DTC OR A NOMINEE OF SUCH SUCCESSOR.
REGISTERED REGISTERED
NO. ( ) PRINCIPAL AMOUNT
CUSIP NO. ( ) $ ( )
LIBERTY PROPERTY LIMITED PARTNERSHIP
( )% Senior Notes due ( )
Liberty Property Limited Partnership, a Pennsylvania limited
partnership (the "Issuer," which term includes any successor under the
Indenture hereinafter referred to), for value received, hereby promises
to pay to Cede & Co. or its registered assigns, the principal sum of
( ) Dollars on ( ) (the "Maturity Date"), and
to pay interest thereon from ( )(or from the most recent
interest payment date to which interest has been paid or duly provided
for), semi-annually in arrears on ( )and ( ) of each
year (each, an "Interest Payment Date"), commencing on ( ), and on
the Maturity Date, at the rate of ( )% per annum, until payment
of said principal sum has been made or duly provided for.
The interest so payable and punctually paid or duly provided for on
any Interest Payment Date and on the Maturity Date will be paid to the
Holder in whose name this Note (or one or more predecessor Notes) is
registered at the close of business on the "Record Date" for such
payment, which will be 15 days (regardless of whether such day is a
Business Day (as defined below)) prior to such payment date or the
Maturity Date, as the case may be. Any interest not so punctually paid
or duly provided for shall forthwith cease to be payable to the Holder
on such record date, and shall be paid to the Holder in whose name this
Note (or one or more predecessor Notes) is registered at the close of
business on a subsequent record date for the payment of such defaulted
interest (which shall be not more than 15 days and not less than 10 days
prior to the date of the payment of such defaulted interest) established
by notice given by mail by or on behalf of the Issuer to the Holders of
the Notes not less than 10 days preceding such subsequent record date.
Interest on this Note will be computed on the basis of a 360-day year of
twelve 30-day months.
The principal of this Note payable on the Maturity Date will be
paid against presentation and surrender of this Note at the corporate
trust office of the Trustee at One First National Plaza, Chicago,
Illinois 60670-0126, in such coin or currency of the United States of
America as at the time of payment is legal tender for payment of public
or private debt.
Interest payable on this Note on any Interest Payment Date and on
the Maturity Date, as the case may be, will be the amount of interest
accrued from and including the immediately preceding Interest Payment
Date (or from and including ( ), in the case of the initial
Interest Payment Date) to but excluding the applicable Interest Payment
Date or the Maturity Date, as the case may be. If any Interest Payment
Date or the Maturity Date falls on a day that is not a Business Day (as
defined below), the required payment of interest or principal or both,
as the case may be, will be made on the next Business Day with the same
force and effect as if it were made on the date such payment was due and
no interest will accrue on the amount so payable for the period from and
after such Interest Payment Date or the Maturity Date, as the case may
be. "Business Day" means any day, other than a Saturday or a Sunday,
that is neither a legal holiday nor a day on which banking institutions
in The City of New York or Chicago are authorized or required by law,
regulation or executive order to close.
Payments of principal and interest in respect of this Note will be
made by wire transfer of immediately available funds in such coin or
currency of the United States of America as at the time of payment is
legal tender for the payment of public and private debts.
Reference is made to the further provisions of this Note set forth
on the reverse hereof. Such further provisions shall for all purposes
have the same effect as though fully set forth at this place.
This Note shall not be entitled to the benefits of the Indenture
referred to on the reverse hereof or be valid or become obligatory for
any purpose until the certificate of authentication hereon shall have
been signed by the Trustee under such Indenture.
IN WITNESS WHEREOF, the Issuer has caused this instrument to be
signed manually or by facsimile by its authorized officers.
Dated: , 1999
LIBERTY PROPERTY LIMITED PARTNERSHIP,
as Issuer
By: LIBERTY PROPERTY TRUST,
as its sole General Partner
By:
-------------------------------------
Name:
Title:
By:
-------------------------------------
Name:
Title:
TRUSTEE'S CERTIFICATE OF AUTHENTICATION
This is one of the Securities of the series designated herein
referred to in the within-mentioned Indenture.
THE FIRST NATIONAL BANK OF CHICAGO,
as Trustees
By:
------------------------------------
Authorized Officer
(REVERSE OF NOTE)
LIBERTY PROPERTY LIMITED PARTNERSHIP
( ) % Senior Notes due ( )
This security is one of a duly authorized issue of debentures,
notes, bonds, or other evidences of indebtedness of the Issuer
(hereinafter called the "Securities") of the series hereinafter
specified, all issued or to be issued under and pursuant to an Indenture
dated as of ( ) (herein called the "Indenture"), duly executed and
delivered by the Issuer to The First National Bank of Chicago, as
Trustee (herein called the "Trustee," which term includes any successor
trustee under the Indenture with respect to the series of Securities of
which this Note is a part), to which Indenture and all indentures
supplemental thereto relating to this security reference is hereby made
for a description of the rights, limitations of rights, obligations,
duties, and immunities thereunder of the Trustee, the Issuer, and the
Holders of the Securities, and of the terms upon which the Securities
are, and are to be, authenticated and delivered. The Securities may be
issued in one or more series, which different series may be issued in
various aggregate principal amounts, may mature at different times, may
bear interest (if any) at different rates, may be subject to different
redemption provisions (if any), and may otherwise vary as provided in
the Indenture or any indenture supplemental thereto. This security is
one of a series designated as the ( )% Notes due ( ) of the
Issuer.
In case an Event of Default with respect to this security shall
have occurred and be continuing, the principal hereof and Make-Whole
Amount, if any, may be declared, and upon such declaration shall become,
due and payable, in the manner, with the effect, and subject to the
conditions provided in the Indenture.
The Issuer may redeem this security 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 this security being
redeemed plus accrued interest thereon to the Redemption Date and (ii)
the Make-Whole Amount, if any, with respect to this security. Notice of
any optional redemption of any Securities will be given to Holders at
their addresses, as shown in the security register for the 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 the principal amount of the Securities held by
such Holder to be redeemed.
