<PAGE>
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
___________
FORM 10-K
FOR ANNUAL AND TRANSITION REPORTS
PURSUANT TO SECTIONS 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
(MARK ONE)
/X/ ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the fiscal year ended December 31, 1997
OR
/ / TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from ____________ to ____________
Commission file number 1-12993
ALEXANDRIA REAL ESTATE EQUITIES, INC.
(Exact name of registrant as specified in its charter)
MARYLAND 95-4502084
(State or other jurisdiction (IRS Employer I.D. Number)
of incorporation or organization)
135 N. LOS ROBLES AVENUE, SUITE 250
PASADENA, CALIFORNIA 91101
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (626) 578-0777
Securities registered pursuant to Section 12(b) of the Act:
TITLE OF EACH CLASS NAME OF EACH EXCHANGE ON WHICH REGISTERED
Common Stock, $.01 par value per share New York Stock Exchange
Securities registered pursuant to Section 12(g) of the Act: NONE
Indicate by check mark whether the registrant: (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. YES X NO
----- -----
Indicate by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K is not contained herein, and will not be contained, to the
best of registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K. / /
The aggregate market value of the shares of Common Stock held by non-
affiliates was approximately $266.2 million based on the closing price for
such shares on the New York Stock Exchange on March 27, 1998.
As of March 27, 1998 the Registrant had 11,404,631 shares of Common Stock
outstanding.
DOCUMENTS INCORPORATED BY REFERENCE
Part III of this report incorporates information by reference from the
definitive Proxy Statement to be mailed in connection with the registrant's
annual meeting of stockholders to be held on May 15, 1998.
<PAGE>
INDEX TO FORM 10-K
ALEXANDRIA REAL ESTATE EQUITIES, INC.
PAGE REFERENCE
PART I
Item 1. Business . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
Item 2. Properties . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
Item 3. Legal Proceedings. . . . . . . . . . . . . . . . . . . . . . . . . 10
Item 4. Submission of Matters to a Vote of Security Holders. . . . . . . . 10
PART II
Item 5. Market for the Registrant's Common Equity and Related Stockholder
Matters. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
Item 6. Selected Financial Data. . . . . . . . . . . . . . . . . . . . . . 12
Item 7. Management's Discussion and Analysis of Financial Condition and
Results of Operations . . . . . . . . . . . . . . . . . . . . . . 13
Item 7A. Quantitative and Qualitative Disclosures About Market Risk . . . . 20
Item 8. Financial Statements and Supplementary Data. . . . . . . . . . . . 20
Item 9. Changes in and Disagreements with Accountants on Accounting and
Financial Disclosure. . . . . . . . . . . . . . . . . . . . . . . 20
PART III
Item 10. Directors and Executive Officers of the Registrant . . . . . . . . 21
Item 11. Executive Compensation . . . . . . . . . . . . . . . . . . . . . . 21
Item 12. Security Ownership of Certain Beneficial Owners and Management . . 21
Item 13. Certain Relationships and Related Transactions . . . . . . . . . . 21
PART IV
Item 14. Exhibits, Financial Statement Schedules, and Reports on Form 8-K . 22
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PART I
When used herein, the words "believes," "expects," "anticipates," "intends"
and similar expressions are intended to identify forward-looking statements
within the meaning of Section 27A of the Securities Act of 1933, as amended (the
"Securities Act"), and Section 21E of the Securities Exchange Act of 1934, as
amended, regarding events, conditions and financial trends that may affect the
Company's future plan of operation, business strategy, results of operations and
financial position. Forward-looking statements are not guarantees of future
performance and are subject to risks and uncertainties. Actual results may
differ materially from those included within the forward-looking statements as a
result of various factors, including, but not limited to, those described below
under the heading "Management's Discussion and Analysis of Financial Condition
and Results of Operations" and the risk factors identified in the Company's
Registration Statement on Form S-11 (No. 333-23545) initially filed with the
Securities and Exchange Commission on March 18, 1997. The Company disclaims any
obligation to update any such factors or to announce publicly the result of any
revisions to any of the forward-looking statements.
ITEM 1. BUSINESS.
BACKGROUND AND FORMATION.
Alexandria Real Estate Equities, Inc. ("Alexandria" and, together with its
subsidiaries, the "Company"), a Maryland corporation, is a real estate
investment trust ("REIT") engaged primarily in the acquisition, management,
expansion and selective development of high quality, strategically located
properties containing office and laboratory space designed and improved for
lease principally to pharmaceutical, biotechnology, diagnostic and personal care
products companies, major scientific research institutions and related
government agencies (collectively, the "Life Science Industry"). Properties
leased to tenants in the Life Science Industry typically consist of suburban
office buildings containing scientific research and development laboratories and
other improvements that are generic to tenants operating in the Life Science
Industry (such properties, "Life Science Facilities"). As of December 31, 1997,
the Company owned 22 Life Science Facilities (the "Properties") and two parcels
of vacant land, aggregating approximately 4.2 acres, adjacent to the Company's
3535 and 3565 General Atomics Court Properties in the Torrey Pines area of San
Diego, California.
FORMATION. In connection with the formation of Alexandria in October 1994,
Health Science Properties Holding Corporation ("Holdings"), a Maryland
corporation formed in September 1993 and capitalized in January 1994,
contributed substantially all of its assets and liabilities (other than certain
outstanding unsecured notes) to Alexandria in exchange for all of the then
issued and outstanding shares of common stock of Alexandria, par value $.01 per
share (the "Common Stock"). Holdings was the sole holder of the Common Stock
until June 2, 1997, when Alexandria completed its initial public offering (the
"Offering") of 6,750,000 shares of Common Stock. On June 26, 1997, Alexandria
issued an additional 1,012,500 shares of Common Stock pursuant to the exercise
of the over-allotment option granted to the underwriters in connection with the
Offering.
THE OFFERING AND RECENT DEVELOPMENTS.
THE OFFERING. Each of the following transactions occurred in connection
with the Offering:
- - The 27,500 outstanding shares of Series V Preferred Stock of Alexandria,
issued in 1996 in a series of transactions to raise additional equity
capital, were converted into 1,659,239 shares of Common Stock.
- - The Company acquired 100% of the membership interests in ARE Acquisitions,
LLC, a Delaware limited liability company (the "Acquisition LLC"), thereby
acquiring three of the Properties, for an aggregate purchase price of
approximately $58.8 million.
- - The Company repaid approximately $77.7 million of its then-existing
mortgage indebtedness with a portion of the net proceeds of the Offering
and the net proceeds of (i) an $8.5 million mortgage loan on the
Property located at 1431 Harbor Bay
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Parkway and (ii) a $6.9 million mortgage loan on the Property located at
1102 and 1124 Columbia Street. The Company subsequently repaid the
mortgage loan on 1102 and 1124 Columbia Street in November 1997.
ACQUISITIONS. Since December 31, 1997 (through March 27, 1998), the
Company has acquired 11 additional Life Science Facilities containing an
aggregate of 927,000 rentable square feet for an aggregate purchase price of
approximately $110 million and made a $6 million loan secured by real estate
related to one of these Life Science Facilities. Of these amounts, $103
million was funded through draws on the Company's unsecured line of credit,
approximately $13 million through the assumption of existing debt and the
remainder with working capital. The recent acquisitions were in California
(in the San Diego and San Francisco Bay areas), Seattle, Washington, suburban
Maryland, Boston/Cambridge, Massachusetts, Raleigh/Durham, North Carolina and
the New York/New Jersey and suburban Philadelphia areas.
STRUCTURE. The Company is in the process of modifying its existing
corporate structure to facilitate its operation as an umbrella partnership or
"UPREIT." The Company has formed an operating partnership (the "Operating
Partnership") through which the Company expects to conduct substantially all
of its operations. The Company believes that the UPREIT structure will
enhance its acquisition activities by providing an additional source of
acquisition consideration. Initially, however, the Company will own all of
the interests in the Operating Partnership ("OP Units").
BUSINESS AND GROWTH STRATEGY.
As of December 31, 1997, the Company owned 22 Properties containing
approximately 1.75 million rentable square feet of office and laboratory
space located in California (in the San Diego and San Francisco Bay areas),
Seattle, Washington and suburban Washington, D.C. (including Maryland and
Virginia). The Company also owned two parcels of vacant land aggregating
approximately 4.2 acres in San Diego, California. The Company focuses its
operations and acquisition activities principally in these markets, as well
as in certain other markets, including Boston/Cambridge, Massachusetts,
Raleigh/Durham, North Carolina and the New York/New Jersey and suburban
Philadelphia areas. See "--Recent Developments." The Company's tenant base
is broad and diverse within the Life Science Industry and reflects the
Company's focus on regional, national and international tenants with
substantial financial and operational resources. For a detailed description
of the Properties and tenants, see "Item 2. Properties." The Company is led
by a senior management team with extensive experience in both the real estate
and Life Science industries and is supported by a highly experienced board of
directors.
The Company seeks to maximize growth in funds from operations ("FFO")
and cash available for distribution to stockholders through effective
management, operation, acquisition, expansion and selective development of
Life Science Facilities. See "Item 7. Management's Discussion and Analysis
of Financial Condition and Results of Operations--Funds from Operations" for
a complete discussion of how the Company computes and views FFO as well as a
discussion of other measures of cash flow. In particular, the Company seeks
to increase FFO and cash available for distribution per share by (i)
acquiring high quality Life Science Facilities at attractive returns in its
target markets; (ii) realizing contractual rental rate escalations; (iii)
retenanting and releasing space within its portfolio at higher rental rates,
and with minimal tenant improvement costs; (iv) expanding existing Properties
or converting existing office space to generic laboratory space that can be
leased at higher rental rates; (v) selectively developing properties on a
retrofit or build-to-suit basis; and (vi) continuing to implement effective
cost control measures, including pass-through provisions in tenant leases for
operating expenses and certain capital expenditures.
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ACQUISITIONS. The Company seeks to identify and acquire high quality Life
Science Facilities in its target markets. Critical evaluation of prospective
property acquisitions is an essential component of the Company's acquisition
strategy. When evaluating acquisition opportunities, the Company assesses a
full range of matters relating to the properties, including the quality of the
tenants, the condition and capacity of building infrastructure, the quality and
generic characteristics of laboratory facilities and the physical condition of
the shell structure and common area improvements. Management also considers
opportunities available for leasing vacant space and for retenanting occupied
space.
INTERNAL GROWTH. The Company seeks to achieve internal growth from several
sources. The Company seeks to (i) include rental rate escalation provisions in
its leases; (ii) acquire undervalued or underperforming properties where it can
improve investment returns through releasing of vacant space and replacement of
existing tenants with new tenants at higher rental rates; (iii) achieve higher
rental rates as existing leases expire; and (iv) expand existing facilities that
are fully leased and/or convert existing office space to higher rent generic
laboratory space. The Company's ability to negotiate contractual rent
escalations in future leases and to achieve increases in rental rates will
depend upon market conditions and demand for Life Science Facilities at the time
such leases are negotiated and such increases are proposed.
DEVELOPMENT. The Company intends to emphasize acquisitions over
development in pursuing its growth objectives. However, the Company plans to
pursue selective build-to-suit and retrofit development projects where it
expects to achieve investment returns that will equal or exceed its returns
on acquisitions. The Company generally intends to undertake build-to-suit
and retrofit projects only if the Company's investment in infrastructure will
be substantially generic in nature and not tenant specific.
FINANCING/WORKING CAPITAL. The Company believes that cash provided by
operations and its unsecured line of credit will be sufficient to fund its
working capital requirements. The Company generally expects to finance
future acquisitions initially through the Company's unsecured line of credit
and then to refinance such indebtedness with additional equity or debt
capital. The Company also may issue Common Stock, OP Units or interests in
other subsidiaries as consideration for acquisitions. See "Item 7.
Management's Discussion and Analysis of Financial Condition and Results of
Operations--Liquidity and Capital Resources" for a complete discussion of the
Company's unsecured line of credit and other outstanding indebtedness.
COMPETITION
Management believes that the Company is the only publicly traded entity
focusing primarily on the acquisition, management, expansion and selective
development of Life Science Facilities. However, various entities, including
insurance companies, pension and investment funds, partnerships, developers,
investment companies and other REITs invest in Life Science Facilities and
therefore compete for investment opportunities with the Company. Many of these
entities have substantially greater financial resources than the Company and may
be able to accept more risk than the Company can prudently manage, including
risks with respect to the creditworthiness of a tenant or the geographic
proximity of its investments. Competition from these entities may reduce the
number of suitable investment opportunities offered to the Company or increase
the bargaining power of property owners seeking to sell.
3
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GOVERNMENT REGULATION
The Company and the Properties are subject to various federal, state and
local regulatory requirements, including local building codes, environmental and
other similar regulations. The Company believes that the Properties are in
substantial compliance with all applicable building code and related
regulations.
ENVIRONMENTAL MATTERS. Under various federal, state and local
environmental laws and regulations, a current or previous owner or operator of
real estate, as well as certain other parties, may be required to investigate
and remediate the effects of hazardous or toxic substances or petroleum product
releases on, under, in or from such property, and may be held liable to a
governmental entity or to third parties for investigation and cleanup costs and
certain damages resulting from such releases. Such laws and regulations
typically impose responsibility and liability without regard to whether such
person knew of or caused the releases, and the liability under such laws and
regulations has been interpreted to be joint and several, unless the harm is
divisible and there is a reasonable basis for allocation of responsibility. The
cost of investigating and remediating such contamination may be substantial, and
the presence of such contamination, or the failure to properly remediate it, may
adversely affect the owner's ability to sell or rent such property or to borrow
using such property as collateral. In addition, the owner of a site may be
subject to governmental fines and common law claims by third parties seeking to
recover damages and costs resulting from such contamination.
Certain other federal, state and local laws and regulations govern the
management and disposal of asbestos containing materials ("ACMs"). Such laws
and regulations may impose liability for the release of ACMs and may provide for
third parties to seek recovery from owners or operators of such property for
personal injury associated with ACMs. In connection with the ownership and
operation of its properties, the Company may be potentially liable for such
costs. ACMs have been detected at certain of the Properties, but are not
expected to result in material environmental costs or liabilities to the
Company. Federal, state and local laws and regulations also require the removal
or upgrading of certain underground storage tanks and regulate the discharge of
storm water, wastewater and any water pollutants, the emission of air
pollutants, the generation, management and disposal of hazardous or toxic
chemicals, substances or wastes, and workplace health and safety.
Life Science Industry tenants, including certain of the Company's tenants,
engage in various research and development activities involving the controlled
use of hazardous materials, chemicals, biological and radioactive compounds.
Although the Company believes that the tenants' activities involving such
materials comply in all material respects with applicable laws and regulations,
the risk of contamination or injury from these materials cannot be completely
eliminated. In the event of such contamination or injury, the Company could be
held liable for any damages that result, and any such liability could exceed the
Company's resources and its environmental remediation coverage.
All of the Properties have been, and it is contemplated that all future
acquisitions will be, subjected to a Phase I or similar environmental assessment
(which generally includes a site inspection, interviews and a records review,
but no subsurface sampling). These assessments and certain follow-up
investigations (including, as appropriate, asbestos, radon and lead surveys,
additional public records review, subsurface sampling and other testing) of the
Properties have not revealed any environmental liability that the Company
believes would have a material adverse effect on the Company's business or
results of operations. Nevertheless, it is possible that the assessments on the
Properties have not revealed, or that the assessments on future acquisitions
will not reveal, all environmental liabilities and that there may be material
environmental liabilities of which the Company is unaware.
The Company believes that the Properties currently are in compliance in all
material respects with applicable environmental laws.
AMERICANS WITH DISABILITIES ACT. Under the Americans with Disabilities Act
of 1990 (the "ADA"), places of public accommodation and/or commercial facilities
are required to meet certain federal requirements related to access and use by
disabled persons. Although management of the Company believes that the
Properties are substantially in compliance with the present requirements of the
ADA, the Company may incur additional costs in connection with such
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compliance in the future. In addition, a number of additional federal, state
and local laws and regulations exist that may require modifications to the
Company's properties, or affect certain future renovations thereof, with respect
to access by disabled persons. Non-compliance with the ADA could result in the
imposition of fines or an award of damages to private litigants, and also could
result in an order to correct any non-complying feature. Under certain of the
Company's leases, the tenant is responsible for ensuring that the property
complies with all laws and regulations, including the ADA. Notwithstanding the
foregoing, the Company may be required to make substantial capital expenditures
to comply with this law. In addition, provisions of the ADA may impose
limitations or restrictions on the completion of certain renovations and thus
may limit the overall returns on the Company's investments.
FINANCIAL INFORMATION REGARDING INDUSTRY SEGMENTS AND OPERATIONS.
The Company currently is involved only in the real estate industry
segment within the United States; the Company has no foreign operations.
Accordingly, all financial statements contained herein relate to such
industry segment. See "Item 2. Properties" and "Item 8. Financial Statements
and Supplementary Data" for detailed financial information regarding the
Company's business.
EMPLOYEES
As of December 31, 1997, the Company had 18 full-time employees.
ITEM 2. PROPERTIES.
GENERAL.
The Properties range in size from approximately 30,000 to 250,000 square
feet, are built to accommodate single or multiple tenants and are generally one
or two story concrete tilt-up or block and steel frame structures. The
exteriors typically resemble traditional suburban office properties, but
interior infrastructures are designed to accommodate the needs of Life Science
Industry tenants. Such improvements typically are generic to Life Science
Industry tenants rather than specific to a particular tenant. As a result,
management believes that the improvements have long-term value and utility and
are readily usable by a wide range of Life Science Industry tenants. Generic
infrastructure improvements for each Property include: reinforced concrete
floors, upgraded roof loading capacity and increased floor to ceiling heights;
heavy-duty HVAC systems and advanced environmental control technology;
significantly upgraded electrical, gas and plumbing infrastructure; and
laboratory benches.
The Company owns fee simple title in each of the Properties, except with
respect to 1311, 1401 and 1431 Harbor Bay Parkway, in which the Company owns a
commercial condominium interest, together with an undivided interest in the
common areas of the project in which the Property is a part.
Leases in the Company's multi-tenant buildings typically have terms of
three to seven years, while the single-tenant building leases typically have
terms of 10 to 20 years. As of December 31, 1997, approximately 76% of the
Company's leases (on a square footage basis) were triple net leases,
requiring tenants to pay substantially all real estate taxes and insurance,
common area and other operating expenses (including increases thereto) in
addition to base rent. In addition, approximately 19% of the Company's
leases (on a square footage basis) required the tenants to pay a majority of
operating expenses. The remaining leases were gross leases, pursuant to which
tenants generally pay for substantially all real estate taxes and insurance,
common area and other operating expenses above those for an established base
year. Approximately 64% of the Company's leases (on a square footage basis)
contained effective annual rent escalations that are either fixed (ranging
from 2.5% to 4.0%) or indexed based on a consumer price index or other index.
In addition, approximately 77% of the Company's leases (on a square footage
basis) provided for the recapture of certain capital expenditures (such as
HVAC systems maintenance and/or replacement, roof replacement and parking
lot resurfacing), which the Company believes would typically be borne by the
landlord in traditional office leases. The leases also typically give the
Company the right to review and approve tenant alterations to the property.
Generally, tenant-installed improvements remain the property of the Company
after termination of the lease. However, the Company is permitted under the
terms of most of its leases to require that the tenant remove such
improvements and restore the premises to their original condition. As of
December 31, 1997, the Company had 42 leases with a total of 35 tenants, and
12 of the Properties were single-tenant properties.
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As of December 31, 1997, the Company managed 21 of the Properties, and the
remaining Property was managed by a major tenant at such Property. All material
decisions with respect to all of the Properties are made by the Company.
The following table sets forth certain information with respect to the
Properties as of December 31, 1997:
<TABLE>
<CAPTION>
PERCENTAGE OF ANNUALIZED ANNUALIZED
AGGREGATE BASE RENT NET EFFECTIVE
PORTFOLIO PER LEASED RENT PER
YEAR BUILT/ RENTABLE PERCENTAGE ANNUALIZED ANNUALIZED SQUARE FEET LEASED SQUARE
PROPERTIES RENOVATED(1) SQUARE FEET LEASED(2) BASE RENT(2)(3) BASE RENT (3) FOOT(4) MAJOR TENANTS
---------- ------------ ----------- --------- ------------ --------- ------- ------- -------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
SAN DIEGO
10933 North Torrey 1971/1994 108,133 100% $2,309,136 7.3% $21.35 16.24 The Scripps Research
Pines Institute
Road San Diego, CA Advanced Tissue
Sciences, Inc.
11099 North Torrey 1986/1996 86,962 100 2,208,192 7.0 25.39 23.62 Agouron
Pines Pharmaceuticals,
Road San Diego, CA Inc.
Axys Pharmaceuticals,
Inc.
3535 General Atomics 1991 76,084 100 2,554,464 8.1 33.57 32.61 The Scripps Research
Court Institute
San Diego, CA R.W. Johnson
Research
Institute(5)
Syntro Corporation(6)
3565 General Atomics 1991 43,600 100 1,526,952 4.8 35.02 35.02 Agouron
Court Pharmaceuticals,
San Diego, CA Inc.
11025 Roselle Street 1983 18,532 59 224,995 0.7 20.45 20.45 Collateral
San Diego, CA Therapeutics, Inc.
SAN FRANCISCO BAY AREA
1201 Harbor Bay 1983 61,100 100 913,296 2.9 14.95 12.22 Avigen Inc.
Parkway American President
Alameda, CA Companies, Ltd.
1311 Harbor Bay 1984 30,000 85 407,844 1.3 15.96 15.96 Chiron Corporation
Parkway Therasense, Inc.
Alameda, CA
1401 Harbor Pay 1986/1994 47,777 100 518,592 1.6 10.85 10.50 Chiron Diagnostics
Parkway
Alameda, CA
1431 Harbor Bay 1985/1994 70,000 100 1,413,972 4.5 20.20 12.86 U.S. Food & Drug
Parkway Administration
Alameda, CA
SEATTLE, WASHINGTON
1102/1124 Columbia 1975/1997 213,397 100 4,777,368 15.1 22.39 22.05 Fred Hutchinson
Street Cancer
Seattle, WA **+ Research Center
Corixa Corporation
Swedish Medical
Center
SUBURBAN WASHINGTON,
D.C.
300 Professional Drive 1989 48,440 100 669,732 2.1 13.83 13.83 Mobile Telesystems,
Gaithersburg, MD Inc.
Antex Biologics Inc.
401 Professional Drive 1987 62,739 100 1,038,588 3.3 16.55 16.55 Gillette Capital
Gaithersburg, MD Corporation(7)
25/35/45 West Watkins 1989/1997 138,938 100 1,900,200 6.0 13.68 13.67 Genetic Therapy,
Mill Inc.(8)
Road Gaithersburg, MedImmune, Inc.
MD
708 Quince Orchard 1982 49,225 100 1,191,600 3.8 24.21 23.87 Gene Logic, Inc.
Road
Gaithersburg, MD(9)
940 Clopper Road 1989 44,464 63 360,240 1.1 12.90 12.90 Immunomatrix, Inc.
Gaithersburg, MD Lockheed Martin
Federal Systems,
Inc.
1401 Research 1966 48,800 100 722,904 2.3 14.81 14.24 U.S. Bureau of
Boulevard Alcohol
Rockville, MD Tobacco and
Firearms
6
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PERCENTAGE OF ANNUALIZED ANNUALIZED
AGGREGATE BASE RENT NET EFFECTIVE
PORTFOLIO PER LEASED RENT PER
YEAR BUILT/ RENTABLE PERCENTAGE ANNUALIZED ANNUALIZED SQUARE FEET LEASED SQUARE
PROPERTIES RENOVATED(1) SQUARE FEET LEASED(2) BASE RENT(2) BASE RENT (3) FOOT(4) MAJOR TENANTS
---------- ------------ ----------- --------- ------------ --------- ------- ------- -------------
1500 East Gude Drive 1981/1986 45,989 83 483,636 1.5 12.62 12.62 bioMerieux Vitek,
Rockville, MD Inc.
3/3 1/2 Taft Court 1981/1986 24,460 15 36,600 0.1% 9.68 9.68 bioMerieux Vitek,
Rockville, MD Inc.
1413 Research 1967/1996 105,000 100 1,563,456 4.9 14.89 13.33 U.S. Army Corps of
Boulevard Engineers
Rockville, MD
1550 East Gude Drive 1981/1995 44,500 100 596,004 1.9 $13.39 $13.39 Shire
Rockville, MD Pharmaceuticals,
PLC(10)
1330 Piccard Drive 1978/1994 131,511 100 1,903,656 6.0 14.48 14.48 Intracel Corporation
Rockville, MD
14225 Newbrook Drive 1992 248,186 100 4,341,132 13.7 17.49 17.49 American Medical
Chantilly, VA + --------- ---- ----------- ----- ------ ------ Laboratories, Inc.
Total/Weighted Average(11): 1,747,837 96.7% $31,662,559 100.0% $18.72 $17.68
--------- ---- ----------- ----- ------ ------
--------- ---- ----------- ----- ------ ------
</TABLE>
______________
** Gross revenues from the Property for the year ended December 31, 1997
represent in excess of 10% of the aggregate gross revenues of the
Company for such period.
+ Book value of the Property represents in excess of 10% of the Company's
total assets as of December 31, 1997.
(1) Includes year in which construction was completed and, where applicable,
year of most recent major renovation.
(2) Based on all leases at the respective Property in effect as of
December 31, 1997.
(3) Annualized Base Rent means the annualized fixed base rental amount in
effect as of December 31, 1997 (using rental revenue computed on a
straight-line basis in accordance with GAAP) paid by tenants under the
terms of their leases. This amount, divided by the rentable square feet
leased at the Property as of December 31, 1997, is the Annualized Base
Rent per Leased Square Foot.
(4) Annualized Net Effective Rent is the Annualized Base Rent in effect as
of December 31, 1997, less (for gross leases) real estate taxes and
insurance, common area and other operating expenses and (for all leases)
amortized tenant improvements and leasing commissions. This amount,
divided by the rentable square feet leased at the Property as of
December 31, 1997, is the Annualized Net Effective Rent per Leased
Square Foot.
(5) The R.W. Johnson Research Institute is a wholly owned subsidiary of
Johnson & Johnson.
(6) Syntro Corporation is a wholly owned subsidiary of Schering-Plough
Corporation
(7) Gillette Capital Corporation is a wholly owned subsidiary of The
Gillette Company, the guarantor of the lessee's obligations under the
lease.
(8) Genetic Therapy, Inc. is a wholly owned subsidiary of Novartis AG.
(9) As of December 31, 1997, Gene Logic, Inc. was converting office space to
laboratory space at this Property and expected to take occupancy upon
completion in March 1998.
(10) Shire Pharmaceuticals, PLC subleases its space from Quest Diagnostics,
Inc.
(11) Weighted Average based on a percentage of aggregate leased square feet.
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LOCATION AND TYPE OF SPACE
The following table sets forth, as of December 31, 1997, the gross
revenues and type of space within the Properties by rentable square footage
in each of the Company's existing markets.
<TABLE>
<CAPTION>
GROSS REVENUES AND TYPE OF SPACE
TOTAL RENTABLE % OF TOTAL RENTABLE ANNUALIZED % OF ANNUALIZED
GEOGRAPHIC AREA SQUARE FOOTAGE SQUARE FOOTAGE BASE RENT(1) BASE RENT
- ---------------- --------------- ------------------- -------------- ---------------
<S> <C> <C> <C> <C>
San Diego...................... 333,311 19.0% $ 8,823,739 27.9%
San Francisco Bay Area......... 208,877 12.0 3,253,704 10.2
Seattle........................ 213,397 12.2 4,777,368 15.1
Suburban Washington, D.C....... 992,252 56.8 14,807,748 46.8
--------- ------ ----------- ------
Total...................... 1,747,837 100.0% $31,662,559 100.0%
--------- ------ ----------- ------
--------- ------ ----------- ------
</TABLE>
- -----------------
(1) Annualized Base Rent means the annualized fixed base rental amount in
effect as of December 31, 1997 (using rental revenues computed on a
straight-line basis in accordance with GAAP) paid by tenants under the terms
of their leases.
TENANTS
The Properties are leased principally to tenants engaged in a variety of
activities in the Life Science Industry. The following table sets forth
information regarding the Company's leases with its 20 largest tenants based
upon Annualized Base Rent as of December 31, 1997.
8
<PAGE>
20 LARGEST TENANTS
<TABLE>
<CAPTION>
REMAIN- PERCENTAGE OF
ING PERCENTAGE AGGREGATE
INITIAL APPROXIMATE PERCENTAGE OF AGGREGATE ANNUALIZED PORTFOLIO
NUMBER LEASE AGGREGATE OF AGGREGATE ANNUALIZED PORTFOLIO NET EFFECTIVE ANNUALIZED
OF TERM IN RENTABLE LEASED BASE RENT (IN ANNUALIZED RENT (IN NET EFFECTIVE
TENANT LEASES YEARS SQUARE FEET SQUARE FEET THOUSANDS)(1) BASE RENT THOUSANDS)(2) RENT
------ ------ ------- ----------- ------------ ------------- ------------ ------------- -------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
American Medical 1 19.0 248,200 14.7% $ 4,341 13.7% $4,341 14.5%
Laboratories, Inc.
Fred Hutchinson Cancer 2 0.4 131,600 7.8 2,705 8.5 2,686 9.0
Research Center(3) 1.9
6.9
Agouron Pharmaceuticals, 2 2.8 70,500 4.2 2,312 7.3 2,251 7.5
Inc. 3.8
Corixa Corporation 2 0.8 65,200 3.8 1,964 6.2 1,911 6.4
7.0
Intracel Corporation 1 9.0 131,500 7.8 1,904 6.0 1,904 6.4
Advanced Tissue 2 2.7 84,500 5.0 1,721 5.4 1,392 4.7
Sciences, Inc. 2.7
U.S. Army Corps of 1 1.4 105,000 6.2 1,563 4.9 1,399 4.7
Engineers(4) 3.8
U.S. Food & Drug 1 16.0 70,000 4.1 1,414 4.5 900 3.0
Administration
R.W. Johnson 1 1.1 45,000 2.7 1,379 4.4 1,306 4.4
Pharmaceutical Research
Institute
The Scripps Research 2 1.8 41,900 2.5 1,334 4.2 1,111 3.7
Institute 2.5
MedImmune, Inc.(5) 2 8.9 81,300 4.8 1,300 4.1 1,298 4.3
8.9
Axys Pharmaceuticals, 1 4.0 55,500 3.3 1,262 4.0 1,191 4.0
Inc.
Gene Logic, Inc. 2 9.9 49,200 2.9 1,192 3.8 1,175 3.9
9.9
Gillette Capital 1 8.3 62,700 3.7 1,039 3.3 1,039 3.5
Corporation(6)
U.S. Bureau of Alcohol, 1 3.5 48,800 2.9 723 2.3 695 2.3
Tobacco & Firearms
Shire Pharmaceuticals, 1 2.3 44,500 2.6 596 1.9 596 2.0
PLC(7)
bioMerieux Vitek, Inc. 1 8.8 42,100 2.5 520 1.6 520 1.7
Chiron Corporation 1 2.0 47,800 2.8 519 1.6 501 1.7
American Presidential 1 0.8 38,100 2.2 494 1.6 494 1.7
Companies, Ltd.
Syntro Corporation 1 2.0 12,800 0.8 430 1.4 429 1.4
-- ---- --------- ---- ------- ---- ------- ----
Total/Weighted
Average(8) 27 7.8 1,476,200 87.3% $28,712 90.7% $27,139 90.8%
-- ---- --------- ---- ------- ---- ------- ----
-- ---- --------- ---- ------- ---- ------- ----
</TABLE>
9
<PAGE>
____________
(1) Annualized Base Rent means the annualized fixed base rental amount in
effect as of December 31, 1997 (using rental revenue computed on a
straight-line basis in accordance with GAAP) paid by tenants under the
terms of their leases.
(2) Annualized Net Effective Rent is the Annualized Base Rent in effect as of
December 31, 1997 (using rental revenue computed on a straight-line basis
in accordance with GAAP), less (for gross leases) real estate taxes and
insurance, common area and other operating expenses and (for all leases)
amortized tenant improvements and leasing commissions.
(3) Of the 131,554 rentable square feet leased to Fred Hutchinson Cancer
Research Center, leases with respect to 61,465 square feet, 28,466 square
feet and 41,623 square feet are subject to expiration in 1998, 1999 and
2004, respectively. Fred Hutchinson Cancer Research Center has the right
to terminate the leases at any time after November 30, 1999, upon 12 months
prior written notice.
(4) Of the 105,000 rentable square feet at 1413 Research Boulevard, leases with
respect to 30,000 square feet are subject to expiration in 1999 and leases
with respect to 75,000 rentable square feet are subject to expiration in
2001.
(5) In addition to the base rent shown, MedImmune, Inc. pays $322,000 per year
in reimbursements for improvements installed by the prior owner of the
property. These payments, which are accounted for as tenant recovery
revenue, continue through the term of the lease. The terms of the lease
with MedImmune allow it to terminate such lease at various dates during the
lease upon six to 12 months notice and the payment of a termination penalty
determined based on the date of the termination. In the event of such
early termination, the remaining amount due over the term of the lease for
improvements as described above must be paid in full.
(6) Gillette Capital Corporation is a wholly owned subsidiary of The Gillette
Company, the guarantor of the lessee's obligations under the lease.
(7) Shire Pharmaceuticals, PLC subleases its space at 1550 East Gude Drive from
Quest Diagnostics, Inc.
(8) Weighted Average based on percentage of aggregate leased square feet.
ITEM 3. LEGAL PROCEEDINGS.
To the Company's knowledge, no litigation is pending against the Company,
other than routine actions and administrative proceedings, substantially all of
which are expected to be covered by liability insurance or which, in the
aggregate, are not expected to have a material adverse effect on the financial
condition, results of operations or cash flows of the Company.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
The Company did not submit any matters to a vote of security holders in the
fourth quarter of the fiscal year ended December 31, 1997.
10
<PAGE>
PART II
ITEM 5. MARKET FOR THE REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER
MATTERS.
The Common Stock began trading on the New York Stock Exchange ("NYSE")
on May 28, 1997 under the symbol "ARE." On March 27, 1998, the last reported
sales price per share of Common Stock on the NYSE was $31 5/8, and there were
approximately 168 holders of record of the Common Stock (excluding beneficial
owners whose shares are held in the name of CEDE & Co.). The following table
sets forth the quarterly high and low sales prices per share of the Common
Stock reported on the NYSE and the distributions paid by Alexandria with
respect to each such period.
<TABLE>
<CAPTION>
PER SHARE
PERIOD(1) HIGH LOW DISTRIBUTION
- --------- ---- --- ------------
<S> <C> <C> <C>
May 28, 1997 to June 30, 1997.............. 22 1/4 20 5/8 $0.1275(2)
July 1, 1997 to September 30, 1997......... 28 9/16 21 5/8 $0.40
October 1, 1997 to December 31, 1997....... 31 7/8 26 5/8 $0.40
January 1, 1998 to March 27, 1998.......... 34 1/8 29 7/8 $0.40(3)
</TABLE>
____________
(1) Period commencing on date Common Stock began trading on the NYSE and ending
on March 27, 1998. Prior to the Offering and the 1,765.923 to 1 stock
split in connection therewith, Alexandria paid the following dividends on
its Common Stock during 1996 and 1997: (1) March 26, 1996, distribution
of Warrants, pro rata, to purchase 117,362 shares of common stock of Corixa
Corporation; (2) September 30, 1996, $183.30 per share; (3) February 3,
1997, $1,549.82 per share; (4) March 31, 1997, $750.01 per share; and (5)
June 5, 1997, $475.00 per share.
(2) Alexandria paid a distribution of $0.1275 per share of Common Stock on
July 18, 1997 for the period May 28, 1997 through June 30, 1997, which is
approximately equivalent to a quarterly distribution of $0.40 per share for
the full calendar quarter.
(3) On February 26, 1998, the Board of Directors of Alexandria authorized
the payment of a distribution of $0.40 per share of Common Stock for the
quarter ending March 31, 1998 to be paid on April 17, 1998 to holders of
record as of the close of business on April 7, 1998.
Future distributions by Alexandria will be determined by the Board of
Directors and will be dependent upon a number of factors, including actual
cash available for distribution, the Company's financial condition and
capital requirements, the annual distribution requirements under the REIT
provisions of the Code and such other factors as the Board of Directors deems
relevant. To maintain its qualification as a REIT, Alexandria must make
annual distributions to stockholders of at least 95% of its taxable income,
determined without regard to deductions for dividends paid and by excluding
any net capital gains. Under certain circumstances, Alexandria may be
required to make distributions in excess of cash flow available for
distribution to meet such distribution requirements. In such case, the
Company may borrow funds or may raise funds through the issuance of
additional debt or equity capital. There can be no assurance that any such
distributions will be made by Alexandria.
11
<PAGE>
ITEM 6. SELECTED FINANCIAL DATA.
The following table should be read in conjunction with the consolidated
financial statements included elsewhere in this Form 10-K.
<TABLE>
<CAPTION>
FOR THE PERIOD
YEAR ENDED DECEMBER 31 OCTOBER 27, 1994
---------------------------------------- (INCEPTION) THROUGH
1997 1996 1995 DECEMBER 31, 1994
---------- ---------- ---------- -------------------
(dollars in thousands, except per share amounts)
<S> <C> <C> <C> <C>
OPERATING DATA:
Total revenue................................................ $ 34,846 $ 17,673 $ 9,923 $ 1,011
Total expenses............................................... 37,643 15,498 9,057 1,659
-----------------------------------------------------------
(Loss) income from operations................................ (2,797) 2,175 866 (648)
Charge in lieu of taxes...................................... - - (105) -
-----------------------------------------------------------
Net (loss) income............................................ $ (2,797) $ 2,175 $ 761 $ (648)
-----------------------------------------------------------
-----------------------------------------------------------
Net (loss) income per pro forma share of Common
Stock - restated for 1996, 1995 and 1994 (basic and
diluted)................................................ $ (0.35) $ 0.60 $ 0.43 $ (0.37)
-----------------------------------------------------------
-----------------------------------------------------------
Pro forma weighted average shares of Common Stock
outstanding - restated for 1996, 1995 and 1994(1)....... 8,075,864 3,642,131 1,765,923 1,765,923
-----------------------------------------------------------
-----------------------------------------------------------
Cash dividends declared per pro forma share of
Common Stock - restated for 1996 and 1995............... $ 1.60 $ 0.87 $ 0.51 $ -
-----------------------------------------------------------
-----------------------------------------------------------
BALANCE SHEET DATA (AT PERIOD END):
Rental properties - net of accumulated depreciation.......... $ 229,970 $ 146,960 $ 54,353 $ 54,366
Total assets................................................. $ 248,454 $ 160,480 $ 58,702 $ 56,600
Mortgage loans payable and unsecured line of credit.......... $ 70,817 $ 113,182 $ 40,894 $ 39,164
Total liabilities............................................ $ 81,537 $ 120,907 $ 42,369 $ 40,119
Mandatorily redeemable Series V Preferred Stock.............. $ - $ 25,042 $ - $ -
Stockholders' equity......................................... $ 166,917 $ 14,531 $ 16,333 $ 16,481
OTHER DATA:
Net (loss) income............................................ $ (2,797) $ 2,175 $ 761 $ (648)
Add:
Special bonus(2)............................................. 353 - - -
Stock compensation(3)........................................ 4,239 - - -
Post-retirement benefit(4)................................... 632 438 - -
Acquisition LLC financing costs(5)........................... 6,973 - - -
Write-off of unamortized loan costs(6)....................... 2,295 - - -
Depreciation and amortization................................ 4,866 2,405 1,668 63
-----------------------------------------------------------
Funds from operations(7)..................................... $ 16,561 $ 5,018 $ 2,429 $ (585)
-----------------------------------------------------------
-----------------------------------------------------------
Cash flows from operating activities......................... $ 3,883 $ (1,646) $ 355 $ (1,024)
Cash flows from investing activities......................... $ (87,620) $ (94,900) $ (1,554) $ (29,924)
Cash flows from financing activities......................... $ 84,101 $ 97,323 $ 927 $ 32,139
Number of properties owned at period end..................... 22 12 4 4
Rentable square feet of properties owned
at period end........................................... 1,747,837 1,031,070 313,042 313,042
Occupancy of properties owned at period end.................. 97% 97% 96% 88%
</TABLE>
12
<PAGE>
______________
(1) Pro forma shares of Common Stock outstanding for the years ended December
31, 1997 and 1996 include all shares outstanding after giving effect to the
Offering, weighted for the period beginning from the date of the Offering,
conversion of all series of preferred stock, the 1,765.923 to 1 stock
split, the issuance of the stock grants and exercise of substitute stock
options. Pro forma restated shares of Common Stock outstanding for the
periods ended December 31, 1995 and 1994 include shares outstanding after
giving effect to the 1,765.923 to 1 stock split.
(2) Represents a $353,000 special bonus paid to an officer of the Company in
connection with the Offering.
(3) Represents an accrual for $4,239,000 of non-recurring, non-cash
compensation expense relating to the issuance of stock options and stock
grants. In connection with the Offering, the holders of options previously
granted by Holdings under its 1994 stock option plans received options to
purchase shares of Common Stock of the Company in substitution therefor.
These substitute options were exercised in connection with the Offering.
(4) This adjustment relates solely to the non-cash accrual of a one-time
post-retirement benefit for an officer of the Company.
(5) In connection with the Offering, the Company acquired the membership
interests in the Acquisition LLC for $58,844,000, which exceeded the
purchase price paid by the Acquisition LLC for the properties by
$6,973,000. This difference was accounted for as a financing cost.
(6) Of this amount, $2,147,000 represents the write-off of costs associated
with debt paid off in connection with the Offering, and $148,000 represents
the write-off of costs associated with debt paid off in November 1997.
(7) The Company computes funds from operations ("FFO") in accordance with
standards established by the Board of Governors of NAREIT in its March 1995
White Paper ("White Paper"). The White Paper defines FFO as net income
(loss) (computed in accordance with GAAP), excluding gains (or losses) from
debt restructuring, sales of property and unusual items, plus real estate
related depreciation and amortization and after adjustments for
unconsolidated partnerships and joint ventures. For a more detailed
discussion of FFO, see "Item 7. Management's Discussion and Analysis of
Financial Condition and Results of Operations-Funds from Operations."
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS.
The following discussion should be read in conjunction with the
consolidated financial statements and notes thereto appearing elsewhere in this
Form 10-K.
OVERVIEW
Since its formation in October 1994, the Company has devoted substantially
all of its resources to the acquisition and management of high quality,
strategically located Life Science Facilities leased principally to tenants in
the Life Science Industry in its target markets.
In June 1997, the Company completed an initial public offering (the
"Offering") of its common stock, par value $.01 per share (the "Common
Stock"). In connection with the Offering (and related exercise of the
underwriters' over-allotment option), 7,762,500 shares of Common Stock were
issued. Aggregate proceeds from the Offering (including proceeds from the
exercise of the over-allotment option), net of underwriting discounts and
commissions, advisory fees and offering costs, were approximately $138.9
million.
The Company receives income from rental revenue (including tenant
recoveries) from its properties. Of the 22 properties owned by the Company
as of December 31, 1997 (the "Properties"), four were acquired in calendar
year 1994, eight in 1996 (the "1996 Acquired Properties"), three in 1997 in
connection with the Offering and seven in 1997 subsequent to the Offering
(together, the "1997 Acquired Properties"). As a result of the Company's
acquisition activities, the financial data shows significant increases in
total revenues and expenses for 1997 compared to 1996, largely attributable
to the 1997 Acquired Properties, and the recognition of a full year of
revenues for the 1996 Acquired Properties. For the foregoing reasons, and
due to the effects of the Offering and related transactions, the Company does
not believe its year-to-year historical financial data are comparable.
Accordingly, the Company also has included pro forma financial information,
which gives effect to the Offering and the acquisitions made in 1996 and 1997
in connection therewith.
13
<PAGE>
RESULTS OF OPERATIONS
COMPARISON OF THE YEAR ENDED DECEMBER 31, 1997 TO THE YEAR ENDED DECEMBER 31,
1996
Rental revenue increased by $12.7 million, or 98%, to $25.6 million for
1997 compared to $12.9 million for 1996. The increase resulted primarily
from the 1996 Acquired Properties being owned for a full period and the
addition of the 1997 Acquired Properties, which together contributed an
additional $12.5 million of rental revenue in 1997. Rental revenue from the
Properties owned since January 1, 1996 (the "Same Properties") increased by
$180,000, or 2%. This increase resulted primarily from the conversion of
19,310 square feet of storage space to higher rent laboratory space at 10933
North Torrey Pines Road in October 1996.
Tenant recoveries increased by $4.2 million, or 100%, to $8.4 million
for 1997 compared to $4.2 million for 1996. The increase resulted primarily
from the 1996 Acquired Properties being owned for a full period and the
addition of the 1997 Acquired Properties, which together contributed an
additional $3.8 million of tenant recoveries. Tenant recoveries for the Same
Properties increased by $416,000, or 19%, due to an increase in operating
expenses (particularly utilities) being passed through to the tenants.
Other income increased by $273,000, or 48%, to $836,000 for 1997
compared to $563,000 for 1996, resulting from an increase in interest income
due to the investment of excess funds from the Offering and increased amounts
in capital improvement reserve accounts.
Rental operating expenses increased by $4.4 million, or 100%, to $8.8
million for 1997 compared to $4.4 million for 1996. The increase resulted
almost entirely from the 1996 Acquired Properties being owned for a full
period and the addition of the 1997 Acquired Properties, which together
contributed an additional $4.0 million in operating expenses. Operating
expenses for the Same Properties increased by $401,000, or 17%, primarily due
to increased utility expenses (due to greater usage) which were passed
through to the tenants.
General and administrative expenses increased by $504,000, or 26%, to
$2.5 million for 1997 compared to $2.0 million for 1996 due to the Company's
larger scope of operations and increased costs incurred as a result of being
a public company.
Special bonus of $353,000 in 1997 reflects a bonus paid to an officer of
the Company in connection with the Offering. Post retirement benefit expense
of $632,000 and $438,000 in 1997 and 1996, respectively, reflects an
adjustment for the non-cash accrual associated with a one-time post
retirement benefit for an officer of the Company. Stock compensation expense
of $4.2 million was recorded in 1997 for the non-recurring, non-cash expense
related to the issuance of stock grants and options to officers, directors
and certain employees of the Company principally in connection with the
Offering.
Interest expense increased by $716,000, or 11%, to $7.0 million for 1997
compared to $6.3 million for 1996. The increase resulted from indebtedness
incurred to acquire the 1996 Acquired Properties, offset by a reduction in
ongoing interest expense due to the payoff of $72.7 million in secured notes
payable in June 1997 with proceeds from the Offering.
Acquisition LLC financing costs of $7.0 million in 1997 represent the
portion of the purchase price of the membership interests in ARE
Acquisitions, LLC (the "Acquisition LLC") in excess of the cost incurred by
the Acquisition LLC to acquire its three Life Science Facilities.
Write-off of unamortized loan costs in 1997 represents the write-off of
$2.1 million in loan costs associated with $72.7 million of secured notes
repaid with proceeds of the Offering and $148,000 in loan costs associated
with the payoff of debt in November 1997.
14
<PAGE>
Depreciation and amortization increased by $2.5 million, or 102%, to
$4.9 million for 1997 compared to $2.4 million for 1996. The increase
resulted primarily from depreciation associated with the 1996 Acquired
Properties being owned for a full period and the addition of the 1997
Acquired Properties.
As a result of the foregoing, the net loss was $2.8 million for 1997
compared to net income of $2.2 million for 1996.
COMPARISON OF YEAR ENDED DECEMBER 31, 1996 TO YEAR ENDED DECEMBER 31, 1995
Rental revenue increased by $4.9 million, or 61%, to $12.9 million for
the year ended December 31, 1996 compared to $8.0 million for the year ended
December 31, 1995. The increase resulted primarily from the 1996 Acquired
Properties, which contributed an additional $4.6 million of rental revenue in
1996. Rental revenue from the Properties owned since January 1, 1995 (the
"1995 Same Properties") increased by $370,000, or 5%. Of this increase,
$320,000 resulted from a full year of rental income in 1996 resulting from
the increase in occupancy at 11099 North Torrey Pines Road during 1995.
Tenant recoveries increased by $2.5 million, or 147%, to $4.2 million
for 1996 compared to $1.7 million for 1995. The increase resulted primarily
from the addition of the 1996 Acquired Properties, which contributed an
additional $2.1 million of tenant recoveries. Tenant recoveries from the
1995 Same Properties increased by $395,000, or 23%. Of this increase,
$300,000 resulted from a new lease at 11099 North Torrey Pines Road. The
remaining increase resulted primarily from a new energy management system at
10933 North Torrey Pines Road that allows the Company to more accurately
measure and recover from its tenants certain costs of utility usage.
Other income increased by $359,000, or 176%, to $563,000 for 1996
compared to $204,000 for 1995. The increase resulted primarily from the
addition of the 1996 Acquired Properties, which contributed an additional
$337,000 of other income.
Rental operating expenses increased by $2.2 million, or 100%, to $4.4
million for 1996 compared to $2.2 million for 1995. The increase resulted
primarily from the addition of the 1996 Acquired Properties, which
contributed an additional $2.0 million of rental operating expenses. Rental
operating expenses from the 1995 Same Properties increased by $162,000, or
7%, primarily as a result of an increase in expenses at 10933 North Torrey
Pines Road.
General and administrative expenses increased by $364,000, or 23%, to
$2.0 million for 1996 compared to $1.6 million for 1995. The increase
resulted primarily from additional professional fees incurred during 1996.
Post-retirement benefit expense in 1996 represents the non-cash accrual
associated with a one-time post-retirement benefit for an officer of the
Company.
Interest expense increased by $2.8 million, or 80%, to $6.3 million for
1996 compared to $3.5 million for 1995. The increase resulted primarily from
indebtedness incurred to acquire the 1996 Acquired Properties, which
contributed an additional $2.3 million of interest expense, and debt
outstanding under the Company's then-existing unsecured line of credit, which
was repaid in July 1996.
Depreciation and amortization increased by $737,000, or 44%, to $2.4
million for 1996 compared to $1.7 million for 1995. The increase resulted
primarily from depreciation associated with the 1996 Acquired Properties.
As a result of the foregoing, net income increased by $1.4 million, or
184%, to $2.2 million for 1996 compared to $761,000 for 1995.
15
<PAGE>
LIQUIDITY AND CAPITAL RESOURCES
THE OFFERING AND SECURED DEBT
The Company completed the Offering in June 1997. Aggregate proceeds of
the Offering (including proceeds from the exercise of the over-allotment
option), net of underwriting discounts and commissions, advisory fees, and
offering costs, were approximately $138.9 million. The Company used such net
proceeds, as well as $15.4 million in proceeds from two new mortgage loans,
to repay outstanding debt of approximately $77.7 million. In addition, in
November 1997, the Company paid off $6.7 million of secured debt with funds
from its unsecured line of credit obtained in connection with the Offering.
Total secured debt as of December 31, 1997 included the following:
<TABLE>
<CAPTION>
PRINCIPAL BALANCE AT INTEREST MATURITY
COLLATERAL DECEMBER 31, 1997 RATE DATE
- ---------- -------------------- ---- ----
(IN THOUSANDS)
<S> <C> <C> <C>
3535/3565 General Atomics Court,
San Diego, CA $ 18,050 9.00% December 2014
1431 Harbor Bay Parkway, Alameda, CA 8,500 7.17% January 2014
1102/1124 Columbia Street, Seattle, WA 21,267 7.75% May 2016
------------
$ 47,817
------------
------------
</TABLE>
UNSECURED LINE OF CREDIT
In connection with the Offering, the Company obtained an unsecured line
of credit providing for borrowings of up to $150 million, consisting of a
$100 million activated portion and a $50 million portion that may be
activated as needed at the Company's discretion (upon payment of an
activation fee) provided that no default exists thereunder. The line of
credit provides for borrowings bearing interest at a floating rate based on
the Company's election of either a LIBOR based rate or the higher of the
bank's reference rate and the Federal Funds rate plus 0.5%. For each LIBOR
based advance, the Company must elect to fix the rate for a one, two, three
or six month period.
The line of credit contains financial covenants, including, among other
things, maintenance of minimum market net worth, a total liabilities to gross
asset value ratio, and a fixed charge coverage ratio (all as defined). The
Company was in compliance with all such covenants as of December 31, 1997.
In addition, the terms of the line of credit restrict, among other things,
certain investments, indebtedness, distributions and mergers. Borrowings
under the line of credit are limited to an amount based on a pool of
unencumbered assets. Accordingly, as the Company acquires additional
unencumbered properties, borrowings available under the line of credit will
increase. As of December 31, 1997, borrowings under the line of credit were
limited to approximately $103 million, and $23 million was outstanding
(leaving $80 million available), at a weighted average rate of interest of
6.9%.
The line of credit expires on May 31, 2000 and provides for annual
extensions (provided there is no default) for two additional one-year periods
upon notice by the Company and consent of the participating banks. In
addition, at the Company's election, the line of credit may be converted at
any time to a term loan with principal installments over two years from the
date of such conversion.
RESTRICTED CASH
As of December 31, 1997, approximately $3.4 million had been set aside
in a restricted cash account to complete the upgrade of laboratory space (as
well as certain related improvements to the property) at 1102/1124 Columbia
Street pursuant to an agreement between the Company and a tenant. The
Company also holds approximately $758,000 in security deposit reserve
accounts based on the terms of certain lease agreements.
16
<PAGE>
LIQUIDITY REQUIREMENTS
Although cash from operations required to fund interest expense has
decreased substantially as a result of the Company's reduction in overall
debt following the Offering, such reduction has been offset by an increased
requirement to use cash from operations to meet distribution requirements to
maintain the Company's REIT status. The Company expects to make
distributions from cash available for distribution, which is expected to
exceed cash historically available for distribution as a result of the
reduction in debt described above, as well as the addition of the 1996 and
1997 Acquired Properties. Cash that accumulates on a short-term basis will
be used to reduce outstanding balances under the Company's unsecured line of
credit or will be invested by the Company primarily in interest-bearing
accounts and other short-term, interest-bearing securities that are
consistent with the Company's qualification for taxation as a REIT. The
Company also believes that net cash provided by operations will be sufficient
to fund its recurring non-revenue enhancing capital expenditures, tenant
improvements and leasing commissions.
The Company expects to meet certain long-term liquidity requirements,
such as property acquisitions, scheduled debt maturities, renovations,
expansions and other non-recurring capital improvements, through long-term
secured and unsecured indebtedness, including borrowings under the line of
credit, and the issuance of additional debt and/or equity securities.
EXPOSURE TO ENVIRONMENTAL LIABILITIES
In connection with the acquisition of all of the Properties, the Company
has obtained Phase I environmental assessments to ascertain the existence of
any environmental liabilities or other issues. The Phase I environmental
assessments of the Properties have not revealed any environmental liabilities
that the Company believes would have a material adverse effect on the
Company's financial condition or results of operations taken as a whole, nor
is the Company aware of any such material environmental liabilities.
HISTORICAL CASH FLOWS
Net cash provided by operating activities for 1997 increased by $5.5
million to $3.9 million compared to net cash used by operating activities of
$(1.6) million for 1996. The increase resulted primarily from operating cash
flows from the addition of the 1996 Acquired Properties and the 1997 Acquired
Properties.
Net cash used in investing activities decreased by $7.3 million to
$(87.6) million for 1997 compared to net cash used in investing activities of
$(94.9) million for 1996. This use of cash related primarily to costs
associated with the acquisition of the 1997 Acquired Properties.
Net cash provided by financing activities decreased by $13.2 million to
$84.1 million for 1997 compared to $97.3 million for 1996. The decrease was
impacted by $85.8 million of principal reductions in debt, retired
principally with proceeds from the Offering, offset by $138.9 million in net
proceeds from the Offering, $15.4 million in proceeds from secured debt, and
$25.5 million in proceeds from unsecured lines of credit. In addition, the
Company paid dividends on the Common Stock of $8.8 million and dividends on
preferred stock of $1.1 million during 1997.
CAPITAL EXPENDITURES, TENANT IMPROVEMENTS AND LEASING COSTS
The following table sets forth total and weighted average per square
foot capital expenditures (excluding those expenditures which are recoverable
from tenants or are revenue-enhancing) and tenant improvements and leasing
costs for the period from October 1994 (inception of operations) to December
31, 1994, and for the years ended December 31, 1995, 1996, and 1997,
attributable to leases that commenced at the Properties after acquisition by
the Company.
17
<PAGE>
<TABLE>
<CAPTION>
TOTAL/
WEIGHTED AVERAGE 1997 1996 1995 1994
---------------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C>
CAPITAL EXPENDITURES:
Weighted average square feet in 2,426,479 1,342,216 563,901 314,779 205,583
portfolio
Property related capital expenditures $ 745,000 $ 547,000 $ 181,000 $ 17,000 $ -
Per weighted average square foot in
portfolio $ 0.31 $ 0.41 $ 0.32 $ 0.05 $ -
TENANT IMPROVEMENTS AND LEASING COSTS:
RETENANTED SPACE:
Retenanted square feet 276,711 40,953 180,398 49,938 5,422
Tenant improvements and leasing costs $ 1,986,000 $ 164,000 $1,220,000 $ 576,000 $ 26,000
Per square foot leased $ 7.18 $ 4.00 $ 6.76 $ 11.53 $ 4.80
RENEWAL SPACE:
Renewal square feet 42,379 1,232 25,063 16,084 -
Tenant improvements and leasing costs $ 48,291 $ - $ - $ 48,291 $ -
Per square foot leased $ 1.14 $ - $ - $ 3.00 $ -
</TABLE>
Capital expenditures may fluctuate in any given period subject to the
nature, extent, and timing of improvements required and to the extent they
are recoverable from tenants. The Company maintains an active preventive
maintenance program in order to minimize required capital improvements.
Tenant improvements and leasing costs also may fluctuate in any given
year depending upon factors such as the timing and extent of vacancies, the
type of lease (renewal or replacement tenant), the involvement of external
leasing agents and overall competitive market conditions.
INFLATION
As of December 31, 1997, approximately 76% of the Company's leases (on a
square footage basis) were triple net leases, requiring tenants to pay
substantially all real estate taxes and insurance, common area and other
operating expenses (including increases thereto). In addition, approximately
19% of the Company's leases (on a square footage basis) required the tenants
to pay a majority of operating expenses. In addition, approximately 64% of
the Company's leases (on a square footage basis) contain effective annual
rent escalations that are either fixed (ranging from 2.5% to 4.0%) or indexed
based on the consumer price index or other index. Accordingly, the Company
does not believe that its earnings or cash flow are subject to any
significant risk of inflation. An increase in inflation, however, could
result in an increase in the Company's variable rate borrowing cost,
including borrowings under the unsecured line of credit.
IMPACT OF THE YEAR 2000
The Company has evaluated the significance of the change from the year
1999 to the year 2000 on its existing computer system and has taken steps to
ensure that its computer system will not be adversely affected thereby. The
financial impact of steps taken to accommodate the change for the year 2000
is not anticipated to be material. The Company relies in part on the
computer systems of its vendors and other companies. If any such company
failed to become year 2000 compliant, the Company could be adversely affected
thereby. The Company has surveyed several of its larger vendors, and all have
responded that they either are currently year 2000 compliant, or are actively
taking steps to become year 2000 compliant.
18
<PAGE>
PRO FORMA CONDENSED CONSOLIDATED FINANCIAL INFORMATION
Due to the impact of the Offering and related transactions and the
acquisitions by the Company in 1996 and 1997, the historical results of
operations are not indicative of the Company's future results of operations.
The following pro forma condensed consolidated financial information presents
the results of operations of the Company as if the Offering (including the
exercise of the over-allotment option) and related transactions occurred on
January 1, 1996. Pro forma results for the year ended December 31, 1997 do
not include the operations of two of the Properties (14225 Newbrook Drive and
1330 Piccard Drive) for the period prior to their acquisition by the
Acquisition LLC (on January 13, 1997 and January 15, 1997, respectively).
These Properties were owner-occupied prior to purchase and, as a result,
there were no historical operating results for these Properties as rental
properties. The adjusted pro forma financial information presented below
assumes that the new leases entered into with the sellers of such Properties
were in effect for the entire period presented. The pro forma and adjusted
pro forma financial information presented below is based upon historical
information and various assumptions and does not purport to present the
actual results that would have occurred had the Offering and related
transactions occurred on January 1, 1996, nor to project the Company's
results of operations for any future period.
