1
EXHIBIT 10.7
COMMON SHARE PURCHASE AGREEMENT
dated as of July 3, 1997
Between
AMERICAN INDUSTRIAL PROPERTIES REIT
and
ABKB/LASALLE SECURITIES LIMITED PARTNERSHIP
as Agent for and for the benefit of a
particular client
2
TABLE OF CONTENTS
SECTION 1. DEFINITIONS AND RULES OF CONSTRUCTION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -1-
1.1 DEFINITIONS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -1-
1.2 RULES OF CONSTRUCTION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -10-
SECTION 2. PURCHASE AND SALE . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -11-
2.1 PURCHASE AND SALE OF THE COMMON SHARES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -11-
2.2 USE OF PROCEEDS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -11-
2.3 CLOSING . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -11-
SECTION 3. REPRESENTATIONS AND WARRANTIES OF SELLER . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -11-
3.1 ORGANIZATION AND RELATED MATTERS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -11-
3.2 CAPITAL STOCK; TITLE TO SHARES. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -12-
3.3 FINANCIAL STATEMENTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -13-
3.4 SEC REPORTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -14-
3.5 AUTHORIZATION; NO CONFLICTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -14-
3.6 LEGAL PROCEEDINGS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -15-
3.7 COMPLIANCE WITH LAW AND PERMITS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -16-
3.8 DIVIDENDS AND OTHER DISTRIBUTIONS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -16-
3.9 CERTAIN INTERESTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -16-
3.10 NO BROKERS OR FINDERS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -17-
3.11 EMPLOYEE BENEFIT PLANS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -17-
3.12 LABOR MATTERS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -18-
3.13 PROPERTIES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -18-
3.14 TAX MATTERS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -20-
3.15 MATERIAL CONTRACTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -22-
3.16 INSURANCE . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -22-
3.17 ENVIRONMENTAL MATTERS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -22-
3.18 TRUST RECORDS; ACCOUNTING RECORDS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -23-
3.19 NEW YORK STOCK EXCHANGE LISTING . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -23-
3.20 DISCLOSURE OF FACTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -23-
3.21 PENSION-HELD REIT . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -24-
3.22 SHAREHOLDER APPROVAL . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -24-
SECTION 4. REPRESENTATIONS AND WARRANTIES OF INVESTOR . . . . . . . . . . . . . . . . . . . . . . . . . . . . -24-
4.1 ORGANIZATION AND RELATED MATTERS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -24-
4.2 AUTHORIZATION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -24-
4.3 NO CONFLICTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -24-
4.4 NO BROKERS OR FINDERS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -24-
4.5 LEGAL PROCEEDINGS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -25-
4.6 INVESTMENT REPRESENTATION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -25-
4.7 LEGENDS; STOP-TRANSFER ORDERS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -25-
-i-
3
4.8 STATUS FOR REIT OWNERSHIP AND INCOME TESTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . -26-
4.9 AUTHORITY OF THE INVESTOR . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -26-
SECTION 5. COVENANTS WITH RESPECT TO CONDUCT OF SELLER PRIOR TO CLOSING . . . . . . . . . . . . . . . . . . . -26-
5.1 ACCESS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -26-
5.2 MATERIAL ADVERSE CHANGES; SEC FILINGS; REPORTS; FINANCIAL STATEMENTS . . . . . . . . . . . . . . . -27-
5.3 CONDUCT OF BUSINESS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -27-
5.4 NOTIFICATION OF CERTAIN MATTERS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -29-
5.5 ADJUSTMENT OF SHARE PRICE . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -29-
SECTION 6. ADDITIONAL CONTINUING COVENANTS AND AGREEMENTS . . . . . . . . . . . . . . . . . . . . . . . . . . -30-
6.1 USE OF PROCEEDS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -30-
6.2 APPOINTMENT OF TRUST MANAGER . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -31-
6.3 ENVIRONMENTAL MATTERS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -32-
6.4 STATUS FOR REIT OWNERSHIP AND INCOME TESTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . -32-
6.5 PROHIBITED TRANSACTIONS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -32-
6.6 SELLER/BUYER REGISTRATION RIGHTS AGREEMENT . . . . . . . . . . . . . . . . . . . . . . . . . . . . -32-
6.7 REIT QUALIFICATION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -32-
6.8 PREEMPTIVE RIGHTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -32-
6.9 DEBT . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -33-
6.10 FURNISH DOCUMENTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -33-
6.11 TAXES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -33-
6.12 ADDITIONAL INFORMATION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -34-
6.13 MSRE AND MSAM CLOSING . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -34-
SECTION 7. GENERAL CONDITIONS OF PURCHASE . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -34-
7.1 NO ORDERS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -34-
7.2 APPROVALS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -34-
7.3 ABSENCE OF LITIGATION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -34-
7.4 NEW YORK STOCK EXCHANGE . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -35-
7.5 SHAREHOLDER APPROVAL . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -35-
SECTION 8. CONDITIONS TO OBLIGATIONS OF THE INVESTOR . . . . . . . . . . . . . . . . . . . . . . . . . . . . -35-
8.1 ACCURACY OF SELLER'S REPRESENTATIONS AND WARRANTIES . . . . . . . . . . . . . . . . . . . . . . . -35-
8.2 PERFORMANCE BY SELLER . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -35-
8.3 NO MATERIAL ADVERSE CHANGE . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -35-
8.4 CERTIFICATION BY SELLER . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -35-
8.5 OPINION OF SELLER'S COUNSEL . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -36-
8.6 SCHEDULES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -36-
8.7 REALCO, MSRE AND MSAM CONSENT . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -36-
8.8 ADDITIONAL INFORMATION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -36-
8.9 CLOSING OF MSRE AND MSAM PURCHASE TRANSACTIONS . . . . . . . . . . . . . . . . . . . . . . . . . . -36-
-ii-
4
SECTION 9. CONDITIONS TO OBLIGATIONS OF SELLER . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -36-
9.1 ACCURACY OF THE INVESTOR'S REPRESENTATIONS AND WARRANTIES . . . . . . . . . . . . . . . . . . . . -36-
9.2 BUYERS' PERFORMANCE . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -36-
9.3 CERTIFICATION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -36-
9.4 OPINION OF COUNSEL . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -37-
9.5 REIT STATUS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -37-
SECTION 10. TERMINATION OF OBLIGATIONS; SURVIVAL . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -37-
10.1 TERMINATION OF AGREEMENT . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -37-
10.2 EFFECT OF TERMINATION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -37-
10.3 SURVIVAL OF REPRESENTATIONS, WARRANTIES AND COVENANTS . . . . . . . . . . . . . . . . . . . . . . -37-
SECTION 11. INDEMNIFICATION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -38-
11.1 INDEMNIFICATION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -38-
11.2 OBLIGATIONS OF THE INVESTOR AND THE PECUNIARY OWNER. . . . . . . . . . . . . . . . . . . . . . . -39-
11.3 PROCEDURE . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -39-
11.4 SURVIVAL . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -40-
11.5 NOTICE BY SELLER . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -40-
SECTION 12. GENERAL . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -40-
12.1 AMENDMENTS; WAIVERS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -40-
12.2 SCHEDULES; EXHIBITS; INTEGRATION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -41-
12.3 BEST EFFORTS; FURTHER ASSURANCES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -41-
12.4 GOVERNING LAW . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -41-
12.5 NO ASSIGNMENT . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -41-
12.6 HEADINGS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -41-
12.7 COUNTERPARTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -41-
12.8 PUBLICITY AND REPORTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -41-
12.9 CONFIDENTIALITY . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -42-
12.10 PARTIES IN INTEREST . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -42-
12.11 NOTICES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -42-
12.12 EXPENSES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -43-
12.13 REMEDIES; WAIVER . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -43-
12.14 REPRESENTATION BY COUNSEL; INTERPRETATION . . . . . . . . . . . . . . . . . . . . . . . . . . . . -43-
12.15 SEVERABILITY . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -44-
12.16 ARBITRATION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -44-
12.17 AGENTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -44-
-iii-
5
EXHIBITS
EXHIBIT A Registration Rights Agreement
SCHEDULES
SCHEDULE 3.1 Jurisdictions; Officers and Trust Managers
SCHEDULE 3.2 Capital Stock; Title to Shares
SCHEDULE 3.3 Additional Liabilities or Contingencies
SCHEDULE 3.5 Permits and Approvals
SCHEDULE 3.6 Litigation
SCHEDULE 3.7 Compliance with Law and Permits
SCHEDULE 3.8 Dividends and Other Distributions
SCHEDULE 3.9 Certain Interests
SCHEDULE 3.11 Seller Benefit Plans
SCHEDULE 3.13 Properties and Encumbrances
SCHEDULE 3.14 Taxes
SCHEDULE 3.15 Material Contracts
SCHEDULE 3.16 Insurance
SCHEDULE 3.17 Environmental Compliance
SCHEDULE 3.18 Trust Records
SCHEDULE 5.3 Conduct of Business
SCHEDULE 8.5 List of Opinions of Seller's Counsel
SCHEDULE 9.4 List of Opinions of Investor's Counsel
-iv-
6
COMMON SHARE PURCHASE AGREEMENT
THIS COMMON SHARE PURCHASE AGREEMENT (this "AGREEMENT") is made and
entered into as of July 3, 1997, by and among AMERICAN INDUSTRIAL PROPERTIES
REIT, a Texas real estate investment trust ("SELLER"), and ABKB/LASALLE
SECURITIES LIMITED PARTNERSHIP, a registered investment advisor (the
"Investor"), as agent for and for the benefit of a particular client.
R E C I T A L S
A. Seller qualifies and operates as a real estate investment
trust for federal income tax purposes.
B. Seller desires to sell to Investor, and Investor desires to
purchase from Seller, the number of Common Shares having an aggregate purchase
price as specified herein (the "Shares") upon the terms and subject to the
conditions set forth in this Agreement.
C. The proceeds from the sale of the Shares are to be used for
the purposes set forth in this Agreement.
A G R E E M E N T
NOW, THEREFORE, in consideration of the premises and the
mutual covenants and agreements set forth in this Agreement, and for other good
and valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, the parties agree as follows:
SECTION 1. DEFINITIONS AND RULES OF CONSTRUCTION
a. DEFINITIONS. The capitalized terms used in
this Agreement, the Exhibits and the Schedules
attached hereto shall have the meanings set forth
below:
"ACTION" means any action, complaint, investigation, suit or
other proceeding, whether civil or criminal, in law or in equity, or before any
mediator, arbitrator or Governmental Entity.
"AFFILIATE" means a Person that directly, or indirectly
through one or more intermediaries, controls, or is controlled by, or is under
common control with, a specified Person.
"AGREEMENT" means this Common Share Purchase Agreement, by and
between Seller and the Investor, as agent for and for the benefit of a
particular client, as amended from time to time pursuant to the terms of this
Agreement, together with all Exhibits and all Schedules attached hereto.
-1-
7
"ANNUAL MEETING" shall mean the Seller's annual meeting that
was held on June 30, 1997.
"APPROVAL" means any approval, authorization, consent,
qualification or registration, or any waiver of the foregoing, or any notice,
statement or other communication required to be filed with or delivered to any
Governmental Entity or any other Person.
"ASSOCIATE" of a Person means
(i) a corporation or organization (other than Seller or a
party to this Agreement) of which such Person is an officer or partner or is,
directly or indirectly, the beneficial owner of 10% or more of any class of
equity securities;
(ii) any trust or other estate in which such Person has a
substantial beneficial interest or as to which such Person serves as trustee or
in a similar capacity; and
(iii) any relative or spouse of such Person who has the same
residence as such Person.
"AUDITED FINANCIAL STATEMENTS" has the meaning set forth in
Section 3.3(a) of this Agreement.
"AUDITORS" means Ernst & Young, LLP, independent public
accountants to Seller.
"BANKRUPTCY CODE" means Title 11 of the United States Code
entitled "Bankruptcy," as now and hereafter in effect, and any successor
statute, as well as any existing or future law of any jurisdiction, foreign or
domestic, relating to bankruptcy, insolvency, reorganization, conservatorship
or relief of debtors.
"BUSINESS DAY" means a day other than a Saturday, a Sunday or
a day on which banking institutions in the State of New York are authorized or
obligated by law or executive order to close.
"CAPITALIZED LEASE" means any lease of property, real or
personal, the obligations of the lessee in respect of which are required in
accordance with GAAP to be capitalized on a balance sheet of the lessee.
"CAPITALIZED LEASE OBLIGATION" means, as to any Person, the
obligation of such Person to pay rent or other amounts under a Capitalized
Lease and, for purposes of this Agreement, the amount of such obligation shall
be the capitalized amount thereof, determined in accordance with GAAP.
"CAPITAL STOCK" means any capital stock, beneficial interest
or other equity interest, or any securities convertible into or exchangeable or
exercisable for capital stock, beneficial interests
-2-
8
or other equity interests, or any other rights, warrants or options to acquire
any of the foregoing securities.
"CHARTER DOCUMENTS" means Seller's Third Amended and Restated
Declaration of Trust and Fourth Amended and Restated Bylaws as in effect as of
the date of this Agreement.
"CLOSING" has the meaning set forth in Section 2.3(a) of this
Agreement.
"CLOSING AGREEMENT" shall mean a written and legally binding
agreement with a taxing authority relating to Taxes.
"CLOSING DATE" means each date specified in Section 2.3(a) of
this Agreement.
"CODE" means the Internal Revenue Code of 1986, as amended,
and, as applicable, the regulations promulgated thereunder.
"COMMISSION" means the United States Securities and Exchange
Commission or any successor entity.
"COMMON SHARES" means common shares of beneficial interest,
par value $.10 per share, of Seller.
"CONTRACT" means any agreement, arrangement, bond, commitment,
franchise, indemnity, indenture, instrument, lease, license or understanding,
whether or not in writing.
"CURRENTLY OUTSTANDING SHARES" has the meaning set forth in
Section 2.4 of this Agreement.
"DEBT" means, with respect to any Person, without duplication,
and without regard to whether it is contingent or direct, (a) all indebtedness
of such Person for borrowed money, (b) any obligation incurred for all or any
part of the purchase price of property or services, other than accounts payable
and accrued expenses included in current liabilities in accordance with GAAP
and incurred in respect of property or services purchased in the ordinary
course of business, (c) indebtedness or obligations evidenced by bonds, notes
or similar written instruments, (d) all reimbursement obligations of such
Person (whether contingent or otherwise) in respect of letters of credit,
banker's acceptances, surety or other bonds and similar instruments, (e) any
obligation (whether or not such Person has assumed or becomes liable for the
payment of such obligation) secured by a lien on any property of such Person,
(f) all Capitalized Lease Obligations of such Person and (g) all Guarantees by
such Person of obligations of any other Person of the types referred to in the
foregoing clauses (a) through (f), inclusive, excluding, (i) the payment of
commissions to Prudential Securities Incorporated in connection with the
transactions contemplated herein and approved at the Annual Meeting, and (ii) a
$25 million line of credit from Prudential Securities Incorporated or its
Affiliates (the "Prudential Line of Credit").
-3-
9
"ENCUMBRANCE" means any claim, charge, easement, encumbrance,
lease, covenant, security interest, lien, option, pledge, rights of others,
preferential right, right of first refusal or restriction (whether on voting,
sale, transfer, disposition or otherwise), whether imposed by agreement,
understanding, law, equity or otherwise, except that "Encumbrance" does not
include any such item that (i) is reflected in the Audited Financial Statements
or (ii) constitutes a statutory lien arising in the ordinary course of
business.
"ENVIRONMENTAL CLAIMS" means any of the following to the
extent they relate to, or arise out of, directly or indirectly, Environmental
Noncompliance with respect to the Properties or actual or alleged Environmental
Conditions or any Notification which may lead to: (i) claims, demands, suits,
causes of action for personal injury, death or property damage; (ii) claims for
actual or threatened damages to natural resources; (iii) claims for the
recovery of response costs, or administrative or judicial orders directing the
performance of investigations, response or remedial actions under any
Environmental Law; (iv) a requirement to implement "corrective action" pursuant
to any restitution, contribution or equitable indemnity to third parties or any
Governmental Entity; (v) fines, penalties, liens against the Properties; (vi)
claims for injunctive relief or other orders or notices of violation from any
Governmental Entity; or (vii) with regard to any present or former employees,
tenants or guests, exposure to or injury from Environmental Conditions.
