PS BUSINESS PARKS, L.P.
AMENDMENT TO AGREEMENT OF LIMITED
PARTNERSHIP RELATING TO
87/8% SERIES Y 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 12th day of July, 2000 (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 (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 Y Preferred
Units, $25.00 per Series Y 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 Y 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 in parity with the Series Y
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 8 7/8% Series B Cumulative Redeemable Preferred Units, the 8 1/4%
Series C Cumulative Redeemable Preferred Units and the 8 7/8% Series X
Cumulative Redeemable Preferred Units. Notwithstanding the differing allocation
rights set forth in Section 4 below that apply to the Series A, B and C
Preferred Units (as compared to the Series X and Y Preferred Units), for
purposes of this Amendment those Series A, B and C 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 X and Y Preferred
Units.
(c) "Priority Return" means an amount equal to 87/8% per annum of the
Liquidation Preference per Series Y Preferred Unit, commencing on the date of
issuance of such Series Y Preferred Unit, determined on the basis of a 365-day
year (and actual days for any period) cumulative to the extent not distributed
on any Series Y Preferred Unit Distribution Payment Date.
(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 "87/8% Series Y Cumulative Redeemable Preferred Units" (the
"Series Y Preferred Units") is hereby established. The number of Series Y
Preferred Units shall be 480,000. The Holders of Series Y 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 Y
Preferred Units shall be entitled to receive, when, as and if declared by the
Partnership acting through the General Partner, the Priority Return. Such
distributions shall be cumulative, shall accrue from the original date of
issuance of the Series Y 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,
2000, and (ii) in the event of a redemption of Series Y Preferred Units (each a
"Series Y Preferred Unit Distribution Payment Date"). If any date on which
distributions are to be made on the Series Y 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 Y
Preferred Units will be made to the holders of record of the Series Y 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 Y Preferred Unit Distribution Payment
Date (the "Series Y Preferred Unit Partnership Record Date").
(b) Prohibition on Distribution. No distributions on Series Y 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 Y 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 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 Y Preferred Units will accumulate
as of the Series Y 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 Y Preferred Unit Distribution Payment Date to holders of record of the
Series Y 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 Y 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 Y 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 Y Preferred Units, any Parity Preferred Units
or any Junior Units, unless, in each case, all distributions accumulated on
all Series Y 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, (y) the
conversion of Junior Units or Parity Preferred Units into Partnership
Interests ranking junior to the Series Y Preferred Units or (z) the
redemption of Partnership Interests corresponding to Series Y Preferred
Stock, Parity Preferred Stock or Junior Stock to be purchased by the
General Partner pursuant to the Articles of Incorporation with respect to
the General Partner's common stock and comparable Articles of Incorporation
provisions 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 Y Preferred Units, all distributions authorized
and declared on the Series Y 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 Y 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 Y 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 Y 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 and C
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
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, 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, 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, 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 and C 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 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 in this Amendment, the Series Y 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 Y Preferred
Units, in whole (and not in part), at any time, upon not less than 10 nor more
than 60 days written notice, at a redemption price, payable in cash, equal to
the Liquidation Preference (the "Series 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 Y 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 Y Preferred
Units. The Series Y Redemption Price will not be payable out of proceeds from a
loan obtained by the Partnership solely for the purpose of payment of said
Series Y Redemption Price.
(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 10 nor more than 60 days prior to the redemption date, addressed to the
respective holders of record of the Series Y 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 Y 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 Y 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 Y Preferred Units shall be delivered for payment of the
Redemption Price, (q) that distributions on the Series Y 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 Y Preferred Units as set forth in Section 5(b)(ii)
below.
(ii) If the Partnership gives a notice of redemption in respect of Series Y
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 Y 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 Y 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 Y 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 Y Preferred Units called for redemption, unless the Partnership
defaults in the payment thereof. If any date fixed for redemption of Series
Y 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 Y
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 Y 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 Y Preferred
Unit shall be treated as one Partnership Unit.)