CONDENSED CONSOLIDATED PRO FORMA
FINANCIAL INFORMATION
(UNAUDITED)
<TABLE>
<CAPTION>
ADJUSTED
PRO FORMA PRO FORMA
------------------------- -----------
YEAR ENDED DECEMBER 31
1997 1996 1997
------------- ----------- ------------
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE
AMOUNTS)
<S> <C> <C> <C>
Total revenues $ 38,103 $ 25,249 $ 38,374
Expenses:
Rental operations 8,857 6,471 8,865
General and administrative 2,662 2,900 2,662
Interest 4,818 3,836 4,818
Special bonus 353 - 353
Stock compensation 4,239 - 4,239
Post retirement benefit 632 438 632
Write-off of unamortized loan 148 - 148
costs
Depreciation and amortization 5,269 3,521 5,309
----------- ----------- -----------
26,978 17,166 27,026
----------- ----------- -----------
Net income $ 11,125 $ 8,083 $ 11,348
----------- ----------- -----------
----------- ----------- -----------
Pro forma shares of Common Stock
outstanding 11,404,631 11,404,631 11,404,631
----------- ----------- -----------
----------- ----------- -----------
Net income per pro forma share of
Common Stock outstanding $ 0.98 $ 0.71 $ 1.00
----------- ----------- -----------
----------- ----------- -----------
</TABLE>
FUNDS FROM OPERATIONS
Management believes that funds from operations ("FFO") is helpful to
investors as a measure of the performance of an equity REIT because, along
with cash flows from operating activities, financing activities and investing
activities, it provides investors with an understanding of the ability of the
Company to incur and service debt, to make capital expenditures and to make
distributions. The Company computes FFO in accordance with standards
established by the Board of Governors of the National Association of Real
Estate Investment Trusts ("NAREIT") in its March 1995 White Paper (the "White
Paper"), which may differ from the methodology for calculating FFO utilized
by other equity REITs, and, accordingly, may not be comparable to such other
REITs. Further, FFO does not represent
19
<PAGE>
amounts available for management's discretionary use because of needed
capital replacement or expansion, debt service obligations, or other
commitments and uncertainties. The White Paper defines FFO as net income
(loss) (computed in accordance with generally accepted accounting principals
("GAAP")), excluding gains (or losses) from debt restructuring, sales of
property and unusual items, plus real estate related depreciation and
amortization and after adjustments for unconsolidated partnerships and joint
ventures. FFO should not be considered as an alternative to net income
(determined in accordance with GAAP) as an indication of the Company's
financial performance or to cash flows from operating activities (determined
in accordance with GAAP) as a measure of the Company's liquidity, nor is it
indicative of funds available to fund the Company's cash needs, including its
ability to make distributions. (See "-Historical Cash Flows" for information
regarding these measures of cash flow).
The following tables present the Company's FFO for the year ended 1997
on a historical, pro forma and adjusted pro forma basis and for the years
ended 1996 and 1995 on a historical basis. The adjusted pro forma
information for the year ended December 31, 1997 assumes that leases entered
into with sellers of previously owner-occupied properties were in effect for
the entire period presented:
<TABLE>
<CAPTION>
(UNAUDITED) (UNAUDITED)
YEAR ENDED DECEMBER 31, 1997 YEAR ENDED DECEMBER 31
---------------------------- -----------------------
ADJUSTED
PRO PRO 1996 1995
HISTORICAL FORMA FORMA HISTORICAL HISTORICAL
---------- ------- -------- ---------- ----------
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C>
Net (loss) income $(2,797) $11,125 $11,348 $2,175 $ 761
Add:
Special bonus 353 353 353 - -
Stock compensation 4,239 4,239 4,239 - -
Post-retirement benefit 632 632 632 438 -
Acquisition LLC
financing costs 6,973 - - - -
Write-off of
unamoritized loan costs 2,295 148 148 - -
Depreciation and
amortization 4,866 5,269 5,309 2,405 1,668
------- ------- ------- ------ ------
Funds from Operations $16,561 $21,766 $22,029 $5,018 $2,429
------- ------- ------- ------ ------
------- ------- ------- ------ ------
</TABLE>
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.
Not applicable.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA.
The financial statements and supplementary data required by Regulation S-X
are included in this Report on Form 10-K commencing on page F-1.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
None.
20
<PAGE>
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT.
The information required by Item 10 is incorporated by reference from the
Company's definitive proxy statement to be mailed in connection with its annual
meeting of stockholders to be held on May 15, 1998.
ITEM 11. EXECUTIVE COMPENSATION.
The information required by Item 11 is incorporated by reference from the
Company's definitive proxy statement to be mailed in connection with its annual
meeting of stockholders to be held on May 15, 1998.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT.
The information required by Item 12 is incorporated by reference from the
Company's definitive proxy statement to be mailed in connection with its annual
meeting of stockholders to be held on May 15, 1998.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.
The information required by Item 13 is incorporated by reference from the
Company's definitive proxy statement to be mailed in connection with its annual
meeting of stockholders to be held on May 15, 1998.
21
<PAGE>
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K
(A) FINANCIAL STATEMENTS AND SCHEDULES
The following consolidated financial information is included as a
separate section of this Annual Report on Form 10-K:
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Report of Independent Auditors. . . . . . . . . . . . . . . . . . . . . . . .F-1
Audited Consolidated Financial Statements
Consolidated Balance Sheets as of December 31, 1997 and 1996. . . . . . . . .F-2
Consolidated Statements of Operations for the Years ended
December 31, 1997, 1996, and 1995. . . . . . . . . . . . . . . . . . . .F-3
Consolidated Statements of Stockholders' Equity for the Years ended
December 31, 1997, 1996, and 1995. . . . . . . . . . . . . . . . . . . .F-4
Consolidated Statements of Cash Flows for the Years ended
December 31, 1997, 1996, and 1995. . . . . . . . . . . . . . . . . . . .F-5
Notes to Consolidated Financial Statements for the Years ended
December 31, 1997, 1996, and 1995. . . . . . . . . . . . . . . . . . . .F-6
Schedule III - Consolidated Financial Statement of Rental Properties
and Accumulated Depreciation . . . . . . . . . . . . . . . . . . . . . F-24
</TABLE>
(B) REPORTS ON FORM 8-K.
On December 2, 1997, the Company filed a report on Form 8-K relating
to the acquisition of certain real property. On January 28, 1998, the Company
filed the required financial statements thereto by amendment on Form 8-K/A.
(C) EXHIBITS.
<TABLE>
<CAPTION>
EXHIBIT
NUMBER EXHIBIT
- ------- -------
<S> <C>
3.1++ Articles of Amendment and Restatement of the Registrant
3.2++ Certificate of Correction of the Registrant
3.3++ Amended and Restated Bylaws of the Registrant
4.1+ Specimen Certificate representing shares of Common Stock
10.1 Amended and Restated Executive Employment Agreement by and between the
Registrant and Joel S. Marcus, dated January 5, 1994, and amended as of
March 28, 1997
10.2 Amended and Restated Executive Employment Agreement by and between the
Registrant and Alan D. Gold, dated January 5, 1994, and amended as of
March 28, 1997
10.3 Amended and Restated Executive Employment Agreement by and between the
Registrant and Gary Kreitzer, dated January 5, 1994, and amended as of
March 28, 1997
10.4 Amended and Restated Executive Employment Agreement by and between the
Registrant and Steven Stone, dated January 5, 1994, and amended as of
March 28, 1997
</TABLE>
22
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT
NUMBER EXHIBIT
- ------- -------
<S> <C>
10.5 Second Amendment to the Executive Employment Agreement and General and
Special Release by and between the Registrant and Jerry M. Sudarsky,
dated May 30, 1997
10.6+++ Executive Employment Agreement between the Registrant and James H.
Richardson, dated July 31, 1997
10.7+ Executive Employment Agreement between the Registrant and Peter J.
Nelson, dated April 22, 1997
10.8+ Form of Director Indemnification Agreement
10.9 Registration Rights Agreement by and between the Registrant and Health
Science Properties Holding Corporation, dated June 2, 1997
10.10+ Standard Lease Form to be executed by tenant and the Registrant as
Landlord
10.11+ Form of Management Agreement
10.12+ Stockholders Agreement by and among the Registrant, Health Science
Properties Holding Corporation and AEW Partners II, L.P., dated
September 9, 1996
10.13 1997 Stock Award and Incentive Plan of the Registrant
10.14+ Form of Non-Employee Director Stock Option Agreement for use in
connection with options issued pursuant to the 1997 Stock Option Plan
10.15+ Form of Incentive Stock Option Agreement for use in connection with
options issued pursuant to the 1997 Stock Option Plan
10.16+ Form of Nonqualified Stock Option Agreement for use in connection with
options issued pursuant to the 1997 Stock Option Plan
10.17 Revolving Loan Agreement among the Registrant, ARE-QRS Corp., ARE
Acquisitions, LLC, the Banks therein named and the Bank of America NT &
SA, dated June 2, 1997
10.18 Amendment No. 1 to Revolving Loan Agreement among the Registrant, ARE-
QRS Corp., ARE Acquisitions, LLC, the Banks therein named and the Bank
of America NT & SA, dated September 9, 1997
10.19 Amendment No. 2 to Revolving Loan Agreement among the Registrant, ARE-
QRS Corp. ARE Acquisitions, LLC, the Banks therein named and the Bank of
America NT & SA, dated January 28, 1998
21.1 List of Subsidiaries of the Registrant
23.1 Consent of Ernst & Young LLP
27.1 Financial Data Schedule
</TABLE>
___________
+ Incorporated by reference to the Registrant's Registration Statement on
Form S-11 (No. 333-23545), declared effective by the Commission on May 27,
1997
++ Incorporated by reference to the Registrant's Quarterly Report on Form 10-Q
for the period ended June 30, 1997, filed with the Commission on August 14,
1997
+++ Incorporated by reference to the Registrant's Quarterly Report on Form 10-Q
for the period ended September 30, 1997, filed with the Commission on
November 14, 1997
23
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Act
of 1934, the registrant has duly caused this report to be signed on its behalf
by the undersigned, thereunto duly authorized.
ALEXANDRIA REAL ESTATE EQUITIES, INC.
Dated: March 30, 1998 By: /s/ Joel S. Marcus
----------------------------------
Joel S. Marcus
Chief Executive Officer
Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below by the following persons on behalf of the
Registrant and in the capacities and on the dates indicated.
<TABLE>
<CAPTION>
SIGNATURES TITLE DATE
---------- ------ -----
<S> <C>
/s/ J M Sudarsky
- ------------------------------------ Chairman of the Board of Directors March 30, 1998
Jerry M. Sudarsky
/s/ Joel S. Marcus
- ------------------------------------ Chief Executive Officer (Principal March 30, 1998
Joel S. Marcus Executive Officer) and Director
/s/ Alan D. Gold
- ------------------------------------ President and Director March 30, 1998
Alan D. Gold
/s/ Peter J. Nelson
- ------------------------------------ Chief Financial Officer, Treasurer and March 30, 1998
Peter J. Nelson Secretary (Principal Financial and
Accounting Officer)
/s/ Joseph Elmaleh
- ------------------------------------ Director March 30, 1998
Joseph Elmaleh
/s/ Viren Mehta
- ------------------------------------ Director March 30, 1998
Viren Mehta
/s/ David M. Petrone
- ------------------------------------ Director March 30, 1998
David M. Petrone
/s/ Anthony M. Solomon
- ------------------------------------ Director March 30, 1998
Anthony M. Solomon
</TABLE>
24
<PAGE>
EXHIBIT INDEX
<TABLE>
<CAPTION>
EXHIBIT SEQUENTIALLY
NUMBER EXHIBIT NUMBERED PAGE
- ------- ------- -------------
<S> <C> <C>
3.1++ Articles of Amendment and Restatement of the Registrant
3.2++ Certificate of Correction of the Registrant
3.3++ Amended and Restated Bylaws of the Registrant
4.1+ Specimen Certificate representing shares of Common Stock
10.1 Amended and Restated Executive Employment Agreement by
and between the Registrant and Joel S. Marcus, dated
January 5, 1994, and amended as of March 28, 1997
10.2 Amended and Restated Executive Employment Agreement by
and between the Registrant and Alan D. Gold, dated
January 5, 1994, and amended as of March 28, 1997
10.3 Amended and Restated Executive Employment Agreement by
and between the Registrant and Gary Kreitzer, dated
January 5, 1994, and amended as of March 28, 1997
10.4 Amended and Restated Executive Employment Agreement by
and between the Registrant and Steven Stone, dated
January 5, 1994, and amended as of March 28, 1997
10.5 Second Amendment to the Executive Employment Agreement
and General and Special Release by and between the
Registrant and Jerry M. Sudarsky, dated May 30, 1997
10.6+++ Executive Employment Agreement between the Registrant
and James H. Richardson, dated July 31, 1997
10.7+ Executive Employment Agreement between the Registrant
and Peter J. Nelson, dated April 22, 1997
10.8+ Form of Director Indemnification Agreement
10.9 Registration Rights Agreement by and between the
Registrant and Health Science Properties Holding
Corporation, dated June 2, 1997
10.10+ Standard Lease Form to be executed by tenant and the
Registrant as Landlord
10.11+ Form of Management Agreement
10.12+ Stockholders Agreement by and among the Registrant,
Health Science Properties Holding Corporation and AEW
Partners II, L.P., dated September 9, 1996
10.13 1997 Stock Award and Incentive Plan of the Registrant
10.14+ Form of Non-Employee Director Stock Option Agreement for
use in connection with options issued pursuant to the
1997 Stock Option Plan
10.15+ Form of Incentive Stock Option Agreement for use in
connection with Options issued pursuant to the 1997
Stock Option Plan
10.16+ Form of Nonqualified Stock Option Agreement for use in
connection with Options issued pursuant to the 1997
Stock Option Plan
10.17 Revolving Loan Agreement among the Registrant, ARE-QRS
Corp., ARE Acquisitions, LLC, the Banks therein named
and the Bank of America NT & SA, dated June 2, 1997
</TABLE>
25
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT SEQUENTIALLY
NUMBER EXHIBIT NUMBERED PAGE
- ------- ------- -------------
<S> <C> <C>
10.18 Amendment No. 1 to Revolving Loan Agreement among the
Registrant, ARE-QRS Corp., ARE Acquisitions, LLC, the
Banks therein named and the Bank of America NT & SA,
dated September 9, 1997
10.19 Amendment No. 2 to Revolving Loan Agreement among the
Registrant, ARE-QRS Corp. ARE Acquisitions, LLC, the
Banks therein named and the Bank of America NT & SA,
dated January 28, 1998
21.1 List of Subsidiaries of the Registrant
23.1 Consent of Ernst & Young LLP
27.1 Financial Data Schedule
</TABLE>
______________
+ Incorporated by reference to the Registrant's Registration Statement on
Form S-11 (No. 333-23545), declared effective by the Commission on May 27,
1997
++ Incorporated by reference to the Registrant's Quarterly Report on Form 10-Q
for the period ended June 30, 1997, filed with the Commission on August 14,
1997
+++ Incorporated by reference to the Registrant's Quarterly Report on Form 10-Q
for the period ended September 30, 1997, filed with the Commission on
November 14, 1997
26
<PAGE>
Report of Independent Auditors
To the Board of Directors and Stockholders of
Alexandria Real Estate Equities, Inc.
We have audited the accompanying consolidated balance sheets of Alexandria
Real Estate Equities, Inc. and subsidiaries (the "Company") as of December
31, 1997, and 1996, and the related consolidated statements of operations,
stockholders' equity, and cash flows for the years ended December 31, 1997,
1996 and 1995. Our audits also included the consolidated financial statement
Schedule III, rental properties and accumulated depreciation. These
consolidated financial statements and consolidated financial statement
schedule are the responsibility of the Company's management. Our
responsibility is to express an opinion on these consolidated financial
statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free
of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial statements.
An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above
present fairly, in all material respects, the consolidated financial position
of the Company as of December 31, 1997 and 1996, and the consolidated results
of its operations and its cash flows for the years ended December 31, 1997,
1996 and 1995, in conformity with generally accepted accounting principles.
Also, in our opinion, the related consolidated financial statement schedule
referred to above, when considered in relation to the consolidated financial
statements taken as a whole, presents fairly in all material respects the
information set forth therein.
/s/ Ernst & Young LLP
Los Angeles, California
January 30, 1998
F-1
<PAGE>
Alexandria Real Estate Equities, Inc. and Subsidiaries
Consolidated Balance Sheets
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<TABLE>
<CAPTION>
DECEMBER 31
1997 1996
-------------------------
<S> <C> <C>
ASSETS
Rental properties, net $ 229,970 $ 146,960
Cash and cash equivalents 2,060 1,696
Tenant security deposits and other restricted cash 6,799 5,585
Tenant receivables and deferred rent 3,630 1,332
Loan fees and costs (net of accumulated amortization of $175 and $131
in 1997 and 1996, respectively) 1,350 2,502
Other assets 4,645 2,405
-------------------------
Total assets $ 248,454 $ 160,480
-------------------------
-------------------------
LIABILITIES AND STOCKHOLDERS' EQUITY
Secured notes payable $ 47,817 $ 113,182
Unsecured line of credit 23,000 -
Accounts payable, tenant security deposits and other liabilities 6,158 3,650
Dividends payable 4,562 1,550
Due to Health Science Properties Holding Corporation - 2,525
-------------------------
81,537 120,907
Commitments and contingencies - -
Manditorily redeemable Series V cumulative convertible preferred
stock, $0.01 par value, $1,000 stated value per share, 50,000 shares
authorized; 27,500 issued and outstanding at December 31, 1996 - 25,042
Stockholders' equity:
Preferred stock:
Series T 8.5% preferred stock, $0.01 par value and $100 stated
value per share, 12 shares issued and outstanding at
December 31, 1996 - 1
Series U 8.5% cumulative convertible preferred stock, $0.01 par
value and $500 stated value per share, 220 shares issued and
outstanding at December 31, 1996 - 110
Common stock, $0.01 par value per share, 100,000,000 shares
authorized; 11,604,631 and 1,765,923 shares issued and
outstanding at December 31, 1997 and 1996, respectively 114 -
Additional paid-in capital 173,735 16,195
Accumulated deficit (6,932) (1,775)
-------------------------
Total stockholders' equity 166,917 14,531
-------------------------
Total liabilities and stockholders' equity $ 248,454 $ 160,480
-------------------------
-------------------------
</TABLE>
SEE ACCOMPANYING NOTES.
F-2
<PAGE>
Alexandria Real Estate Equities, Inc. and Subsidiaries
Consolidated Statements of Operations
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31
1997 1996 1995
-----------------------------------------
<S> <C> <C> <C>
Revenues:
Rental $ 25,622 $ 12,941 $ 8,020
Tenant recoveries 8,388 4,169 1,699
Other 836 563 204
-----------------------------------------
34,846 17,673 9,923
Expenses:
Rental operations 8,766 4,356 2,228
General and administrative 2,476 1,972 1,608
Interest 7,043 6,327 3,553
Stock compensation 4,239 - -
Post retirement benefit 632 438 -
Special bonus 353 - -
Acquisition LLC financing costs 6,973 - -
Write-off of unamortized loan costs 2,295 - -
Depreciation and amortization 4,866 2,405 1,668
-----------------------------------------
37,643 15,498 9,057
-----------------------------------------
(Loss) income from operations (2,797) 2,175 866
Charge in lieu of income taxes - - 105
-----------------------------------------
Net (loss) income $ (2,797) $ 2,175 $ 761
-----------------------------------------
-----------------------------------------
Net (loss) income allocated to preferred
stockholders $ 3,038 $ 1,590 $ -
-----------------------------------------
-----------------------------------------
Net (loss) income allocated to common stockholders $ (5,835) $ 585 $ 761
-----------------------------------------
-----------------------------------------
Net (loss) income per pro forma share of
common stock - restated for 1996 and
1995 (basic and diluted) $ (0.35) $ 0.60 $ 0.43
-----------------------------------------
-----------------------------------------
Pro forma weighted average shares of
common stock outstanding - restated for
1996 and 1995 (basic and diluted) 8,075,864 3,642,131 1,765,923
-----------------------------------------
-----------------------------------------
</TABLE>
SEE ACCOMPANYING NOTES.
F-3
<PAGE>
Alexandria Real Estate Equities, Inc. and Subsidiaries
Consolidated Statements of Stockholders' Equity
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<TABLE>
<CAPTION>
NUMBER OF
SERIES T SERIES T SERIES U SERIES U NUMBER OF
PREFERRED PREFERRED PREFERRED PREFERRED COMMON COMMON
SHARES STOCK SHARES STOCK SHARES STOCK
--------- -------- --------- --------- ---------- ------
<S> <C> <C> <C> <C> <C>
Balance at January 1, 1995 (restated) - $ - - $ - 1,765,923 $ 18
Issuance of Series T preferred stock 12 1 - - - -
Dividends declared and payable on common stock - - - - - -
Net income - - - - - -
-------------------------------------------------------------
Balance at December 31, 1995 (restated) 12 1 - - 1,765,923 18
Issuance of Series U preferred stock - - 220 110 - -
Accretion on Series V preferred stock - - - - - -
Cash dividends on Series T, U, & V preferred stock - - - - - -
Dividends declared and payable on common stock - - - - - -
Net income - - - - - -
-------------------------------------------------------------
Balance at December 31, 1996 (restated) 12 1 220 110 1,765,923 18
Accretion on Series V preferred stock - - - - - -
Cash dividends on Series T, U and V preferred stock - - - - - -
Exercise of compensatory stock options and issuance
of stock grants (including compensation expense of
$4,161) - - - - 209,615 2
Issuance of common stock in connection with initial
public offering, net of offering costs - - - - 7,762,500 78
Conversion of Series V and Series U preferred stock - - (220) (110) 1,666,593 16
Redemption of Series T preferred stock (12) (1) - - - -
Dividends declared and payable on common stock - - - - - -
Net loss - - - - - -
-------------------------------------------------------------
Balance at December 31, 1997 - $ - - $ - 11,404,631 $114
-------------------------------------------------------------
-------------------------------------------------------------
<CAPTION>
ADDITIONAL
PAID-IN ACCUMULATED
CAPITAL DEFICIT TOTAL
---------- ----------- --------
<S> <C> <C> <C>
Balance at January 1, 1995 (restated) $ 17,110 $ (648) $ 16,480
Issuance of Series T preferred stock - - 1
Dividends declared and payable on common stock - (909) (909)
Net income - 761 761
-------------------------------------
Balance at December 31, 1995 (restated) 17,110 (796) 16,333
Issuance of Series U preferred stock - - 110
Accretion on Series V preferred stock (933) - (933)
Cash dividends on Series T, U, & V preferred stock - (665) (665)
Dividends declared and payable on common stock - (2,489) (2,489)
Net income - 2,175 2,175
-------------------------------------
Balance at December 31, 1996 (restated) 16,177 (1,775) 14,531
Accretion on Series V preferred stock (1,911) - (1,911)
Cash dividends on Series T, U and V preferred stock - (1,127) (1,127)
Exercise of compensatory stock options and issuance
of stock grants (including compensation expense of
$4,161) 4,190 - 4,192
Issuance of common stock in connection with initial
public offering, net of offering costs 138,812 - 138,890
Conversion of Series V and Series U preferred stock 27,045 - 26,951
Redemption of Series T preferred stock - - (1)
Dividends declared and payable on common stock (10,578) (1,233) (11,811)
Net loss - (2,797) (2,797)
-------------------------------------
Balance at December 31, 1997 $173,735 $(6,932) $166,917
-------------------------------------
-------------------------------------
</TABLE>
SEE ACCOMPANYING NOTES
F-4
<PAGE>
Alexandria Real Estate Equities, Inc. and Subsidiaries
Consolidated Statements of Cash Flows
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31
1997 1996 1995
-------- -------- --------
<S> <C> <C> <C>
OPERATING ACTIVITIES
Net (loss) income $ (2,797) $ 2,175 $ 761
Adjustments to reconcile net (loss) income to net
cash provided by (used in) operating activities:
Depreciation and amortization 4,866 2,405 1,668
Stock option compensation 4,161 - -
Changes in operating assets and liabilities:
Tenant security deposits and other restricted cash (1,214) (4,371) (779)
Tenant receivables and deferred rent (2,298) (502) (709)
Loan fees and costs 906 (2,402) (15)
Other assets (2,249) (1,231) (982)
Accounts payable, tenant security deposits and other
liabilities 2,508 2,280 411
---------------------------------
Net cash provided by (used in) operating activities 3,883 (1,646) 355
INVESTING ACTIVITIES
Additions to rental properties (3,566) (1,578) (1,554)
Purchase of rental properties (84,054) (93,322) -
---------------------------------
Net cash used in investing activities (87,620) (94,900) (1,554)
FINANCING ACTIVITIES
Proceeds from secured notes payable 15,360 77,260 1,250
Proceeds from issuance of common stock 138,919 - -
Proceeds from issuance of Series V preferred stock
(net of issuance costs of $3,391) - 24,109 -
Proceeds from issuance of Series U preferred stock - 110 -
Proceeds from unsecured lines of credit 25,500 - 1,000
(Decrease) increase in due to Health Science
Properties Holding Corporation (2,525) 2,420 105
Principal reductions on unsecured line of credit (2,500) (4,000) -
Principal reductions on secured notes payable (80,725) (972) (519)
Common dividends paid (8,800) (939) (909)
Preferred dividends paid (1,127) (665) -
Redemption of Series T preferred stock (1) - -
---------------------------------
Net cash provided by financing activities 84,101 97,323 927
Net increase (decrease) in cash and cash equivalents 364 777 (272)
Cash and cash equivalents at beginning of year 1,696 919 1,191
---------------------------------
Cash and cash equivalents at end of year $ 2,060 $ 1,696 $ 919
---------------------------------
---------------------------------
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION
Cash paid during the year for interest and financing
costs, net of interest capitalized $ 13,552 $ 5,953 $ 3,409
---------------------------------
---------------------------------
</TABLE>
SEE ACCOMPANYING NOTES.
F-5
<PAGE>
Alexandria Real Estate Equities, Inc. and Subsidiaries
Notes to Consolidated Financial Statements
December 31, 1997 and 1996
1. BACKGROUND, BASIS OF PRESENTATION AND SUMMARY OF SIGNIFICANT ACCOUNTING
POLICIES
BACKGROUND
Alexandria Real Estate Equities, Inc. (known as Health Science Properties,
Inc. prior to 1997), a Maryland corporation (the "Company"), is a real estate
investment trust ("REIT") formed in 1994.
The Company and its subsidiaries were formed to acquire, manage and
selectively develop properties for lease principally to participants in the
life science industry ("Life Science Facilities"). As of December 31, 1997
and 1996, the Company owned 22 and 12 Life Science Facilities, respectively,
in four and three states, respectively, consisting of 1,748,000 and 1,031,000
rentable square feet, respectively.
BASIS OF PRESENTATION
The consolidated financial statements include the accounts of the Company and
its wholly owned subsidiaries which own, directly or indirectly, Life
Science Facilities. All significant intercompany accounts and transactions
have been eliminated in consolidation.
THE INITIAL PUBLIC OFFERING AND RELATED TRANSACTIONS
On June 2, 1997, the Company completed an initial public offering (the
"Offering") of 6,750,000 shares of common stock. The Offering price was
$20.00 per share, resulting in gross proceeds of $135,000,000. On June 26,
1997, the underwriters exercised their over-allotment option provided for in
the Offering, and the Company issued an additional 1,012,500 shares of common
stock, resulting in additional gross proceeds of $20,250,000. The aggregate
net proceeds of the Offering (including exercise of the over-allotment
option), net of underwriting discounts and commissions, advisory fees and
offering costs, were approximately $138,890,000.
F-6
<PAGE>
Alexandria Real Estate Equities, Inc. and Subsidiaries
Notes to Consolidated Financial Statements (continued)
1. BACKGROUND, BASIS OF PRESENTATION AND SUMMARY OF SIGNIFICANT ACCOUNTING
POLICIES (CONTINUED)
THE INITIAL PUBLIC OFFERING AND RELATED TRANSACTIONS (CONTINUED)
The following transactions also occurred in June 1997 in connection with the
Offering:
- - The Company paid off debt of approximately $77,723,000, including (i)
mortgage debt of $72,698,000, (ii) debt of $2,500,000 outstanding under
its prior unsecured line of credit, and (iii) debt of $2,525,000 to Health
Science Properties Holding Corporation ("Holdings"). Holdings owned all of
the Company's common stock prior to the Offering and 15.5% of the common
stock of the Company after the Offering and the exercise of the over-
allotment option.
- - The Company obtained two new mortgage loans totaling $15,360,000.
- - The Company acquired an entity that owns three Life Science Facilities
from affiliates of PaineWebber Incorporated, the lead managing underwriter
for the Offering, for an aggregate purchase price of $58,844,000 (see
Note 9).
- - Each previously outstanding share of the Company's common stock was split
into 1,765.923 shares of common stock. The share data as of and for the
years ended December 31, 1996 and 1995 has been restated to reflect the
effects of the stock split.
- - All of the previously outstanding shares of Series T preferred stock were
redeemed at their stated value ($1,200 in the aggregate) (see Note 6).
- - All of the previously outstanding shares of Series U preferred stock and
Series V preferred stock were converted into shares of common stock (7,354
shares in the aggregate for Series U and 1,659,239 shares in the aggregate
for Series V) (see Note 6).
- - Officers, directors and certain employees of the Company were granted an
aggregate of 152,615 shares of the Company's common stock. In addition,
officers, directors and certain employees of the Company were granted
options to purchase 57,000 shares of the Company's common stock in
substitution for stock options previously issued by Holdings (see Notes 5
and 8). These options were exercised at a nominal exercise price in
connection with the Offering.
F-7
<PAGE>
Alexandria Real Estate Equities, Inc. and Subsidiaries
Notes to Consolidated Financial Statements (continued)
1. BACKGROUND, BASIS OF PRESENTATION AND SUMMARY OF SIGNIFICANT ACCOUNTING
POLICIES (CONTINUED)
THE INITIAL PUBLIC OFFERING AND RELATED TRANSACTIONS (CONTINUED)
- - Officers, directors and employees of the Company were granted options
under the Company's 1997 stock option plan to purchase an aggregate of
600,000 shares of common stock of the Company at the Offering price (see
Note 8).
- - A special bonus of $353,000 was paid to an officer of the Company.
USE OF ESTIMATES
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions
that affect the reported amounts of assets and liabilities, the disclosure of
contingent assets and liabilities at the date of the financial statements and
the reported amounts of revenues and expenses during the reporting period.
Actual results could differ from those estimates.
CASH EQUIVALENTS
The Company considers all highly liquid investments with original maturities
of three months or less when purchased to be cash equivalents.
RENTAL PROPERTIES
Rental properties consist of the Company's portfolio of Life Science
Facilities, recorded at cost. Costs associated with acquiring and renovating
properties are capitalized as incurred. If events or circumstances indicate
that the carrying amount of a property may be impaired, the Company would
make an assessment of its recoverability by estimating the future
undiscounted cash flows, excluding interest charges, of the property. If the
carrying amount were to exceed the aggregate future cash flows, the Company
would recognize an impairment loss to the extent the carrying amount exceeds
the fair value of the property. Based upon such periodic assessments, no
impairment has been determined and no rental properties carrying amounts have
been adjusted.
F-8
<PAGE>
Alexandria Real Estate Equities, Inc. and Subsidiaries
Notes to Consolidated Financial Statements (continued)
1. BACKGROUND, BASIS OF PRESENTATION AND SUMMARY OF SIGNIFICANT ACCOUNTING
POLICIES (CONTINUED)
RENTAL PROPERTIES (CONTINUED)
Maintenance and repairs are expensed as incurred. Major replacements and
betterments are capitalized and depreciated over their estimated useful lives.
Depreciation is provided using the straight-line method using estimated lives
of 30 to 40 years for buildings and building improvements, 20 years for land
improvements, and the term of the respective lease for tenant improvements.
RESTRICTED CASH
Restricted cash as of December 31, 1997 and 1996, consists of a tenant
improvement reserve of $3,364,000 and $4,715,000, respectively, established
by the Company pursuant to a lease at one of the Company's properties, funds
held in trust of $1,966,000 and none, respectively, as additional security on
a note with the City of Seattle, and security deposit funds and other
restricted cash of $1,469,000 and $870,000, respectively. In connection with
the repayment of the note with the City of Seattle, the cash held in trust was
returned to the Company in February 1998 (see Note 4).
LOAN FEES AND COSTS
Fees and costs incurred in obtaining long-term financing are amortized over
the terms of the related loans and included in interest expense.
RENTAL INCOME
Rental income from leases with scheduled rent increases, free rent and other
rent adjustments are recognized on a straight-line basis over the lease term.
Amounts currently recognized as income, and expected to be received in later
years, are included in tenant receivables and deferred rent. Amounts received
currently, but recognized as income in future years, are included in unearned
rent.
OTHER INCOME
Other income consists of interest income and other income associated with the
operations of the properties. Interest income was $588,000, $118,000 and
$57,000 in 1997, 1996 and 1995, respectively.
F-9
<PAGE>
Alexandria Real Estate Equities, Inc. and Subsidiaries
Notes to Consolidated Financial Statements (continued)
1. BACKGROUND, BASIS OF PRESENTATION AND SUMMARY OF SIGNIFICANT ACCOUNTING
POLICIES (CONTINUED)
LEASING COMMISSIONS
Leasing commissions are amortized on a straight-line basis over the term of
the related lease.
FAIR VALUE OF FINANCIAL INSTRUMENTS
The following disclosures of estimated fair value of financial instruments at
December 31, 1997 and 1996 were determined by management using available
market information and appropriate valuation methodologies. Considerable
judgment is necessary to interpret market data and develop estimated fair
value. The use of different market assumptions and/or estimation
methodologies may have a material effect on the estimated fair value amounts.
Based on the borrowing rates currently available to the Company for bank
loans with similar maturities, the fair value of secured notes payable as of
December 31, 1997 and 1996 is approximately $46,822,000 and $113,215,000,
respectively. All other financial instruments are stated at amounts that
approximate their fair value.
NET (LOSS) INCOME PER SHARE
Historical per share data has not been presented because it is not meaningful
due to the material changes in the Company's capital structure as a result of
the Offering.
The Company has adopted Statement of Financial Accounting Standards No. 128
("FAS 128") and has restated pro forma net income per share for the years
ended December 31, 1996 and 1995. Because the impact of the Company's stock
options outstanding as of December 31, 1997 is antidilutive, diluted net
income per share is not presented for 1997. There were no dilutive stock
options on a pro forma basis for 1996 and 1995.
F-10
<PAGE>
Alexandria Real Estate Equities, Inc. and Subsidiaries
Notes to Consolidated Financial Statements (continued)
1. BACKGROUND, BASIS OF PRESENTATION AND SUMMARY OF SIGNIFICANT ACCOUNTING
POLICIES (CONTINUED)
NET (LOSS) INCOME PER SHARE (CONTINUED)
Pro forma shares of common stock outstanding for the years ended December 31,
1997 and 1996 include all shares outstanding after giving effect to the
1,765.923 to 1 stock split, the issuance of stock grants, the issuance and
exercise of substitute stock options and the conversion of the Series U and
Series V preferred stock. In addition, shares issued to the public in
connection with the Offering have been weighted for the period of time they
were outstanding. Pro forma shares of common stock outstanding for the year
ended December 31, 1995 include all shares outstanding after giving effect to
the 1,765.923 to 1 stock split.
The following table sets forth the computation of net (loss) income per pro
forma share of common stock outstanding:
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31
1997 1996 1995
------------------------------------------------
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<S> <C> <C> <C>
Net (loss) income $ (2,797) $ 2,175 $ 761
---------- ---------- ----------
---------- ---------- ----------
Pro forma shares of common stock
before shares issued in the
Offering - restated for 1996
and 1995 3,642,131 3,642,131 1,765,923
Shares issued in the Offering,
weighted for period outstanding 4,433,733 - -
---------- ---------- ----------
Pro forma weighted average shares
- restated for 1996 and 1995 8,075,864 3,642,131 1,765,923
---------- ---------- ----------
---------- ---------- ----------
Pro forma net (loss) income per
pro forma share - restated for
1996 and 1995 $ (0.35) $ 0.60 $ 0.43
---------- ---------- ----------
---------- ---------- ----------
Pro forma dividends declared per
share - restated for 1996 and
1995 $ 1.60 $ 0.87 $ 0.51
---------- ---------- ----------
---------- ---------- ----------
</TABLE>
F-11
<PAGE>
Alexandria Real Estate Equities, Inc. and Subsidiaries
Notes to Consolidated Financial Statements (continued)
1. BACKGROUND, BASIS OF PRESENTATION AND SUMMARY OF SIGNIFICANT ACCOUNTING
POLICIES (CONTINUED)
INCOME TAXES
As a REIT, the Company is not subject to federal income taxation as long as
it meets a number of organizational and operational requirements and
distributes all of its taxable income to its stockholders. Since the Company
believes it has met these requirements and the Company's distributions
exceeded taxable income, no federal income tax provision has been reflected
in the accompanying consolidated financial statements for 1997 and 1996. If
the Company fails to qualify as a REIT in any taxable year, the Company will
be subject to federal income tax on its taxable income at regular corporate
tax rates. For the year ended December 31, 1997, the Company reported that
37.6% of its distributions with respect to common stock represented a return
of capital for federal income tax purposes, while none of the distributions
for the year ended December 31, 1996 represented a return of capital.
For the year ended December 31, 1995, before the Company elected to be taxed
as a REIT, deferred income taxes were recognized for tax consequences of
temporary differences resulting from income and expense items reported for
financial accounting and tax purposes in different periods and tax net
operating loss carryforwards.
RECLASSIFICATIONS
Certain prior year amounts have been reclassified to conform to the current
year presentation.
2. RENTAL PROPERTIES
Rental properties are as follows:
<TABLE>
<CAPTION>
DECEMBER 31
1997 1996
------------------------
(DOLLARS IN THOUSANDS)
<S> <C> <C>
Land $ 46,283 $ 28,383
Building and improvements 189,624 121,236
Tenant and other improvements 2,867 1,535
------------------------
238,774 151,154
Less accumulated depreciation (8,804) (4,194)
------------------------
$229,970 $146,960
------------------------
------------------------
</TABLE>
F-12
<PAGE>
Alexandria Real Estate Equities, Inc. and Subsidiaries
Notes to Consolidated Financial Statements (continued)
2. RENTAL PROPERTIES (CONTINUED)
Four of the Company's rental properties are encumbered by deeds of trust and
assignments of rents and leases associated with the properties (see Note 4).
The net book value of these properties as of December 31, 1997 is $70,663,000.
The Company leases space under noncancelable leases with remaining terms of 1
to 20 years. Certain tenants are also obligated to reimburse the Company for
specific operating expenses.
The Company capitalizes interest to properties under construction and
renovation during the period the asset is undergoing activities to prepare it
for its intended use. Total interest capitalized was $96,000 in 1997. Total
interest incurred for the years ended December 31, 1997, 1996 and 1995 was
$7,139,000, $6,327,000 and $3,553,000, respectively.
A majority of the Company's lease agreements require that the lessee pay all
taxes, maintenance, insurance and certain other operating expenses applicable
to the leased properties.
Minimum lease payments to be received under the terms of the operating lease
agreements, excluding expense reimbursements, as of December 31, 1997, are as
follows (in thousands):
<TABLE>
<S> <C>
1998 $ 31,642
1999 27,734
2000 24,079
2001 20,869
2002 17,095
Thereafter 107,032
--------
$228,451
--------
--------
</TABLE>
Alexandria Real Estate Equities, Inc. and Subsidiaries
Notes to Consolidated Financial Statements (continued)
3. UNSECURED LINE OF CREDIT
In connection with the Offering, the Company obtained an unsecured line of
credit providing for borrowings of up to $150,000,000, consisting of a
$100,000,000 activated portion and a $50,000,000 portion that may be activated
as needed at the Company's discretion (upon the payment of an activation fee)
provided no default exists under the line of credit facility. Borrowings under
the line of credit bear interest at a floating rate which is based on the
Company's election of either a LIBOR based rate or the higher of the bank's
reference rate and the Federal Funds rate plus 0.5%. For each LIBOR based
F-13
<PAGE>
Alexandria Real Estate Equities, Inc. and Subsidiaries
Notes to Consolidated Financial Statements (continued)
3. UNSECURED LINE OF CREDIT (CONTINUED)
advance, the Company must elect to fix the rate for a one, two, three or six
month period.
The line of credit contains financial covenants, including, among other
things, maintenance of minimum market net worth, a total liabilities to gross
asset value ratio, and a fixed charge coverage ratio (all as defined). The
Company was in compliance with all covenants as of December 31, 1997. In
addition, the terms of the line of credit restrict, among other things,
certain investments, indebtedness, distributions and mergers. Borrowings
under the line of credit are limited to an amount based on a pool of
unencumbered assets. Accordingly, as the Company acquires additional
unencumbered properties, borrowings available under the line credit will
increase. As of December 31, 1997, borrowings under the line of credit were
limited to approximately $103,000,000, and $23,000,000 was outstanding
(leaving $80,000,000 available), at a weighted average rate of interest of
6.9%.
The line of credit expires on May 31, 2000 and provides for annual extensions
(provided there is no default) for two additional one-year periods. In
addition, at the Company's election, the line of credit may be converted at
any time to a term loan with principal installments over two years from the
date of such conversion.
In connection with obtaining the line of credit, the Company incurred
$705,000 in fees and costs, which are being amortized over the term of the
line of credit. In addition, the Company is required to continue to pay
certain periodic fees for the line of credit, depending on the usage of the
facility. The fees are included as part of interest expense.
4. SECURED NOTES PAYABLE
As of December 31, 1997, the Company had three notes payable to banks and an
insurance company, secured by first and second deeds of trust on four rental
properties. The notes bear interest at fixed rates ranging from 7.17% to
9.00% and are due at various dates through 2016. As of December 31, 1997 and
1996, the outstanding balances under these notes were $47,817,000 and
$61,292,000, respectively.
As of December 31, 1996, the Company had an aggregate of $51,890,000
outstanding under two notes payable and two secured lines of credit with
PaineWebber Incorporated, the City of Seattle and two banks. The loans bore
interest at variable rates based upon LIBOR or the prime rate. As of December
31, 1996, the interest rates on these loans ranged from 8.28% to 9.75%. In
connection with the Offering, the Company repaid $46,030,000 of the balance
outstanding as of December 31, 1996. The remaining
F-14
<PAGE>
Alexandria Real Estate Equities, Inc. and Subsidiaries
Notes to Consolidated Financial Statements (continued)
4. SECURED NOTES PAYABLE (CONTINUED)
$5,860,000 was repaid in November 1997. In connection with the retirement of
these loans, the Company wrote-off $2,147,000 of unamortized loan costs,
including the cost of certain interest rate cap agreements.
Future principal payments due on secured notes payable as of December 31,
1997, are as follows (in thousands):
<TABLE>
<S> <C>
1998 $ 1,009
1999 2,451
2000 2,320
2001 2,502
2002 2,699
Thereafter 36,836
-------
$47,817
-------
-------
</TABLE>
5. NON-CASH TRANSACTIONS
Stock compensation expense represents non-cash compensation expense
associated with stock grants and stock options issued to officers, directors
and certain employees of the Company in connection with the Offering. Stock
compensation expense of $4,239,000 was recognized to record the stock grants
and the issuance and exercise of substitute stock options (see Note 8).
In connection with the Offering, outstanding shares of the Company's Series U
preferred stock and Series V preferred stock were converted into shares of
common stock (see Note 6). The common stock issued was recorded at the book
value of the Series U preferred stock and the Series V preferred stock (an
aggregate of $27,061,000).
6. PREFERRED STOCK AND EXCESS STOCK
SERIES V CUMULATIVE CONVERTIBLE PREFERRED STOCK
Prior to the Offering, the Company had 27,500 shares of manditorily
redeemable Series V cumulative convertible preferred stock outstanding. The
stated value of each share was $1,000. In connection with the Offering, the
shares were converted into 1,659,239 shares of common stock. The conversion
rate was computed to provide for an internal rate of return on the stated
value of each share, equal to 20% less the return previously received from
prior dividends.
F-15
<PAGE>
Alexandria Real Estate Equities, Inc. and Subsidiaries
Notes to Consolidated Financial Statements (continued)
6. PREFERRED STOCK AND EXCESS STOCK (CONTINUED)
SERIES V CUMULATIVE CONVERTIBLE PREFERRED STOCK (CONTINUED)
Prior to conversion, Series V preferred stockholders were entitled to
dividends at an annual rate of 10% of the stated value per share during the
first twelve dividend periods or such larger amount as would be payable on an
as converted basis if the Series V preferred stock were converted to common
stock. Dividends were cumulative and payable in quarterly equal installments
on March 31, June 30, September 30, and December 31 of each year. Offering
costs associated with the issuance of the Series V preferred stock were
deducted from the proceeds of the issuance. Until the conversion of the
Series V preferred stock into shares of common stock in 1997, the Company
accreted the amount of the offering costs and the difference between the
minimum yield requirement on the Series V preferred stock (20% per annum) and
the minimum dividend payment as a charge to additional paid-in capital.
SERIES T AND SERIES U PREFERRED STOCK
Holders of each of the Series T and Series U preferred stock were entitled to
dividends at an annual rate of 8.5% of the stated value per share. In
connection with the Offering, all of the previously outstanding shares of
Series T preferred stock (12 shares) were redeemed at their stated value
($1,200 in the aggregate). In connection with the Offering, all of the
previously outstanding shares of Series U preferred stock (220 shares) were
converted into an aggregate of 7,354 shares of common stock.
PREFERRED STOCK AND EXCESS STOCK AUTHORIZATIONS
The charter of the Company authorizes the issuance of up to 100,000,000
shares of preferred stock and 200,000,000 shares of excess stock (as
defined), none of which was issued and outstanding at December 31, 1997.
7. COMMITMENTS AND CONTINGENCIES
LITIGATION
The Company currently is not subject to any material legal proceedings or
claims, nor, to management's knowledge, are any material legal proceedings or
claims being threatened.
F-16
<PAGE>
Alexandria Real Estate Equities, Inc. and Subsidiaries
Notes to Consolidated Financial Statements (continued)
7. COMMITMENTS AND CONTINGENCIES (CONTINUED)
POST-RETIREMENT BENEFIT
In 1997, in connection with the Offering, an officer of the Company retired.
In connection with the officer's retirement, the Company agreed to pay a
post-retirement benefit equal to $150,000 for each of the first three years
following the Offering, and $90,000 per year (plus an annual increase of 2%
per year) thereafter for the remainder of the longer of the executive's life
and the executive's current spouse's life. In 1997 and 1996, the Company
recorded a post-retirement expense for past services equal to $632,000 and
$438,000, respectively (pursuant to a prior agreement). The accrual was based
upon the estimated number of payments to be made, discounted at a rate of 8%.
As of December 31, 1997, the accrued liability for post-retirement benefit is
$1,037,000. For the year ended December 31, 1997, the Company paid $75,000
under the retirement agreement of which $42,000 represented interest.
EMPLOYEE RETIREMENT SAVINGS PLAN
Effective January 1, 1997, the Company adopted a retirement savings plan
pursuant to Section 401(k) of the Internal Revenue Code ("Code"), whereby
participants may contribute a portion of their compensation to their
respective retirement accounts, in an amount not to exceed the maximum
allowed under the Code. The plan provides for matching contributions by the
Company, which amounted to $36,000 for the year ended December 31, 1997. Plan
participants are immediately vested in their contributions and in the
matching contributions by the Company.
CONCENTRATION OF CREDIT RISK
The Company maintains its cash and cash equivalents at insured financial
institutions. The combined account balances at each institution periodically
exceed FDIC insurance coverage, and, as a result, there is a concentration of
credit risk related to amounts in excess of FDIC insurance coverage.
Management believes that the risk is not significant.
The Company is dependent on rental payments from a limited number of tenants,
and the inability of any single tenant to make its lease payments could
adversely affect the Company and its ability to make distributions to
stockholders. As of December 31, 1997, the Company had 42 leases with a total
of 35 tenants, and 12 of the Company's 22 properties were single tenant
properties. At December 31, 1997, three of the Company's tenants accounted
for approximately 29.5% of the Company's aggregate annualized base rent.
F-17
<PAGE>
Alexandria Real Estate Equities, Inc. and Subsidiaries
Notes to Consolidated Financial Statements (continued)
7. COMMITMENTS AND CONTINGENCIES (CONTINUED)
CONCENTRATION OF CREDIT RISK (CONTINUED)
The Company does not generally require collateral or other security from its
tenants other than security deposits. The Company has available from certain
tenants two irrevocable letters of credit totaling $858,000 which are used as
security deposits for two leases.
8. STOCK OPTION PLANS AND STOCK GRANTS
The Company has elected to follow Accounting Principles Board Opinion No. 25,
"Accounting for Stock Issued to Employees" ("APB 25") and related
Interpretations in accounting for its employee and director stock options,
stock grants and stock appreciation rights. Under APB 25, if the exercise
price of employee and director stock options granted by the Company equals
the market price of the underlying stock on the date of grant, no
compensation expense is recognized.
1997 STOCK OPTION PLAN
In connection with the Offering, the Company adopted a stock option and
incentive plan (the "1997 Stock Option Plan"). The 1997 Stock Option Plan is
administered by the Compensation Committee of the Board of Directors and
provides for the grant of incentive stock options intended to qualify as such
under Section 422 of the Code, non-qualified stock options, stock
appreciation rights and restricted stock to employees, officers, directors
and independent contractors (including non-employee directors) of the Company
with respect to 900,000 shares of common stock. The 1997 Stock Option Plan
permits the Compensation Committee to select eligible employees, officers,
directors and independent contractors (including non-employee directors) of
the Company to receive awards, to determine the type and number of awards to
be granted and to determine the terms, conditions, restrictions and
performance criteria relating to any award. As of December 31, 1997, there
were 701,000 options outstanding under the 1997 Stock Option Plan. The
Company has reserved 900,000 shares of common stock for issuance under the
1997 Stock Option Plan.
During the year ended December 31, 1997, the Company granted 701,000 stock
options under the 1997 stock option plan at exercise prices ranging from
$20.00 to $30.94 (the market price at date of grant). All of these options
have a ten year term. Options for 671,000 shares vest ratably in three annual
installments from the date of grant. The
F-18
<PAGE>
Alexandria Real Estate Equities, Inc. and Subsidiaries
Notes to Consolidated Financial Statements (continued)
8. STOCK OPTION PLANS AND STOCK GRANTS (CONTINUED)
1997 STOCK OPTION PLAN (CONTINUED)
remaining 30,000 options (which were issued to non-employee directors) were
exercisable immediately upon the date of grant.
Pro forma information regarding net income and earnings per share has been
determined as if the Company had accounted for its employee stock options
under the fair value method. The fair value of the options issued under the
1997 Stock Option Plan was estimated at the date of grant using a
Black-Scholes option pricing model with the following weighted-average
assumptions for 1997: risk-free interest rate of 5.82%; dividend yield
ranging from 5.17% to 8%; volatility factor of the expected market price of
the Company's common stock of 28.7%; and a weighted average expected life of
the option of five years.
For purposes of the following pro forma disclosures for the year ended
December 31, 1997, the estimated fair value of these options has been
amortized to expense over the vesting periods (in thousands, except per share
information):
<TABLE>
<S> <C>
Pro forma net loss $ (3,096)
---------
---------
Pro forma net loss per share $ (0.38)
---------
---------
</TABLE>
A summary of the Company's stock option activity under the 1997 Stock Option
Plan, and related information for the year ended December 31, 1997 follows:
<TABLE>
<CAPTION>
WEIGHTED
AVERAGE
STOCK EXERCISE
OPTIONS PRICE OF
GRANTED OPTIONS
---------------------------
<S> <C> <C>
Outstanding-beginning of year -
Granted 701,000 $ 20.80
Exercised - -
Forfeited - -
---------------------------
Outstanding-end of year 701,000 $ 20.80
---------------------------
---------------------------
Exercisable at end of year 30,000 $ 20.00
---------------------------
---------------------------
Weighted-average per share fair value
of options granted during the year
based upon the minimum value method $ 2.93
-----------
-----------
</TABLE>
F-19
<PAGE>
Alexandria Real Estate Equities, Inc. and Subsidiaries
Notes to Consolidated Financial Statements (continued)
8. STOCK OPTION PLANS AND STOCK GRANTS (CONTINUED)
1997 STOCK OPTION PLAN (CONTINUED)
Exercise prices for options outstanding as of December 31, 1997 range from
$20.00 to $30.94. The weighted average contractual life of those options is
9.5 years.
PRIOR STOCK OPTION PLAN
Prior to the Offering, the Company had a ten-year incentive and nonqualified
stock option plan (the "Prior Plan") for certain employees and non-employee
directors of the Company.
Under the Prior Plan, holders of options to purchase common stock of Holdings
granted under stock option plans of Holdings ("Holdings Stock Options") were
eligible, under certain circumstances (including the Offering), to receive
substitute stock options of the Company in substitution for previously
granted Holdings Stock Options. As such, in connection with the Offering,
officers, directors and certain employees of the Company received substitute
stock options to purchase 57,000 shares of common stock of the Company under
the Prior Plan. Such substitute stock options were exercised in connection
with the Offering at a nominal exercise price. No further stock options were
issued under the Prior Plan. In connection with the issuance of the
substitute stock options, the Company recognized $1,187,000 of stock
compensation expense.
The following table sets forth certain information regarding activity in
Holdings Stock Options, including (i) the grant date of the Holdings Stock
Options, (ii) the number of substitute stock options that were granted in
connection with the Offering in substitution for the underlying Holdings Stock
Options and (iii) the weighted average exercise price of substitute stock
options for shares of the Company's common stock.
F-20
<PAGE>
Alexandria Real Estate Equities, Inc. and Subsidiaries
Notes to Consolidated Financial Statements (continued)
8. STOCK OPTION PLANS AND STOCK GRANTS (CONTINUED)
PRIOR STOCK OPTION PLAN (CONTINUED)
<TABLE>
<CAPTION>
For the Year Ended December 31,
----------------------------------------------------------------------------------
1997 1996
---------------------------------------- ----------------------------------------
Weighted- Weighted-
Grant Date Substitute Average Grant Date Substitute Average
of Holdings Stock Exercise price of Holdings Stock Exercise price
Stock Options of Substitute Stock Options of Substitute
Options General (1) Options Options General (1) Options
----------- ----------- -------------- ----------- ----------- --------------
<S> <C> <C> <C> <C> <C> <C>
Outstanding - beginning of year 37,749 $ 0.54 78,935 $ 0.54
Granted 1/28/97 19,251 0.54 7/1/96 1,756 0.54
Exercised (57,000) (0.54) (42,942) 0.54
Forfeited - - - -
----------- -------------- ----------- --------------
Outstanding - end of year - - 37,749 $ 0.54
----------- -------------- ----------- --------------
----------- -------------- ----------- --------------
Exercisable at end of year - - 13,606 $ 0.54
----------- -------------- ----------- --------------
----------- -------------- ----------- --------------
Weighted-average fair value of
options granted during the
year based upon the minimum
value method $ 0.93 $ 0.03
-------------- --------------
-------------- --------------
</TABLE>
<TABLE>
<CAPTION>
For the Year Ended December 31,
----------------------------------------
1995
----------------------------------------
Weighted-
Grant Date Substitute Average
of Holdings Stock Exercise price
Stock Options of Substitute
Options General (1) Options
------------ ----------- -------------
<S> <C> <C> <C>
Outstanding - beginning of year 51,727 $ 0.54
Granted 12/31/95 27,208 0.54
Exercised - -
Forfeited - -
----------- -------------
Outstanding - end of year 78,935 $ 0.54
----------- -------------
----------- -------------
Exercisable at end of year 35,384 $ 0.54
----------- -------------
----------- -------------
Weighted-average fair value of
options granted during the
year based upon the minimum
value method $ 0.04
-------------
-------------
</TABLE>
(1) The grant of substitute stock options was made in May 1997.
No compensation expense was recorded with respect to Holdings Stock
Options issued during the years ended December 31, 1996 and 1995
since they were issued with an exercise price equal to the then fair
market value of the Holdings common stock.
STOCK GRANTS
In connection with the Offering, officers, directors and certain
employees of the Company were granted on aggregate of 152,615 shares
of common stock. As a result of the grants, the Company recorded
stock compensation expense of $3,052,000.
F-21
<PAGE>
Alexandria Real Estate Equities, Inc. and Subsidiaries
Notes to Consolidated Financial Statements (continued)
9. PURCHASE OF ACQUISITION LLC
During January 1997, the Company assigned its rights to purchase three Life
Science Facilities to an entity owned by affiliates of PaineWebber
Incorporated ("PaineWebber"), the lead managing underwriter of the Offering
(the "Acquisition LLC"). In January 1997, the Acquisition LLC acquired the
three Life Science Facilities for $51,871,000 from unaffiliated sellers. In
connection with the Offering, the Company acquired 100% of the membership
interests in the Acquisition LLC from the PaineWebber affiliates.
The Company's purchase price for the membership interests ($58,844,000)
exceeded the cost incurred by the Acquisition LLC to acquire the properties
($51,871,000). The Company's acquisition of the membership interests in the
Acquisition LLC has been recorded as a financing transaction, with the excess
of the purchase price of such membership interests over the cost of the
Acquisition LLC to acquire the properties ($6,973,000) being reflected as a
financing cost in the accompanying consolidated statement of operations.
10. RELATED PARTY TRANSACTIONS
During 1997, 1996 and 1995, the Company incurred $3,358,000, $1,708,000 and
$369,000, respectively, for legal services provided by a firm of which a
minority shareholder of Holdings is a member.
During 1996, Holdings advanced to the Company $2,483,000 bearing interest at a
rate of 10% per annum which was due on demand. For the year ended December 31,
1996, $162,000 of interest was accrued and $42,000 was paid on this advance.
During 1997 in connection with the Offering, the Company repaid this advance
plus accrued interest.
F-22
<PAGE>
Alexandria Real Estate Equities, Inc. and Subsidiaries
Notes to Consolidated Financial Statements (continued)
11. QUARTERLY FINANCIAL DATA (UNAUDITED)
Following is a summary of consolidated financial information on a quarterly
basis for 1997 and 1996:
<TABLE>
<CAPTION>
QUARTER
---------------------------------------------------
FIRST SECOND THIRD FOURTH
---------------------------------------------------
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
1997
<S> <C> <C> <C> <C>
Revenues $ 7,161 $ 7,743 $ 9,677 $ 10,265
Net (loss) income $ (143) $(10,989) $ 4,126 $ 4,209
Net (loss) income per pro forma share
(restated for the first and second
quarters)
-basic $ (0.04) $ (1.80) $ 0.36 $ 0.37
-diluted $ (0.04) $ (1.80) $ 0.36 $ 0.36
1996
Revenues $ 2,610 $ 3,163 $ 5,411 $ 6,489
Net income $ 319 $ 448 $ 691 $ 717
Net income per pro forma share
(restated) $ 0.09 $ 0.12 $ 0.19 $ 0.20
</TABLE>
12. SUBSEQUENT EVENTS (UNAUDITED)
On various dates subsequent to December 31, 1997 (through March 27, 1998), the
Company acquired 11 Life Science Facilities containing an aggregate of 927,000
rentable square feet for an aggregate purchase price of $109,875,000 and made
a $6,000,000 loan secured by real estate related to one of these Life Science
Facilities. Of these amounts, $103,000,000 was funded through draws on the
Company's line of credit, $12,641,000 through the assumption of existing debt,
and the remainder with working capital.