"ENVIRONMENTAL CONDITIONS" means conditions of the
environment, including the ocean, natural resources (including flora and
fauna), soil, surface water, ground water, any actual or potential drinking or
water supply, subsurface strata, or air, including ambient air, relating to or
arising out of the use, handling, storage, treatment, recycling, generation,
transportation, release, spilling, leaking, pumping, pouring, emptying,
discharging, injecting, escaping, leaching, disposal, dumping or threatened
release of Hazardous Materials from, in, on, or onto the Properties.
"ENVIRONMENTAL NONCOMPLIANCE" means any of the following to
the extent they are applicable to the Properties or alleged to be applicable to
the Properties or to Seller, Subsidiaries or a Seller Partnership: (i) the
Release of any Hazardous Material into the environment, any storm drain, sewer,
septic system or publicly-owned treatment works, in violation of any effluent
or emission limitations, standards or other criteria or guidelines established
by any Environmental Law; (ii) any noncompliance of physical structure,
equipment, process or premises with the requirements of building or fire codes,
zoning or land use regulations or ordinances or conditional use permits; (iii)
any noncompliance with federal, state or local requirements governing
occupational safety and health; (iv) any operations, procedures and designs at
or on the Properties which do not conform to the statutory or regulatory
requirements of any Law (including land use regulations and ordinances)
intended to protect public health, welfare and the environment; (v) the failure
to have obtained permits, licenses, variances or other governmental
authorizations necessary for the legal use and/or operation of any equipment,
process or any activity at the Properties; or (vi) the operation and/or use of
any process or equipment in violation of any permit condition, schedule of
compliance, administrative or court order.
-4-
10
"ENVIRONMENTAL PERMITS" has the meaning set forth in Section
3.17(a) of this Agreement.
"EQUITABLE REMEDIES" has the meaning set forth in Section 3.5
of this Agreement.
"ERISA" means the Employee Retirement Income Security Act of
1974, as amended.
"EXCHANGE ACT" means the Securities Exchange Act of 1934, as
amended.
"GAAP" means generally accepted accounting principles as in
effect from time to time.
"GOVERNMENTAL ENTITY" means any agency, bureau, commission,
court, department, official, political subdivision, tribunal or other
instrumentality of any government, whether federal, state or local, domestic or
foreign.
"GUARANTEE" means, with respect to any Person, any guarantee
or other contingent liability (other than any endorsement for collection or
deposit in the ordinary course of business and performance bonds, indemnities
and similar obligations not guaranteeing or otherwise insuring payment of any
Debt or other financial obligation), direct or indirect, of such Person with
respect to any Debt or other obligation of another Person (including
obligations under leases), through an agreement or otherwise, including (a) any
other endorsement or discount with recourse or undertaking substantially
equivalent to or having economic effect similar to a guarantee in respect of
any such Debt or other obligations and (b) any agreement (i) to purchase, or to
advance or supply funds for the payment or purchase of, any such obligations,
(ii) to purchase, sell or lease property, products, materials or supplies, or
transportation or services, in respect of enabling such other Person to pay any
such obligation or to assure the owner thereof against loss regardless of the
delivery or nondelivery of the property, products, materials or supplies or
transportation or services or (iii) to make any loan, advance or capital
contribution to or other investment in, or to otherwise provide funds to or
for, such other Person in respect of enabling such Person to satisfy any
obligation (including any liability for a dividend, stock liquidation payment
or expense) or to assure a minimum equity, working capital or other balance
sheet condition in respect of any such obligation. The amount of any Guarantee
shall be equal to the outstanding amount of the obligations of such other
Person directly or indirectly guaranteed.
"HAZARDOUS MATERIALS" means any substance, matter, material,
waste, solid, liquid, gas, or pollutant, the generation, storage, disposal,
handling, recycling, Release (or threatened Release) or treatment of which is
regulated, prohibited, or limited under: (1) the Resource Conservation and
Recovery Act, as amended by the Hazardous and Solid Waste Amendments of 1984,
as now or hereafter amended ("RCRA") (42 U.S.C. Sections 6901 et seq.); (ii)
the Comprehensive Environmental Response, Compensation and Liability Act, as
amended by the Superfund Amendments and Reauthorization Act of 1986, as now or
hereafter amended ("CERCLA") (42 U.S.C. Sections 9601 et seq.); (iii) the Clean
Water Act, as now or hereafter
-5-
11
amended ("CWA") (33 U.S.C. Sections 1251 et seq.); (iv) the Toxic Substances
Control Act, as now or hereafter amended ("TSCA") (15 U.S.C. Sections 2601 et
seq.); (v) the Clean Air Act, as now or hereafter amended ("CAA") (42 U.S.C.
Sections 7401 et seq.) (RCRA, CERCLA, CWA, TSCA and CAA are collectively
referred to herein as the "FEDERAL ENVIRONMENTAL LAWS"); (vi) any local, state
or foreign law, statute, regulation, or ordinance analogous to any of the
Federal Environmental Laws; or (vii) any other federal, state, local, or
foreign law (including any common law), statute, regulation, or ordinance
regulating, prohibiting, or otherwise restricting the placement, Release,
threatened Release, generation, treatment, or disposal upon or into any
environmental media of any substance, pollutant, or waste which is now or
hereafter classified or considered to be hazardous or toxic to human health or
the environment. All of the laws, statutes, regulations and ordinances referred
to in subsections (vi) and (vii) above, together with the Federal Environmental
Laws, are collectively referred to herein as "ENVIRONMENTAL LAWS." The term
"HAZARDOUS MATERIALS" shall also include: (a) gasoline, diesel fuel, fuel oil,
motor oil, waste oil, and any other petroleum hydrocarbons, including any
additives or other by-products associated therewith; (b) "friable" asbestos (as
the term "friable" is defined under 40 C.F.R. Section 61.141) and friable
asbestos-containing materials in any form; (c) polychlorinated biphenyls; or
(d) any substance the presence of which on the Properties, (x) requires
reporting or remediation under any Environmental Law, (y) causes or threatens
to cause a nuisance on the Properties or poses or threatens to pose a hazard to
the health or safety of persons on the Properties, or (z) which, if it emanated
or migrated from the Properties, could constitute a trespass, nuisance or
health or safety hazard to persons on adjacent property.
"INDEMNIFIABLE CLAIM" means any Loss for or against which any
Person is entitled to indemnification under this Agreement.
"INDEMNIFIED PERSON" shall mean each Investor Indemnified
Person and each Seller Indemnified Party.
"INDEMNIFYING PARTY" has the meaning set forth in Section
11.3(a) of this Agreement.
"INITIAL REIT YEAR" has the meaning set forth in Section
3.14(c) of this Agreement.
"INVESTMENT COMMITTEE" means the investment committee of the
Seller's Board of Trust Managers which after the Annual Meeting shall consist
of one Trust Manager designee of Investor, one Trust Manager designee of
Realco, one Trust Manager designee of MSAM and one independent Trust Manager.
"INVESTOR" means ABKB/LaSalle Securities Limited Partnership,
a registered investment advisor.
"INVESTOR INDEMNIFIED PERSON" has the meaning set forth in
Section 11.1 of this Agreement.
-6-
12
"LAW" means any constitutional provision, statute or other
law, rule, regulation or interpretation of any thereof and any Order of any
Governmental Entity (including Environmental Laws, including, without
limitation, the Americans with Disabilities Act).
"LOSS" means any claim, amount paid in settlement, cost,
damage (including, without limitation, consequential damage), disbursement,
expense (including legal fees and expenses), liability, loss, deficiency,
diminution in value or obligation.
"MATERIAL CONTRACT" means any Contract to which Seller, any
Subsidiary or any Seller Partnership is a party or by which any such Person or
any of their respective Properties are bound that currently is in effect and
(a) after December 31, 1996 obligates Seller, any Subsidiary or any Seller
Partnership to pay an amount equal to $100,000 or more, (b) is one of the group
of Tenant Leases that is anticipated by Seller to produce 66 2/3% of Seller's
gross income during the fiscal year ending December 31, 1997, such group of
Tenant Leases calculated beginning with the Tenant Lease that is anticipated to
produce the most gross income during such period and thereafter in descending
order of magnitude of gross income anticipated to be earned during such period
under each other Tenant Lease until such percentage of gross income is reached,
(c) is a Tenant Lease involving the lease of space in excess of 10,000 square
feet for any Property, (d) other than any Tenant Lease, has an unexpired term
as of December 31, 1996 in excess of five (5) years, (e) other than any Tenant
Lease, contains a covenant not to compete or otherwise significantly restricts
business activities of Seller, any Subsidiary or any Seller Partnership, (f)
provides for the extension of credit by Seller, any Subsidiary or any Seller
Partnership or a line of credit to Seller, any Subsidiary or any Seller
Partnership in excess of $50,000, (g) provides for a guaranty or indemnity by
Seller, any Subsidiary or any Seller Partnership, (h) grants a power of
attorney, agency or similar authority to another Person, (i) contains an option
to purchase or a right of first refusal relating to any of the Properties, (j)
relates to the sale or issuance of any equity securities of Seller or
securities exercisable for or convertible into any equity securities of Seller,
or (k) any other Contract that is not within the general descriptions of
clauses (a) through (j) (i.e., is not a Tenant Lease or within any of the other
general categories listed above) but is material to the business, financial
condition, assets, results of operations or prospects of Seller, Subsidiaries
or Seller Partnerships.
"MINIMUM EQUITY CAPITALIZATION" means $150 million as
calculated using the average closing price of the Common Shares on the New York
Stock Exchange for the 10 trading days immediately preceding the applicable
date of determination multiplied by the current number of issued and
outstanding Common Shares and Common Share equivalents; provided, however, it
shall not in any event include operating partnership units in excess of $50
million.
"MSAM" means Xxxxxx Xxxxxxx Asset Management, Inc., a Delaware
corporation.
"MSAM PURCHASE AGREEMENT" means that certain Common Share
Purchase Agreement dated as of June 20, 1997, by and among Seller, MSRE and
MSAM pursuant to which MSRE and MSAM, as agent and attorney-in-fact on behalf
of certain clients, have agreed to
-7-
13
purchase up to $20 million of Common Shares of Seller on terms and conditions
substantially similar to the terms and conditions contained herein.
"MSAM PURCHASERS" means the clients of MSAM listed on Exhibit
A to the MSAM Purchase Agreement.
"MSRE" means MS Real Estate Special Situations Inc., a
Delaware corporation.
"NOTIFICATION" means any summons, citation, directive, order,
claim, litigation, pleading, investigation, proceeding, judgment, letter or any
other written or oral communication from any Governmental Entity, any entity or
any individual, concerning any intentional or unintentional act or omission
which has resulted in or which may result in any Environmental Noncompliance or
Environmental Claim.
"ORDER" means any decree, injunction, judgment, order, ruling,
assessment or writ.
"OTHER PECUNIARY OWNERS" means the other pecuniary owners for
whom the Investor is acting as agent for and on behalf of in connection with
the purchase of Common Shares of the Seller pursuant to Common Share Purchase
Agreements dated the date hereof similar to this Agreement and who, along with
the Pecuniary Owner, are purchasing Common Shares having an aggregate purchase
price of up to $15 million.
"PECUNIARY OWNER" means the client of Investor for whom
Investor is acting as Agent for and for the benefit of, in connection with the
purchase of the Common Shares pursuant to the Agreement.
"PERMIT" means any license, permit, franchise, certificate of
authority or order, or any waiver of the foregoing, required to be issued by
any Governmental Entity.
"PERSON" means an individual, corporation, partnership,
limited liability company, joint venture, an unincorporated organization,
government or any department or agency thereof, estate, trust, association, or
private foundation within the meaning of Section 509(a) of the Code, or joint
stock company.
"PREEMPTIVE RIGHTS" has the meaning set forth in Section 6.8
of this Agreement.
"PREFERRED SHARES" means any class of capital stock of a
Person which is entitled to a preference or priority over any other class of
capital stock of such Person with respect to any distribution of such Person's
assets, whether with respect to dividends, or upon liquidation or dissolution,
or both.
"PROPERTIES" means the real property owned or leased by
Seller, Subsidiaries and Seller Partnerships listed on Schedule 3.13 hereto.
-8-
14
"PURCHASE PRICE" means, with respect to the Closing Date, the
aggregate price paid for the Common Shares purchased by Investor on the Closing
Date.
"REALCO" means USAA Real Estate Company, a Delaware
corporation.
"REALCO DEBT" has the meaning set forth in Section 3.2 of this
Agreement.
"REGISTRATION RIGHTS AGREEMENT" means the registration rights
agreement among Seller, and Investor, as agent for and on behalf of the
Pecuniary Owner and certain Other Pecuniary Owners, to be executed
contemporaneously with the execution of this Agreement.
"REIT" has the meaning set forth in Section 3.14(b) of this
Agreement.
"RELEASE" means releasing, spilling, leaking, pumping,
pouring, emitting, emptying, discharging, ejecting, escaping, leaching,
disposing, seeping, infiltrating, draining or dumping of any Hazardous
Material. This term shall be interpreted to include both the present and past
tense, as appropriate.
"SCHEDULE" means any schedule attached to this Agreement.
"SEC FILINGS" has the meaning set forth in Section 3.4 of this
Agreement.
"SECURITIES ACT" means the Securities Act of 1933, as amended.
"SELLER" means American Industrial Properties REIT, a Texas
real estate investment trust.
"SELLER BENEFIT PLANS" has the meaning set forth in Section
3.11 of this Agreement.
"SELLER INDEMNIFIED PARTIES" has the meaning set forth in
Section 11.2 of this Agreement.
"SELLER PARTNERSHIPS" has the meaning set forth in Section 3.1
of this Agreement.
"SELLER PERMITS" has the meaning set forth in Section 3.7(b)
of this Agreement.
"SHARE PRICE" has the meaning set forth in Section 2.1 of this
Agreement.
"SHAREHOLDER APPROVAL" means the approval by Seller's
shareholders at the Annual Meeting of the proposal to approve the sale to
Investor of Common Shares having an aggregate
-9-
15
purchase price of up to $15 million, and the authorization of the issuance of a
sufficient number of Common Shares to allow such sale to occur.
"SHARES" has the meaning set forth in Section 2.1 of this
Agreement.
"SUBSIDIARIES" has the meaning set forth in Section 3.1 of
this Agreement.
"TAXES" has the meaning set forth in Section 3.14(a) of this
Agreement.
"TAX RETURN" has the meaning set forth in Section 3.14(b) of
this Agreement.
"TENANT LEASES" has the meaning set forth in Section 3.13(b)
of this Agreement.
"TRUST MANAGERS" means the Trust Managers of Seller.
"THRESHOLD EQUITY CAPITALIZATION" means equity capitalization
of $250 million, calculated in the same manner as Minimum Equity
Capitalization.
"UNAUDITED FINANCIAL STATEMENTS" has the meaning set forth in
Section 3.3(b) of this Agreement.
b. RULES OF CONSTRUCTION. This Agreement shall be
construed in accordance with the following rules of
construction:
(a) the terms defined in this Agreement include the plural as
well as the singular;
(b) all accounting terms not otherwise defined herein have the
meanings given such terms under GAAP;
(c) all references in the Agreement to designated "Sections" and
other subdivisions are to the designated Sections and other subdivisions of the
body of this Agreement;
(d) pronouns of either gender or neuter shall include, as
appropriate, the other pronoun forms;
(e) the words "herein," "hereof" and "hereunder" and other words
of similar import refer to this Agreement as a whole and not to any particular
Section or other subdivision;
(f) the words "includes" and "including" are not limiting; and
(g) knowledge of any Subsidiary or any Seller Partnership shall
be deemed to be knowledge of Seller.
