Exhibit 10.2
PS BUSINESS PARKS, L.P.
AMENDMENT TO AGREEMENT OF LIMITED
PARTNERSHIP RELATING TO
9 1/4% SERIES E CUMULATIVE REDEEMABLE
PREFERRED UNITS
This Amendment to the Agreement of Limited Partnership of PS Business
Parks, L.P., a California limited partnership (the "Partnership"), dated as of
the 21st day of September, 2001 (this "Amendment") amends the Agreement of
Limited Partnership of the Partnership, dated as of March 17, 1998, by and among
PS Business Parks, Inc. (the "General Partner") and each of the limited partners
executing a signature page thereto, as amended by that certain Amendment to
Agreement of Limited Partnership Relating to 8?% Series B Cumulative Redeemable
Preferred Units, dated as of April 23, 1999, an Amendment to Agreement of
Limited Partnership Relating to 9 1/4% Series A Cumulative Redeemable Preferred
Units, dated as of April 30, 1999, an Amendment Relating to the 8?% Series X
Cumulative Redeemable Preferred Units dated as of September 7, 1999, an
Amendment to Agreement of Limited Partnership Relating to 8 3/4% Series C
Cumulative Redeemable Preferred Units, dated as of September 3, 1999, an
Amendment to Agreement of Limited Partnership Relating to 8?% of Series Y
Cumulative Redeemable Preferred Units, dated as of July 12, 2000, and an
Amendment to Agreement of Limited Partnership Relating to 9 1/2% Series D
Cumulative Redeemable Preferred Units, dated as of May 10, 2001, as amended by
Amendment No. 1 to such Amendment to Agreement of Limited Partnership Relating
to 9 1/2% Series D Cumulative Redeemable Preferred Units, dated as of June 18,
2001 (collectively, the "Partnership Agreement"). Capitalized terms used herein
and not otherwise defined shall have the meanings ascribed to such terms in the
Partnership Agreement. Section references are (unless otherwise specified)
references to sections in this Amendment.
WHEREAS, pursuant to Section 4.2(a) of the Partnership Agreement, the
General Partner desires to cause the Partnership to issue additional Units of a
new class and series, with the designations, preferences and relative,
participating, optional or other special rights, powers and duties set forth
herein;
WHEREAS, pursuant to Section 4.2(a) of the Partnership Agreement, the
General Partner, without the consent of the Limited Partners, may amend the
Partnership Agreement by executing a written instrument setting forth the terms
of such amendment; and
WHEREAS, the General Partner desires by this Amendment to so amend the
Partnership Agreement as of the date first set forth above to provide for the
designation and issuance of such new class and series of Units.
NOW, THEREFORE, the Partnership Agreement is hereby amended by
establishing and fixing the rights, limitations and preferences of a new class
and series of Units as follows:
Section 1. Definitions. Capitalized terms not otherwise defined herein
shall have their respective meanings set forth in the Partnership Agreement.
Capitalized terms that are used in this Amendment shall have the meanings set
forth below:
(a) "Liquidation Preference" means, with respect to the Series E
Preferred Units, $25.00 per Series E Preferred Unit, plus the amount of any
accumulated and unpaid Priority Return with respect to such unit, whether or not
declared, minus any distributions in excess of the Priority Return that has
accrued with respect to such Series E Preferred Units to the date of payment.
(b) "Parity Preferred Units" means any class or series of Partnership
Interests of the Partnership now or hereafter authorized, issued or outstanding
and expressly designated by the Partnership to rank on a parity with the Series
E Preferred Units (as hereinafter defined) with respect to distributions and
rights upon voluntary or involuntary liquidation winding-up or dissolution of
the Partnership, including the 9 1/4% Series A Cumulative Redeemable Preferred
Units (the "Series A Preferred Units"), the 8?% Series B Cumulative Redeemable
Preferred Units (the "Series B Preferred Units"), the 8 3/4% Series C Cumulative
Redeemable Preferred Units (the "Series C Preferred Units"), the 9 1/2 Series D
Cumulative Redeemable Preferred Units (the "Series D Preferred Units"), the 8?%
Series X Cumulative Redeemable Preferred Units (the "Series X Preferred Units")
and the 8?% Series Y Cumulative Redeemable Preferred Units (the "Series Y
Preferred Units"). Notwithstanding the differing allocation rights set forth in
Section 4 below that apply to the Series A, B, C and D Preferred Units (as
compared to the Series E, X and Y Preferred Units), for purposes of this
Amendment, those Series A, B, C and D Preferred Units and any future series of
preferred units that rank in parity with those series also shall be considered
Parity Preferred Units to the Series E, X and Y Preferred Units.