The Indenture contains provisions permitting the Issuer and the
Trustee, with the consent of the Holders of not less than a majority of
the aggregate principal amount of the Securities at the time Outstanding
of all series to be affected (voting as one class), evidenced as
provided in the Indenture, to execute supplemental indentures adding any
provisions to or changing in any manner or eliminating any of the
provisions of the Indenture or of any supplemental indenture or
modifying in any manner the rights of the Holders of the Securities of
each series; provided, however, that no such supplemental indenture
shall, without the consent of the Holder of each Security so affected,
(i) 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
Security, (ii) reduce the principal amount of, or the rate or amount of
interest on, or any premium payable on redemption of the Notes, or
adversely affect any right of repayment of the Holder of any Securities;
(iii) change the place of payment, or the coin or currency, for payment
of principal or premium, if any, or interest on the Securities; (iv)
impair the right to institute suit for the enforcement of any payment on
or with respect to the Securities on or after the stated maturity of any
such Security; (v) reduce the above-stated percentage in principal
amount of outstanding Securities, the extent of whose Holders is
necessary to modify or amend the Indenture, for any waiver with respect
to the Securities or to waive compliance with certain provisions of the
Indenture or certain defaults and consequences thereunder or to reduce
the quorum or voting requirements set forth in the Indenture; or (vi)
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 Indenture may not be modified or
waived without the consent of the Holder of each Security. It is also
provided in the Indenture that, with respect to certain defaults or
Events of Default regarding the Securities of any series, the Holders of
a majority in aggregate principal amount outstanding of the Securities
of such series (or, in the case of certain defaults or Events of
Default, all series of Securities) may on behalf of the Holders of all
the Securities of such series (or all of the Securities, as the case may
be) waive any such past default or Event of Default and its
consequences, prior to any declaration accelerating the maturity of such
Securities, or, subject to certain conditions, may rescind a declaration
of acceleration and its consequences with respect to such Securities.
Any such consent or waiver by the Holder of this Security (unless
revoked as provided in the Indenture) shall be conclusive and binding
upon such Holder and upon all future Holders and owners of this Security
and any Securities that may be issued in exchange or substitution
herefor, irrespective of whether or not any notation thereof is made
upon this security or such other securities.
No reference herein to the Indenture and no provision of this
security or of the Indenture shall alter or impair the obligation of the
Issuer, which is absolute and unconditional, to pay the principal of and
any Make-Whole Amount and interest on this security in the manner, at
the respective times, at the rate and in the coin or currency herein
prescribed.
This security is issuable only in registered form without coupons
in denominations of $1,000 and integral multiples thereof. Securities
may be exchanged for a like aggregate principal amount of securities of
this series of other authorized denominations at the office or agency of
the Issuer in The Borough of Manhattan, The City of New York, in the
manner and subject to the limitations provided in the Indenture, but
without the payment of any service charge except for any tax or other
governmental charge imposed in connection therewith.
Upon due presentment for registration of transfer of Securities at
the office or agency of the Issuer in The Borough of Manhattan, The City
of New York, one or more new Securities of the same series of authorized
denominations in an equal aggregate principal amount will be issued to
the transferee in exchange therefor, subject to the limitations provided
in the Indenture, without charge except for any tax or other
governmental charge imposed in connection therewith.
The Issuer, the Trustee or any authorized agent of the Issuer or
the Trustee may deem and treat the Person in whose name this security is
registered as the absolute owner of this security (whether or not this
security shall be overdue and notwithstanding any notation of ownership
or other writing hereon), for the purpose of receiving payment of, or on
account of, the principal hereof and Make-Whole Amount, if any, and
subject to the provisions on the face hereof, interest hereon, and for
all other purposes, and neither the Issuer nor the Trustee nor any
authorized agent of the Issuer or the Trustee shall be affected by any
notice to the contrary.
The Indenture and each Security shall be deemed to be a contract
under the laws of the State of New York, and for all purposes shall be
construed in accordance with the laws of such state, except as may
otherwise be required by mandatory provisions of law.
Capitalized terms used herein which are not otherwise defined shall
have the respective meanings assigned to them in the Indenture and all
indentures supplemental thereto relating to this security.
16
Exhibit 10.1
LIBERTY PROPERTY TRUST
AMENDED AND RESTATED SHARE INCENTIVE PLAN
1. Purpose. Liberty Property Trust (the "Company") hereby amends
and restates the Liberty Property Trust Share Incentive Plan (the
"Plan") as set forth herein. The Plan is intended to recognize the
contributions made to the Company by key employees, consultants and
advisors of the Company or an Affiliate (including employees who are
members of the Board of Trustees) of the Company or any Affiliate, to
provide such persons with additional incentive to devote themselves to
the future success of the Company or an Affiliate, and to improve the
ability of the Company or an Affiliate to attract, retain, and motivate
individuals upon whom the Company's sustained growth and financial
success depend, by providing such persons with an opportunity to
acquire or increase their proprietary interest in the Company through
receipt of rights to acquire common shares of beneficial interest,
$.001 par value per share (the "Shares"), in the Company, and through
transfers of Shares subject to conditions of forfeiture. In addition,
the Plan is intended as an additional incentive to members of the Board
of Trustees (the "Trustees") who are not employees of the Company or an
Affiliate to serve on the Board of Trustees and to devote themselves to
the future success of the Company by providing them with an opportunity
to acquire or increase their proprietary interest in the Company
through the receipt of Options to acquire Shares.
2. Definitions. Unless the context clearly indicates otherwise,
the following terms shall have the following meanings:
(a) "Affiliate" means a corporation which is a parent corporation
or a subsidiary corporation with respect to the Company within the
meaning of Section 424(e) or (f) of the Code. In addition, "Affiliate"
means any other entity in which the Company owns an interest which
would be an Affiliate as defined in the preceding sentence but for the
fact that such entity is not a corporation. Employees of any such non-
corporate affiliate shall not be granted ISOs under the Plan.
(b) "Award" means a grant of Shares subject to conditions of
forfeiture made pursuant to the terms of the Plan.
(c) "Award Agreement" means the agreement between the Company and
a Grantee with respect to an Award made pursuant to the Plan.
(d) "Awardee" means a person to whom an Award has been granted
pursuant to the Plan.