-10-
16
SECTION 2. PURCHASE AND SALE
a. PURCHASE AND SALE OF THE COMMON SHARES. Subject to
the terms and conditions set forth herein, Seller
shall sell and issue to Investor, and Investor shall
purchase from Seller, up to an aggregate of
1,956,122 Common Shares (the "Shares") at a price of
$2.45 per Common Share, subject to adjustment as set
forth in Section 5.5 (the "Share Price").
b. USE OF PROCEEDS. The proceeds of the purchase of
Shares hereunder shall be used by the Seller to
purchase real property as approved by the Investment
Committee.
c. CLOSING.
i. The Closing shall occur on or before July 11, 1997,
(the "CLOSING DATE"), and the Investor shall
purchase the number of Shares specified in Section
2.1.
ii. At the Closing, Seller shall deliver to the Investor
the certificates evidencing the Shares purchased by
the Investor on the applicable Closing Date,
registered in the name of the Investor or its
nominee. In addition, all other actions shall be
taken and all other documents shall be delivered
which are necessary to consummate the purchase and
sale of the Shares purchased by the Investor on the
applicable Closing Date.
iii. At the Closing, the Investor shall pay and deliver
to Seller the Purchase Price for the Shares being
purchased by the Investor at the Closing.
SECTION 3. REPRESENTATIONS AND WARRANTIES OF SELLER
Seller represents and warrants to, and agrees with, the Investor and
the Pecuniary Owner as follows:
a. ORGANIZATION AND RELATED MATTERS. Seller is duly
organized, validly existing and in good standing
under the laws of the State of Texas. Seller has all
necessary power and authority to execute, deliver
and perform this Agreement. Schedule 3.1 lists all
Subsidiaries (the "SUBSIDIARIES") and all
Partnerships of Seller (the "SELLER PARTNERSHIPS")
and correctly sets forth Seller's ownership interest
therein, the jurisdiction in which each Subsidiary
and each Seller Partnership is organized and each
jurisdiction in which Seller, each Subsidiary and
each Seller Partnership is and is required to be
qualified or licensed to do business as a foreign
Person. Each Subsidiary and each Seller Partnership
is duly organized, validly existing and, with
-11-
17
respect to each Subsidiary, in good standing under
the laws of the jurisdiction of its incorporation or
organization. Seller, Subsidiaries and Seller
Partnerships have all necessary power (whether
corporate, partnership or other power, as
applicable) and authority to own their respective
properties and assets and to carry on their
respective businesses as now conducted. Seller,
Subsidiaries and Seller Partnerships are duly
qualified or licensed to do business as foreign
Persons in good standing in all jurisdictions in
which the character or the location of the assets
owned or leased by any of them or the nature of the
business conducted by any of them requires licensing
or qualification, except where the failure to be so
qualified or licensed is not and will not be
material to their respective businesses, financial
condition, assets, results of operations or
prospects. Schedule 3.1 correctly lists the current
Trust Managers, directors, general partners and
executive officers of Seller, Subsidiaries and
Seller Partnerships. True, correct and complete
copies of the Charter Documents and the charter or
organizational documents of Subsidiaries and Seller
Partnerships (including the declaration of trust,
articles or certificate of incorporation, bylaws and
partnership agreements, as applicable) as in effect
on the date hereof have been delivered to the
Investor. Seller is registered and is a reporting
company under the Exchange Act. Neither any
Subsidiary nor any Seller Partnership is registered
or is a reporting company under the Exchange Act.
Except as listed on Schedule 3.1, Seller does not
directly or indirectly own or control any equity
interest in any Person.
b. CAPITAL STOCK; TITLE TO SHARES. The authorized
Capital Stock of Seller consists of 500,000,000
Common Shares, 10,000,000 of which are issued and
outstanding and 10,000,000 Preferred Shares, none of
which are issued and outstanding. Seller owns all of
the outstanding Capital Stock of Subsidiaries free
and clear of any Encumbrances, equities and claims
except as specified in Schedule 3.2. Seller owns the
equity interest in each Seller Partnership free and
clear of any Encumbrances, equities and claims
except as specified in Schedule 3.2. No Common
Shares or Capital Stock of any Subsidiary are held
in treasury. Except as set forth in Schedule 3.2 or
as contemplated in this Agreement, there are no
outstanding Contracts or other rights to subscribe
for or purchase, or Contracts or other obligations
to issue or grant any rights to acquire, any Common
Shares, any Capital Stock of any Subsidiary or any
Seller Partnership or to restructure or recapitalize
Seller, any Subsidiary or any Seller Partnership.
Except as set forth in Schedule 3.2, there are no
outstanding Contracts of Seller, any Subsidiary or
any Seller Partnership to repurchase, redeem or
otherwise acquire any of their respective Common
Shares or Capital Stock, as applicable. No bonds,
debentures, notes or other indebtedness having
general voting rights (or convertible into
securities having general voting rights) of Seller,
any
-12-
18
Subsidiary or any Seller Partnership are issued or
outstanding other than the Seller's note in the
aggregate principal amount of $5,449,618 (the
"REALCO DEBT") held by Realco. There are no voting
trusts or other agreements or understandings to
which Seller, any Subsidiary or any Seller
Partnership is a party or is bound, or to the
knowledge of Seller, to which any other Person is a
party or is bound, with respect to the voting of the
Common Shares or the Capital Stock of any Subsidiary
or any Seller Partnership. All issued and
outstanding Common Shares and Capital Stock of all
Subsidiaries and Seller Partnerships were duly
authorized and validly issued at the time of
issuance and are fully paid and nonassessable.
Except as contemplated by this Agreement, there are
no preemptive rights in respect of any Common Shares
or Capital Stock of any Subsidiary or any Seller
Partnership. Upon any issuance of Shares to the
Investor, such Shares will have been duly
authorized, validly issued and be validly
outstanding, fully paid and nonassessable, and the
issuance of such Shares will not be subject to
preemptive rights of any other shareholder of Seller
and such Shares will be issued in compliance with
all applicable federal and state laws and stock
trading requirements. Each Buyer shall receive good
and marketable title to all Shares acquired by such
Buyer pursuant to this Agreement, free and clear of
all Encumbrances created by Seller, except for
restrictions on the transferability of the Shares
set forth in the Charter Documents or generally
imposed on securities under federal and state
securities laws. Such Shares will rank equally with
all other Common Shares of Seller with respect to
priority in payment of dividends and the
distribution of assets upon any liquidation of
Seller, and except for a class of preferred shares
of beneficial interest which the shareholders
approved at the Annual Meeting, none of which shall
be issued and outstanding as of the First Closing
Date, there are no shares of any class of Capital
Stock of Seller having any priority in respect
thereof. All of the outstanding securities of Seller
were issued in compliance with all applicable
federal and state securities laws.
c. FINANCIAL STATEMENTS.
i. AUDITED FINANCIAL STATEMENTS. Seller has delivered
to the Investor the consolidated balance sheets of
Seller (which reflect the financial position of all
Subsidiaries and Seller Partnerships), as of
December 31, 1994, 1995 and 1996, and the respective
related consolidated statements of operations, cash
flows and shareholders' equity for the periods then
ended (collectively, the "AUDITED FINANCIAL
STATEMENTS"). The Audited Financial Statements have
been examined by the Auditors whose report thereon
is attached to such financial statements. All
Audited Financial Statements have been prepared in
conformity with GAAP applied on a consistent basis
(except for changes, if any, disclosed therein). The
Audited Financial Statements
-13-
19
present fairly, in all material respects, the
consolidated financial condition and results of
operations of Seller, Subsidiaries and Seller
Partnerships as of their respective dates and
periods. Since December 31, 1996, there has been no
change in the significant accounting policies or
procedures of Seller, any Subsidiary or any Seller
Partnership. Seller has not received any annual
management letters from the Auditors since March 5,
1997.
ii. UNAUDITED FINANCIAL STATEMENTS. Seller has
delivered to the Investor the consolidated balance
sheets of Seller (which reflect the financial
position of all Subsidiaries and Seller
Partnerships), as of March 31, 1997 and the related
consolidated statements of operations, cash flows
and shareholders' equity for the period then ended
(the "UNAUDITED FINANCIAL STATEMENTS"). The
Unaudited Financial Statements have been prepared in
conformity with GAAP applied on a consistent basis
(except for changes, if any, disclosed therein). The
Unaudited Financial Statements present fairly, in
all material respects, the consolidated financial
condition and results of operations of Seller,
Subsidiaries and Seller Partnerships as of March 31,
1997.
iii. NO MATERIAL ADVERSE CHANGES. Since March 31, 1997,
except as set forth in Schedule 3.3, or specifically
disclosed in any SEC Filings filed since March 31,
1997 and prior to the date of this Agreement (copies
of which have been provided to the Investor),
Seller, Subsidiaries and Seller Partnerships have
conducted their respective businesses only in the
ordinary course and in a manner consistent with past
practice and, whether or not in the ordinary course
of business, there has not been, occurred or arisen:
(1) any change in or event affecting the business of
Seller, Subsidiaries and Seller Partnerships that has
had a material adverse effect on such business or any
materially adverse change or trend in the business,
financial condition, assets, results of operations or
prospects of Seller, Subsidiaries or Seller
Partnerships, or
(2) any condition or action which would be proscribed
by (or require consent under) Section 5.3 had it
existed, occurred or arisen after the date of this
Agreement, or
(3) any casualty, loss, damage or destruction of any
real property of Seller, any Subsidiary or any Seller
Partnership that has involved or may involve a Loss
(whether or not covered by insurance) to Seller, any
Subsidiary or any Seller Partnership of more than
$100,000 individually, or $300,000 in the aggregate.
-14-
20
iv. NO OTHER LIABILITIES OR CONTINGENCIES. Neither
Seller nor any Subsidiary nor any Seller Partnership
has any material liability of any nature, whether
accrued, absolute, contingent or otherwise, and
whether due or to become due, probable of assertion
or not, except liabilities that (i) were incurred
after March 31, 1997 in the ordinary course of
business in a manner consistent with past practice
and are not material in amount, or (ii) are set forth
in Schedule 3.3 hereto.
d. SEC REPORTS. Seller has filed with the Commission
all forms, reports, statements, including
registration statements, and other material
documents, together with any amendments required to
be made with respect thereto, that were required to
be filed with the Commission since December 31, 1994.
Such forms, reports, statements, including
registration statements, and other material documents
required to be filed with the Commission by Seller
since December 31, 1994 are collectively referred to
in this Agreement as the "SEC FILINGS." Seller has
made available to the Investor all SEC Filings. As of
their respective dates, (x) each of the SEC Filings,
including the financial statements contained therein,
was true and complete in all material respects, (y)
each of the SEC Filings, including the financial
statements contained therein, complied in all
material respects with the Securities Act and
Exchange Act, as applicable, and the rules and
regulations promulgated thereunder, and (z) none
contained any untrue statement of a material fact or
omitted to state a material fact required to be
stated therein or necessary to make the statements
therein, in light of the circumstances under which
they were made, not misleading.
e. AUTHORIZATION; NO CONFLICTS. Seller has the
requisite power and authority to enter into this
Agreement and the Registration Rights Agreement and
to carry out its obligations hereunder and
thereunder. Except for the share ownership limitation
contained therein, the Charter Documents do not in
any way prevent or restrict the transactions
contemplated hereby or preclude the Investor acting
as agent on behalf of the Pecuniary Owner, or the
Pecuniary Owner from owning or holding the amount,
value or class of Common Shares to be purchased
hereby. The execution, delivery and performance of
this Agreement by Seller has been duly and validly
authorized by the Trust Managers and by all other
necessary action on the part of Seller, and no other
proceedings on the part of Seller (including Trust
Manager and shareholder approval) are necessary to
authorize this Agreement or to consummate the
transactions contemplated hereby except the
shareholder consent needed to increase the number of
authorized Common Shares to allow the issuance and
sale of Shares on any Closing Date to occur. This
Agreement has been duly
-15-
21
executed and delivered by Seller and constitutes the
legally valid and binding obligation of Seller,
enforceable against Seller in accordance with its
terms, except as such enforceability may be limited
by bankruptcy, insolvency, reorganization, moratorium
and other similar laws and equitable principles
relating to or limiting creditors' rights generally
(collectively, "EQUITABLE REMEDIES"). Except as set
forth in Schedule 3.5, the execution, delivery and
performance of this Agreement by Seller and the
consummation by Seller of the transactions
contemplated hereby will not (i) conflict with or
result in the breach or violation of any provisions
of, or trigger any preferential rights under, the
Charter Documents or the charter or organizational
documents of Subsidiaries or Seller Partnerships,
(ii) result in a breach or violation of, a default
under, or the triggering of any payment or other
material obligations pursuant to, or accelerate
vesting under, any Seller Benefit Plans or any grant
or award thereunder or any employment or consulting
agreement or arrangement of Seller, any Subsidiary or
any Seller Partnership, (iii) violate, conflict with,
result in a breach of any provision of, constitute a
default (or an event which, with notice or lapse of
time or both, would constitute a default) under,
result in the termination or in a right of
termination or cancellation of, accelerate the
performance required by, result in the creation of
any Encumbrance upon any Properties under, result in
the triggering of any rights under, or result in
being declared void, voidable or without further
binding effect, any of the terms or provisions of any
Material Contract of Seller, any Subsidiary or any
Seller Partnership or (iv) violate any Law. Schedule
3.5 lists all Permits and Approvals required to be
obtained by Seller, Subsidiaries and Seller
Partnerships to consummate the transactions
contemplated hereby. Except for matters identified in
Schedule 3.5 as requiring that certain actions be
taken by or with respect to a third party or
Governmental Entity, the execution and delivery of
this Agreement by Seller and the consummation of the
transactions contemplated hereby will not require the
consent, authorization or approval or filing or
registration with, or the issuance of any Permit by,
any other third party or Governmental Entity under
the terms of any applicable Laws or Material
Contracts of Seller, Subsidiaries or Seller
Partnerships.
f. LEGAL PROCEEDINGS. Except as set forth in Schedule
3.6, there is no Order or Action pending, or to the
knowledge of Seller threatened, against or affecting
Seller, any Subsidiary, any Seller Partnership, any
Trust Manager in his capacity as a Trust Manager of
Seller or any of the Properties which (i) questions
the validity of this Agreement, the Registration
Rights Agreement or any action taken or to be taken
pursuant hereto or thereto, (ii) may adversely affect
the right, title or interest of the Investor to the
Shares or (iii) individually or when aggregated with
one or
-16-
22
more other Orders or Actions has, or if determined
adversely will have, a material adverse effect on the
business, financial condition, assets, results of
operations or prospects of Seller, any Subsidiary or
any Seller Partnership or on Seller's ability to
perform this Agreement. To Seller's knowledge,
Schedule 3.6 lists each Order and each Action that
(i) involves a claim or potential claim of aggregate
liability in excess of $50,000 against Seller, any
Subsidiary or any Seller Partnership that is not
covered by insurance, (ii) involves a claim or
potential claim of aggregate liability brought by
Seller, any Subsidiary or any Seller Partnership
against a tenant under any Tenant Lease which Tenant
Lease obligates such tenant to pay rent to Seller,
any Subsidiary or any Seller Partnership during the
year ending December 31, 1997 in an amount equal to
or in excess of $150,000, or (iii) that enjoins or
seeks to enjoin any activity by Seller, any
Subsidiary or any Seller Partnership. There is no
matter as to which Seller, any Subsidiary or any
Seller Partnership has received any notice, claim or
assertion in connection with which any such Person
has or may reasonably be expected to have any right
to be indemnified by Seller, any Subsidiary or any
Seller Partnership.
g. COMPLIANCE WITH LAW AND PERMITS.
i. Seller, Subsidiaries and Seller Partnerships are
organized and have conducted their respective
businesses in accordance with applicable Laws,
neither Seller nor any Subsidiaries or Seller
Partnerships has received any notice of violation of
any Laws which remains uncorrected, and the
respective forms, procedures and practices of Seller,
Subsidiaries and Seller Partnerships are in
compliance with all such Laws, to the extent
applicable, the violation of which would have a
material adverse effect on the respective businesses,
financial condition, assets, results of operations or
prospects of Seller, Subsidiaries and Seller
Partnerships.
ii. Except as set forth in Schedule 3.7, Seller,
Subsidiaries and Seller Partnerships hold all
permits, licenses, variances, exemptions,
authorizations, orders and approvals of all
Governmental Entities necessary for the lawful
conduct of their respective businesses (the "SELLER
PERMITS") and Seller, Subsidiaries and Seller
Partnerships are in compliance with the terms of the
Seller Permits relating to each such Person, except
where the failure to hold such Seller Permits or be
in compliance therewith would not, individually or in
the aggregate, have a material adverse effect on the
business, financial condition, assets, results of
operations or prospects of Seller, Subsidiaries or
Seller Partnerships. Seller has made available to the
Investor correct and complete copies of all Seller
Permits. Except as set forth in Schedule 3.7, to the
knowledge of the Seller, no investigation or review
by any Governmental Entity with respect to the Seller
Permits is pending or threatened.