(c) "Priority Return" means an amount equal to 9 1/4% per annum of the
Liquidation Preference per Series E Preferred Unit, commencing on the date of
issuance of such Series E Preferred Unit, 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 distributions
payable will be 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 3, hereof, commencing on the date
of the issuance of such Series E Preferred Unit.
(d) "PTP" means a "publicly traded partnership" within the meaning of
Section 7704 of the Code.
Section 2. Designation and Number. Pursuant to Section 4.2(a) of the
Partnership Agreement, a series of Partnership Units in the Partnership
designated as the "9 1/4% Series E Cumulative Redeemable Preferred UnitS" (the
"Series E Preferred Units") is hereby established. The number of Series E
Preferred Units shall be 2,120,000. The Holders of Series E Preferred Units
shall not have any Percentage Interest (as such term is defined in the
Partnership Agreement) in the Partnership.
Section 3. Distributions. (a) Payment of Distributions. Subject to the
rights of holders of Parity Preferred Units as to the payment of distributions
pursuant to Section 5.1 of the Partnership Agreement, holders of Series E
Preferred Units shall be entitled to receive, when, as and if declared by the
Partnership acting through the General Partner, the Priority Return. Such
Priority Return shall be cumulative, shall accrue from the original date of
issuance of the Series E Preferred Units and, notwithstanding Section 5.1 of the
Partnership Agreement, will be payable (i) quarterly in arrears on March 31,
June 30, September 30 and December 31 of each year commencing on September 30,
2001, and (ii) in the event of (A) a redemption of Series E Preferred Units, or
(B) an exchange of Series E Preferred Units into Series E Preferred Stock, on
the redemption date or the exchange date, as applicable (each a "Series E
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 E 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 Business Day
immediately preceding such date with the same force and effect as if made on
such date. Distributions on the Series E Preferred Units will be made to the
holders of record of the Series E 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
Series E Preferred Unit Distribution Payment Date (the "Series E Preferred Unit
Partnership Record Date").
(b) Prohibition on Distribttion. No distributions on Series E Preferred
Units shall be authorized by the General Partner or paid or set apart for
payment by the Partnership at any such time as the terms and provisions of any
agreement of the Partnership or the General Partner, including any agreement
relating to their indebtedness, prohibits such authorization, payment or setting
apart for payment or provides that such authorization, payment or setting apart
for payment would constitute a breach thereof or a default thereunder, or to the
extent that such authorization or payment shall be restricted or prohibited by
law.
(c) Distributions Cumulative. Distributions on the Series E Preferred
Units will accrue, whether or not declared, whether or not the terms and
provisions of any agreement of the Partnership or the General Partner, including
any agreement relating to its indebtedness at any time prohibit the current
payment of distributions, whether or not the Partnership has earnings, whether
or not there are funds legally available for the payment of such distributions
and whether or not such distributions are authorized. Accrued but unpaid
distributions on the Series E Preferred Units will accumulate as of the Series E
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 Series E Preferred
Unit Distribution Payment Date to holders of record of the Series E 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.
(d) Priority as to Distributions. Subject to the provisions of Article
13 of the Partnership Agreement:
(i) so long as any Series E 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 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 E 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 E Preferred
Units, any Parity Preferred Units or any Junior Units, unless, in each case, all
distributions accumulated on all Series E Preferred Units and all classes and
series of outstanding Parity Preferred Units have been paid in full. The
foregoing sentence shall not prohibit (x) distributions payable solely in Junior
Units, or (y) the conversion of Junior Units or Parity Preferred Units into
Partnership Interests ranking junior to the Series E Preferred Units as to
distributions and rights upon involuntary or voluntary liquidation, dissolution
or winding up of the Partnership or (z) the redemption of Partnership Interests
corresponding to Series E Preferred Stock, Parity Preferred Stock or Junior
Stock to be purchased by the General Partner pursuant to the Articles of
Incorporation of the General Partner with respect to the General Partner's
common stock and comparable provisions in the Articles of Incorporation with
respect to other classes or series of capital stock of the General Partner 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 the Articles of Incorporation.