(e) "Board of Trustees" means the Board of Trustees of the
Company.
(f) "Change of Control" has the meaning as set forth in Section
10 of the Plan.
(g) "Code" means the Internal Revenue Code of 1986, as amended.
(h) "Committee" has the meaning set forth in Section 3 of the
Plan.
(i) "Company" means Liberty Property Trust, a Maryland real
estate investment trust.
(j) "Disability" has the meaning set forth in Section 22(e)(3) of
the Code.
(k) "Fair Market Value" has the meaning set forth in Subsection
8(b) of the Plan.
(l) "Grantee" means a person to whom an Option or an Award has
been granted pursuant to the Plan.
(m) "ISO" means an Option granted under the Plan which is
intended to qualify as an "incentive stock option" within the meaning
of Section 422(b) of the Code.
(n) "Non-employee Trustee" means a member of the Board of
Trustees who is not an employee of the Company or an Affiliate and who
qualifies both as a "non-employee director" as that term is used in
Rule 16b-3 and as an "outside director" as that term is used in
applicable IRS regulations promulgated under Code Section 162(m).
(o) "Non-qualified Stock Option" means an Option granted under
the Plan which is not intended to qualify, or otherwise does not
qualify, as an incentive stock option" within the meaning of Section
422(b) of the Code.
(p) "Option" means either an ISO or a Non-qualified Stock Option
granted under the Plan.
(q) "Optionee" means a person to whom an Option has been granted
under the Plan, which Option has not been exercised and has not expired
or terminated.
(r) "Option Document" means the document described in Section 8
or Section 9 of the Plan, as applicable, which sets forth the terms and
conditions of each grant of Options.
(s) "Option Price" means the price at which Shares may be
purchased upon exercise of an Option, as calculated pursuant to
Subsection 8(b) or Subsection 9(a) of the Plan.
(t) "Restricted Share" means a Share subject to conditions of
forfeiture and transfer granted to any person pursuant to an Award
under the Plan.
(u) "Retirement" shall mean a termination of an Optionee's
employment or services for the Company or an Affiliate at any time
after such Optionee has reached age 65.
(v) "Rule 16b-3" means Rule 16b-3 promulgated under the
Securities Exchange Act of 1934, as amended, or any successor rule.
(w) "Section 16 Officer" means any person who is an "officer"
within the meaning of Rule 16a-1(f) promulgated under the Securities
Exchange Act of 1934, as amended, or any successor rule.
(x) "Shares" means the shares of beneficial interest, $.01 par
value per share, of the Company.
(y) "Trustee" means a member of the Board of Trustees.
3. Administration of the Plan. The Plan shall be administered by
the Board of Trustees of the Company if all members of the Board of
Trustees are Non-employee Trustees; provided, however, that the Board
of Trustees may designate a committee or committee(s) of the Board of
Trustees composed of two or more of its Trustees to administer the Plan
in its stead. If any member of the Board of Trustees is not a Non-
employee Trustee, the Board of Trustees shall (i) designate a committee
composed of two or more Trustees, each of whom is a Non-employee
Trustee (the "Non-employee Trustee Committee"), to operate and
administer the Plan in its stead, (ii) designate two committees to
operate and administer the Plan in its stead, one of such committees
composed of two or more of its Non-employee Trustees (the "Non-employee
Trustee Committee") to operate and administer the Plan with respect to
the Company's Section 16 Officers and the Trustees who are not members
of the Non-employee Trustee Committee, and another committee composed
of two or more Trustees (which may include Trustees who are not Non-
employee Trustees) to operate and administer the Plan with respect to
persons other than Section 16 Officers or Trustees or (iii) designate
only one committee composed of two or more Non-employee Trustees (the
"Non-employee Trustee Committee") to operate and administer the Plan
with respect to the Company's Section 16 Officers and Trustees (other
than those Trustees serving on the Non-employee Trustee Committee) and
itself operate and administer the Plan with respect to persons other
than Section 16 Officers or Trustees. Any of such committees
designated by the Board of Trustees, and the Board of Trustees itself
in its administrative capacity with respect to the Plan, is referred to
as the "Committee." With the exception of the timing of grants of
Options, the price at which Shares may be purchased, and the number of
Shares covered by Options granted to each member of the Non-employee
Trustee Committee, all of which shall be as specifically set forth in
Section 9, the other provisions set forth herein, as it pertains to
members of the Non-employee Trustee Committee, shall be administered by
the Board of Trustees.
(a) Meetings. The Committee shall hold meetings at such times
and places as it may determine. Acts approved at a meeting by a
majority of the members of the Committee or acts approved in writing by
the unanimous consent of the members of the Committee shall be the
valid acts of the Committee.
(b) Grants and Awards. Except with respect to Options granted
under Subsection 8(j) and to Non-employee Trustee Committee Members
pursuant to Section 9, the Committee shall from time to time at its
discretion direct the Company to grant Options and Awards pursuant to
the terms of the Plan. The Committee shall have plenary authority to
(i) determine the persons to whom, and the times at which Options and
Awards are to be granted as well as the terms applicable to Options and
Awards, (ii) determine the type of Option to be granted and the number
of Shares subject thereto, (iii) determine the Awardees to whom, and
the times at which, Restricted Shares are granted, the number of Shares
awarded, and the purchase price per Share, if any, and (iv) approve the
form and terms and conditions of the Option Documents and Award
Agreements; all subject, however, to the express provisions of the
Plan. In making such determinations, the Committee may take into
account the nature of the Grantee's services and responsibilities, the
Grantee's present and potential contribution to the Company's success
and such other factors as it may deem relevant. Notwithstanding the
foregoing, grants of Options to Non-employee Trustee Committee Members
shall be made exclusively in accordance with Section 9 and such other
provisions of the Plan that specifically apply to such Options. The
interpretation and construction by the Committee of any provisions of
the Plan or of any Option or Award granted under it shall be final,
binding and conclusive.