F-23
<PAGE>
Alexandria Real Estate Equities, Inc. and Subsidiaries
Schedule III
Consolidated Financial Statement Schedule of Rental Properties and Accumulated
Depreciation
December 31, 1997
(IN THOUSANDS, EXCEPT SQUARE FOOT DATA)
<TABLE>
<CAPTION>
COSTS
INITIAL COSTS CAPITALIZED TOTAL COSTS
----------------------- SUBSEQUENT TO ---------------------------------
SQUARE BUILDINGS AND ACQUISITION BUILDINGS AND
PROPERTY NAME FOOTAGE LAND IMPROVEMENTS IMPROVEMENTS LAND IMPROVEMENTS TOTAL
- ---------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
10933 N. Torrey Pines 108,133 $ 3,903 $ 5,960 $1,071 $ 3,903 $ 7,031 $ 10,934
11099 N. Torrey Pines 86,962 2,663 10,649 1,620 2,663 12,269 14,932
3535 General Atomics Court 76,084 2,651 18,046 152 2,651 18,198 20,849
3565 General Atomics Court 43,600 1,227 9,554 - 1,227 9,554 10,781
11025 Roselle Street 18,532 463 1,840 8 463 1,848 2,311
Fred Hutchinson 213,397 6,566 23,528 1,502 6,566 25,030 31,596
1311 Harbor Bay Parkway 30,000 775 1,917 134 775 2,051 2,826
1401 Harbor Bay Parkway 47,777 1,200 3,880 35 1,200 3,915 5,115
1431 Harbor Bay Parkway 70,000 1,800 9,731 87 1,800 9,818 11,618
1201 Harbor Bay Parkway 61,100 1,507 5,357 132 1,507 5,489 6,996
1413 Research Boulevard 105,000 2,317 9,611 322 2,317 9,933 12,250
300 Professional Drive 48,440 871 5,362 17 871 5,379 6,250
401 Professional Drive 62,739 1,129 6,940 20 1,129 6,960 8,089
25/35/45 West Watkins 138,938 3,281 14,416 50 3,281 14,466 17,747
1550 East Guide Drive 44,500 775 4,122 149 775 4,271 5,046
1330 Piccard Drive 131,511 2,800 11,533 196 2,800 11,729 14,529
14225 Newbrook Drive 248,186 4,800 27,639 356 4,800 27,995 32,795
708 Quince Orchard 49,225 1,267 3,031 487 1,267 3,518 4,785
940 Clopper Road 44,464 900 2,732 87 900 2,819 3,719
1401 Research Boulevard 48,800 1,533 4,391 104 1,533 4,495 6,028
1500 East Gude Drive 45,989 690 3,609 55 690 3,664 4,354
3 & 3 1/2 Taft Court 24,460 367 1,949 37 367 1,986 2,353
John Hopkins Court - 2,798 - 73 2,798 73 2,871
----------------------------------------------------------------------------------
1,747,837 $46,283 $185,797 $6,694 $46,283 $192,491 $238,774
----------------------------------------------------------------------------------
----------------------------------------------------------------------------------
<CAPTION>
ACCUMULATED YEAR
PROPERTY NAME DEPRECIATION(1) ENCUMBRANCES BUILT
- ------------------------------------------------------------------------------
<S> <C> <C> <C>
10933 N. Torrey Pines $ 908 $ - 1971/1994
11099 N. Torrey Pines 1,484 - 1986/1996
3535 General Atomics Court 1,910 11,868 1991
3565 General Atomics Court 969 6,182 1991
11025 Roselle Street 2 - 1993
Fred Hutchinson 1,031 21,267 1975/1997
1311 Harbor Bay Parkway 55 - 1984
1401 Harbor Bay Parkway 110 - 1986/1994
1431 Harbor Bay Parkway 271 8,500 1985/1994
1201 Harbor Bay Parkway 13 - 1983
1413 Research Boulevard 371 - 1967/1996
300 Professional Drive 182 - 1989
401 Professional Drive 240 - 1987
25/35/45 West Watkins 458 - 1989/1997
1550 East Guide Drive 68 - 1981
1330 Piccard Drive 179 - 1978
14225 Newbrook Drive 431 - 1992
708 Quince Orchard 34 - 1992
940 Clopper Road 28 - 1989
1401 Research Boulevard 42 - 1966
1500 East Gude Drive 12 - 1981
3 & 3 1/2 Taft Court 6 - 1981
John Hopkins Court - -
-----------------------
$8,804 $47,817
-----------------------
-----------------------
</TABLE>
(1) The depreciable life for buildings and improvements ranges from 30 to 40
years, 20 years for land improvements, and the term of the respective lease for
tenant improvement.
F-24
<PAGE>
A summary of activity of consolidated rental properties and accumulated
depreciation is as follows:
<TABLE>
<CAPTION>
RENTAL PROPERTIES
DECEMBER 31,
----------------------------------
1997 1996 1995
---------- ---------- ----------
(IN THOUSANDS)
<S> <C> <C> <C>
Balance at beginning of period $151,154 $ 56,254 $54,700
Improvements 3,566 1,578 1,554
Acquisition of land, building and improvements 84,054 93,322 -
-------- -------- -------
Balance at end of period $238,774 $151,154 $56,254
-------- -------- -------
-------- -------- -------
</TABLE>
<TABLE>
<CAPTION>
ACCUMULATED DEPRECIATION
DECEMBER 31,
----------------------------------
1997 1996 1995
---------- ---------- ----------
(IN THOUSANDS)
<S> <C> <C> <C>
Balance at beginning of period $4,194 $1,901 $ 333
Depreciation expense 4,610 2,293 1,568
------ ------ ------
Balance at end of period $8,804 $4,194 $1,901
------ ------ ------
------ ------ ------
</TABLE>
F-25
<PAGE>
- -------------------------------------------------------------------------------
AMENDED AND RESTATED EXECUTIVE EMPLOYMENT AGREEMENT
by and between
ALEXANDRIA REAL ESTATE EQUITIES, INC.,
a Maryland corporation,
and
JOEL S. MARCUS,
an individual
- -------------------------------------------------------------------------------
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
<C> <S> <C>
1. POSITION AND DUTIES; LOCATION . . . . . . . . . . . . . . . . . . . . . . . . 1
2. TERM OF EMPLOYMENT. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
3. COMPENSATION, BENEFITS AND REIMBURSEMENT. . . . . . . . . . . . . . . . . . . 2
3.1 BASE SALARY. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
(a) MINIMUM BASE . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
(b) EARNED BASE SALARY. . . . . . . . . . . . . . . . . . . . . . . . . 2
3.2 INCREASES IN BASE SALARY . . . . . . . . . . . . . . . . . . . . . . . . 2
3.3 BONUS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
(a) MINIMUM BONUS . . . . . . . . . . . . . . . . . . . . . . . . . . . .3
(b) DETERMINATION OF BONUS. . . . . . . . . . . . . . . . . . . . . . . .3
3.4 ADDITIONAL BENEFITS . . . . . . . . . . . . . . . . . . . . . . . . . . 3
(a) OFFICER BENEFITS. . . . . . . . . . . . . . . . . . . . . . . . . . 3
(b) VACATION. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
(c) LIFE INSURANCE. . . . . . . . . . . . . . . . . . . . . . . . . . . 4
(d) DISABILITY INSURANCE. . . . . . . . . . . . . . . . . . . . . . . . 4
(e) REIMBURSEMENT FOR EXPENSES . . . . . . . . . . . . . . . . . . . . 4
(f) WITHHOLDING . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
(g) SIGNING BONUS . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
4. TERMINATION OF THE AGREEMENT. . . . . . . . . . . . . . . . . . . . . . . . . 5
4.1 TERMINATION BY CORPORATION DEFINED . . . . . . . . . . . . . . . . . . . 5
(a) TERMINATION WITHOUT CAUSE . . . . . . . . . . . . . . . . . . . . . 5
(b) TERMINATION FOR CAUSE . . . . . . . . . . . . . . . . . . . . . . . 5
(c) TERMINATION BY REASON OF DEATH OR DISABILITY . . . . . . . . . . . 5
4.2 TERMINATION BY OFFICER DEFINED . . . . . . . . . . . . . . . . . . . . . 6
(a) TERMINATION OTHER THAN FOR GOOD REASON. . . . . . . . . . . . . . . 6
(b) TERMINATION FOR GOOD REASON . . . . . . . . . . . . . . . . . . . . 6
(c) GOOD REASON FOLLOWING A CHANGE IN CONTROL . . . . . . . . . . . . . 6
4.3 EFFECT OF TERMINATION. . . . . . . . . . . . . . . . . . . . . . . . . . 8
(a) TERMINATION BY CORPORATION. . . . . . . . . . . . . . . . . . . . . 8
(i) TERMINATION WITHOUT CAUSE, DEATH OR
i
<PAGE>
<C> <S> <C>
PERMANENT DISABILITY . . . . . . . . . . . . . . . . . . . . . 8
(ii) TERMINATION FOR CAUSE. . . . . . . . . . . . . . . . . . . . . 8
(b) TERMINATION BY OFFICER. . . . . . . . . . . . . . . . . . . . . . . 9
(i) TERMINATION OTHER THAN FOR GOOD REASON . . . . . . . . . . . . 9
(ii) TERMINATION FOR GOOD REASON. . . . . . . . . . . . . . . . . . 9
4.4 SEVERANCE PAYMENT. . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
(a) DEFINITION OF "SEVERANCE PAYMENT" . . . . . . . . . . . . . . . . . 9
(b) PAYMENT OF SEVERANCE PAYMENT. . . . . . . . . . . . . . . . . . . . 10
(c) OTHER SEVERANCE BENEFITS. . . . . . . . . . . . . . . . . . . . . . 10
(d) FULL SETTLEMENT OF ALL OBLIGATIONS. . . . . . . . . . . . . . . . . 10
(e) CHANGE IN CONTROL . . . . . . . . . . . . . . . . . . . . . . . . . 10
4.5 GROSS-UP . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
4.6 OFFSET . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
5. NONCOMPETITION. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
6. MISCELLANEOUS.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
6.1 PAYMENT OBLIGATIONS . . . . . . . . . . . . . . . . . . . . . . . . . . 13
6.2 CONFIDENTIALITY. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
6.3 WAIVER . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
6.4 ENTIRE AGREEMENT; MODIFICATIONS. . . . . . . . . . . . . . . . . . . . . 13
6.5 NOTICES. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
6.6 HEADINGS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
6.7 GOVERNING LAW. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
6.8 ARBITRATION. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
6.9 SEVERABILITY . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
6.10 SURVIVAL OF CORPORATION'S OBLIGATIONS. . . . . . . . . . . . . . . . . . 15
6.11 SURVIVAL OF CERTAIN RIGHTS AND OBLIGATIONS . . . . . . . . . . . . . . . 15
6.12 COUNTERPARTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
6.13 INDEMNIFICATION. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
</TABLE>
ii
<PAGE>
AMENDED AND RESTATED
EXECUTIVE EMPLOYMENT AGREEMENT
THIS AMENDED AND RESTATED EXECUTIVE EMPLOYMENT AGREEMENT (this
"Agreement") originally made and entered into as of the fifth (5th) day of
January, 1994, (the "Original Effective Date"), by and between Health Science
Properties Holding Corp., a Maryland corporation (the "Parent") and Joel S.
Marcus, an individual (the "Officer") is hereby amended and restated in its
entirety effective as of March 28, 1997 (the "Effective Date") to read as
follows:
RECITAL
WHEREAS, on November 3, 1994, Parent transferred to its then
wholly-owned subsidiary Alexandria Real Estate Equities, Inc., a Maryland
corporation (formerly, Health Science Properties, Inc.) (the "Corporation")
substantially all of its property, assets and certain liabilities, including
Parent's rights and obligations under this Agreement;
WHEREAS, on July 30, 1996, this Agreement was amended pursuant to an
agreement between the Corporation and Officer;
WHEREAS, Corporation desires to continue to employ Officer as its Vice
Chairman and Chief Operating Officer, and Officer is willing to continue to
accept such employment by Corporation, on the terms and subject to the
conditions set forth in this Agreement.
NOW, THEREFORE, in consideration of the mutual covenants contained
herein and for other good and valuable consideration, the receipt and
sufficiency of which is hereby acknowledged, the parties hereto agree to amend
and restate this Agreement as follows:
1. POSITION AND DUTIES; LOCATION.
During the Term (as defined in Paragraph 2 below) of this Agreement,
Officer agrees to be employed by and to serve Corporation at its Vice Chairman
and Chief Operating Officer; PROVIDED that effective as of January 1, 1998,
Officer shall be employed by and serve the Corporation as its Vice Chairman and
Chief Executive Officer. In addition, Officer agrees to serve in such
additional capacity consistent with the Officer's current position as a senior
executive officer as may be determined by the Board of Directors of the
Corporation (the "Board"). Corporation agrees to employ and retain Officer in
such capacities. Officer shall
1
<PAGE>
devote such of his business time, energy, and skill to the affairs of
Corporation as shall be necessary to perform the duties of such positions.
Officer shall report to the Chairman and prior to January 1, 1998, the Chief
Executive Officer and at all times during the Term (as defined in Paragraph 2
below) of this Agreement shall have powers and duties at least commensurate
with his position as senior executive officer. Officer shall be based at the
principal executive offices of Corporation in the Los Angeles, California
metropolitan area, except for required travel on Corporation's business.
2. TERM OF EMPLOYMENT.
The Term (the "Term") of this Agreement shall be for a period
commencing on January 1, 1997 and ending on December 31, 2000 (the
"Termination Date"), unless terminated earlier pursuant to this Agreement
(the "Early Termination Date"). Commencing on December 31, 2000 and each
subsequent anniversary thereof, the Term shall be automatically extended for
one (1) additional year unless, no later six (6) months before such date,
either party shall have given written notice to the other that it does not
wish to extend the Term of this Agreement. References herein to the Term of
this Agreement shall refer to both the initial Term and any such extended
Term.
3. COMPENSATION, BENEFITS AND REIMBURSEMENT.
3.1 BASE SALARY. During the Term of this Agreement Officer shall be
entitled to the following base salary:
(a) MINIMUM BASE. During the Term of this Agreement and
subject to the terms and conditions set forth herein, Corporation agrees to
pay to Officer an annual "Base Salary" of Two Hundred Thirty Five Thousand
Dollars ($235,000), or such higher amount as may from time to time be
determined by Corporation. Unless otherwise agreed in writing by Officer and
Corporation, the salary shall be payable in substantially equal semimonthly
installments in accordance with the standard policies of Corporation in
existence from time to time.
(b) EARNED BASE SALARY. For purposes of any early
termination of this Agreement as provided in Paragraph 4 below, the term
"Earned Base Salary" shall mean all semimonthly installments of the Base
Salary which have become due and payable to Officer, together with any
partial monthly installment prorated on a daily basis up to and including the
applicable Termination Date.
2
<PAGE>
3.2 INCREASES IN BASE SALARY. Officer's Base Salary shall be
reviewed no less frequently than on each anniversary of the Effective Date
during the Term by the Board (or such committee as may be appointed by the
Board for such purpose). The Base Salary payable to Officer shall be
increased on each such anniversary date (and such other times as the Board or
a committee of the Board may deem appropriate during the Term of this
Agreement) to an amount determined by the Board (or a committee of the
Board). Each such new Base Salary shall become the base for each successive
year increase; PROVIDED, HOWEVER, that such increase, at a minimum, shall be
equal to the cumulative cost-of-living increment as reported in the "Consumer
Price Index, Los Angeles, California, All Items," published by the U.S.
Department of Labor (using January 1, 1994 as the base date for comparison).
Any increase in Base Salary or other compensation shall in no way limit or
reduce any other obligations of Corporation hereunder and, once established
at an increased specified rate, Officer's Base Salary shall not be reduced
unless Officer otherwise agrees in writing.
3.3 BONUS. During the Term of this Agreement Officer is eligible
for the following bonus:
(a) MINIMUM BONUS. Officer shall be eligible to receive a
bonus for each fiscal year of Corporation (or portion thereof) during the
Term of this Agreement, with the actual amount of any such bonus to be
determined in the sole discretion of the Board (or a committee of the Board)
based upon its evaluation of Officer's performance during such year and such
other factors and conditions as the Board (or a committee of the Board) deems
relevant. Any such bonus shall be payable within seventy-five (75) days
after the end of Corporation's fiscal year to which such bonus relates. The
Board shall, at an appropriate subsequent time, consider the establishment of
an annual incentive compensation plan providing for the payment of a minimum
annual bonus based upon the achievement of certain objective criteria for the
benefit of Officer and other specified executive officers of Corporation.
(b) DETERMINATION OF BONUS. With respect to the period
commencing upon consummation of an initial public offering (the "IPO") of the
Corporation's common stock, par value $.01 per share (the "Common Stock"),
and ending on December 31, 1997, and with respect to each calendar year
thereafter during the Term, the bonus payable pursuant to Subparagraph (a),
if any, shall be based upon such factors as the Board (or a committee
thereof) deems appropriate, which may include the enhancement of stockholder
value based upon Funds From Operations (as defined in the White Paper on
Funds From Operations approved by the Board of Governors of the National
Association of Real Estate Investment Trusts in March 1995) as determined in
good faith by the
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Board during such period, divided by the weighted average
number of shares of Common Stock outstanding during such period.
3.4 ADDITIONAL BENEFITS. During the Term of this Agreement,
Officer shall be entitled to the following additional benefits:
(a) OFFICER BENEFITS. Officer shall be eligible to
participate in such of Corporation's benefit and deferred compensation plans
as are made available to executive officers of Corporation, including,
without limitation, Corporation's stock incentive plans, annual incentive
compensation plans, profit sharing/pension plans, deferred compensation
plans, annual physical examinations, dental, vision, sick pay, and medical
plans, personal catastrophe and accidental death insurance plans, financial
planning and automobile arrangements, retirement plans and supplementary
executive retirement plans, if any. For purposes of establishing the length
of service under any benefit plans or programs of Corporation, Officer's
employment with the Corporation will be deemed to have commenced on the
Original Effective Date of this Agreement. Until Corporation adopts a package
of health and medical benefits, Corporation shall promptly reimburse Officer
for payments made by Officer (i) with respect to the continuation of benefits
provided by Officer's previous employer pursuant to Section 4980B ("COBRA")
of the Internal Revenue Code of 1986, as amended (the "Code"), and (ii) upon
expiration of COBRA coverage to maintain substantially similar health and
medical benefits coverage for Officer and his family.
(b) VACATION. Officer shall be entitled to a minimum of five
(5) weeks of vacation during each year during the Term of this Agreement and
any extensions thereof, prorated for partial years. Any accrued vacation not
taken during any year may be carried forward to subsequent years; PROVIDED,
that Officer may not accrue more than eight (8) weeks of unused vacation at
any time.
(c) LIFE INSURANCE. During Term of this Agreement,
Corporation shall, at its sole cost and expense, procure and keep in effect
term life insurance (a minimum three (3) year term certain policy) on the
life of Officer, payable to such beneficiaries as Officer may from time to
time designate, in the aggregate amount of One Million Dollars ($1,000,000).
Such policy shall be owned by Officer or by a member of his immediate family.
Corporation shall have no incidents of ownership therein.
(d) DISABILITY INSURANCE. During the Term of this Agreement,
Corporation shall, at its sole cost and expense, procure and keep in effect
disability insurance similar to Officer's current disability insurance policy
on Officer, payable to
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Officer in an annual amount not less than sixty percent (60%) of Officer's
then existing Base Salary (the "Disability Policy"). For purposes of this
Agreement, "Permanent Disability" shall have the same meaning as is ascribed
to such term in the Disability Policy (including the COBRA Disability Policy)
covering Officer at the time of occurrence of such Permanent Disability.
(e) REIMBURSEMENT FOR EXPENSES. During the Term of this
Agreement, Corporation shall reimburse Officer for all reasonable
out-of-pocket business and/or entertainment expenses incurred by Officer for
the purpose of and in connection with the performance of his services
pursuant to this Agreement. Officer shall be entitled to such reimbursement
upon the presentation by Officer to Corporation of vouchers or other
statements itemizing such expenses in reasonable detail consistent with
Corporation's policies. In addition, Officer shall be entitled to
reimbursement for (i) dues and membership fees in professional organizations
and/or industry associations in which Officer is currently a member or
becomes a member, and (ii) appropriate industry seminars and mandatory
continuing education.
(f) WITHHOLDING. Compensation and benefits paid to Officer
under this Agreement shall be subject to applicable federal, state and local
wage deductions and other deductions required by law.
(g) SIGNING BONUS. Upon the Effective Date of this Agreement,
Corporation shall pay Officer a lump sum cash signing bonus equal to Fifteen
Thousand Dollars ($15,000).
4. TERMINATION OF THIS AGREEMENT.
4.1 TERMINATION BY CORPORATION DEFINED.
(a) TERMINATION WITHOUT CAUSE. Subject to the provisions set
forth in Paragraph 4.3 below, "Termination Without Cause" shall constitute
any termination by Corporation other than termination for Cause (as defined
in Paragraph 4.1(b) below).
(b) TERMINATION FOR CAUSE. Subject to the provisions set
forth in Paragraph 4.3 below, prior to the Termination Date, Corporation
shall have the right to terminate this Agreement for Cause immediately after
written notice has been delivered to Officer, which notice shall specify the
reason for and the effective date of such Termination (which date shall be
the applicable Early Termination Date). For purposes of this Agreement,
"Cause" shall mean the following:
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(i) Officer's use of alcohol or narcotics which
proximately results in the willful material breach or habitual willful
neglect of Officer's duties under this Agreement;
(ii) Officer's criminal conviction of fraud,
embezzlement, misappropriation of assets, malicious mischief, or any
felony;
(iii) Officer's willful Material Breach (as defined
below) of this Agreement, if such willful Material Breach is not cured
by Officer within thirty (30) days after Corporation's written notice
thereof specifying the nature of such willful Material Breach. For
purposes of this Paragraph 4.1(b), the term willful "Material Breach"
shall mean the substantial and continual willful nonperformance of
Officer's duties under this Agreement which the Board determines has
resulted in material injury to Corporation.
(c) TERMINATION BY REASON OF DEATH OR DISABILITY. Subject to
the provisions set forth in Paragraph 4.3 below, prior to the Termination
Date, Corporation shall have the right to terminate this Agreement by reason
of Officer's death or Permanent Disability.
4.2 TERMINATION BY OFFICER DEFINED.
(a) TERMINATION OTHER THAN FOR GOOD REASON. Subject to the
provisions set forth in Paragraph 4.3 below, Officer shall have the right to
terminate this Agreement for any reason other than for Good Reason (as
defined in Paragraph 4.2(b) below), at any time prior to the Termination
Date, upon written notice delivered to Corporation thirty (30) days prior to
the effective date of termination specified in such notice (which date shall
be the applicable Early Termination Date).
(b) TERMINATION FOR GOOD REASON. Subject to the provisions of
Paragraph 4.3 below, Officer shall have the right to terminate this Agreement
prior to the Termination Date in the event of the material breach of this
Agreement by Corporation, if such breach is not cured by Corporation within
thirty (30) days after written notice thereof specifying the nature of such
breach has been delivered to Corporation, or, following a Change in Control
(as defined in Paragraph 4.4(e) below), under the circumstances set forth in
Paragraph 4.2(c) below. For purposes of this Agreement, termination of this
Agreement by Officer in the event of Corporation's material breach of this
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Agreement in accordance with the provisions of this Paragraph 4.2(b) shall be
defined as termination by Officer for "Good Reason."
(c) GOOD REASON FOLLOWING A CHANGE IN CONTROL. Following a
Change in Control (as defined in Paragraph 4.4(e) below), "Good Reason" shall
mean, without Officer's express written consent, a material breach of this
Agreement by Corporation, including the occurrence of any of the following
circumstances, which breach is not fully corrected within thirty (30) days
after written notice thereof specifying the nature of such breach has been
delivered to Corporation:
(i) the assignment to Officer of any duties
inconsistent with the position in Corporation that Officer held
immediately prior to the Change in Control, or an adverse alteration in
the nature or status of Officer's responsibilities from those in effect
immediately prior to such change;
(ii) a substantial change in the nature of the business
operations of Corporation;
(iii) a reduction by Corporation in Officer's annual
base salary as in effect on the date hereof or as the same may be
increased from time to time;
(iv) the relocation of Corporation's principal
executive offices to a location outside the Los Angeles metropolitan
area (or, if different, the metropolitan area in which such offices are
located immediately prior to the Change in Control), or Corporation's
requiring Officer to be based anywhere other than the Corporation's
principal executive offices except for required travel on Corporation's
business to an extent substantially consistent with Officer's business
travel obligations immediately prior to the Change in Control;
(v) the failure by Corporation to pay Officer any
portion of his current compensation except pursuant to an
across-the-board compensation deferral similarly affecting all officers
of Corporation and all officers of any person whose actions resulted in
a Change in Control or any person affiliated with Corporation or such
person, or to pay Officer any portion of an installment of deferred
compensation under any deferred
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compensation program of Corporation, within seven (7) days of the date
such compensation is due;
(vi) the failure by Corporation to continue in effect
any compensation plan in which Officer participates immediately prior to
the Change in Control which is material to Officer's total compensation,
unless an equitable arrangement (embodied in an ongoing substitute or
alternative plan) has been made with respect to such plan, or the
failure by Corporation to continue Officer's participation therein (or
in such substitute or alternative plan) on a basis not materially less
favorable, both in terms of the amount of benefits provided and the
level of participation relative to other participants, as existed at the
time of the Change in Control;
(vii) the failure by Corporation to continue to provide
Officer with benefits substantially similar to those under any of
Corporation's life insurance, medical, health and accident, or
disability plans in which Officer was participating at the time of the
Change in Control, the taking of any action by Corporation which would
directly or indirectly materially reduce any of such benefits or deprive
Officer of any material fringe benefit enjoyed by him at the time of the
Change in Control, or the failure by Corporation to provide Officer with
the number of paid vacation days to which he is entitled on the basis of
years of service with Corporation in accordance with Corporation's
normal vacation policy in effect at the time of the Change in Control; or
(viii) the failure of Corporation to obtain a
satisfactory agreement from any successor to assume and agree to perform
this Agreement.
Officer's right to terminate Officer's employment for Good Reason
shall not be affected by Officer's incapacity due to physical or mental
illness. Officer's continued employment shall not constitute consent to, or a
waiver of rights with respect to, any circumstance constituting Good Reason
hereunder.
4.3 EFFECT OF TERMINATION. In the event that this Agreement is
terminated by Corporation or Officer prior to the Termination Date in
accordance with the provisions of this Paragraph 4, the obligations and
covenants of the parties under this Paragraph 4 shall be of no further force
and effect, except for the obligations of the parties set forth below in this
Paragraph 4.3, and such other provisions of this Agreement which
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shall survive termination of this Agreement as provided in Paragraph 6.11
below. Except as otherwise specifically set forth, all amounts due upon
termination shall be payable on the date such amounts would otherwise have
been paid had the Agreement continued through its Term; PROVIDED, HOWEVER,
that Deferred Amounts (as defined in Paragraph 4.3(a)(i) below) shall be
payable within thirty (30) days following the Early Termination Date. In the
event of any such early termination in accordance with the provisions of this
Paragraph 4.3, Officer shall be entitled to the following:
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(a) TERMINATION BY CORPORATION.
(i) TERMINATION WITHOUT CAUSE, DEATH OR PERMANENT
DISABILITY. In the event that Corporation terminates this Agreement
without Cause pursuant to Paragraph 4.1(a) above or by reason of death
or Permanent Disability pursuant to Paragraph 4.1(c) above, Officer
shall be entitled to (i) Earned Base Salary; (ii) earned benefits and
reimbursable expenses; (iii) any earned bonus which Officer has been
awarded pursuant to the terms of this Agreement Or any other plan or
arrangement as of the Early Termination Date, but which has not been
received by Officer as of such date; (iv) any compensation earned but
deferred ("Deferred Amounts"); and (v) the Severance Payment (as defined
in Paragraph 4.4 below).
(ii) TERMINATION FOR CAUSE. In the event that
Corporation terminates this Agreement for Cause pursuant to Paragraph
4.1(b) above, Officer shall be entitled to (i) Earned Base Salary; (ii)
any earned bonus which officer has been awarded pursuant to the terms of
this Agreement or any other plan or arrangement as of the Early
Termination Date, but which has not been received by Officer as of such
date; (iii) earned benefits and reimbursable expenses; and (iv) any
Deferred Amounts. Officer shall not be entitled to any future annual
bonus or Severance Payment.
(b) TERMINATION BY OFFICER.
(i) TERMINATION OTHER THAN FOR GOOD REASON. In the
event that Officer terminates this Agreement other than for Good Reason,
Officer shall be entitled to (i) Earned Base Salary; (ii) any earned
bonus which Officer has been awarded pursuant to the terms of this
Agreement or any other plan or arrangement as of the Early Termination
Date, but which has not been received by Officer as of such date; (iii)
earned benefits and reimbursable expenses; and (iv) any Deferred
Amounts. Officer shall not be entitled to any future annual bonus or
Severance Payment.
(ii) TERMINATION FOR GOOD REASON. In the event that
Officer terminates this Agreement for Good Reason, Officer shall be
entitled to (i) Earned Base Salary; (ii) earned benefits and
reimbursable
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expenses; (iii) any earned bonus which Officer has been awarded pursuant
to the terms of this Agreement or any other plan or arrangement as of
the Early Termination Date, but which has not been received by Officer
as of such date; (iv) any Deferred Amounts; and (v) the Severance
Payment (as defined in Paragraph 4.4 below).
4.4 SEVERANCE PAYMENT.
(a) DEFINITION OF "SEVERANCE PAYMENT." For purposes of this
Agreement, the term "Severance Payment" shall mean an amount equal to the sum
of (i) the Base Salary otherwise payable to Officer during the remainder of
the Term had such early termination of this Agreement not occurred
("Severance Period") and (ii) for each full year remaining in the Severance
Period, the average of the annual bonuses earned by Officer in the two (2)
years immediately preceding the date of termination (or if there are less
than two (2) years immediately preceding such date, an amount equal to the
immediately preceding bonus earned) ("Average Bonus"), but in no event shall
Average Bonus be less than 50% of such Base Salary; PROVIDED, HOWEVER, that
in the event that, following a Change in Control (as defined in Paragraph
4.4(e) below), Officer terminates this Agreement for Good Reason pursuant to
Paragraph 4.2(b) above, the term "Severance Payment" shall mean three (3)
times the sum of the Base Salary then in effect and the average bonus;
FURTHER, PROVIDED, HOWEVER, that in the event that (i) Officer's employment
is terminated in connection with or following the Board's good faith
determination that the possible long-run loss of Corporation may reasonably
be expected to increase unreasonably if Corporation is not dissolved and (ii)
such dissolution is effected in accordance with applicable law, the term
"Severance Payment" shall mean the sum of the Base Salary then in effect and
the Average Bonus, and the term "Severance Period" shall mean the one-year
period immediately following Officer's date of termination of employment.
(b) PAYMENT OF SEVERANCE PAYMENT. In the event that Officer
is entitled to any Severance Payment pursuant to Paragraph 4.3 above, that
portion of such Severance Payment that represents Base Salary shall be
payable in monthly installments, and that portion of such Severance Payment
that represents the Average Bonus shall be payable on the dates such amounts
would have been paid had Officer continued in Corporation's employment for
the Severance Period; PROVIDED, HOWEVER, that in the event of a Termination
upon a Change in Control (as defined in Paragraph 4.4(e) below), the
Severance Payment shall be payable in a lump sum within ten (10) days
following such termination.
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(c) OTHER SEVERANCE BENEFITS. In the event that Officer is entitled
to any Severance Payment pursuant to Paragraph 4.3 above, he shall also be
entitled to full and immediate vesting of any awards granted to Officer under
Corporation's stock option or incentive compensation plans, and continued
participation throughout the Severance Period in all employee welfare and
pension benefit plans, programs or arrangements. In the event Officer's
participation in any such plan, program or arrangement is barred, Corporation
shall arrange to provide Officer with substantially similar benefits.
(d) FULL SETTLEMENT OF ALL OBLIGATIONS. Officer hereby acknowledges
and agrees that any Severance Payment paid to Officer hereunder shall be
deemed to be in full and complete settlement of all obligations of
Corporation under this Agreement.
(e) CHANGE IN CONTROL. For purposes of this Agreement, "Termination
Upon a Change in Control" shall mean a termination of Officer's employment
with Corporation following a "Change in Control" by Officer for Good Reason
or by Corporation other than for Cause. A "Change in Control" shall be
deemed to have occurred if, following Corporation's underwritten initial
public offering:
(i) Any person, as such term is used in section 3(a)(9)
of the Securities Exchange Act of 1934 as amended from time to time (the
"Exchange Act"), as modified and used in sections 13(d) and 14(d) thereof,
except that such term shall not include (A) the Corporation or any of its
subsidiaries, (B) a trustee or other fiduciary holding securities under an
employee benefit plan of the Corporation or any of its affiliates, (C) an
underwriter temporarily holding securities pursuant to an offering of such
securities, (D) a corporation owned, directly or indirectly, by the
stockholders of the Corporation in substantially the same proportions as
their ownership of stock of the Corporation, or (E) a person or group as used
in Rule 13d-1(b) under the Exchange Act, that is or becomes the Beneficial
Owner, as such term is defined in Rule 13d-3 under the Exchange Act, directly
or indirectly, of securities of the Corporation (not including in the
securities beneficially owned by such Person any securities acquired directly
from the Corporation or its affiliates other than in connection with the
acquisition by the Corporation or its affiliates of a business) representing
twenty-five percent (25%) or more of the combined voting power of the
Corporation's then outstanding securities; or
(ii) The following individuals cease for any reason to
constitute a majority of the number of directors then serving: individuals
who, on the date hereof, constitute the Board and any new director (other
than a director whose initial assumption of office is in connection with an
actual or threatened election contest, including but not limited to a consent
solicitation, relating to the election of directors of the Corpo-
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ration) whose appointment or election by the Board or nomination for election
by the Corporation's stockholders was approved or recommended by a vote of at
least two-thirds (2/3) of the directors then still in office who either were
directors on the date hereof or whose appointment, election or nomination for
election was previously so approved or recommended; or
(iii) There is consummated a merger or consolidation of
the Corporation with any other corporation, other than (A) a merger or
consolidation which would result in the voting securities of the Corporation
outstanding immediately prior to such merger or consolidation continuing to
represent (either by remaining outstanding or by being converted into voting
securities of the surviving entity or any parent thereof), in combination
with the ownership of any trustee or other fiduciary holding securities under
an employee benefit plan of the Corporation or any subsidiary of the
Corporation, at least seventy-five percent (75%) of the combined voting power
of the securities of the Corporation or such surviving entity or any parent
thereof outstanding immediately after such merger or consolidation, or (B) a
merger or consolidation effected to implement a recapitalization of the
Corporation (or similar transaction) in which no Person is or becomes the
Beneficial Owner, directly or indirectly, of securities of the Corporation
(not including in the securities beneficially owned by such Person any
securities acquired directly from the Corporation or its affiliates other
than in connection with the acquisition by the Corporation or its affiliates
of a business) representing twenty-five percent (25%) or more of the combined
voting power of the Corporation's then outstanding securities; or
(iv) The stockholders of the Corporation approve a plan
of complete liquidation or dissolution of the Corporation or there is
consummated an agreement for the sale or disposition by the Corporation of
all or substantially all of the Corporation's assets, other than a sale or
disposition by the Corporation of all or substantially all of the
Corporation's assets to an entity, at least seventy-five (75%) of the
combined voting power of the voting securities of which are owned by
stockholders of the Corporation in substantially the same proportions as
their ownership of the Corporation immediately prior to such sale.
4.5 GROSS-UP. If any of the Total Payments (as hereinafter defined)
will be subject to the tax (the "Excise Tax") imposed by Section 4999 of the
Code, Corporation shall pay to Officer, no later than the tenth (10th) day
following the Early Termination date, an additional amount (the "Gross-Up
Payment") such that the net amount retained by him, after deduction of any
Excise Tax on the Total Payments and any federal and state and local income
tax upon the payment provided for by this Paragraph, shall be
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equal to the excess of the Total Payments over the payment provided for by
this Paragraph. For purposes of determining whether any of the Total
Payments will be subject to the Excise Tax and the amount of such Excise Tax,
(i) all payments or benefits received or to be received by Officer in
connection with a Change in Control or the termination of Officer's
employment (whether payable pursuant to the terms of this Agreement or of any
other plan, arrangement or agreement with Corporation, its successors, any
person whose actions result in a Change in Control or any person affiliated
(or which, as a result of the completion of the transactions causing a Change
in Control, will become affiliated) with Corporation or such person within
the meaning of Section 1504 of the Code (the "Total Payments")) Shall be
treated as "parachute payments" (within the meaning of Section 280G(b)(2) of
the Code) unless, in the opinion of tax counsel selected by Corporation's
independent auditors and reasonably acceptable to Officer, such payments or
benefits (in whole or in part) do not constitute parachute payments,
including by reason of Section 280G(b)(4)(A) of the Code, and all "excess
parachute payments" (within the meaning of Section 280G(b)(1) of the Code)
shall be treated as subject to the Excise Tax, unless in the opinion of such
tax counsel such excess parachute payments represent reasonable compensation
for services actually rendered within the meaning of Section 280G(b)(4)(B) of
the Code, or are not otherwise subject to the Excise Tax, and (ii) the value
of any noncash benefits or any deferred payment or benefit shall be
determined by the Corporation's independent auditors in accordance with the
principles of Sections 280G(d)(3) and (4) of the Code. For purposes of
determining the amount of the Gross-Up Payment, Officer shall be deemed to
pay federal income taxes at the highest marginal rate of federal income
taxation in the calendar year in which the Gross-Up Payment is to be made and
state and local income taxes at the highest marginal rate of taxation in the
state and locality of the residence of Officer on the Early Termination Date,
net of the maximum reduction in federal income taxes that could be obtained
from deduction of such state and local taxes.
4.6 OFFSET. Although Officer shall not be required to mitigate damages
under this Agreement by seeking other comparable employment or otherwise, the
amount of any payment or benefit provided for in this Agreement, including
without limitation welfare benefits, shall be reduced by any compensation
earned by or provided to Officer as the result of employment by an employer
other than Corporation prior to the expiration of the term of this Agreement;
PROVIDED, HOWEVER, that this Paragraph 4.6 shall not apply in the event of a
Termination upon a Change in Control.
5. NONCOMPETITION.
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During the Term of this Agreement, including the period, if any, with
respect to which Officer shall be entitled to Severance Payments, Officer shall
not engage in any activity competitive with the business of Corporation.
6. MISCELLANEOUS.
6.1 PAYMENT OBLIGATIONS. Corporation's obligation to pay Officer the
compensation and to make the arrangements provided herein shall be
unconditional, and Officer shall have no obligation whatsoever to mitigate
damages hereunder. If arbitration after a Change in Control shall be brought
to enforce or interpret any provision contained herein, Corporation shall, to
the extent permitted by applicable law and Corporation's Articles of
Incorporation and By-Laws, indemnify Officer for Officer's attorneys' fees
and disbursements incurred in such arbitration.
6.2 CONFIDENTIALITY. Officer agrees that all confidential and
proprietary information relating to the business of Corporation shall be kept
and treated as confidential both during and after the Term of this Agreement,
except as may be permitted in writing by the Board or as such information is
within the public domain or comes within the public domain without any breach
of this Agreement.
6.3 WAIVER. The waiver of the breach of any provision of this
Agreement shall not operate or be construed as a waiver of any subsequent
breach of the same or other provision hereof.
6.4 ENTIRE AGREEMENT; MODIFICATIONS. Except as otherwise provided
herein, this Agreement (together with the agreements and plans referred to
herein) represents the entire understanding among the parties with respect to
the subject matter hereof, and this Agreement supersedes any and all prior
understandings, agreements, plans and negotiations, whether written or oral,
with respect to the subject matter hereof, including without limitation any
understandings, agreements or obligations respecting any past or future
compensation, bonuses, reimbursements or other payments to Officer from
Corporation. All modifications to the Agreement must be in writing and
signed by the party against whom enforcement of such modification is sought.
6.5 NOTICES. All notices and other communications under this Agreement
shall be in writing and shall be given by facsimile or first class mail,
certified or registered with return receipt requested, and shall be deemed to
have been duly given three (3) DAYS AFTER MAILING OR TWENTY-FOUR (24) HOURS
AFTER TRANSMISSION OF A FACSIMILE TO THE RESPECTIVE PERSONS NAMED BELOW:
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If to CORPORATION: Alexandria Real Estate Equities, Inc.
251 South Lake Avenue
Pasadena, California 91101
Phone: (818) 578-6812
Facsimile: (818) 578-6966
If to Officer: Joel S. Marcus
3153 Abington Drive
Beverly Hills, California 90210
Phone: (310) 274-8383
Any Party may change such Party's address for notices by notice duly given
pursuant hereto.
6.6 HEADINGS. The Paragraph headings herein are intended for reference
only and shall not by themselves determine the construction or interpretation
of this Agreement.
6.7 GOVERNING LAW. Other than with respect to Paragraph 6.13 below,
this Agreement shall be governed by and construed in accordance with the laws
of the State of California without regard to its principles of conflict of
laws.
6.8 ARBITRATION. Any dispute arising out of or relating to this
Agreement that cannot be settled by good faith negotiation between the
parties shall be submitted to ENDISPUTE for final and binding arbitration
pursuant to ENDISPUTE's Arbitration Rules incorporated herein by reference,
which arbitration shall be the exclusive remedy of the parties hereto. The
resulting arbitration shall be deemed a final order of a court having
jurisdiction over the subject matter, shall not be appealable, and shall be
enforceable in any court of competent jurisdiction. Submission to
arbitration, as provided in Exhibit A, shall not preclude the right of any
party hereto involved in a dispute regarding this Agreement (each, a
"Disputing Party" and collectively, the "Disputing Parties") to institute
proceedings at law or in equity for injunctive or other relief pending the
arbitration of a matter subject to arbitration pursuant to this Agreement.
Any documentation and information submitted by any party in the arbitration
proceeding shall be kept strictly confidential by the parties and the
arbitrator.
In addition to any other relief or award granted by the arbitrator to
either Disputing Party, the arbitrator shall determine the extent to which each
Disputing Party has prevailed as to the material issues raised in the
arbitration, and, based upon such
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determination, shall apportion to each Disputing Party its ratable
share of (i) the Disputing Parties' reasonable attorneys' fees and other
costs reasonably incurred in the arbitration, (ii) the expense of the
arbitrator, and (iii) all other expenses of the arbitration; PROVIDED,
HOWEVER, that any dispute following a Change in Control shall be governed by
the provisions of Paragraph 6.1 above. The arbitrator shall make such
determination and apportionment whether or not the dispute proceeds to a
final award.
6.9 SEVERABILITY. Should a court or other body of competent
jurisdiction determine that any provision of this Agreement is excessive in
scope or otherwise invalid or unenforceable, such provision shall be adjusted
rather than voided, if possible, all other provisions of this Agreement shall
be deemed valid and enforceable to the extent possible.
6.10 SURVIVAL OF CORPORATION'S OBLIGATIONS. Corporation's obligations
hereunder shall not be terminated by reason of any liquidation, dissolution,
bankruptcy, cessation of business, or similar event relating to Corporation.
This Agreement shall not be terminated by any merger or consolidation or
other reorganization of Corporation. In the event any such merger,
consolidation or reorganization shall be accomplished by transfer of stock or
by transfer of assets or otherwise, the provisions of this Agreement shall be
binding upon and inure to the benefit of the surviving or resulting
corporation or person. This Agreement shall be binding upon and inure to the
benefit of the executors, administrators, heirs, successors and assigns of
the parties; PROVIDED, HOWEVER, that except as herein expressly provided,
this Agreement shall not be assignable either by Corporation (except to an
affiliate of the Corporation, in which event Corporation shall remain liable
if the affiliate fails to meet any obligations to make payments or provide
benefits or otherwise) or by Officer.
6.11 SURVIVAL OF CERTAIN RIGHTS AND OBLIGATIONS. The rights and
obligations of the parties hereto pursuant to Paragraphs 4.3, 4.4, 4.5, 4.6,
5 and 6.1, 6.2, 6.10, 6.11 and 6.13 hereof shall survive the termination of
this Agreement.
6.12 COUNTERPARTS. This Agreement may be executed in one or more
counterparts, all of which taken together shall constitute one and the same
Agreement.
6.13 INDEMNIFICATION. In addition to any rights to indemnification to
which Officer is entitled under the Corporation's Articles of Incorporation
and By-Laws, Corporation shall indemnify Officer at all times during and
after the Term of this Agreement to the maximum extent permitted under
Section 2-418 of the General Corporation Law of the State of Maryland or any
successor provision thereof and any other
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applicable state law, and shall pay Officer's expenses in defending any civil
or criminal action, suit, or proceeding in advance of the final disposition
of such action, suit, or proceeding, to the maximum extent permitted under
such applicable state laws.
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IN WITNESS WHEREOF, the parties hereto have executed this Agreement.
CORPORATION:
ALEXANDRIA REAL ESTATE EQUITIES, INC.,
a Maryland corporation
By: /s/ JERRY M. SUDARSKY
---------------------------
Jerry M. Sudarsky
Date:
-------------------------
OFFICER:
/s/ JOEL S. MARCUS
--------------------------------
Joel S. Marcus
Date:
--------------------------
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- -------------------------------------------------------------------------------
AMENDED AND RESTATED EXECUTIVE EMPLOYMENT AGREEMENT
by and between
ALEXANDRIA REAL ESTATE EQUITIES, INC.,
a Maryland corporation,
and
ALAN D. GOLD,
an individual
- -------------------------------------------------------------------------------
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
1. POSITION AND DUTIES; LOCATION . . . . . . . . . . . . . . . . . . . . . . . . 1
2. TERM OF EMPLOYMENT. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
3. COMPENSATION, BENEFITS AND REIMBURSEMENT. . . . . . . . . . . . . . . . . . . 2
3.1 BASE SALARY . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
(a) MINIMUM BASE . . . . . . . . . . . . . . . . . . . . . . . . 2
(b) EARNED BASE SALARY . . . . . . . . . . . . . . . . . . . . . 2
3.2 INCREASES IN BASE SALARY. . . . . . . . . . . . . . . . . . . . . . 2
3.3 BONUS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
(a) MINIMUM BONUS. . . . . . . . . . . . . . . . . . . . . . . . 3
(b) DETERMINATION OF BONUS . . . . . . . . . . . . . . . . . . . 3
3.4 ADDITIONAL BENEFITS . . . . . . . . . . . . . . . . . . . . . . . . 4
(a) OFFICER BENEFITS . . . . . . . . . . . . . . . . . . . . . . 4
(b) VACATION . . . . . . . . . . . . . . . . . . . . . . . . . . 4
(c) LIFE INSURANCE . . . . . . . . . . . . . . . . . . . . . . . 4
(d) DISABILITY INSURANCE . . . . . . . . . . . . . . . . . . . . 4
(e) REIMBURSEMENT FOR EXPENSES . . . . . . . . . . . . . . . . . 5
(f) WITHHOLDING. . . . . . . . . . . . . . . . . . . . . . . . . 5
4. TERMINATION OF THE AGREEMENT. . . . . . . . . . . . . . . . . . . . . . . . . 5
4.1 TERMINATION BY CORPORATION DEFINED. . . . . . . . . . . . . . . . . 5
(a) TERMINATION WITHOUT CAUSE. . . . . . . . . . . . . . . . . . 5
(b) TERMINATION FOR CAUSE. . . . . . . . . . . . . . . . . . . . 5
(c) TERMINATION BY REASON OF DEATH OR DISABILITY . . . . . . . . 6
4.2 TERMINATION BY OFFICER DEFINED. . . . . . . . . . . . . . . . . . . 6
(a) TERMINATION OTHER THAN FOR GOOD REASON . . . . . . . . . . . 6
(b) TERMINATION FOR GOOD REASON. . . . . . . . . . . . . . . . . 6
(c) GOOD REASON FOLLOWING A CHANGE IN CONTROL. . . . . . . . . . 7
4.3 EFFECT OF TERMINATION . . . . . . . . . . . . . . . . . . . . . . . 8
(a) TERMINATION BY CORPORATION . . . . . . . . . . . . . . . . . 9
(i) TERMINATION WITHOUT CAUSE. . . . . . . . . . . . . . 9
(ii) TERMINATION FOR CAUSE, DEATH OR
PERMANENT DISABILITY . . . . . . . . . . . . . . . . 9
(b) TERMINATION BY OFFICER . . . . . . . . . . . . . . . . . . . 9
(i) TERMINATION OTHER THAN FOR GOOD REASON . . . . . . . 9
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(ii) TERMINATION FOR GOOD REASON . . . . . . . . . . . . 10
4.4 SEVERANCE PAYMENT . . . . . . . . . . . . . . . . . . . . . . . . . 10
(a) DEFINITION OF "SEVERANCE PAYMENT." . . . . . . . . . . . . . 10
(b) PAYMENT OF SEVERANCE PAYMENT . . . . . . . . . . . . . . . . 10
(c) OTHER SEVERANCE BENEFITS . . . . . . . . . . . . . . . . . . 11
(d) FULL SETTLEMENT OF ALL OBLIGATIONS . . . . . . . . . . . . . 11
(e) CHANGE IN CONTROL. . . . . . . . . . . . . . . . . . . . . . 11
4.5 GROSS-UP. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
4.6 OFFSET. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
5. NONCOMPETITION. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
6. MISCELLANEOUS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
6.1 PAYMENT OBLIGATIONS . . . . . . . . . . . . . . . . . . . . . . . . 14
6.2 CONFIDENTIALITY . . . . . . . . . . . . . . . . . . . . . . . . . . 14
6.3 WAIVER. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
6.4 ENTIRE AGREEMENT; MODIFICATIONS . . . . . . . . . . . . . . . . . . 14
6.5 NOTICES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
6.6 HEADINGS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
6.7 ARBITRATION . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
6.8 SEVERABILITY. . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
6.9 SURVIVAL OF CORPORATION'S OBLIGATIONS . . . . . . . . . . . . . . . 16
6.10 SURVIVAL OF CERTAIN RIGHTS AND OBLIGATIONS . . . . . . . . . . . . 16
6.11 COUNTERPARTS . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
6.12 INDEMNIFICATION. . . . . . . . . . . . . . . . . . . . . . . . . . 17
</TABLE>
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<PAGE>
AMENDED AND RESTATED
EXECUTIVE EMPLOYMENT AGREEMENT
THIS AMENDED AND RESTATED EXECUTIVE EMPLOYMENT AGREEMENT (this
"Agreement") originally made and entered into as of the fifth (5th) day of
January, 1994, (the "Original Effective Date"), by and between Health Science
Properties Holding Corp., a Maryland corporation (the "Parent") and Alan D.
Gold, an individual (the "Officer") is hereby amended and restated in its
entirety effective March 28, 1997 (the "Effective Date") to read as follows:
RECITAL
WHEREAS, on November 3, 1994 Parent transferred to its then
wholly-owned subsidiary Alexandria Real Estate Equities, Inc., a Maryland
corporation (formerly, Health Science Properties, Inc.) (the "Corporation")
substantially all of its property, assets and certain liabilities, including
Parent's rights and obligations under this Agreement;
WHEREAS, on July 30, 1996, this Agreement was amended pursuant to
an agreement between the Corporation and Officer;
WHEREAS, Corporation desires to continue to employ Officer as its
President and Treasurer, and Officer is willing to continue to accept such
employment by Corporation, on the terms and subject to the conditions set
forth in this Agreement.
NOW, THEREFORE, in consideration of the mutual covenants contained
herein and other good and valuable consideration, the receipt and sufficiency
of which is hereby acknowledged, the parties hereto agree to amend and
restate this Agreement as follows:
1. POSITION AND DUTIES; LOCATION.
During the Term (as defined in Paragraph 2 below) of this Agreement
Officer agrees to be employed by and to serve Corporation as its President
and Treasurer or in such other capacity consistent with the Officer's current
position as senior executive officer as may be determined by the Board of
Directors of the Corporation (the "Board"). Corporation agrees to employ and
retain officer in such
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capacities. Officer shall devote such of his business time, energy, and
skill to the affairs of Corporation as shall be necessary to perform the
duties of such positions. Officer shall report to the Chief Operating
Officer or such other officer as the Board shall direct, and at all times
during the Term (as defined in Paragraph 2 below) of this Agreement shall
have powers and duties at least commensurate with his position as a senior
executive officer. Officer shall be based at the offices of Corporation in
the San Diego, California metropolitan area, except for required travel on
Corporation's business.
2. TERM OF EMPLOYMENT.
The term (the "Term") of this Agreement shall be for a period
commencing on January 1, 1997 and ending on December 31, 1998 (the
"Termination Date"), unless terminated earlier pursuant to this Agreement
(the "Early Termination Date"). Commencing on December 31, 1998 and on each
subsequent anniversary thereof, the Term shall be automatically extended for
one (1) additional year unless, no later than six (6) months before such
date, either party shall have given written notice to the other that it does
not wish to extend the Term of this Agreement. References herein to the Term
of this Agreement shall refer to both the initial Term and any such extended
Term.
3. COMPENSATION, BENEFITS AND REIMBURSEMENT.
3.1 BASE SALARY. During the Term of this Agreement, Officer shall
be entitled to the following base salary:
(a) MINIMUM BASE. During the Term of this Agreement and
subject to the terms and conditions set forth herein, Corporation agrees to
pay to Officer an annual "Base Salary" of One Hundred Ninety Thousand Dollars
($190,000), or such other higher amount as may from time to time be
determined by Corporation. Unless otherwise agreed in writing by Officer and
Corporation, and subject to Subparagraph (b) below, the salary shall be
payable in substantially equal semimonthly installments in accordance with
the standard policies of Corporation in existence from time to time.
(b) EARNED BASE SALARY. For purposes of any early
termination of this Agreement as provided in Paragraph 4 below, the term
"Earned Base Salary" shall mean all semimonthly installments of the Base
Salary which have become due and payable to Officer pursuant to this
Paragraph 3.1, together with any
2
<PAGE>
partial monthly installment prorated on a daily basis up to and including the
applicable Termination Date.
3.2 INCREASES IN BASE SALARY. Officer's Base Salary shall be
reviewed no less frequently than on each anniversary of the Original
Effective Date during the Term by the Board (or such committee as may be
appointed by the Board for such purpose). The Base Salary payable to Officer
shall be increased on each such anniversary date (and such other times as the
Board or a committee of the Board may deem appropriate during the Term of
this Agreement) to an amount determined by the Board (or a committee of the
Board). Each such new Base Salary shall become the base for each successive
year increase; PROVIDED, HOWEVER, that such increase, at a minimum, shall be
equal to the cumulative cost-of-living increment as reported in the "Consumer
Price Index, Los Angeles, California, All Items," published by the U.S.
Department of Labor (using January 1, 1994 as the base date for comparison).
Any increase in Base Salary or other compensation shall in no way limit or
reduce any other obligations of Corporation hereunder and, once established
at an increased specified rate, Officer's Base Salary shall not be reduced
unless Officer otherwise agrees in writing.
3.3 BONUS. During the Term of this Agreement, the Officer is
eligible for the following bonus:
(a) MINIMUM BONUS. Officer shall be eligible to receive a
bonus for each fiscal year of Corporation (or portion thereof) during the
Term of this Agreement, with the actual amount of any such bonus to be
determined in the sole discretion of the Board (or a committee of the Board)
based upon its evaluation of Officer's performance during such year and such
other factors and conditions as the Board (or a committee of the Board) deems
relevant. Any such bonus shall be payable within seventy-five (75) days
after the end of Corporation's fiscal year to which such bonus relates. The
Board shall, at an appropriate subsequent time, consider for the benefit of
the Officer and other specified officers of the Corporation the establishment
of an annual incentive compensation plan providing for the payment of a
minimum annual bonus based upon the achievement of certain objective criteria
for the benefit of Officer and other specified executive officers of
Corporation.
(b) DETERMINATION OF BONUS. With respect to the period
commencing upon consummation of an initial public offering (the "IPO") of the
Corporation's common stock, par value $.01 per share (the "Common Stock"),
and
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<PAGE>
ending on December 31, 1997, and with respect to each calendar year
thereafter during the Term, the bonus payable pursuant to Subparagraph (a),
if any, shall be based upon such factors as the Board (or a committee
thereof) deems appropriate, which may include the enhancement of stockholder
value based upon Funds From Operations (as defined in the White Paper on
Funds From Operations approved by the Board of Governors of the National
Association of Real Estate Investment Trusts in March 1995) as determined in
good faith by the Board during such period, divided by the weighted average
number of shares of Common Stock outstanding during such period.
3.4 ADDITIONAL BENEFITS. During the term of this Agreement, Officer
shall be entitled to the following additional benefits:
(a) OFFICER BENEFITS. Officer shall be eligible to
participate in such of Corporation's benefit and deferred compensation plans
as are made available to executive officers of Corporation, including,
without limitation, Corporation's stock incentive plans, annual incentive
compensation plans, profit sharing/pension plans, deferred compensation
plans, annual physical examinations, dental, vision, sick pay, and medical
plans, personal catastrophe and accidental death insurance plans, financial
planning and automobile arrangements, retirement plans and supplementary
executive retirement plans, if any. For purposes of establishing the length
of service under any benefit plans or programs of Corporation, Officer's
employment with the Corporation will be deemed to have commenced on the
Original Effective Date of this Agreement. Until Corporation adopts a package
of health and medical benefits, Corporation shall promptly reimburse Officer
for payments made by Officer (i) with respect to the continuation of benefits
provided by Officer's previous employer pursuant to Section 4980B ("COBRA")
of the Internal Revenue Code of 1986, as amended (the "Code"), (ii) upon
expiration of COBRA coverage to maintain substantially similar health and
medical benefits coverage for Officer and his family, and (iii) if Officer is
not covered by COBRA, to maintain reasonable health and medical benefits
coverage for Officer and his family.
(b) VACATION. During the Term of this Agreement, Officer
shall be entitled to four (4) weeks of vacation during each year during the
Term of this Agreement and any extensions thereof, prorated for partial
years. Any accrued vacation not taken during any year may be carried forward
to subsequent years; PROVIDED that Officer may not accrue more than eight (8)
weeks of unused vacation at any time.
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<PAGE>
(c) LIFE INSURANCE. During the Term of this Agreement,
Corporation shall, at its sole cost and expense, procure and keep in effect
term life insurance (a minimum three (3) year term certain policy) on the
life of Officer, payable to such beneficiaries as Officer may from time to
time designate, in the aggregate amount of One Million Dollars ($1,000,000).
Such policy shall be owned by Officer or by a member of his immediate family.
Corporation shall have no incidents of ownership therein.
(d) DISABILITY INSURANCE. During the Term of this
Agreement, Corporation shall, at its sole cost and expense, procure and keep
in effect disability insurance similar to Officer's current disability
insurance policy on Officer, payable to Officer in an annual amount not less
than sixty percent (60%) of Officer's then existing Base Salary (the
"Disability Policy"). For purposes of this Agreement, "Permanent Disability"
shall have the same meaning as is ascribed to such terms in the Disability
Policy (including the COBRA Disability Policy) covering Officer at the time
of occurrence of such Permanent Disability.
(e) REIMBURSEMENT FOR EXPENSES. During the Term of this
Agreement, Corporation shall reimburse Officer for all reasonable
out-of-pocket business and/or entertainment expenses incurred by Officer for
the purpose of and in connection with the performance of his services
pursuant to this Agreement. Officer shall be entitled to such reimbursement
upon the presentation by Officer to Corporation of vouchers or other
statements itemizing such expenses in reasonable detail consistent with
Corporation's policies. In addition, Officer shall be entitled to
reimbursement for (i) dues and membership fees in professional organizations
and/or industry associations in which Officer is currently a member or
becomes a member, and (ii) appropriate industry seminars and mandatory
continuing education.
(f) WITHHOLDING. Compensation and benefits paid to Officer
under this Agreement shall be subject to applicable federal, state and local
wage deductions and other deductions required by law.
4. TERMINATION OF THIS AGREEMENT.
4.1 TERMINATION BY CORPORATION DEFINED.
(a) TERMINATION WITHOUT CAUSE. Subject to the provisions
set forth in Paragraph 4.3 below, "Termination Without Cause" shall
constitute any
5
<PAGE>
termination by Corporation other than termination for Cause (as defined in
Paragraph 4.1(b) below).
(b) TERMINATION FOR CAUSE. Subject to the provisions set
forth in Paragraph 4.3 below, prior to the Termination Date, Corporation
shall have the right to terminate this Agreement for Cause immediately after
written notice has been delivered to Officer, which notice shall specify the
reason for and the effective date of such Termination (which date shall be
the applicable Early Termination Date). For purposes of this Agreement,
"Cause" shall mean the following:
(i) Officer's use of alcohol or narcotics which proximately
results in the willful material breach or habitual willful neglect of
Officer's duties under this Agreement;
(ii) Officer's criminal conviction of fraud, embezzlement,
misappropriation of assets, malicious mischief, or any felony;
(iii) Officer's willful Material Breach (as defined below) of
this Agreement, if such willful Material Breach is not cured by Officer
within thirty (30) days after Corporation's written notice thereof specifying
the nature of such willful Material Breach. For purposes of this Paragraph
4.1(b), the term willful "Material Breach" shall mean the substantial and
continual willful nonperformance of Officer's duties under this Agreement
which the Board determines has resulted in material injury to Corporation.
(c) TERMINATION BY REASON OF DEATH OR DISABILITY. Subject
to the provisions set forth in Paragraph 4.3 below, prior to the Termination
Date, Corporation shall have the right to terminate this Agreement by reason
of Officer's death or Permanent Disability.
4.2 TERMINATION BY OFFICER DEFINED.
(a) TERMINATION OTHER THAN FOR GOOD REASON. Subject to the
provisions set forth in Paragraph 4.3 below, Officer shall have the right to
terminate this Agreement for any reason other than for Good Reason (as
defined in Paragraph 4.2(b) below), at any time prior to the Termination
Date, upon written notice delivered to Corporation thirty (30) days prior to
the effective date of
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termination specified in such notice (which date shall
be the applicable Early Termination Date).