(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
payment) upon the Series E Preferred Units, all distributions authorized and
declared on the Series E 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 E 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 E 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.
(e) No Further Rights. Holders of Series E 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 6.1(a)(ii) of the Partnership Agreement
is amended to read, in its entirety, as follows:
"(ii)(A) Notwithstanding anything to the contrary contained in
this Agreement, in any taxable year: (1) the holders of Series A, B, C
and D Preferred Units shall first be allocated an amount of gross
income equal to the Priority Return distributed to such holders in such
taxable year, and (2) subject to any prior allocation of Profit
pursuant to the loss chargeback set forth in Section 6.1(a)(ii)(B)
below, the holders of Series E, X and Y Preferred Units shall then be
allocated an amount of Profit equal to the Priority Return distributed
to such holders either in such taxable year or in prior taxable years
to the extent that such distributions have not previously been matched
with an allocation of Profit pursuant to this Section 6.1(a)(ii)(A)(2).
(B) After the Capital Account balances of all Partners other
than holders of any series of Preferred Units have been reduced to
zero, Losses of the Partnership that otherwise would be allocated so as
to cause deficit Capital Account balances for those other Partners
shall be allocated to the holders of the Series A, B, C, D, E, X and Y
Preferred Units in proportion to the positive balances of their Capital
Accounts until those Capital Account balances have been reduced to
zero. If Losses have been allocated to the holders of the Series A, B,
C, D, E, X and Y Preferred Units pursuant to the preceding sentence,
the first subsequent Profits shall be allocated to those preferred
partners so as to recoup, in reverse order, the effects of the loss
allocations.
(C) Upon liquidation of the Partnership or the interest of the
holders of Series A, B, C, D, E, X or Y Preferred Units in the
Partnership: (1) items of gross income or deduction shall first be
allocated to the holders of Series A, B, C and D Preferred Units in a
manner such that, immediately prior to such liquidation, the Capital
Account balances of such holders shall equal the amount of their
Liquidation Preferences, and (2) an amount of Profit or Loss shall then
be allocated to the holders of Series E, X and Y Preferred Units in a
manner such that, immediately prior to such liquidation, the Capital
Account balances of such holders shall equal the amount of their
Liquidation Preferences."
Section 5. Optional Redemption. (a) Right of Optional Redemption.
Except as otherwise provided herein, the Series E Preferred Units may not be
redeemed prior to the fifth (5th) anniversary of the issuance date. On or after
such date, the Partnership shall have the right to redeem the Series E Preferred
Units, in whole (and not in part), at any time, upon not less than 30 nor more
than 60 days written notice, at a redemption price, payable in cash, equal to
the Liquidation Preference (the "Series E Redemption Price"). The Redemption
Right given to Limited Partners in Section 8.6 of the Partnership Agreement
shall not be available to the holders of the Series E Preferred Units and all
references to Limited Partners in said Section 8.6 (and related provisions of
the Partnership Agreement) shall not include holders of the Series E Preferred
Units.
(b) 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 30 nor more than 60 days prior to the redemption date, addressed
to the respective holders of record of the Series E Preferred Units at their
respective addresses as they appear on the records of the Partnership. No
failure to give or defect in such notice shall affect the validity of the
proceedings for the redemption of any Series E Preferred Units except as to the
holder to whom such notice was defective or not given. In addition to any
information required by law each such notice shall state: (m) the redemption
date, (n) the Redemption Price, (o) the aggregate number of Series E Preferred
Units to be redeemed, (p) as provided in Section 5(b)(ii) below, the place or
places where evidence of the surrender of such Series E Preferred Units shall be
delivered for payment of the Redemption Price, (q) that distributions on the
Series E Preferred Units to be redeemed will cease to accumulate on such
redemption date and (r) that payment of the Redemption Price will be made upon
presentation of evidence of the surrender of such Series E Preferred Units as
set forth in Section 5(b)(ii) below.
(ii) If the Partnership gives a notice of redemption in respect of
Series E Preferred Units (which notice will be irrevocable) then, by 12:00 noon,
New York City time, on the redemption date, the Partnership will deliver into
escrow with an escrow agent acceptable to the Partnership and the holders of the
Series E Preferred Units (the "Escrow Agent") the Redemption Price and an
executed Redemption Agreement, in the form attached hereto as Exhibit A (the
"Redemption Agreement"), and an Amendment to the Agreement of Limited
Partnership evidencing the Redemption, in the form attached hereto as Exhibit B.