(b) Certain Voting Rights. So long as any Series Y Preferred Units remain
outstanding, the Partnership shall not, without the affirmative vote of the
holders of at least a majority of the Series Y 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 Y
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 (for this purpose, partnership interests that rank in
parity with the Series A, B and C Preferred Units or other series with
equivalent parity, shall not be treated as ranking senior to, and shall be
treated as in parity with, the Series Y Preferred Units and any other series
that rank in parity with the Series Y Preferred Units); (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 any 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); or (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 adversely affect the powers, special
rights, preferences, privileges or voting power of the Series Y 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 Y 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 substitutes the Series Y Preferred Units for
other interests in such entity having substantially the same terms and rights as
the Series Y 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 Y 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 Y 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 Y
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 adversely affect such rights, preferences, privileges or voting
powers. Notwithstanding anything to the contrary contained in this Section 6, if
holders of a majority of the Series Y Preferred Units do not approve of a
proposed action by the Partnership described in clause (iii) of the immediately
preceding sentence which, in the reasonable judgment of the Partnership, results
in the holders of Series Y Preferred Units having substantially the same terms
and rights as the Series Y Preferred Units, including with respect to
distributions, voting rights and rights upon liquidation, dissolution or
winding-up, and the holders of a majority of the Series Y Preferred Units do not
affirmatively vote in favor of such proposed action, then the Partnership may
proceed with such proposed action and the sole remedy of the holders of the
Series Y Preferred Units shall be the acceleration of the exchange date relating
to the Series Y Preferred Units, as set forth in Section 8 of this Amendment. In
the event of any conflict between the provisions of Section 4.2 of the
Partnership Agreement and the provisions of this Section 6, the provisions of
this Section 6 shall control.
Section 7. Transfer Restrictions. (a) The holders of Series Y Preferred
Units shall be subject to all of the provisions of Section 11 of the Partnership
Agreement as modified by this Section 7. Subject to the consent of the General
Partner, which shall not be unreasonably withheld or delayed, the Series Y
Preferred Units may be transferred to a maximum of five (5) persons. At no time
shall the number of holders of the Series Y Preferred Units exceed five.
(b) Notwithstanding anything to the contrary in Section 7(a), if any holder
of Series Y Preferred Units concludes based upon results or projected results
that there exists (in the reasonable judgment of such holder) an imminent and
substantial risk that such holder's interest in the Partnership represents or
will represent more than 20% of the total profits or capital interests in the
Partnership for a taxable year (determined in accordance with Treasury
Regulations Section 1.731-2), then such holder shall be permitted to transfer so
much of its Series Y Preferred Units as may be appropriate to alleviate the risk
of not satisfying such 20% limit.
Section 8. Exchange Rights. (a) Right to Exchange. (i) Series Y Preferred
Units will be exchangeable in whole (and not in part) at any time on or after
the tenth (10th) anniversary of the date of issuance, at the option of the
Partnership or a majority of the holders thereof (acting as a whole), for
authorized but previously unissued shares of 87/8% Series Y Cumulative
Redeemable Preferred Stock of the General Partner (the "Series Y Preferred
Stock") at an exchange rate of one share of Series Y Preferred Stock for one
Series Y Preferred Unit, subject to adjustment as described below (the "Series Y
Exchange Price"); provided that the Series Y Preferred Units will become
exchangeable at any time, in whole (and not in part), at the option of a
majority of the holders of Series Y Preferred Units (acting as a whole) for
Series Y Preferred Stock if (x) at any time full distributions shall not have
been timely made on any Series Y Preferred Unit with respect to six (6) prior
quarterly distribution periods, whether or not consecutive; provided, however,
that a distribution in respect of Series Y Preferred Units shall be considered
timely made if made within two (2) Business Days after the applicable Series Y
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 Y 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 Y 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) the holders of the Series Y Preferred
Units hold or will hold 20% or more of the profits and capital interests of the
Partnership, provided further that, in the case of clause (z), the Series Y
Preferred Units will be exchangeable only to the extent necessary to reduce the
holdings of the holders of the Series Y Preferred Units to less than 20% of the
capital and profits interests of the Partnership.
In addition to and not in limitation of the foregoing, the Series Y
Preferred Units may be exchanged for Series Y Preferred Stock, in whole (and not
in part), at the option of the holders of a majority of the Series Y Preferred
Units (acting as a whole) prior to the tenth (10th) anniversary of the issuance
date and after the third anniversary thereof if such holder of Series Y
Preferred Units shall deliver to the General Partner either (i) a private letter
ruling addressed to such holder of Series Y 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 Y
Preferred Units at such earlier time would not cause the Series Y Preferred
Units to be considered "stock and securities" within the meaning of section
351(e) of the Internal Revenue Code of 1986, as amended (the "Code") for
purposes of determining whether the holder of such Series Y Preferred Units is
an "investment company" under section 721(b) of the Code if an exchange is
permitted at such earlier date.