(c) Exculpation. No member of the Committee shall be personally
liable for monetary damages as such for any action taken or any failure
to take any action in connection with the administration of the Plan or
the granting of Options or Awards thereunder unless (i) the member of
the Committee has breached or failed to perform the duties of his
office under applicable law and (ii) the breach or failure to perform
constitutes self-dealing, willful misconduct or recklessness; provided,
however, that the provisions of this Subsection 3(c) shall not apply to
the responsibility or liability of a member of the Committee pursuant
to any criminal statute or to the liability of a member of the
Committee for the payment of taxes pursuant to local, state or federal
law.
(d) Indemnification. Service on the Committee shall constitute
service as a member of the Board of Trustees. Each member of the
Committee shall be entitled without further act on his part to
indemnity from the Company to the fullest extent provided by applicable
law and the Company's Declaration of Trust and/or By-laws in connection
with or arising out of any action, suit or proceeding with respect to
the administration of the Plan or the granting of Options or Awards
thereunder in which he or she may be involved by reason of his or her
being or having been a member of the Committee, whether or not he or
she continues to be such member of the Committee at the time of the
action, suit or proceeding.
4. Grants and Awards under the Plan. Options under the Plan may
be in the form of a Non-qualified Stock Option, an ISO, or Awards of
Restricted Shares, or any combination thereof, at the discretion of the
Committee.
5. Eligibility. All key employees, consultants and advisors of
the Company or an Affiliate and members of the Board of Trustees shall
be eligible to receive Options and Awards hereunder. The Committee, in
its sole discretion, shall determine whether an individual qualifies as
a key employee. Notwithstanding anything to the contrary contained
herein, consultants and advisors shall only be eligible to receive
Options or Awards provided bona fide services shall be rendered by such
persons, and such services are not in connection with a capital raising
transaction.
6. Shares Subject to Plan. The aggregate maximum number of
Shares for which Options or Awards may be granted pursuant to the Plan
(including Shares for which Options or Awards were granted under the
Plan prior to this restatement) is six million five hundred thousand
(6,500,000), subject to adjustment as provided in Section 11 of the
Plan. The Shares shall be issued from authorized and unissued Shares
or Shares held in or hereafter acquired for the treasury of the
Company. If an Option terminates or expires without having been fully
exercised for any reason, or if Shares granted pursuant to an Award
have been conveyed back to the Company pursuant to the terms of an
Award Agreement, the Shares for which the Option was not exercised or
the Shares that were conveyed back to the Company may again be the
subject of one or more Options or Awards granted pursuant to the Plan.
7. Term of the Plan. The amended and restated Plan is effective
as of February 26, 1997, the date of its adoption by the Board of
Trustees (the "Approval Date"), subject to the approval of the amended
and restated Plan within twelve months of the Approval Date by a
majority of the votes cast at a duly called meeting of the shareholders
at which a quorum representing a majority of all outstanding voting
interests of the Company is, either in person or by proxy, present and
voting, or by a method and in a degree that would be treated as
adequate under applicable state law in the case of an action requiring
shareholder approval. No Option or Award may be granted under the Plan
ten years after the Approval Date. If the Plan is not approved by
shareholder vote as described above, all Options and Awards granted
under the Plan as amended and restated that could not have been granted
under the Plan as in effect without regard to this Amended and Restated
Plan shall be null and void.
8. Option Documents and Terms. Each Option granted under the
Plan shall be a Non-qualified Stock Option unless the Option shall be
specifically designated at the time of grant to be an ISO for federal
income tax purposes. To the extent any Option designated an ISO is
determined for any reason not to qualify as an incentive stock option
within the meaning of Section 422 of the Code, such Option shall be
treated as a Non-qualified Stock Option for all purposes under the
provisions of the Plan. Options granted pursuant to the Plan shall be
evidenced by the Option Documents in such form as the Committee shall
from time to time approve, which Option Documents shall comply with and
be subject to the following terms and conditions and such other terms
and conditions as the Committee shall from time to time require which
are not inconsistent with the terms of the Plan. However, the
provisions of this Section 8 shall not be applicable to Options granted
to non-employee members of the Board of Trustees, except as otherwise
provided in Subsection 9(c).
(a) Number of Option Shares. Each Option Document shall state
the number of Shares to which it pertains. An Optionee may receive
more than one Option, which may include Options which are intended to
be ISO's and Options which are not intended to be ISO's, but only on
the terms and subject to the conditions and restrictions of the Plan.
Notwithstanding anything to the contrary contained herein, no employee
shall be granted Options to acquire more than two hundred fifty
thousand (250,000) Shares during any calendar year.
(b) Option Price. Each Option Document shall state the Option
Price which, for a Non-qualified Stock Option, may be less than, equal
to, or greater than the Fair Market Value of the Shares on the date the
Option is granted and, for an ISO, shall be at least 100% of the Fair
Market Value of the Shares on the date the Option is granted as
determined by the Committee in accordance with this Subsection 8(b);
provided, however, that if an ISO is granted to an Optionee who then
owns, directly or by attribution under Section 424(d) of the Code,
interests in the Company or any parent or subsidiary corporation
possessing more than ten percent of the total combined voting power of
all classes of interests of the Company or such parent or subsidiary,
then the Option Price shall be at least 110% of the Fair Market Value
of the Shares on the date the Option is granted. If the Shares are
traded in a public market, then the Fair Market Value per Share shall
be, if the Shares are listed on a national securities exchange or
included in the NASDAQ National Market System, the last reported sale
price thereof on the relevant date, or, if the Shares are not so listed
or included (or if there was no reported sale on the relevant date),
the mean between the last reported "bid" and "asked" prices thereof on
the relevant date, as reported on NASDAQ or by the exchange, as
applicable, or, if not so reported, as reported by the National Daily
Quotation Bureau, Inc. or as reported in a customary financial
reporting service, as applicable, or, in the event such method of
determination of fair market value is determined to be inaccurate or
such information as is needed for such determination as set forth above
is not available, as the Committee determines in good faith.