-17-
23
h. DIVIDENDS AND OTHER DISTRIBUTIONS. Except as set
forth in Schedule 3.8, there has been no dividend or
other distribution of assets or securities by Seller
or Seller Partnerships (other than Seller
Partnerships in which Seller owns 100% beneficial
interest) whether consisting of money, property or
any other thing of value, declared, issued or paid to
or for the benefit of Seller subsequent to December
31, 1996.
i. CERTAIN INTERESTS. Except as set forth in Schedule
3.1 and Schedule 3.9, no Affiliate of Seller, any
Subsidiary or any Seller Partnership, nor any of
their respective officers, Trust Managers, directors
or partners, nor any Associate of any such
individual, has any material interest in any property
used in or pertaining to the respective businesses of
Seller, any Subsidiary or any Seller Partnership.
Except as set forth in Schedule 3.1 and Schedule 3.9,
no such Person is indebted or otherwise obligated to
Seller, any Subsidiary or any Seller Partnership.
Except as set forth in Schedule 3.9, Seller,
Subsidiaries and Seller Partnerships are not indebted
or otherwise obligated to any such Person, except for
amounts due under normal arrangements applicable to
all employees generally as to salary or reimbursement
of ordinary business expenses not unusual in amount
or significance. Except as set forth in Schedule 3.1
and Schedule 3.9, there are no material transactions
between Seller, any Subsidiary or any Seller
Partnership and any Affiliate of Seller, any
Subsidiary or any Seller Partnership or any Associate
of any such Affiliate that have continuing
obligations of any party thereunder. Except as set
forth in Schedule 3.9, the consummation of the
transactions contemplated by this Agreement will not
(either alone, or upon the occurrence of any act or
event, or with the lapse of time, or both) result in
any compensation or severance or other payment or
benefit arising or becoming due from Seller, any
Subsidiary or any Seller Partnership or any of its
assigns to any Person.
j. NO BROKERS OR FINDERS. No agent, broker, finder,
or investment or commercial banker, or other Person
or firm engaged by or acting on behalf of Seller or
any of its Affiliates in connection with the
negotiation, execution or performance of this
Agreement or the transactions contemplated by this
Agreement, is or will be entitled to any brokerage or
finder's or similar fee or other commission as a
result of this Agreement or such transactions except
for a fee payable to Prudential Securities
Incorporated.
-18-
24
k. EMPLOYEE BENEFIT PLANS. Schedule 3.11 lists all
employee benefit plans and collective bargaining,
labor and employment agreements or other similar
benefit arrangements to which either Seller, any
Subsidiary, or any Seller Partnership is a party or
by which either Seller, any Subsidiary, or any Seller
Partnership is bound (collectively, the "SELLER
BENEFIT PLANS"), including (i) any profit-sharing,
deferred compensation, bonus, stock option, stock
purchase, pension, retainer, consulting, retirement,
severance, welfare or incentive plan, agreement or
arrangement, (ii) any plan, agreement or arrangement
providing for "fringe benefits" or perquisites to
employees, officers, directors, trust managers or
agents, including benefits relating to automobiles,
clubs, vacation, child care, parenting, sabbatical,
sick leave, medical, dental, hospitalization, life
insurance and other types of insurance, (iii) any
employment agreement not terminable on 30 days (or
less) written notice or (iv) any other "employee
benefit plan" within the meaning of Section 3(3) of
ERISA. True and complete copies of the Seller
Benefit Plans, current descriptive booklets and
summary plan descriptions of the Seller Benefit
Plans, any relevant trust agreements or insurance
policies or contracts and, if applicable, the most
recent annual return on Form 5500 (or equivalent
form) have been made available to the Investor. To
the extent applicable, the Seller Benefit Plans
comply, in all material respects, with the
requirements of ERISA and the Code. Except as set
forth in Schedule 3.11, no Seller Benefit Plan is or
is intended to be a stock bonus, pension or
profit-sharing plan within the meaning of Section
401(a) of the Code. Neither any Seller Benefit Plan
nor Seller, any Subsidiary, or any Seller Partnership
has incurred any liability or penalty under Section
4975 of the Code or Section 502(i) of ERISA. Each
Seller Benefit Plan has been maintained and
administered in all material respects in compliance
with its terms and with ERISA and the Code to the
extent applicable thereto. Except as set forth in
Schedule 3.11, there are no pending, or to the
knowledge of Seller threatened, claims (other than
pursuant to the terms of any such plan) against or
otherwise involving any of the Seller Benefit Plans
and no Action has been brought against or with
respect to any Seller Benefit Plan, and neither
Seller nor any Subsidiary nor any Seller Partnership
has incurred any liability to any party with respect
to any Seller Benefit Plan. All contributions
required to be made to the Seller Benefit Plans have
been made or provided for. Except as set forth in
Schedule 3.11, neither Seller nor any Subsidiary nor
any Seller Partnership maintains or contributes to
any plan or arrangement which provides or has any
liability to provide life insurance or medical or
other employee welfare benefits to any employee or
former employee upon his retirement or termination of
employment and neither Seller nor any Subsidiary nor
any Seller Partnership has represented, promised or
contracted (whether in oral or written form) to any
employee or former
-19-
25
employee that such benefits would be provided. Except
as set forth in Schedule 3.11, the execution of, and
performance of the transactions contemplated by, this
Agreement will not (either alone or upon the
occurrence of any additional or subsequent event)
constitute an event under any Seller Benefit Plan or
other policy, arrangement or any trust or loan that
will or may result in any payment (whether of
severance pay or otherwise), acceleration,
forgiveness of indebtedness, vesting, distribution,
increase in benefits or obligation to fund benefits
with respect to any employee. No Seller Benefit Plan
is subject to Title IV of ERISA and neither Seller
nor any Subsidiary nor any Seller Partnership has,
within six years prior to the date of this Agreement,
contributed to or had any obligation to contribute to
any employee benefit plan subject to Title IV of
ERISA. For purposes of this Section 3.11, (i) the
term "Seller" includes any entity required to be
aggregated with the Seller pursuant to Code Section
414(b), (c), (m) or (o) and (ii) provisions of ERISA
or the Code include regulations prescribed under such
provisions.
l. LABOR MATTERS. Neither Seller nor any Subsidiary
nor any Seller Partnership is a party to or bound by
any collective bargaining or other labor union
contracts. There is no pending or, to the knowledge
of Seller, threatened labor dispute, strike or work
stoppage against Seller, any Subsidiary, or any
Seller Partnership. Neither Seller nor any Subsidiary
nor any Seller Partnership, nor their respective
representatives or employees, has committed any
unfair labor practices in connection with the
operation of the respective businesses of Seller,
each Subsidiary, and each Seller Partnership, and
there is no pending or, to the knowledge of Seller,
threatened charge or complaint against Seller, any
Subsidiary, or any Seller Partnership by the National
Labor Relations Board or any comparable state agency.
Seller, Subsidiaries, and Seller Partnerships are in
compliance with all applicable Laws respecting
employment, consulting, employment practices, wages,
hours, and terms and conditions of employment.
m. PROPERTIES.
i. Schedule 3.13 contains a complete and correct list
of all real property owned or leased by Seller, each
Subsidiary and each Seller Partnership (collectively,
the "PROPERTIES") as of the date hereof. Except as
set forth in Schedule 3.13, Seller, Subsidiary or
Seller Partnership, as applicable, owns good,
marketable and indefeasible title to each Property,
including the land and all improvements, all
personalty and the Tenant Leases (as hereinafter
defined). Except as set forth in Schedule 3.13, the
Properties are free and clear of all Encumbrances of
any nature, except for (i) liens for real property
taxes or similar assessments not yet due and
-20-
26
payable, (ii) easements for utilities servicing the
Properties and (iii) such Encumbrances as do not
materially detract from or interfere with the present
use of the Properties subject thereto or affected
thereby, or otherwise materially impair the use or
value of such Properties.
ii. Seller has delivered to the Investor a true,
correct and complete copy of a rent roll with respect
to each Property as of the date hereof setting forth,
among other matters, the term (commencement or
renewal date and expiration date) of each lease with
respect to the Properties (collectively, the "TENANT
LEASES"), the square feet for each of the Tenant
Leases, the monthly base rental rates for each of the
Tenant Leases and the security deposits for each of
the Tenant Leases. Other than the Tenant Leases, no
party has been granted any license, lease or other
material right relating to the use or possession of
the Properties which is material to the use or value
of the Properties. Except as set forth in Schedule
3.13, all of the Tenant Leases are valid and
subsisting and in full force and effect with respect
to Seller, Subsidiaries and Seller Partnerships and,
to Seller's knowledge, with respect to any other
party thereto, and no tenant of the Properties is
more than 30 days delinquent on its rental as of
April 30, 1997 except as set forth in Schedule 3.13.
To Seller's knowledge, no tenant of the Properties
has initiated or threatened bankruptcy since January
1, 1997. No tenant of the Properties is an Affiliate
or Associate of Seller, any Subsidiary or any Seller
Partnership. Except as set forth in Schedule 3.13,
there are no contracts or other material obligations
outstanding for the sale, exchange or transfer of the
Properties or any portion thereof. There are no
attachments, executions, assignments for the benefit
of creditors, receiverships, conservatorship or
voluntary or involuntary proceedings in bankruptcy or
pursuant to any other debtor relief laws filed by, or
pending against, Seller, Subsidiaries, Seller
Partnerships or the Properties. Except as set forth
in Schedule 3.13, since January 1, 1997, no tenants
have terminated their leases prior to expiration and,
to Seller's knowledge, have no intent to do so.
(c) Except as set forth in Schedule 3.13, there is no pending
condemnation or similar proceeding affecting the land, the improvements or the
personalty situated at the Properties or any portion thereof, and neither
Seller nor any Subsidiary nor any Seller Partnership has received any written
notice and has no knowledge that any such proceeding is contemplated.
(d) The continued ownership, operation, use and occupancy of the
land or the improvements thereon do not violate any zoning, building,
administrative or other law, ordinance, order or regulation or any restrictive
covenant applicable to the Properties, the violation of which would have a
material adverse effect on the business, financial condition, assets, results
of operations or prospects of Seller, Subsidiaries or Seller Partnerships, as
applicable, and no written notice of any such violation has been received by
Seller, any Subsidiary or any Seller Partnership from any Governmental Entity.
-21-
27
(e) Seller, Subsidiaries or Seller Partnerships, as applicable,
currently has in place title, liability, casualty and other insurance coverage
with respect to the Properties in such amounts as are reasonable and customary
for properties similar to the Properties. Each of such policies is in full
force and effect, and all premiums due and payable thereunder have been, and on
any Closing Date will be, fully paid when due. No notice of cancellation has
been received, or to the knowledge of Seller threatened, with respect thereto.
(f) Except as set forth in Schedule 3.13, there is no Action
pending, or to the knowledge of Seller contemplated, by any Governmental Entity
or third party to levy any special assessments against the Properties that, if
successful, would have a material adverse effect on the business, financial
condition, assets, results of operations or prospects of Seller, any Subsidiary
or any Seller Partnership.
(g) To Seller's knowledge, each unsatisfied brokerage obligation
that is in excess of $25,000 with respect to the Properties is set forth on
Schedule 3.13.
(h) To Seller's knowledge and except as set forth on Schedule
3.13, no capital expenditures are contemplated by Seller to be incurred by
Seller, any Subsidiary or any Seller Partnership within twelve months after the
date of this Agreement in excess of $50,000 per Property with respect to any
Property.
(i) Except as set forth in Schedule 3.13, all management
contracts with respect to the Properties are terminable by Seller on 30 days
notice.
(j) To Seller's knowledge, except for customary easements for
access to building systems or utilities and except as set forth in Schedule
3.13, each Property is an independent unit which does not now rely on any
facilities (other than facilities of municipalities or public utilities)
located on any property that is not part of the Property for the furnishing to
the Property of any essential building systems or utilities (including drainage
facilities, catch basins and retention ponds) that if the owner of the Property
could not avail the use of which, would materially detract from the value of
the Property or materially interfere with the use of the Property.
3.14 TAX MATTERS.
(a) For purposes of this Agreement, "TAXES" means any federal
(including, without limitation, tax on its undistributed taxable income,
alternative minimum tax, tax on certain sale proceeds or other nonqualifying
income from foreclosure property or on income from prohibited transactions, and
any taxes imposed upon Seller, Subsidiaries or Seller Partnerships under
Section 857 or Section 4981 of the Code), state, county, local or foreign
taxes, charges, fees, levies, or other assessments, including, without
limitation, all net income, gross income, sales and use, ad valorem,
-22-
28
transfer, gains, profits, excise, franchise, real and personal property, gross
receipt, capital stock, business and occupation, disability, employment,
payroll, license, estimated, or withholding taxes or charges imposed by any
Governmental Entity, and includes any interest and penalties (civil or
criminal) on or additions to any such taxes.
(b) For purposes of this Agreement, "TAX RETURN" means a report,
return or other information required to be filed with or supplied to a
Governmental Entity with respect to Taxes including, without limitation, any
notices or information reports or returns required to be filed by Seller,
Subsidiaries or Seller Partnerships with respect to their respective
operations, income, assets and shareholders or partners in order to maintain
Seller's status as a real estate investment trust ("REIT") under the Code.
(c) Seller elected to be taxed as a REIT under Sections 856
through 860 of the Code effective for its taxable year ended December 31, 1985
(the "INITIAL REIT YEAR"). Seller, since the Initial REIT Year through the end
of the immediately preceding taxable year, has always qualified as a REIT under
the Code. At all times from and after the Initial REIT Year to the date hereof,
Seller has complied with, and through the Closing Date will comply with, all
applicable Code and regulatory requirements necessary to maintain its
qualification as a REIT under the Code and has otherwise operated, and through
the Closing Date will have otherwise operated, in the manner necessary to
maintain its qualification as a REIT under the Code. No dividend will be
required to be distributed before December 31, 1997 in order for Seller to
maintain its qualification as a REIT under the Code.
(d) Except as disclosed in Schedule 3.14, Seller, Subsidiaries
and Seller Partnerships have (i) filed all Tax Returns required to be filed by
applicable Law since December 31, 1990, and all such Tax Returns were in all
material respects (and, as to Tax Returns not filed as of the date hereof but
filed on or before the Closing Date, will be in all material respects) true,
complete and correct and filed on a timely basis and (ii) within the time and
in the manner prescribed by law, paid (and until the Closing Date will pay
within the time and in the manner prescribed by law) all material Taxes that
were or are due and payable.
(e) Except as set forth in Schedule 3.14, Seller, Subsidiaries
and Seller Partnerships have established (and until the Closing Date will
maintain) on their respective books and records reserves adequate to pay all
Taxes of Seller, Subsidiaries and Seller Partnerships not yet due and payable
in accordance with GAAP which are reflected in the Audited Financial Statements
and Unaudited Financial Statements to the extent required by GAAP.
(f) Except as disclosed in Schedule 3.14, as of the date hereof,
there are no, and, as of any Closing Date, there will be no, material Tax liens
upon the assets of Seller, Subsidiaries and Seller Partnerships, except liens
for Taxes not yet due.