The holders of the Series E Preferred Units shall also, by 12:00 noon, New York
City time, on the redemption date, deliver into escrow with the Escrow Agent an
executed Redemption Agreement and an executed Amendment to the Agreement of
Limited Partnership evidencing the Redemption. Upon delivery of all of the
above-described items by both parties, Escrow Agent shall release the Redemption
Price to the holders of the Series E Preferred Units and the fully-executed
Redemption Agreement and Amendment to Agreement of Limited Partnership to both
parties. On and after the date of redemption, distributions will cease to
accumulate on the Series E Preferred Units called for redemption, unless the
Partnership defaults in the payment thereof. If any date fixed for redemption of
Series E 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 E 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 6. Voting Rights. (a) General. Holders of the Series E
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 in Section 14.1 of the Partnership Agreement and in this Section 6.
(Solely for purposes of Section 14.1 of the Partnership Agreement, each Series E
Preferred Unit shall be treated as one Partnership Unit.) If and for so long as
the General Partner holds any Series E Preferred Units, the General Partner
shall not have any voting rights with respect to such Series E Preferred Units
and such Series E Preferred Units shall not be counted in determining the number
of such units outstanding for the purpose of determining whether the holders of
such units have granted any approval called for hereunder.
(b) Certain Voting Rights. So long as any Series E Preferred Units
remain outstanding, the Partnership shall not, without the affirmative vote of
the holders of at least a majority of the Series E Preferred Units outstanding
at the time:
(i) authorize or create, or increase the authorized or issued
amount of, any class or series of Partnership Interests ranking senior to the
Series E Preferred Units with respect to payment of distributions or rights upon
liquidation, dissolution or winding-up or reclassify any Partnership Interests
into any such Partnership Interest, or create, authorize or issue any
obligations or security convertible into or evidencing the right to purchase any
such Partnership Interests;
(ii) designate or create, or increase the authorized or issued
amount of, any Parity Preferred Units or reclassify any authorized Partnership
Interests into any such Parity Preferred Units, or create, authorize or issue
any obligations or security convertible into or evidencing the right to purchase
any such shares, but only to the extent such Parity Preferred Units are issued
to an Affiliate of the Partnership on terms that differ from the terms of such
series of Parity Preferred Units issued to the public or non-Affiliates of the
Partnership (for purposes of this Section 6(b)(ii), an issuance to the General
Partner shall not be treated as an issuance to an Affiliate of the Partnership
to the extent the issuance of such Partnership Interests was to allow the
General Partner to issue corresponding preferred stock to persons who are not
Affiliates);
(iii) either (A) exchange shares, consolidate, merge into or
with, or convey, transfer or lease its assets substantially as an entirety to,
any corporation or other entity or (B) amend, alter or repeal the provisions of
the Partnership Agreement, whether by merger, consolidation or otherwise, that
would materially and adversely affect the powers, special rights, preferences,
privileges or voting power of the Series E Preferred Units or the holders
thereof; provided, however, that with respect to the occurrence of a share
exchange, merger, consolidation or a sale or lease of all of the Partnership's
assets as an entirety, so long as (1) the Partnership is the surviving entity
and the Series E Preferred Units remain outstanding with the terms thereof
unchanged, or (2) the resulting, surviving or transferee entity (I) is a
partnership, limited liability company or other pass-through entity organized
under the laws of any state, (II) is not taxable as a corporation for U.S.
federal income tax purposes, and (III) substitutes the Series E Preferred Units
for other interests in such entity having substantially the same terms and
rights as the Series E 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 adversely affect such
rights, privileges or voting powers of the holders of the Series E Preferred
Units; and 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, in each case ranking (y) junior to the Series E Preferred
Units with respect to payment of distributions or the distribution of assets
upon liquidation, dissolution or winding-up, or (z) on a parity to the Series E
Preferred Units with respect to payment of distributions or the distribution of
assets upon liquidation, dissolution or winding-up, to the extent such
Partnership Interests are not issued to an Affiliate of the Partnership (an
issuance to the General Partner shall not be treated as an issuance to an
Affiliate of the Partnership to the extent the issuance of such Partnership
Interests was to allow the General Partner to issue corresponding preferred
stock to persons who are not Affiliates of the Partnership) such issuance shall
not be deemed to materially and adversely affect such rights, preferences,
privileges or voting powers; or
(iv) increase the authorized or issued amount of Series E Preferred
Units.