(b) TERMINATION FOR GOOD REASON. Subject to the provisions
of Paragraph 4.3 below, Officer shall have the right to terminate this
Agreement prior to the Termination Date in the event of the material breach
of this Agreement by Corporation, if such breach is not cured by Corporation
within thirty (30) days after written notice thereof specifying the nature of
such breach has been delivered to Corporation, or, following a Change in
Control (as defined in Paragraph 4.4(e) below), under the circumstances set
forth in Paragraph 4.2(c) below. For purposes of this Agreement, termination
of this Agreement by Officer in the event of Corporation's material breach of
this Agreement in accordance with the provisions of this Paragraph 4.2(b)
shall be defined as termination by Officer for "Good Reason."
(c) GOOD REASON FOLLOWING A CHANGE IN CONTROL. Following a
Change in Control (as defined in Paragraph 4.4(e) below), "Good Reason" shall
mean, without Officer's express written consent, a material breach of this
Agreement by Corporation, including the occurrence of any of the following
circumstances, which breach is not fully corrected within thirty (30) days
after written notice thereof specifying the nature of such breach has been
delivered to Corporation:
(i) the assignment to Officer of any duties inconsistent with
the position in Corporation that Officer held immediately prior to the Change
in Control, or an adverse alteration in the nature or status of Officer's
responsibilities from those in effect immediately prior to such change;
(ii) a reduction by Corporation in Officer's annual base salary
as in effect on the date hereof or as the same may be increased from time to
time;
(iii) the relocation of Officer's offices to a location outside
the San Diego metropolitan area (or, if different, the metropolitan area in
which such offices are located immediately prior to the Change in Control),
or Corporation's requiring Officer to travel on Corporation's business to an
extent not substantially consistent with
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Officer's business travel obligations immediately prior to the Change in
Control;
(iv) the failure by Corporation to pay Officer any portion of
his current compensation except pursuant to an across-the-board compensation
deferral similarly affecting all officers of Corporation and all officers of
any person whose actions resulted in a Change in Control or any person
affiliated with Corporation or such person, or to pay Officer any portion of
an installment of deferred compensation under any deferred compensation
program of Corporation, within seven (7) days of the date such compensation
is due;
(v) the failure by Corporation to continue in effect any
compensation plan in which Officer participates immediately prior to the
Change in Control which is material to Officer's total compensation, unless
an equitable arrangement (embodied in an ongoing substitute or alternative
plan) has been made with respect to such plan, or the failure by Corporation
to continue Officer's participation therein (or in such substitute or
alternative plan) on a basis not materially less favorable, both in terms of
the amount of benefits provided and the level of participation relative to
other participants, as existed at the time of the Change in Control;
(vi) the failure by Corporation to continue to provide Officer
with benefits substantially similar to those under any of Corporation's life
insurance, medical, health and accident, or disability plans in which Officer
was participating at the time of the Change in Control, the taking of any
action by Corporation which would directly or indirectly materially reduce
any of such benefits or deprive Officer of any material fringe benefit
enjoyed by him at the time of the Change in Control, or the failure by
Corporation to provide Officer with the number of paid vacation days to which
he is entitled on the basis of years of service with Corporation in
accordance with Corporation's normal vacation policy in effect at the time of
the Change in Control; or
(vii) the failure of Corporation to obtain a satisfactory
agreement from any successor to assume and agree to perform this Agreement.
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Officer's right to terminate Officer's employment for Good Reason
shall not be affected by Officer's incapacity due to physical or mental
illness. Officer's continued employment shall not constitute consent to, or a
waiver of rights with respect to, any circumstance constituting Good Reason
hereunder.
4.3 EFFECT OF TERMINATION. In the event that this Agreement is
terminated by Corporation or Officer prior to the Termination Date in
accordance with the provisions of this Paragraph 4, the obligations and
covenants of the parties under this Paragraph 4 shall be of no further force
and effect, except for the obligations of the parties set forth below in this
Paragraph 4.3, and such other provisions of this Agreement which shall
survive termination of this Agreement as provided in Paragraph 6.11 below.
Except as otherwise specifically set forth, all amounts due upon termination
shall be payable on the date such amounts would otherwise have been paid had
the Agreement continued through its Term; PROVIDED, HOWEVER, that Deferred
Amounts (as defined in Paragraph 4.3(a)(i) below) shall be payable within
thirty (30) days following the Early Termination Date. In the event of any
such early termination in accordance with the provisions of this Paragraph
4.3, Officer shall be entitled to the following:
(a) TERMINATION BY CORPORATION.
(i) TERMINATION WITHOUT CAUSE. In the event that Corporation
terminates this Agreement without Cause pursuant to Paragraph 4.1(a) above,
Officer shall be entitled to (i) Earned Base Salary; (ii) earned benefits and
reimbursable expenses; (iii) any earned bonus which Officer has been awarded
pursuant to the terms of this Agreement or any other plan or arrangement as
of the Early Termination Date, but which has not been received by Officer as
of such date; (iv) any compensation earned but deferred ("Deferred Amounts");
and (v) the Severance Payment (as defined in Paragraph 4.4 below).
(ii) TERMINATION FOR CAUSE, DEATH OR PERMANENT DISABILITY. In
the event that Corporation terminates this Agreement for Cause pursuant to
Paragraph 4.1(b) above or by reason of Permanent Disability or death pursuant
to Paragraph 4.1(c) above, Officer shall be entitled to (i) Earned Base
Salary; (ii) any earned bonus which Officer has been awarded pursuant to the
terms of this Agreement or any other plan or arrangement as of the Early
Termination Date, but which has not been received by Officer as of such date;
(iii) earned
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benefits and reimbursable expenses; and (iv) any Deferred Amounts. Officer
shall not be entitled to any future annual bonus or Severance Payment.
(b) TERMINATION BY OFFICER.
(i) TERMINATION OTHER THAN FOR GOOD REASON. In the event that
Officer terminates this Agreement other than for Good Reason, Officer shall
be entitled to (i) Earned Base Salary; (ii) any earned bonus which Officer
has been awarded pursuant to the terms of this Agreement or any other plan or
arrangement as of the Early Termination Date, but which has not been received
by Officer as of such date; (iii) earned benefits and reimbursable expenses;
and (iv) any Deferred Amounts. Officer shall not be entitled to any future
annual bonus or Severance Payment.
(ii) TERMINATION FOR GOOD REASON. In the event that Officer
terminates this Agreement for Good Reason, Officer shall be entitled to (i)
Earned Base Salary; (ii) earned benefits and reimbursable expenses; (iii) any
earned bonus which Officer has been awarded pursuant to the terms of this
Agreement or any other plan or arrangement as of the Early Termination Date,
but which has not been received by Officer as of such date; (iv) any Deferred
Amounts; and (v) the Severance Payment (as defined in Paragraph 4.4 below).
4.4 SEVERANCE PAYMENT.
(a) DEFINITION OF "SEVERANCE PAYMENT." For purposes of this
Agreement, the term "Severance Payment" shall mean an amount equal to the sum
of (i) the Base Salary otherwise payable to Officer during the remainder of
the Term had such early termination of this Agreement not occurred
("Severance Period") and (ii) for each full year remaining in the Severance
Period, the average of the annual bonuses earned by Officer in the two (2)
years immediately preceding the date of termination (or if there are less
than two (2) years immediately preceding such date, an amount equal to the
immediately preceding bonus earned) ("Average Bonus"); PROVIDED, HOWEVER,
that in the event that, following a Change in Control as defined in Paragraph
4.4(e) below, Officer terminates this Agreement for Good Reason pursuant to
Paragraph 4.2(b) above, the term "Severance Payment" shall mean three
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(3) times the sum of the Base Salary then in effect and the Average Bonus;
FURTHER PROVIDED, HOWEVER, that in the event that (i) Officer's employment is
terminated in connection with or following the Board's good faith
determination that the possible long-run loss of Corporation may reasonably
be expected to increase unreasonably if Corporation is not dissolved and (ii)
such dissolution is effected in accordance with applicable law, the term
"Severance Payment" shall mean the Base Salary then in effect, and the term
"Severance Period" shall mean the one-year period immediately following
Officer's date of termination of employment.
(b) PAYMENT OF SEVERANCE PAYMENT. In the event that
Officer is entitled to any Severance Payment pursuant to Paragraph 4.3 above,
that portion of such Severance Payment that represents Base Salary shall be
payable in monthly installments and that portion of such Severance Payment
that represents the Average Bonus shall be payable on the dates such amounts
would have been paid had Officer continued in Corporation's employment for
the Severance Period; PROVIDED, HOWEVER, that in the event of a Termination
upon a Change in Control (as defined in Paragraph 4.4(e) below), the
Severance Payment shall be payable in a lump sum within ten (10) days
following such termination.
(c) OTHER SEVERANCE BENEFITS. In the event that Officer is
entitled to any Severance Payment pursuant to Paragraph 4.3 above, he shall
also be entitled to full and immediate vesting of any awards granted to
Officer under Corporation's stock option or incentive compensation plans, and
continued participation throughout the Severance Period in all employee
welfare and pension benefit plans, programs or arrangements. In the event
Officer's participation in any such plan, program or arrangement is barred,
Corporation shall arrange to provide Officer with substantially similar
benefits.
(d) FULL SETTLEMENT OF ALL OBLIGATIONS. Officer hereby
acknowledges and agrees that any Severance Payment paid to Officer hereunder
shall be deemed to be in full and complete settlement of all obligations of
Corporation under this Agreement.
(e) CHANGE IN CONTROL. For purposes of this Agreement,
"Termination Upon a Change in Control" shall mean a termination of Officer's
employment with Corporation following a "Change in Control" by Officer for
Good Reason or by Corporation Other Than for Cause. A "Change in Control"
shall be deemed to have occurred if:
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(i) Any Person, as such term is used in section 3(a)(9) of the
Securities Exchange Act of 1934, as amended from time to time (the "Exchange
Act"), as modified and used in sections 13(d) and 14(d) thereof, except that
such term shall not include (A) the Corporation or any of its subsidiaries,
(B) a trustee or other fiduciary holding securities under an employee benefit
plan of the Corporation or any of its affiliates, (C) an underwriter
temporarily holding securities pursuant to an offering of such securities,
(D) a corporation owned, directly or indirectly, by the stockholders of the
Corporation in substantially the same proportions as their ownership of stock
of the Corporation, or (E) a person or group as used in Rule 13d-1(b) under
the Exchange Act, that is or becomes the Beneficial Owner, as such term is
defined in Rule 13d-3 under the Exchange Act, directly or indirectly, of
securities of the Corporation (not including in the securities beneficially
owned by such Person any securities acquired directly from the Corporation or
its affiliates other than in connection with the acquisition by the
Corporation or its affiliates of a business) representing twenty-five percent
(25%) or more of the combined voting power of the Corporation's then
outstanding securities; or
(ii) The following individuals cease for any reason to
constitute a majority of the number of directors then serving: individuals
who, on the date hereof, constitute the Board and any new director (other
than a director whose initial assumption of office is in connection with an
actual or threatened election contest, including but not limited to a consent
solicitation, relating to the election of directors of the Corporation) whose
appointment or election by the Board or nomination for election by the
Corporation's stockholders was approved or recommended by a vote of at least
two-thirds (2/3) of the directors then still in office who either were
directors on the date hereof or whose appointment, election or nomination for
election was previously so approved or recommended; or
(iii) There is consummated a merger or consolidation of the
Corporation with any other corporation, other than (A) a merger or
consolidation which would result in the voting securities of the Corporation
outstanding immediately prior to such merger or consolidation continuing to
represent (either by remaining outstanding or by being converted into voting
securities of the surviving entity or any parent thereof), in combination
with the ownership of any trustee or other fiduciary holding securities under
an employee benefit plan of the Corporation or any subsidiary of the
Corporation, at least seventy-five percent (75%) of the combined voting power
of the securities of the Corporation or such surviving entity or any parent
thereof outstanding immediately after such merger or consolidation, or (B) a
merger or consolidation effected to implement a recapitalization of the
Corpo-
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ration (or similar transaction) in which no Person is or becomes the
Beneficial Owner, directly or indirectly, of securities of the Corporation
(not including in the securities beneficially owned by such Person any
securities acquired directly from the Corporation or its affiliates other
than in connection with the acquisition by the Corporation or its affiliates
of a business) representing twenty-five percent (25%) or more of the combined
voting power of the Corporation's then outstanding securities; or
(iv) The stockholders of the Corporation approve a plan of
complete liquidation or dissolution of the Corporation or there is
consummated an agreement for the sale or disposition by the Corporation of
all or substantially all of the Corporation's assets, other than a sale or
disposition by the Corporation of all or substantially all of the
Corporation's assets to an entity, at least seventy-five (75%) of the
combined voting power of the voting securities of which are owned by
stockholders of the Corporation in substantially the same proportions as
their ownership of the Corporation immediately prior to such sale.
4.5 GROSS-UP. If any of the Total Payments (as hereinafter
defined) will be subject to the tax imposed by Section 4999 of the Code (the
"Excise Tax"), Corporation shall pay to Officer, no later than the tenth
(10th) day following the Early Termination Date, an additional amount (the
"Gross-Up Payment") such that the net amount retained by him, after deduction
of any Excise Tax on the Total Payments and any federal and state and local
income tax upon the payment provided for by this Paragraph, shall be equal to
the excess of the Total Payments over the payment provided for by this
Paragraph. For purposes of determining whether any of the Total Payments
will be subject to the Excise Tax and the amount of such Excise Tax, (i) all
payments or benefits received or to be received by Officer in connection with
a Change in Control or the termination of Officer's employment (whether
payable pursuant to the terms of this Agreement or of any other plan,
arrangement or agreement with Corporation, its successors, any person whose
actions result in a Change in Control or any person affiliated (or which, as
a result of the completion of the transactions causing a Change in Control,
will become affiliated) with Corporation or such person within the meaning of
Section 1504 of the Code (the "Total Payments")) shall be treated as
"parachute payments" (within the meaning of Section 280G(b)(2) of the Code)
unless, in the opinion of tax counsel selected by Corporation's independent
auditors and reasonably acceptable to Officer, such payments or benefits (in
whole or in part) do not constitute parachute payments, including by reason
of Section 280G(b)(4)(A) of the Code, and all "excess parachute payments"
(within the meaning of Section 280G(b)(1) of the Code) shall
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be treated as subject to the Excise Tax, unless in the opinion of such tax
counsel such excess parachute payments represent reasonable compensation for
services actually rendered within the meaning of Section 280G(b)(4)(B) of the
Code, or are not otherwise subject to the Excise Tax, and (ii) the value of
any noncash benefits or any deferred payment or benefit shall be determined
by the Corporation's independent auditors in accordance with the principles
of Sections 280G(d)(3) and (4) of the Code. For purposes of determining the
amount of the Gross-Up Payment, Officer shall be deemed to pay federal income
taxes at the highest marginal rate of federal income taxation in the calendar
year in which the Gross-Up Payment is to be made and state and local income
taxes at the highest marginal rate of taxation in the state and locality of
the residence of Officer on the Early Termination Date, net of the maximum
reduction in federal income taxes that could be obtained from deduction of
such state and local taxes.
4.6 OFFSET. Although Officer shall not be required to mitigate
damages under this Agreement by seeking other comparable employment or
otherwise, the amount of any payment or benefit provided for in this
Agreement, including, without limitation, welfare benefits, shall be reduced
by any compensation earned by or provided to Officer as the result of
employment by an employer other than Corporation prior to the expiration of
the Term of this Agreement; PROVIDED, HOWEVER, that this Paragraph 4.6 shall
not apply in the event of a Termination Upon a Change in Control.
5. NONCOMPETITION.
During the Term of this Agreement, including the period, if any, with
respect to which Officer shall be entitled to Severance Payments, Officer shall
not engage in any activity competitive with the business of Corporation.
6. MISCELLANEOUS.
6.1 PAYMENT OBLIGATIONS. Corporation's obligation to pay Officer
the compensation and to make the arrangements provided herein shall be
unconditional, and Officer shall have no obligation whatsoever to mitigate
damages hereunder. If arbitration after a Change in Control shall be brought
to enforce or interpret any provision contained herein, Corporation shall, to
the extent permitted by applicable law and Corporation's Articles of
Incorporation and By-Laws, indemnify Officer for Officer's attorneys' fees
and disbursements incurred in such arbitration. 0
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6.2 CONFIDENTIALITY. Officer agrees that all confidential and
proprietary information relating to the business of Corporation shall be kept
and treated as confidential both during and after the Term of this Agreement,
except as may be permitted in writing by the Board or as such information is
within the public domain or comes within the public domain without any breach
of this Agreement.
6.3 WAIVER. The waiver of the breach of any provision of this
Agreement shall not operate or be construed as a waiver of any subsequent
breach of the same or other provision hereof.
6.4 ENTIRE AGREEMENT; MODIFICATIONS. Except as otherwise provided
herein, this Agreement (together with the agreements and plans referred to
herein) represents the entire understanding among the parties with respect to
the subject matter hereof, and this Agreement supersedes any and all prior
understandings, agreements, plans and negotiations, whether written or oral,
with respect to the subject matter hereof, including without limitation any
understandings, agreements or obligations respecting any past or future
compensation, bonuses, reimbursements or other payments to Officer from
Corporation. All modifications to the Agreement must be in writing and
signed by the party against whom enforcement of such modification is sought.
6.5 NOTICES. All notices and other communications under this
Agreement shall be in writing and shall be given by facsimile or first class
mail, certified or registered with return receipt requested, and shall be
deemed to have been duly given three (3) days after mailing or twenty-four
(24) hours after transmission of a facsimile to the respective persons named
below:
If to Corporation: Alexandria Real Estate Equities, Inc.
251 South Lake Avenue
Pasadena, California 91101
Phone: (818) 578-6812
Facsimile: (818) 578-6966
If to Officer: Alan D. Gold
18269 Sun Maiden Court
San Diego, California 92127
Phone: (619) 487-3764
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Any party may change such party's address for notices by notice duly given
pursuant hereto.
6.6 HEADINGS. The Paragraph headings herein are intended for
reference only and shall not by themselves determine the construction or
interpretation of this Agreement.
6.7 ARBITRATION. Any dispute arising out of or relating to this
Agreement that cannot be settled by good faith negotiation between the
parties shall be submitted to ENDISPUTE for final and binding arbitration
pursuant to ENDISPUTE's Arbitration Rules incorporated herein by reference,
which arbitration shall be the exclusive remedy of the parties hereto. The
resulting arbitration shall be deemed a final order of a court having
jurisdiction over the subject matter, shall not be appealable, and shall be
enforceable in any court of competent jurisdiction. Submission to
arbitration, as provided in Exhibit A, shall not preclude the right of any
party hereto involved in a dispute regarding this Agreement (each, a
"Disputing Party" and collectively, the "Disputing Parties") to institute
proceedings at law or in equity for injunctive or other relief pending the
arbitration of a matter subject to arbitration pursuant to this Agreement.
Any documentation and information submitted by any party in the arbitration
proceeding shall be kept strictly confidential by the parties and the
arbitrator.
In addition to any other relief or award granted by the arbitrator
to either Disputing Party, the arbitrator shall determine the extent to which
each Disputing Party has prevailed as to the material issues raised in the
arbitration, and, based upon such determination, shall apportion to each
Disputing Party its ratable share of (i) the Disputing Parties' reasonable
attorneys' fees and other costs reasonably incurred in the arbitration, (ii)
the expense of the arbitrator, and (iii) all other expenses of the
arbitration; PROVIDED, HOWEVER, that any dispute following a Change in
Control shall be governed by the provisions of Paragraph 6.1 above. The
arbitrator shall make such determination and apportionment whether or not the
dispute proceeds to a final award.
6.8 SEVERABILITY. Should a court or other body of competent
jurisdiction determine that any provision of this Agreement is excessive in
scope or otherwise invalid or unenforceable, such provision shall be adjusted
rather than voided, if possible, and all other provisions of this Agreement
shall be deemed valid and enforceable to the lawfully permitted.
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6.9 SURVIVAL OF CORPORATION'S OBLIGATIONS. Corporation's
obligations hereunder shall not be terminated by reason of any liquidation,
dissolution, bankruptcy, cessation of business, or similar event relating to
Corporation. This Agreement shall not be terminated by any merger or
consolidation or other reorganization of Corporation. In the event any such
merger, consolidation or reorganization shall be accomplished by transfer of
stock or by transfer of assets or otherwise, the provisions of this Agreement
shall be binding upon and inure to the benefit of the surviving or resulting
corporation or person. This Agreement shall be binding upon and inure to the
benefit of the executors, administrators, heirs, successors and assigns of
the parties; PROVIDED, HOWEVER, that except as herein expressly provided,
this Agreement shall not be assignable either by Corporation (except to an
affiliate of the Corporation, in which event Corporation shall remain liable
if the affiliate fails to meet any obligations to make payments or provide
benefits or otherwise) or by Officer.
6.10 SURVIVAL OF CERTAIN RIGHTS AND OBLIGATIONS. The rights and
obligations of the parties hereto pursuant to Paragraphs 4.3, 4.4, 4.5, 4.6,
5 and 6.1, 6.2, 6.10, 6.11 and 6.13 hereof shall survive the termination of
this Agreement.
6.11 COUNTERPARTS. This Agreement may be executed in one or more
counterparts, all of which taken together shall constitute one and the same
Agreement.
6.12 INDEMNIFICATION. In addition to any rights to
indemnification to which Officer is entitled under the Corporation's Articles
of Incorporation and By-Laws, Corporation shall indemnify Officer at all
times during and after the Term of this Agreement to the maximum extent
permitted under Section 2-418 of the General Corporation Law of the State of
Maryland or any successor provision thereof and any other applicable state
law, and shall pay Officer's expenses in defending any civil or criminal
action, suit, or proceeding in advance of the final disposition of such
action, suit, or proceeding, to the maximum extent permitted under such
applicable state laws.
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IN WITNESS WHEREOF, the parties hereto have executed this Agreement.
CORPORATION:
ALEXANDRIA REAL ESTATE EQUITIES, INC.,
a Maryland corporation
By:/s/ Joel S. Marcus
-----------------------------------
Joel S. Marcus
Chief Executive Officer
OFFICER:
/s/ Alan D. Gold
--------------------------------------
Alan D. Gold
Date: 8-12-97
---------------------------------
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AMENDED AND RESTATED
EXECUTIVE EMPLOYMENT AGREEMENT
by and between
ALEXANDRIA REAL ESTATE EQUITIES, INC.,
a Maryland corporation,
and
GARY A. KREITZER,
an individual
<PAGE>
AMENDED AND RESTATED
EXECUTIVE EMPLOYMENT AGREEMENT
THIS AMENDED AND RESTATED EXECUTIVE EMPLOYMENT AGREEMENT (this
"Agreement") originally made and entered into as of the fifth (5th) day of
January, 1994, (the "Original Effective Date"), by and between Health Science
Properties Holding Corp., a Maryland corporation (the "Parent") and Gary A.
Kreitzer, an individual (the "Officer") is hereby amended and restated in its
entirety effective as of March 28, 1997 (the "Effective Date") to read as
follows:
RECITAL
WHEREAS, on November 3, 1994, Parent transferred to its then
wholly-owned subsidiary Alexandria Real Estate Equities, Inc., a Maryland
corporation (formerly, Health Science Properties, Inc.) (the "Corporation")
substantially all of its property, assets and certain liabilities, including
Parent's rights and obligations under this Agreement;
WHEREAS, on July 30, 1996, this Agreement was amended pursuant to
an agreement between the Corporation and Officer;
WHEREAS, Corporation desires to continue to employ Officer as its
Senior Vice President and In-House Counsel, and Officer is willing to
continue to accept such employment by Corporation, on the terms and subject
to the conditions set forth in this Agreement.
NOW, THEREFORE, in consideration of the mutual covenants contained
herein and for other good and valuable consideration, the receipt and
sufficiency of which is hereby acknowledged, the parties hereto agree to
amend and restate this Agreement as follows:
1. POSITION AND DUTIES; LOCATION.
During the Term (as defined in Paragraph 2 below) of this Agreement,
Officer agrees to be employed by and to serve Corporation as its Senior Vice
President and In-House Counsel or in such other capacity consistent with the
Officer's current position as a senior executive officer, as may be determined
by the Board of Directors of the Corporation (the "Board"). Corporation agrees
to employ and retain Officer in such capacities. Officer shall devote such of
his business time, energy, and skill to the affairs of Corporation as shall be
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necessary to perform the duties of such positions. Officer shall report to the
President or such other officer as the Board shall direct, and at all times
during the Term (as defined in Paragraph 2 below) of this Agreement shall have
powers and duties at least commensurate with his position as a senior executive
officer. Officer shall be based at the offices of Corporation in the San Diego,
California metropolitan area, except for required travel on Corporation's
business.
2. TERM OF EMPLOYMENT.
The term (the "Term") of this Agreement shall be for a period
commencing January 1, 1997 and ending on December 31, 1998 (the "Termination
Date"), unless terminated earlier pursuant to this Agreement (the "Early
Termination Date"). Commencing on December 31, 1998 and on each subsequent
anniversary thereof, the Term shall be automatically extended for one (1)
additional year unless, no later than six (6) months before such date, either
party shall have given written notice to the other that it does not wish to
extend the Term of this Agreement. References herein to the Term of this
Agreement shall refer to both the initial Term and any such extended Term.
3. COMPENSATION, BENEFITS AND REIMBURSEMENT.
3.1 BASE SALARY. During the Term of this Agreement, Officer shall
be entitled to the following base salary:
(a) MINIMUM BASE. During the Term of this Agreement and subject
to the terms and conditions set forth herein, Corporation agrees to pay to
Officer an annual "Base Salary" of One Hundred Forty Thousand Dollars
($140,000) or such higher amount as may from time to time be determined by
Corporation. Unless otherwise agreed to in writing by Officer and
Corporation, and subject to Subparagraph (b) below, the salary shall be
payable in substantially equal semimonthly installments in accordance with
the standard policies of Corporation in existence from time to time.
(b) EARNED BASE SALARY. For purposes of any early termination of
this Agreement as provided in Paragraph 4 below, the term "Earned Base
Salary" shall mean all semimonthly installments of the Base Salary which have
become due and payable to Officer together with any partial monthly
installment prorated on a daily basis up to and including the applicable
Termination Date.
3.2 INCREASES IN BASE SALARY. Officer's Base Salary shall be
reviewed no less frequently than on each anniversary of the Original
Effective Date during the Term by the
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Board (or such committee as may be appointed by the Board for such purpose).
The Base Salary payable to Officer shall be increased on each such
anniversary date (and such other times as the Board or a committee of the
Board may deem appropriate during the Term of this Agreement) by an amount
determined by the Board (or a committee of the Board). Each such new Base
Salary shall become the base for each successive year increase; PROVIDED,
HOWEVER, that, at a minimum, such increase shall be equal to the cumulative
cost-of-living increment as reported in the "Consumer Price Index, Los
Angeles, California, All Items," published by the U.S. Department of Labor
(using January 1, 1994, as the base date for comparison). Any increase in
Base Salary or other compensation shall in no way limit or reduce any other
obligations of Corporation hereunder and, once established at an increased
specified rate, Officer's Base Salary shall not be reduced unless Officer
otherwise agrees in writing.
3.3 BONUS. Officer shall be eligible to receive a bonus for each
fiscal year of Corporation (or portion thereof) during the Term of this
Agreement, with the actual amount of any such bonus to be determined in the
sole discretion of the Board (or a committee of the Board) based upon its
evaluation of Officer's performance during such year and such other factors
and conditions as the Board (or a committee of the Board) deems relevant.
Any such bonus shall be payable within seventy-five (75) days after the end
of Corporation's fiscal year to which such bonus relates. The Board shall,
at an appropriate subsequent time, consider for the benefit of Officer and
other specified executive officers of the Corporation the establishment of an
annual incentive compensation plan providing for the payment of a minimum
annual bonus based upon the achievement of certain objective criteria.
3.4 ADDITIONAL BENEFITS. During the Term of this Agreement,
Officer shall be entitled to the following additional benefits:
(a) OFFICER BENEFITS. Officer shall be eligible to participate
in such of Corporation's benefit and deferred compensation plans as are made
available to executive officers of Corporation, including, without
limitation, Corporation's stock incentive plans, annual incentive
compensation plans, profit sharing/pension plans, deferred compensation
plans, annual physical examinations, dental, vision, sick pay, and medical
plans, personal catastrophe and accidental death insurance plans, financial
planning and automobile arrangements, retirement plans and supplementary
executive retirement plans, if any. For purposes of establishing the length
of service under any benefit plans or programs of Corporation, Officer's
employment with the Corporation will be deemed to have commenced on the
Original Effective Date of this Agreement. Until Corporation adopts a package
of health and medical benefits, Corporation shall promptly reimburse Officer
for payments made by Officer (i) with respect to the continuation of benefits
provided by Officer's previous employer pursuant to Section 4980B ("COBRA")
of the Internal Revenue Code of 1986, as amended (the
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"Code"), (ii) upon expiration of COBRA coverage to maintain substantially
similar health and medical benefits coverage for Officer and his family, and
(iii) if Officer is not covered by COBRA, to maintain reasonable health and
medical benefits coverage for Officer and his family.
(b) VACATION. During the Term of this Agreement, Officer shall be
entitled to four (4) weeks of vacation during each year during the Term of
this Agreement and any extensions thereof, prorated for partial years. Any
accrued vacation not taken during any year may be carried forward to
subsequent years; PROVIDED that Officer may not accrue more than eight (8)
weeks of unused vacation at any time.
(c) LIFE INSURANCE. During the Term of this Agreement,
Corporation shall, at its sole cost and expense, procure and keep in effect
term life insurance (a minimum three (3) year term certain policy) on the
life of Officer, payable to such beneficiaries as Officer may from time to
time designate, in the aggregate amount of One Million Dollars ($1,000,000).
Such policy shall be owned by Officer or by a member of his immediate family.
Corporation shall have no incidents of ownership therein.
(d) DISABILITY INSURANCE. During the Term of this Agreement,
Corporation shall, at its sole cost and expense, procure and keep in effect
disability insurance similar to Officer's current disability insurance policy
on Officer, payable to Officer in an annual amount not less than sixty
percent (60%) of Officer's then-existing Base Salary (the "Disability
Policy"). For purposes of this Agreement, "Permanent Disability" shall have
the same meaning as is ascribed to such terms in the Disability Policy
(including the COBRA Disability Policy) covering Officer at the time of
occurrence of such Permanent Disability.
(e) REIMBURSEMENT FOR EXPENSES. During the Term of this
Agreement, Corporation shall reimburse Officer for all reasonable
out-of-pocket business and/or entertainment expenses incurred by Officer for
the purpose of and in connection with the performance of his services
pursuant to this Agreement. Officer shall be entitled to such reimbursement
upon the presentation by Officer to Corporation of vouchers or other
statements itemizing such expenses in reasonable detail consistent with
Corporation's policies. In addition, Officer shall be entitled to
reimbursement for (i) dues and membership fees in professional organizations
and/or industry associations in which Officer is currently a member or
becomes a member, and (ii) appropriate industry seminars and mandatory
continuing education.
(f) WITHHOLDING. Compensation and benefits paid to Officer under
this Agreement shall be subject to applicable federal, state and local wage
deductions and other deductions required by law.
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4. TERMINATION OF THE AGREEMENT.
4.1 TERMINATION BY CORPORATION DEFINED.
(a) TERMINATION WITHOUT CAUSE. Subject to the provisions set
forth in Paragraph 4.3 below, "Termination Without Cause" shall constitute
any termination by Corporation other than termination for Cause (as defined
in Paragraph 4.1(b) below).
(b) TERMINATION FOR CAUSE. Subject to the provisions set forth in
Paragraph 4.3 below, prior to the Termination Date, Corporation shall have
the right to terminate this Agreement for Cause immediately after written
notice has been delivered to Officer, which notice shall specify the reason
for and the effective date of such Termination (which date shall be the
applicable Early Termination Date). For purposes of this Agreement, "Cause"
shall mean the following:
(i) Officer's use of alcohol or narcotics which proximately
results in the willful material breach or habitual willful neglect of
Officer's duties under this Agreement;
(ii) Officer's criminal conviction of fraud, embezzlement,
misappropriation of assets, malicious mischief, or any felony;
(iii) Officer's willful Material Breach (as defined below) of
this Agreement, if such willful Material Breach is not cured by Officer
within thirty (30) days after Corporation's written notice thereof
specifying the nature of such willful Material Breach. For purposes of
this Paragraph 4.1(b), the term willful "Material Breach" shall mean the
substantial and continual willful nonperformance of Officer's duties
under this Agreement which the Board determines has resulted in material
injury to Corporation.
(c) TERMINATION BY REASON OF DEATH OR DISABILITY. Subject to the
provisions set forth in Paragraph 4.3 below, prior to the Termination Date,
Corporation shall have the right to terminate this Agreement by reason of
Officer's death or Permanent Disability.
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4.2 TERMINATION BY OFFICER DEFINED.
(a) TERMINATION OTHER THAN FOR GOOD REASON. Subject to the
provisions set forth in Paragraph 4.3 below, Officer shall have the right to
terminate this Agreement for any reason other than for Good Reason (as
defined in Paragraph 4.2(b) below), at any time prior to the Termination
Date, upon written notice delivered to Corporation thirty (30) days prior to
the effective date of termination specified in such notice (which date shall
be the applicable Early Termination Date).
(b) TERMINATION FOR GOOD REASON. Subject to the provisions of
Paragraph 4.3 below, Officer shall have the right to terminate this Agreement
prior to the Termination Date in the event of the material breach of this
Agreement by Corporation, if such breach is not cured by Corporation within
thirty (30) days after written notice thereof specifying the nature of such
breach has been delivered to Corporation, or, following a Change in Control
(as defined in Paragraph 4.4(e) below), under the circumstances set forth in
Paragraph 4.2(c) below. For purposes of this Agreement, termination of this
Agreement by Officer in the event of Corporation's material breach of this
Agreement in accordance with the provisions of this Paragraph 4.2(b) shall be
defined as termination by Officer for "Good Reason."
(c) GOOD REASON FOLLOWING A CHANGE IN CONTROL. Following a Change
in Control (as defined in Paragraph 4.4(e) below), "Good Reason" shall mean,
without Officer's express written consent, a material breach of this
Agreement by Corporation, including the occurrence of any of the following
circumstances, which breach is not fully corrected within thirty (30) days
after written notice thereof specifying the nature of such breach has been
delivered to Corporation:
(a) the assignment to Officer of any duties inconsistent with
the position in Corporation that Officer held immediately prior to the Change in
Control, or an adverse alteration in the nature or status of Officer's
responsibilities from those in effect immediately prior to such change;
(b) a reduction by Corporation in Officer's annual base salary
as in effect on the date hereof or as the same may be increased from time to
time;
(c) the relocation of Officer's offices to a location outside
the San Diego metropolitan area (or, if different, the metropolitan area in
which such offices are located immediately prior to the Change in Control) or
Corporation's requiring Officer to travel on Corporation's business to an extent
not substantially consistent with Officer's business travel obligations
immediately prior to the Change in Control;
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(d) the failure by Corporation to pay Officer any portion of
his current compensation except pursuant to an across-the-board compensation
deferral similarly affecting all officers of Corporation and all officers of
any person whose actions resulted in a Change in Control or any person
affiliated with Corporation or such person, or to pay Officer any portion of
an installment of deferred compensation under any deferred compensation
program of Corporation, within seven (7) days of the date such compensation
is due;
(e) the failure by Corporation to continue in effect any
compensation plan in which Officer participates immediately prior to the
Change in Control which is material to Officer's total compensation, unless
an equitable arrangement (embodied in an ongoing substitute or alternative
plan) has been made with respect to such plan, or the failure by Corporation
to continue Officer's participation therein (or in such substitute or
alternative plan) on a basis not materially less favorable, both in terms of
the amount of benefits provided and the level of participation relative to
other participants, as existed at the time of the Change in Control;
(f) the failure by Corporation to continue to provide Officer
with benefits substantially similar to those under any of Corporation's life
insurance, medical, health and accident, or disability plans in which Officer
was participating at the time of the Change in Control, the taking of any
action by Corporation which would directly or indirectly materially reduce
any of such benefits or deprive Officer of any material fringe benefit
enjoyed by him at the time of the Change in Control, or the failure by
Corporation to provide Officer with the number of paid vacation days to which
he is entitled on the basis of years of service with Corporation in
accordance with Corporation's normal vacation policy, in effect at the time
of the Change in Control; or
(g) the failure of Corporation to obtain a satisfactory
agreement from any successor to assume and agree to perform this Agreement.
Officer's right to terminate Officer's employment for Good Reason
shall not be affected by Officer's incapacity due to physical or mental
illness. Officer's continued employment shall not constitute consent to, or a
waiver of rights with respect to, any circumstance constituting Good Reason
hereunder.
4.3 EFFECT OF TERMINATION. In the event that this Agreement is
terminated by Corporation or Officer prior to the Termination Date in
accordance with the provisions of this Paragraph 4, the obligations and
covenants of the parties under this Paragraph 4 shall be of no further force
and effect, except for the obligations of the parties set forth below in this
Paragraph 4.3, and such other provisions of this Agreement which shall
survive termination of
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this Agreement as provided in Paragraph 6.11 below. Except as otherwise
specifically set forth, all amounts due upon termination shall be payable on
the date such amounts would otherwise have been paid had the Agreement
continued through its Term; PROVIDED, HOWEVER, that Deferred Amounts (as
defined in Paragraph 4.3(a)(i) below) shall be payable within thirty (30)
days following the Early Termination Date. In the event of any such early
termination in accordance with the provisions of this Paragraph 4.3, Officer
shall be entitled to the following:
(a) TERMINATION BY CORPORATION.
(i) TERMINATION WITHOUT CAUSE. In the event that Corporation
terminates this Agreement without Cause pursuant to Paragraph 4.1(a) above,
Officer shall be entitled to (i) Earned Base Salary; (ii) earned benefits and
reimbursable expenses; (iii) any earned bonus which Officer has been awarded
pursuant to the terms of this Agreement or any other plan or arrangement as of
the Early Termination Date, but which has not been received by Officer as of
such date; (iv) any compensation earned but deferred ("Deferred Amounts"); and
(v) the Severance Payment (as defined in Paragraph 4.4 below).
(ii) TERMINATION FOR CAUSE, DEATH OR PERMANENT DISABILITY. In
the event that Corporation terminates this Agreement for Cause pursuant to
Paragraph 4.1(b) above or by reason of Permanent Disability or death pursuant to
Paragraph 4.1(c) above, Officer shall be entitled to (i) Earned Base Salary;
(ii) any earned bonus which Officer has been awarded pursuant to the terms of
this Agreement or any other plan or arrangement as of the Early Termination
Date, but which has not been received by Officer as of such date; (iii) earned
benefits and reimbursable expenses; and (iv) any Deferred Amounts. Officer
shall not be entitled to any future annual bonus or Severance Payment.
(b) TERMINATION BY OFFICER.
(i) TERMINATION OTHER THAN FOR GOOD REASON. In the event that
Officer terminates this Agreement other than for Good Reason, Officer shall be
entitled to (i) Earned Base Salary; (ii) any earned bonus which Officer has been
awarded pursuant to the terms of this Agreement or any other plan or arrangement
as of the Early Termination Date, but which has not been received by Officer as
of such date; (iii) earned benefits and reimbursable expenses; and (iv) any
Deferred Amounts. Officer shall not be entitled to any future annual bonus or
Severance Payment.
(ii) TERMINATION FOR GOOD REASON. In the event that Officer
terminates this Agreement for Good Reason, Officer shall be entitled to (i)
Earned Base Salary; (ii) earned benefits and reimbursable expenses; (iii) any
earned bonus which Officer
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has been awarded pursuant to the terms of this Agreement or any other plan or
arrangement as of the Early Termination Date, but which has not been received
by Officer as of such date; (iv) any Deferred Amounts; and (v) the Severance
Payment (as defined in Paragraph 4.4 below).
4.4 SEVERANCE PAYMENT.
(a) DEFINITION OF "SEVERANCE PAYMENT." For purposes of this
Agreement, the term "Severance Payment" shall mean an amount equal to the sum
of (i) the Base Salary otherwise payable to Officer during the remainder of
the Term had such early termination of this Agreement not occurred (the
"Severance Period") and (ii) for each full year remaining in the Severance
Period, the average of the annual bonuses earned by Officer in the two (2)
years immediately preceding the date of termination (or if there are less
than two (2) years immediately preceding such date, an amount equal to the
immediately preceding bonus earned) (the "Average Bonus"); PROVIDED, HOWEVER,
that in the event that, following a Change in Control (as defined in
Paragraph 4.4(e) below), Officer terminates this Agreement for Good Reason
pursuant to Paragraph 4.2(b) above, the term "Severance Payment" shall mean
three (3) times the sum of the Base Salary then in effect and the Average
Bonus; FURTHER, PROVIDED, HOWEVER, that in the event that (i) Officer's
employment is terminated in connection with or following the Board's good
faith determination that the possible long-run loss of Corporation may
reasonably be expected to increase unreasonably if Corporation is not
dissolved and (ii) such dissolution is effected in accordance with applicable
law, the term "Severance Payment" shall mean the Base Salary then in effect,
and the term "Severance Period" shall mean the one-year period immediately
following Officer's date of termination of employment.
(b) PAYMENT OF SEVERANCE PAYMENT. In the event that Officer is
entitled to any Severance Payment pursuant to Paragraph 4.3 above, that
portion of such Severance Payment that represents Base Salary shall be
payable in monthly installments, and that portion of such Severance Payment
that represents the Average Bonus shall be payable on the dates such amounts
would have been paid had Officer continued in Corporation's employment for
the Severance Period; PROVIDED, HOWEVER, that in the event of a Termination
upon a Change in Control (as defined in Paragraph 4.4(e) below), the
Severance Payment shall be payable in a lump sum within ten (10) days
following such termination.
(c) OTHER SEVERANCE BENEFITS. In the event that Officer is
entitled to any Severance Payment pursuant to Paragraph 4.3 above, he shall
also be entitled to full and
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immediate vesting of any awards granted to Officer under Corporation's stock
option or incentive compensation plans, and continued participation
throughout the Severance Period in all employee welfare and pension benefit
plans, programs or arrangements. In the event Officer's participation in any
such plan, program or arrangement is barred, Corporation shall arrange to
provide Officer with substantially similar benefits.
(d) FULL SETTLEMENT OF ALL OBLIGATIONS. Officer hereby acknowledges
and agrees that any Severance Payment paid to Officer hereunder shall be
deemed to be in full and complete settlement of all obligations of
Corporation under this Agreement.
(e) CHANGE IN CONTROL. For purposes of this Agreement, "Termination
Upon a Change in Control" shall mean a termination of Officer's employment
with Corporation following a "Change in Control" by Officer for Good Reason
or by Corporation Other Than for Cause. A "Change in Control" shall be
deemed to have occurred if:
(i) Any Person, as such term is used in section 3(a)(9) of
the Securities Exchange Act of 1934 as amended from time to time (the "Exchange
Act"), as modified and used in sections 13(d) and 14(d) thereof, except that
such term shall not include (A) the Corporation or any of its subsidiaries, (B)
a trustee or other fiduciary holding securities under an employee benefit plan
of the Corporation or any of its affiliates, (C) an underwriter temporarily
holding securities pursuant to an offering of such securities, (D) a corporation
owned, directly or indirectly, by the stockholders of the Corporation in
substantially the same proportions as their ownership of stock of the
Corporation, or (E) a person or group as used in Rule 13d-1(b) under the
Exchange Act, that is or becomes the Beneficial Owner, as such term is defined
in Rule 13d-3 under the Exchange Act, directly or indirectly, of securities of
the Corporation (not including in the securities beneficially owned by such
Person any securities acquired directly from the Corporation or its affiliates
other than in connection with the acquisition by the Corporation or its
affiliates of a business) representing twenty-five percent (25%) or more of the
combined voting power of the Corporation's then outstanding securities; or
(ii) The following individuals cease for any reason to
constitute a majority of the number of directors then serving: individuals who,
on the date hereof, constitute the Board and any new director (other than a
director whose initial assumption of office is in connection with an actual or
threatened election contest, including but not limited to a consent
solicitation, relating to the election of directors of the Corporation) whose
appointment or election by the Board or nomination for election by the
Corporation's stockholders was approved or recommended by a vote of at least
two-thirds (2/3) of the directors then still in
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office who either were directors on the date hereof or whose appointment,
election or nomination for election was previously so approved or
recommended; or
(iii) There is consummated a merger or consolidation of
the Corporation with any other corporation, other than (A) a merger or
consolidation which would result in the voting securities of the Corporation
outstanding immediately prior to such merger or consolidation continuing to
represent (either by remaining outstanding or by being converted into voting
securities of the surviving entity or any parent thereof), in combination
with the ownership of any trustee or other fiduciary holding securities under
an employee benefit plan of the Corporation or any subsidiary of the
Corporation, at least seventy-five percent (75%) of the combined voting power
of the securities of the Corporation or such surviving entity or any parent
thereof outstanding immediately after such merger or consolidation, or (B) a
merger or consolidation effected to implement a recapitalization of the
Corporation (or similar transaction) in which no Person is or becomes the
Beneficial Owner, directly or indirectly, of securities of the Corporation
(not including in the securities beneficially owned by such Person any
securities acquired directly from the Corporation or its affiliates other
than in connection with the acquisition by the Corporation or its affiliates
of a business) representing twenty-five percent (25%) or more of the combined
voting power of the Corporation's then outstanding securities; or
(iv) The stockholders of the Corporation approve a plan
of complete liquidation or dissolution of the Corporation or there is
consummated an agreement for the sale or disposition by the Corporation of
all or substantially all of the Corporation's assets, other than a sale or
disposition by the Corporation of all or substantially all of the
Corporation's assets to an entity, at least seventy-five (75%) of the
combined voting power of the voting securities of which are owned by
stockholders of the Corporation in substantially the same proportions as
their ownership of the Corporation immediately prior to such sale.
4.5 GROSS-UP. If any of the Total Payments (as hereinafter
defined) will be subject to the tax imposed by Section 4999 of the Code (the
"Excise Tax"), Corporation shall pay to Officer, no later than the tenth
(10th) day following the Early Termination Date, an additional amount (the
"Gross-Up Payment") such that the net amount retained by him, after deduction
of any Excise Tax on the Total Payments and any federal and state and local
income tax upon the payment provided for by this Paragraph, shall be equal to
the excess of the Total Payments over the payment provided for by this
Paragraph. For purposes of determining whether any of the Total Payments
will be subject to the Excise Tax and the amount of such Excise Tax, (i) all
payments or benefits received or to be received by Officer in connection with
a Change in Control or the termination of Officer's employment (whether
payable pursuant to the terms of this Agreement or of any other plan,
arrangement or agreement with
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Corporation, its successors, any person whose actions result in a Change in
Control or any person affiliated (or which, as a result of the completion of
the transactions causing a Change in Control, will become affiliated) with
Corporation or such person within the meaning of Section 1504 of the Code
(the "Total Payments")) shall be treated as "parachute payments" (within the
meaning of Section 280G(b)(2) of the Code) unless, in the opinion of tax
counsel selected by Corporation's independent auditors and reasonably
acceptable to Officer, such payments or benefits (in whole or in part) do not
constitute parachute payments, including by reason of Section 280G(b)(4)(A)
of the Code, and all "excess parachute payments" (within the meaning of
Section 280G(b)(1) of the Code) shall be treated as subject to the Excise
Tax, unless in the opinion of such tax counsel such excess parachute payments
represent reasonable compensation for services actually rendered within the
meaning of Section 280G(b)(4)(B) of the Code, or are not otherwise subject to
the Excise Tax, and (ii) the value of any noncash benefits or any deferred
payment or benefit shall be determined by the Corporation's independent
auditors in accordance with the principles of Sections 280G(d)(3) and (4) of
the Code. For purposes of determining the amount of the Gross-Up Payment,
Officer shall be deemed to pay federal income taxes at the highest marginal
rate of federal income taxation in the calendar year in which the Gross-Up
Payment is to be made and state and local income taxes at the highest
marginal rate of taxation in the state and locality of the residence of
Officer on the Early Termination Date, net of the maximum reduction in
federal income taxes that could be obtained from deduction of such state and
local taxes.
4.6 OFFSET. Although Officer shall not be required to mitigate
damages under this Agreement by seeking other comparable employment or
otherwise, the amount of any payment or benefit provided for in this
Agreement, including, without limitation, welfare benefits, shall be reduced
by any compensation earned by or provided to Officer as the result of
employment by an employer other than Corporation prior to the expiration of
the Term of this Agreement; PROVIDED, HOWEVER, that this Paragraph 4.6 shall
not apply in the event of a Termination Upon a Change in Control.
5. NONCOMPETITION.
During the Term of this Agreement, including the period, if any, with
respect to which Officer shall be entitled to Severance Payments, Officer shall
not engage in any activity competitive with the business of Corporation.
6. MISCELLANEOUS.
6.1 PAYMENT OBLIGATIONS. Corporation's obligation to pay Officer the
compensation and to make the arrangements provided herein shall be
unconditional, and
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Officer shall have no obligation whatsoever to mitigate damages hereunder.
If arbitration after a Change in Control shall be brought to enforce or
interpret any provision contained herein, Corporation shall, to the extent
permitted by applicable law and Corporation's Articles of Incorporation and
By-Laws, indemnify Officer for Officer's attorneys' fees and disbursements
incurred in such arbitration.
6.2 CONFIDENTIALITY. Officer agrees that all confidential and
proprietary information relating to the business of Corporation shall be kept
and treated as confidential both during and after the Term of this Agreement,
except as may be permitted in writing by the Board or as such information is
within the public domain or comes within the public domain without any breach
of this Agreement.
6.3 WAIVER. The waiver of the breach of any provision of this
Agreement shall not operate or be construed as a waiver of any subsequent
breach of the same or other provision hereof.
6.4 ENTIRE AGREEMENT; MODIFICATIONS. Except as otherwise provided
herein, this Agreement (together with the agreements and plans referred to
herein) represents the entire understanding among the parties with respect to
the subject matter hereof, and this Agreement supersedes any and all prior
understandings, agreements, plans and negotiations, whether written or oral,
with respect to the subject matter hereof, including, without limitation, any
understandings, agreements or obligations respecting any past or future
compensation, bonuses, reimbursements or other payments to Officer from
Corporation. All modifications to the Agreement must be in writing and
signed by the party against whom enforcement of such modification is sought.
6.5 NOTICES. All notices and other communications under this
Agreement shall be in writing and shall be given by facsimile or first-class
mail, certified or registered with return receipt requested, and shall be
deemed to have been duly given three (3) days after mailing or twenty-four
(24) hours after transmission of a facsimile to the respective persons named
below:
If to Corporation: Alexandria Real Estate Equities, Inc.
251 South Lake Avenue
Pasadena, California 91101
Phone: (818) 578-6812
Facsimile: (818) 578-6966
If to Officer: Gary A. Kreitzer
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17511 Caminito Canasto
San Diego, California 92127
Phone: (619) 485-9425
Any party may change such party's address for notices by notice duly given
pursuant hereto.
6.6 HEADINGS. The Paragraph headings herein are intended for
reference only and shall not by themselves determine the construction, or
interpretation of this Agreement.
6.7 GOVERNING LAW. Other than with respect to Paragraph 6.13
below, this Agreement shall be governed by and construed in accordance with
the laws of the State of California without regard to its principles of
conflict of laws.
6.8 ARBITRATION. Any dispute arising out of or relating to this
Agreement that cannot be settled by good faith negotiation between the
parties shall be submitted to ENDISPUTE for final and binding arbitration
pursuant to ENDISPUTE's Arbitration Rules incorporated herein by reference,
which arbitration shall be the exclusive remedy of the parties hereto. The
resulting arbitration shall be deemed a final order of a court having
jurisdiction over the subject matter, shall not be appealable, and shall be
enforceable in any court of competent jurisdiction. Submission to
arbitration, as provided in Exhibit A, shall not preclude the right of any
party hereto involved in a dispute regarding this Agreement (each a
"Disputing Party" and collectively, the "Disputing Parties") to institute
proceedings at law or in equity for injunctive or other relief pending the
arbitration of a matter subject to arbitration pursuant to this Agreement.
Any documentation and information submitted by any party in the arbitration
proceeding shall be kept strictly confidential by the parties and the
arbitrator.
In addition to any other relief or award granted by the arbitrator
to either Disputing Party, the arbitrator shall determine the extent to which
each Disputing Party has prevailed as to the material issues raised in the
arbitration, and, based upon such determination, shall apportion to each
Disputing Party its ratable share of (i) the Disputing Parties' reasonable
attorneys' fees and other costs reasonably incurred in the arbitration, (ii)
the expense of the arbitrator, and (iii) all other expenses of the
arbitration; PROVIDED, HOWEVER, that any dispute following a Change in
Control shall be governed by the provisions of Paragraph 6.1 above. The
arbitrator shall make such determination and apportionment whether or not the
dispute proceeds to a final award.
6.9 SEVERABILITY. Should a court or other body of competent
jurisdiction determine that any provision of this Agreement is excessive in
scope or otherwise invalid or unenforceable, such provision shall be adjusted
rather than voided, if possible, and all other
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provisions of this Agreement shall be deemed valid and enforceable to the
extent lawfully permitted.
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6.10 SURVIVAL OF CORPORATION'S OBLIGATIONS. Corporation's
obligations hereunder shall not be terminated by reason of any liquidation,
dissolution, bankruptcy, cessation of business, or similar event relating to
Corporation. This Agreement shall not be terminated by any merger or
consolidation or other reorganization of Corporation. In the event any such
merger, consolidation or reorganization shall be accomplished by transfer of
stock or by transfer of assets or otherwise, the provisions of this Agreement
shall be binding upon and inure to the benefit of the surviving or resulting
corporation or person. This Agreement shall be binding upon and inure to the
benefit of the executors, administrators, heirs, successors and assigns of
the parties; PROVIDED, HOWEVER, that except as herein expressly provided,
this Agreement shall not be assignable either by Corporation (except to an
affiliate of the Corporation, in which event Corporation shall remain liable
if the affiliate fails to meet any obligations to make payments or provide
benefits or otherwise) or by Officer.
6.11 SURVIVAL OF CERTAIN RIGHTS AND OBLIGATIONS. The rights and
obligations of the parties hereto pursuant to Paragraphs 4.3, 4.4, 4.5, 4.6,
5 and 6.1, 6.2, 6.10, 6.11 and 6.13 hereof shall survive the termination of
this Agreement.
6.12 COUNTERPARTS. This Agreement may be executed in one or more
counterparts, all of which taken together shall constitute one and the same
Agreement.
6.13 INDEMNIFICATION. In addition to any rights to indemnification
to which Officer is entitled under the Corporation's Articles of
Incorporation and By-Laws, Corporation shall indemnify Officer at all times
during and after the Term of this Agreement to the maximum extent permitted
under Section 2-418 of the General Corporation Law of the State of Maryland
or any successor provision thereof and any other applicable state law, and
shall pay Officer's expenses in defending any civil or criminal action, suit,
or proceeding in advance of the final disposition of such action, suit, or
proceeding, to the maximum extent permitted under such applicable state laws.
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IN WITNESS WHEREOF, the parties hereto have executed this Agreement.
CORPORATION:
ALEXANDRIA REAL ESTATE EQUITIES, INC.,
a Maryland corporation
By: /s/ JOEL S. MARCUS
------------------------------------
Joel S. Marcus
Chief Executive Officer
Date: 6-2-97
-----------------------------------
OFFICER:
/s/ GARY A. KREITZER
-----------------------------------------
Gary A. Kreitzer
Date: 7-22-97
------------------------------------
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- -------------------------------------------------------------------------------
AMENDED AND RESTATED EXECUTIVE EMPLOYMENT AGREEMENT
by and between
ALEXANDRIA REAL ESTATE EQUITIES, INC.
a Maryland corporation,
and
STEVEN A. STONE,
an individual
- -------------------------------------------------------------------------------
<PAGE>
AMENDED AND RESTATED EXECUTIVE EMPLOYMENT AGREEMENT
THIS AMENDED AND RESTATED EXECUTIVE EMPLOYMENT AGREEMENT (this
"Agreement") originally made and entered into as of the fifth (5th) day of
January, 1994, (the "Original Effective Date"), by and between Health Science
Properties Holding Corp., a Maryland corporation (the "Parent") and Steven A.
Stone, an individual (the "Officer") is hereby amended and restated in its
entirety effective as of March 28, 1997 (the "Effective Date") to read as
follows:
RECITAL
WHEREAS, on November 3, 1994, Parent transferred to its then wholly-
owned subsidiary Alexandria Real Estate Equities, Inc., a Maryland corporation
(formerly, Health Science Properties, Inc.) (the "Corporation") substantially
all of its property, assets and certain liabilities, including Parent's rights
and obligations under this Agreement;
WHEREAS, on July 30, 1996, this Agreement was amended pursuant to an
agreement between the Corporation and Officer;
WHEREAS, Corporation desires to continue to employ Officer as its Vice
President, and Officer is willing to continue to accept such employment by
Corporation, on the terms and subject to the conditions set forth in this
Agreement.
NOW, THEREFORE, in consideration of the mutual covenants contained
herein and other good and valuable consideration, the receipt and sufficiency of
which is hereby acknowledged, the parties hereto agree to amend and restate this
Agreement as follows:
POSITION AND DUTIES; LOCATION.
During the Term (as defined in Paragraph 2 below) of this Agreement,
Officer agrees to be employed by and to serve Corporation as its Vice President
or in such other capacity consistent with the Officer's current position as a
senior executive officer as may be determined by the Board of Directors of the
Corporation (the "Board"). Corporation agrees to employ and retain Officer in
such capacities. Officer shall devote such of his business time, energy, and
skill to the affairs of Corporation as shall be necessary to perform the duties
of such positions. Officer shall report to the President or such other officer
as the Board shall direct, and at all times during the Term (as defined in
Paragraph 2 below) of this Agreement
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shall have powers and duties at least commensurate with his position as a senior
executive officer. Officer shall be based at the offices of Corporation in the
San Diego, California metropolitan area, except for required travel on
Corporation's business.
2. TERM OF EMPLOYMENT.
The term (the "Term") of this Agreement shall be for a period
commencing on January 1, 1997 and ending on December 31, 1998 (the "Termination
Date"), unless terminated earlier pursuant to this Agreement (the "Early
Termination Date"). Commencing on December 31, 1998 and on each subsequent
anniversary thereof, the Term shall be automatically extended for one (1)
additional year unless, no later than six (6) months before such date, either
party shall have given written notice to the other that it does not wish to
extend the Term of this Agreement. References herein to the Term of this
Agreement shall refer to both the initial Term and any such extended Term.
3. COMPENSATION, BENEFITS AND REIMBURSEMENT.
3.1 BASE SALARY. During the Term of this Agreement, Officer shall be
entitled to the following base salary:
(a) MINIMUM BASE. During the Term of this Agreement and subject to
the terms and conditions set forth herein, Corporation agrees to pay to Officer
an annual "Base Salary" of One Hundred Five Thousand Dollars ($105,000), or such
higher amount as may from time to time be determined by Corporation. Unless
otherwise agreed in writing by Officer and Corporation, and subject to
Subparagraph (b) below, the salary shall be payable in substantially equal
semimonthly installments in accordance with the standard policies of
Corporation inexistence from time to time.
(b) EARNED BASE SALARY. For purposes of any early termination of this
Agreement as provided in Paragraph 4 below, the term "Earned Base Salary" shall
mean all semimonthly installments of the Base Salary which have become due and
payable to Officer together with any partial monthly installment prorated on a
daily basis up to and including the applicable Termination Date.
3.2 INCREASES IN BASE SALARY. Officer's Base Salary shall be reviewed
no less frequently than on each anniversary of the Original Effective Date
during the Term by the Board (or such committee as may be appointed by the Board
for such purpose). The Base Salary payable to Officer shall be increased on
each such anniversary date (and such other times as the Board or a committee of
the Board may deem appropriate during the Term of this
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Agreement) to an amount determined by the Board (or a committee of the Board).
Each such new Base Salary shall become the base for each successive year
increase; PROVIDED, HOWEVER, that such increase, at a minimum, shall be equal to
the cumulative cost-of-living increment as reported in the "Consumer Price
Index, Los Angeles, California, All Items," published by the U.S. Department of
Labor (using January 1, 1994 as the base date for comparison). Any increase in
Base Salary or other compensation shall in no way limit or reduce any other
obligations of Corporation hereunder and, once established at an increased
specified rate, Officer's Base Salary shall not be reduced unless Officer
otherwise agrees in writing.
3.3 BONUS. Officer shall be eligible to receive a bonus for each
fiscal year of Corporation (or portion thereof) during the Term of this
Agreement, with the actual amount of any such bonus to be determined in the
sole discretion of the Board (or a committee of the Board) based upon its
evaluation of Officer's performance during such year and such other factors and
conditions as the Board (or a committee of the Board) deems relevant. Any such
bonus shall be payable within seventy-five (75) days after the end of
Corporation's fiscal year to which such bonus relates. The Board shall, at an
appropriate subsequent time, consider for the benefit of Officer and other
specified executive officers of the Corporation the establishment of an annual
incentive compensation plan providing for the payment of a minimum annual bonus
based upon the achievement of certain objective criteria for the benefit of
Officer and other specified executive officers of Corporation.