(g) Except as disclosed in Schedule 3.14, Seller, Subsidiaries
and Seller Partnerships have complied (and until the Closing Date will comply)
in all material respects with the provisions
-23-
29
of the Code relating to the payment and withholding of Taxes, including the
withholding and reporting requirements under Code Sections 1441 through 1464,
3401 through 3406, and 6041 through 6049, as well as similar provisions under
any other laws, and have, within the time and in the manner prescribed by law,
withheld from employee wages and paid over to the proper governmental
authorities all material amounts required by applicable Law.
(h) Except as disclosed in Schedule 3.14, Seller, Subsidiaries
and Seller Partnerships have not executed any outstanding waivers or comparable
consents regarding the application of the statute of limitations with respect
to any Taxes or Tax Returns.
(i) No notice of any material deficiency for any Taxes has been
received by Seller, any Subsidiary or any Seller Partnership that has not been
resolved and paid in full or otherwise settled, no audits or other
administrative proceedings or court proceedings are presently pending or, to
Seller's knowledge, threatened with regard to any Taxes or Tax Returns of
Seller, Subsidiaries or Seller Partnerships, and no notice of any material
claim has been received by Seller, any Subsidiary or any Seller Partnership
from any authority in a jurisdiction where Seller, Subsidiaries or Seller
Partnerships do not file Tax Returns that Seller, any Subsidiary or any Seller
Partnership is or may be subject to Tax in that jurisdiction.
(j) Seller, Subsidiaries and Seller Partnerships have not
received a Tax Ruling or entered into a Closing Agreement with the Internal
Revenue Service that would have any continuing effect after the First Closing
Date.
(k) Seller has made available (or, with respect to all Tax
Returns filed after the date hereof, will make available) to the Investor
complete and accurate copies of all Tax Returns, and amendments thereto, filed
by Seller, any Subsidiary or any Seller Partnership for all taxable periods or
years ending on or prior to the First Closing Date.
(l) Neither Seller nor any Subsidiary nor any Seller Partnership
is required to include in income any adjustment pursuant to Code Section 481(a)
by reason of a voluntary change in federal income tax accounting method (other
than a change of federal income tax accounting method required as a result of a
change in law) initiated by Seller, and the Internal Revenue Service has not
proposed any such adjustment or change in accounting method.
(m) Seller has made available to the Investor all relevant
information with respect to the federal income tax net operating loss
carryovers of Seller as of December 31, 1996, based on the federal income Tax
Returns filed by Seller as of such date.
(n) For all taxable years from and including its Initial REIT
Year through the First Closing Date, (i) Seller has maintained permanent
records containing the information required to be maintained by Code Section
857(a)(2) and Treasury Regulation Sections 1.857-(8)(a), 1.857-8(c) and
1.857-8(e) and (ii) Seller has demanded the written statements from its
shareholders required by Treasury Regulation Section 1.857-8(d) in accordance
with Treasury Regulation Section 1.857-8(e).
-24-
30
3.15 MATERIAL CONTRACTS. Schedule 3.15 sets forth an accurate
list of all Material Contracts of Seller, Subsidiaries and Seller Partnerships.
Seller has made available to the Investor complete and correct copies of all
Material Contracts. All Material Contracts are in full force and effect. Except
as set forth in Schedule 3.15, Seller, Subsidiaries and Seller Partnerships are
not in violation of or default in any material respect (nor is there any waiver
in effect of any event that would constitute a default but for such waiver)
under, and no event has occurred that (with notice or the lapse of time or
both) would constitute a violation of or default under, any Material Contract.
Except as set forth in Schedule 3.15, to the knowledge of Seller, no other
party to any Material Contract is in breach of the terms, provisions and
conditions of such Material Contract and no other party to any Material
Contract has notified Seller, any Subsidiary or any Seller Partnership that it
intends to terminate or modify a Material Contract.
3.16 INSURANCE. Schedule 3.16 sets forth a complete and correct
list of all insurance policies, except for title insurance policies, currently
in force insuring against risks of Seller, Subsidiaries and Seller
Partnerships. Seller, Subsidiaries and Seller Partnerships are in compliance
with the terms of such policies applicable to them and there are no claims by
Seller, any Subsidiary or any Seller Partnership under any such policy as to
which any insurance company is denying liability or defending under a
reservation of rights clause.
3.17 ENVIRONMENTAL MATTERS.
(a) Except as set forth in the documentation provided to Seller
pursuant to Section 3.17(b) and in Schedule 3.17, there is no material
Environmental Noncompliance with respect to any Property and there are no
material Environmental Claims with respect to any Property or the Seller, any
Subsidiary or any Seller Partnership or, to the knowledge of Seller, any
tenants under any of the Tenant Leases. All material permits, consents,
licenses, certificates, approvals, registrations, and authorizations in
connection with environmental matters (collectively, "ENVIRONMENTAL PERMITS")
which are required by any Law have been obtained and are valid. The Properties
(and all uses thereof and operations conducted thereon) comply in all material
respects with all Environmental Permits. All operations on or at the Properties
conducted by Seller are and have been conducted in all material respects in
compliance with applicable Environmental Laws. Except as set forth in the
documentation provided to Seller pursuant to Section 3.17(b) and in Schedule
3.17, Seller has not received any Notification from any Governmental Entity
seeking any information or alleging any violation of any Law regarding
Environmental Conditions. Except as set forth in the documentation provided to
Seller pursuant to Section 3.17(b) and in Schedule 3.17, Seller has not caused
or given its verbal or written authorization to cause, and has no knowledge of,
any Release of any Hazardous Materials on-site or off-site of the Properties in
violation of any Environmental Law.
(b) Seller has made available to Investor true, correct, and
complete copies of all written reports of any environmental assessment,
compliance or regulatory audit, inspection, or investigation
-25-
31
of the Properties in its possession, and Seller has not received any other
written report containing any evidence of Environmental Noncompliance.
(c) Except as set forth in the documentation provided to Seller
pursuant to Section 3.17(b) and in Schedule 3.17, there is not now, nor has
there been in the past, any "friable" asbestos (as the term "friable" is
defined under 40 C.F.R. Section 61.141) or friable asbestos containing
materials located on, incorporated in, or otherwise contained in the Properties
or any portion thereof, and there are not now, and have not in the past been,
any underground storage tanks located on the Properties or any portion thereof.
(d) Except as set forth in the documentation provided to Seller
pursuant to Section 3.17(b), and in Schedule 3.17, none of the tenants under
any Tenant Lease handle or store any Hazardous Material as a principal or
primary business.
3.18 TRUST RECORDS; ACCOUNTING RECORDS. The minute books of
Seller accurately reflect in all material respects all actions taken to the
date of this Agreement by the holders of Common Shares, the Trust Managers and
committees of the Trust Managers, except for those matters set forth in
Schedule 3.18 for which minutes of such actions have not yet been prepared or
approved. The share certificate books and records of Seller accurately reflect
the ownership of the Common Shares. Seller maintains accounting records which
fairly reflect, in all material respects, Seller's transactions.
3.19 NEW YORK STOCK EXCHANGE LISTING. The outstanding Common
Shares are listed on the New York Stock Exchange. The issuance or sale and
delivery of any Shares to the Investor pursuant to this Agreement will not
violate any listing requirements of the New York Stock Exchange for the listing
of Common Shares, including the Shares.
3.20 DISCLOSURE OF FACTS. There are no facts peculiar to Seller,
Subsidiaries or the Seller Partnerships that Seller has not disclosed to the
Investor that materially adversely affect, or insofar as Seller can reasonably
foresee, will materially adversely affect, the business, financial condition,
assets, results of operations or prospects of Seller, Subsidiaries or Seller
Partnerships.
3.21 PENSION-HELD REIT. For purposes of Section 856(h)(3) of the
Code, Seller hereby represents that at any time during the shorter of (i) the
two-year period ending immediately prior to the First Closing Date or (ii) the
period during which Seller was in existence, to the best of Seller's knowledge,
no "qualified trust" has held, directly or indirectly, more than 10% of the
interests in Seller.
3.22 SHAREHOLDER APPROVAL. The Seller's shareholders approved at
the Annual Meeting all of the proposals set forth in the Notice of Annual
Meeting of Shareholders and accompanying proxy statement dated May 12, 1997.
-26-
32
SECTION 4. REPRESENTATIONS AND WARRANTIES OF INVESTOR
The Investor represents and warrants with respect to itself (except as
indicated) to, and agrees with, Seller as follows:
a. ORGANIZATION AND RELATED MATTERS. It is a limited
partnership duly organized and validly existing under the
laws of the state of its organization. It has all necessary
partnership power and partnership authority to carry on its
business as now being conducted. It has all necessary
partnership power and partnership authority to execute,
deliver and perform this Agreement and the transactions
contemplated hereby.
b. AUTHORIZATION. This Agreement has been duly executed
and delivered by it and constitutes the legally valid and
binding obligation of the Investor and the Pecuniary Owner,
enforceable in accordance with its terms, except as such
enforceability may be limited by Equitable Remedies. The
execution and delivery of this Agreement by it and the
consummation of the transactions contemplated hereby will
not require filing or registration with, or the issuance of
any Permit by, any other third party or Governmental Entity
under the terms of any applicable Law or its material
Contracts, other than any filing required under the Exchange
Act.
c. NO CONFLICTS. The execution, delivery and
performance of this Agreement by it will not violate the
provisions of, or constitute a breach or default (whether
upon lapse of time and/or the occurrence of any act or event
or otherwise) under, (a) its organizational documents,
pursuant to which it was organized and by which it is
governed, (b) any Law to which it is subject or (c) any
Contract to which it is a party that is material to the
financial condition, results of operations or conduct of its
business.
d. NO BROKERS OR FINDERS. No agent, broker, finder or
investment or commercial banker, or other Person or firms
engaged by or acting on its behalf or on behalf of any of
its Affiliates in connection with the negotiation, execution
or performance of this Agreement or the transactions
contemplated by this Agreement, is or will be entitled to
any broker's or finder's or similar fees or other
commissions as a result of this Agreement or such
transactions.
e. LEGAL PROCEEDINGS. There is no Order or Action
pending against or, to its knowledge, affecting it that
individually or when aggregated with one or more other
Actions has, or if determined adversely would have, a
material adverse effect on its business, properties, or
financial condition or on its ability to perform this
Agreement.
-27-
33
f. INVESTMENT REPRESENTATION. This Agreement is made
with the Investor in reliance upon such Investor's
representation to Seller, which by such Investor's execution
of this Agreement such Investor hereby confirms that the
Shares will be acquired by the Investor as agent for and on
behalf of the Pecuniary Owner, for the Pecuniary Owner's own
account, not as nominee or agent for any other party, for
investment purposes only and not with a view to or for sale
in connection with the distribution thereof. It agrees to
execute any further certificate or other document
representing such investment intent or as to any other
matter reasonably requested by Seller to assure compliance
with applicable securities laws.
g. LEGENDS; STOP-TRANSFER ORDERS.
i. The certificates for Shares will bear legends in
substantially the following form:
THE SHARES REPRESENTED HEREBY HAVE BEEN ACQUIRED FOR
INVESTMENT AND HAVE NOT BEEN REGISTERED UNDER THE SECURITIES
ACT OF 1933, AS AMENDED, OR UNDER THE SECURITIES LAWS OF ANY
STATE AND, ACCORDINGLY, MAY BE OFFERED, SOLD, TRANSFERRED OR
PLEDGED ONLY IN A TRANSACTION WHICH IS REGISTERED UNDER SUCH
ACT AND UNDER SUCH LAWS OR IS EXEMPTED FROM SUCH
REGISTRATION REQUIREMENTS.
The foregoing legend shall be removed from any such certificate at the request
of the holder thereof at such time as the shares represented thereby are
registered under the Securities Act or become eligible for resale under Rule
144 promulgated under the Securities Act.
ii. The certificates for Shares may also bear any legend
required by any applicable state blue sky law.
iii. Any certificates for Shares will also bear a legend
relating to restrictions on transfer imposed pursuant to
the percentage ownership limitation contained in the Charter
Documents.
iv. Seller may impose appropriate stop-transfer instructions
relating to the restrictions set forth herein.
h. STATUS FOR REIT OWNERSHIP AND INCOME TESTS. At the
Closing, to the best of Investor's knowledge, the purchase
of the Common
-28-
34
Shares by the Pecuniary Owner will not result in a "qualified
trust" as defined in Code Section 856(h)(3) holding more than
25% in value of the Seller's outstanding Capital Stock. The
Pecuniary Owner is not purchasing the Common Shares, and will
not hold any or all of the Common Shares so purchased,
through any arrangement or entity that would be deemed, for
federal income tax purposes, to be a partnership between the
Pecuniary Owner and any or all of the Other Pecuniary Owners.
The Common Shares that each Pecuniary Owner owns will not be
considered to be owned by any individual (or entity treated
as an individual under Section 856(h) of the Code), who after
application of the stock ownership rules of Section 856(h) of
the Code would own more than 9.8% of the lesser of the number
or value of any outstanding class of Capital Stock.
i. AUTHORITY OF THE INVESTOR. The Investor is duly
authorized to enter into this Agreement and to consummate the
transactions contemplated hereby as agent for and on behalf
of the Pecuniary Owner.
SECTION 5. COVENANTS WITH RESPECT TO CONDUCT OF SELLER PRIOR TO CLOSING
From the date of this Agreement up to and including the Closing Date,
Seller covenants and agrees to take such actions, or refrain from taking such
actions, as are set forth in this Section 5.
a. ACCESS. Seller shall, and shall cause the Subsidiaries and
Seller Partnerships to, authorize and permit the Investor and
its representatives (which term shall be deemed to include
its independent accountants and counsel) to have reasonable
access during normal business hours, upon reasonable notice
and in such manner as will not unreasonably interfere with
the conduct of business, to all of the Properties, books,
records, operating instructions and procedures, Tax Returns
and all other information with respect to the businesses of
Seller, Subsidiaries and Seller Partnerships as the Investor
may from time to time reasonably request, and to make copies
of such books, records and other documents and to discuss the
business of Seller, Subsidiaries and Seller Partnerships with
the Investor and its partners and their respective officers,
employees, accountants and counsel, as the Investor considers
necessary or appropriate for the purposes of familiarizing
itself with the business of Seller, obtaining any necessary
Approvals of, or Permits for, the transactions contemplated
by this Agreement and conducting an evaluation of the
organization and business of Seller. From the date of this
Agreement up to and including the Closing Date, Seller will
permit, and cause Subsidiaries and Seller Partnerships to
permit, the Investor and its officers, directors, agents,
attorneys, accountants, and representatives, to audit such
books and records, to meet
-29-
35
with tenants of the Properties, and to conduct such
investigations, tests, or inspections of the Properties as
Seller shall approve in Seller's sole discretion, including
intrusive sampling studies to ascertain whether or not there
are any Hazardous Materials on, in, or under the Properties.
b. MATERIAL ADVERSE CHANGES; SEC FILINGS; REPORTS;
FINANCIAL STATEMENTS.
i. Seller shall promptly notify the Investor of any
event of which Seller obtains knowledge which has had or
might reasonably be expected to have a material adverse
effect on Seller's business or which if known as of the date
hereof would have been required to be disclosed to the
Investor.
ii. Seller will, and will cause the Subsidiaries and
Seller Partnerships to, furnish to the Investor as soon as
available copies of all SEC Filings, and all material
reports, renewals, filings, certificates, statements and
other documents filed with any Governmental Entity.