In addition to the foregoing, the Partnership will not (x) enter into
any contract, mortgage, loan or other agreement that prohibits or restricts, or
has the effect of prohibiting or restricting, the ability of a holder of the
Preferred Units to exercise its rights set forth herein to effect in full an
exchange or redemption pursuant to Section 8, below, except with the written
consent of such holder; or (y) amend, alter, or repeal or waive Sections 7.6 or
11.3(f) of the Partnership Agreement without the affirmative vote of at least a
majority of the Series E Preferred Units outstanding at the time.
Section 7. Transfer Restrictions. The holders of Series E Preferred
Units shall be subject to all of the provisions of Section 11 of the Partnership
Agreement except Section 11.3(b), as modified by this Section 7. Except as
otherwise provided, if the General Partner's consent to a transfer of Series E
Preferred Units is required by Section 11.3 of the Partnership Agreement, the
General Partner agrees not to unreasonably withhold that consent. Subject to the
consent of the General Partner, which shall not be unreasonably withheld or
delayed, the Series E Preferred Units may be transferred to a maximum of five
(5) persons. At no time shall the number of holders of the Series E Preferred
Units exceed five.
Section 8. Exchange Rights. (a) Right to Exchange. (i) All, but not
less than all, of the Series E Preferred Units will be exchangeable at any time
on or after the tenth (10th) anniversary of the date of issuance, at the option
of the Partnership or upon the affirmative vote of the holders of a majority of
the outstanding Series E Preferred Units, for authorized but previously unissued
shares of 9 1/4% Series E CumulatiVE Redeemable Preferred Stock of the General
Partner (the "Series E Preferred Stock") at an exchange rate of one share of
Series E Preferred Stock for one Series E Preferred Unit, subject to adjustment
as described below (the "Series E Exchange Price"); provided that all, but not
less than all, of the Series E Preferred Units will become exchangeable for
Series E Preferred Stock at any time upon the affirmative vote of the holders of
a majority of the outstanding Series E Preferred Units (x) if at any time full
distributions shall not have been timely made on any Series E Preferred Unit
with respect to six (6) prior quarterly distribution periods, whether or not
consecutive; provided, however, that a distribution in respect of Series E
Preferred Units shall be considered timely made if made within two (2) Business
Days after the applicable Series E Preferred Units 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, (y) upon receipt by a holder or holders of Series E Preferred Units of (1)
notice from the General Partner that the General Partner or the Partnership has
become aware of facts that will or likely will cause the Partnership to become a
PTP or takes the position that the Partnership is, or upon consummation of an
identified 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 E 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, or (z) at any time (1) a
holder of Series E Preferred Units concludes (in the reasonable judgment of the
holder) that it is imminent that the Partnership will not or likely will not
satisfy the income and asset tests of Section 856 of the Internal Revenue Code
of 1986, as amended (the "CODE") for a taxable year if the Partnership were a
real estate investment trust within the meaning of the Code, (2) such holder
delivers to the General Partner an opinion of nationally recognized independent
counsel to the effect that it is imminent that the Partnership will not or
likely will not satisfy the income and asset tests of Section 856 of the Code
for a taxable year if the Partnership were a real estate investment trust within
the meaning of the Code, and (3) such failure would create a meaningful risk
that a holder of the Series E Preferred Units would fail to maintain its
qualification as a real estate investment trust.
In addition to and not in limitation of the foregoing, all, but not
less than all, of the Series E Preferred Units may be exchanged (regardless of
whether held by GSEP 2001 Realty Corp. ("Contributor")) upon the affirmative
vote of the holders of a majority of the outstanding Series E Preferred Units
for Series E Preferred Stock (but only if the exchange in whole may be
accomplished consistently with the ownership limitations set forth under the
Article IV of the Charter of the General Partner, taking into account exceptions
thereto) if at any time (i) such holders conclude based on results or projected
results that there exists (in the reasonable judgment of such holders) an
imminent and substantial risk that the Series E Preferred Units represent or
will represent more than 19.5% of the total profits of or capital interests in
the Partnership for a taxable year, (ii) such holders deliver to the General
Partner an opinion of nationally recognized independent counsel, reasonably
acceptable to the General Partner, to the effect that there is a substantial
risk that its interest in the Partnership does not or will not satisfy the 19.5%
limit, and (iii) the General Partner agrees with the conclusions referred to in
clauses (i) and (ii) of this sentence, such agreement not to be unreasonably
withheld.