3.4 ADDITIONAL BENEFITS. During the Term of this Agreement, Officer
shall be entitled to the following additional benefits:
(a) OFFICER BENEFITS. Officer shall be eligible to participate in
such of Corporation's benefit and deferred compensation plans as are made
available to executive officers of Corporation, including, without limitation,
Corporation's stock incentive plans, annual incentive compensation plans, profit
sharing/pension plans, deferred compensation plans, annual physical
examinations, dental, vision, sick pay, and medical plans, personal catastrophe
and accidental death insurance plans, financial planning and automobile
arrangements, retirement plans and supplementary executive retirement plans, if
any. For purposes of establishing the length of service under any benefit plans
or programs of Corporation, Officer's employment with the Corporation will be
deemed to have commenced on the Original Effective Date of this Agreement.
Until Corporation adopts a package of health and medical benefits, Corporation
shall promptly reimburse Officer for payments made by Officer (i) with respect
to the continuation of benefits provided by Officer's previous employer pursuant
to Section 4980B ("COBRA") of the Internal Revenue Code of 1986, as amended (the
"Code"), (ii) upon expiration of COBRA coverage to maintain substantially
similar health and medical benefits coverage for Officer and his family, and
(iii) if Officer is not covered by
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COBRA, to maintain reasonable health and medical benefits coverage for Officer
and his family.
(b) VACATION. During the Term of this Agreement, Officer shall be
entitled to four (4) weeks of vacation during each year during the Term of this
Agreement and any extensions thereof, prorated for partial years. Any accrued
vacation not taken during any year may be carried forward to subsequent years;
PROVIDED that Officer may not accrue more than eight (8) weeks of unused
vacation at any time.
(c) LIFE INSURANCE. During the Term of this Agreement, Corporation
shall, at its sole cost and expense, procure and keep in effect term life
insurance (a minimum three (3) year term certain policy) on the life of
Officer, payable to such beneficiaries as Officer may from time-to-time
designate, in the aggregate amount of One Million Dollars ($1,000,000). Such
policy shall be owned by Officer or by a member of his immediate family.
Corporation shall have no incidents of ownership therein.
(d) DISABILITY INSURANCE. During the Term of this Agreement,
Corporation shall, at its sole cost and expense, procure and keep in effect
disability insurance similar to Officer's current disability insurance policy
on Officer, payable to Officer in an annual amount not less than sixty percent
(60%) of Officer's then existing Base Salary (the "Disability Policy"). For
purposes of this Agreement,"Permanent Disability" shall have the same meaning
as is ascribed to such terms in the Disability Policy (including the COBRA
Disability Policy) covering Officer at the time of occurrence of such Permanent
Disability.
(e) REIMBURSEMENT FOR EXPENSES. During the Term of this Agreement,
Corporation shall reimburse Officer for all reasonable out-of-pocket business
and/or entertainment expenses incurred by Officer for the purpose of and in
connection with the performance of his services pursuant to this Agreement.
Officer shall be entitled to such reimbursement upon the presentation by Officer
to Corporation of vouchers or other statements itemizing such expenses in
reasonable detail consistent with Corporation's policies. In addition, Officer
shall be entitled to reimbursement for (i) dues and membership fees in
professional organizations and/or industry associations in which Officer is
currently a member or becomes a member, and (ii) appropriate industry seminars
and mandatory continuing education.
(f) WITHHOLDING. Compensation and benefits paid to Officer under this
Agreement shall be subject to applicable federal, state and local wage
deductions and other deductions required by law.
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4. TERMINATION OF THE AGREEMENT.
4.1 TERMINATION BY CORPORATION DEFINED.
(a) TERMINATION WITHOUT CAUSE. Subject to the provisions set forth in
Paragraph 4.3 below, "Termination Without Cause" shall constitute any
termination by Corporation other than termination for Cause (as defined in
Paragraph 4.1(b) below).
(b) TERMINATION FOR CAUSE. Subject to the provisions set forth in
Paragraph 4.3 below, prior to the Termination Date, Corporation shall have the
right to terminate this Agreement for Cause immediately after written notice has
been delivered to Officer, which notice shall specify the reason for and the
effective date of such Termination (which date shall be the applicable Early
Termination Date). For purposes of this Agreement, "Cause" shall mean the
following:
(i) Officer's use of alcohol or narcotics which proximately
results in the willful material breach or habitual willful neglect of Officer's
duties under this Agreement;
(ii) Officer's criminal conviction of fraud, embezzlement,
misappropriation of assets, malicious mischief, or any felony;
(iii) Officer's willful Material Breach (as defined below) of
this Agreement, if such willful Material Breach is not cured by Officer within
thirty (30) days after Corporation's written notice thereof specifying the
nature of such willful Material Breach. For purposes of this Paragraph 4.1(b),
the term willful "Material Breach" shall mean the substantial and continual
willful nonperformance of Officer's duties under this Agreement which the Board
determines has resulted in material injury to Corporation.
(c) TERMINATION BY REASON OF DEATH OR DISABILITY. Subject to the
provisions set forth in Paragraph 4.3 below, prior to the Termination Date,
Corporation shall have the right to terminate this Agreement by reason of
Officer's death or Permanent Disability.
4.2 TERMINATION BY OFFICER DEFINED.
(a) TERMINATION OTHER THAN FOR GOOD REASON. Subject to the provisions
set forth in Paragraph 4.3 below, Officer shall have the right to terminate this
Agreement for any reason other than for Good Reason (as defined in Paragraph
4.2(b) below), at any time prior to the Termination Date, upon written notice
delivered to Corporation thirty (30) days prior to
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the effective date of termination specified in such notice (which date shall
be the applicable Early Termination Date).
(b) TERMINATION FOR GOOD REASON. Subject to the provisions of
Paragraph 4.3 below, Officer shall have the right to terminate this Agreement
prior to the Termination Date in the event of the material breach of this
Agreement by Corporation, if such breach is not cured by Corporation within
thirty (30) days after written notice thereof specifying the nature of such
breach has been delivered to Corporation or following a Change in Control (as
defined in Paragraph 4.4(e) below), under the circumstances set forth in
Paragraph 4.2(c) below. For purposes of this Agreement, termination of this
Agreement by Officer in the event of Corporation's material breach of this
Agreement in accordance with the provisions of this Paragraph 4.2(b) shall be
defined as termination by Officer for "Good Reason."
(c) GOOD REASON FOLLOWING A CHANGE IN CONTROL. Following a Change
in Control (as defined in Paragraph 4.4(e) below), "Good Reason" shall mean,
without Officer's express written consent, a material breach of this
Agreement by Corporation, including the occurrence of any of the following
circumstances, which breach is not fully corrected within thirty (30) days
after written notice thereof specifying the nature of such breach has been
delivered to Corporation:
(a) the assignment to Officer of any duties inconsistent with
the position in Corporation that Officer held immediately prior to the Change
in Control, or an adverse alteration in the nature or status of Officer's
responsibilities from those in effect immediately prior to such change;
(b) a reduction by Corporation in Officer's annual base
salary as in effect on the date hereof or as the same may be increased from
time-to-time;
(c) the relocation of Officer's offices to a location outside
the San Diego metropolitan area (or, if different, the metropolitan area in
which such offices are located immediately prior to the Change in Control) or
Corporation's requiring Officer to travel on Corporation's business to an
extent not substantially consistent with Officer's business travel
obligations immediately prior to the Change in Control;
(d) the failure by Corporation to pay Officer any portion of
his current compensation except pursuant to an across-the-board compensation
deferral similarly affecting all officers of Corporation and all officers of
any person whose actions resulted in a Change in Control or any person
affiliated with Corporation or such person, or to pay Officer
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any portion of an installment of deferred compensation under any deferred
compensation program of Corporation, within seven (7) days of the date such
compensation is due;
(e) the failure by Corporation to continue in effect any
compensation plan in which Officer participates immediately prior to the
Change in Control which is material to Officer's total compensation, unless
an equitable arrangement (embodied in an ongoing substitute or alternative
plan) has been made with respect to such plan, or the failure by Corporation
to continue Officer's participation therein (or in such substitute or
alternative plan) on a basis not materially less favorable, both in terms of
the amount of benefits provided and the level of participation relative to
other participants, as existed at the time of the Change in Control;
(f) the failure by Corporation to continue to provide Officer
with benefits substantially similar to those under any of Corporation's life
insurance, medical, health and accident, or disability plans in which Officer
was participating at the time of the Change in Control, the taking of any
action by Corporation which would directly or indirectly materially reduce
any of such benefits or deprive Officer of any material fringe benefit
enjoyed by him at the time of the Change in Control, or the failure by
Corporation to provide Officer with the number of paid vacation days to which
he is entitled on the basis of years of service with Corporation in
accordance with Corporation's normal vacation policy in effect at the time of
the Change in Control; or
(g) the failure of Corporation to obtain a satisfactory
agreement from any successor to assume and agree to perform this Agreement.
Officer's right to terminate Officer's employment for Good Reason
shall not be affected by Officer's incapacity due to physical or mental
illness. Officer's continued employment shall not constitute consent to, or a
waiver of rights with respect to, any circumstance constituting Good Reason
hereunder.
4.3 EFFECT OF TERMINATION. In the event that this Agreement is
terminated by Corporation or Officer prior to the Termination Date in
accordance with the provisions of this Paragraph 4, the obligations and
covenants of the parties under Paragraph 4 shall be of no further force and
effect, except for the obligations of the parties set forth below in this
Paragraph 4.3, and such other provisions of this Agreement which shall
survive termination of this Agreement as provided in Paragraph 6.11 below.
Except as otherwise specifically set forth, all amounts due upon termination
shall be payable on the date such amounts would otherwise have been paid had
the Agreement continued through its Term; PROVIDED, HOWEVER, that Deferred
Amounts (as defined in Paragraph 4.3(a)(i) below) shall be payable within
thirty
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(30) days following the Early Termination Date. In the event of any such
early termination in accordance with the provisions of this Paragraph 4.3,
Officer shall be entitled to the following:
(a) TERMINATION BY CORPORATION.
(i) TERMINATION WITHOUT CAUSE. In the event that Corporation
terminates this Agreement without Cause pursuant to Paragraph 4.1(a) above,
Officer shall be entitled to (i) Earned Base Salary; (ii) earned benefits and
reimbursable expenses; (iii) any earned bonus which Officer has been awarded
pursuant to the terms of this Agreement or any other plan or arrangement as
of the Early Termination Date, but which has not been received by Officer as
of such date; (iv) any compensation earned but deferred ("Deferred Amounts");
and (v) the Severance Payment (as defined in Paragraph 4.4 below).
(ii) TERMINATION FOR CAUSE, DEATH OR PERMANENT DISABILITY. In
the event that Corporation terminates this Agreement for Cause pursuant to
Paragraph 4.1(b) above or by reason of Permanent Disability or death pursuant
to Paragraph 4.1(c) above, Officer shall be entitled to (i) Earned Base
Salary; (ii) any earned bonus which Officer has been awarded pursuant to the
terms of this Agreement or any other plan or arrangement as of the Early
Termination Date, but which has not been received by Officer as of such date;
(iii) earned benefits and reimbursable expenses; and (iv) any Deferred
Amounts. Officer shall not be entitled to any future annual bonus or
Severance Payment.
(b) TERMINATION BY OFFICER.
(i) TERMINATION OTHER THAN FOR GOOD REASON. In the event
that Officer terminates this Agreement other than for Good Reason, Officer
shall be entitled to (i) Earned Base Salary; (ii) any earned bonus which
Officer has been awarded pursuant to the terms of this Agreement or any other
plan or arrangement as of the Early Termination Date, but which has not been
received by Officer as of such date; (iii) earned benefits and reimbursable
expenses; and (iv) any Deferred Amounts. Officer shall not be entitled to
any future annual bonus or Severance Payment.
(ii) TERMINATION FOR GOOD REASON. In the event that Officer
terminates this Agreement for Good Reason, Officer shall be entitled to (i)
Earned Base Salary; (ii) earned benefits and reimbursable expenses; (iii) any
earned bonus which Officer has been awarded pursuant to the terms of this
Agreement or any other plan or arrangement as of the Early Termination Date,
but which has not been received by Officer as of such date; (iv) any Deferred
Amounts; and (v) the Severance Payment (as defined in Paragraph 4.4 below).
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4.4 SEVERANCE PAYMENT.
(a) DEFINITION OF "SEVERANCE PAYMENT." For purposes of this
Agreement, the term "Severance Payment" shall mean an amount equal to the sum
of (i) the Base Salary otherwise payable to Officer during the remainder of
the Term had such early termination of this Agreement not occurred (the
"Severance Period") and (ii) for each full year remaining in the Severance
Period, the average of the annual bonuses earned by Officer in the two (2)
years immediately preceding the date of termination (or if there are less
than two (2) years immediately preceding such date, an amount equal to the
immediately preceding bonus earned) (the "Average Bonus"); PROVIDED, HOWEVER,
that in the event that, following a Change in Control (as defined in
Paragraph 4.4(e) below), Officer terminates this Agreement for Good Reason
pursuant to Paragraph 4.2(b) above, the term "Severance Payment" shall mean
three (3) times the sum of the Base Salary then in effect and the Average
Bonus; FURTHER PROVIDED, HOWEVER, that in the event that (i) Officer's
employment is terminated in connection with or following the Board's good
faith determination that the possible long-run loss of Corporation may
reasonably be expected to increase unreasonably if Corporation is not
dissolved and (ii) such dissolution is effected in accordance with applicable
law, the term "Severance Payment" shall mean the Base Salary then in effect,
and the term "Severance Period" shall mean the one-year period immediately
following Officer's date of termination of employment.
(b) PAYMENT OF SEVERANCE PAYMENT. In the event that Officer is
entitled to any Severance Payment pursuant to Paragraph 4.3 above, that
portion of such Severance Payment that represents Base Salary shall be
payable in monthly installments, and that portion of such Severance Payment
that represents the Average Bonus shall be payable on the dates such amounts
would have been paid had Officer continued in Corporation's employment for
the Severance Period; PROVIDED, HOWEVER, that in the event of a Termination
upon a Change in Control (as defined in Paragraph 4.4(e) below), the
Severance Payment shall be payable in a lump sum within ten (10) days
following such termination.
(c) OTHER SEVERANCE BENEFITS. In the event that Officer is
entitled to any Severance Payment pursuant to Paragraph 4.3 above, he shall
also be entitled to full and immediate vesting of any awards granted to
Officer under Corporation's stock option or incentive compensation plans, and
continued participation throughout the Severance Period in all employee
welfare and pension benefit plans, programs or arrangements. In the event
Officer's participation in any such plan, program or arrangement is barred,
Corporation shall arrange to provide Officer with substantially similar
benefits.
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(d) FULL SETTLEMENT OF ALL OBLIGATIONS. Officer hereby
acknowledges and agrees that any Severance Payment paid to Officer hereunder
shall be deemed to be in full and complete settlement of all obligations of
Corporation under this Agreement.
(e) CHANGE IN CONTROL. For purposes of this Agreement,
"Termination Upon a Change in Control" shall mean a termination of Officer's
employment with Corporation following a "Change in Control" by Officer for
Good Reason or by Corporation Other Than for Cause. A "Change in Control"
shall be deemed to have occurred if:
(i) Any Person, as such term is used in section 3(a)(9)
of the Securities Exchange Act of 1934 as amended from time to time (the
"Exchange Act"), as modified and used in sections 13(d) and 14(d) thereof,
except that such term shall not include (A) the Corporation or any of its
subsidiaries, (B) a trustee or other fiduciary holding securities under an
employee benefit plan of the Corporation or any of its affiliates, (C) an
underwriter temporarily holding securities pursuant to an offering of such
securities, (D) a corporation owned, directly or indirectly, by the
stockholders of the Corporation in substantially the same proportions as
their ownership of stock of the Corporation, or (E) a person or group as used
in Rule 13d-1(b) under the Exchange Act, that is or becomes the Beneficial
Owner, as such term is defined in Rule 13d-3 under the Exchange Act, directly
or indirectly, of securities of the Corporation (not including in the
securities beneficially owned by such Person any securities acquired directly
from the Corporation or its affiliates other than in connection with the
acquisition by the Corporation or its affiliates of a business) representing
twenty-five percent (25%) or more of the combined voting power of the
Corporation's then outstanding securities; or
(ii) The following individuals cease for any reason to
constitute a majority of the number of directors then serving: individuals
who, on the date hereof, constitute the Board and any new director (other
than a director whose initial assumption of office is in connection with an
actual or threatened election contest, including but not limited to a consent
solicitation, relating to the election of directors of the Corporation) whose
appointment or election by the Board or nomination for election by the
Corporation's stockholders was approved or recommended by a vote of at least
two-thirds (2/3) of the directors then still in office who either were
directors on the date hereof or whose appointment, election or nomination for
election was previously so approved or recommended; or
(iii) There is consummated a merger or consolidation of the
Corporation with any other corporation, other than (A) a merger or consolidation
which would result in the voting securities of the Corporation outstanding
immediately prior to such merger or consolidation continuing to represent
(either by remaining outstanding or by being con-
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verted into voting securities of the surviving entity or any parent thereof),
in combination with the ownership of any trustee or other fiduciary holding
securities under an employee benefit plan of the Corporation or any
subsidiary of the Corporation, at least seventy-five percent (75%) of the
combined voting power of the securities of the Corporation or such surviving
entity or any parent thereof outstanding immediately after such merger or
consolidation, or (B) a merger or consolidation effected to implement a
recapitalization of the Corporation (or similar transaction) in which no
Person is or becomes the Beneficial Owner, directly or indirectly, of
securities of the Corporation (not including in the securities beneficially
owned by such Person any securities acquired directly from the Corporation or
its affiliates other than in connection with the acquisition by the
Corporation or its affiliates of a business) representing twenty-five percent
(25%) or more of the combined voting power of the Corporation's then
outstanding securities; or
(iv) The stockholders of the Corporation approve a plan
of complete liquidation or dissolution of the Corporation or there is
consummated an agreement for the sale or disposition by the Corporation of
all or substantially all of the Corporation's assets, other than a sale or
disposition by the Corporation of all or substantially all of the
Corporation's assets to an entity, at least seventy-five (75%) of the
combined voting power of the voting securities of which are owned by
stockholders of the Corporation in substantially the same proportions as
their ownership of the Corporation immediately prior to such sale.
4.5 GROSS-UP. If any of the Total Payments (as hereinafter
defined) will be subject to the tax imposed by Section 4999 of the Code (the
"Excise Tax"), Corporation shall pay to Officer, no later than the tenth
(10th) day following the Early Termination Date, an additional amount (the
"Gross-Up Payment") such that the net amount retained by him, after deduction
of any Excise Tax on the Total Payments and any federal and state and local
income tax upon the payment provided for by this Paragraph, shall be equal to
the excess of the Total Payments over the payment provided for by this
Paragraph. For purposes of determining whether any of the Total Payments
will be subject to the Excise Tax and the amount of such Excise Tax, (i) all
payments or benefits received or to be received by Officer in connection with
a Change in Control or the termination of Officer's employment (whether
payable pursuant to the terms of this Agreement or of any other plan,
arrangement or agreement with Corporation, its successors, any person whose
actions result in a Change in Control or any person affiliated (or which, as
a result of the completion of the transactions causing a Change in Control,
will become affiliated) with Corporation or such person within the meaning of
Section 1504 of the Code (the "Total Payments")) shall be treated as
"parachute payments" (within the meaning of Section 280G(b)(2) of the Code)
unless, in the opinion of tax counsel selected by Corporation's independent
auditors and reasonably acceptable to Officer, such payments or benefits (in
whole or in part) do not constitute parachute payments, including by
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reason of Section 280G(b)(4)(A) of the Code, and all "excess parachute
payments" (within the meaning of Section 280G(b)(l) of the Code) shall be
treated as subject to the Excise Tax, unless in the opinion of such tax
counsel such excess parachute payments represent reasonable compensation for
services actually rendered within the meaning of Section 280G(b)(4)(B) of the
Code, or are not otherwise subject to the Excise Tax, and (ii) the value of
any noncash benefits or any deferred payment or benefit shall be determined
by the Corporation's independent auditors in accordance with the principles
of Sections 280G(d)(3) and (4) of the Code. For purposes of determining the
amount of the Gross-Up Payment, Officer shall be deemed to pay federal income
taxes at the highest marginal rate of federal income taxation in the calendar
year in which the Gross-Up Payment is to be made and state and local income
taxes at the highest marginal rate of taxation in the state and locality of
the residence of Officer on the Early Termination Date, net of the maximum
reduction in federal income taxes that could be obtained from deduction of
such state and local taxes.
4.6 OFFSET. Although Officer shall not be required to mitigate
damages under this Agreement by seeking other comparable employment or
otherwise, the amount of any payment or benefit provided for in this
Agreement, including without limitation welfare benefits, shall be reduced by
any compensation earned by or provided to Officer as the result of employment
by an employer other than Corporation prior to the expiration of the Term of
this Agreement; PROVIDED, HOWEVER, that this Paragraph 4.6 shall not apply in
the event of a Termination Upon a Change in Control.
5. NONCOMPETITION.
During the Term of this Agreement, including the period, if any,
with respect to which Officer shall be entitled to Severance Payments,
Officer shall not engage in any activity competitive with the business of
Corporation.
6. MISCELLANEOUS.
6.1 PAYMENT OBLIGATIONS. Corporation's obligation to pay Officer
the compensation and to make the arrangements provided herein shall be
unconditional, and Officer shall have no obligation whatsoever to mitigate
damages hereunder. If arbitration after a Change in Control shall be brought
to enforce or interpret any provision contained herein, Corporation shall, to
the extent permitted by applicable law and Corporation's Articles of
Incorporation and By-Laws, indemnify Officer for Officer's attorneys' fees
and disbursements incurred in such arbitration.
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6.2 CONFIDENTIALITY. Officer agrees that all confidential and
proprietary information relating to the business of Corporation shall be kept
and treated as confidential both during and after the term of this Agreement,
except as may be permitted in writing by the Board or as such information is
within the public domain or comes within the public domain without any breach
of this Agreement.
6.3 WAIVER. The waiver of the breach of any provision of this
Agreement shall not operate or be construed as a waiver of any subsequent
breach of the same or other provision hereof.
6.4 ENTIRE AGREEMENT; MODIFICATIONS. Except as otherwise provided
herein, this Agreement (together with the agreements and plans referred to
herein) represents the entire understanding among the parties with respect to
the subject matter hereof, and this Agreement supersedes any and all prior
understandings, agreements, plans and negotiations, whether written or oral,
with respect to the subject matter hereof, including without limitation any
understandings, agreements or obligations respecting any past or future
compensation, bonuses, reimbursements or other payments to Officer from
Corporation. All modifications to the Agreement must be in writing and
signed by the party against whom enforcement of such modification is sought.
6.5 NOTICES. All notices and other communications under this
Agreement shall be in writing and shall be given by facsimile or first class
mail, certified or registered with return receipt requested, and shall be
deemed to have been duly given three (3) days after mailing or twenty-four
(24) hours after transmission of a facsimile to the respective persons named
below:
<TABLE>
<S> <C>
If to Corporation: Alexandria Real Estate Equities, Inc.
251 South Lake Avenue
Pasadena, California 91101
Phone: (818) 578-6812
Facsimile: (818) 578-6966
If to Officer: Steven A. Stone
3536 Santa Flora Court
Escondido, California 92029
Phone: (619) 432-0270
</TABLE>
Any party may change such party's address for notices by notice duly given
pursuant hereto.
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6.6 HEADINGS. The Paragraph headings herein are intended for
reference only and shall not by themselves determine the construction or
interpretation of this Agreement.
6.7 GOVERNING LAW. Other than with respect to Paragraph 6.13
below, this Agreement shall be governed by and construed in accordance with
the laws of the State of California without regard to its principles of
conflict of laws.
6.8 ARBITRATION. Any dispute arising out of or relating to this
Agreement that cannot be settled by good faith negotiation between the
parties shall be submitted to ENDISPUTE for final and binding arbitration
pursuant to ENDISPUTE's Arbitration Rules incorporated herein by reference,
which arbitration shall be the exclusive remedy of the parties hereto. The
resulting arbitration shall be deemed a final order of a court having
jurisdiction over the subject matter, shall not be appealable, and shall be
enforceable in any court of competent jurisdiction. Submission to
arbitration, as provided in Exhibit A, shall not preclude the right of any
party hereto involved in a dispute regarding this Agreement (each a
"Disputing Party" and collectively, the "Disputing Parties") to institute
proceedings at law or in equity for injunctive or other relief pending the
arbitration of a matter subject to arbitration pursuant to this Agreement.
Any documentation and information submitted by any party in the arbitration
proceeding shall be kept strictly confidential by the parties and the
arbitrator.
In addition to any other relief or award granted by the arbitrator
to either Disputing Party, the arbitrator shall determine the extent to which
each Disputing Party has prevailed as to the material issues raised in the
arbitration, and, based upon such determination, shall apportion to each
Disputing Party its ratable share of (i) the Disputing Parties' reasonable
attorneys' fees and other costs reasonably incurred in the arbitration, (ii)
the expense of the arbitrator, and (iii) all other expenses of the
arbitration; PROVIDED, HOWEVER, that any dispute following a Change in
Control shall be governed by the provisions of Paragraph 6.1 above. The
arbitrator shall make such determination and apportionment whether or not the
dispute proceeds to a final award.
6.9 SEVERABILITY. Should a court or other body of competent
jurisdiction determine that any provision of this Agreement is excessive in
scope or otherwise invalid or unenforceable, such provision shall be adjusted
rather than voided, if possible, and all other provisions of this Agreement
shall be deemed valid and enforceable to the lawfully permitted.
6.10 SURVIVAL OF CORPORATION'S OBLIGATIONS. Corporation's
obligations hereunder shall not be terminated by reason of any liquidation,
dissolution, bankruptcy, cessation of business, or similar event relating to
Corporation. This Agreement shall not be terminated by any merger or
consolidation or other reorganization of Corporation. In the
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event any such merger, consolidation or reorganization shall be accomplished
by transfer of stock or by transfer of assets or otherwise, the provisions of
this Agreement shall be binding upon and inure to the benefit of the
surviving or resulting corporation or person. This Agreement shall be binding
upon and inure to the benefit of the executors, administrators, heirs,
successors and assigns of the parties; PROVIDED, HOWEVER, that except as
herein expressly provided, this Agreement shall not be assignable either by
Corporation (except to an affiliate of the Corporation, in which event
Corporation shall remain liable if the affiliate fails to meet any
obligations to make payments or provide benefits or otherwise) or by Officer.
6.11 SURVIVAL OF CERTAIN RIGHTS AND OBLIGATIONS. The rights and
obligations of the parties hereto pursuant to Paragraphs 4.3, 4.4, 4.5, 4.6,
5 and 6.1, 6.2, 6.10, 6.11 and 6.13 hereof shall survive the termination of
this Agreement.
6.12 COUNTERPARTS. This Agreement may be executed in one or more
counterparts, all of which taken together shall constitute one and the same
Agreement.
6.13 INDEMNIFICATION. In addition to any rights to indemnification
to which Officer is entitled under the Corporation's Articles of
Incorporation and Bylaws, Corporation shall indemnify Officer at all times
during and after the Term of this Agreement to the maximum extent permitted
under Section 2-418 of the General Corporation Law of the State of Maryland
or any successor provision thereof and any other applicable state law, and
shall pay Officer's expenses in defending any civil or criminal action, suit,
or proceeding in advance of the final disposition of such action, suit, or
proceeding, to the maximum extent permitted under such applicable state laws.
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<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed this Agreement.
CORPORATION:
ALEXANDRIA REAL ESTATE EQUITIES, INC.,
a Maryland corporation
By: /s/ Joel S. Marcus
-----------------------------------
Joel S. Marcus
Chief Executive Officer
Date: 6-2-97
---------------------------------
OFFICER:
/s/ Steven A. Stone
--------------------------------------
Steven A. Stone
Date: 7-22-97
---------------------------------
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SECOND AMENDMENT TO THE EXECUTIVE EMPLOYMENT
AGREEMENT AND GENERAL AND SPECIAL RELEASE
This Second Amendment to the Executive Employment Agreement and
General and Special Release (this "Second Amendment and Release") is entered
into as of this 30th day of May, 1997, by and between ALEXANDRIA REAL ESTATE
EQUITIES, INC., a Maryland corporation (formerly known as Health Science
Properties, Inc.) (the "Corporation"), and JERRY M. SUDARSKY, an individual
(the "Officer") (collectively, the "Parties").
WHEREAS, Officer originally entered into that certain Executive
Employment Agreement (the "Employment Agreement"), dated as of June 9, 1994,
with Health Science Properties Holding Corporation (the "Parent"), and on
November 3, 1994, Parent transferred to the Corporation substantially all of
its property, assets and certain liabilities, including Parent's rights and
obligations under the Employment Agreement;
WHEREAS, on July 30, 1996, the Parties amended the Employment
Agreement by execution of that certain First Amendment to the Employment
Agreement Between Health Science Properties, Inc. And Jerry M. Sudarsky,
pursuant to which the Corporation agreed to employ Officer as its Chairman of
the Board of Directors (the "Chairman") and Chief Executive Officer until
December 31, 2000;
WHEREAS, on March 14, 1997, Officer resigned from the position of
Chief Executive Officer of the Corporation and currently serves as full-time
executive Chairman of the Corporation; and
WHEREAS, upon consummation of an initial public offering by the
Corporation of its common stock (the "IPO"), Officer desires to retire from
employment with the Corporation and thereafter to serve as non-executive
Chairman of the Corporation and perform the duties consistent with such
position for the duration of his term as Chairman, which expires at the next
annual election of officers.
NOW, THEREFORE, in consideration of the mutual covenants and
agreements contained herein, and for good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged, the Parties hereto
agree as follows:
<PAGE>
1. AMENDMENTS TO EMPLOYMENT AGREEMENT.
a. OFFICER'S RETIREMENT; TERMINATION OF EMPLOYMENT AGREEMENT.
Effective upon consummation of the IPO, Officer shall voluntarily retire from
employment with the Corporation. Except as expressly provided herein, all of
the Corporation's duties and obligations under the Employment Agreement shall
terminate effective as of the date of Officer's retirement. Officer
acknowledges and agrees that his voluntary retirement pursuant to this Second
Amendment and Release is not, and shall not be treated as, a Termination for
Good Reason pursuant to Section 4.2 of the Employment Agreement.
b. RETIREMENT BENEFITS. Section 3.5(e) of the Employment
Agreement is hereby amended in its entirety to read as follows:
"(e) RETIREMENT BENEFIT. Commencing on the date of consummation of the
IPO, the Company shall pay Officer an annual retirement benefit equal to
One Hundred Fifty Thousand Dollars ($150,000) per year for a period of
three (3) years, and, thereafter, shall pay Officer an annual retirement
benefit equal to Ninety Thousand Dollars ($90,000) per year as provided
herein; PROVIDED, HOWEVER, that commencing June 1 of the year following
the year in which the retirement benefit is reduced to Ninety Thousand
Dollars ($90,000) per year, the amount of the retirement benefit shall
be increased by 2% per year on June 1 of each year thereafter. The
benefit shall be payable monthly, beginning on the first day of the
month following the month in which consummation of the IPO occurs and
shall be payable in the form of a 100% joint and survivor annuity on the
lives of Officer and Officer's spouse as of the date hereof, if then
living; PROVIDED, HOWEVER that in the event of a Change in Control (as
defined in Section 4.4(d) of this Employment Agreement), the
Corporation shall secure the payment of such benefit through the
purchase of an annuity contract that provides Officer with the benefit
described in this Paragraph 3.5(e). In the event of Officer's death
prior to the commencement of the retirement benefit under this Paragraph
3.5(e), Officer's spouse as of the date hereof, if then living, shall be
entitled to receive, commencing on the first day of the month next
following Officer's death, the retirement benefit, the Officer's spouse
as of the date hereof, would have received had Officer retired and
commenced receiving benefits immediately prior to his death. Amounts
payable under this Paragraph 3.5(e) shall be offset by any amounts paid
to Officer under any Disability Policy maintained by the Corporation."
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c. SURVIVAL OF PROVISIONS. Notwithstanding the termination
of the Employment Agreement pursuant to Section 1(a), above, the rights and
obligations of the Parties with respect to Sections 3.5(e) (as amended in
Section 1(b), above), 5, 6.1, 6.2, 6.3, 6.8, 6.10, 6.11, and 6.13 of the
Employment Agreement shall survive the termination of that agreement.
2. STATUS AS CHAIRMAN OF THE BOARD OF DIRECTORS. The execution
of this Second Amendment and Release shall not preclude Officer from serving
as, and the Corporation hereby acknowledges that it intends to continue to
retain Officer as, non-executive Chairman performing the duties consistent
with such position at least for the remainder of his term as Chairman, which
expires at the next annual election of officers.
3. RELEASE OF CLAIMS AND OTHER MATTERS.
a. OFFICER'S GENERAL AND SPECIAL RELEASE. In consideration
of the benefits provided to Officer pursuant to this Second Amendment and
Release, Officer hereby forever releases and discharges the Corporation, its
parent, subsidiary and affiliated corporations, and each of their respective
present and former officers, directors, managers, agents, employees, and
attorneys, and their successors and assigns (collectively, the "Released
Parties") from any and all claims, charges, complaints, liens, demands,
causes of action, obligations, damages and liabilities, KNOWN OR UNKNOWN,
SUSPECTED OR UNSUSPECTED, that Officer had, now has, or may hereafter claim
to have against the Released Parties, arising out of or relating in any way
to Officer's employment with or his separation from the Corporation, any and
all alleged acts or omissions of any of the Released Parties, and any other
claim relating to any of the Released Parties from the beginning of time
through the effective date of Officer's resignation from the Corporation
pursuant to Section 1(a), above. This release specifically extends to,
without limitation, claims or causes of action for wrongful termination,
impairment of ability to compete in the open labor market, breach of an
express or implied contract, breach of the covenant of good faith and fair
dealing, breach of fiduciary duty, fraud, misrepresentation, defamation,
slander, infliction of emotional distress, disability, loss of future
earnings, and claims under the California Constitution, the United States
Constitution, and applicable state and federal fair employment laws, federal
equal employment opportunity laws, and federal and state labor statutes and
regulations, including, but not limited to, the Civil Rights Act of 1964, as
amended, the Fair Labor Standards Act, as amended, the Americans With
Disabilities Act of 1990, the Rehabilitation Act of 1973, as amended, the Em-
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ployee Retirement Income Security Act of 1974, as amended, the Age
Discrimination in Employment Act of 1967, as amended, and the California Fair
Employment and Housing Act. Notwithstanding the generality of the foregoing,
nothing contained herein shall release any of the Released Parties from their
obligations under this Second Amendment and Release.
b. OFFICER'S WAIVER OF RIGHTS AFFORDED BY CALIFORNIA CIVIL
CODE SECTION 1542. Officer expressly waives all rights afforded by Section
1542 of the Civil Code of the State of California ("Section 1542") with
respect to the Released Parties. Section 1542 states as follows:
A GENERAL RELEASE DOES NOT EXTEND TO CLAIMS WHICH THE CREDITOR DOES
NOT KNOW OR SUSPECT TO EXIST IN HIS FAVOR AT THE TIME OF EXECUTING THE
RELEASE, WHICH IF KNOWN BY HIM MUST HAVE MATERIALLY AFFECTED HIS
SETTLEMENT WITH THE DEBTOR.
Notwithstanding the provisions of Section 1542, and for the purpose of
implementing a full and complete release, Officer understands and agrees that
this Second Amendment and Release is intended to include all claims, if any,
that Officer may have which he does not now know or suspect to exist in his
favor against the Released Parties and this Second Amendment and Release
extinguishes those claims.
4. REVIEW AND REVOCATION PERIOD. Officer acknowledges that the
Corporation has advised Officer that he may consult with an attorney of his
choosing prior to signing this Second Amendment and Release and that Officer
has twenty-one (21) days during which to consider the provisions of this
Second Amendment and Release, although Officer may sign and return it sooner.
Officer further acknowledges that he has been advised by the Corporation
that he has the right to revoke this Second Amendment and Release for a
period of seven (7) days after signing it and that this Second Amendment and
Release shall not become effective or enforceable until such seven (7)-day
revocation period has expired. Officer acknowledges and agrees that if he
wishes to revoke this Agreement, he must do so in writing, and that such
revocation must be signed by Officer and received by the Corporation no later
than 5:00 p.m. Pacific Standard Time on the seventh (7th) day after Officer
has signed this Second Amendment and Release.
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5. VOLUNTARY AGREEMENT. Each Party to this Second Amendment and
Release acknowledges and represents that he or it (a) has fully and carefully
read this Second Amendment and Release prior to signing it,(b) has been, or
has had the opportunity to be, advised by independent legal counsel of his or
its own choice as to the legal effect and meaning of each of the terms and
conditions of this Second Amendment and Release, and (c) is signing and
entering into this Second Amendment and Release freely and voluntarily and
without duress or undue pressure or influence of any kind or nature
whatsoever and has not relied on any promises, representations or warranties
regarding the subject matter hereof other than that which is set forth in
this Second Amendment and Release.
6. BINDING EFFECT. This Second Amendment and Release shall be
binding upon the Parties and their respective heirs, administrators,
representatives, executors, successors and assigns, and shall inure to the
benefit of the Parties and their respective heirs, administrators,
representatives, executors, successors and assigns.
7. GOVERNING LAW. This Second Amendment and Release shall be
construed and enforced pursuant to the laws of the State of California
applicable to contracts made and entirely to be performed therein.
8. COUNTERPARTS. This Second Amendment and Release may be
executed in counterparts, each of which shall be an original and all of which
together shall constitute one and the same agreement.
9. ENTIRE AGREEMENT; MODIFICATION. This Second Amendment and
Release, together with the Employment Agreement, constitute the entire
understanding of the Parties and neither the Second Amendment and Release, nor
the Employment Agreement, may be modified except in a writing signed by the
Parties. Other than as set forth herein, this Second Amendment and Release
supersedes all prior written and/or oral and all contemporaneous oral
agreements, understandings and negotiations regarding the subject matter hereof.
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IN WITNESS WHEREOF, the Parties hereto have executed this Second
Amendment and Release on the day and year first above written.
CORPORATION:
ALEXANDRIA REAL ESTATE EQUITIES,
INC., a Maryland corporation
By: /s/ Joel S. Marcus
---------------------------------------
Joel S. Marcus
Chief Executive Officer
OFFICER:
/s/ Jerry M. Sudarsky
---------------------------------------
Jerry M. Sudarsky
<PAGE>
REGISTRATION RIGHTS AGREEMENT
This REGISTRATION RIGHTS AGREEMENT (the "Agreement") is entered
into as of this 2nd day of June, 1997, by and among Alexandria Real Estate
Equities, Inc., a Maryland corporation (the "Company"), and Health Science
Properties Holding Corporation (together with its permitted assigns, the
"Investor").
NOW, THEREFORE, the parties hereto hereby agree as follows:
ARTICLE 1
DEFINITIONS
Section 1.1 DEFINITIONS. The following terms shall have the
meanings ascribed to them below:
"AFFILIATE," as applied to any Person, shall mean any other Person
directly or indirectly controlling or controlled by or under direct or
indirect common control with such Person.
"COMMISSION" shall mean the United States Securities and Exchange
Commission.
"COMMON STOCK" shall mean the common stock of the Company, par
value $.01 per share, or any other class of Common Stock of the Company.
"CONTROL," when used with respect to any Person, shall mean the
power to direct the management and policies of such Person, directly or
indirectly, whether through the ownership of voting securities, by contract
or otherwise; and the terms "controlling" and "controlled" have meanings
correlative to the foregoing.
"CONTROLLING PERSON" shall mean each Person, if any, who controls
such Selling Holder within the meaning of Section 15 of the Securities Act or
Section 20 of the Exchange Act, together with the partners, officers,
directors, employees and agents of such controlling Person.
<PAGE>
"DAMAGES" shall mean any loss, claim, damage, liability, reasonable
attorneys' fee, cost or expense and costs and expenses of investigating and
defending any such claim.
"DEMAND REGISTRATION" shall mean a registration of Registrable
Securities under the Securities Act pursuant to a request made under Section
2.1 hereof.
"DEMANDING HOLDER" shall mean any Holder who has initiated a
registration request in compliance with Section 2.1(a); PROVIDED, HOWEVER,
that (i) "Demanding Holders" shall include each Holder who has requested to
have included in a Demand Registration Registrable Securities pursuant to the
notice provision of Section 2.1(a), and (ii) any action required or permitted
to be taken under this Agreement by any Demanding Holders shall be taken by
action of the holders of a majority of the Registrable Securities held by
such Demanding Holders.
"EFFECTIVE DATE" shall mean the date on which the Initial Public
Offering is consummated.
"EXCHANGE ACT" shall mean the Securities Exchange Act of 1934, as
amended, and the rules and regulations thereunder.
"HOLDER" shall mean the Investor in its capacity as holder of
Registrable Securities and any Person who shall hereafter acquire from the
Investor or another Holder.
"INDEMNIFIED PARTY" shall have the meaning set forth in Section 4.3
hereof.
"INDEMNIFYING PARTY" shall have the meaning set forth in Section
4.3 hereof.
"INITIAL PUBLIC OFFERING" shall mean the initial Public Offering of
Common Stock by the Company pursuant to a registration statement on Form
S-11.
"INSPECTORS" shall have the meaning set forth in Section 3.1(i)
hereof.
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"INVESTOR" shall have the meaning set forth in the preamble hereto.
"NOTICES" shall have the meaning set forth in Section 5.7 hereof.
"NASD" shall mean the National Association of Securities Dealers,
Inc.
"PERSON" shall mean an individual or a corporation, partnership,
trust, or any other entity or organization, including a government or
political subdivision or an agency or instrumentality thereof.
"PIGGY-BACK HOLDERS" shall have the meaning set forth in Section
2.2 hereof.
"PIGGY-BACK REGISTRATION" shall have the meaning set forth in
Section 2.2 hereof.
"RECORDS" shall have the meaning set forth in Section 3.1(i) hereof.
"REGISTRABLE SECURITY" shall mean each Share until it (i) has been
effectively registered under the Securities Act and disposed of pursuant to
an effective registration statement, (ii) is sold under circumstances in
which all of the applicable conditions of Rule 144 (or any similar provisions
then in force) under the Securities Act are met, including a sale pursuant to
the provisions of Rule 144(k) or (iii) has been otherwise transferred and may
be resold by the person receiving such certificate without registration under
the Securities Act.
"REQUISITE SHARE NUMBER" on any date shall mean a number of
Registrable Securities representing not less than 10% of the issued and
outstanding Registrable Securities held in the aggregate on such date by the
Holders.
"SECURITIES ACT" shall mean the Securities Act of 1933, as amended,
and the rules and regulations thereunder.
"SELLING HOLDER" shall mean a Holder who sells or proposes to sell
Registrable Securities pursuant to a registration statement under the
Securities Act.
"SHARES" shall mean the shares of Common Stock initially held by
the Investor upon consummation of the Initial Public Offering, or any
securities
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received as a dividend thereon or with respect thereto (including, without
limitation, by way of merger, consolidation, recapitalization or otherwise).
"UNDERWRITER" shall mean a securities dealer who purchases any
Registrable Securities as principal in a Public Offering and not as part of
such dealer's market-making activities.
ARTICLE II
REGISTRATION RIGHTS
Section 2.1 DEMAND REGISTRATION. (a) REQUEST FOR REGISTRATION BY
THE HOLDERS. At any time and from time to time during the period commencing
on the first anniversary of the Effective Date and ending on the second
anniversary of the Effective Date, Holders owning, individually or in the
aggregate, at least the Requisite Share Number may make a total of two
written requests for a Demand Registration of not less than 10% of the
Registrable Securities held by all Holders. Such request will specify the
number of Registrable Securities proposed to be sold and the intended method
of disposition thereof.
The Company shall give written notice of any registration request
by the Holders, which request complies with this Section 2.1(a), within 10
days after the receipt thereof, to each Holder who did not initially join in
such request. Within 20 days after receipt of such notice, any such Holder
may request in writing that Registrable Securities owned by it be included in
such registration. Each such request shall specify the number of shares of
Registrable Securities proposed to be sold and the intended method of
disposition thereof.
Subject to Section 2.3, the Company shall use its best efforts to
effect the registration under the Securities Act of the Registrable
Securities of each Holder that the Company has been so requested to register;
PROVIDED, HOWEVER, that: (i) the Company shall not be obligated to file or
cause to become effective any registration statement during any period in
which any other registration statement (other than a registration statement
on Form S-4 or S-8 or any substitute form that may be adopted by the
Commission) pursuant to which shares of Common Stock are to be or were sold
has been filed and not withdrawn or has been declared effective within the
prior 180 days; and (ii) the Company may delay the filing of a registration
statement for a period of not more than 90 days after the date of
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<PAGE>
receipt of a request in accordance with Section 2.1 if the Company reasonably
determines that such a filing would adversely affect any proposed financing
or acquisition by the Company and furnishes to the Demanding Holder a
certificate signed by an executive officer of the Company to such effect. If
the Company delays the filing of a Registration Statement, it shall promptly
notify the Demanding Holders in writing when the events or circumstances
permitting such postponement have ended.
(b) EFFECTIVE REGISTRATION. A registration will not be deemed to
have been effected as a Demand Registration unless it has been declared
effective by the Commission and the Company has complied in all material
respects with its obligations under this Agreement with respect thereto;
PROVIDED, that if, after it has become effective, the offering of Registrable
Securities pursuant to such registration is or becomes the subject of any
stop order, injunction or other order or requirement of the Commission or any
other governmental or administrative agency, or if any court prevents or
otherwise limits the sale of Registrable Securities pursuant to the
registration (for any reason other than the acts or omissions of the
Holders), such registration will be deemed not to have been effected. If (i)
a registration requested pursuant to this Section 2.1 is deemed not to have
been effected or (ii) the registration requested pursuant to this Section 2.1
is requested to be a "shelf" registration and it does not remain effective
until the earlier to occur of 180 days after the effective date thereof or
the consummation of the distribution by the Selling Holders of the
Registrable Securities included in such registration statement, then such
registration statement shall not count as a Demand Registration that may be
requested by the Demanding Holder(s) in question and the Company shall
continue to be obligated to effect a registration pursuant to this Section
2.1.
The Demanding Holders may withdraw all or any part of the Registrable
Securities from a Demand Registration at any time (whether before or after the
filing or effective date of such Demand Registration), and if all such
Registrable Securities are withdrawn, to withdraw the demand related thereto.
If at any time a registration statement is filed pursuant to a Demand
Registration, and subsequently a sufficient number of Registrable Securities are
withdrawn from a Demand Registration so that such registration statement does
not cover at least the required amounts specified by Section 2.1(a), and an
additional number of Registrable Securities is not so included, the Company may
(or shall, if requested by the Demanding Holders) withdraw the registration
statement; and such registra-
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<PAGE>
tion statement will not count as a Demand Registration and the Company shall
continue to be obligated to effect a registration pursuant to this Section
2.1.
(c) SELECTION OF UNDERWRITER. If the Demanding Holders so elect,
the offering of Registrable Securities pursuant to a Demand Registration
shall be in the form of an underwritten public offering. The Demanding
Holders shall select one or more nationally recognized firms of investment
bankers to act as the bookrunning managing Underwriter or Underwriters in
connection with such offering and shall select any additional investment
bankers and managers to be used in connection with the offering; PROVIDED
that such investment bankers and managers must be reasonably satisfactory to
the Company.
Section 2.2 PIGGY-BACK REGISTRATION. If at any time the Company
proposes to file a registration statement under the Securities Act with
respect to an offering of equity securities by the Company for its own
account or for the account of any securityholders of any class of its equity
securities (other than (i) a registration statement on Form S-4 or S-8 (or
any substitute form that may be adopted by the Commission) or (ii) a
registration statement filed in connection with an exchange offer or offering
of securities solely to the Company's existing securityholders), including a
registration statement relating to a Demand Registration, then the Company
shall give written notice of such proposed filing to the Holders as soon as
practicable (but in no event less than 20 days before the anticipated filing
date), and such notice shall offer such Holders the opportunity to register
such number of shares of Registrable Securities as each such Holder may
request (which request shall specify the Registrable Securities intended to
be disposed of by such Holder and the intended method of distribution
thereof) (a "Piggy-Back Registration").
The Company shall use its best efforts to cause the managing
Underwriter or Underwriters of a proposed underwritten public offering to
permit the Registrable Securities requested by the Holders thereof to be
included in a Piggy-Back Registration (the "Piggy-Back Holders") on the same
terms and conditions as any similar securities of the Company or any other
securityholder included therein and to permit the sale or other disposition
of such Registrable Securities in accordance with the intended method of
distribution thereof. Any Holder shall have the right to withdraw its
request for inclusion of its Registrable Securities in any registration
statement pursuant to this Section 2.2 by giving written notice to the
Company of its request to withdraw. Subject to the provisions of Section
2.1, the Company may withdraw a Piggy-Back Registration at any time
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<PAGE>
prior to the time it becomes effective; PROVIDED that the Company shall
reimburse the Piggy-Back Holders for all reasonable out-of-pocket expenses
(including counsel fees and expenses) incurred prior to such withdrawal.
No registration effected under this Section 2.2, and no failure to
effect a registration under this Section 2.2, shall relieve the Company of
its obligations pursuant to Section 2.1, and no failure to effect a
registration under this Section 2.2 and to complete the sale of Shares in
connection therewith shall relieve the Company of any other obligation under
this Agreement (including, without limitation, the Company's obligations
under Sections 3.2 and 4.1).
Section 2.3 REDUCTION OF OFFERING. (a) DEMAND REGISTRATION. The
Company may include in a Demand Registration shares of Common Stock for the
account of the Company and Registrable Securities for the account of the
Piggy-Back Holders and shares of Common Stock for the account of other
holders thereof exercising contractual piggy-back rights, on the same terms
and conditions as the Registrable Securities to be included therein for the
account of the Demanding Holders; PROVIDED, HOWEVER, that (i) if the managing
Underwriter or Underwriters of any underwritten public offering described in
Section 2.1 have informed the Company in writing that it is their opinion
that the total number of shares which the Demanding Holders, the Company, any
Piggy-Back Holders and any such other holders intend to include in such
offering is such as to materially and adversely affect the success of such
offering, then (x) the number of shares to be offered for the account of the
Company (if any) shall be reduced (to zero, if necessary) and (y) thereafter,
if necessary, the number of shares to be offered for the account of such
Piggy-Back Holders and such other holders shall be reduced (to zero, if
necessary), in the case of this clause (y) PRO RATA in proportion to the
respective number of shares requested to be registered to the extent
necessary to reduce the total number of shares requested to be included in
such offering to the number of shares, if any, recommended by such managing
Underwriters; and if the number of shares to be offered for the account of
each such Person has been reduced to zero, and the number of Shares requested
to be registered by the Demanding Holders exceeds the number of shares
recommended by such managing Underwriters, then the number of Shares to be
offered for the account of the Demanding Holders shall be reduced PRO RATA in
proportion to the respective number of Shares requested to be registered by
the Demanding Holders and (ii) if the offering is not underwritten, no other
party (other than Piggy-Back Holders), including the Company, shall be
permitted to offer securities under any such
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<PAGE>
Demand Registration unless a majority of the Shares held by the Demanding
Holder or Holders consent to the inclusion of such shares therein.
(b) PIGGY-BACK REGISTRATION. Notwithstanding anything contained
herein, if the managing Underwriter or Underwriters of any public offering
described in Section 2.2 have informed, in writing, the Piggy-Back Holders
that it is their opinion that the total number of shares that the Company and
Holders of Registrable Securities and any other Persons desiring to
participate in such registration intend to include in such offering is such
as to materially and adversely affect the success of such offering, then the
number of shares to be offered for the account of the Piggy-Back Holders and
all such other Persons (other than the Company) participating in such
registration shall be reduced (to zero, if necessary) or limited PRO RATA in
proportion to the respective number of shares requested to be registered to
the extent necessary to reduce the total number of shares requested to be
included in such offering to the number of shares, if any, recommended by
such managing Underwriters; PROVIDED, HOWEVER, that (i) if such offering is
effected for the account of Demanding Holders pursuant to Section 2.1, then
the number of shares to be offered for the account of each Person shall be
reduced in accordance with Section 2.3(a), and (ii) if such offering is
effected for the account of any other securityholder of the Company pursuant
to the demand registration rights of such securityholder, then the number of
shares to be offered for the account of each Person shall be reduced in
accordance with the instrument granting such demand registration rights, if
any, and, in the absence of such instrument (x) the number of shares to be
offered for the account of the Company, if any, shall be reduced (to zero, if
necessary) and (y) thereafter, if necessary, the number of shares to be
offered for the account of the Piggy-Back Holders and any other Persons that
have requested to include shares in such registration (but not such
securityholders who have exercised their demand registration rights) shall be
reduced (to zero, if necessary), in the case of this clause (y) PRO RATA in
proportion to the respective number of shares requested to be registered, to
the extent necessary to reduce the total number of shares requested to be
included in such offering to the number of shares, if any, recommended by
such managing Underwriters.
ARTICLE III
REGISTRATION PROCEDURES
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Section 3.1 FILINGS: INFORMATION. Whenever the Company is
required to effect or cause the registration of Registrable Securities
pursuant to Section 2.1, the Company will use its best efforts to effect the
registration and the sale of such Registrable Securities in accordance with
the intended method of disposition thereof as quickly as practicable, and in
connection with any such request:
(a) The Company will as expeditiously as possible prepare and file
with the Commission a registration statement on any form for which the
Company then qualifies or which counsel for the Company shall deem
appropriate and which form shall be available for the sale of the Registrable
Securities to be registered thereunder in accordance with the intended method
of distribution thereof, and use its best efforts to cause such filed
registration statement to become and remain effective as provided herein.
(b) The Company will as expeditiously as possible prepare and file
with the Commission such amendments and supplements to such registration
statement and the prospectus used in connection therewith as may be necessary
to keep such registration statement continuously effective (subject to the
penultimate paragraph of this Section 3.1) during the period with respect to
the disposition of all securities covered by such registration statement as
provided herein (but not before the expiration of the 90-day period referred
to in Section 4(3) of the Securities Act and Rule 174 thereunder, if
applicable) and comply with the provisions of the Securities Act with respect
to the disposition of all securities covered by such registration statement
during such period in accordance with the intended methods of disposition by
each Selling Holder thereof set forth in such registration statement.
(c) The Company will, prior to filing a registration statement or
prospectus or any amendment or supplement thereto, furnish to each Selling
Holder, counsel representing such Selling Holders, and each Underwriter, if
any, of the Registrable Securities covered by such registration statement
copies of such registration statement as proposed to be filed, together with
exhibits thereto if so requested, which documents will be subject to review
and comment by the foregoing within five days after delivery, and thereafter
furnish to such Selling Holder, counsel and Underwriter, if any, for their
review and comment such number of copies of such registration statement, each
amendment and supplement thereto (in each case including all exhibits thereto
if so requested), the prospectus included in such registration statement
(including each preliminary prospectus) and such other
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<PAGE>
documents or information as such Selling Holder, counsel or Underwriter may
reasonably request in order to facilitate the disposition of the Registrable
Securities owned by such Selling Holder.
(d) After the filing of the registration statement, the Company
will promptly notify each Selling Holder of Registrable Securities covered by
such registration statement (i) when a prospectus or any prospectus
supplement or post-effective amendment has been filed and, with respect to a
registration statement or any post-effective amendment, when the same has
become effective, (ii) of any request by the Commission or any other federal
or state governmental authority for amendments or supplements to a
registration statement or related prospectus or for additional information,
(iii) of the issuance by the Commission or any other federal or state
governmental authority of any stop order suspending the effectiveness of a
registration statement or the initiation of any proceedings for that purpose,
(iv) of the receipt by the Company of any notification with respect to the
suspension of the qualification or exemption from qualification of any of the
Registrable Securities for sale in any jurisdiction or the initiation or
threatening of any proceeding for such purpose, (v) of the happening of any
event that makes any statement made in such registration statement or related
prospectus or any document incorporated or deemed to be incorporated therein
by reference untrue in any material respect or that requires the making of
any changes in a registration statement, prospectus or documents incorporated
therein by reference so that, in the case of the registration statement, it
will not contain any untrue statement of a material fact or omit to state any
material fact required to be stated therein or necessary to make the
statements therein not misleading, and that in the case of the prospectus, it
will not contain any untrue statement of a material fact or omit to state any
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, and (vi) of the Company's reasonable determination that a
post-effective amendment to a registration statement would be necessary.
(e) The Company will use its best efforts to (i) register or
qualify the Registrable Securities under such other securities or blue sky
laws of such jurisdictions in the United States as any Selling Holder
reasonably (in light of such Selling Holder's intended plan of distribution)
requests, and (ii) cause such Registrable Securities to be registered with or
approved by such other govern-mental agencies or authorities in the United
States as may be necessary by virtue of the business and operations of the
Company and do any and all other acts and things that may be reasonably
necessary or advisable to enable such Selling Holder
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to consummate the disposition of the Registrable Securities owned by such
Selling Holder; PROVIDED that the Company will not be required to (A) qualify
generally to do business in any jurisdiction where it would not otherwise be
required to qualify but for this paragraph (e), (B) subject itself to
taxation in any such jurisdiction or (C) consent to general service of
process in any such jurisdiction.
(f) The Company will take all reasonable actions required to
prevent the entry, or obtain the withdrawal, of any order suspending the
effectiveness of a registration statement, or the lifting of any suspension
of the qualification (or exemption from qualification) of any Registrable
Securities for sale in any jurisdiction, at the earliest moment.
(g) Upon the occurrence of any event contemplated by paragraph
3.1(d)(v) or 3.1(d)(vi) above, the Company will (i) prepare a supplement or
post-effective amendment to such registration statement or a supplement to
the related prospectus or any document incorporated therein by reference or
file any other required document so that, as thereafter delivered to the
purchasers of the Registrable Securities being sold thereunder, such
prospectus will not contain an untrue statement of a material fact or omit to
state a material fact required to be stated therein or necessary to make the
statements therein, in light of the circumstances under which they were made,
not misleading, and (ii) promptly make available to each Selling Holder any
such supplement or amendment.
(h) The Company will enter into customary agreements (including,
if applicable, an underwriting agreement in customary form and reasonably
satisfactory to the Company) and take such other actions as are reasonably
required in order to expedite or facilitate the disposition of such
Registrable Securities (the Selling Holders may, at their option, require
that any or all of the representations, warranties and covenants of the
Company to or for the benefit of such Underwriters also be made to and for
the benefit of such Selling Holders).
(i) The Company will make available to each Selling Holder (and
their counsel) and each Underwriter, if any, subject to restrictions imposed
by the United States federal government or any agency or instrumentality
thereof, copies of all correspondence between the Commission and the Company,
its counsel or auditors and will also make available for inspection by any
Selling Holder, any Underwriter participating in any disposition pursuant to
such registration statement and any attorney, accountant or other
professional retained by any such Selling Holder or Underwriter
(collectively, the "Inspectors"), all financial and other
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records, pertinent corporate documents and properties of the Company
(collectively, the "Records") as shall be reasonably necessary to enable them
to exercise their due diligence responsibility, and cause the Company's
officers and employees to supply all information reasonably requested by any
Inspectors in connection with such registration statement. Records that the
Company determines, in good faith, are confidential, and of which
determination the Company so notifies the Inspectors, shall not be disclosed
by the Inspectors unless (i) the disclosure of such Records is necessary to
avoid or correct a misstatement or omission in such registration statement or
(ii) the disclosure or release of such Records is requested or required
pursuant to oral questions, interrogatories, requests for information or
documents or a subpoena or other order from a court of competent jurisdiction
or other process; PROVIDED that prior to any disclosure or release pursuant
to clause (ii), the Inspectors shall provide the Company with prompt notice
of any such request or requirement so that the Company may seek an
appropriate protective order or waive such Inspectors' obligation not to
disclose such Records; and, PROVIDED FURTHER, that if, failing the entry of a
protective order or the waiver by the Company permitting the disclosure or
release of such Records, the Inspectors, upon advice of counsel, are
compelled to disclose such Records, the Inspectors may disclose only that
portion of the Records that counsel has advised them that they are compelled
to disclose. Each Selling Holder agrees that information obtained by it
solely as a result of such inspections shall be deemed confidential and shall
not be used by it as the basis for any market transactions in the securities
of the Company or its Affiliates unless and until such information is made
generally available to the public.