c. CONDUCT OF BUSINESS. Except as set forth in
Schedule 5.3 and as provided in Section 5.4, from the date of
this Agreement until the Closing Date, Seller agrees with and
for the benefit of Buyer that Seller shall not, and Seller
shall cause Subsidiaries and Seller Partnerships not to,
without the prior written consent of the Investor, which
consent may not unreasonably be withheld:
i. conduct the business of Seller, Subsidiaries and
Seller Partnerships in any manner except in the ordinary
course consistent with past practices; or
ii. purchase any real property without the consent of
the Investment Committee; or
iii. declare, issue, make or pay any dividend or other
distribution of assets, whether consisting of money, other
tangible or intangible personal property, real property or
other thing of value, to its shareholders, or split, combine,
dividend, distribute or reclassify any Common Shares or any
shares of its Capital Stock, as applicable, except for
dividends the record date of which is after the First Closing
Date; or
iv. issue, sell, redeem or acquire for value, or agree
to do so, any debt obligations (other than the Prudential
Line of Credit), Common Shares or Capital Stock; or
-30-
36
v. incur or agree to incur any obligation or
liability (absolute or contingent) that individually calls
for payment by Seller, any Subsidiary or any Seller
Partnership of more than $50,000 individually or in the
aggregate except for (i) liabilities (other than indebtedness
for borrowed money) incurred in the ordinary course of
business consistent with past practices (including, but not
limited to, tenant improvements and capital improvements to
Properties), (ii) liabilities arising out of, incurred in
connection with, or related to the consummation of the
transactions contemplated by this Agreement, (iii) payments
to Realco under the Realco Debt and (iv) purchases of real
property in accordance with Section 5.3(b); or
vi. merge (if Seller is not the surviving entity),
sell substantially all of its assets or enter into any other
contract involving any other form of business combination or
liquidate, wind-up or dissolve (or suffer any liquidation or
dissolution) or adopt any plan of liquidation or dissolution;
or
vii. change the number of Trust Managers or the Board
of Directors of any of the Subsidiaries, or admit any
additional partners to the Seller Partnerships; or
viii. amend the Charter Documents or the charter or
organizational documents of the Subsidiaries or Seller
Partnerships; or
ix. sell, lease, transfer or otherwise dispose of,
or mortgage, pledge or otherwise encumber, other than the
lease of any Property or space therein in the ordinary course
of business consistent with past practices, any of the
Properties; or
x. cancel, satisfy or prepay any debt, obligation,
liability or encumbrance, or waive any claim or right of
value of Seller, Subsidiaries or Seller Partnerships except
the extinguishment of debt under the Realco Debt through the
conversion of the Realco Debt to Common Shares; or
xi. (i) increase in any manner the compensation or
fringe benefits (including, but not limited to, severance
benefits) payable or to become payable by Seller,
Subsidiaries, or Seller Partnerships to any officer, Trust
Manager, director, partner, consultant or independent
contractor as salary or wages or under any bonus, insurance,
welfare, severance, deferred compensation, pension,
retirement, profit sharing, share option (including, without
limitation, the granting of any share option or share
appreciation right or performance or restricted share award),
share purchase or other
-31-
37
employee benefit plan, (ii) except as approved by the
Compensation Committee prior to the date of this Agreement or
except as approved by the Compensation Committee and approved
by a unanimous vote of the Seller's Board of Trust Managers,
increase in any manner the compensation or fringe benefits
(including, but not limited to, severance benefits) payable
or to become payable by Seller, Subsidiaries or Seller
Partnerships to any employee who is not an officer, Trust
Manager, director or partner of Seller, Subsidiaries or
Seller Partnerships as salary or wages or under any bonus,
insurance, welfare, severance, deferred compensation,
pension, retirement, profit sharing, share option (including,
without limitation, the granting of any share option or share
appreciation right or performance or restricted share award),
share purchase or other employee benefit plan, except for
such increase in salary, bonuses or severance benefits to
such employees in the ordinary course of business consistent
with past practices and provided that all such increases in
salary, bonuses or severance benefits do not have a material
adverse effect on the business, assets, financial condition
or prospects of Seller, Subsidiaries or Seller Partnerships,
or (iii) enter into, adopt, amend in any material respect
(except as required by law) or terminate any Seller Benefit
Plan or any agreement, arrangement, plan or policy between
Seller, Subsidiaries or Seller Partnerships, as applicable,
and one or more of its Trust Managers, directors, partners,
officers, employees or independent contractors; or
xii. make any tax election other than in connection
with maintaining Seller's qualification as a REIT or take any
action that would cause Seller not to qualify as a REIT, or
fail to take any reasonable action to preserve Seller's
qualification as a REIT; or
xiii. make any change in any significant accounting
principles or practices used by Seller, Subsidiaries or
Seller Partnerships, except as required by the Commission; or
xiv. amend, modify or change the terms of any
Material Contract other than in the ordinary course of
business consistent with past practice and provided that such
amendment, modification or change does not have a material
adverse effect on the business, assets, financial condition
or prospects of Seller, Subsidiaries or Seller Partnerships;
or
xv. except as provided in Section 5.3(b), acquire
any Person (or interest therein) or any material amount of
assets, or make any loans, advances or capital contributions
to, or investments in, any Person; or
-32-
38
xvi. take any action that would, or fail to take any
action which failure would, result in any of Seller's
representations and warranties set forth in this Agreement
not being true; or
xvii. agree to or make any commitment to take any
action prohibited by this Section 5.3.
d. NOTIFICATION OF CERTAIN MATTERS. Seller shall
give prompt notice to the Investor, and the Investor shall
give prompt notice to Seller, of (a) the occurrence, or
failure to occur, of any event that causes any representation
or warranty contained in this Agreement to be untrue or
inaccurate at any time from the date of this Agreement to the
Closing Date and (b) any failure of the Investor or Seller,
as the case may be, to comply with or satisfy, in any
material respect, any covenant, condition or agreement to be
complied with or satisfied by it under this Agreement.
e. ADJUSTMENT OF SHARE PRICE. The Share Price will
be subject to adjustment from time to time prior to the
Closing Date as follows:
(a) If Seller shall at any time prior to the Closing Date (i) pay
a dividend or make any other distribution payable in Common Shares to holders of
any class of Capital Stock of Seller, (ii) subdivide or reclassify the
outstanding Common Shares into a greater number of shares or (iii) combine or
reclassify the outstanding Common Shares into a smaller number of shares, the
Share Price in effect at the time of the record date for such dividend or
distribution or the effective date of such subdivision, combination or
reclassification will be proportionately adjusted so that the Investor will be
entitled to receive upon purchase after such time the number of Common Shares
that the Investor would have owned or been entitled to receive had such purchase
occurred immediately prior to such time. An adjustment made pursuant to this
subsection (a) will become effective immediately after the record date in the
case of a dividend or other distribution and will become effective immediately
after the effective date of any such subdivision, combination, reclassification
or change, provided that, if such dividend or distribution is not ultimately
paid or made, the Share Price shall be readjusted to be equal to the Share Price
in effect immediately prior to such record date. Such adjustment will be made
successively whenever any event listed above occurs.
(b) If Seller shall at any time prior to the Closing Date issue
rights or warrants to all holders of Common Share entitling them (for a period
commencing no earlier than the record date for the determination of holders of
Common Shares entitled to receive such rights or warrants and expiring within 45
days after such record date) to subscribe for or purchase Common Shares at a
price per share less than the Current Market Price (as defined in subsection (d)
below) of Common Shares on such record date, the Share Price will be adjusted
effective as of immediately after such record date so that it shall equal the
price determined by multiplying the Share Price in effect immediately prior
thereto by a fraction, the numerator of which is the number of Common Shares
-33-
39
outstanding on such record date plus the number of Common Shares that the
aggregate offering price of the Common Shares so offered for subscription or
purchase or purchased would purchase at the Current Market Price per Common
Share, and the denominator of which is the number of Common Shares outstanding
on such record date plus the number of additional Common Shares which may be
purchased upon the exercise of the rights or warrants issued, provided that, if
such issuance is not ultimately made, the Share Price shall be readjusted to be
equal to the Share Price in effect immediately prior to such record date.
Common Shares owned by or held for the account of Seller shall not be deemed
outstanding for the purpose of any such computation. Such adjustment will be
made successively whenever such rights or warrants are issued.
(c) If Seller shall at any time prior to the Closing Date
distribute to all holders of Common Shares any shares of any class of Capital
Stock other than Common Shares, evidences of indebtedness or other assets (other
than cash dividends or distributions out of retained earnings), or shall
distribute to holders of Common Shares rights or warrants to subscribe to
securities (other than those referred to in subsection (b) above), then in each
such case the Share Price will be adjusted so that it equals the price
determined by multiplying the Share Price in effect immediately prior to the
date of such distribution by a fraction, the numerator of which is the Current
Market Price per Common Share on the record date mentioned below less the then
fair market value (as determined by the Board of Trust Managers, whose
determinations shall be conclusive evidences of such fair market value) of said
shares, evidences of indebtedness, assets, rights or warrants or distributions
applicable to one Common Share, and the denominator of which is such Current
Market Price. Such adjustment will become effective immediately after the record
date for the determination of the holders of Common Shares entitled to receive
such distribution, provided that, if such issuance is not ultimately made, the
Share Price shall be readjusted to be equal to the Share Price in effect
immediately prior to such record date. Such adjustment will be made successively
whenever such a distribution is made.
(d) For the purpose of computation under subsections (b) and
(c) above, the "Current Market Price" per Common Share at any date will be
deemed to be the average of the daily closing price for the Common Shares on the
New York Stock Exchange for 20 consecutive trading days commencing 30 trading
days before such date.
SECTION 6. ADDITIONAL CONTINUING COVENANTS AND AGREEMENTS
a. USE OF PROCEEDS. The proceeds from the
sale of the Shares to the Investor, net of any costs
(including any accounting, legal and fairness
opinion costs and expenses) associated with the
transactions contemplated by this Agreement, shall
be applied by Seller to the purchase of real
property as approved by the Investment Committee in
accordance with Section 2.2.
-34-
40
b. APPOINTMENT OF TRUST MANAGER.
i. GENERAL. Effective immediately
following the Closing, Seller shall increase the
number of its Trust Managers from seven to eight,
and Seller shall appoint one individual designated
by the Investor as Agent for and on behalf of the
Pecuniary Owner and the Other Pecuniary Owners
collectively to fill the vacancy caused by the
increase in the number of Trust Managers under this
Section 6.2(a). Simultaneously with the designee of
the Investor becoming a Trust Manager of Seller,
Seller and such designee shall enter into an
indemnification agreement providing for
indemnification of such designee identical in form
to the indemnification agreements entered into
between Seller and other Trust Managers. In
addition, at the first annual meeting and all
subsequent annual meetings of shareholders after the
number of Trust Managers has been increased to eight
under this Section 6.2(a), until Seller achieves the
Threshold Equity Capitalization, Seller shall
nominate, and use its best efforts to have such
person elected (which efforts shall include, without
limitation, including the Investor's nominee in
management's slate for nomination and election and
solicitation of proxies on their behalf), one
designee of the Investor (which may be a different
person than the person initially appointed as Trust
Manager pursuant to the first sentence of this
Section 6.2(a) if such initial designee shall have
died, resigned, been removed or declined to be
nominated) as Trust Manager. During such time as
Seller shall have an individual designated by the
Investor serving as Trust Manager pursuant to this
Section 6.2(a), and except as otherwise provided in
Section 6.2(b) hereof, the number of Trust Managers
shall consist of not more than eight persons,
including the designee of the Investor. Such
designee of the Investor shall hold office until
resignation, removal, death or expiration of the
term for which he or she was appointed and any
successive term for which such representative is
duly elected as a Trust Manager by the shareholders
of Seller. In the event of the death, resignation or
removal from office of the designee of the Investor
serving as a Trust Manager pursuant to the first
sentence of this Section 6.2(a), Seller agrees to
promptly appoint a replacement designee selected by
the Investor as Trust Manager prior to the date
Trust Managers are to be elected at the first annual
meeting after the number of Trust Managers has been
increased to eight pursuant to this Section 6.2(a).
ii. OBSERVATION RIGHTS. In the event that
the designee selected by the Investor to serve as
Trust Manager is not, for any reason, elected by
Seller's shareholders, the Investor shall have full
observation rights with respect to Seller's Trust
Managers, including the right to obtain full and
timely notice of all meetings of the Trust Managers
and of each of its
-35-
41
committees, to obtain copies of all written and
other materials disseminated to Trust Managers and
to designate a person to attend in person or by
telephone all meetings of the Trust Managers or
their committees. If the Investor receives
observation rights pursuant to the provisions of
this paragraph, the Investor and its designees in
respect of such rights shall each execute a
confidentiality agreement in form and substance
reasonably satisfactory to Seller.
iii. RESIGNATIONS. At such time as Seller
achieves Threshold Equity Capitalization, the
Investor shall cause its designee to not seek
re-election at the next annual meeting, or at
Seller's option, to immediately resign.
iv. QUALIFICATIONS. Each of the
representatives designated by the Investor in
accordance with this Section 6.2 shall be a Person
selected by the Investor in its sole discretion;
provided, however, that any such person may not have
been involved in any of the events described in Item
401(f)(1)-(4) of Regulation S-K promulgated under
the Exchange Act.
v. COMMITTEES. At any time that the
Investor shall have exercised its rights under this
Section 6.2 to appoint a designee as Trust Manager,
Seller shall appoint the Investor's designee on each
committee of the Trust Managers, and each such
committee shall contain no more than four members
until expiration of the latest term of office of any
designee of the Investor pursuant to Section 6.2(a)
or 6.2(b).
c. ENVIRONMENTAL MATTERS. Seller will
advise the Investor promptly (a) upon obtaining
knowledge that a Release has occurred at or upon the
Properties and/or (b) upon receipt of a Notification
pertaining to the Properties.
d. STATUS FOR REIT OWNERSHIP AND INCOME
TESTS. Following the Closing Date, and at all
subsequent times during which the Investor or the
Pecuniary Owner owns any of the Shares, applying the
stock ownership rules of Section 856(h) of the Code,
the representation set forth in Section 4.8 will
remain true and correct.
e. PROHIBITED TRANSACTIONS. Seller shall
not effect any business transactions, or agree to
effect any business transactions, with Affiliates,
Trust Managers or employees of Seller except in the
ordinary course of business and unless the
consideration paid by Seller in any such business
transaction is fair value at market rates, or
approved by Seller's shareholders in accordance with
applicable state law.
-36-
42
f. SELLER/BUYER REGISTRATION RIGHTS
AGREEMENT. On the Closing Date, the Investor, as
agent for and on behalf of the Pecuniary Owner and
certain Other Pecuniary Owners, and Seller shall
enter into a Registration Rights Agreement
substantially in the form of Exhibit A.
g. REIT QUALIFICATION. Seller shall take
all actions necessary to maintain Seller's
qualification as a REIT and, without the written
consent of the Investor shall take no action that
would cause Seller not to qualify as a REIT or fail
to take any action that would preserve Seller's
qualification as a REIT. Seller covenants and agrees
that (i) it will duly and promptly notify the
Investor upon becoming aware that any "qualified
trust" holds or is expected to hold, directly or
indirectly, more than 10% of the interests in
Seller, and (ii) it will provide the Investor such
information and/or verification as the Investor
shall reasonably request in order to verify whether
Seller constitutes a "pension-held REIT" as defined
under Section 856(h)(3)(C) of the Code.
h. PREEMPTIVE RIGHTS. In the event that
Seller shall at any time subsequent to the date of
this Agreement issue any Common Shares to any Person
or Persons (other than (i) Common Shares issued to
Realco in connection with the conversion of the
Realco Debt to Common Shares, (ii) Common Shares
issued pursuant to an employee share option, share
purchase, share incentive or compensation plan or
(iii) Common Shares issued to any partners in
Affiliates of Realco in connection with the merger
of such Affiliates with and into Seller) (each such
issuance, a "Subsequent Offering")), the Investor
shall have the right to purchase, on the same terms
and conditions as the other purchasers in the
Subsequent Offering, Common Shares in an amount not
to exceed, in the aggregate, such number of Common
Shares as is equal to the total number of Common
Shares offered in the Subsequent Offering times a
fraction, the numerator of which is the number of
Common Shares then owned by the Investor in the
aggregate and the denominator of which is the total
number of Common Shares outstanding immediately
prior to such Subsequent Offering. Notwithstanding
the foregoing, with respect to each Subsequent
Offering by Seller in the amount of $10 million or
more, the amount of shares the Investor may purchase
in the aggregate pursuant to such Preemptive Rights
shall be reduced by 5% of the total Common Shares
outstanding (on a fully-diluted basis) after each
such Subsequent Offering. The Investor's Preemptive
Rights will immediately terminate once Seller
achieves a Minimum Equity Capitalization. The
Investor or the Pecuniary Owner, as applicable,
shall have the right to assign the preemptive right
to buy additional Common Shares pursuant to this
Section 6.8 to any of the Other Pecuniary Owners or
to any other client of the Investor who can make the
representation to Seller set forth in Section 4.8.