(c) Exercise. No Option shall be deemed to have been exercised
prior to the receipt by the Company of written notice of such exercise
and of payment in full of the Option Price for the Shares to be
purchased. Each such notice shall specify the number of Shares to be
purchased and shall (unless the Shares are covered by a then current
registration statement or qualified Offering Statement under Regulation
A under the Securities Act of 1933, as amended (the "Act")), contain
the Optionee's acknowledgment in form and substance satisfactory to the
Company that (a) such Shares are being purchased for investment and not
for distribution or resale (other than a distribution or resale which,
in the opinion of counsel satisfactory to the Company, may be made
without violating the registration provisions of the Act), (b) the
Optionee has been advised and understands that (i) the Shares have not
been registered under the Act and are "restricted securities" within
the meaning of Rule 144 under the Act and are subject to restrictions
on transfer and (ii) the Company is under no obligation to register the
Shares under the Act or to take any action which would make available
to the Optionee any exemption from such registration, (c) such Shares
may not be transferred without compliance with all applicable federal
and state securities laws, and (d) an appropriate legend referring to
the foregoing restrictions on transfer and any other restrictions
imposed under the Option Documents may be endorsed on the certificates.
Notwithstanding the foregoing, if the Company determines that issuance
of Shares should be delayed pending (A) registration under federal or
state securities laws, (B) the receipt of an opinion of counsel
satisfactory to the Company that an appropriate exemption from such
registration is available, (C) the listing or inclusion of the Shares
on any securities exchange or an automated quotation system or (D) the
consent or approval of any governmental regulatory body whose consent
or approval is deemed necessary in connection with the issuance of such
Shares, the Company may defer exercise of any Option granted hereunder
until any of the events described in this sentence has occurred.
(d) Medium of Payment. An Optionee shall pay for Shares (i) in
cash, (ii) by certified or cashier's check payable to the order of the
Company, or (iii) by such other mode of payment as the Committee may
approve, including payment through a broker in accordance with
procedures permitted by Regulation T of the Federal Reserve Board.
Furthermore, the Committee may provide in an Option Document that
payment may be made in whole or in part in Shares held by the Optionee.
If payment is made in whole or in part in Shares, then the Optionee
shall deliver to the Company certificates registered in the name of
such Optionee representing the Shares owned by such Optionee, free of
all liens, claims and encumbrances of every kind and having an
aggregate Fair Market Value on the date of delivery that is at least as
great as the Option Price of the Shares (or relevant portion thereof)
with respect to which such Option is to be exercised by the payment in
Shares, endorsed in blank or accompanied by stock powers duly endorsed
in blank by the Optionee. In the event that certificates for Shares
delivered to the Company represent a number of Shares in excess of the
number of Shares required to make payment for the Option Price of the
Shares (or relevant portion thereof) with respect to which such Option
is to be exercised by payment in Shares, the certificate or
certificates issued to the Optionee shall represent (i) the Shares in
respect of which payment is made, and (ii) such excess number of
Shares. Notwithstanding the foregoing, the Committee may impose from
time to time such limitations and prohibitions on the use of Shares to
exercise an Option as it deems appropriate.
(e) Termination of Options.
(i) No Option shall be exercisable after the first to occur
of the following:
(A) Expiration of the Option term specified in the
Option Document, which, in the case of an ISO, shall not occur after
(1) ten years from the date of grant, or (2) five years from the date
of grant of an ISO if the Optionee on the date of grant owns, directly
or by attribution under Section 424(d) of the Code, interests in the
Company or any parent or subsidiary corporation possessing more than
ten percent (10%) of the total combined voting power of all classes of
interests of the Company or such parent or subsidiary;
(B) The third month anniversary of the date of
termination of the Optionee's services or employment with the Company
or an Affiliate for any reason other than death, Disability or
Retirement.
(C) A finding by the Committee, after full consideration
of the facts presented on behalf of both the Company and the Optionee,
that the Optionee has breached his or her employment or service
contract with the Company or an Affiliate, or has been engaged in
disloyalty to the Company or an Affiliate, including, without
limitation, fraud, embezzlement, theft, commission of a felony or
proven dishonesty in the course of his or her employment or service, or
has disclosed trade secrets or confidential information of the Company
or an Affiliate. In such event, in addition to immediate termination
of the Option, the Optionee shall automatically forfeit all Shares for
which the Company has not yet delivered the Share certificates upon
refund by the Company of the Option Price. Notwithstanding anything
herein to the contrary, the Company may withhold delivery of Share
certificates pending the resolution of any inquiry that could lead to a
finding resulting in a forfeiture;
(D) The date, if any, set by the Board of Trustees as an
accelerated expiration date in the event of the liquidation or
dissolution of the Company; or
(E) The occurrence of such other event or events as may
be set forth in the Option Document as causing an accelerated
expiration of the Option.
(ii) Notwithstanding the foregoing, the Committee may extend
the period during which all or any portion of an Option may be
exercised to a date no later than the Option term specified in the
Option Document pursuant to Subsection 8(e)(i)(A), provided that any
change pursuant to this Subsection 8(e)(ii) which would cause an ISO to
become a Non-qualified Stock Option may be made only with the consent
of the Optionee.
(iii) The terms of an executive severance agreement or other
agreement between the Company and an Optionee, approved by the
Committee, whether entered into prior or subsequent to the grant of an
Option, which provide for Option exercise dates later than those set
forth in Subsection 8(e)(i) but permitted by this Subsection 8(e)(ii)
shall be deemed to be Option terms approved by the Committee and
consented to by the Optionee.
(iv) Unless otherwise expressly permitted in the Option
Document, no Option granted pursuant to this Section 8 shall be
exercisable following the termination of the Optionee's services as a
member of the Board of Trustees or employment with the Company or any
Affiliate with respect to any Shares in excess of those which could
have been acquired by exercise of the Option on the date of such
termination of services or employment.
(f) Transfers. No Option granted under the Plan may be
transferred, except by will or by the laws of descent and distribution.
During the lifetime of the person to whom an Option is granted, such
Option may be exercised only by such person. Notwithstanding the
foregoing, (1) a Non-qualified Stock Option may be transferred pursuant
to the terms of a "qualified domestic relations order," within the
meaning of Sections 401(a)(13) and 414(p) of the Code or within the
meaning of Title I of the Employee Retirement Income Security Act of
1974, as amended, and (2) the Committee may provide, in an Option
Document, that an Optionee may transfer Options to his or her children,
grandchildren or spouse or to one or more trusts for the benefit of
such family members or to partnerships in which such family members are
the only partners (a "Family Transfer"), provided that the Optionee
receives no consideration for such Family Transfer and the Option
Documents relating to Options transferred in such Family Transfer
continue to be subject to the same terms and conditions that were
applicable to such Options immediately prior to the Family Transfer.