(j) The Company will furnish to each Selling Holder and to each
Underwriter, if any, a signed counterpart, addressed to such Selling Holder
or Underwriter, of (i) an opinion or opinions of counsel to the Company, and
(ii) a comfort letter or comfort letters from the Company's independent
public accountants, each in customary form and covering such matters of the
type customarily covered by opinions or comfort letters, as the case may be,
as the Selling Holders or the managing Underwriter therefor reasonably
requests.
(k) The Company will otherwise use its best efforts to comply with
all applicable rules and regulations of the Commission, and make available to
its securityholders, as soon as reasonably practicable, an earnings statement
covering a period of 12 months, beginning within three months after the
effective date of the registration statement, which earnings statement shall
satisfy the provisions of Section 11(a) of the Securities Act.
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(l) The Company will use its best efforts (i) to cause any class
of Registrable Securities to be listed on a national securities exchange (if
such shares are not already so listed) and on each additional national
securities exchange on which similar securities issued by the Company are
then listed (if any), if the listing of such Registrable Securities is then
permitted under the rules of such exchange or (ii) to secure designation of
all such Registrable Securities covered by such registration statement as a
NASDAQ "national market system security" within the meaning of Rule 11Aa2-1
of the Commission or, failing that, to secure NASDAQ authorization for such
Registrable Securities.
(m) In connection with an underwritten public offering, the
Company will participate, to the extent reasonably requested by the managing
Underwriter for the offering or the Selling Holders, in customary efforts to
sell the securities under the offering, including, without limitation,
participating in "road shows"; PROVIDED that the Company shall not be
obligated so to participate in more than one such offering in any 12-month
period.
The Company may require each Selling Holder to promptly furnish in
writing to the Company such information regarding the distribution of the
Registrable Securities by such Selling Holder as the Company may from time to
time reasonably request and such other information as may be legally required
in connection with such registration including, without limitation, all such
information as may be requested by the Commission or the NASD. The Company
may exclude from such registration any Holder who fails to provide such
information.
Each Selling Holder agrees that, upon receipt of any notice from
the Company of the happening of any event of the kind described in Sections
3.1(d)(iii), (iv), (v) and (vi) hereof, such Selling Holder will forthwith
discontinue disposition of Registrable Securities pursuant to the
registration statement covering such Registrable Securities until such
Selling Holder's receipt of the copies of the supplemented or amended
prospectus contemplated by Section 3.1(g) hereof, and, if so directed by the
Company, such Selling Holder will deliver to the Company all copies, other
than permanent file copies, then in such Selling Holder's possession of the
most recent prospectus covering such Registrable Securities at the time of
receipt of such notice. In the event the Company shall give such notice, the
Company shall extend the period during which such registration statement
shall be maintained effective as provided herein by the number of days during
the period from and including the date of the giving of notice pursuant to
Section 3.1(d)(iii), (iv), (v) or (vi) hereof to the date when the Company
shall make available to the
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Selling Holders a prospectus supplemented or amended to conform with the
requirements of Section 3.1(g) hereof.
In connection with any registration of Registrable Securities
pursuant to Section 2.2, the Company will take the actions contemplated by
paragraphs (c), (d), (e), (g), (i), (j), (k) and (l) above.
Section 3.2 REGISTRATION EXPENSES. In connection with a Demand
Registration pursuant to Section 2.1 hereof, and any registration statement
filed pursuant to Section 2.2 hereof, the Company shall pay the following
registration expenses incurred in connection with the registration hereunder
(i) all registration and filing fees, (ii) fees and expenses of compliance
with securities or blue sky laws (including reasonable fees and disbursements
of counsel in connection with blue sky qualifications of the Registrable
Securities), (iii) printing expenses, (iv) the Company's internal expenses
(including, without limitation, all salaries and expenses of its officers and
employees performing legal or accounting duties) and all fees and expenses
incident to the performance of or compliance with this Agreement by the
Company, (v) the fees and expenses incurred in connection with the listing of
the Registrable Securities, (vi) reasonable fees and disbursements of counsel
for the Company and customary fees and expenses for independent certified
public accountants retained by the Company (including the expenses of any
comfort letters or costs associated with the delivery by independent
certified public accountants of a comfort letter or comfort letters requested
pursuant to Section 3.1(j) hereof), (vii) the reasonable fees and expenses of
any special experts retained by the Company in connection with such
registration, and (viii) reasonable fees and expenses of one firm of counsel
for the Holders (together with necessary local counsel fees and expenses),
which counsel shall be chosen by the Demanding Holders or, if none, by the
Holders of a majority of the Registrable Securities being included in such
Registration Statement. The Company shall have no obligation to pay any
underwriting fees, discounts or commissions attributable to the sale of
Registrable Securities.
ARTICLE IV
INDEMNIFICATION AND CONTRIBUTION
Section 4.1 INDEMNIFICATION BY THE COMPANY. The Company agrees to
indemnify and hold harmless each Selling Holder, its partners, officers,
direc-
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tors, employees, agents, and Controlling Persons from and against any and all
Damages, joint or several, and any action in respect thereof to which such
Selling Holder, its partners, officers, directors, employees and agents, and
any such Controlling Person may become subject under the Securities Act or
otherwise, insofar as such Damages (or proceedings in respect thereof) arise
out of, or are based upon, any untrue statement or alleged untrue statement
of a material fact contained in any registration statement or prospectus
relating to the Registrable Securities or any preliminary prospectus, or
arises out of, or are based upon, any omission or alleged omission to state
therein a material fact required to be stated therein or necessary to make
the statements therein not misleading, except insofar as the same are based
upon information furnished to the Company by a Selling Holder or Underwriter
expressly for use therein, and shall reimburse each Selling Holder, its
partners, officers, directors, employees and agents, and each such
Controlling Person for any legal and other expenses reasonably incurred by
that Selling Holder, its partners, officers, directors, employees and agents,
or any such Controlling Person in investigating or defending or preparing to
defend against any such Damages or proceedings; PROVIDED, that the Company
shall not be liable to any Selling Holder to the extent that (a) any such
Damages arise out of or are based upon an untrue statement or omission made
in any preliminary prospectus if (i) such Selling Holder failed to send or
deliver a copy of the final prospectus with or prior to the delivery of
written confirmation of the sale by such Selling Holder to the Person
asserting the claim from which such Damages arise, and (ii) the final
prospectus would have corrected such untrue statement or such omission; or
(b) any such Damages arise out of or are based upon an untrue statement or
omission in any prospectus if (x) such untrue statement or omission is
corrected in an amendment or supplement to such prospectus, and (y) having
previously been furnished by or on behalf of the Company with copies of such
prospectus as so amended or supplemented, such Selling Holder thereafter
fails to deliver such prospectus as so amended or supplemented prior to or
concurrently with the sale of a Registrable Security to the Person asserting
the claim from which such Damages arise.
Section 4.2 INDEMNIFICATION BY HOLDERS OF REGISTRABLE SECURITIES.
Each Selling Holder agrees, severally but not jointly, to indemnify and hold
harmless the Company, its officers, directors, employees and agents and each
Person, if any, who controls the Company within the meaning of Section 15 of
the Securities Act or Section 20 of the Exchange Act, together with the
partners, officers, directors, employees and agents of such controlling
Person, to the same extent as the foregoing indemnity from the Company to
such Selling Holder, but
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<PAGE>
only with reference to information related to such Selling Holder or its plan
of distribution, as furnished by such Selling Holder or on such Selling
Holder's behalf expressly for use in any registration statement or prospectus
relating to the Registrable Securities, or any amendment or supplement
thereto, or any preliminary prospectus. In case any action or proceeding
shall be brought against the Company or its officers, directors, employees or
agents or any such controlling Person or its partners, officers, directors,
employees or agents, in respect of which indemnity may be sought against such
Selling Holder, such Selling Holder shall have the rights and duties given to
the Company, and the Company or its officers, directors, employees or agents,
controlling Person, or its partners, officers, directors, employees or
agents, shall have the rights and duties given to such Selling Holder, under
Section 4.1. Each Selling Holder also agrees to indemnify and hold harmless
each other Selling Holder and any Underwriters of the Registrable Securities,
and their respective officers and directors and each Person who controls each
such other Selling Holder or Underwriter on substantially the same basis as
that of the indemnification of the Company provided in this Section 4.2. The
Company shall be entitled to receive indemnities from Underwriters, selling
brokers, dealer managers and similar securities industry professionals
participating in the distribution, to the same extent as provided above, with
respect to information so furnished by such Persons specifically for
inclusion in any prospectus or registration statement. In no event shall the
liability of any Selling Holder be greater in amount than the dollar amount
of the proceeds (net of payment of all expenses) received by such Selling
Holder upon the sale of the Registrable Securities giving rise to such
indemnification obligation.
Section 4.3 CONDUCT OF INDEMNIFICATION PROCEEDINGS. Promptly
after receipt by any Person in respect of which indemnity may be sought
pursuant to Section 4.1 or 4.2 (an "Indemnified Party") of notice of any
claim or the commencement of any action, the Indemnified Party shall, if a
claim in respect thereof is to be made against the Person against whom such
indemnity may be sought (an "Indemnifying Party"), notify the Indemnifying
Party in writing of the claim or the commencement of such action, PROVIDED
that the failure to notify the Indemnifying Party shall not relieve the
Indemnifying Party from any liability except to the extent of any material
prejudice resulting therefrom. If any such claim or action shall be brought
against an Indemnified Party, and it shall notify the Indemnifying Party
thereof, the Indemnifying Party shall be entitled to participate therein,
and, to the extent that it wishes, jointly with any other similarly notified
Indemnifying Party, to assume the defense thereof with counsel reasonably
satisfactory to the Indemnified Party. After notice from the Indemnifying
Party to
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the Indemnified Party of its election to assume the defense of such claim or
action, the Indemnifying Party shall not be liable to the Indemnified Party
for any legal or other expenses subsequently incurred by the Indemnified
Party in connection with the defense thereof other than reasonable costs of
investigation; PROVIDED that the Indemnified Party shall have the right to
employ separate counsel to represent the Indemnified Party and its
controlling Persons who may be subject to liability arising out of any claim
in respect of which indemnity may be sought by the Indemnified Party against
the Indemnifying Party, but the fees and expenses of such counsel shall be
for the account of such Indemnified Party unless (i) the Indemnifying Party
and the Indemnified Party shall have mutually agreed to the retention of such
counsel or (ii) in the reasonable judgment of the Indemnifying Party and such
Indemnified Party, representation of both parties by the same counsel would
be inappropriate due to actual or potential conflicts of interest between
them, it being understood however, that the Indemnifying Party shall not, in
connection with any one such claim or action or separate but substantially
similar or related claims or actions in the same jurisdiction arising out of
the same general allegations or circumstances, be liable for the fees and
expenses of more than one separate firm of attorneys (together with
appropriate local counsel) at any time for all Indemnified Parties, or for
fees and expenses that are not reasonable. No Indemnifying Party shall,
without the prior written consent of the Indemnified Party, effect any
settlement of any claim or pending or threatened proceeding in respect of
which the Indemnified Party is or could have been a party and indemnity could
have been sought hereunder by such Indemnified Party, unless such settlement
includes an unconditional release of such Indemnified Party from all
liability arising out of such claim or proceeding. Whether or not the
defense of any claim or action is assumed by the Indemnifying Party, such
Indemnifying Party will not be subject to any liability for any settlement
made without its consent, which consent will not be unreasonably withheld.
Section 4.4 CONTRIBUTION. If the indemnification provided for in
this Article IV is unavailable to the Indemnified Parties in respect of any
Damages referred to herein, then each Indemnifying Party, in lieu of
indemnifying such Indemnified Party, shall contribute to the amount paid or
payable by such Indemnified Party as a result of such Damages (i) as between
the Company and the Selling Holders on the one hand and the Underwriters on
the other, in such proportion as is appropriate to reflect the relative benefits
received by the Company and the Selling Holders on the one hand and the
Underwriters on the other from the offering of the Registrable Securities, or if
such allocation is not permitted by applicable law, in such proportion as is
appropriate to reflect not only the relative
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benefits but also the relative fault of the Company and the Selling Holders
on the one hand and of the Underwriters on the other in connection with the
statements or omissions which resulted in such Damages, as well as any other
relevant equitable considerations, and (ii) as between the Company on the one
hand and each Selling Holder on the other, in such proportion as is
appropriate to reflect the relative fault of the Company and of each Selling
Holder in connection with such statements or omissions, as well as any other
relevant equitable considerations. The relative benefits received by the
Company and the Selling Holders on the one hand and the Underwriters on the
other shall be deemed to be in the same proportion as the total proceeds from
the offering (net of underwriting discounts and commissions but before
deducting expenses) received by the Company and the Selling Holders bear to
the total underwriting discounts and commissions received by the
Underwriters, in each case as set forth in the table on the cover page of the
prospectus. The relative fault of the Company and the Selling Holders on the
one hand and of the Underwriters on the other shall be determined by
reference to, among other things, whether the untrue or alleged untrue
statement of a material fact or the omission or alleged omission to state a
material fact relates to information supplied by the Company and the Selling
Holders or by the Underwriters. The relative fault of the Company on the one
hand and of each Selling Holder on the other shall be determined by reference
to, among other things, whether the untrue or alleged untrue statement of a
material fact or the omission or alleged omission to state a material fact
relates to information supplied by such party, and the parties' relative
intent, knowledge, access to information and opportunity to correct or
prevent such statement or omission.
The Company and the Selling Holders agree that it would not be just
and equitable if contribution pursuant to this Section 4.4 were determined by
pro rata allocation (even if the Underwriters were treated as one entity for
such purpose) or by any other method of allocation which does not take
account of the equitable considerations referred to in the immediately
preceding paragraph. The amount paid or payable by an Indemnified Party as a
result of the Damages referred to in the immediately preceding paragraph
shall be deemed to include, subject to the limitations set forth above, any
legal or other expenses reasonably incurred by such Indemnified Party in
connection with investigating or defending any such action or claim.
Notwithstanding the provisions of this Section 4.4, no Underwriter shall be
required to contribute any amount in excess of the amount by which the total
price at which the Registrable Securities underwritten by it and distributed
to the public were offered to the public exceeds the amount of any damages
which such Underwriter has otherwise been required to pay by reason of
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<PAGE>
such untrue or alleged untrue statement or omission or alleged omission, and
no Selling Holder shall be required to contribute any amount in excess of the
amount by which the total price at which the Registrable Securities of such
Selling Holder were offered to the public (less underwriting discounts and
commissions) exceeds the amount of any damages which such Selling Holder has
otherwise been required to pay by reason of such untrue or alleged untrue
statement or omission or alleged omission. No Person guilty of fraudulent
misrepresentation (within the meaning of Section 11(f) of the Securities Act)
shall be entitled to contribution from any Person who was not guilty of such
fraudulent misrepresentation. Each Selling Holder's obligation to contribute
pursuant to this Section 4.4 is several and not joint.
The indemnity, contribution and expense reimbursement obligations
contained in this Article IV are in addition to any liability any
Indemnifying Party may otherwise have to an Indemnified Party or otherwise.
The provisions of this Article IV shall survive, notwithstanding any transfer
of the Registrable Securities by any Holder or any termination of this
Agreement.
ARTICLE V
MISCELLANEOUS
Section 5.1 PARTICIPATION IN UNDERWRITTEN REGISTRATIONS. No
Person may participate in any underwritten registration hereunder unless such
Person (a) agrees to sell such Person's securities on the basis provided in
any underwriting arrangements approved by the Persons entitled hereunder to
approve such arrangements, and (b) completes and executes all questionnaires,
indemnities, underwriting agreements and other documents reasonably required
under the terms of such underwriting arrangements and these registration
rights; PROVIDED, that (i) no Selling Holder shall be required to make any
representations or warranties except those which relate solely to such Holder
and its intended method of distribution, and (ii) the liability of each such
Holder to any Underwriter under such underwriting agreement will be limited
to liability arising from misstatements or omissions regarding such Holder
and its intended method of distribution and any such liability shall not
exceed an amount equal to the amount of net proceeds such Holder derives from
such registration; PROVIDED, HOWEVER, that in an offering by the Company in
which any Holder requests to be included in a Piggy-Back Registration, the
Company shall use its best efforts to arrange the terms of the
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offering such that the provisions set forth in clauses (i) and (ii) of this
Section 5.1 are true; PROVIDED FURTHER, that if the Company fails in its best
efforts to so arrange the terms, the Holder may withdraw all or any part of
its Registrable Securities from the Piggy-Back Registration and the Company
shall reimburse such Holder for all reasonable out-of-pocket expenses
(including counsel fees and expenses) incurred prior to such withdrawal.
Section 5.2 RULE 144. The Company covenants that it will file any
reports required to be filed by it under the Securities Act and the Exchange
Act and that it will take such further action as any Holder may reason-ably
request, all to the extent required from time to time to enable Holders to
sell Registrable Securities without registration under the Securities Act
within the limitation of the exemptions provided by (a) Rule 144 under the
Securities Act, as such Rules may be amended from time to time, or (b) any
similar rule or regulation hereafter adopted by the Commission. Upon the
request of any Holder, the Company will deliver to such Holder a written
statement as to whether it has complied with such requirements.
Section 5.3 AMENDMENT AND MODIFICATION. Any provision of this
Agreement may be waived, PROVIDED that such waiver is set forth in a writing
executed by the party against whom the enforcement of such waiver is sought.
This Agreement may not be amended, modified or supplemented other than by a
written instrument signed by (a) the Company and (b) a majority of the
Holders of Registrable Securities. No course of dealing between or among any
Persons having any interest in this Agreement will be deemed effective to
modify, amend or discharge any part of this Agreement or any rights or
obligations of any Person under or by reason of this Agreement.
Section 5.4 SUCCESSORS AND ASSIGNS: ENTIRE AGREEMENT. (a) This
Agreement and all of the provisions hereof shall be binding upon and inure to
the benefit of the parties hereto and their respective successors and assigns
and executors, administrators and heirs.
(b) This Agreement sets forth the entire agreement and
understanding between the parties as to the subject matter hereof and merges
and supersedes all prior discussions, agreements and understandings of any
and every nature among them.
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Section 5.5 SEVERABILITY. In the event that any provision of this
Agreement or the application of any provision hereof is declared to be
illegal, invalid or otherwise unenforceable by a court of competent
jurisdiction, the remainder of this Agreement shall not be affected except to
the extent necessary to delete such illegal, invalid or unenforceable
provision unless that provision held invalid shall substantially impair the
benefits of the remaining portions of this Agreement.
Section 5.6 NOTICES. All notices, demands, requests, consents or
approvals (collectively, "Notices") required or permitted to be given
hereunder or which are given with respect to this Agreement shall be in
writing and shall be personally delivered or delivered by a reputable
overnight courier service with charges prepaid, or transmitted by hand
delivery, telegram, telex or facsimile, addressed as set forth below, or such
other address as such party shall have specified most recently by written
notice. Notice shall be deemed given or delivered on the date of service or
transmission if personally served or transmitted by telegram, telex or
facsimile. Notice otherwise sent as provided herein shall be deemed given or
delivered on the next business day following delivery of such notice to a
reputable overnight courier service.
To the Company:
Alexandria Real Estate Equities, Inc.
251 South Lake Avenue
Suite 700
Pasadena, California 91101
Attn: Joel S. Marcus
Fax: (818) 578-0770
with a copy (which shall not constitute notice) to:
Skadden, Arps, Slate, Meagher & Flom LLP
300 South Grand Avenue
34th Floor
Los Angeles, California 90071
Attn: Michael A. Woronoff, Esq.
Fax: (213) 687-5600.
To the Investor:
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To the address specified on the signature page of this Agreement.
To any other Holder:
To the address specified in the notice provided to the Company
upon such Person becoming a Holder.
Section 5.7 GOVERNING LAW. This Agreement shall be governed by
and construed in accordance with the internal law of the State of California,
without giving effect to principles of conflicts of law.
Section 5.8 HEADINGS. The headings in this Agreement are for
convenience of reference only and shall not constitute a part of this
Agreement, nor shall they affect their meaning, construction or effect.
Section 5.9 COUNTERPARTS. This Agreement may be executed in any
number of counterparts, each of which shall be deemed to be an original
instrument and all of which together shall constitute one and the same
instrument.
Section 5.10 FURTHER ASSURANCES. Each party shall cooperate and
take such action as may be reasonably requested by another party in order to
carry out the provisions and purposes of this Agreement and the transactions
contemplated hereby.
Section 5.11 TERMINATION. Unless sooner terminated in accordance
with its terms or as otherwise herein provided, this Agreement shall
terminate upon the earlier to occur of (i) the mutual agreement by the
parties hereto, (ii) with respect to any Holder, such Holder ceasing to own
any Registrable Securities or (iii) the fifth anniversary of the Effective
Date.
Section 5.12 REMEDIES. In the event of a breach or a threatened
breach by any party to this Agreement of its obligations under this
Agreement, any party injured or to be injured by such breach will be entitled
to specific performance of its rights under this Agreement or to injunctive
relief, in addition to being entitled to exercise all rights provided in this
Agreement and granted by law. The parties agree that the provisions of this
Agreement shall be specifically enforceable, it being agreed by the parties
that the remedy at law, including monetary damage, for breach of any such
provision will be inadequate compen-
22
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sation for any loss and that any defense or objection in any action for
specific performance or injunctive relief that a remedy at law would be
adequate is waived.
Section 5.14 PRONOUNS. Whenever the context may require, any
pronouns used herein shall be deemed also to include the corresponding
neuter, masculine or feminine forms.
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IN WITNESS WHEREOF, the parties hereto have executed this Agreement as
of the date first above written.
ALEXANDRIA REAL ESTATE EQUITIES, INC.
By: /s/ Joel S. Marcus
-----------------------------------
Name: Joel S. Marcus
Title: Chief Executive Officer
HEALTH SCIENCE PROPERTIES HOLDING
CORPORATION
251 South Lake Avenue
Suite 700
Pasadena, California 91101
By: /s/ Jerry M. Sudarsky
-----------------------------------
Name: Jerry M. Sudarsky
Title: Chairman
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ALEXANDRIA REAL ESTATE EQUITIES, INC.
1997 STOCK AWARD AND INCENTIVE PLAN
<PAGE>
ALEXANDRIA REAL ESTATE EQUITIES, INC.
1997 STOCK AWARD AND INCENTIVE PLAN
1. PURPOSE; TYPES OF AWARDS; CONSTRUCTION.
The purpose of the Alexandria Real Estate Equities, Inc. 1997 Stock
Award and Incentive Plan (the "Plan") is to afford an incentive to selected
officers, employees and independent contractors (including non-employee
directors) of Alexandria Real Estate Equities, Inc. (the "Company"), or any
Subsidiary or Affiliate that now exists or hereafter is organized or
acquired, to acquire a proprietary interest in the Company, to continue as
employees or independent contractors (including non-employee directors), as
the case may be, to increase their efforts on behalf of the Company and to
promote the success of the Company's business. Pursuant to Section 6 of the
Plan, there may be granted Options (including "incentive stock options" and
"nonqualified stock options"), Stock Appreciation Rights, Restricted Stock,
and Other Stock-Based Awards or Other Cash-Based Awards. The Plan also
provides the authority to make loans to purchase shares of Stock. From and
after the consummation of the Initial Public Offering, the Plan is designed
to comply with the requirements of Regulation G (12 C.F.R. Section 207)
regarding the purchase of shares on margin, the requirements for
"performance-based compensation" under Section 162(m) of the Code and the
conditions for exemption from short-swing profit recovery rules under Rule
16b-3 of the Exchange Act, and shall be interpreted in a manner consistent
with the requirements thereof.
2. DEFINITIONS.
2.1 For purposes of the Plan, the following terms shall be
defined as set forth below:
(a) "Affiliate" means any entity if, at the time of
granting of an Award or a Loan, (i) the Company, directly or indirectly, owns
at least 20% of the combined voting power of all classes of stock of such
entity or at least 20% of the ownership interests in such entity or (ii) such
entity, directly or indirectly, owns at least 20% of the combined voting
power of all classes of stock of the Company.
<PAGE>
(b) "Award" means any Option, SAR, Restricted Stock, or
Other Stock-Based Award or Other Cash-Based Award granted under the Plan.
(c) "Award Agreement" means any written agreement,
contract, or other instrument or document evidencing an Award.
(d) "Beneficiary" means the person, persons, trust or
trusts that have been designated by a Grantee in his or her most recent
written beneficiary designation filed with the Company to receive the
benefits specified under the Plan upon his or her death, or, if there is no
designated Beneficiary or surviving designated Beneficiary, then the person,
persons, trust or trusts entitled by will or the laws of descent and
distribution to receive such benefits.
(e) "Board" means the Board of Directors of the Company.
(f) "Change of Control" shall mean the occurrence of any
of the following events:
(i) Any Person (as such term is used in section
3(a)(9) of the Exchange Act, as modified and used in sections 13(d) and 14(d)
thereof, except that such term shall not include (A) the Company or any of
its subsidiaries, (B) a trustee or other fiduciary holding securities under
an employee benefit plan of the Company or any of its affiliates, (C) an
underwriter temporarily holding securities pursuant to an offering of such
securities, (D) a corporation owned, directly or indirectly, by the
stockholders of the Company in substantially the same proportions as their
ownership of stock of the Company, or (E) a person or group as used in Rule
13d-1(b) under the Exchange Act) that is or becomes the Beneficial Owner, as
such term is defined in Rule 13d-3 under the Exchange Act, directly or
indirectly, of securities of the Company (not including in the securities
beneficially owned by such Person any securities acquired directly from the
Company or its affiliates other than in connection with the acquisition by
the Company or its affiliates of a business) representing twenty-five percent
(25%) or more of the combined voting power of the Company's then outstanding
securities; or
(ii) The following individuals cease for any reason
to constitute a majority of the number of directors then serving:
individuals
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who, on the date hereof, constitute the Board and any new director (other
than a director whose initial assumption of office is in connection with an
actual or threatened election contest, including but not limited to a consent
solicitation, relating to the election of directors of the Company) whose
appointment or election by the Board or nomination for election by the
Company's stockholders was approved or recommended by a vote of at least
two-thirds (2/3) of the directors then still in office who either were
directors on the date hereof or whose appointment, election or nomination for
election was previously so approved or recommended; or
(iii) There is consummated a merger or consolidation
of the Company with any other corporation, other than (A) a merger or
consolidation that would result in the voting securities of the Company
outstanding immediately prior to such merger or consolidation continuing to
represent (either by remaining outstanding or by being converted into voting
securities of the surviving entity or any parent thereof), in combination
with the ownership of any trustee or other fiduciary holding securities under
an employee benefit plan of the Company or any subsidiary of the Company, at
least seventy-five percent (75%) of the combined voting power of the
securities of the Company or such surviving entity or any parent thereof
outstanding immediately after such merger or consolidation, or (B) a merger
or consolidation effected to implement a recapitalization of the Company (or
similar transaction) in which no Person is or becomes the Beneficial Owner,
directly or indirectly, of securities of the Company (not including in the
securities beneficially owned by such Person any securities acquired directly
from the Company or its affiliates other than in connection with the
acquisition by the Company or its affiliates of a business) representing
twenty-five percent (25%) or more of the combined voting power of the
Company's then outstanding securities; or
(iv) The stockholders of the Company approve a plan
of complete liquidation or dissolution of the Company or there is consummated
an agreement for the sale or disposition by the Company of all or
substantially all of the Company's assets, other than a sale or disposition
by the Company of all or substantially all of the Company's assets to an
entity, at least seventy-five (75%) of the combined voting power of the
voting securities of which are owned by stockholders of the Company in
substantially the same proportions as their ownership of the Company
immediately prior to such sale.
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(g) "Code" means the Internal Revenue Code of 1986, as
amended from time to time.
(h) "Committee" means the Board or the committee
designated or established by the Board to administer the Plan from and after
the consummation of the Initial Public Offering, the composition of which
shall at all times satisfy the provisions of Rule 16b-3. With respect to the
period prior to consummation of the Initial Public Offering, references to
the "Committee" shall be deemed to refer to the Board or to the Compensation
Committee of the Board.
(i) "Company" means Alexandria Real Estate Equities,
Inc., a corporation organized under the laws of the State of Maryland, or any
successor corporation.
(j) "Exchange Act" means the Securities Exchange Act of
1934, as amended from time to time, and as now or hereafter construed,
interpreted and applied by regulations, rulings and cases.
(k) "Fair Market Value" means, with respect to Stock or
other property, the fair market value of such Stock or other property
determined by such methods or procedures as shall be established from time to
time by the Committee. Unless otherwise determined by the Committee in good
faith, the per share Fair Market Value of Stock as of a particular date shall
mean (i) the closing sales price per share of Stock on the national
securities exchange on which the Stock is principally traded for the last
preceding date on which there was a sale of such Stock on such exchange, or
(ii) if the shares of Stock are then traded in an over-the-counter market,
the average of the closing bid and ask prices for the shares of Stock in such
over-the-counter market for the last preceding date on which there was a sale
of such Stock in such market, or (iii) if the shares of Stock are not then
listed on a national securities exchange or traded in an over-the-counter
market, such value as the Committee, in its sole discretion, shall determine.
(l) "Grantee" means a person who, as an employee or
independent contractor of the Company, a Subsidiary or an Affiliate, has been
granted an Award or Loan under the Plan.
(m) "Initial Public Offering" shall mean the initial public
offering of shares of Stock of the Company, as more fully described in the
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Registration Statement on Form S-11 filed with the Securities and Exchange
Commission on March 18, 1997, as such Registration Statement may be amended
from time to time.
(n) "Incentive Stock Option" or "ISO" means any Option
intended to be and designated as an incentive stock option within the meaning
of Section 422 of the Code.
(o) "Loan" means the proceeds from the Company borrowed
by a Plan participant under Section 8 of the Plan.
(p) "Non-Employee Director" means any director who is not
an employee of the Company or any of its subsidiaries or affiliates. For
purposes of this Plan, such non-employee director shall be treated as an
independent contractor.
(q) "Nonqualified Stock Option" or "NQSO" means any
Option that is designated as a nonqualified stock option.
(r) "Option" means a right, granted to a Grantee under
Section 6.2, to purchase shares of Stock. An Option may be either an ISO or
an NQSO; PROVIDED THAT ISOs may be granted only to employees of the Company
or of a Subsidiary.
(s) "Other Cash-Based Award" means cash awarded to a
Grantee under Section 6.6, including cash awarded as a bonus or upon the
attainment of specified performance objectives or otherwise as permitted
under the Plan.
(t) "Other Stock-Based Award" means a right or other
interest granted to a Grantee under Section 6.6 that may be denominated or
payable in, valued in whole or in part by reference to, or otherwise based
on, or related to, Stock, including, but not limited to (1) unrestricted
Stock awarded as a bonus or upon the attainment of specified performance
objectives or otherwise as permitted under the Plan and (2) a right granted
to a Grantee to acquire Stock from the Company for cash and/or a promissory
note containing terms and conditions prescribed by the Committee.
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(u) "Plan" means this Alexandria Real Estate Equities,
Inc. 1997 Stock Award and Incentive Plan, as amended from time to time.
(v) "Restricted Stock" means an Award of shares of Stock
to a Grantee under Section 6.4 that may be subject to certain restrictions
and to a risk of forfeiture.
(w) "Rule 16b-3" means Rule 16b-3, as from time to time
in effect promulgated by the Securities and Exchange Commission under Section
16 of the Exchange Act, including any successor to such Rule.
(x) "Securities Act" means the Securities Act of 1933, as
amended from time to time, and as now or hereafter construed, interpreted and
applied by the regulations, rulings and cases.
(y) "Stock" means shares of the common stock, par value
$.01 per share, of the Company.
(z) "Stock Appreciation Right" or "SAR" means the right,
granted to a Grantee under Section 6.3, to be paid an amount measured by the
appreciation in the Fair Market Value of Stock from the date of grant to the
date of exercise of the right, with payment to be made in cash, Stock, or
property as specified in the Award or determined by the Committee.
(aa) "Subsidiary" means any corporation (other than the
Company) in an unbroken chain of corporations beginning with the Company if,
at the time of granting of an Award, each of the corporations (other than the
last corporation in the unbroken chain) owns stock possessing 50% or more of
the total combined voting power of all classes of stock in one of the other
corporations in the chain.
3. ADMINISTRATION.
The Plan shall be administered by the Committee. The Committee
shall have the authority in its discretion, subject to and not inconsistent
with the express provisions of the Plan, to administer the Plan and to
exercise all the powers and authorities either specifically granted to it
under the Plan or necessary or advisable in the administration of the Plan
including, without limitation, the
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authority to grant Awards and make Loans; to determine the persons to whom
and the time or times at which Awards shall be granted and Loans shall be
made; to determine the type and number of Awards to be granted and the amount
of any Loan, the number of shares of Stock to which an Award may relate and
the terms, conditions, restrictions and performance criteria relating to any
Award or Loan; and to determine whether, to what extent, and under what
circumstances an Award may be settled, cancelled, forfeited, exchanged, or
surrendered; to make adjustments in the terms and conditions of, and the
criteria and performance objectives (if any) included in, Awards and Loans in
recognition of unusual or non-recurring events affecting the Company or any
Subsidiary or Affiliate or the financial statements of the Company or any
Subsidiary or Affiliate, or in response to changes in applicable laws,
regulations, or accounting principles; to designate Affiliates; to construe
and interpret the Plan and any Award or Loan; to prescribe, amend and rescind
rules and regulations relating to the Plan; to determine the terms and
provisions of the Award Agreements and any promissory note or agreement
related to any Loan (which need not be identical for each Grantee); and to
make all other determinations deemed necessary or advisable for the
administration of the Plan.
The Committee may appoint a chairperson and a secretary and may
make such rules and regulations for the conduct of its business as it shall
deem advisable, and shall keep minutes of its meetings. All determinations
of the Committee shall be made by a majority of its members either present in
person or participating by conference telephone at a meeting or by written
consent. The Committee may delegate to one or more of its members or to one
or more agents such administrative duties as it may deem advisable, and the
Committee or any person to whom it has delegated duties as aforesaid may
employ one or more persons to render advice with respect to any
responsibility the Committee or such person may have under the Plan. All
decisions, determinations and interpretations of the Committee shall be final
and binding on all persons, including the Company, and any Subsidiary,
Affiliate or Grantee (or any person claiming any rights under the Plan from
or through any Grantee) and any stockholder.
No member of the Board or Committee shall be liable for any action
taken or determination made in good faith with respect to the Plan or any
Award granted or Loan made hereunder.
4. ELIGIBILITY.
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Subject to the provisions set forth below, Awards and Loans may be
granted to selected employees, officers and independent contractors
(including Non-Employee Directors) of the Company and its present or future
Subsidiaries and Affiliates, in the discretion of the Committee; PROVIDED
THAT ISOs may be granted only to employees of the Company or of a Subsidiary.
In determining the persons to whom Awards and Loans shall be granted and the
type (including the number of shares to be covered) of any Award or the
amount of any Loan, the Committee shall take into account such factors as the
Committee shall deem relevant in connection with accomplishing the purposes
of the Plan.
5. STOCK SUBJECT TO THE PLAN.
The maximum number of shares of Stock reserved for the grant of
Awards under the Plan shall be 900,000, subject to adjustment as provided
herein. No more than 100% of the total shares available for grant may be
awarded to a single individual in a single year. Such shares may, in whole
or in part, be authorized but unissued shares or shares that shall have been
or may be reacquired by the Company in the open market, in private
transactions or otherwise. If any shares subject to an Award are forfeited,
cancelled, exchanged or surrendered, or if an Award otherwise terminates or
expires without a distribution of shares to the Grantee, the shares of stock
with respect to such Award shall, to the extent of any such forfeiture,
cancellation, exchange, surrender, termination or expiration, again be
available for Awards under the Plan; PROVIDED THAT, in the case of
forfeiture, cancellation, exchange or surrender of shares of Restricted Stock
with respect to which dividends have been paid or accrued, the number of
shares with respect to such Awards shall not be available for Awards
hereunder unless, in the case of shares with respect to which dividends were
accrued but unpaid, such dividends are also forfeited, cancelled, exchanged
or surrendered. Upon the exercise of any Award granted in tandem with any
other Awards or awards, such related Awards or awards shall be cancelled to
the extent of the number of shares of Stock as to which the Award is
exercised and, notwithstanding the foregoing, such number of shares shall no
longer be available for Awards under the Plan.
In the event that the Committee shall determine that any dividend
or other distribution (whether in the form of cash, Stock, or other
property), recapitalization, stock split, reverse split, reorganization,
merger, consolidation, spin-off, combination, repurchase, or share exchange,
or other similar corporate transaction or event, affects the Stock such that
an adjustment is appropriate in order to prevent dilution or enlargement of
the rights of Grantees under the Plan,
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then the Committee shall make such equitable changes or adjustments as it
deems necessary or appropriate to any or all of (a) the number and kind of
shares of Stock which may thereafter be issued in connection with Awards, (b)
the number and kind of shares of Stock issued or issuable in respect of
outstanding Awards, and (c) the exercise price, grant price, or purchase
price relating to any Award; PROVIDED THAT, with respect to ISOs, such
adjustment shall be made in accordance with Section 424(h) of the Code.
6. SPECIFIC TERMS OF AWARDS.
6.1 GENERAL. The term of each Award shall be for such period
as may be determined by the Committee. Subject to the terms of the Plan and
any applicable Award Agreement, payments to be made by the Company or a
Subsidiary or Affiliate upon the grant, maturation, or exercise of an Award
may be made in such forms as the Committee shall determine at the date of
grant or thereafter, including, without limitation, cash, Stock, or other
property, and may be made in a single payment or transfer, in installments,
or on a deferred basis. The Committee may make rules relating to installment
or deferred payments with respect to Awards, including the rate of interest
to be credited with respect to such payments. In addition to the foregoing,
the Committee may impose on any Award or the exercise thereof, at the date of
grant or thereafter, such additional terms and conditions, not inconsistent
with the provisions of the Plan, as the Committee shall determine .
6.2 OPTIONS. The Committee is authorized to grant Options to
Grantees on the following terms and conditions:
(a) TYPE OF AWARD. The Award Agreement evidencing the
grant of an Option under the Plan shall designate the Option as an ISO or an
NQSO.
(b) EXERCISE PRICE. The exercise price per share of
Stock purchasable under an Option shall be determined by the Committee;
PROVIDED THAT, in the case of an ISO, such exercise price shall be not less
than the Fair Market Value of a share on the date of grant of such Option,
and in no event shall the exercise price for the purchase of shares be less
than par value. The exercise price for Stock subject to an Option may be
paid in cash or subject to the approval of the Committee, by an exchange of
Stock previously owned by the Grantee, or a combination of both, in an amount
having a combined value equal to such exercise
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price. Subject to the approval of the Committee, a Grantee may pay all or a
portion of the aggregate exercise price by having shares of Stock with a Fair
Market Value on the date of exercise equal to the aggregate exercise price
withheld by the Company or sold by a broker-dealer under circumstances
meeting the requirements of 12 C.F.R. Section 220 or any successor thereof.
(c) TERM AND EXERCISABILITY OF OPTIONS. The date on
which the Committee adopts a resolution expressly granting an Option shall be
considered the day on which such Option is granted. Options shall be
exercisable over the exercise period (which shall not exceed ten years from
the date of grant), at such times and upon such conditions as the Committee
may determine, as reflected in the Award Agreement; PROVIDED THAT, the
Committee shall have the authority to accelerate the exercisability of any
outstanding Option at such time and under such circumstances as it, in its
sole discretion, deems appropriate. An Option may be exercised to the extent
of any or all full shares of Stock as to which the Option has become
exercisable, by giving written notice of such exercise to the Committee or
its designated agent.
(d) TERMINATION OF EMPLOYMENT, ETC. An Option may not be
exercised unless the Grantee is then in the employ of, or then maintains an
independent contractor relationship with, the Company or a Subsidiary or an
Affiliate (or a company or a parent or Subsidiary company of such company
issuing or assuming the Option in a transaction to which Section 424(a) of
the Code applies); PROVIDED THAT ISOs may be granted only to employees of the
Company or of a Subsidiary, and may not be exercised unless the Grantee has
remained continuously so employed, or has continuously maintained such
relationship, since the date of grant of the Option; PROVIDED THAT, the Award
Agreement may contain provisions extending the exercisability of Options, in
the event of specified terminations, to a date not later than the expiration
date of such Option.
(e) OTHER PROVISIONS. Options may be subject to such
other conditions including, but not limited to, restrictions on
transferability of the shares acquired upon exercise of such Options, as the
Committee may prescribe in its discretion or as may be required by applicable
law, including but not limited to the requirements respecting ISOs set forth
in Section 422 of the Code.
6.3 SARs. The Committee is authorized to grant SARs to
Grantees on the following terms and conditions:
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(a) IN GENERAL. Unless the Committee determines
otherwise, (i) an SAR granted in tandem with an NQSO may be granted at the
time of grant of the related NQSO or at any time thereafter or (ii) an SAR
granted in tandem with an ISO may only be granted at the time of grant of the
related ISO. An SAR granted in tandem with an Option shall be exercisable
only to the extent the underlying Option is exercisable.
(b) SARs. An SAR shall confer on the Grantee a right to
receive an amount with respect to each share subject thereto, upon exercise
thereof, equal to the excess of (i) the Fair Market Value of one share of
Stock on the date of exercise over (ii) the grant price of the SAR (which in
the case of an SAR granted in tandem with an Option shall be equal to the
exercise price of one share of Stock underlying the Option, and which in the
case of any other SAR shall be such price as the Committee may determine).
6.4 RESTRICTED STOCK. The Committee is authorized to grant
Restricted Stock to Grantees on the following terms and conditions:
(a) ISSUANCE AND RESTRICTIONS. Restricted Stock shall be
subject to such restrictions on transferability and other restrictions, if
any, as the Committee may impose at the date of grant or thereafter, which
restrictions may lapse separately or in combination at such times, under such
circumstances, in such installments, or otherwise, as the Committee may
determine. Such restrictions may include factors relating to the increase in
the value of the Stock or to individual or Company performance such as the
attainment of certain specified individual or Company-wide performance goals
or earnings per share. Except to the extent restricted under the Award
Agreement relating to the Restricted Stock, a Grantee granted Restricted
Stock shall have all of the rights of a stockholder including, without
limitation, the right to vote Restricted Stock and the right to receive
dividends thereon.
(b) FORFEITURE. Upon termination of employment with or
service to the Company and any Subsidiary, or upon termination of the
independent contractor relationship, as the case may be, during the
applicable restriction period, Restricted Stock and any accrued but unpaid
dividends that are at that time subject to restrictions shall be forfeited;
PROVIDED THAT, the Committee may provide, by rule or regulation or in any
Award Agreement, or may determine in any individual case, that restrictions
or forfeiture conditions relating to Restricted Stock will be waived in whole
or in part in the event of terminations
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resulting from specified causes, and the Committee may in other cases waive
in whole or in part the forfeiture of Restricted Stock.
(c) CERTIFICATES FOR STOCK. Restricted Stock granted
under the Plan may be evidenced in such manner as the Committee shall
determine. If certificates representing Restricted Stock are registered in
the name of the Grantee, such certificates shall bear an appropriate legend
referring to the terms, conditions, and restrictions applicable to such
Restricted Stock, and the Company shall retain physical possession of the
certificate.
(d) DIVIDENDS. Dividends paid on Restricted Stock shall
either be paid at the dividend payment date, or be deferred for payment to
such date as determined by the Committee, in cash or in shares of
unrestricted Stock having a Fair Market Value equal to the amount of such
dividends. Stock distributed in connection with a stock split or stock
dividend, and other property distributed as a dividend, shall be subject to
restrictions and a risk of forfeiture to the same extent as the Restricted
Stock with respect to which such Stock or other property has been distributed.
6.5 STOCK AWARDS IN LIEU OF CASH AWARDS. The Committee is
authorized to grant Stock to Grantees as a bonus, or to grant other Awards,
in lieu of Company commitments to pay cash under other plans or compensatory
arrangements. Stock or Awards granted hereunder shall have such other terms
as shall be determined by the Committee.
6.6 OTHER STOCK-BASED OR CASH-BASED AWARDS. The Committee is
authorized to grant to Grantees Other Stock-Based Awards or Other Cash-Based
Awards alone or in addition to any other Award under the Plan, as deemed by
the Committee to be consistent with the purposes of the Plan. Such Awards
may be granted with value and payment contingent upon performance of the
Company or any other factors designated by the Committee, or valued by
reference to the performance of specified Subsidiaries or Affiliates.
The Committee shall determine the terms and conditions of such
Awards at the date of grant or thereafter; PROVIDED, THAT performance
objectives for each year shall be established by the Committee not later than
the latest date permissible under Section 162(m) of the Code. Such
performance objectives may be expressed in terms of one or more financial or
other objective goals. Financial goals may be expressed, for example, in
terms of earnings per share, stock price,
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return on equity, net earnings growth, net earnings, related return ratios,
cash flow, earnings before interest, taxes, depreciation and amortization
(EBITDA), return on assets or total stockholder return. Other objective
goals may include the attainment of various productivity and long-term growth
objectives. Any criteria may be measured in absolute terms or as compared to
another corporation or corporations. To the extent applicable, any such
performance objective shall be determined (a) in accordance with the
Company's audited financial statements and generally accepted accounting
principles and reported upon by the Company's independent accountants or (b)
so that a third party having knowledge of the relevant facts could determine
whether such performance objective is met. Performance objectives shall
include a threshold level of performance below which no Award payment shall
be made, levels of performance above which specified percentages of target
Awards shall be paid, and a maximum level of performance above which no
additional Award shall be paid. Performance objectives established by the
Committee may be (but need not be) different from year-to-year and different
performance objectives may be applicable to different Grantees.
7. CHANGE OF CONTROL PROVISIONS. The following provisions shall
apply in the event of a Change of Control, unless otherwise determined by the
Committee or the Board in writing at or after grant (including under any
individual agreement), but prior to the occurrence of such Change of Control:
7.1 any Award carrying a right to exercise that was not
previously exercisable and vested shall become fully exercisable and vested;
7.2 the restrictions, deferral limitations, payment
conditions, and forfeiture conditions applicable to any other Award granted
under the Plan shall lapse and such Awards shall be deemed fully vested, and
any performance conditions imposed with respect to Awards shall be deemed to
be fully achieved; and
7.3 any indebtedness incurred pursuant to Section 8 of this
Plan shall be forgiven and the collateral pledged in connection with any such
Loan shall be released.
8. LOAN PROVISIONS. Subject to the provisions of the Plan and all
applicable federal and state laws, rules and regulations (including the
requirements of Regulation G (12 C.F.R. Section 207)), the Committee shall
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have the authority to make Loans to Grantees (on such terms and conditions as
the Committee shall determine), to enable such Grantees to purchase shares in
connection with the Initial Public Offering or otherwise in connection with
the realization of Awards under the Plan. Loans shall be evidenced by a
promissory note or other agreement, signed by the borrower, which shall
contain provisions for repayment and such other terms and conditions as the
Committee shall determine.
9. GENERAL PROVISIONS.
9.1 EFFECTIVE DATE; APPROVAL BY STOCKHOLDERS. The Plan shall
take effect upon its adoption by the Board (the "Effective Date"), but the
Plan (and any grants of Awards made prior to the stockholder approval
mentioned herein), shall be subject to the approval of the holder(s) of a
majority of the issued and outstanding shares of voting securities of the
Company entitled to vote, which approval must occur within twelve (12) months
of the date the Plan is adopted by the Board. In the absence of such
approval, such Awards shall be null and void. Notwithstanding the foregoing,
the effectiveness of the Plan is conditioned upon the consummation of the
Initial Public Offering, and shall be of no force and effect if the Initial
Public Offering is not consummated.
9.2 NONTRANSFERABILITY. Awards shall not be transferable by
a Grantee except by will or the laws of descent and distribution or, if then
permitted under Rule 16b-3, pursuant to a qualified domestic relations order
as defined under the Code or Title I of the Employee Retirement Income
Security Act of 1974, as amended, or the rules thereunder, and shall be
exercisable during the lifetime of a Grantee only by such Grantee or his
guardian or legal representative.
9.3 NO RIGHT TO CONTINUED EMPLOYMENT, ETC. Nothing in the
Plan or in any Award or Loan granted or any Award Agreement, promissory note
or other agreement entered into pursuant hereto shall confer upon any Grantee
the right to continue in the employ of or to continue as an independent
contractor of the Company, any Subsidiary or any Affiliate, or to be entitled
to any remuneration or benefits not set forth in the Plan or such Award
Agreement, promissory note, or other agreement or to interfere with or limit
in any way the right of the Company or any such Subsidiary or Affiliate to
terminate such Grantee's employment or independent contractor relationship.
9.4 TAXES. The Company or any Subsidiary or Affiliate is
authorized to withhold from any Award granted, any payment relating to an
Award under the Plan, including from a distribution of Stock, or any other
payment to a
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Grantee, amounts of withholding and other taxes due in connection with any
transaction involving an Award, and to take such other action as the
Committee may deem advisable to enable the Company and Grantees to satisfy
obligations for the payment of withholding taxes and other tax obligations
relating to any Award. This authority includes the authority to withhold or
receive Stock or other property and to make cash payments in respect thereof
in satisfaction of a Grantee's tax obligations.
9.5 AMENDMENT AND TERMINATION OF THE PLAN. The Board may at
any time and from time to time alter, amend, suspend, or terminate the Plan
in whole or in part; PROVIDED THAT, if the Committee determines that
stockholder approval of an amendment is necessary and desirable in order for
the Plan to comply or continue to comply with any applicable law, such
amendment shall not be effective unless the same shall be approved by the
requisite vote of the stockholders of the Company entitled to vote thereon.
Notwithstanding the foregoing, no amendment shall affect adversely any of the
rights of any Grantee, without such Grantee's consent, under any Award or
Loan theretofore granted under the Plan.
9.6 NO RIGHTS TO AWARDS OR LOANS; NO STOCKHOLDER RIGHTS. No
Grantee shall have any claim to be granted any Award or Loan under the Plan,
and there is no obligation for uniformity of treatment of Grantees. Except
as provided specifically herein, a Grantee or a transferee of an Award shall
have no rights as a stockholder with respect to any shares covered by the
Award until the date of the issuance of a stock certificate to him for such
shares.
9.7 UNFUNDED STATUS OF AWARDS. The Plan is intended to
constitute an "unfunded" plan for incentive and deferred compensation. With
respect to any payments not yet made to a Grantee pursuant to an Award,
nothing contained in the Plan or any Award shall give any such Grantee any
rights that are greater than those of a general creditor of the Company.
9.8 NO FRACTIONAL SHARES. No fractional shares of Stock
shall be issued or delivered pursuant to the Plan or any Award. The
Committee shall determine whether cash, other Awards, or other property shall
be issued or paid in lieu of such fractional shares or whether such
fractional shares or any rights thereto shall be forfeited or otherwise
eliminated.
9.9 REGULATIONS AND OTHER APPROVALS.
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(a) The obligation of the Company to sell or deliver
Stock with respect to any Award granted under the Plan shall be subject to
all applicable laws, rules and regulations, including all applicable federal
and state securities laws, and the obtaining of all such approvals by
governmental agencies as may be deemed necessary or appropriate by the
Committee.
(b) Each Award is subject to the requirement that, if at
any time the Committee determines, in its absolute discretion, that the
listing, registration or qualification of Stock issuable pursuant to the Plan
is required by any securities exchange or under any state or federal law, or
the consent or approval of any governmental regulatory body is necessary or
desirable as a condition of, or in connection with, the grant of an Award or
the issuance of Stock, no such Award shall be granted or payment made or
Stock issued, in whole or in part, unless listing, registration,
qualification, consent or approval has been effected or obtained free of any
conditions not acceptable to the Committee.
(c) In the event that the disposition of Stock acquired
pursuant to the Plan is not covered by a then current registration statement
under the Securities Act and is not otherwise exempt from such registration,
such Stock shall be restricted against transfer to the extent required by the
Securities Act or regulations thereunder, and the Committee may require a
Grantee receiving Stock pursuant to the Plan, as a condition precedent to
receipt of such Stock, to represent to the Company in writing that the Stock
acquired by such Grantee is acquired for investment only and not with a view
to distribution.
9.10 GOVERNING LAW. The Plan and all determinations made and
actions taken pursuant hereto shall be governed by the laws of the State of
Maryland without giving effect to the conflict of laws principles thereof.
16
<PAGE>
ALEXANDRIA REAL ESTATE EQUITIES, INC.
1997 STOCK AWARD AND INCENTIVE PLAN
<TABLE>
<CAPTION>
Section Page
- ------- ----
<S> <C> <C>
1. Purpose; Types of Awards; Construction. . . . . . . . . . . . . . . . . . . 1
2. Definitions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
3. Administration. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
4. Eligibility . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
5. Stock Subject to the Plan . . . . . . . . . . . . . . . . . . . . . . . . . 8
6. Specific Terms of Awards. . . . . . . . . . . . . . . . . . . . . . . . . . 9
7. Change of Control Provisions. . . . . . . . . . . . . . . . . . . . . . . . 13
8. Loan Provisions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
9. General Provisions. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
</TABLE>
i
<PAGE>
REVOLVING LOAN AGREEMENT
Dated as of June 2, 1997
among
ALEXANDRIA REAL ESTATE EQUITIES, INC.
ARE - QRS CORP.
ARE ACQUISITIONS, LLC
THE BANKS HEREIN NAMED
and
BANK OF AMERICA NATIONAL
TRUST AND SAVINGS ASSOCIATION, as Managing Agent
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
<S> <C> <C>
Article 1 DEFINITIONS AND ACCOUNTING TERMS................................ 1
1.1 Defined Terms................................................... 1
1.2 Use of Defined Terms............................................ 31
1.3 Accounting Terms................................................ 31
1.4 Rounding........................................................ 32
1.5 Exhibits and Schedules.......................................... 32
1.6 References to "Borrowers and their Subsidiaries"................ 32
1.7 Miscellaneous Terms............................................. 32
Article 2 LOANS........................................................... 33
2.1 Committed Loans-General......................................... 33
2.2 Alternate Base Rate Loans....................................... 35
2.3 Eurodollar Rate Loans........................................... 35
2.4 Competitive Advances............................................ 35
2.5 Voluntary Reduction of Commitments.............................. 39
2.6 Automatic Reduction of Commitments.............................. 39
2.7 Optional Termination of Commitments............................. 40
2.8 Managing Agent's Right to Assume Funds Available for Advances... 40
2.9 Extension of Revolver Termination Date.......................... 40
2.10 Term Loan Conversion............................................ 42
2.11 Unencumbered Asset Pool......................................... 42
2.12 Representative of Borrowers..................................... 43
Article 3 PAYMENTS AND FEES............................................... 44
3.1 Principal and Interest.......................................... 44
3.2 Arrangement Fee................................................. 46
3.3 Line B Commitment Activation Fee................................ 46
3.4 Commitment Fee.................................................. 46
3.5 Agency Fee...................................................... 46
3.6 Extension Fees.................................................. 46
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<PAGE>
3.7 Increased Commitment Costs...................................... 47
3.8 Eurodollar Costs and Related Matters............................ 47
3.9 Late Payments................................................... 51
3.10 Computation of Interest and Fees................................ 52
3.11 Non-Banking Days................................................ 52
3.12 Manner and Treatment of Payments................................ 52
3.13 Funding Sources................................................. 53
3.14 Failure to Charge Not Subsequent Waiver......................... 54
3.15 Managing Agent's Right to Assume Payments Will be Made by
Borrowers....................................................... 54
3.16 Fee Determination Detail........................................ 54
3.17 Survivability................................................... 54
Article 4 REPRESENTATIONS AND WARRANTIES.................................. 55
4.1 Existence and Qualification; Power; Compliance With Laws........ 55
4.2 Authority; Compliance With Other Agreements and Instruments and
Government Regulations.......................................... 55
4.3 No Governmental Approvals Required.............................. 56
4.4 Subsidiaries.................................................... 56
4.5 Financial Statements............................................ 56
4.6 No Other Liabilities; No Material Adverse Changes............... 57
4.7 Title to Property............................................... 57
4.8 Intangible Assets............................................... 57
4.9 Public Utility Holding Company Act.............................. 57
4.10 Litigation...................................................... 57
4.11 Binding Obligations............................................. 58
4.12 No Default...................................................... 58
4.13 ERISA........................................................... 58
4.14 Regulations G and U; Investment Company Act..................... 59
4.15 Disclosure...................................................... 59
4.16 Tax Liability................................................... 59
4.17 Hazardous Materials............................................. 59
4.18 Initial Pool Properties......................................... 60
Article 5 AFFIRMATIVE COVENANTS (OTHER THAN INFORMATION AND REPORTING
REQUIREMENTS)................................................... 61
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<PAGE>
5.1 Payment of Taxes and Other Potential Liens...................... 61
5.2 Preservation of Existence....................................... 61
5.3 Maintenance of Properties....................................... 61
5.4 Maintenance of Insurance........................................ 61
5.5 Compliance With Laws............................................ 62
5.6 Inspection Rights............................................... 62
5.7 Keeping of Records and Books of Account......................... 62
5.8 Compliance With Agreements...................................... 62
5.9 Use of Proceeds................................................. 62
5.10 Hazardous Materials Laws........................................ 62
5.11 Unencumbered Asset Pool......................................... 63
5.12 REIT Status..................................................... 63
5.13 Additional Borrowers............................................ 63
Article 6 NEGATIVE COVENANTS.............................................. 64
6.1 Mergers......................................................... 64
6.2 ERISA........................................................... 64
6.3 Change in Nature of Business.................................... 64
6.4 Transactions with Affiliates.................................... 64
6.5 Leverage Ratio.................................................. 64
6.6 Interest Coverage............................................... 65
6.7 Fixed Charge Coverage........................................... 65
6.8 Distributions................................................... 65
6.9 Market Net Worth................................................ 65
6.10 Undeveloped Property............................................ 65
6.11 Unencumbered Revenue-Producing Property......................... 65
6.12 Secured Recourse Debt........................................... 65
6.13 Other Unsecured Debt............................................ 65
6.14 Investments in Certain Persons.................................. 66
6.15 Negative Pledges................................................ 66
Article 7 INFORMATION AND REPORTING REQUIREMENTS.......................... 67
7.1 Financial and Business Information.............................. 67
7.2 Compliance Certificates......................................... 70
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<PAGE>
Article 8 CONDITIONS...................................................... 71
8.1 Initial Advances................................................ 71
8.2 Any Advance..................................................... 73
Article 9 EVENTS OF DEFAULT AND REMEDIES UPON EVENT OF DEFAULT............ 74
9.1 Events of Default............................................... 74
9.2 Remedies Upon Event of Default.................................. 76
Article 10 THE MANAGING AGENT.............................................. 79
10.1 Appointment and Authorization................................... 79
10.2 Managing Agent and Affiliates................................... 79
10.3 Proportionate Interest in any Collateral........................ 79
10.4 Banks' Credit Decisions......................................... 80
10.5 Action by Managing Agent........................................ 80
10.6 Liability of Managing Agent..................................... 81
10.7 Indemnification................................................. 82
10.8 Successor Managing Agent........................................ 83
10.9 No Obligations of Borrowers..................................... 84
Article 11 MISCELLANEOUS................................................... 85
11.1 Cumulative Remedies; No Waiver.................................. 85
11.2 Amendments; Consents............................................ 85
11.3 Costs, Expenses and Taxes....................................... 86
11.4 Nature of Banks' Obligations.................................... 87
11.5 Survival of Representations and Warranties...................... 87
11.6 Notices......................................................... 87
11.7 Execution of Loan Documents..................................... 88
11.8 Binding Effect; Assignment...................................... 88
11.9 Right of Setoff................................................. 91
11.10 Sharing of Setoffs.............................................. 91
11.11 Indemnity by Borrowers.......................................... 92
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<PAGE>
11.12 Nonliability of the Banks....................................... 93
11.13 No Third Parties Benefited...................................... 94
11.14 Confidentiality................................................. 94
11.15 Further Assurances.............................................. 95
11.16 Integration..................................................... 95
11.17 Governing Law................................................... 95
11.18 Severability of Provisions...................................... 95
11.19 Headings........................................................ 96
11.20 Time of the Essence............................................. 96
11.21 Foreign Banks and Participants.................................. 96
11.22 Hazardous Material Indemnity.................................... 97
11.23 Joint and Several............................................... 97
11.24 Removal of a Bank............................................... 98
11.25 Waiver of Right to Trial by Jury................................ 98
11.26 Purported Oral Amendments....................................... 99
</TABLE>
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<PAGE>
<TABLE>
<CAPTION>
EXHIBITS
- --------
<S> <C>
A - Commitments Assignment and Acceptance
B - Competitive Advance Note
C - Competitive Bid
D - Competitive Bid Request
E - Compliance Certificate
F - Joinder Agreement
G - Line A Note
H - Line B Note
I-1 - Opinion of Counsel
I-2 - Opinion of Counsel
I-3 - Opinion of Counsel
J - Pricing Certificate
K - Request for Loan
L - Joint Borrower Provisions
<CAPTION>
SCHEDULES
- ---------
<S> <C>
1.1 Bank Commitments
4.4 Subsidiaries
4.7 Existing Liens, Negative Pledges and Rights of Others
4.10 Material Litigation
4.17 Hazardous Materials Matters
4.18 Initial Pool Properties
</TABLE>
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<PAGE>
REVOLVING LOAN AGREEMENT
Dated as of June 2, 1997
This REVOLVING LOAN AGREEMENT ("Agreement") is entered into by and among
Alexandria Real Estate Equities, Inc., a Maryland corporation ("Parent"),
ARE-QRS Corp., a Maryland corporation ("QRS"), ARE Acquisitions, LLC, a
Delaware limited liability company ("ARE"), each other Wholly-Owned
Subsidiary of Parent which may hereafter become a party to this Agreement as
a borrower pursuant to Section 5.13 (collectively, with Parent, QRS and ARE,
the "Borrowers", all on a joint and several basis), each bank whose name is
set forth on the signature pages of this Agreement and each lender which may
hereafter become a party to this Agreement pursuant to Section 11.8
(collectively, the "Banks" and individually, a "Bank"), and Bank of America
National Trust and Savings Association, as Managing Agent.