(ii) Notwithstanding anything to the contrary set forth in Section
8(a)(i), if an Exchange Notice (as hereinafter defined) 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 (but not a portion) of the
outstanding Series E Preferred Units for cash in an amount equal to the
Liquidation Preference per Series E Preferred Unit. The General Partner may
exercise its option to redeem the Series E Preferred Units for cash pursuant to
this Section 8(a)(ii) by giving each holder of record of Series E Preferred
Units notice of its election to redeem for cash, within five (5) 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 E Preferred Units are to be
surrendered for payment of the redemption price, (D) that distributions on the
Series E 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 E Preferred Units and (F) the aggregate number of Series E Preferred
Units to be redeemed.
(iii) If an exchange of Series E Preferred Units pursuant to Section
8(a)(i) would violate the provisions on ownership limitation of the General
Partner set forth in Article IV of the Charter of the General Partner (taking
into account exceptions thereto) with respect to the Series E Preferred Stock
the General Partner shall give written notice thereof to each holder of record
of Series E 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 E Preferred Units shall be entitled to
exchange, pursuant to the provisions of Section 8(b) a number of Series E
Preferred Units which would comply with the provisions on the ownership
limitation of the General Partner set forth in such Article IV of the Charter of
the General Partner and any Series E Preferred Units not so exchanged (the
"Excess Units") shall be redeemed by the Partnership for cash in an amount equal
to the Liquidation Preference. 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. If 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 stock of
the General Partner (without regard to the limits described above) will not
cause any Person (as such term is defined in the Charter of the General Partner)
to own stock of the General Partner in an amount that would cause such Person
not to comply with the provisions of the ownership limitation of the General
Partner set forth in such Article IV of the Charter of the General Partner; 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.
To the extent the General Partner would not be able to pay the cash set
forth above in exchange for the Excess Units, and to the extent consistent with
the Charter, the General Partner agrees that it will grant to the holders of the
Series E Preferred Units exceptions to the Beneficial Ownership Limit and
Constructive Ownership Limit set forth in the Charter sufficient to allow such
holders to exchange all of their Series E Preferred Units for Series E Preferred
Stock, provided such holders furnish to the General Partner representations
acceptable to the General Partner in its sole and absolute discretion which
assure the General Partner that such exceptions will not jeopardize the General
Partner's tax status as a REIT for purposes of federal and applicable state law.
Notwithstanding any provision of the Agreement to the contrary, no
holder of Series E Preferred Units shall be entitled to effect an exchange of
Series E Preferred Units for Series E Preferred Stock to the extent that the
ownership or right to acquire such shares would cause the holder or any other
Person or, in the opinion of counsel selected by the General Partner, may cause
the holder or any other Person, to violate the restrictions on ownership and
transfer of Series E Preferred Stock set forth in the Charter (taking into
account exceptions thereto). To the extent any such attempted exchange for
Series E Preferred Stock would be in violation of the previous sentence, it
shall be VOID AB INITIO and such holder of Series E Preferred Units shall not
acquire any rights or economic interest in the Series E Preferred Stock
otherwise issuable upon such exchange.
(iv) The redemption of Series E Preferred Units described in Sections
8(a)(ii) and 8(a)(iii) shall be subject to the provisions of Sections 5(b)(i)
and 5(b)(ii); provided, however, that the term "redemption price" in such
Section shall be read to mean the Liquidation Preference per Series E Preferred
Unit being redeemed.
(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 E Preferred
Units 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 E Preferred Units to be exchanged together with, if
applicable, written notice of exchange and a proper assignment of such Series E
Preferred Units to the office of the General Partner maintained for such
purpose. Currently, such office is c/o PS Business Parks, Inc., ▇▇▇ ▇▇▇▇▇▇▇
▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇, Attention: ▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇. Each exchange
will be deemed to have been effected immediately prior to the close of business
on the date on which such Series E 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 Series E Exchange
Price shall have been paid. Any Series E Preferred Stock issued pursuant to this
Section 8 shall be delivered, as promptly as practicable, 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 of 1933, as amended, and
relevant state securities or blue sky laws.