(g) Limitation on ISO Grants. In no event shall the aggregate
Fair Market Value of the Shares with respect to which ISOs issued under
the Plan and incentive stock options issued under any other incentive
stock option plans of the Company or its Affiliates which are
exercisable for the first time by the Optionee during any calendar year
exceed $100,000. Any ISOs issued in excess of this limitation shall be
treated as Non-qualified Stock Options issued under the Plan. For
purposes of this subsection 8(g), the Fair Market Value of Shares shall
be determined as of the date of grant of the ISO or other incentive
stock option.
(h) Other Provisions. Subject to the provisions of the Plan, the
Option Documents shall contain such other provisions including, without
limitation, provisions authorizing the Committee to accelerate the
exercisability of all or any portion of an Option granted pursuant to
the Plan, additional restrictions upon the exercise of the Option or
additional limitations upon the term of the Option, as the Committee
shall deem advisable.
(i) Amendment. Subject to the provisions of the Plan, the
Committee shall have the right to amend Option Documents issued to an
Optionee, subject to the Optionee's consent if such amendment is not
favorable to the Optionee, except that the consent of the Optionee
shall not be required for any amendment made pursuant to Subsection
8(e)(i)(C) or Section 10 of the Plan, as applicable.
(j) No Options shall be granted under the Plan if, taking into
account the grant of such options, five or fewer individuals would own
more than 50% of the outstanding Shares, as computed for purposes of
Code Section 856(h).
9. Special Provisions Relating to Grants of Options to Non-
employee Members of the Board of Trustees. Options granted pursuant to
the Plan to non-employee members of the Board of Trustees shall be
granted, without any further action by the Committee, in accordance
with the terms and conditions set forth in this Section 9. Options
granted pursuant to this Section 9 shall be evidenced by Option
Documents in such form as the Committee shall from time to time
approve, which Option Documents shall comply with and be subject to the
following terms and conditions and such other terms and conditions as
the Committee shall from time to time require which are not
inconsistent with the terms of the Plan and would not cause a Non-
employee Trustee to lose his or her status as a "non-employee director"
(as that term is used for purposes of Rule 16b-3) due to the grant of
Options to such person pursuant to this Section 9.
(a) Timing of Grants; Number of Shares Subject of Options;
Exercisability of Options; Option Price. Each non-employee member of
the Board of Trustees shall be granted annually, commencing on the date
of the initial public offering of Shares, and on each anniversary of
such date thereafter, an Option to purchase five thousand (5,000)
Shares provided such person is a member of the Board of Trustees on
such grant date. Each such Option shall be a Non-qualified Stock
Option exercisable with respect to twenty percent (20%) of the Shares
subject to such Option after the first anniversary of the date of
grant, exercisable with respect to fifty percent (50%) of the Shares
after the second anniversary of the date of grant, and fully
exercisable after the third anniversary of the date of grant. The
Option Price shall be equal to the Fair Market Value of the Shares on
the date the Option is granted.
(b) Termination of Options Granted Pursuant to Section 9. No
Option granted pursuant to this Section 9 shall be exercisable after
the first to occur of the following:
(i) The tenth anniversary of the date of grant.
(ii) The third month anniversary of the date of termination
of the Optionee's services as a member of the Board of Trustees for any
reason other than death, Disability or Retirement.
Notwithstanding anything to the contrary contained herein, no
Option granted pursuant to this Section 9 shall be exercisable
following the termination of the Optionee's services as a member of the
Board of Trustees with respect to any Shares in excess of those which
could have been acquired by exercise of the Option on the date of such
termination of services.
(c) Applicability of Section 8 to Options Granted Pursuant to
Section 9. The following provisions of Section 8 shall be applicable
to Options granted pursuant to this Section 9: Subsection 8(a)
(provided that all Options granted pursuant to this Section 9 shall be
Non-qualified Stock Options); the last sentence of Subsection 8(b);
Subsection 8(c); Subsection 8(d) (provided that Option Documents
relating to Options granted pursuant to this Section 9 shall provide
that payment may be made in whole or in part in Shares); and Subsection
8(f) (provided that Option Documents relating to Options granted
pursuant to this Section 9 shall not permit Family Transfers).
10. Change of Control. In the event of a Change of Control, the
Committee may take whatever action it deems necessary or desirable with
respect to the Options and Awards outstanding (other than Options
granted pursuant to Subsection 8(j) and Section 9), including, without
limitation, accelerating the expiration or termination date in the
respective Option Documents to a date no earlier than thirty (30) days
after notice of such acceleration is given to the Optionees. In
addition to the foregoing, in the event of a Change of Control, Options
granted pursuant to the Plan and held by Optionees who are employees of
the Company or an Affiliate or members of the Board of Trustees at the
time of a Change of Control shall become immediately exercisable in
full and the restrictions applicable to Restricted Shares awarded to
Awardees who are employees of the Company or an Affiliate or members of
the Board of Trustees at the time of a Change of Control shall
immediately lapse. Any amendment to this Section 10 which diminishes
the rights of Optionees, shall not be effective with respect to Options
outstanding at the time of adoption of such amendment, whether or not
such outstanding Options are then exercisable.