-37-
43
i. DEBT. Neither Seller, any Subsidiary
or any Seller Partnership shall, without the prior
written consent of the Investor (i) incur, create,
assume, guarantee or in any way become liable for,
or permit to exist, any Debt prior to such time as
the Seller achieves a Minimum Equity Capitalization,
except to the extent the proceeds of such Debt is to
be used to acquire real property, and such
acquisition occurs within 90 days of the date such
Debt is incurred; or (ii) issue or have outstanding
any Preferred Shares, or any warrants, options,
conversion rights or other rights to subscribe for,
purchase or acquire any Preferred Shares, prior to
such time as the Seller achieves Minimum Equity
Capitalization.
j. FURNISH DOCUMENTS. Seller shall
furnish or cause to be furnished to the Investor
within five Business Days after Seller is required
to file the same with the Commission , copies of the
periodic information, documents and other reports
which Seller is required to file with the Commission
pursuant to Section 13(a) of the Exchange Act. If
Seller ceases to be required to file information,
documents and other reports pursuant to Section 13
of the Exchange Act, it shall remain obligated to
furnish the same information, documents and reports
otherwise required under Section 13(a) of the
Exchange Act to the Investor within five Business
Days after Seller would have been required to file
the same with the Commission; and
i. Seller shall furnish or cause to be
furnished to the Investor, within five
Business Days after the effective date
thereof, copies of any amendment or
modification to its Charter Documents.
k. TAXES. Seller shall, and shall cause
each Subsidiary and Seller Partnership to, pay, when
due, all taxes, assessments and governmental charges
or levies imposed upon it and all claims or demands
of materialmen, mechanics, carriers, warehousemen,
landlords and any other like person or entity which,
if unpaid, might result in the creation of a lien
upon the income of Seller or its assets; provided
that items of the foregoing description need not be
paid while being contested in good faith and by
appropriate proceedings and adequate reserves with
respect thereto have been provided on the books of
Seller, such Subsidiary of such Seller Partnership,
as the case may be.
-38-
44
l. ADDITIONAL INFORMATION Seller shall
execute and deliver or cause to be executed and
delivered to the Investor upon the Investor's
reasonable request such other and further
instruments or documents as in the reasonable
judgment of the Investor and Seller are necessary to
conform, create, evidence, preserve or maintain the
Pecuniary Owner's rights in the Shares, and Seller
shall do all such additional acts, give such
assurances and execute such instruments as the
Investor may reasonably require to vest more
completely in and assure to the Pecuniary Owner its
rights in the Shares.
m. MSRE AND MSAM CLOSING. If MSRE and
MSAM, as agent and attorney-in-fact on behalf of
certain clients, do not purchase additional Common
Shares of Seller for an aggregate purchase price of
at least $4,500,000 within seven days of the Closing
Date, Seller shall rescind the sale of Shares
hereunder and promptly repay to the Investor the
full purchase price for the Shares purchased hereby.
SECTION 7. GENERAL CONDITIONS OF PURCHASE
The obligations of the parties to effect each Closing shall be subject
to the following conditions unless waived in writing by all parties:
a. NO ORDERS. No Law or Order shall have
been enacted, entered, issued, promulgated or
enforced by any Governmental Entity which prohibits
or restricts the transactions contemplated by this
Agreement. No Governmental Entity shall have notified
any party to this Agreement that consummation of the
transactions contemplated by this Agreement would
constitute a violation of any Law of any jurisdiction
or that it intends to commence proceedings to
restrain or prohibit such transactions or force
divestiture or rescission, unless such Governmental
Entity shall have withdrawn such notice and abandoned
any such proceedings prior to the time which
otherwise would have been the applicable Closing
Date.
b. APPROVALS. To the extent required by
applicable Law, all Permits and Approvals required to
be obtained in connection with each Closing from any
Governmental Entity or any consent from a third party
material to Seller or its business shall have been
received or obtained on or prior to the applicable
Closing Date.
c. ABSENCE OF LITIGATION. No Action before any
Governmental Entity pertaining to the transactions
contemplated by this Agreement shall have been
instituted on or before the applicable Closing Date
whether or not any of the parties hereto or its
Affiliates is a party.
-39-
45
d. NEW YORK STOCK EXCHANGE. The Shares shall
have been approved for listing, upon official notice
of issuance, on the New York Stock Exchange. Seller
will use its best efforts to maintain the listing of
its Common Shares on the New York Stock Exchange.
e. SHAREHOLDER APPROVAL. Seller shall have
received Shareholder Approval.
SECTION 8. CONDITIONS TO OBLIGATIONS OF THE INVESTOR
The obligations of the Investor, as agent for and on behalf of the
Pecuniary Owner, to effect the Closing shall be subject to the following
conditions except to the extent waived in writing by the Investor:
a. ACCURACY OF SELLER'S REPRESENTATIONS AND
WARRANTIES. All representations and warranties of
Seller set forth in this Agreement shall be true and
correct in all material respects on the applicable
Closing Date as if made on and as of such Closing
Date.
b. PERFORMANCE BY SELLER. Seller shall have in
all material respects performed, satisfied and
complied with all covenants, agreements and
conditions required by this Agreement to be
performed, satisfied or complied with by Seller on or
before the applicable Closing Date, including the
covenants set forth in Section 5.
c. NO MATERIAL ADVERSE CHANGE. During the period
from December 31, 1996 to the applicable Closing
Date, (i) there shall not have been any material
adverse change or any development involving a
material adverse change in the condition (financial
or otherwise) of Seller, any Subsidiary or any Seller
Partnership, taken as a whole, or in the earnings,
business, prospects or operations of Seller, any
Subsidiary or any Seller Partnership, taken as a
whole, and (ii) there shall not have occurred any
material adverse change in the financial markets in
the United States, any outbreak of hostilities or
escalation thereof or other calamity or crisis or any
change or development involving a prospective change
in national or international political, financial or
economic conditions, in each case the effect of which
is such as to, in the judgment of the Investor,
significantly impair the marketability or value of
the Shares, (iii) the trading in any securities of
Seller shall not have been suspended or limited by
the Commission or the New York Stock Exchange,
trading generally on the American Stock Exchange or
the New York Stock Exchange or in the
-40-
46
Nasdaq National Market shall not have been suspended
or limited, minimum or maximum prices for trading
shall not have been fixed, and maximum ranges for
prices shall not have been required, by any of said
exchanges or by such system or by order of the
Commission, the National Association of Securities
Dealers, Inc. or any other Governmental Entity, and
(iv) a banking moratorium shall not have been
declared by Federal, Texas or New York authorities.
d. CERTIFICATION BY SELLER. The Investor shall
have received a certificate, addressed to the
Investor and dated as of the applicable Closing Date,
signed by the President of Seller, certifying, in
such detail as the Investor and its counsel
reasonably may request, that all of the conditions
specified in Section 8 have been fulfilled.
e. OPINION OF SELLER'S COUNSEL. The Investor
shall have received from counsel for Seller an
opinion, addressed to the Investor and dated as of
the applicable Closing Date, in form and substance
reasonably satisfactory to the Investor as to the
matters set forth in Schedule 8.5.
f. SCHEDULES. Seller shall have delivered to the
Investor updated Schedules, if any, to this
Agreement.
g. REALCO, MSRE AND MSAM CONSENT. Seller shall
have received all necessary consents or waivers from
Realco, MSRE and MSAM in connection with the matters
contemplated by this Agreement.
h. ADDITIONAL INFORMATION. Seller's Fourth
Amended and Restated Bylaws shall have been amended
to provide for a maximum of eight (8) Trust Managers.
i. CLOSING OF MSRE AND MSAM PURCHASE TRANSACTIONS.
Seller shall have closed on the sale of the Common
Shares to MSRE and MSAM, as agent and
attorney-in-fact on behalf of the MSAM Purchasers,
pursuant o the MSAM Purchase Agreement whereby Seller
shall have received an aggregate purchase price of at
least $12,500,00 from such purchasers from the
issuance and sale of its Common Shares.
SECTION 9. CONDITIONS TO OBLIGATIONS OF SELLER
The obligations of Seller to effect each Closing shall be subject to
the following conditions, except to the extent waived in writing by Seller:
-41-
47
a. ACCURACY OF THE INVESTOR'S
REPRESENTATIONS AND WARRANTIES. All representations
and warranties of the Investor set forth in this
Agreement shall be true and correct in all material
respects on the applicable Closing Date as if made
on and as of such Closing Date.
b. BUYERS' PERFORMANCE. The Investor
shall have in all material respects performed,
satisfied and complied with all covenants,
agreements and conditions required by this Agreement
to be performed, satisfied or complied with by the
Investor on or before the applicable Closing Date.
c. CERTIFICATION. Seller shall have
received a certificate, dated as of the applicable
Closing Date, signed by a Managing Director of the
Investor, certifying, in such detail as Seller and
its counsel reasonably may request, that the
conditions specified in Section 9 have been
fulfilled.
d. OPINION OF COUNSEL. Seller shall have
received from counsel to the Investors an opinion,
dated as of the applicable Closing Date, in form and
substance reasonably satisfactory to Seller as to
the matters set forth in Schedule 9.4.
e. REIT STATUS. The purchase of Shares by
the Investor, as agent for and on behalf of the
Pecuniary Owner, will not cause Seller to lose its
status as a REIT under the Code.
SECTION 10. TERMINATION OF OBLIGATIONS; SURVIVAL
a. TERMINATION OF AGREEMENT. This
Agreement and the transactions contemplated by this
Agreement may be terminated at any time before the
Closing Date, as follows and in no other manner:
i. MUTUAL CONSENT. By mutual consent in
writing of the Investor and Seller.
ii. MISREPRESENTATION OR MATERIAL BREACH.
By the Investor or Seller with written notice to the
other parties if there has been a misrepresentation
or material breach on the part of Seller or the
Investor, in their respective representations,
warranties and covenants set forth herein, which,
with respect to a breach of a covenant, if curable,
has not been cured within 10 business days after
receipt of notice from the Investor or Seller of the
terminating party's intention to terminate.
iii. ENVIRONMENTAL NONCOMPLIANCE. By the
Investor in the event of the discovery of any
Release or other matter prior to any Closing Date
-42-
48
which, if known to Seller as of the date of this
Agreement, would have constituted a breach of the
representations and warranties contained in Section
3.17.
iv. CLOSING. This Agreement shall
terminate if the Closing does not occur on or before
July 11, 1997.
b. EFFECT OF TERMINATION. In the event
that this Agreement shall be terminated pursuant to
Section 10.1 all further obligations of the parties
under this Agreement shall terminate; provided that
the obligations of the parties contained in this
Section 10.2, Section 11, and Section 12 (other than
Sections 12.3 and 12.8) shall survive any such
termination. A termination under Section 10.1 shall
not relieve any party of any liability for a breach
of, or for any misrepresentation under, this
Agreement, or be deemed to constitute a waiver of
any available remedy (including specific performance
if available) for any such breach or
misrepresentation.
c. SURVIVAL OF REPRESENTATIONS,
WARRANTIES AND COVENANTS. (a) The representations
and warranties contained in or made pursuant to this
Agreement shall expire on the third anniversary of
the Closing Date except that (a) the representations
and warranties contained in Section 3.2 shall
continue forever (subject to all defenses of Seller
available under applicable Law, including the
expiration of the applicable statute of limitations
period), (b) the representations and warranties
contained in Section 3.14 shall continue through the
applicable statute of limitations, (c)
representations and warranties which are
intentionally misrepresented shall continue through
the later of the first anniversary of the Closing
Date and one year following the date of actual
discovery of such intentional misrepresentation, and
(d) if a claim or notice is given under Section 12
with respect to the breach of any representation or
warranty prior to the applicable expiration date,
such representation or warranty shall continue
indefinitely until such claim is finally resolved.
(b) All covenants and agreements of the parties hereto shall be
continuing and shall survive each Closing Date pursuant to the terms thereof.
(c) The provisions of Section 11.1 through Section 11.5 and
Section 12.12 shall survive and remain in full force and effect with respect to
the Investor notwithstanding any termination of the Investor's appointment as
agent on behalf of the Pecuniary Owner.
-43-
49
SECTION 11. INDEMNIFICATION
a. INDEMNIFICATION. In partial consideration of the
commitment of the Investors as agent for and on behalf of
the Pecuniary Owner hereunder, Seller agrees to indemnify
and hold harmless the Investor and the Pecuniary Owner and
any of their respective affiliates, directors, officers,
agents and employees and each other person, if any,
controlling the Investor or the Pecuniary Owner or any of
their respective affiliates (each an "Investor Indemnified
Person") from and against any Losses (or actions in respect
thereof) to which such Investor Indemnified Person may
become subject in connection with the matters which are the
subject of the commitment made hereunder (including any use
or proposed use of the proceeds from the sale of the Common
Shares) including without limitation any and all Losses of
the Investor Indemnified Person as a result of, or based
upon or arising out of, directly or indirectly any
inaccuracy in, breach or nonperformance of, any of the
representations, warranties, covenants or agreements made by
Seller in, or pursuant to this Agreement, and will reimburse
any Investor Indemnified Person for all reasonable expenses
(including the reasonable fees of counsel) as they are
incurred by any such Investor Indemnified Person in
connection with investigating, preparing or defending any
such action or claim pending or threatened, whether or not
such Investor Indemnified Person is a party hereto. Seller
shall not be responsible for any losses, claims, damages,
liabilities or expenses resulting from such Investor
Indemnified Person's gross negligence or willful misconduct.
Seller also agrees that no Investor Indemnified Person shall
have any liability (whether direct or indirect, in contract
or tort or otherwise) to Seller for or in connection with
this Agreement except for losses, claims, damages,
liabilities or expenses to the extent that a court of
competent jurisdiction or arbitration panel shall have
finally determined that such losses, claims, damages,
liabilities or expenses resulted from such Investor
Indemnified Persons's gross negligence or willful
misconduct. In the event that the foregoing indemnity is
unavailable or insufficient to hold Investor Indemnified
Person harmless, Seller shall contribute to amounts paid or
payable by such Investor Indemnified Person in respect of
such losses, claims, damages, liabilities and expenses in
such proportion as appropriately reflects the relative
benefits received by, and fault of Seller, on the one hand,
and the Investor and the Pecuniary Owner on the other hand,
in connection with the matters as to which such losses,
claims, damages, liabilities or expenses relate. The
agreement of Seller in this paragraph shall be in addition
to any other liability that Seller may otherwise have.
-44-
50
b. OBLIGATIONS OF THE INVESTOR AND THE PECUNIARY OWNER.