In consideration of the mutual covenants and agreements herein contained, the
parties hereto covenant and agree as follows:
Article 1
DEFINITIONS AND ACCOUNTING TERMS
1.1 DEFINED TERMS. As used in this Agreement, the following
terms shall have the meanings set forth below:
"ACTIVATED LINE B COMMITMENT" means, as of any date of
determination, the portion of the Line B Commitment which has been
activated pursuant to Section 2.1(b) as of that date.
"ADJUSTED EBITDA" means, with respect to any fiscal period, the SUM
OF (a) the Net Income of Parent for that period, PLUS (b) any
non-operating non-recurring loss reflected in such Net Income, MINUS (c)
any non-operating non-recurring gain reflected in such Net Income, PLUS
(d) Interest Expense of Parent for that period, PLUS (e) the aggregate
amount of federal and state taxes on or measured by income of Parent for
that period (whether or not payable during that period), PLUS (f)
depreciation, amortization and all other non-cash
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<PAGE>
expenses (INCLUDING non-cash officer compensation) of Parent for that
period, in each case as determined in accordance with Generally Accepted
Accounting Principles, and ADJUSTED BY SUBTRACTING therefrom a property
expenditure reserve equal to 22% of the rental revenues of Parent for
that period that arise from or are related to Revenue-Producing Property
of Parent.
"ADJUSTED NOI" means, with respect to any Revenue-Producing Property
and with respect to any fiscal period, the SUM OF (a) the net income of
that Revenue-Producing Property for that period, PLUS (b) Interest
Expense of that Revenue-Producing Property for that period, PLUS (c) the
aggregate amount of federal and state taxes on or measured by income of
that Revenue-Producing Property for that period (whether or not payable
during that period), PLUS (d) depreciation, amortization and all other
non-cash expenses of that Revenue-Producing Property for that period, in
each case as determined in accordance with Generally Accepted Accounting
Principles, and ADJUSTED BY SUBTRACTING therefrom a property expenditure
reserve equal to 22% of the rental revenues of that Revenue-Producing
Property for that period.
"ADJUSTED TOTAL LIABILITIES" means, as of any date of determination,
without duplication, the SUM OF (a) Total Liabilities as of that date,
PLUS (b) an amount equal to 50% of the face amount of all undrawn
letters of credit for which Parent or any of its Wholly-Owned
Subsidiaries is the account party outstanding on that date, PLUS (c) the
aggregate Indebtedness covered by all Guaranty Obligations of Parent and
its Wholly-Owned Subsidiaries outstanding on that date, PLUS (d) the
aggregate Indebtedness of all partnerships in which Parent or any
Wholly-Owned Subsidiary is a general partner on that date, PLUS (e) the
Parent's Proportional Share of the Indebtedness of any Related Venture.
"ADVANCE" means any advance made or to be made by any Bank to
Borrowers as provided in ARTICLE 2, and INCLUDES each Alternate Base
Rate Advance and Eurodollar Rate Advance.
"AFFILIATE" means, as to any Person, any other Person which directly
or indirectly controls, or is under common control with, or is
controlled by, such Person. As used in this definition, "control" (and
the correlative terms, "controlled by" and "under common control with")
shall mean possession, directly or indirectly, of power to direct or
cause the direction of management or
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<PAGE>
policies (whether through ownership of securities or partnership or
other ownership interests, by contract or otherwise); PROVIDED that, in
any event, any Person that owns, directly or indirectly, 10% or more of
the securities having ordinary voting power for the election of
directors or other governing body of a corporation that has more than
100 record holders of such securities, or 10% or more of the partnership
or other ownership interests of any other Person that has more than 100
record holders of such interests, will be deemed to be an Affiliate of
such corporation, partnership or other Person.
"AGREEMENT" means this Revolving Loan Agreement, either as
originally executed or as it may from time to time be supplemented,
modified, amended, restated or extended.
"ALTERNATE BASE RATE" means, as of any date of determination, the
rate per annum (rounded upwards, if necessary, to the next 1/100 of 1%)
equal to the HIGHER OF (a) the Reference Rate in effect on such date and
(b) the Federal Funds Rate in effect on such date plus 2 of 1% (50 basis
points).
"ALTERNATE BASE RATE ADVANCE" means an Advance made hereunder and
specified to be an Alternate Base Rate Advance in accordance with
ARTICLE 2.
"ALTERNATE BASE RATE LOAN" means a Loan made hereunder and specified
to be an Alternate Base Rate Loan in accordance with ARTICLE 2.
"AMORTIZATION AMOUNT" means, if the Term Loan Conversion has
occurred, the result obtained by DIVIDING (a) the aggregate principal
balance outstanding under the Line A Notes and the Line B Notes on the
Conversion Date by (b) seven (7).
"AMORTIZATION DATE" means, if the Term Loan Conversion has occurred,
(a) the date that is six (6) months after the Conversion Date and (b)
every three (3) months thereafter through and including the Maturity
Date.
"ANNUALIZED ADJUSTED EBITDA" means, for any fiscal period, (a)
Adjusted EBITDA of Parent for that fiscal period PLUS (b) with respect
to any such fiscal period in which any Revenue-Producing Property
(herein the "New Property") has not been owned and operated by Parent or
one of its
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Subsidiaries for at least four (4) full Fiscal Quarters, such amount as
is necessary to reflect the annualization of Adjusted EBITDA
attributable to the New Property using the following conventions: (i) if
the New Property has been owned and operated by Parent or its Subsidiary
for at least one (1) Fiscal Quarter, the Adjusted NOI of the New
Property shall be multiplied by the appropriate factor so as to result
in annualized Adjusted NOI for the full four (4) Fiscal Quarters and
(ii) if the New Property has not been owned and operated by Parent or
its Subsidiary for at least one (1) Fiscal Quarter, the Adjusted NOI of
the New Property for the four (4) Fiscal Quarters shall be deemed to be
the Adjusted NOI for such period reflected in a pro-forma income
statement for the New Property prepared by Parent in good faith using
reasonable assumptions consistent with all facts known to Parent.
"ANNUALIZED ADJUSTED NOI" means, with respect to any
Revenue-Producing Property and for any fiscal period, (a) Adjusted NOI
of that Revenue-Producing Property PLUS (b) with respect to any such
fiscal period in which any Revenue-Producing Property (herein, the "New
Property") has not been owned and operated by Parent or one of its
Subsidiaries for at least four (4) full Fiscal Quarters, such amount as
is necessary to reflect the annualization of Adjusted NOI attributable
to the New Property using the following conventions: (i) if the New
Property has been owned and operated by Parent or its Subsidiary for at
least one (1) Fiscal Quarter, the Adjusted NOI of the New Property shall
be multiplied by the appropriate factor so as to result in annualized
Adjusted NOI for the full four (4) Fiscal Quarters and (ii) if the New
Property has not been owned and operated by Parent or its Subsidiary for
at least one (i) Fiscal Quarter, the Adjusted NOI of the New Property
for the four (4) Fiscal Quarters shall be deemed to be the Adjusted NOI
for such period reflected in a pro-forma income statement for the New
Property prepared by Parent in good faith using reasonable assumptions
consistent with all facts known to Parent.
"APPLICABLE ALTERNATE BASE RATE MARGIN" means, for each Pricing
Period, the interest rate margin set forth below (expressed in basis
points per annum) opposite the Applicable Pricing Level for that Pricing
Period:
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<TABLE>
<CAPTION>
APPLICABLE
PRICING LEVEL MARGIN
------------- ------
<S> <C>
I 0
II 0
III 0
IV 0
V 25
</TABLE>
"APPLICABLE COMMITMENT FEE RATE" means, for each Pricing Period, the
rate set forth below (expressed in basis points per annum) opposite the
Applicable Pricing Level for that Pricing Period:
<TABLE>
<CAPTION>
APPLICABLE
PRICING LEVEL COMMITMENT FEE
------------- --------------
<S> <C>
I 17.50
II 17.50
III 25.00
IV 25.00
V 25.00
</TABLE>
"APPLICABLE EURODOLLAR RATE MARGIN" means, for each Pricing Period,
the interest rate margin set forth below (expressed in basis points per
annum) opposite the Applicable Pricing Level for that Pricing Period:
<TABLE>
<CAPTION>
APPLICABLE
PRICING LEVEL MARGIN
------------- ------
<S> <C>
I 110.00
II 120.00
III 130.00
IV 140.00
V 150.00
</TABLE>
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<PAGE>
"APPLICABLE PRICING LEVEL" means (a) for any date on which Parent
holds a Credit Rating of BBB (or its equivalent) or better, Pricing
Level I, (b) for any date on which Parent holds a Credit Rating of BBB-
(or its equivalent), Pricing Level II and (c) for any date during a
Pricing Period on which Parent does not hold a Credit Rating of BBB- (or
its equivalent) or better, the pricing level set forth below opposite
the Leverage Ratio as of the last day of the Fiscal Quarter most
recently ended prior to the commencement of that Pricing Period:
<TABLE>
<CAPTION>
PRICING LEVEL LEVERAGE RATIO
------------- --------------
<S> <C>
III Less than .35 to 1.00
IV Equal to or greater than .35 to 1.00
but less than .45 to 1.00
V Greater than .45 to 1.00;
</TABLE>
PROVIDED that (a) the Applicable Pricing Level for the initial Pricing
Period shall (UNLESS Pricing Level I or Pricing Level II is then in
effect) be Pricing Level III, (b) in the event that Borrowers do not
deliver a Pricing Certificate with respect to any Pricing Period prior
to the commencement of such Pricing Period, then until (but only until)
such Pricing Certificate is delivered the Applicable Pricing Level for
that Pricing Period shall be Pricing Level V and (c) if any Pricing
Certificate is subsequently determined to be in error, then the
resulting change in the Applicable Pricing Level shall be made
retroactively to the beginning of the relevant Pricing Period.
"BANK" means each bank whose name is set forth in the signature
pages of this Agreement and each lender which may hereafter become a
party to this Agreement pursuant to Section 11.8.
"BANKING DAY" means any Monday, Tuesday, Wednesday, Thursday or
Friday, OTHER THAN a day on which banks are authorized or required to be
closed in California or New York.
"BORROWING BASE" means, as of any date of determination, the LESSER
OF (a) the Net Leverage Base on that date or (b) the Net Mortgage Amount
on that date.
"BORROWERS" means, collectively, (a) Parent, (b) QRS, (c) ARE and
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(d) any other Wholly-Owned Subsidiary of Parent that hereafter executes
a Joinder Agreement pursuant to Section 5.13. Borrowers are jointly and
severally obligated with respect to the Obligations.
"CAPITAL LEASE OBLIGATIONS" means all monetary obligations of a
Person under any leasing or similar arrangement which, in accordance
with Generally Accepted Accounting Principles, is classified as a
capital lease.
"CAPITALIZATION RATE" means (a) during the period from the Closing
Date through June 30, 1998, ten percent (10%) and (b) during each twelve
(12) month period thereafter, the capitalization rate determined by
Arthur Andersen & Co. (or other independent expert mutually acceptable
to Parent and the Managing Agent) as of the beginning of each such
period to be the prevailing capitalization rate used by sophisticated
real estate industry professionals to value properties comparable to
those in the Unencumbered Asset Pool for comparable purposes; PROVIDED
that if the capitalization rate is for any reason not so determined as
of the beginning of any such period, then the capitalization rate in
effect for the prior period shall remain in effect.
"CASH" means, when used in connection with any Person, all monetary
and non-monetary items owned by that Person that are treated as cash in
accordance with Generally Accepted Accounting Principles, consistently
applied.
"CASH INCOME TAXES" means, with respect to any fiscal period, taxes
on or measured by the income of Borrowers that are paid or currently
payable in Cash by Borrowers during that fiscal period.
"CASH INTEREST EXPENSE" means Interest Expense that is paid or
currently payable in Cash.
"CERTIFICATE" means a certificate signed by a Senior Officer or
Responsible Official (as applicable) of the Person providing the
certificate.
"CHANGE IN CONTROL" means (a) any transaction or series of related
transactions in which any Unrelated Person or two or more Unrelated
Persons acting in concert acquire beneficial ownership (within the
meaning of
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<PAGE>
Rule 13d-3(a)(1) under the Securities Exchange Act of 1934, as amended),
directly or indirectly, of 40% or more of the outstanding Common Stock, (b)
Parent consolidates with or merges into another Person or conveys, transfers
or leases its properties and assets substantially as an entirety to any
Person or any Person consolidates with or merges into Parent, in either event
pursuant to a transaction in which the outstanding Common Stock is changed
into or exchanged for cash, securities or other property, with the effect
that any Unrelated Person becomes the beneficial owner, directly or
indirectly, of 40% or more of Common Stock or that the Persons who were the
holders of Common Stock immediately prior to the transaction hold less than
60% of the common stock of the surviving corporation after the transaction,
(c) during any period of 24 consecutive months, individuals who at the
beginning of such period constituted the board of directors of Parent
(together with any new or replacement directors whose election by the board
of directors, or whose nomination for election, was approved by a vote of at
least a majority of the directors then still in office who were either
directors at the beginning of such period or whose election or nomination for
reelection was previously so approved) cease for any reason to constitute a
majority of the directors then in office or (d) a "change in control" as
defined in any document governing Indebtedness of Parent in excess of
$25,000,000 which gives the holders of such Indebtedness the right to
accelerate or otherwise require payment of such Indebtedness prior to the
maturity date thereof. For purposes of the foregoing, the term "UNRELATED
PERSON" means any Person OTHER THAN (i) a Subsidiary of Parent, (ii) an
employee stock ownership plan or other employee benefit plan covering the
employees of Parent and its Subsidiaries or (iii) any Person that held Common
Stock on the day prior to the effective date of Parent's registration
statement under the Securities Act of 1933 covering the initial public
offering of Common Stock.
"CLOSING DATE" means the time and Banking Day on which the conditions set
forth in Section 8.1 are satisfied or waived. The Managing Agent shall
notify Borrowers and the Banks of the date that is the Closing Date.
"CODE" means the Internal Revenue Code of 1986, as amended or replaced
and as in effect from time to time.
"COMMITMENTS" means the Line A Commitment and the Line B Commitment.
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<PAGE>
"COMMITMENTS ASSIGNMENT AND ACCEPTANCE" means a commitment assignment and
acceptance substantially in the form of EXHIBIT A.
"COMMITTED ADVANCE" means an Advance made to Borrowers by any Bank in
accordance with its Pro Rata Share of the Commitments pursuant to Section 2.1.
"COMMITTED LOANS" means Loans that are comprised of Committed Advances.
"COMMON STOCK" means the common stock of Parent or its successor.
"COMPETITIVE ADVANCE" means an Advance made to Borrowers by any Bank not
determined by that Bank's Pro Rata Share of the Commitments pursuant to
Section 2.4.
"COMPETITIVE ADVANCE NOTE" means the promissory note made by Borrowers in
favor of a Bank to evidence the Competitive Advances made by that Bank,
substantially in the form of EXHIBIT B, either as originally executed or as
the same may from time to time be supplemented, modified, amended, renewed,
extended or supplanted.
"COMPETITIVE BID" means (a) a written bid to provide a Competitive
Advance substantially in the form of EXHIBIT C, signed by a Responsible
Official of a Bank and properly completed to provide all information required
to be included therein or (b) at the election of any Bank, a telephonic bid
by that Bank to provide a Competitive Advance which, if so made, shall be
made by a Responsible Official of that Bank and deemed to have been made
incorporating the substance of EXHIBIT C, and shall promptly be confirmed by
a written Competitive Bid.
"COMPETITIVE BID REQUEST" means (a) a written request submitted by
Borrowers to the Managing Agent to provide a Competitive Bid, substantially
in the form of EXHIBIT D, signed by a Responsible Official of Borrowers and
properly completed to provide all information required to be included therein
or (b) at the election of Borrowers, a telephonic request by Borrowers to the
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Managing Agent to provide a Competitive Bid which, if so made, shall be made
by a Responsible Official of Borrowers and deemed to have been made
incorporating the substance of EXHIBIT D, and shall promptly be confirmed by
a written Competitive Bid Request.
"COMPLIANCE CERTIFICATE" means a certificate in the form of EXHIBIT E,
properly completed and signed by a Senior Officer of Borrowers.
"CONSENT CRITERIA" means, as of any date of determination, that as of
that date EITHER (a) Parent holds a Credit Rating of BBB- (or its equivalent)
or better or (b) as of the last day of the Fiscal Quarter then most
recently-ended, the RATIO OF (i) Adjusted NOI of the Revenue-Producing
Properties in the Unencumbered Asset Pool (INCLUDING any Qualified Investment
Pool Property (herein, the "New Property") proposed to be added to the
Unencumbered Asset Pool; PROVIDED, however, in the case of any such New
Property that within the preceding sixty (60) day period has been purchased
by a Borrower from a Person that is now a tenant occupying 100% of such New
Property, that Adjusted NOI for such New Property shall be the Adjusted NOI
for the first year of such lease as reflected in a pro-forma income statement
for this New Property prepared by Parent in good faith using reasonable
assumptions consistent with all facts known to Parent) for the fiscal period
consisting of that Fiscal Quarter and the three immediately preceding Fiscal
Quarters to (ii) the SUM OF (A) Interest Charges for such fiscal period PLUS
(B) all scheduled principal payments on Indebtedness of Parent (INCLUDING the
principal portion of rent under Capital Lease Obligations) made during such
fiscal period, OTHER THAN payments made at the maturity date of such
Indebtedness, was 3.50 to 1.00 or greater.
"CONTRACTUAL OBLIGATION" means, as to any Person, any provision of any
outstanding security issued by that Person or of any material agreement,
instrument or undertaking to which that Person is a party or by which it or
any of its Property is bound.
"CONTROLLED ENTITY" means a Person (a) that is a Subsidiary of Parent,
(b) that is a general partnership or a limited partnership in which a
Wholly-Owned Subsidiary is the sole managing general partner and such
managing general partner has the sole power to (i) sell all or substantially
all of the assets of such Person, (ii) incur Indebtedness in the name of such
Person,
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(iii) grant a Lien on all or any portion of the assets of such Person and
(iv) otherwise generally manage the business and assets of such Person or (c)
that is a limited liability company for which a Wholly-Owned Subsidiary is
the sole manager and such manager has the sole power to do the acts described
in subclauses (i) through (iv) of clause (b) above.
"CONVERSION DATE" means the Maturity Date in effect immediately prior to
the date upon which the Term Loan Conversion is effected.
"CREDIT RATING" means, as of any date of determination, the credit rating
(or its equivalent) then assigned to Parent's long-term senior unsecured debt
by at least two (2) Rating Agencies; PROVIDED that any credit rating so
assigned by a Rating Agency shall be deemed for this purpose to include all
lower credit ratings of such Rating Agency. For purposes of the foregoing,
"RATING AGENCIES" means (a) Standard & Poor's Rating Group (a division of
McGraw Hill, Inc.) ("S&P") and its successors, (b) Moody's Investor Services,
Inc. ("Moody's") and its successors and (c) Duff and Phelps Credit Rating Co.,
Inc. ("Duff") and its successors. A credit rating of BBB- from S&P is
equivalent to a credit rating of Baa3 from Moody's and BBB- from Duff, and
vice versa. A credit rating of BBB from S&P is equivalent to a credit rating
of Baa2 from Moody's and BBB from Duff, and vice versa.
"DEBTOR RELIEF LAWS" means the Bankruptcy Code of the United States of
America, as amended from time to time, and all other applicable liquidation,
conservatorship, bankruptcy, moratorium, rearrangement, receivership,
insolvency, reorganization, or similar debtor relief Laws from time to time
in effect affecting the rights of creditors generally.
"DEFAULT" means any event that, with the giving of any applicable notice
or passage of time specified in Section 9.1, or both, would be an Event of
Default.
"DEFAULT RATE" means the interest rate prescribed in Section 3.9.
"DESIGNATED DEPOSIT ACCOUNT" means a deposit account to be maintained by
Borrowers with Bank of America National Trust and Savings Association or one
of its Affiliates, as from time to time designated by Borrowers by written
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notification to the Managing Agent.
"DESIGNATED EURODOLLAR MARKET" means, with respect to any Eurodollar Rate
Loan, the London Eurodollar Market.
"DISQUALIFIED STOCK" means any capital stock, warrants, options or other
rights to acquire capital stock (but excluding any debt security which is
convertible, or exchangeable, for capital stock), which, by its terms (or by
the terms of any security into which it is convertible or for which it is
exchangeable), or upon the happening of any event, matures or is mandatorily
redeemable, pursuant to a sinking fund obligation or otherwise, or is
redeemable at the option of the holder thereof, in whole or in part, on or
prior to the Maturity Date.
"DISTRIBUTION" means, with respect to any shares of capital stock or any
warrant or option to purchase an equity security or other equity security
issued by a Person, (i) the retirement, redemption, purchase or other
acquisition for Cash or for Property by such Person of any such security,
(ii) the declaration or (without duplication) payment by such Person of any
dividend in Cash or in Property on or with respect to any such security,
(iii) any Investment by such Person in the holder of 5% or more of any such
security if a purpose of such Investment is to avoid characterization of the
transaction as a Distribution and (iv) any other payment in Cash or Property
by such Person constituting a distribution under applicable Laws with respect
to such security.
"DOLLARS" or "$" means United States dollars.
"DOMESTIC REFERENCE BANK" means Bank of America National Trust and
Savings Association or such other Bank as may be appointed by the Managing
Agent with the approval of Parent (which shall not be unreasonably withheld).
"ELIGIBLE ASSIGNEE" means (a) another Bank, (b) with respect to any Bank,
any Affiliate of that Bank, (c) any commercial bank having a combined capital
and surplus of $100,000,000 or more, (d) any (i) savings bank, savings and
loan association or similar financial institution or (ii) insurance company
engaged in the business of writing insurance which, in either case (A) has a
net worth of $200,000,000 or more, (B) is engaged in the business of lending
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money and extending credit under credit facilities substantially similar to
those extended under this Agreement and (C) is operationally and procedurally
able to meet the obligations of a Bank hereunder to the same degree as a
commercial bank and (e) any other financial institution (INCLUDING a mutual
fund or other fund) having total assets of $250,000,000 or more which meets
the requirements set forth in subclauses (B) and (C) of clause (d) above;
PROVIDED that each Eligible Assignee must either (a) be organized under the
Laws of the United States of America, any State thereof or the District of
Columbia or (b) be organized under the Laws of the Cayman Islands or any
country which is a member of the Organization for Economic Cooperation and
Development, or a political subdivision of such a country, and (i) act
hereunder through a branch, agency or funding office located in the United
States of America and (ii) be exempt from withholding of tax on interest and
deliver the documents related thereto pursuant to Section 11.21.
"EMPLOYEE PLAN" means any (a) employee benefit plan (as defined in
Section 3(3) of ERISA) that is subject to Title I of ERISA, (b) any plan (as
defined in Section 4975(e)(1) of the Code) that is subject to Section 4975 of
the Code, (c) any entity the underlying assets of which include plan assets
(as defined in 29 C.F.R. Section 2510.3-101 or otherwise under ERISA) by
reason of a plan's investment in such entity (INCLUDING an insurance company
general account), or (d) a governmental plan (as defined in Section 3(32) of
ERISA or Section 414(d) of the Code) organized in a jurisdiction within the
United States of America having prohibitions on transactions with such
governmental plan substantially similar to those contained in Section 406 of
ERISA or Section 4975 of the Code.
"ERISA" means the Employee Retirement Income Security Act of 1974, and
any regulations issued pursuant thereto, as amended or replaced and as in
effect from time to time.
"ERISA AFFILIATE" means each Person (whether or not incorporated) which
is required to be aggregated with Parent pursuant to Section 414 of the Code.
"EURODOLLAR BANKING DAY" means any Banking Day on which dealings in
Dollar deposits are conducted by and among banks in the Designated Eurodollar
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Market.
"EURODOLLAR LENDING OFFICE" means, as to each Bank, its office or branch
so designated by written notice to Borrowers and the Managing Agent as its
Eurodollar Lending Office. If no Eurodollar Lending Office is designated by
a Bank, its Eurodollar Lending Office shall be its office at its address for
purposes of notices hereunder.
"EURODOLLAR MARKET" means a regular established market located outside
the United States of America by and among banks for the solicitation, offer
and acceptance of Dollar deposits in such banks.
"EURODOLLAR OBLIGATIONS" means eurocurrency liabilities, as defined in
Regulation D or any comparable regulation of any Governmental Agency having
jurisdiction over any Bank.
"EURODOLLAR PERIOD" means, as to each Eurodollar Rate Loan, the period
commencing on the date specified by Borrowers pursuant to Section 2.1(c) and
ending 1, 2, 3 or 6 months (or, with the written consent of all of the Banks,
any other period) thereafter, as specified by Borrowers in the applicable
Request for Loan; PROVIDED that:
(a) The first day of any Eurodollar Period shall be a Eurodollar
Banking Day;
(b) Any Eurodollar Period that would otherwise end on a day that is
not a Eurodollar Banking Day shall be extended to the next succeeding
Eurodollar Banking Day unless such Eurodollar Banking Day falls in
another calendar month, in which case such Eurodollar Period shall end
on the next preceding Eurodollar Banking Day;
(c) Borrowers may not specify a Eurodollar Period that extends
beyond the next Amortization Date unless the aggregate principal amount
of the Eurodollar Loans having a Eurodollar Period ending after such
Amortization Date does not exceed the Commitments (after giving effect
to any reduction thereto scheduled to be made on such Amortization Date
pursuant to Section 2.6); and
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(d) No Eurodollar Period shall extend beyond the Maturity Date.
"EURODOLLAR RATE" means, with respect to any Eurodollar Rate Loan, the
average of the interest rates per annum (rounded upward, if necessary, to the
next 1/100 of 1%) at which deposits in Dollars are offered by the Eurodollar
Reference Banks to prime banks in the Designated Eurodollar Market at or
about 11:00 a.m. local time in the Designated Eurodollar Market, two (2)
Eurodollar Banking Days before the first day of the applicable Eurodollar
Period in an aggregate amount approximately equal to the amount of the
Advance made by the Eurodollar Reference Bank with respect to such Eurodollar
Rate Loan and for a period of time comparable to the number of days in the
applicable Eurodollar Period.
"EURODOLLAR RATE ADVANCE" means an Advance made hereunder and specified
to be a Eurodollar Rate Advance in accordance with ARTICLE 2.
"EURODOLLAR RATE LOAN" means a Loan made hereunder and specified to be a
Eurodollar Rate Loan in accordance with ARTICLE 2.
"EURODOLLAR REFERENCE BANK" means Bank of America National Trust and
Savings Association or such other Bank as may be appointed by the Managing
Agent with the approval of Parent (which shall not be unreasonably withheld).
"EVENT OF DEFAULT" shall have the meaning provided in Section 9.1.
"FEDERAL FUNDS RATE" means, as of any date of determination, the rate set
forth in the weekly statistical release designated as H.15(519), or any
successor publication, published by the Federal Reserve Board (including any
such successor, "H.15(519)") for such date opposite the caption "Federal
Funds (Effective)". If for any relevant date such rate is not yet published
in H.15(519), the rate for such date will be the rate set forth in the daily
statistical release designated as the Composite 3:30 p.m. Quotations for U.S.
Government Securities, or any successor publication, published by the Federal
Reserve Bank of New York (including any such successor, the "Composite 3:30
p.m.
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Quotation") for such date under the caption "Federal Funds Effective Rate".
If on any relevant date the appropriate rate for such date is not yet
published in either H.15(519) or the Composite 3:30 p.m. Quotations, the rate
for such date will be the arithmetic mean of the rates for the last
transaction in overnight Federal funds arranged prior to 9:00 a.m. (New York
City time) on that date by each of three leading brokers of Federal funds
transactions in New York City selected by the Managing Agent. For purposes
of this Agreement, any change in the Alternate Base Rate due to a change in
the Federal Funds Rate shall be effective as of the opening of business on
the effective date of such change.
"FISCAL QUARTER" means the fiscal quarter of Borrowers ending on each
March 31, June 30, September 30 and December 31.
"FISCAL YEAR" means the fiscal year of Borrowers ending on each
December 31.
"FIXED CHARGE COVERAGE" means, as of the last day of each Fiscal
Quarter, the RATIO of (a) Adjusted EBITDA for the fiscal period consisting of
that Fiscal Quarter and the three immediately preceding Fiscal Quarters TO
(b) the SUM of (i) Interest Charges for such fiscal period PLUS (ii) all
scheduled principal payments on Indebtedness of Parent (INCLUDING the
principal portion of rent under Capital Lease Obligations) made during such
fiscal period, OTHER THAN payments made at the maturity date of such
Indebtedness PLUS (iii) all dividends on preferred stock of Parent made
during such fiscal period.
"FUNDS FROM OPERATIONS" means, with respect to any fiscal period,
(a) the Net Income of Parent for that period, PLUS (b) any loss resulting from
the restructuring of Indebtedness, sale of Property or other non-operating
non-recurring cause during that period, MINUS (c) any gain resulting from the
restructuring of Indebtedness, sale of Property or other non-operating
non-recurring cause during that period, PLUS (d) depreciation and
amortization of Revenue-Producing Properties (INCLUDING with respect to trade
fixtures and tenant improvements which are a part thereof and capitalized
leasing expenses, such as leasing commissions and tenant improvement
allowances), and ADJUSTED to take into account (i) the results of operations
of any unconsolidated Related Ventures calculated on the same basis and
(ii) any unusual and non-recurring expense which otherwise would materially
distort a comparative evaluation of
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Funds From Operation for different fiscal periods. Funds From Operations
shall be determined in accordance with the March 1995 White Paper on Funds
From Operations approved by the Board of Governors of the National
Association of Real Estate Investment Trusts, as in effect on the Closing
Date.
"GENERALLY ACCEPTED ACCOUNTING PRINCIPLES" means, as of any date of
determination, accounting principles (a) set forth as generally accepted in
then currently effective Opinions of the Accounting Principles Board of the
American Institute of Certified Public Accountants, (b) set forth as
generally accepted in then currently effective Statements of the Financial
Accounting Standards Board or (c) that are then approved by such other entity
as may be approved by a significant segment of the accounting profession in
the United States of America. The term "CONSISTENTLY APPLIED," as used in
connection therewith, means that the accounting principles applied are
consistent in all material respects with those applied at prior dates or for
prior periods.
"GOVERNMENTAL AGENCY" means (a) any international, foreign, federal,
state, county or municipal government, or political subdivision thereof,
(b) any governmental or quasi-governmental agency, authority, board, bureau,
commission, department, instrumentality or public body or (c) any court or
administrative tribunal of competent jurisdiction.
"GROSS ASSET VALUE" means, as of the last day of each Fiscal Quarter,
the SUM OF (a) Cash held by Parent and its Subsidiaries as of that date PLUS
(b) the value obtained by DIVIDING (i) Annualized Adjusted EBITDA for the
fiscal period consisting of that Fiscal Quarter and the three immediately
preceding Fiscal Quarters BY (ii) the then effective Capitalization Rate.
"GUARANTY OBLIGATION" means, as to any Person, any (a) guarantee by that
Person of Indebtedness of, or other obligation performable by, any other
Person or (b) assurance given by that Person to an obligee of any other
Person with respect to the performance of an obligation by, or the financial
condition of, such other Person, whether direct, indirect or contingent,
INCLUDING any purchase or repurchase agreement covering such obligation or
any collateral security therefor, any agreement to provide funds (by means of
loans, capital contributions or otherwise) to such other Person, any
agreement to support the
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solvency or level of any balance sheet item of such other Person or any
"keep-well" or other arrangement of whatever nature given for the purpose of
assuring or holding harmless such obligee against loss with respect to any
obligation of such other Person; PROVIDED, HOWEVER, that the term Guaranty
Obligation shall not include endorsements of instruments for deposit or
collection in the ordinary course of business. The amount of any Guaranty
Obligation in respect of Indebtedness shall be deemed to be an amount equal
to the stated or determinable amount of the related Indebtedness (unless the
Guaranty Obligation is limited by its terms to a lesser amount, in which case
to the extent of such amount) or, if not stated or determinable, the maximum
reasonably anticipated liability in respect thereof as determined by the
Person in good faith. The amount of any other Guaranty Obligation shall be
deemed to be zero unless and until the amount thereof has been (or in
accordance with Financial Accounting Standards Board Statement No. 5 should
be) quantified and reflected or disclosed in the consolidated financial
statements (or notes thereto) of Borrowers.
"HAZARDOUS MATERIALS" means substances defined as "hazardous substances"
pursuant to the Comprehensive Environmental Response, Compensation and
Liability Act of 1980, 42 U.S.C. Section 9601 et seq., or as "hazardous",
"toxic" or "pollutant" substances or as "solid waste" pursuant to the
Hazardous Materials Transportation Act, 49 U.S.C. Section 1801, et seq., the
Resource Conservation and Recovery Act, 42 U.S.C. Section 6901, et seq., or
as "friable asbestos" pursuant to the Toxic Substances Control Act, 15 U.S.C.
Section 2601 et seq. or any other applicable Hazardous Materials Law, in each
case as such Laws are amended from time to time.
"HAZARDOUS MATERIALS LAWS" means all Laws governing the treatment,
transportation or disposal of Hazardous Materials applicable to any of the
Real Property.
"INDEBTEDNESS" means, as to any Person (without duplication),
(a) indebtedness of such Person for borrowed money or for the deferred
purchase price of Property (EXCLUDING trade and other accounts payable in the
ordinary course of business in accordance with ordinary trade terms),
INCLUDING any Guaranty Obligation for any such indebtedness, (b) indebtedness
of such Person of the nature described in clause (a) that is non-recourse to
the credit of
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such Person but is secured by assets of such Person, to the extent of the
fair market value of such assets as determined in good faith by such Person,
(c) Capital Lease Obligations of such Person, (d) indebtedness of such Person
arising under bankers' acceptance facilities or under facilities for the
discount of accounts receivable of such Person, (e) any direct or contingent
obligations of such Person under letters of credit issued for the account of
such Person and (f) any net obligations of such Person under Swap Agreements.
"INITIAL POOL PROPERTIES" means the eleven (11) Revenue-Producing
Properties described in SCHEDULE 4.18.
"INTANGIBLE ASSETS" means assets that are considered intangible assets
under Generally Accepted Accounting Principles, INCLUDING customer lists,
goodwill, copyrights, trade names, trademarks and patents.
"INTEREST CHARGES" means, as of the last day of any fiscal period, the
SUM OF (a) Cash Interest Expense of Parent PLUS (b) all interest currently
payable by Parent in Cash incurred during that fiscal period which is
capitalized under Generally Accepted Accounting Principles PLUS (c) the
Parent's Proportional Share of the Cash Interest Expense and capitalized
interest payable in Cash of Related Ventures during that fiscal period.
"INTEREST COVERAGE" means, as of the last day of each Fiscal Quarter,
the RATIO OF (a) Adjusted EBITDA for the fiscal period consisting of that
Fiscal Quarter and the three immediately preceding Fiscal Quarters TO
(b) Interest Charges for that fiscal period.
"INTEREST EXPENSE" means, with respect to any Person and as of the last
day of any fiscal period, the SUM OF (a) all interest, fees, charges and
related expenses paid or payable (without duplication) for that fiscal period
by that Person to a lender in connection with borrowed money (INCLUDING any
obligations for fees, charges and related expenses payable to the issuer of
any letter of credit) or the deferred purchase price of assets that are
considered "interest expense" under Generally Accepted Accounting Principles
PLUS (b) the portion of rent paid or payable (without duplication) for that
fiscal period by that Person under Capital Lease Obligations that should be
treated as interest in accordance with Financial Accounting Standards Board
Statement No. 13.
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"INTEREST PERIOD" means, with respect to any Eurodollar Rate Loan, the
related Eurodollar Period.
"INVESTMENT" means, when used in connection with any Person, any
investment by or of that Person, whether by means of purchase or other
acquisition of stock or other securities of any other Person or by means of a
loan, advance creating a debt, capital contribution, guaranty or other debt
or equity participation or interest in any other Person, INCLUDING any
partnership and joint venture interests of such Person. The amount of any
Investment shall be the amount actually invested (MINUS any return of capital
with respect to such Investment which has actually been received in Cash or
has been converted into Cash), without adjustment for subsequent increases or
decreases in the value of such Investment.
"JOINDER AGREEMENT" means the joinder agreement with respect to this
Agreement to be executed and delivered pursuant to Section 5.13 by any
additional Borrower in the form of EXHIBIT F, either as originally executed
or as it may from time to time be supplemented, modified, amended, extended
or supplanted.
"LAWS" means, collectively, all international, foreign, federal, state
and local statutes, treaties, rules, regulations, ordinances, codes and
administrative or judicial precedents.
"LEVERAGE RATIO" means, as of the last day of each Fiscal Quarter, the
RATIO OF (a) Adjusted Total Liabilities as of that date TO (b) Gross Asset
Value as of that date.
"LIEN" means any mortgage, deed of trust, pledge, hypothecation,
assignment for security, security interest, encumbrance, lien or charge of
any kind, whether voluntarily incurred or arising by operation of Law or
otherwise, affecting any Property, INCLUDING any conditional sale or other
title retention agreement, any lease in the nature of a security interest,
and/or the filing of any financing statement (OTHER THAN a precautionary
financing statement with respect to a lease that is not in the nature of a
security interest) under the Uniform Commercial Code or comparable Law of any
jurisdiction with respect to any
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Property.
"LINE A COMMITMENT" means, subject to Sections 2.5 and 2.6,
$100,000,000. The respective Pro Rata Shares of the Banks with respect to
the Line A Commitment are set forth in SCHEDULE 1.1.
"LINE A NOTE" means any of the promissory notes made by Borrowers to a
Bank evidencing Advances under that Bank's Pro Rata Share of the Line A
Commitment, substantially in the form of EXHIBIT G, either as originally
executed or as the same may from time to time be supplemented, modified,
amended, renewed, extended or supplanted.
"LINE A LOAN" means any Loan made under the Line A Commitment.
"LINE B COMMITMENT" means, subject to Sections 2.5 and 2.6, $50,000,000.
No credit is available under the Line B Commitment unless and until
activated pursuant to Section 2.1(b). The respective Pro Rata Shares of the
Banks with respect to the Line B Commitment are set forth in SCHEDULE 1.1.
"LINE B LOAN" means a Loan made under the Line B Commitment.
"LINE B NOTE" means any of the promissory notes made by Borrowers to a
Bank evidencing Advances under that Bank's Pro Rata Share of the Line B
Commitment, substantially in the form of EXHIBIT H, either as originally
executed or as the same may from time to time be supplemented, modified,
amended, renewed, extended or supplanted.
"LOAN" means the aggregate of the Advances made at any one time by the
Banks pursuant to Section 2.1.
"LOAN DOCUMENTS" means, collectively, this Agreement, the Notes, and any
other agreements of any type or nature hereafter executed and delivered by
Borrowers to the Managing Agent or to any Bank in any way relating to or in
furtherance of this Agreement, in each case either as originally executed or
as the same may from time to time be supplemented, modified, amended,
restated, extended or supplanted.
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"MANAGING AGENT" means Bank of America National Trust and Savings
Association, when acting in its capacity as the Managing Agent under any of
the Loan Documents, or any successor Managing Agent.
"MANAGING AGENT'S OFFICE" means the Managing Agent's address as set
forth on the signature pages of this Agreement, or such other address as the
Managing Agent hereafter may designate by written notice to Borrowers and the
Banks.
"MARGIN STOCK" means "margin stock" as such term is defined in
Regulation G or U.
"MARKET NET WORTH" means, as of the last day of each Fiscal Quarter, the
amount by which (a) Gross Asset Value on that date exceeds (b) Total
Liabilities on that date.
"MATERIAL ADVERSE EFFECT" means any set of circumstances or events which
(a) has had or could reasonably be expected to have any material adverse
effect whatsoever upon the validity or enforceability of any Loan Document
(OTHER THAN as a result of any action or inaction of the Managing Agent or
any Bank), (b) has been or could reasonably be expected to be material and
adverse to the business or condition (financial or otherwise) of Borrowers or
(c) has materially impaired or could reasonably be expected to materially
impair the ability of Borrowers to perform the Obligations.
"MATURITY DATE" means (a) May 31, 2000, (b) if the Revolver Termination
Date has then been extended pursuant to Section 2.9, such extended Revolver
Termination Date or (c) if the Term Loan Conversion has then been effected
pursuant to Section 2.10, the date that is two (2) years subsequent to the
Conversion Date.
"MAXIMUM COMPETITIVE ADVANCE" means, with respect to any Competitive Bid
made by a Bank, the amount set forth therein as the maximum Competitive
Advance which that Bank is willing to make in response to the related
Competitive Bid Request.
"MONTHLY PAYMENT DATE" means the first day of each calendar month.
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"MORTGAGE AMOUNT" means, as of the last day of each Fiscal Quarter, the
principal amount of a twenty-five (25) year mortgage loan that would bear
interest at a rate equal to the SUM OF the Treasury Base Rate plus 2% (200
basis points), that would fully amortize in equal consecutive monthly
installments of principal and interest over the term thereof and that is
Supportable by the Annualized Adjusted NOI of the Revenue-Producing
Properties in the Unencumbered Asset Pool for that Fiscal Quarter and the
three immediately preceding Fiscal Quarters. For purposes of the foregoing,
"TREASURY BASE RATE" means the yield (adjusted to constant maturity and
expressed as a rate per annum) of the United States Treasury Security then
maturing in seven (7) years or, if there is more than one such United States
Treasury Security, the average of such yields, or if there is no such United
States Treasury Security, the yield determined by interpolation of the yields
of the United States Treasury Securities maturing on the nearest earlier and
later dates, in all cases adjusted to constant maturity and expressed as a
rate per annum, as reported at the close of business on the last day of the
Fiscal Quarter by the Bloomberg Financial Market Information Service (or
other nationally-recognized on-line trading screen which reports current
trading in United States Treasury Securities) or, if no such trading screen
is available, as reported in the most recent Federal Reserve Board
Statistical Release and "SUPPORTABLE" means that such Annualized Adjusted NOI
is 200% (the "SUPPORT MULTIPLE") of the aggregate annual monthly payments
under such a mortgage loan.
"MULTIEMPLOYER PLAN" means any employee benefit plan of the type
described in Section 4001(a)(3) of ERISA to which Borrowers or any of their
ERISA Affiliates contribute or are obligated to contribute.
"NEGATIVE PLEDGE" means a Contractual Obligation that contains a
covenant binding on Borrowers that prohibits Liens on any of their Property,
OTHER THAN (a) any such covenant contained in a Contractual Obligation
granting or relating to a particular Lien which affects only the Property
that is the subject of such Lien and (b) any such covenant that does not
apply to Liens securing the Obligations.
"NET INCOME" means, with respect to any Person and with respect to any
fiscal period, the net income of that Person for that period, determined in
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accordance with Generally Accepted Accounting Principles, consistently
applied.
"NET LEVERAGE BASE" means, as of any date of determination, (a) an
amount equal to 50% of the Unencumbered Asset Pool Value as of the most
recently-ended Fiscal Quarter MINUS (b) any Other Unsecured Debt on that date.
"NET MORTGAGE AMOUNT" means, as of any date of determination, (a) the
Mortgage Amount applicable to the Unencumbered Asset Pool as of the most
recently-ended Fiscal Quarter MINUS (b) any Other Unsecured Debt on that date.
"NON-RECOURSE DEBT" means Indebtedness of Parent or any of its
Subsidiaries for which the liability of Parent or such Subsidiary (EXCEPT
with respect to fraud, Hazardous Materials Laws liability and other customary
exceptions) either is contractually limited to collateral securing such
Indebtedness or is so limited by operation of Law.
"NOTES" means the Line A Notes, the Line B Notes and the Competitive
Advance Notes.
"OBLIGATIONS" means all present and future obligations of every kind or
nature of Borrowers at any time and from time to time owed to the Managing
Agent or the Banks or any one or more of them, under any one or more of the
Loan Documents, whether due or to become due, matured or unmatured,
liquidated or unliquidated, or contingent or noncontingent, INCLUDING
obligations of performance as well as obligations of payment, and INCLUDING
interest that accrues after the commencement of any proceeding under any
Debtor Relief Law by or against Borrowers.
"OPINIONS OF COUNSEL" means the favorable written legal opinions of
(a) Gary A. Kreitzer, general counsel of Borrowers, (b) Ballard Spahr Andrews &
Ingersoll, special Maryland counsel to Borrowers and (c) Skadden, Arps,
Slate, Meagher & Flom, LLP, special counsel to Borrowers, substantially in
the form of EXHIBITS I-1 AND I-2 , respectively, together with copies of all
factual certificates and legal opinions delivered to such counsel in
connection with such opinion upon which such counsel has relied.
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"OTHER UNSECURED DEBT" means Indebtedness of any of Borrowers (OTHER
THAN Indebtedness under this Agreement) that is not secured by a Lien on any
Property of any of Borrowers.
"PARENT'S PROPORTIONAL SHARE" means, with respect to any Related
Venture, the percentage of the direct and indirect equity ownership interest
of Parent in the Related Venture.
"PARTY" means any Person other than the Managing Agent and the Banks,
which now or hereafter is a party to any of the Loan Documents.
"PBGC" means the Pension Benefit Guaranty Corporation or any successor
thereof established under ERISA.
"PENSION PLAN" means any "employee pension benefit plan" (as such term
is defined in Section 3(2) of ERISA), OTHER THAN a Multiemployer Plan, which
is subject to Title IV of ERISA and is maintained by Borrowers or to which
Borrowers contribute or have an obligation to contribute.
"PERMITTED ENCUMBRANCES" means:
(a) Inchoate Liens incident to construction on or maintenance of
Property; or Liens incident to construction on or maintenance of
Property now or hereafter filed of record for which adequate reserves
have been set aside (or deposits made pursuant to applicable Law) and
which are being contested in good faith by appropriate proceedings and
have not proceeded to judgment, PROVIDED that, by reason of nonpayment
of the obligations secured by such Liens, no such Property is subject to
a material impending risk of loss or forfeiture;
(b) Liens for taxes and assessments on Property which are not yet
past due; or Liens for taxes and assessments on Property for which
adequate reserves have been set aside and are being contested in good
faith by appropriate proceedings and have not proceeded to judgment,
PROVIDED that, by reason of nonpayment of the obligations secured by
such Liens, no such Property is subject to a material impending risk of
loss or forfeiture;
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(c) defects and irregularities in title to any Property which in
the aggregate do not materially impair the fair market value or use of
the Property for the purposes for which it is or may reasonably be
expected to be held;
(d) easements, exceptions, reservations, or other agreements for
the purpose of pipelines, conduits, cables, wire communication lines,
power lines and substations, streets, trails, walkways, drainage,
irrigation, water, and sewerage purposes, dikes, canals, ditches, the
removal of oil, gas, coal, or other minerals, and other like purposes
affecting Property which in the aggregate do not materially burden or
impair the fair market value or use of such Property for the purposes
for which it is or may reasonably be expected to be held;
(e) easements, exceptions, reservations, or other agreements for
the purpose of facilitating the joint or common use of Property in or
adjacent to a shopping center or similar project affecting Property
which in the aggregate do not materially burden or impair the fair
market value or use of such Property for the purposes for which it is or
may reasonably be expected to be held;
(f) rights reserved to or vested in any Governmental Agency to
control or regulate, or obligations or duties to any Governmental Agency
with respect to, the use of any Property;
(g) rights reserved to or vested in any Governmental Agency to
control or regulate, or obligations or duties to any Governmental Agency
with respect to, any right, power, franchise, grant, license, or permit;
(h) present or future zoning laws and ordinances or other laws and
ordinances restricting the occupancy, use, or enjoyment of Property;
(i) statutory Liens, other than those described in clauses (a) or
(b) above, arising in the ordinary course of business with respect to
obligations which are not delinquent or are being contested in good
faith,
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PROVIDED that, if delinquent, adequate reserves have been set aside with
respect thereto and, by reason of nonpayment, no Property is subject to
a material impending risk of loss or forfeiture;
(j) covenants, conditions, and restrictions affecting the use of
Property which in the aggregate do not materially impair the fair market
value or use of the Property for the purposes for which it is or may
reasonably be expected to be held;
(k) rights of tenants under leases and rental agreements covering
Property entered into in the ordinary course of business of the Person
owning such Property;
(l) Liens consisting of pledges or deposits to secure obligations
under workers' compensation laws or similar legislation, including Liens
of judgments thereunder which are not currently dischargeable;
(m) Liens consisting of pledges or deposits of Property to secure
performance in connection with operating leases made in the ordinary
course of business, PROVIDED the aggregate value of all such pledges and
deposits in connection with any such lease does not at any time exceed
20% of the annual fixed rentals payable under such lease;
(n) Liens consisting of deposits of Property to secure bids made
with respect to, or performance of, contracts (OTHER THAN contracts
creating or evidencing an extension of credit to the depositor);
(o) Liens consisting of any right of offset, or statutory bankers'
lien, on bank deposit accounts maintained in the ordinary course of
business so long as such bank deposit accounts are not established or
maintained for the purpose of providing such right of offset or bankers'
lien;
(p) Liens consisting of deposits of Property to secure statutory
obligations of Borrowers;
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(q) Liens consisting of deposits of Property to secure (or in lieu
of) surety, appeal or customs bonds;
(r) Liens created by or resulting from any litigation or legal
proceeding in the ordinary course of business which is currently being
contested in good faith by appropriate proceedings, PROVIDED that,
adequate reserves have been set aside and no material Property is
subject to a material impending risk of loss or forfeiture; and
(s) other non-consensual Liens incurred in the ordinary course of
business but not in connection with the incurrence of any Indebtedness,
which do not in the aggregate, when taken together with all other Liens,
materially impair the fair market value or use of the Property for the
purposes for which it is or may reasonably be expected to be held.
"PERMITTED RIGHT OF OTHERS" means a Right of Others consisting of (a) an
interest (OTHER THAN a legal or equitable co-ownership interest, an option or
right to acquire a legal or equitable co-ownership interest and any interest
of a ground lessor under a ground lease), that does not materially impair the
fair market value or use of Property for the purposes for which it is or may
reasonably be expected to be held, (b) an option or right to acquire a Lien
that would be a Permitted Encumbrance, (c) the subordination of a lease or
sublease in favor of a financing entity and (d) a license, or similar right,
of or to Intangible Assets granted in the ordinary course of business.
"PERSON" means any individual or entity, INCLUDING a trustee,
corporation, limited liability company, general partnership, limited
partnership, joint stock company, trust, estate, unincorporated organization,
business association, firm, joint venture, Governmental Agency, or other
entity.
"PRICING CERTIFICATE" means a certificate in the form of EXHIBIT J,
properly completed and signed by a Senior Officer of Borrowers.
"PRICING PERIOD" means (a) the period commencing on the Closing Date and
ending on September 1, 1997, (b) the period commencing on each September 2,
and ending on the next following December 1, (c) the period
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commencing on each December 2 and ending on the next following March 1,
(d) the period commencing on each March 2 and ending on the next following
June 1, and (e) the period commencing on each June 2 and ending on the next
following September 1.
"PRIOR CREDIT AGREEMENT" means that certain Unsecured Line of Credit
Loan Agreement dated as of January 24, 1997 between Parent (then known as
"Health Science Properties, Inc.") and Bank of America National Trust Savings
Association.
"PROPERTY" means any interest in any kind of property or asset, whether
real, personal or mixed, or tangible or intangible.
"PRO RATA SHARE" means, with respect to each Bank, the percentage of the
Commitments set forth opposite the name of that Bank on SCHEDULE 1.1, as such
percentage may be increased or decreased pursuant to a Commitments Assignment
and Acceptance executed in accordance with Section 11.8.
"QUALIFIED UNENCUMBERED ASSET POOL PROPERTY" means a Revenue-Producing
Property that (a) is wholly owned in fee simple absolute by Parent or any
other Borrower that is a Wholly-Owned Subsidiary, (b) is a Stabilized
Revenue-Producing Property and (c) is Unencumbered.
"QUARTERLY PAYMENT DATE" means each July 1, October 1, January 1 and
April 1.
"REAL PROPERTY" means, as of any date of determination, all real
property then or theretofore owned, leased or occupied by any of Borrowers.
"REFERENCE RATE" means the rate of interest publicly announced from time
to time by the Domestic Reference Bank in San Francisco, California (or other
headquarters city of the Domestic Reference Bank), as its "reference rate."
It is a rate set by the Domestic Reference Bank based upon various factors
including the Domestic Reference Bank's costs and desired return, general
economic conditions and other factors, and is used as a reference point for
pricing some loans, which may be priced at, above, or below such announced
rate. Any change in the Reference Rate announced by the Domestic Reference
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Bank shall take effect at the opening of business on the day specified in the
public announcement of such change.
"REGULATION D" means Regulation D, as at any time amended, of the Board
of Governors of the Federal Reserve System, or any other regulation in
substance substituted therefor.
"REGULATIONS G AND U" means Regulations G and U, as at any time amended,
of the Board of Governors of the Federal Reserve System, or any other
regulations in substance substituted therefor.
"RELATED VENTURE" means a corporation, limited liability company,
partnership or other Person that owns one or more Revenue-Producing
Properties and which is not a Wholly-Owned Subsidiary.
"REQUEST FOR LOAN" means a written request for a Loan substantially in
the form of EXHIBIT K, signed by a Responsible Official of any of Borrowers,
on behalf of Borrowers, and properly completed to provide all information
required to be included therein.
"REQUIREMENT OF LAW" means, as to any Person, the articles or
certificate of incorporation and by-laws or other organizational or governing
documents of such Person, and any Law, or judgment, award, decree, writ or
determination of a Governmental Agency, in each case applicable to or binding
upon such Person or any of its Property or to which such Person or any of its
Property is subject.
"REQUISITE BANKS" means (a) as of any date of determination if the
Commitments are then in effect, Banks having in the aggregate 66-2/3% or more
of the Commitments then in effect and (b) as of any date of determination if
the Commitments have then been suspended or terminated and there is then any
Indebtedness evidenced by the Notes, Banks holding Notes evidencing in the
aggregate 66-2/3% or more of the aggregate Indebtedness then evidenced by the
Notes.
"RESPONSIBLE OFFICIAL" means (a) when used with reference to a Person
other than an individual, any corporate officer of such Person, general
partner of such Person, corporate officer of a corporate general partner of
such Person, or
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corporate officer of a corporate general partner of a partnership that is a
general partner of such Person, or any other responsible official thereof
duly acting on behalf thereof, and (b) when used with reference to a Person
who is an individual, such Person. The Banks shall be entitled to
conclusively rely upon any document or certificate that is signed or executed
by a Responsible Official of Parent or any of its Subsidiaries as having been
authorized by all necessary corporate, partnership and/or other action on the
part of Parent or such Subsidiary.
"REVENUE-PRODUCING PROPERTY" means an identifiable real estate property,
such as an office building, laboratory, factory, warehouse or other facility
(INCLUDING the underlying real property and all appurtenant real property
rights) which produces revenue to Parent or a Subsidiary of Parent.
"REVENUE-PRODUCING PROPERTY VALUE" means, as of the last day of each
Fiscal Quarter, the value obtained by DIVIDING (a) the Annualized Adjusted
NOI of all Revenue-Producing Properties for the fiscal period consisting of
that Fiscal Quarter and the three immediately preceding Fiscal Quarters BY
(b) the then effective Capitalization Rate.
"REVOLVER TERMINATION DATE" means (a) May 31, 2000, (b) if the Revolver
Termination Date has then been extended pursuant to Section 2.9, such
extended Revolver Termination Date or (c) if the Term Loan Conversion has
then been effected pursuant to Section 2.10, the Conversion Date.
"RIGHT OF OTHERS" means, as to any Property in which a Person has an
interest, any legal or equitable right, title or other interest (other than a
Lien) held by any other Person in that Property, and any option or right held
by any other Person to acquire any such right, title or other interest in
that Property, INCLUDING any option or right to acquire a Lien; PROVIDED,
however, that (a) no covenant restricting the use or disposition of Property
of such Person contained in any Contractual Obligation of such Person and (b)
no provision contained in a contract creating a right of payment or
performance in favor of a Person that conditions, limits, restricts,
diminishes, transfers or terminates such right shall be deemed to constitute
a Right of Others.
"SECURED RECOURSE DEBT" means Indebtedness of Parent or any of its
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Subsidiaries (INCLUDING Indebtedness of a Related Venture which is the
subject of a Guaranty Obligation of Parent or a Subsidiary of Parent or, if
such Person is a partnership, of which Parent or a Subsidiary of Parent is a
general partner) that (a) is secured by a Lien on Revenue-Producing Property
and (b) for which the liability of Parent or its Subsidiary is not
contractually limited.
"SENIOR OFFICER" means (a) the chief executive officer, (b) the
president, (c) any executive vice president, (d) any senior vice president,
(e) the chief financial officer, (f) the treasurer or (g) any assistant
treasurer, in each case of any of the Borrowers.
"SPECIAL EURODOLLAR CIRCUMSTANCE" means the application or adoption
after the Closing Date of any Law or interpretation, or any change therein or
thereof, or any change in the interpretation or administration thereof by any
Governmental Agency, central bank or comparable authority charged with the
interpretation or administration thereof, or compliance by any Bank or its
Eurodollar Lending Office with any request or directive (whether or not
having the force of Law) of any such Governmental Agency, central bank or
comparable authority.
"STABILIZED REVENUE-PRODUCING PROPERTY" means a Revenue-Producing
Property (a) that has been at least 85% (measured by rentable square feet)
leased to Persons that are not an Affiliate of Parent for at least three (3)
consecutive months and (b) that met the requirements of clause (a) at the
time it became a part of the Unencumbered Asset Pool but subsequently failed
to meet such requirements, BUT ONLY (i) so long as Borrowers are making
reasonable efforts to cause such requirements to be met and (ii) for a period
not exceeding six (6) months from the date upon which such requirements were
first not met; PROVIDED, however, that the aggregate rentable square feet of
all Revenue-Producing Properties which qualify as Stabilized Revenue-Producing
Properties under this clause (B) may not at any time exceed 15% of the
aggregate rentable square feet of all Revenue-Producing Properties that are
in the Unencumbered Asset Pool.
"STOCKHOLDERS' EQUITY" means, as of any date of determination and with
respect to any Person, the consolidated stockholders' equity of the Person as
of that date determined in accordance with Generally Accepted Accounting
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Principles; PROVIDED that there shall be excluded from Stockholders' Equity
any amount attributable to Disqualified Stock.
"SUBSIDIARY" means, as of any date of determination and with respect to
any Person, any corporation, limited liability company or partnership
(whether or not, in any case, characterized as such or as a "joint venture"),
whether now existing or hereafter organized or acquired: (a) in the case of
a corporation or limited liability company, of which a majority of the
securities having ordinary voting power for the election of directors or
other governing body (other than securities having such power only by reason
of the happening of a contingency) are at the time beneficially owned by such
Person and/or one or more Subsidiaries of such Person, or (b) in the case of
a partnership, of which a majority of the partnership or other ownership
interests are at the time beneficially owned by such Person and/or one or
more of its Subsidiaries.
"SWAP AGREEMENT" means a written agreement between Borrowers and one or
more financial institutions providing for "swap", "cap", "collar" or other
interest rate protection with respect to any Indebtedness.
"TANGIBLE NET WORTH" means, as of any date of determination, the
Stockholders' Equity of Parent on that date MINUS the Intangible Assets of
Parent and its Subsidiaries on that date.
"TERM LOAN CONVERSION" means the conversion of all then outstanding
Committed Loans to a term loan pursuant to Section 2.10.