A "Change of Control" shall be deemed to have occurred upon the
earliest to occur of the following events: (i) the date the
shareholders of the Company (or the Board of Trustees, if shareholder
action is not required) approve a plan or other arrangement pursuant to
which the Company will be dissolved or liquidated, or (ii) the date the
shareholders of the Company (or the Board of Trustees, if shareholder
action is not required) approve a definitive agreement to sell or
otherwise dispose of substantially all of the assets of the Company, or
(iii) the date the shareholders of the Company (or the Board of
Trustees, if shareholder action is not required) and the shareholders
of the other constituent corporation or entity (or its board of
directors or trustees if shareholder action is not required) have
approved a definitive agreement to merge or consolidate the Company
with or into such other corporation or other entity, other than, in
either case, a merger or consolidation of the Company in which holders
of Shares immediately prior to the merger or consolidation will have at
least a majority of the ownership of interests of the surviving
corporation or entity (and, if one class of common stock or other
equity interest is not the only class of voting securities entitled to
vote on the election of directors or trustees of the surviving entity,
a majority of the voting power of the surviving entity's voting
securities) immediately after the merger or consolidation, which equity
interest (and, if applicable, voting securities) is to be held in the
same proportion as such holders' ownership of Shares immediately before
the merger or consolidation, or (iv) the first day, after the date this
Plan is effective on which there has occurred a change in the majority
of the positions on the Board of Trustees or if any person (or any
group of associated persons acting in concert) acquires, directly or
indirectly, more than a percentage of the voting stock of the Trust in
excess of that held by the "Senior Executives" (as defined in the
Registration Statement) in the aggregate as of the date of the closing
of the initial public offering of the Common Shares, in either case
without the advance written consent of the current Board of Trustees.
11. Adjustments on Changes in Capitalization.
(a) Corporate Transactions. In the event that the outstanding
Shares are changed by reason of a reorganization, merger,
consolidation, recapitalization, reclassification, stock split-up,
combination or exchange of shares and the like (not including the
issuance of Shares on the conversion of other securities of the Company
which are outstanding on the date of grant and which are convertible
into Shares) or dividends payable in Shares, an equitable adjustment
shall be made by the Committee in the aggregate number of Shares
available under the Plan and in the number of Shares and price per
Share subject to outstanding Options. Unless the Committee makes other
provisions for the equitable settlement of outstanding options, if the
Company shall be reorganized, consolidated, or merged with another
corporation, or if all or substantially all of the assets of the
Company shall be sold or exchanged, an Optionee shall at the time of
issuance of the Shares under such corporate event be entitled to
receive upon the exercise of his or her Option the same number and kind
of shares or the same amount of property, cash or securities as he or
she would have been entitled to receive upon the occurrence of any such
corporate event as if he or she had been, immediately prior to such
event, the holder of the number of shares covered by his or her Option.
(b) Proportionate Application. Any adjustment under this Section
11 in the number of Shares subject to Options shall apply
proportionately to only the unexercised portion of any Option granted
hereunder. If fractions of a Share would result from any such
adjustment, the adjustment shall be revised to the next lower whole
number of Shares.
(c) Committee Authority. The Committee shall have authority to
determine the adjustments to be made under this Section, and any such
determination by the Committee shall be final, binding and conclusive.
12. Terms and Conditions of Awards. Awards granted pursuant to
the Plan shall be evidenced by written Award Agreements in such form as
the Committee shall from time to time approve, which Award Agreements
shall comply with and be subject to the following terms and conditions
and such other terms and conditions which the Committee shall from time
to time require which are not inconsistent with the terms of the Plan.
The Committee may, in its sole discretion, shorten or waive any term or
condition with respect to all or any portion of any Award.
Notwithstanding the foregoing, all restrictions shall lapse or
terminate with respect to Restricted Shares upon the death or
Disability of the Awardee.
(a) Number of Shares. Each Award Agreement shall state the
number of Shares to which it pertains.
(b) Purchase Price. Each Award Agreement shall specify the
purchase price, if any, which applies to the Award. If the Board of
Trustees specifies a purchase price, the Awardee shall be required to
make payment on or before the date specified in the Award Agreement.
An Awardee shall pay for such Shares (i) in cash, (ii) by certified
check payable to the order of the Company, or (iii) by such other mode
of payment as the Committee may approve.
(c) Restrictions on Transfer and Forfeitures. A share
certificate representing the Restricted Shares granted to an Awardee
shall be registered in the Awardee's name but shall be held in escrow
by the Company or an appropriate officer of the Company, together with
an undated share transfer power executed by the Awardee with respect to
each share certificate representing Restricted Shares in such Awardee's
name. The Awardee shall generally have the rights and privileges of a
shareholder as to such Restricted Shares including the right to vote
such Restricted Shares and to receive and retain all cash dividends
with respect to such Shares, except that the following restrictions
shall apply: (i) the Awardee shall not be entitled to delivery of the
certificate until the expiration or termination of any period
designated by the Committee ("Restricted Period") and the satisfaction
of any other conditions prescribed by the Committee; and (ii) all
distributions with respect to the Restricted Shares other than cash
dividends, such as share dividends, share splits or distributions of
property, and any distributions (other than cash dividends)
subsequently made with respect to other distributions, shall be
delivered to the Company or an appropriate officer of the Company,
together with appropriate share transfer powers or other instruments of
transfer signed and delivered to the Company or appropriate officer of
the Company by the Awardee, to be held by the Company or appropriate
officer of the Company and released to either the Awardee or the
Company, as the case may be, together with the Shares to which they
relate; (iii) the Awardee will have no right to sell, exchange,
transfer, pledge, hypothecate or otherwise dispose of any of the
Restricted Shares or distributions (other than cash dividends) with
respect thereto; and (iv) all of the Restricted Shares shall be
forfeited and all rights of the Awardee with respect to such Restricted
Shares shall terminate without further obligation on the part of the
Company unless the Awardee has remained a regular full-time employee of
the Company or an Affiliate, any of its subsidiaries or any parent or
any combination thereof until the expiration or termination of the
Restricted Period and the satisfaction of any other conditions
prescribed by the Committee applicable to such Restricted Share. Upon
the forfeiture of any Restricted Share, such forfeited shares shall be
transferred to the Company without further action by the Awardee.