(ii) In the event of an exchange of Series E Preferred Units for shares
of Series E Preferred Stock, an amount equal to the accrued and unpaid Priority
Return, whether or not declared, to the date of exchange on any Series E
Preferred Units tendered for exchange shall (a) accrue on the shares of the
Series E Preferred Stock into which such Series E Preferred Units are exchanged,
and (b) continue to accrue on such Series E Preferred Units, which shall remain
outstanding following such exchange, with the General Partner as the holder of
such Series E Preferred Units. Notwithstanding anything to the contrary set
forth herein, in no event shall a holder of a Series E Preferred Unit that was
validly exchanged into Series E Preferred Stock pursuant to this section (other
than the General Partner now holding such Series E Preferred Unit), receive a
distribution from the Partnership, if such holder, after exchange, is entitled
to receive a distribution from the General Partner with respect to the share of
Series E Preferred Stock for which such Series E Preferred Unit was exchanged or
redeemed.
(iii) Fractional shares of Series E Preferred Stock 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 E Preferred Stock 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 E Preferred Stock, and (b) distributions to all
holders of Series E Preferred Stock of evidences of indebtedness of the General
Partner or assets (including securities, but excluding dividends and
distributions paid in cash out of equity applicable to Series E Preferred
Stock).
(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 E Preferred Stock 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 E
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 shares of Series E Preferred Stock or fraction thereof
into which one Series E 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. In
addition, so long as a holder of Series E Preferred Units or any of its
permitted successors or assigns, hold any Series E Preferred Units, as the case
may be, the General Partner shall not, without the affirmative vote of the
holders of at least a majority of the Series E Preferred Units outstanding at
the time: (a) designate or create, or increase the authorized or issued amount
of, any class or series of shares ranking senior to the Series E Preferred Stock
with respect to the payment of distributions or rights upon liquidation,
dissolution or winding-up or reclassify any authorized shares of the General
Partner into any such shares, or create, authorize or issue any obligations or
securities convertible into or evidencing the right to purchase any such shares;
or (b) amend, alter or repeal the provisions of the Charter or bylaws of the
General Partner, whether by merger, consolidation or otherwise, that would
materially and adversely affect the powers, special rights, preferences,
privileges or voting power of the Series E Preferred Stock or the holders
thereof; provided, however, that any increase in the amount of authorized
Preferred Shares or the creation or issuance of any other series or class of
Preferred Shares, or any increase in the amount of authorized shares of each
class or series, in each case ranking either (1) junior to the Series E
Preferred Stock with respect to the payment of distributions and the
distribution of assets upon liquidation, dissolution or winding-up, or (2) on a
parity with the Series E Preferred Stock with respect to the payment of
distributions and the distribution of assets upon liquidation, dissolution or
winding-up shall not be deemed to materially and adversely affect such rights,
preferences, privileges or voting powers. In the event of a conflict between the
provisions of this Section 8(c)(ii) and any provision of the Partnership
Agreement, the provisions of this Section 8(c)(ii) shall control.
Section 9. No Conversion Rights. Except as set forth in Section 8, the
holders of the Series E Preferred Units shall not have any rights to convert
such units into shares of any other class or series of stock or into any other
securities of, or interest in, the Partnership.
Section 10. No Sinking Fund. No sinking fund shall be established for
the retirement or redemption of Series E Preferred Units.
Section 11. Exhibit A to Partnership Agreement. In order to duly
reflect the issuance of the Series E Preferred Units provided for herein, the
Partnership Agreement is hereby further amended pursuant to Section 12.3 thereof
by deleting Exhibit A thereto and replacing such Exhibit A with Exhibit C
attached hereto.
Section 12. Inconsistent Provisions. Nothing to the contrary contained
in the Partnership Agreement shall limit any of the rights or obligations set
forth in this Amendment.
IN WITNESS WHEREOF this Amendment has been executed as of the date
first above written.
PS BUSINESS PARKS, INC.
By: /S/ ▇▇▇▇ ▇▇▇▇▇▇▇▇
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Name: ▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
Title: Chief Financial Officer