In addition to and not in limitation of the foregoing, the Series Y
Preferred Units may be exchanged in whole (and not in part) (regardless of
whether held by ▇▇▇▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇ Tax Advantaged Exchange Fund III, LLC
("Subscriber") at the option of the holders of a majority of the Series Y
Preferred Units (acting as a whole) for Series Y 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) the
Partnership or the General Partner breach any of the covenants set forth in the
Tax Representations Certificate delivered in connection with the Private
Placement Purchase Agreement, dated as of July 12th, 2000, among Subscriber, the
Partnership and the General Partner, (ii) the Partnership reasonably determines
that the assets and income of the Partnership for a taxable year after 2000
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, (iii) under the circumstances described in the
penultimate sentence of Section 6(b), or (iv) any holder of Series Y Preferred
Units shall deliver to the Partnership and the Company an opinion of independent
counsel reasonably acceptable to the Company to the effect that, based on the
assets and income of the Partnership for a taxable year after 2000, 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 in the case of each of (ii) and
(iv), such failure would create a meaningful risk that a holder of the Series Y
Preferred Units would fail to maintain qualification as a real estate investment
trust.
(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 Y
Preferred Units for cash in an amount equal to the Liquidation Preference per
Series Y Preferred Unit. The General Partner may exercise its option to redeem
the Series Y Preferred Units for cash pursuant to this Section 8(a)(ii) by
giving each holder of record of Series Y 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 Y Preferred Units are to be surrendered for payment of
the redemption price, (D) that distributions on the Series Y 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 Y Preferred
Units and (F) the aggregate number of Series Y Preferred Units to be redeemed.
(iii) If an exchange of Series Y 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 with
respect to the Series Y Preferred Stock the General Partner shall give written
notice thereof to each holder of record of Series Y 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 Y
Preferred Units shall be entitled to exchange, pursuant to the provisions of
Section 8(b) a number of Series Y 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 Y 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 Articles of Incorporation 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 Articles of
Incorporation 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.
Notwithstanding provision of this Agreement to the contrary, no Series Y
Limited Partner shall be entitled to effect an exchange of Series Y Preferred
Units for Series Y Preferred Stock to the extent that ownership or right to
acquire such shares would cause the Partner or any other Person or, in the
opinion of counsel selected by the General Partner, may cause the Partner or any
other Person to violate the restrictions on ownership and transfer of Series Y
Preferred Stock set forth in the Articles of Incorporation. To the extent any
such attempted exchange for Series Y Preferred Stock would be in violation of
the previous sentence, it shall be void ab initio and such Series Y Limited
Partner shall not acquire any rights or economic interest in the Series Y
Preferred Stock otherwise issuable upon such exchange.
(iv) The redemption of Series Y Preferred Units described in Section
8(a)(ii) and (iii) shall be subject to the provisions of Section 5(b)(i) and
Section 5(b)(ii); provided, however, that the term "redemption price" in such
Section shall be read to mean the Liquidation Preference per Series Y 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 Y 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 Y Preferred Units to be exchanged together with, if applicable,
written notice of exchange and a proper assignment of such Series Y 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 Y 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 Y Preferred Stock issued pursuant to this Section 8 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
of 1933, as amended and relevant state securities or blue sky laws.
(ii) In the event of an exchange of Series Y Preferred Units for shares of
Series Y Preferred Stock, an amount equal to the accrued and unpaid Priority
Return, whether or not declared, to the date of exchange on any Series Y
Preferred Units tendered for exchange shall (a) accrue on the shares of the
Series Y Preferred Stock into which such Series Y Preferred Units are exchanged,
and (b) continue to accrue on such Series Y Preferred Units, which shall remain
outstanding following such exchange, with the General Partner as the holder of
such Series Y Preferred Units. Notwithstanding anything to the contrary set
forth herein, in no event shall a holder of a Series Y Preferred Unit that was
validly exchanged into Series Y Preferred Stock pursuant to this section (other
than the General Partner now holding such Series Y 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 Y Preferred Stock for which such Series Y Preferred Unit was exchanged or
redeemed.
(iii) Fractional shares of Series Y 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 Y 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 Y Preferred Stock, and (b) distributions to all
holders of Series Y 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 Y 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 Y 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 Y
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 Y Preferred Stock or fraction thereof
into which one Series Y 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 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 Y 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 Y Preferred Units.
Section 11. Exhibit A to Partnership Agreement. In order to duly reflect
the issuance of the Series Y 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 Exhibit A attached hereto therefor.
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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▇▇▇▇ ▇▇▇▇▇▇▇▇
Vice President and Chief Financial Officer