(d) Lapse of Restrictions. Upon the expiration or termination
of the Restricted Period and the satisfaction of any other conditions
prescribed by the Committee as provided for in the Plan, the
restrictions applicable to the Restricted Share shall lapse and a stock
certificate for the number of shares of Common Stock with respect to
which the restrictions have lapsed shall be delivered, free of all such
restrictions, except any that may be imposed by law, to the Awardee or
the beneficiary or estate, as the case may be. The Company shall not
be required to deliver any fractional share of Common Stock but will
pay, in lieu thereof, the fair market value (determined as of the date
the restrictions lapse) of such fractional share to the Awardee or the
Awardee's beneficiary or estate, as the case may be. The Award may
provide for the lapse of restrictions on transfer and forfeiture
conditions in installments. Notwithstanding the foregoing, unless the
Shares are covered by a then current registration statement or a
Notification under Regulation A under the Act, the Company may require
as a condition to the transfer of Share certificates to an Awardee
under this Subsection 12(d) that the Awardee provide the Company with
an acknowledgment in form and substance satisfactory to the Company
that (a) such Shares are being purchased for investment and not for
distribution or resale (other than a distribution or resale which, in
the opinion of counsel satisfactory to the Company, may be made without
violating the registration provisions of the Act), (b) the Optionee has
been advised and understands that (i) the Shares have not been
registered under the Act and are "restricted securities" within the
meaning of Rule 144 under the Act and are subject to restrictions on
transfer and (ii) the Company is under no obligation to register the
Shares under the Act or to take any action which would make available
to the Optionee any exemption from such registration, (c) such Shares
may not be transferred without compliance with all applicable federal
and state securities laws, and (d) an appropriate legend referring to
the foregoing restrictions on transfer may be endorsed on the
certificates. Notwithstanding the foregoing, if the Company determines
that the transfer of Share certificates should be delayed pending (A)
registration under federal or state securities laws, (B) the receipt of
an opinion of counsel satisfactory to the Company that an appropriate
exemption from such registration is available, (C) the listing or
inclusion of the Shares on any securities exchange or an automated
quotation system or (D) the consent or approval of any governmental
regulatory body whose consent or approval is necessary in connection
with the issuance of such Shares, the Company may defer transfer of
Share certificates hereunder until any of the events described in this
sentence has occurred.
(e) Section 83(b) Election. An Awardee who files an election
with the Internal Revenue Service to include the fair market value of
any Restricted Share in gross income while they are still subject to
restrictions shall promptly furnish the Company with a copy of such
election together with the amount of any federal, state, local or other
taxes required to be withheld to enable the Company to claim an income
tax deduction with respect to such election.
(f) Rights as Shareholder. Upon payment of the purchase price,
if any, for Shares covered by an Award and compliance with the
acknowledgment requirement of subsection 12(d), the Grantee shall have
all of the rights of a shareholder with respect to the Shares covered
thereby, including the right to vote the Shares and receive all
dividends and other distributions paid or made with respect thereto,
except to the extent otherwise provided by the Committee or in the
Award Agreement.
(g) Amendment. Subject to the provisions of the Plan, the
Committee shall have the right to amend Awards issued to an Awardee,
subject to the Awardee's consent if such amendment is not favorable to
the Awardee, except that the consent of the Awardee shall not be
required for any amendment made pursuant to Section 10 of the Plan.
13. Amendment of the Plan. The Board of Trustees of the Company
may amend the Plan from time to time in such manner as it may deem
advisable. Nevertheless, the Board of Trustees of the Company may not
change the class of individuals eligible to receive an ISO or increase
the maximum number of Shares as to which Options or Awards may be
granted without obtaining approval, within twelve months before or
after such action, by vote of a majority of the votes cast at a duly
called meeting of the shareholders at which a quorum representing a
majority of all outstanding voting interests of the Company is, either
in person or by proxy, present and voting on the matter, or by a method
and in a degree that would be treated as adequate under applicable
state law in the case of an action requiring shareholder approval. No
amendment to the Plan shall adversely affect any outstanding Option or
Award, however, without the consent of the Grantee.
14. No Commitment to Retain. The grant of an Option or an Award
pursuant to the Plan shall not be construed to imply or to constitute
evidence of any agreement, express or implied, on the part of the
Company or any Affiliate to retain the Grantee in the employ of the
Company or an Affiliate and/or as a member of the Company's Board of
Trustees or in any other capacity.
15. Withholding of Taxes. Whenever the Company proposes or is
required to deliver or transfer Shares in connection with an Award or
the exercise of an Option, the Company shall have the right to (a)
require the recipient to remit or otherwise make available to the
Company an amount sufficient to satisfy any federal, state and/or local
withholding tax requirements prior to the delivery or transfer of any
certificate or certificates for such Shares or (b) take whatever other
action it deems necessary to protect its interests with respect to its
tax liabilities. The Company's obligation to make any delivery or
transfer of Shares shall be conditioned on the Grantee's compliance, to
the Company's satisfaction, with any withholding requirement.
16. Interpretation. The Plan is intended to enable transactions
under the Plan with respect to Trustees and officers (within the
meaning of Section 16(a) under the Securities Exchange Act of 1934, as
amended) to satisfy the conditions of Rule 16b-3; to the extent that
any provision of the Plan would cause a conflict with such conditions
or would cause the administration of the Plan as provided in Section 3
to fail to satisfy the conditions of Rule 16b-3, such provision shall
be deemed null and void to the extent permitted by applicable law.
This section shall not be applicable if no class of the Company's
equity securities is then registered pursuant to Section 12 of the
Securities Exchange Act of 1934, as amended.
2
4
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted from the
Consolidated Balance Sheet at June 30, 1999 and the Consolidated Statement of
Operations for the six months ended June 30, 1999 and is qualified in its
entirety by reference to such financial statements.
</LEGEND>
<CIK> 0000921112
<NAME> LIBERTY PROPERTY TRUST
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-START> JAN-01-1999
<PERIOD-END> JUN-30-1999
<CASH> 33,555
<SECURITIES> 0
<RECEIVABLES> 5,780
<ALLOWANCES> 2,977
<INVENTORY> 0
<CURRENT-ASSETS> 39,335
<PP&E> 3,167,096
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<TOTAL-ASSETS> 3,042,405
<CURRENT-LIABILITIES> 46,853
<BONDS> 1,512,879
0
120,814
<COMMON> 66
<OTHER-SE> 1,169,955
<TOTAL-LIABILITY-AND-EQUITY> 3,042,405
<SALES> 0
<TOTAL-REVENUES> 127,482
<CGS> 0
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<INTEREST-EXPENSE> 25,822
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<EXTRAORDINARY> 0
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<NET-INCOME> 40,502
<EPS-BASIC> 0.61
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</TABLE>