The Investor and the Pecuniary Owner, severally and not
jointly, agree to indemnify, defend and hold harmless Seller
and its Trust Managers, officers, employees, agents,
directors and Affiliates (collectively, the "SELLER
INDEMNIFIED PARTIES") from and against any and all Losses of
the Seller Indemnified Parties as a result of, or based upon
or arising out of, directly or indirectly, (a) any material
inaccuracy in, or material breach or material nonperformance
of, any of the representations, warranties, covenants or
agreements made by the Investor as agent for and on behalf
of the Pecuniary Owner in, or pursuant to, this Agreement,
or (b) any pending or threatened Action brought by the
Investor's or the Pecuniary Owner's shareholders or
creditors relating to, or arising out of or in connection
with, directly or indirectly, the transactions contemplated
under this Agreement; provided, however, that the Investor
or the Pecuniary Owner, as applicable, shall not be
obligated to indemnify, defend or hold harmless any of the
Seller Indemnified Parties for any claims based solely on
actions taken by any of the Seller Indemnified Parties other
than the performance of the covenants and agreements to be
undertaken by Seller pursuant to the terms and conditions of
this Agreement and any other action authorized in writing by
the Investor or the Pecuniary Owner, as applicable. As a
condition to the rights of any of the Seller Indemnified
Parties under this Section 11, the Investor may require that
any such Person provide a written undertaking that such
Person will repay to the Investor or the Pecuniary Owner, as
applicable, any amount expended by the Investor or the
Pecuniary Owner, as applicable, to indemnify, defend or hold
harmless such Person in the event and to the extent a court
determines that such Investor's or Pecuniary Owner's
indemnification or defense of such Person is prohibited by
applicable Law. The agreement of the Investor and the
Pecuniary Owner in this paragraph shall be in addition to
any other liability that the Investor and the Pecuniary
Owner may otherwise have.
c. PROCEDURE.
i. NOTICE. Any party seeking indemnification with
respect to any Loss shall give notice to the party required
to provide indemnity hereunder (the "INDEMNIFYING PARTY") on
or before the date specified in Section 11.4.
ii. DEFENSE OF CLAIM. If any claim, demand or liability
is asserted by any third party against any Indemnified Party,
the Indemnifying Party shall have the right, unless otherwise
precluded by applicable law, to conduct and control the
defense, compromise or settlement of any Action or threatened
Action brought against the Indemnified Party in respect of
matters embraced by the indemnity set forth in this Section
11. The
-45-
51
Indemnified Party shall have the right to employ counsel
separate from counsel employed by the Indemnifying Party in
connection with any such Action or threatened Action and to
participate in the defense thereof, but the fees and
expenses of such counsel employed by the Indemnified Party
shall be at the sole expense of the Indemnified Party unless
(i) the Indemnifying Party shall have elected not, or, after
reasonable written notice of any such Action or threatened
Action, shall have failed, to assume or participate in the
defense thereof, (ii) the employment thereof has been
specifically authorized by the Indemnifying Party in
writing, or (iii) the parties to any such Action or
threatened Action (including any impleaded parties) include
both the Indemnifying Party and the Indemnified Party and
the Indemnified Party shall have been advised in writing by
counsel for the Indemnified Party that there may be one or
more defenses available to the Indemnified Party that are
not available to the Indemnifying Party or legal conflicts
of interest pursuant to applicable rules of professional
conduct between the Indemnifying Party and the Indemnified
Party (in any which case, the Indemnifying Party shall not
have the right to assume the defense of such Action on
behalf of the Indemnified Party), in either of which events
referred to in clauses (i), (ii) and (iii) the fees and
expenses of such counsel employed by the Indemnified Party
shall be at the expense of the Indemnifying Party. The
Indemnifying Party shall not, without the written consent of
the Indemnified Party, settle or compromise any such Action
or threatened Action or consent to the entry of any judgment
which does not include as an unconditional term thereof the
giving by the claimant or the plaintiff to the Indemnified
Party a release from all liability in respect of such Action
or threatened Action. Unless the Indemnifying Party shall
have elected not, or shall have after reasonable written
notice of any such Action or threatened Action failed, to
assume or participate in the defense thereof, the
Indemnified Party may not settle or compromise any Action or
threatened Action without the written consent of the
Indemnifying Party. If, after reasonable written notice of
any such Action or threatened Action, the Indemnifying Party
neglects to defend the Indemnified Party, a recovery against
the latter suffered by it in good faith, is conclusive in
its favor against the Indemnifying Party; provided, however,
that no such conclusive presumption shall be made if the
Indemnifying Party has not received reasonable written
notice of the Action against the Indemnified Party.
d. SURVIVAL. The indemnity set forth in this Section 11
shall survive each Closing or any termination of this
Agreement and shall remain in effect for a period of (a)
with respect to a breach of a representation or warranty,
for the period through which such representation or warranty
shall continue pursuant to Section 10.3 (including such
period of time through which such representation or warranty
shall be extended until resolution of a claim with respect
thereto) and (b) with respect to a breach of a covenant or
agreement or an Action referred to in Sections 11.1 or
11.2(b), forever.
-46-
52
e. NOTICE BY SELLER. Seller and the Investor agree to
notify in writing the other parties of any liabilities,
claims or misrepresentations, breaches or other matters
covered by this Section 11 upon discovery or receipt of
notice thereof (other than from such other parties), whether
before or after any Closing Date.
SECTION 12. GENERAL
a. AMENDMENTS; WAIVERS. This Agreement and any Schedule
or Exhibit attached hereto or referenced herein may be
amended only by agreement in writing of all parties. No
waiver of any provision nor consent to any exception to the
terms of this Agreement shall be effective unless in writing
and signed by the party to be bound and then only to the
specific purpose, extent and instance so provided.
b. SCHEDULES; EXHIBITS; INTEGRATION. Each Exhibit and
Schedule delivered pursuant to the terms of this Agreement
shall be in writing and shall constitute a part of the
Agreement. This Agreement, together with such Exhibits and
Schedules, constitutes the entire agreement among the
parties pertaining to the subject matter hereof and
supersedes all prior agreements and understandings of the
parties in connection therewith.
c. BEST EFFORTS; FURTHER ASSURANCES. Each party will
use its best efforts to cause all conditions to its
obligations to be timely satisfied and to perform and
fulfill all obligations on its part to be performed and
fulfilled under this Agreement. The parties shall cooperate
with each other in such actions and in securing requisite
Approvals. Each party shall execute and deliver such further
certificates, agreements and other documents and take such
other actions as the other party may reasonably request to
consummate or implement the transactions contemplated hereby
or to evidence such events or matters, including the seeking
of any necessary shareholder approvals.
d. GOVERNING LAW. ALL QUESTIONS CONCERNING THE
CONSTRUCTION, VALIDITY AND INTERPRETATION OF THIS AGREEMENT
SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE
DOMESTIC LAWS OF THE STATE OF MARYLAND, WITHOUT GIVING
EFFECT TO ANY CHOICE OF LAW OR CONFLICT OF LAW PROVISION
(WHETHER OF THE STATE OF MARYLAND OR ANY OTHER JURISDICTION)
THAT WOULD CAUSE THE APPLICATION OF THE LAWS OF ANY
JURISDICTION OTHER THAN THE STATE OF NEW YORK.
-47-
53
e. NO ASSIGNMENT. Except as otherwise specifically
provided herein, neither this Agreement nor any rights or
obligations under it are assignable by any party, except
that the Investor may assign the commitment of any Pecuniary
Owner to purchase Shares hereunder, and the related rights
and remedies of such Pecuniary Owner, to any other client on
behalf of whom it or any of its Affiliates acts as
investment advisor, whether or not such client is initially
the Pecuniary Owner hereunder and (ii) the Pecuniary Owner
may at any time subsequent to the date hereof appoint a
successor agent to act on its behalf in connection with the
matters contemplated herein.
f. HEADINGS. The descriptive headings of the Sections
and subsections of this Agreement are for convenience only
and do not constitute a part of this Agreement.
g. COUNTERPARTS. This Agreement and any other agreement
or document delivered pursuant hereto may be executed in one
or more counterparts and by different parties in separate
counterparts. All of such counterparts shall constitute one
and the same agreement or other document and shall become
effective when one or more counterparts of this Agreement
have been signed by each party and delivered to the other
parties.
h. PUBLICITY AND REPORTS. Seller and the Investor shall
coordinate all publicity relating to the transactions
contemplated by this Agreement and no party shall issue any
press release, publicity statement or other public notice
relating to this Agreement, or the transactions contemplated
by this Agreement, without obtaining the prior consent of
the other parties, except to the extent that independent
legal counsel to Seller or the Investor, as the case may be,
shall advise the other parties in writing that a particular
action is required by applicable Law (in which event the
party taking such action shall cooperate with the other
party in connection with any disclosure or publicity
resulting from such action).
i. CONFIDENTIALITY. All information disclosed by any
party (or its representatives) to the other party whether
before or after the date hereof, in connection with the
transactions contemplated by, or the discussions and
negotiations preceding, this Agreement to any other party
(or its representatives) shall be kept confidential by such
other party and its representatives and shall not be used by
any such Persons other than as contemplated by this
Agreement, except (a) to the extent that such information
(i) was known by the recipient when received, (ii) is or
hereafter becomes lawfully obtainable from other public
sources or (iii) is necessary or appropriate to be disclosed
to a Governmental Entity having jurisdiction over the
parties, (b) as may otherwise be required by Law to be
-48-
54
disclosed or (c) to the extent such duty as to
confidentiality is waived in writing by the other parties.
Notwithstanding the foregoing, the Investor shall be
entitled to disclose information relating to this Agreement
and the transactions contemplated hereby to any client on
behalf of whom it or any of its Affiliates acts as
investment advisor, in connection with a contemplated
investment by such client in Seller as described herein. If
this Agreement is terminated in accordance with its terms,
each party shall use all reasonable efforts to return upon
written request from the other parties all documents (and
reproductions thereof) received by it or its representatives
from such other parties (and, in the case of reproductions,
all such reproductions made by the receiving party) that
include information not within the exceptions contained in
the first sentence of this Section 12.9, unless the
recipients provide assurances reasonably satisfactory to the
requesting party that such documents have been destroyed.
j. PARTIES IN INTEREST. This Agreement shall be binding
upon and inure to the benefit of each party, and nothing in
this Agreement, express or implied, is intended to confer
upon any other Person any rights or remedies of any nature
whatsoever under or by reason of this Agreement. Nothing in
this Agreement is intended to relieve or discharge the
obligation of any third Person to or to confer any right of
subrogation or action over or against any party to this
Agreement.
k. NOTICES. Any notice or other communication hereunder
must be given in writing and (a) either delivered in person,
(b) transmitted by telex, telefax or telecopy mechanism, (c)
mailed by first class mail, return receipt requested, or (d)
delivered by overnight mail or courier service, as follows:
If to the Investor, addressed to:
ABKB/LaSalle Securities Limited Partnership
000 Xxxx Xxxxx Xxxxxx
Xxxxxxxxx, Xxxxxxxx 00000
Attention: Xxxxxxx X. Xxxxxx, Xx.
Telecopy: (000) 000-0000
With a copy to:
Xxxxxxxxx Xxxxx, Esquire
Piper & Marbury L.L.P.
00 X. Xxxxxxx Xxxxxx
Xxxxxxxxx, Xxxxxxxx 00000
Telecopy: (000) 000-0000
-49-
55
If to Seller, addressed to:
American Industrial Properties REIT
0000 Xxxxx Xxxxxxxx Xxxx, Xxxxx 000
Xxxxxx, Xxxxx 00000-0000
Attention: Xx. Xxxxxxx X. Xxxxxxx
President and Chief Executive Officer
Telecopy: (000) 000-0000
or to such other address or to such other person as any party shall have last
designated by such notice to the other parties. Each such notice or other
communication shall be effective (i) if given by telecommunication, when
transmitted to the applicable number so specified in this Section 12.11 and an
appropriate answer back is received, (ii) if given by mail, three days after
such communication is deposited in the mails with first class postage prepaid,
addressed as aforesaid or (iii) if given by any other means, when actually
delivered at such address.
l. EXPENSES. Except as set forth in the next
sentence, each of the parties hereto shall pay its own
respective expenses incident to the negotiation, preparation
and performance of this Agreement and the transactions
contemplated hereby, including but not limited to the fees,
expenses and disbursements of its respective financial
advisers, accountants and counsel. Seller shall reimburse the
Investors for all legal fees incurred by the Investor
relating to the transactions contemplated by this Agreement
and the Registration Rights Agreement up to a maximum of
$25,000.
m. REMEDIES; WAIVER. All rights and remedies
existing under this Agreement and any related agreements or
documents are cumulative to and not exclusive of any rights
or remedies otherwise available under applicable Law. No
failure on the part of any party to exercise or delay in
exercising any right hereunder shall be deemed a waiver
thereof, nor shall any single or partial exercise preclude
any further or other exercise of such or any other right.
Each of the parties hereto shall be entitled to seek any
equitable remedy to the extent such remedy is available under
applicable Law.
n. REPRESENTATION BY COUNSEL; INTERPRETATION. Each
of the parties hereto acknowledges that each party to this
Agreement has been represented by counsel in connection with
this Agreement and the transactions contemplated by this
Agreement. Accordingly, any rule of Law or any legal decision
that would require interpretation of any claimed ambiguities
in this Agreement against the party that drafted it has no
application and is expressly waived. The provisions of this
Agreement shall be interpreted in a reasonable manner to
effect the intent of the parties hereto, and no rule of
strict construction shall be applied against any party to
this Agreement.
-50-
56
o. SEVERABILITY. If any provision of this Agreement
is held to be illegal, invalid or unenforceable under any
current or future law, and if the rights or obligations of
the parties under this Agreement would not be materially and
adversely affected thereby, such provision shall be fully
separable, and this Agreement shall be construed and enforced
as if such illegal, invalid or unenforceable provision had
never comprised a part thereof, and the remaining provisions
of this Agreement shall remain in full force and effect and
shall not be affected by the illegal, invalid or
unenforceable provision or by its severance therefrom. In
lieu of such illegal, invalid or unenforceable provision,
there shall be added automatically as a part of this
Agreement, a legal, valid and enforceable provision as
similar in terms to such illegal, invalid or unenforceable
provision as may be possible, and the parties hereto request
the court or any arbitrator to whom disputes relating to this
Agreement are submitted to reform the otherwise illegal,
invalid or unenforceable provision in accordance with this
Section 12.15.
p. ARBITRATION. In the event of a dispute hereunder
which cannot be resolved by the parties, such dispute shall
be settled by arbitration in accordance with the Commercial
Arbitration Rules of the American Arbitration Association and
judgment on the award rendered by the arbitration panel may
be entered in any court or tribunal of competent
jurisdiction. Any arbitration occurring under this Section
12.16 shall be held in Baltimore, Maryland in the first
instance, in Dallas, Texas in the second instance, and
continuing in that order with respect to each dispute
occurring hereunder.
q. AGENTS. (a) Seller acknowledges and agrees that
the Investor is acting as agent for and on behalf of the
Pecuniary Owner and that the Investor shall not have any
liability to Seller, and shall not be obligated to purchase
securities hereunder with respect to which the Pecuniary
Owner was obligated to but did not purchase.
(b) In the event that the Investor shall no longer act as agent for and on
behalf of the Pecuniary Owner in connection with the matters contemplated by
this Agreement, then (i) any agent(s) appointed by the Pecuniary Owner as
successor agent(s) to the Investor shall be entitled to, and to exercise on
behalf of the Pecuniary Owner, all of the rights and remedies provided for
herein with respect to the Investor and (ii) at any such time as no successor
agent(s) shall have been appointed by the Pecuniary Owner, the Pecuniary Owner
shall be entitled to exercise all of the rights and remedies provided for herein
in its individual capacity, including the right to obtain, upon request, copies
of all documents and notices as specified herein. In the event that the Investor
shall no longer act as agent on behalf of the Pecuniary Owner hereunder, all
consents or waivers of the Investor necessary to effect any action hereunder
shall be required to be given by any successor agent(s) appointed by the
Pecuniary Owner or, if no successor(s) has been appointed, by the Pecuniary
Owner, prior to the consummation of such action.
-51-
57
(c) Until such time as Seller shall have received a written notice
from the Pecuniary Owner that the Investor is no longer acting as the Pecuniary
Owner's agent hereunder, Seller shall be entitled to rely on any instructions
and any notices received from the Investor on behalf of the Pecuniary Owner as
if received from the Pecuniary Owner directly.
"INVESTOR"
ABKB/LASALLE SECURITIES LIMITED
PARTNERSHIP, as Agent and for and
on behalf of the Pecuniary Owner
By:
----------------------------------
Name:
--------------------------------
Title:
-------------------------------
"SELLER"
AMERICAN INDUSTRIAL PROPERTIES REIT
-------------------------------------
Xxxxxxx X. Xxxxxxx
President and Chief Executive Officer
-52-