"TO THE BEST KNOWLEDGE OF" means, when modifying a representation,
warranty or other statement of any Person, that the fact or situation
described therein is known by the Person (or, in the case of a Person other
than a natural Person, known by a Responsible Official of that Person) making
the representation, warranty or other statement, or with the exercise of
reasonable due diligence under the circumstances (in accordance with the
standard of what a reasonable Person in similar circumstances would have
done) would have been known by the Person (or, in the case of a Person other
than a natural Person, would have been known by a Responsible Official of
that Person).
"TOTAL LIABILITIES" means, as of any date of determination, the total
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liabilities that are or should be reflected on a consolidated balance sheet
of Parent and its Subsidiaries prepared in accordance with Generally Accepted
Accounting Principles as of that date.
"TYPE", when used with respect to any Loan or Advance, means the
designation of whether such Loan or Advance is an Alternate Base Rate Loan or
Advance, or a Eurodollar Rate Loan or Advance.
"UNDEVELOPED PROPERTY" means all real property owned by Parent or a
Subsidiary of Parent that is not (a) a Stabilized Revenue-Producing Property
or (b) used exclusively for office purposes by Parent or a Subsidiary of
Parent.
"UNENCUMBERED" means, with respect to any Revenue-Producing Property,
that such Revenue-Producing Property (a) is not subject to any Lien OTHER
THAN Permitted Encumbrances, (b) is not subject to any Negative Pledge and
(c) is not held by a Person any of whose equity interests are subject to a
Lien or Negative Pledge in favor of any creditor of Parent or any of its
Subsidiaries.
"UNENCUMBERED ASSET POOL" means, as of any date of determination, (a)
the Initial Pool Properties, PLUS (b) each other Qualified Unencumbered Asset
Pool Property which has been added to the Unencumbered Asset Pool pursuant to
Section 2.11 as of such date, MINUS (c) any Revenue-Producing Property which
has been removed from the Unencumbered Asset Pool pursuant to Section 2.11 as
of such date.
"UNENCUMBERED ASSET POOL VALUE" means, as of the last day of each Fiscal
Quarter, the value obtained by DIVIDING (a) the Annualized Adjusted NOI of
the Revenue-Producing Properties in the Unencumbered Asset Pool for the
fiscal period consisting of that Fiscal Quarter and the three immediately
preceding Fiscal Quarters BY (b) the then effective Capitalization Rate.
"WHOLLY-OWNED SUBSIDIARY" means a Subsidiary of Parent, 100% of the
capital stock or other equity interest of which is owned, directly or
indirectly, by Parent, EXCEPT for director's qualifying shares required by
applicable Laws.
1.2 USE OF DEFINED TERMS. Any defined term used in the plural shall
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refer to all members of the relevant class, and any defined term used in the
singular shall refer to any one or more of the members of the relevant class.
1.3 ACCOUNTING TERMS. All accounting terms not specifically defined in
this Agreement shall be construed in conformity with, and all financial data
required to be submitted by this Agreement shall be prepared in conformity
with, Generally Accepted Accounting Principles applied on a consistent basis,
EXCEPT as otherwise specifically prescribed herein. In the event that
Generally Accepted Accounting Principles change during the term of this
Agreement such that the covenants contained in Sections 6.5 through 6.14,
inclusive, would then be calculated in a different manner or with different
components, (a) Borrowers and the Banks agree to amend this Agreement in such
respects as are necessary to conform those covenants as criteria for
evaluating Borrowers' financial condition to substantially the same criteria
as were effective prior to such change in Generally Accepted Accounting
Principles and (b) Borrowers shall be deemed to be in compliance with the
covenants contained in the aforesaid Sections if and to the extent that
Borrowers would have been in compliance therewith under Generally Accepted
Accounting Principles as in effect immediately prior to such change, but
shall have the obligation to deliver each of the materials described in
ARTICLE 7 to the Managing Agent and the Banks, on the dates therein
specified, with financial data presented in a manner which conforms with
Generally Accepted Accounting Principles as in effect immediately prior to
such change.
1.4 ROUNDING. Any financial ratios required to be maintained by
Borrowers pursuant to this Agreement shall be calculated by dividing the
appropriate component by the other component, carrying the result to one
place more than the number of places by which such ratio is expressed in this
Agreement and rounding the result up or down to the nearest number (with a
round-up if there is no nearest number) to the number of places by which such
ratio is expressed in this Agreement.
1.5 EXHIBITS AND SCHEDULES. All Exhibits and Schedules to this
Agreement, either as originally existing or as the same may from time to time
be supplemented, modified or amended, are incorporated herein by this
reference. A matter disclosed on any Schedule shall be deemed disclosed on
all Schedules.
1.6 REFERENCES TO "BORROWERS AND THEIR SUBSIDIARIES". Any reference
herein to "Borrowers and their Subsidiaries" or the like shall refer solely
to Borrowers during such times, if any, as Borrowers shall have no
Subsidiaries.
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1.7 MISCELLANEOUS TERMS. The term "or" is disjunctive; the term "and"
is conjunctive. The term "shall" is mandatory; the term "may" is permissive.
Masculine terms also apply to females; feminine terms also apply to males.
The term "including" is by way of example and not limitation.
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Article 2
LOANS
2.1 COMMITTED LOANS-GENERAL.
(a) Subject to the terms and conditions set forth in this
Agreement, at any time and from time to time from the Closing Date
through the Revolver Termination Date, each Bank shall, pro rata
according to that Bank's Pro Rata Share of the then applicable Line A
Commitment, make Advances to Borrowers under the Line A Commitment in
such amounts as Borrowers may request that do not result in (i) the
aggregate principal amount outstanding under the Line A Notes to exceed
the Line A Commitment or (ii) the aggregate principal amount outstanding
under the Notes to exceed the LESSER OF (A) the SUM OF the Line A
Commitment PLUS the Activated Line B Commitment or (B) the Borrowing
Base. Subject to the limitations set forth herein, Borrowers may borrow,
repay and reborrow under the Line A Commitment without premium or
penalty.
(b) Borrowers may at any time activate all or a portion (in
amounts that are an integral multiple of $1,000,000 and not less than
$10,0000,000) of the Line B Commitment upon written notice to that
effect to the Managing Agent accompanied by payment of the activation
fee then due and payable pursuant to Section 3.3; PROVIDED that (i) no
Event of Default then exists and (ii) no more than five (5) such
activations may be made. Subject to the terms and conditions set forth
in this Agreement, at any time and from time to time from the Closing
Date through the Revolver Termination Date, each Bank shall, pro rata
according to that Bank's Pro Rata Share of the then applicable Line B
Commitment, make Advances to Borrowers under the Activated Line B
Commitment in such amounts as Borrowers may request that do not result
in (i) the aggregate principal amount outstanding under the Line B Notes
to exceed the Activated Line B Commitment or (ii) the aggregate
principal amount outstanding under the Notes to exceed the LESSER OF (A)
the SUM OF the Line A Commitment PLUS the Activated Line B Commitment or
(B) the Borrowing Base. Subject to the limitations set forth herein,
Borrowers may borrow, repay and reborrow under the Activated Line B
Commitment without premium or penalty.
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(c) Subject to the next sentence, each Loan shall be made pursuant
to a Request for Loan which shall specify the requested (i) date of such
Loan, (ii) type of Loan, (iii) amount of such Loan, and (iv) in the case
of a Eurodollar Rate Loan, the Interest Period for such Loan. Unless
the Managing Agent has notified, in its sole and absolute discretion,
Borrowers to the contrary, a Loan may be requested by telephone by a
Responsible Official of Borrowers, in which case Borrowers shall confirm
such request by promptly delivering a Request for Loan in person or by
telecopier conforming to the preceding sentence to the Managing Agent.
Managing Agent shall incur no liability whatsoever hereunder in acting
upon any telephonic request for Loan purportedly made by a Responsible
Official of Borrowers, and Borrowers hereby agree to indemnify the
Managing Agent from any loss, cost, expense or liability as a result of
so acting.
(d) Promptly following receipt of a Request for Loan, the Managing
Agent shall notify each Bank by telephone or telecopier (and if by
telephone, promptly confirmed by telecopier) of the date and type of the
Loan, the applicable Interest Period, and that Bank's Pro Rata Share of
the Loan. Not later than 10:00 a.m., California time, on the date
specified for any Loan (which must be a Banking Day), each Bank shall
make its Pro Rata Share of the Loan in immediately available funds
available to the Managing Agent at the Managing Agent's Office. Upon
satisfaction or waiver of the applicable conditions set forth in
ARTICLE 8, all Advances shall be credited on that date in immediately
available funds to the Designated Deposit Account.
(e) Unless the Requisite Banks otherwise consent, each Alternate
Base Rate Loan shall be not less than $2,000,000, each Eurodollar Rate
Loan shall be not less than $5,000,000 and all Loans shall be in an
integral multiple of $1,000,000.
(f) The Advances made by each Bank under the Line A Commitment
shall be evidenced by that Bank's Line A Note. The Advances made by
each Bank under the Line B Commitment shall be evidenced by that Bank's
Line B Note.
(g) A Request for Loan shall be irrevocable upon the
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Managing Agent's first notification thereof.
(h) If no Request for Loan (or telephonic request for Loan
referred to in the second sentence of Section 2.1(C), if applicable) has
been made within the requisite notice periods set forth in Section 2.2
or 2.3 prior to the end of the Interest Period for any Eurodollar Rate
Loan, then on the last day of such Interest Period, such Eurodollar Rate
Loan shall be automatically converted into an Alternate Base Rate Loan
in the same amount.
2.2 ALTERNATE BASE RATE LOANS. Each request by Borrowers for an
Alternate Base Rate Loan shall be made pursuant to a Request for Loan (or
telephonic or other request for loan referred to in the second sentence of
Section 2.1(C), if applicable) received by the Managing Agent, at the
Managing Agent's Office, not later than 11:00 a.m. California time, on the
date (which must be a Banking Day) prior to the date of the requested
Alternate Base Rate Loan. All Loans shall constitute Alternate Base Rate
Loans unless properly designated as a Eurodollar Rate Loan pursuant to
Section 2.3.
2.3 EURODOLLAR RATE LOANS.
(a) Each request by Borrowers for a Eurodollar Rate Loan shall be
made pursuant to a Request for Loan (or telephonic or other request for
Loan referred to in the second sentence of Section 2.1(C), if
applicable) received by the Managing Agent, at the Managing Agent's
Office, not later than 9:00 a.m., California time, at least three
(3) Eurodollar Banking Days before the first day of the applicable
Eurodollar Period.
(b) On the date which is two (2) Eurodollar Banking Days before
the first day of the applicable Eurodollar Period, the Managing Agent
shall confirm its determination of the applicable Eurodollar Rate (which
determination shall be conclusive in the absence of manifest error) and
promptly shall give notice of the same to Borrowers and the Banks by
telephone or telecopier (and if by telephone, promptly confirmed by
telecopier).
(c) Unless the Managing Agent and the Requisite Banks otherwise
consent, no more than ten (10) Eurodollar Rate Loans shall be
outstanding at any one time.
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(d) No Eurodollar Rate Loan may be requested during the
continuation of a Default or Event of Default.
(e) Nothing contained herein shall require any Bank to fund any
Eurodollar Rate Advance in the Designated Eurodollar Market.
2.4 COMPETITIVE ADVANCES.
(a) Subject to the terms and conditions hereof, at any time and
from time to time from the Closing Date through the Revolver Termination
Date, each Bank may in its sole and absolute discretion make Competitive
Advances to Borrower in such principal amounts as Borrowers may request
pursuant to a Competitive Bid Request that do not result in (i) the
aggregate principal amount outstanding under the Competitive Advance
Notes being in excess of the GREATER OF (A) $35,000,000 or (B) an amount
equal to 33 1/3% of the SUM OF the Line A Commitment PLUS the Activated
Line B Commitment or (ii) the aggregate principal amount outstanding
under the Notes to exceed the LESSER OF (A) the SUM OF the Line A
Commitment PLUS the Activated Line B Commitment or (B) the Borrowing
Base.
(b) Borrowers shall request Competitive Advances by submitting a
Competitive Bid Request to the Managing Agent, which Competitive Bid
Request shall specify the relevant date, amount and maturity for the
proposed Competitive Advance and shall state whether a Competitive Bid
is requested on the basis of a fixed interest rate (an "Absolute Rate
Bid") or on the basis of a margin over the Eurodollar Rate (a
"Eurodollar Margin Bid") and which shall be accompanied by payment of a
nonrefundable $2500 competitive bid request fee for the account of the
Managing Agent. Any Competitive Bid Request made by telephone shall
promptly be confirmed by the delivery to the Managing Agent in person or
by telecopier of a written Competitive Bid Request. The Managing Agent
shall incur no liability whatsoever hereunder in acting upon any
telephonic Competitive Bid Request purportedly made by a Responsible
Official of Borrowers, which hereby agrees to indemnify the Managing
Agent from any loss, cost, expense or liability as a result of so
acting. The Competitive Bid Request must be received by the Managing
Agent not later than 9:15 a.m. California time on a Banking Day that is
at least one (1) Banking Day prior to the date of the proposed
Competitive
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Advance if an Absolute Rate Bid is requested; if a Eurodollar Margin Bid
is requested, it must be received by the Administrative Agent at least
five (5) Banking Days prior to the date of the proposed Competitive
Advance.
(c) Unless the Managing Agent otherwise agrees, in its sole and
absolute discretion, no Competitive Bid Request shall be made by
Borrowers if Borrowers have within the current calendar month submitted
five (5) or more Competitive Bid Requests.
(d) Each Competitive Bid Request must be made for a Competitive
Advance of at least $10,000,000 and shall be in an integral multiple of
$1,000,000.
(e) No Competitive Bid Request shall be made for a Competitive
Advance with a maturity of less than 7 days or more than 180 days, or
with a maturity date subsequent to the Maturity Date.
(f) The Managing Agent shall, promptly after receipt of a
Competitive Bid Request, notify the Banks thereof by telephone and
provide the Banks a copy thereof by telecopier. Any Bank may, by
written notice to the Managing Agent, advise the Managing Agent that it
elects not to be so notified of Competitive Bid Requests, in which case
the Managing Agent shall not notify such Bank of the Competitive Bid
Request.
(g) Each Bank receiving a Competitive Bid Request may, in its sole
and absolute discretion, make or not make a Competitive Bid responsive
to the Competitive Bid Request. Each Competitive Bid shall be submitted
to the Managing Agent not later than 7:30 a.m. (or, in the case of the
Domestic Reference Bank, not later than 7:15 a.m.) California time, in
the case of a Eurodollar Margin Bid, on the date which is four (4) Banking
Days prior to the requested Competitive Advance and, in the case of an
Absolute Rate Bid, on the date of the requested Competitive Advance. Any
Competitive Bid received by the Managing Agent after 7:30 a.m. (or
7:15 a.m. in the case of the Domestic Reference Bank) on such date shall
be disregarded for purposes of this Agreement. Any Competitive Bid made
by telephone shall promptly be confirmed by the delivery to the Managing
Agent in person or by telecopier of a written Competitive Bid. The
Managing Agent shall incur no liability whatsoever hereunder in acting
upon any telephonic Competitive Bid
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purportedly made by a Responsible Official of a Bank, each of which hereby
agrees to indemnify the Managing Agent from any loss, cost, expense or
liability as a result of so acting with respect to that Bank.
(h) Each Competitive Bid shall specify the fixed interest rate or
the margin over the Eurodollar Rate, as applicable, for the offered
Maximum Competitive Advance set forth in the Competitive Bid. The
Maximum Competitive Advance offered by a Bank in a Competitive Bid may
be less than the Competitive Advance requested by Borrower in the
Competitive Bid Request, but shall be an integral multiple of
$1,000,000. Any Competitive Bid which offers an interest rate OTHER
THAN a fixed interest rate or a margin over the Eurodollar Rate, is in a
form other than set forth in EXHIBIT C or which otherwise contains any
term, condition or provision not contained in the Competitive Bid
Request shall be disregarded for purposes of this Agreement. A
Competitive Bid once submitted to the Managing Agent shall be
irrevocable until 8:30 a.m. California time, in the case of a Eurodollar
Margin Bid, on the date which is three (3) Banking Days prior to the
requested Competitive Advance and, in the case of an Absolute Rate Bid,
on the date of the proposed Competitive Advance set forth in the related
Competitive Bid Request, and shall expire by its terms at such time
unless accepted by Borrower prior thereto.
(i) Promptly after 7:30 a.m. California time, in the case of a
Eurodollar Margin Bid, on the date which is four (4) Banking Days prior
to the date of the proposed Competitive Advance and, in the case of an
Absolute Rate Bid, on the date of the proposed Competitive Advance, the
Managing Agent shall notify Borrowers of the names of the Banks
providing Competitive Bids to the Managing Agent at or before 7:30 a.m.
on that date (or 7:15 a.m. in the case of the Domestic Reference Bank)
and the Maximum Competitive Advance and fixed interest rate or margin
over the Eurodollar Rate set forth by each such Bank in its Competitive
Bid. The Managing Agent shall promptly confirm such notification in
writing delivered in person or by telecopier to Borrower.
(j) Borrowers may, in their sole and absolute discretion, reject
any or all of the Competitive Bids. If Borrowers accept any Competitive
Bid, the following shall apply: (i) Borrowers must accept all Absolute
Rate Bids at all lower fixed interest rates before accepting any portion
of an Absolute Rate Bid at a higher fixed interest rate, (ii) Borrowers
must accept all Eurodollar Margin Bids at all lower margins over the
Eurodollar Rate before accepting any
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portion of a Eurodollar Margin Bid at a higher margin over the Eurodollar
Rate, (iii) if two or more Banks have submitted a Competitive Bid at the
same fixed interest rate or margin, then Borrowers must accept either all
of such Competitive Bids or accept such Competitive Bids in the same
proportion as the Maximum Competitive Advance of each Bank bears to the
aggregate Maximum Competitive Advances of all such Banks, and
(iv) Borrowers may not accept Competitive Bids for an aggregate amount in
excess of the requested Competitive Advance set forth in the Competitive
Bid Request. Acceptance by Borrowers of a Eurodollar Margin Rate Bid must
be made prior to 8:30 a.m. on the date which is three (3) Banking Days
prior to the requested Competitive Advance and acceptance by Borrower of
an Absolute Rate Bid must be made prior to 8:30 a.m. on the date of the
requested Competitive Advance. Acceptance of a Competitive Bid by
Borrowers shall be accomplished by notification thereof to the Managing
Agent and shall be irrevocable upon such notification. The Managing
Agent shall promptly notify each of the Banks whose Competitive Bid has
been accepted by Borrowers by telephone, which notification shall
promptly be confirmed in writing delivered in person or by telecopier to
such Banks. Any Competitive Bid not accepted by Borrowers by 8:30 a.m.,
in the case of a Eurodollar Margin Bid, on the date which is three (3)
Banking Days prior to the proposed Competitive Advance or, in the case
of an Absolute Rate Bid, on the date of the proposed Competitive Bid,
shall be deemed rejected.
(k) In the case of a Eurodollar Margin Bid, the Managing Agent
shall determine the Eurodollar Rate on the date which is two
(2) Eurodollar Banking Days prior to the date of the proposed Competitive
Advance, and shall promptly thereafter notify Borrowers and the Banks
whose Eurodollar Margin Bids were accepted by Borrowers of such
Eurodollar Rate.
(l) A Bank whose Competitive Bid has been accepted by Borrowers
shall make the Competitive Advance in accordance with the Competitive
Bid Request and with its Competitive Bid, subject to the applicable
conditions set forth in this Agreement, by making funds immediately
available to the Managing Agent at the Managing Agent's Office in the
amount of such Competitive Advance not later than 12:00 noon, California
time, on the date set forth in the Competitive Bid Request. The
Managing Agent shall then promptly credit the Competitive Advance in
immediately available funds to the
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Designated Deposit Account.
(m) The Managing Agent shall notify Borrowers and the Banks
promptly after any Competitive Advance is made of the amounts and
maturity of such Competitive Advances and the identity of the Banks
making such Competitive Advances.
(n) The Competitive Advances made by a Bank shall be evidenced by
that Bank's Competitive Advance Note.
(o) No Competitive Advance may be prepaid without the prior
written consent of the affected Bank.
2.5 VOLUNTARY REDUCTION OF COMMITMENTS. Borrowers shall have the
right, at any time and from time to time, without penalty or charge, upon at
least three (3) Banking Days' prior written notice by a Responsible Official
of Borrowers to the Managing Agent, voluntarily to reduce, permanently and
irrevocably, in aggregate principal amounts in an integral multiple of
$1,000,000 but not less than $5,000,000, or to terminate, all or a portion of
the then undisbursed portion of the Commitments. The Managing Agent shall
promptly notify the Banks of any reduction or termination of the Commitments
under this Section.
2.6 AUTOMATIC REDUCTION OF COMMITMENTS. On each Amortization Date, the
Commitments shall automatically be reduced by the applicable Amortization
Amount.
2.7 OPTIONAL TERMINATION OF COMMITMENTS. Following the occurrence of a
Change in Control, the Requisite Banks may in their sole and absolute
discretion elect, during the thirty (30) day period immediately subsequent to
the LATER OF (a) such occurrence or (b) the EARLIER of (i) receipt of
Borrowers' written notice to the Managing Agent of such occurrence or (ii) if
no such notice has been received by the Managing Agent, the date upon which
the Managing Agent has actual knowledge thereof, to terminate the
Commitments, in which case the Commitments shall be terminated effective on
the date which is thirty (30) days subsequent to written notice from the
Managing Agent to Borrowers thereof.
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2.8 MANAGING AGENT'S RIGHT TO ASSUME FUNDS AVAILABLE FOR ADVANCES.
Unless the Managing Agent shall have been notified by any Bank no later than
10:00 a.m. on the Banking Day of the proposed funding by the Managing Agent
of any Loan that such Bank does not intend to make available to the Managing
Agent such Bank's portion of the total amount of such Loan, the Managing
Agent may assume that such Bank has made such amount available to the
Managing Agent on the date of the Loan and the Managing Agent may, in
reliance upon such assumption, make available to Borrowers a corresponding
amount. If the Managing Agent has made funds available to Borrowers based on
such assumption and such corresponding amount is not in fact made available
to the Managing Agent by such Bank, the Managing Agent shall be entitled to
recover such corresponding amount on demand from such Bank. If such Bank
does not pay such corresponding amount forthwith upon the Managing Agent's
demand therefor, the Managing Agent promptly shall notify Borrowers and
Borrowers shall pay such corresponding amount to the Managing Agent. The
Managing Agent also shall be entitled to recover from such Bank interest on
such corresponding amount in respect of each day from the date such
corresponding amount was made available by the Managing Agent to Borrowers to
the date such corresponding amount is recovered by the Managing Agent, at a
rate per annum equal to the daily Federal Funds Rate. Nothing herein shall
be deemed to relieve any Bank from its obligation to fulfill its share of the
Commitments or to prejudice any rights which the Managing Agent or Borrowers
may have against any Bank as a result of any default by such Bank hereunder.
2.9 EXTENSION OF REVOLVER TERMINATION DATE.
(a) The Revolver Termination Date may be extended for one-year
periods at the request of Borrowers and with the written consent of all
of the Banks (which may be withheld in the sole and absolute discretion
of each Bank) pursuant to this Section. Not earlier than June 1, 1998
nor later than July 1, 1998, or in the corresponding period in each
subsequent year, and provided that Borrowers are then in compliance with
Section 7.1, Borrowers may deliver to the Managing Agent and the Banks a
written request for a one year extension of the Revolver Termination
Date together with a Certificate of a Responsible Official signed by a
Senior Officer on behalf of Borrowers stating that the representations
and warranties contained in ARTICLE 4 (OTHER THAN (i) representations
and warranties which expressly speak as of a particular date
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or are no longer true and correct as a result of a change which is not a
violation of this Agreement and (ii) as otherwise disclosed by Borrowers
and approved in writing by the Requisite Banks are true and correct on and
as of the date of such Certificate). Each Bank shall, on or prior to
the date that is sixty (60) days after receipt of such written request,
notify in writing the Managing Agent whether (in its sole and absolute
discretion) it consents to such request and the Managing Agent shall,
after receiving the notifications from all of the Banks or the
expiration of such period, whichever is earlier, notify Borrowers and
the Banks of the results thereof. If all of the Banks have consented,
then the Revolver Termination Date shall be automatically extended for
one year upon payment by Borrowers to the Managing Agent of the
extension fee pursuant to Section 3.6.
(b) If Banks holding 80% or more of the Commitments (the
"Approving Banks") consent to the request for extension, but one or more
Banks (the "Disapproving Banks") notifies the Managing Agent that it
will not consent to the request for extension (or fails to notify the
Managing Agent in writing of its consent to the extension by the date
that is sixty (60) days after receipt of such written request),
Borrowers may at their option reduce the Commitments by an amount equal
to the amount thereof held by the Disapproving Banks, adjust the
Pro-Rata Shares (but not the amount) of the reduced Commitments of the
Approving Banks to correspond with the reduced Commitments and, subject
to the further written consent of all the Approving Banks, the Revolver
Termination Date shall automatically be extended for one year upon
payment by Borrowers to the Managing Agent of the extension fee pursuant
to Section 3.6.
(c) If Banks holding 80% or more of the Commitments do not consent
to the request for extension, Borrowers may, within the thirty (30) day
period following expiration of the aforesaid sixty (60) day period,
cause the Disapproving Banks to assign their Pro-Rata Shares of the
Commitments to an Eligible Assignee acceptable to Borrowers and the
Managing Agent pursuant to Section 11.25. Upon completion of such
assignments, the request for extension shall be renewed and, subject to
the written consent of all of the Banks (INCLUDING the new Banks), the
Revolver Termination Date shall automatically be extended for one year
upon payment by Borrowers to the Managing Agent of the extension fee
pursuant to Section 3.6.
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2.10 TERM LOAN CONVERSION. Borrowers may at any time elect to convert
the credit facility under this Agreement to a term loan by delivery of a
written notice to that effect to the Managing Agent and payment of the
extension fee payable pursuant to Section 3.6. The Line A Notes and the
Line A Notes will continue to evidence the outstanding Indebtedness incurred
under the Line A Commitment and the Line B Commitment subsequent to such
conversion. The term loan so elected shall commence on the Conversion Date
and shall be payable in Amortization Amounts on each Amortization Date.
2.11 UNENCUMBERED ASSET POOL. Borrowers may at any time add a Qualified
Unencumbered Asset Pool Property to the Unencumbered Asset Pool pursuant to
this Section 2.11, which process shall be initiated by delivery by Borrowers
to the Managing Agent (which the Managing Agent shall promptly distribute to
the Banks) of a complete description of the Qualified Unencumbered Asset Pool
Property, at least two (2) years of operating income statements related
thereto (to the extent available), a description of all tenants and leases
with respect thereto, a current written report prepared by a qualified
independent expert with respect to Hazardous Materials related thereto and
other written materials reasonably requested by any Bank. Thereafter:
(a) If at that date either of the Consent Criteria is satisfied,
the Qualified Unencumbered Asset Pool Property so described shall
thereupon become part of the Unencumbered Asset Pool; or
(b) If at that date neither of the Consent Criteria is satisfied,
the Qualified Unencumbered Asset Pool Property so described shall become
part of the Unencumbered Asset Pool on the tenth (10th) day after the
date the aforesaid descriptive materials are delivered to the Managing
Agent UNLESS on or before such day Banks holding 51% or more of the
Commitments have notified Borrowers and the Managing Agent in writing
that they object to the addition of such Qualified Unencumbered Asset
Pool Property to the Unencumbered Asset Pool, which notifications shall
state the reason or reasons for such objection.
Borrowers may remove a Revenue-Producing Property from the Unencumbered Asset
Pool by delivery to the Managing Agent (for distribution to the Banks) of a
written
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notice to that effect, accompanied by a Certificate of a Senior Officer of
Borrowers setting forth the revised Borrowing Base as of the most
recently-ended Fiscal Quarter resulting from such removal, which removal
shall be effective on the tenth (10th) day after the date of such notice.
2.12 REPRESENTATIVE OF BORROWERS. Each of Borrowers hereby appoints
Parent as its agent, attorney-in-fact and representative for the purpose of
making Requests for Loans, Competitive Bid Requests, acceptance of
Competitive Bids, payment and prepayment of Loans and Competitive Advances,
the giving and receipt of notices by and to Borrowers under this Agreement
and all other purposes incidental to any of the foregoing. Each of Borrowers
agrees that any action taken by Parent as the agent, attorney-in-fact and
representative of such Borrower shall be binding on such Borrowers to the
same extent as if directly taken by such Borrower.
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Article 3
PAYMENTS AND FEES
3.1 PRINCIPAL AND INTEREST.
(a) Interest shall be payable on the outstanding daily unpaid
principal amount of each Advance from the date thereof until payment in
full is made and shall accrue and be payable at the rates set forth or
provided for herein before and after Default, before and after maturity,
before and after judgment, and before and after the commencement of any
proceeding under any Debtor Relief Law, with interest on overdue
interest at the Default Rate to the fullest extent permitted by
applicable Laws.
(b) Interest accrued on each Alternate Base Rate Loan shall be due
and payable on each Monthly Payment Date. EXCEPT as otherwise provided
in Section 3.9, the unpaid principal amount of any Alternate Base Rate
Loan shall bear interest at a fluctuating rate per annum equal to the
Alternate Base Rate PLUS the Applicable Alternate Base Rate Margin.
Each change in the interest rate under this Section 3.1(b) due to a
change in the Alternate Base Rate shall take effect simultaneously with
the corresponding change in the Alternate Base Rate.
(c) Interest accrued on each Eurodollar Rate Loan shall be due and
payable on each Monthly Payment Date. EXCEPT as otherwise provided in
Section 3.9, the unpaid principal amount of any Eurodollar Rate Loan
shall bear interest at a rate per annum equal to the Eurodollar Rate for
that Eurodollar Rate Loan PLUS the Applicable Eurodollar Rate Margin.
(d) If not sooner paid, the principal Indebtedness evidenced by
the Notes shall be payable as follows:
(i) the amount, if any, by which (A) the principal
Indebtedness evidenced by the Line A Notes at any time exceeds the
then applicable Line A Commitment or (B) the principal Indebtedness
evidenced by the Line B Notes at any time exceeds the then applicable
Line B Commitment, shall in each case be payable immediately;
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(ii) the amount, if any, by which the principal Indebtedness
evidenced by the Notes at any time exceeds the SUM OF the Line A
Commitment PLUS the Activated Line B Commitment shall be payable
immediately;
(iii) the amount, if any, by which the principal Indebtedness
evidenced by the Notes at any time exceeds the Borrowing Base shall
(A) if the Net Leverage Amount is then the determinative component of
the Borrowing Base, be payable immediately and (B) if the Net
Mortgage Amount is then the determinative component of the Borrowing
Base, be payable as follows:
(aa) immediately, in an amount equal to the excess of such
Indebtedness over the Net Mortgage Amount assuming that
the related Mortgage Amount was calculated with a Support
Multiple (as such term is used in the definition of
Mortgage Amount) of 180%, rather than 200%;
(bb) concurrently with the determination of the Net Mortgage
Amount for the next following Fiscal Quarter, in an
amount equal to the excess of such Indebtedness over the
Net Mortgage Amount assuming that the related Mortgage
Amount was calculated with a Support Multiple of 190%,
rather than 200%; and
(cc) concurrently with the determination of the Net Mortgage
Amount for the next following Fiscal Quarter, in an
amount equal to the excess of such Indebtedness over the
Net Mortgage Amount;
(iv) the principal Indebtedness evidenced by each Competitive
Advance Note shall be payable on the maturity date of each Competitive
Advance in the amount of such Competitive Advance; and
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(v) the principal Indebtedness evidenced by the Notes shall in
any event be payable on the Maturity Date.
(e) The Notes may, at any time and from time to time, voluntarily
be paid or prepaid in whole or in part without premium or penalty,
EXCEPT that with respect to any voluntary prepayment under this Section,
(i) any partial prepayment shall be not less than $2,000,000, (ii) the
Managing Agent shall have received written notice of any prepayment by
9:00 a.m. California time on the date of prepayment (which must be a
Banking Day) in the case of an Alternate Base Rate Loan, and, in the
case of a Eurodollar Rate Loan, three (3) Banking Days before the date
of prepayment, which notice shall identify the date and amount of the
prepayment and the Loan(s) being prepaid, (iii) each prepayment of
principal on any Eurodollar Rate Loan shall be accompanied by payment of
interest accrued to the date of payment on the amount of principal paid,
(iv) any payment or prepayment of all or any part of any Eurodollar Rate
Loan on a day other than the last day of the applicable Interest Period
shall be subject to Section 3.8(e) and (v) upon any partial prepayment
of a Eurodollar Rate Loan that reduces it below $5,000,000, the
remaining portion thereof shall automatically convert to an Alternate
Base Rate Loan.
3.2 ARRANGEMENT FEE. On the Closing Date, Borrowers shall pay to the
Managing Agent the balance of the arrangement fee as heretofore agreed upon
by letter agreement between Borrowers and the Managing Agent. The
arrangement fee paid to the Managing Agent is solely for its own account and
is nonrefundable.
3.3 LINE B COMMITMENT ACTIVATION FEE. On each activation of all or a
portion of the Line B Commitment, Borrowers shall pay to the Managing Agent,
for the respective accounts of the Banks pro rata according to their Pro Rata
Share of the Commitments, an activation fee of .25% (25 basis points) TIMES
the amount of the Line B Commitment then so activated.
3.4 COMMITMENT FEE. From the Closing Date through the Revolver
Termination Date, Borrowers shall pay to the Managing Agent, for the ratable
accounts of the Banks pro rata according to their Pro Rata Share of the
Commitments, a commitment fee equal to the daily Applicable Commitment Fee
Rate per annum TIMES the average daily amount by which the Line A Commitment
plus the Activated Line B Commitment exceed the aggregate daily principal
Indebtedness evidenced by the
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Line A Notes and the Line B Notes. The commitment fee shall be payable
quarterly in arrears on each Quarterly Payment Date and on the Revolver
Termination Date.
3.5 AGENCY FEE. Borrowers shall pay to the Managing Agent an
agency fee in such amounts and at such times as heretofore agreed upon by
letter agreement between Borrowers and the Managing Agent. The agency fee
paid to the Managing Agent is solely for its own account and is nonrefundable.
3.6 EXTENSION FEES. Borrowers shall pay to the Managing Agent, for
the respective accounts of the Banks pro rata according to their Pro Rata
Share of the Commitments, an extension fee of .125% (12.5 basis points) TIMES
the Line A Commitment and the Activated Line B Commitment concurrently with
(a) each extension of the Revolver Termination Date pursuant to Section 2.9
and (b) its election to effect the Term Loan Conversion pursuant to Section
2.10.
3.7 INCREASED COMMITMENT COSTS. If any Bank shall determine in
good faith that the introduction after the Closing Date of any applicable
law, rule, regulation or guideline regarding capital adequacy, or any change
therein or any change in the interpretation or administration thereof by any
central bank or other Governmental Agency charged with the interpretation or
administration thereof, or compliance by such Bank (or its Eurodollar Lending
Office) or any corporation controlling such Bank, with any request, guideline
or directive regarding capital adequacy (whether or not having the force of
Law) of any such central bank or other authority not imposed as a result of
such Bank's or such corporation's failure to comply with any other Laws,
affects or would affect the amount of capital required or expected to be
maintained by such Bank or any corporation controlling such Bank and (taking
into consideration such Bank's or such corporation's policies with respect to
capital adequacy and such Bank's desired return on capital) determines in
good faith that the amount of such capital is increased, or the rate of
return on capital is reduced, as a consequence of its obligations under this
Agreement, then, within ten (10) Banking Days after demand of such Bank,
Borrowers shall pay to such Bank, from time to time as specified in good
faith by such Bank, additional amounts sufficient to compensate such Bank in
light of such circumstances, to the extent reasonably allocable to such
obligations under this Agreement, PROVIDED that Borrowers shall not be
obligated to pay any such amount which arose prior to the date which is
ninety (90) days preceding the date of such demand or is attributable to
periods prior to the date which is ninety (90) days preceding the date of
such demand. Each Bank's determination of such amounts shall
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be conclusive in the absence of manifest error.
3.8 EURODOLLAR COSTS AND RELATED MATTERS.
(a) In the event that any Governmental Agency imposes on any
Bank any reserve or comparable requirement (INCLUDING any emergency,
supplemental or other reserve) with respect to the Eurodollar
Obligations of that Bank, Borrowers shall pay that Bank within five (5)
Banking Days after demand all amounts necessary to compensate such Bank
(determined as though such Bank's Eurodollar Lending Office had funded
100% of its Eurodollar Rate Advance in the Designated Eurodollar Market)
in respect of the imposition of such reserve requirements (PROVIDED,
that Borrowers shall not be obligated to pay any such amount which arose
prior to the date which is ninety (90) days preceding the date of such
demand or is attributable to periods prior to the date which is ninety
(90) days preceding the date of such demand). The Bank's determination
of such amount shall be conclusive in the absence of manifest error.
(b) If, after the date hereof, the existence or occurrence of
any Special Eurodollar Circumstance:
(1) shall subject any Bank or its Eurodollar Lending
Office to any tax, duty or other charge or cost with respect to any
Eurodollar Rate Advance, any of its Notes evidencing Eurodollar
Rate Loans or its obligation to make Eurodollar Rate Advances, or
shall change the basis of taxation of payments to any Bank
attributable to the principal of or interest on any Eurodollar Rate
Advance or any other amounts due under this Agreement in respect of
any Eurodollar Rate Advance, any of its Notes evidencing Eurodollar
Rate Loans or its obligation to make Eurodollar Rate Advances
(PROVIDED, that Borrowers shall not be obligated to pay any such
amount which arose prior to the date which is ninety (90) days
preceding the date of such demand or is attributable to periods
prior to the date which is ninety (90) days preceding the date of
such demand), EXCLUDING (i) taxes imposed on or measured in whole
or in part by its overall net income by (A) any jurisdiction (or
political subdivision thereof) in which it is organized or
maintains its principal office or Eurodollar Lending Office or (B)
any
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jurisdiction (or political subdivision thereof) in which it is
"doing business" and (ii) any withholding taxes or other taxes
based on gross income imposed by the United States of America for
any period with respect to which it has failed to provide Borrowers
with the appropriate form or forms required by Section 11.21, to
the extent such forms are then required by applicable Laws;
(2) shall impose, modify or deem applicable any reserve not
applicable or deemed applicable on the date hereof (INCLUDING any
reserve imposed by the Board of Governors of the Federal Reserve
System, special deposit, capital or similar requirements against
assets of, deposits with or for the account of, or credit extended
by, any Bank or its Eurodollar Lending Office); or
(3) shall impose on any Bank or its Eurodollar Lending Office
or the Designated Eurodollar Market any other condition affecting
any Eurodollar Rate Advance, any of its Notes evidencing Eurodollar
Rate Loans, its obligation to make Eurodollar Rate Advances or this
Agreement, or shall otherwise affect any of the same;
and the result of any of the foregoing, as determined in good faith by
such Bank, increases the cost to such Bank or its Eurodollar Lending
Office of making or maintaining any Eurodollar Rate Advance or in
respect of any Eurodollar Rate Advance, any of its Notes evidencing
Eurodollar Rate Loans or its obligation to make Eurodollar Rate Advances
or reduces the amount of any sum received or receivable by such Bank or
its Eurodollar Lending Office with respect to any Eurodollar Rate
Advance, any of its Notes evidencing Eurodollar Rate Loans or its
obligation to make Eurodollar Rate Advances (assuming such Bank's
Eurodollar Lending Office had funded 100% of its Eurodollar Rate Advance
in the Designated Eurodollar Market), then, within five (5) Banking Days
after demand by such Bank (with a copy to the Managing Agent), Borrowers
shall pay to such Bank such additional amount or amounts as will
compensate such Bank for such increased cost or reduction (determined as
though such Bank's Eurodollar Lending Office had funded 100% of its
Eurodollar Rate Advance in the Designated Eurodollar Market). A
statement of any Bank claiming compensation under this subsection shall
be conclusive in the absence of manifest error.
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(c) If, after the date hereof, the existence or occurrence of any
Special Eurodollar Circumstance shall, in the good faith opinion of any
Bank, make it unlawful or impossible for such Bank or its Eurodollar
Lending Office to make, maintain or fund its portion of any Eurodollar
Rate Loan, or materially restrict the authority of such Bank to purchase
or sell, or to take deposits of, Dollars in the Designated Eurodollar
Market, or to determine or charge interest rates based upon the
Eurodollar Rate, and such Bank shall so notify the Managing Agent, then
such Bank's obligation to make Eurodollar Rate Advances shall be
suspended for the duration of such illegality or impossibility and the
Managing Agent forthwith shall give notice thereof to the other Banks
and Borrowers. Upon receipt of such notice, the outstanding principal
amount of such Bank's Eurodollar Rate Advances, together with accrued
interest thereon, automatically shall be converted to Alternate Base
Rate Advances on either (1) the last day of the Eurodollar Period(s)
applicable to such Eurodollar Rate Advances if such Bank may lawfully
continue to maintain and fund such Eurodollar Rate Advances to such
day(s) or (2) immediately if such Bank may not lawfully continue to fund
and maintain such Eurodollar Rate Advances to such day(s), PROVIDED that
in such event the conversion shall not be subject to payment of a
prepayment fee under Section 3.8(e). Each Bank agrees to endeavor
promptly to notify Borrowers of any event of which it has actual
knowledge, occurring after the Closing Date, which will cause that Bank
to notify the Managing Agent under this Section, and agrees to designate
a different Eurodollar Lending Office if such designation will avoid the
need for such notice and will not, in the good faith judgment of such
Bank, otherwise be materially disadvantageous to such Bank. In the
event that any Bank is unable, for the reasons set forth above, to make,
maintain or fund its portion of any Eurodollar Rate Loan, such Bank
shall fund such amount as an Alternate Base Rate Advance for the same
period of time, and such amount shall be treated in all respects as an
Alternate Base Rate Advance. Any Bank whose obligation to make
Eurodollar Rate Advances has been suspended under this Section shall
promptly notify the Managing Agent and Borrowers of the cessation of the
Special Eurodollar Circumstance which gave rise to such suspension.
(d) If, with respect to any proposed Eurodollar Rate Loan:
(1) the Managing Agent reasonably determines that, by
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reason of circumstances affecting the Designated Eurodollar Market
generally that are beyond the reasonable control of the Banks,
deposits in Dollars (in the applicable amounts) are not being
offered to any Bank in the Designated Eurodollar Market for the
applicable Eurodollar Period; or
(2) the Requisite Banks advise the Managing Agent that the
Eurodollar Rate as determined by the Managing Agent (i) does not
represent the effective pricing to such Banks for deposits in
Dollars in the Designated Eurodollar Market in the relevant amount
for the applicable Eurodollar Period, or (ii) will not adequately
and fairly reflect the cost to such Banks of making the applicable
Eurodollar Rate Advances;
then the Managing Agent forthwith shall give notice thereof to Borrowers
and the Banks, whereupon until the Managing Agent notifies Borrowers
that the circumstances giving rise to such suspension no longer exist,
the obligation of the Banks to make any future Eurodollar Rate Advances
shall be suspended.
(e) Upon payment or prepayment of any Eurodollar Rate Advance
(OTHER THAN as the result of a conversion required under Section 3.8(c)
on a day other than the last day in the applicable Eurodollar Period
(whether voluntarily, involuntarily, by reason of acceleration, or
otherwise), or upon the failure of Borrowers (for a reason other than
the breach by a Bank of its obligation pursuant to Sections 2.1(a) or
2.1(b) to make an Advance) to borrow on the date or in the amount
specified for a Eurodollar Rate Loan in any Request for Loan, Borrowers
shall pay to the appropriate Bank within ten (10) Banking Days after
demand a prepayment fee or failure to borrow fee, as the case may be
(determined as though 100% of the Eurodollar Rate Advance had been
funded in the Designated Eurodollar Market) equal to the SUM of:
(1) $250; PLUS
(2) the amount, if any, by which (i) the additional interest
would have accrued on the amount prepaid or not borrowed at the
Eurodollar Rate PLUS the Applicable Eurodollar Rate Margin if that
amount had remained or been outstanding through the last day of the
applicable Interest Period EXCEEDS (ii) the interest that the Bank
could
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recover by placing such amount on deposit in the Designated
Eurodollar Market for a period beginning on the date of the
prepayment or failure to borrow and ending on the last day of the
applicable Interest Period (or, if no deposit rate quotation is
available for such period, for the most comparable period for which
a deposit rate quotation may be obtained); PLUS
(3) all out-of-pocket expenses incurred by the Bank reasonably
attributable to such payment, prepayment or failure to borrow.
Each Bank's determination of the amount of any prepayment fee
payable under this Section shall be conclusive in the absence of
manifest error.
(f) Each Bank agrees to endeavor promptly to notify Borrowers of
any event of which it has actual knowledge, occurring after the Closing
Date, which will entitle such Bank to compensation pursuant to clause
(a) or clause (b) of this Section 3.8, and agrees to designate a
different Eurodollar Lending Office if such designation will avoid the
need for or reduce the amount of such compensation and will not, in the
good faith judgment of such Bank, otherwise be materially
disadvantageous to such Bank. Any request for compensation by a Bank
under this Section 3.8 shall set forth the basis upon which it has been
determined that such an amount is due from Borrowers, a calculation of
the amount due, and a certification that the corresponding costs have
been incurred by the Bank.
3.9 LATE PAYMENTS. If any installment of principal or interest or any
fee or cost or other amount payable under any Loan Document to the Managing
Agent or any Bank is not paid when due, it shall thereafter bear interest at
a fluctuating interest rate per annum at all times equal to the SUM OF the
Alternate Base Rate PLUS the Applicable Alternate Base Rate Margin PLUS 2%,
to the fullest extent permitted by applicable Laws. Accrued and unpaid
interest on past due amounts (INCLUDING, without limitation, interest on past
due interest) shall be compounded monthly, on the last day of each calendar
month, to the fullest extent permitted by applicable Laws.
3.10 COMPUTATION OF INTEREST AND FEES. Computation of interest and fees
under this Agreement shall be calculated on the basis of a year of 360 days
and the
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actual number of days elapsed. Interest shall accrue on each Loan for the
day on which the Loan is made; interest shall not accrue on a Loan, or any
portion thereof, for the day on which the Loan or such portion is paid. Any
Loan that is repaid on the same day on which it is made shall bear interest
for one day. Notwithstanding anything in this Agreement to the contrary,
interest in excess of the maximum amount permitted by applicable Laws shall
not accrue or be payable hereunder or under the Notes, and any amount paid as
interest hereunder or under the Notes which would otherwise be in excess of
such maximum permitted amount shall instead be treated as a payment of
principal.
3.11 NON-BANKING DAYS. If any payment to be made by Borrowers or any
other Party under any Loan Document shall come due on a day other than a
Banking Day, payment shall instead be considered due on the next succeeding
Banking Day and the extension of time shall be reflected in computing
interest and fees.
3.12 MANNER AND TREATMENT OF PAYMENTS.
(a) Each payment hereunder (EXCEPT payments pursuant to Sections
3.7, 3.8, 11.3, 11.11 and 11.22) or on the Notes or under any other Loan
Document shall be made to the Managing Agent at the Managing Agent's
Office for the account of each of the Banks or the Managing Agent, as
the case may be, in immediately available funds not later than 11:00
a.m. California time, on the day of payment (which must be a Banking
Day). All payments received after such time, on any Banking Day, shall
be deemed received on the next succeeding Banking Day. The amount of
all payments received by the Managing Agent for the account of each Bank
shall be immediately paid by the Managing Agent to the applicable Bank
in immediately available funds and, if such payment was received by the
Managing Agent by 11:00 a.m., California time, on a Banking Day and not
so made available to the account of a Bank on that Banking Day, the
Managing Agent shall reimburse that Bank for the cost to such Bank of
funding the amount of such payment at the Federal Funds Rate. All
payments shall be made in lawful money of the United States of America.
(b) Each payment or prepayment on account of any Loan shall be applied
pro rata according to the outstanding Advances made by each Bank
comprising such Loan.
(c) Each Bank shall use its best efforts to keep a record (in
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writing or by an electronic data entry system) of Advances made by it
and payments received by it with respect to each of its Notes and,
subject to Section 10.6(g), such record shall, as against Borrowers, be
presumptive evidence of the amounts owing. Notwithstanding the foregoing
sentence, the failure by any Bank to keep such a record shall not affect
Borrowers' obligation to pay the Obligations.
(d) Each payment of any amount payable by Borrowers or any
other Party under this Agreement or any other Loan Document shall be
made free and clear of, and without reduction by reason of, any taxes,
assessments or other charges imposed by any Governmental Agency, central
bank or comparable authority, EXCLUDING (i) taxes imposed on or measured
in whole or in part by its overall net income by (A) any jurisdiction
(or political subdivision thereof) in which it is organized or maintains
its principal office or Eurodollar Lending Office or (B) any
jurisdiction (or political subdivision thereof) in which it is "doing
business" and (ii) any withholding taxes or other taxes based on gross
income imposed by the United States of America for any period with
respect to which it has failed to provide Borrowers with the appropriate
form or forms required by Section 11.21, to the extent such forms are
then required by applicable Laws (all such non-excluded taxes,
assessments or other charges being hereinafter referred to as "Taxes").
To the extent that Borrowers are obligated by applicable Laws to make
any deduction or withholding on account of Taxes from any amount payable
to any Bank under this Agreement, Borrowers shall (i) make such
deduction or withholding and pay the same to the relevant Governmental
Agency and (ii) pay such additional amount to that Bank as is necessary
to result in that Bank's receiving a net after-Tax amount equal to the
amount to which that Bank would have been entitled under this Agreement
absent such deduction or withholding. If and when receipt of such
payment results in an excess payment or credit to that Bank on account
of such Taxes, that Bank shall promptly refund such excess to Borrowers.
3.13 FUNDING SOURCES. Nothing in this Agreement shall be deemed to
obligate any Bank to obtain the funds for any Loan or Advance in any
particular place or manner or to constitute a representation by any Bank that
it has obtained or will obtain the funds for any Loan or Advance in any
particular place or manner.
3.14 FAILURE TO CHARGE NOT SUBSEQUENT WAIVER. Any decision by the
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Managing Agent or any Bank not to require payment of any interest (INCLUDING
interest arising under Section 3.9), fee, cost or other amount payable under
any Loan Document, or to calculate any amount payable by a particular method,
on any occasion shall in no way limit or be deemed a waiver of the Managing
Agent's or such Bank's right to require full payment of any interest
(INCLUDING interest arising under Section 3.9), fee, cost or other amount
payable under any Loan Document, or to calculate an amount payable by another
method that is not inconsistent with this Agreement, on any other or
subsequent occasion.
3.15 MANAGING AGENT'S RIGHT TO ASSUME PAYMENTS WILL BE MADE BY
BORROWERS. Unless the Managing Agent shall have been notified by Borrowers
prior to the date on which any payment to be made by Borrowers hereunder is
due that Borrowers do not intend to remit such payment, the Managing Agent
may, in its discretion, assume that Borrowers have remitted such payment when
so due and the Managing Agent may, in its discretion and in reliance upon
such assumption, make available to each Bank on such payment date an amount
equal to such Bank's share of such assumed payment. If Borrowers have not in
fact remitted such payment to the Managing Agent, each Bank shall forthwith
on demand repay to the Managing Agent the amount of such assumed payment made
available to such Bank, together with interest thereon in respect of each day
from and including the date such amount was made available by the Managing
Agent to such Bank to the date such amount is repaid to the Managing Agent at
the Federal Funds Rate.
3.16 FEE DETERMINATION DETAIL. The Managing Agent, and any Bank,
shall provide reasonable detail to Borrowers regarding the manner in which
the amount of any payment to the Managing Agent and the Banks, or that Bank,
under ARTICLE 3 has been determined, concurrently with demand for such
payment.
3.17 SURVIVABILITY. All of Borrowers' obligations under Sections
3.7 and 3.8 shall survive for the ninety (90) day period following the date
on which the Commitments are terminated and all Loans hereunder are fully
paid, and Borrowers shall remain obligated thereunder for all claims under
such Sections made by any Bank to Borrowers prior to the expiration of such
period.
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Article 4
REPRESENTATIONS AND WARRANTIES
Borrowers represent and warrant to the Banks that:
4.1 EXISTENCE AND QUALIFICATION; POWER; COMPLIANCE WITH LAWS.
Parent is a corporation duly formed, validly existing and in good standing
under the Laws of Maryland and each other Borrower is a corporation or
limited liability company duly formed, validly existing and in good standing
under the Laws of its state of formation. Each of Borrowers is duly
qualified or registered to transact business and is in good standing in each
other jurisdiction in which the conduct of its business or the ownership or
leasing of its Properties makes such qualification or registration necessary,
EXCEPT where the failure so to qualify or register and to be in good standing
would not constitute a Material Adverse Effect. Each of Borrowers has all
requisite power and authority to conduct its business, to own and lease its
Properties and to execute and deliver each Loan Document to which it is a
Party and to perform its Obligations. All outstanding shares of capital
stock of Parent are duly authorized, validly issued, fully paid and
non-assessable, and no holder thereof has any enforceable right of rescission
under any applicable state or federal securities Laws. Each of Borrowers is
in compliance with all Laws and other legal requirements applicable to its
business, has obtained all authorizations, consents, approvals, orders,
licenses and permits from, and has accomplished all filings, registrations
and qualifications with, or obtained exemptions from any of the foregoing
from, any Governmental Agency that are necessary for the transaction of its
business, EXCEPT where the failure so to comply, obtain authorizations, etc.,
file, register, qualify or obtain exemptions does not constitute a Material
Adverse Effect. Parent is a "real estate investment trust" within the
meaning of Section 856 of the Code.
4.2 AUTHORITY; COMPLIANCE WITH OTHER AGREEMENTS AND INSTRUMENTS AND
GOVERNMENT REGULATIONS. The execution, delivery and performance by each of
Borrowers of the Loan Documents to which it is a Party have been duly
authorized by all necessary corporate action, and do not and will not:
(a) Require any consent or approval not heretofore obtained of
any partner, director, stockholder, security holder or creditor of
Borrowers;
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(b) Violate or conflict with any provision of Borrowers'
charter, articles of incorporation or bylaws, as applicable;
(c) Result in or require the creation or imposition of any
Lien or Right of Others upon or with respect to any Property now owned
or leased or hereafter acquired by Borrowers;
(d) Violate any Requirement of Law applicable to Borrowers;
(e) Result in a breach of or constitute a default under, or
cause or permit the acceleration of any obligation owed under, any
indenture or loan or credit agreement or any other Contractual
Obligation to which Borrowers are a party or by which Borrowers or any
of their Property is bound or affected;
and none of Borrowers is in violation of, or default under, any Requirement
of Law or Contractual Obligation, or any indenture, loan or credit agreement
described in Section 4.2(e), in any respect that constitutes a Material
Adverse Effect.
4.3 NO GOVERNMENTAL APPROVALS REQUIRED. EXCEPT as previously
obtained or made, no authorization, consent, approval, order, license or
permit from, or filing, registration or qualification with, any Governmental
Agency is or will be required to authorize or permit under applicable Laws
the execution, delivery and performance by any of Borrowers of the Loan
Documents to which it is a Party.
4.4 SUBSIDIARIES. SCHEDULE 4.4 hereto correctly sets forth the
names, form of legal entity, number of shares of capital stock (or other
applicable unit of equity interest) issued and outstanding, and the record
owner thereof and jurisdictions of organization of all Subsidiaries of
Parent. Unless otherwise indicated in SCHEDULE 4.4, all of the outstanding
shares of capital stock, or all of the units of equity interest, as the case
may be, of each such Subsidiary are owned of record and beneficially by
Parent, there are no outstanding options, warrants or other rights to
purchase capital stock of any such Subsidiary, and all such shares or equity
interests so owned are duly authorized, validly issued, fully paid and
non-assessable, and were issued in compliance with all applicable state and
federal securities and other Laws, and are free and clear of all Liens and
Rights of Others, EXCEPT for Permitted Encumbrances and Permitted Rights of
Others.
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4.5 FINANCIAL STATEMENTS. Borrowers have furnished to the Banks
(a) the audited consolidated financial statements of Parent and its
Subsidiaries for the Fiscal Year ended December 31, 1996 and (b) the
unaudited consolidated balance sheet and statement of operations of Parent
and its Subsidiaries for the Fiscal Quarter ended March 31, 1997. The
financial statements described in clause (a) fairly present in all material
respects the financial condition, results of operations and changes in
financial position, and the balance sheet and statement of operations
described in clause (b) fairly present the financial condition and results of
operations of Parent and its Subsidiaries as of such dates and for such
periods in conformity with Generally Accepted Accounting Principles
consistently applied.
4.6 NO OTHER LIABILITIES; NO MATERIAL ADVERSE CHANGES. Borrowers
do not have any material liability or material contingent liability required
under Generally Accepted Accounting Principles to be reflected or disclosed,
and not reflected or disclosed, in the balance sheet described in
Section 4.5(b), OTHER THAN liabilities and contingent liabilities arising in
the ordinary course of business since the date of such financial statements.
As of the Closing Date, no circumstance or event has occurred that constitutes
a Material Adverse Effect since March 31, 1997. As of any date subsequent to
the Closing Date, no circumstance or event has occurred that constitutes a
Material Adverse Effect since the Closing Date.
4.7 TITLE TO PROPERTY. Borrowers have valid title to the Property
(OTHER THAN assets which are the subject of a Capital Lease Obligation)
reflected in the balance sheet described in Section 4.5(b), OTHER THAN items
of Property or exceptions to title which are in each case immaterial to
Borrowers and Property subsequently sold or disposed of in the ordinary
course of business. Such Property is free and clear of all Liens and Rights
of Others, OTHER THAN Liens or Rights of Others described in SCHEDULE 4.7 and
Permitted Encumbrances and Permitted Rights of Others.
4.8 INTANGIBLE ASSETS. Borrowers own, or possess the right to use
to the extent necessary in their respective businesses, all material
trademarks, trade names, copyrights, patents, patent rights, computer
software, licenses and other Intangible Assets that are used in the conduct
of their businesses as now operated, and no such Intangible Asset, to the
best knowledge of Borrowers, conflicts with the valid trademark, trade name,
copyright, patent, patent right or Intangible Asset of any other Person to
the extent that such conflict constitutes a Material Adverse Effect.
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4.9 PUBLIC UTILITY HOLDING COMPANY ACT. None of Borrowers is a
"holding company", or a "subsidiary company" of a "holding company", or an
"affiliate" of a "holding company" or of a "subsidiary company" of a "holding
company", within the meaning of the Public Utility Holding Company Act of
1935, as amended.
4.10 LITIGATION. EXCEPT for (a) any matter fully covered as to
subject matter and amount (subject to applicable deductibles and retentions)
by insurance for which the insurance carrier has not asserted lack of subject
matter coverage or reserved its right to do so, (b) any matter, or series of
related matters, involving a claim against Parent or any of its Subsidiaries
of less than $1,000,000, (c) matters of an administrative nature not
involving a claim or charge against Parent or any of its Subsidiaries and (d)
matters set forth in SCHEDULE 4.10, there are no actions, suits, proceedings
or investigations pending as to which Parent or any of its Subsidiaries have
been served or have received notice or, to the best knowledge of Borrowers,
threatened against or affecting Parent or any of its Subsidiaries or any
Property of any of them before any Governmental Agency.
4.11 BINDING OBLIGATIONS. Each of the Loan Documents to which
Borrowers are a Party will, when executed and delivered by Borrowers,
constitute the legal, valid and binding obligation of Borrowers, enforceable
against Borrowers in accordance with its terms, EXCEPT as enforcement may be
limited by Debtor Relief Laws or equitable principles relating to the
granting of specific performance and other equitable remedies as a matter of
judicial discretion.
4.12 NO DEFAULT. No event has occurred and is continuing that is a
Default or Event of Default.
4.13 ERISA.
(a) With respect to each Pension Plan:
(i) such Pension Plan complies in all material respects
with ERISA and any other applicable Laws to the extent that
noncompliance could reasonably be expected to have a Material
Adverse Effect;
(ii) such Pension Plan has not incurred any
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"accumulated funding deficiency" (as defined in Section 302 of ERISA)
that could reasonably be expected to have a Material Adverse Effect;
(iii) no "reportable event" (as defined in Section 4043 of
ERISA, but EXCLUDING such events as to which the PBGC has by
regulation waived the requirement therein contained that it be
notified within thirty days of the occurrence of such event) has
occurred that could reasonably be expected to have a Material
Adverse Effect; and
(iv) none of Parent nor any of its Subsidiaries has
engaged in any non-exempt "prohibited transaction" (as defined in
Section 4975 of the Code) that could reasonably be expected to have
a Material Adverse Effect.
(b) None of Parent nor any of its Subsidiaries has incurred or
expects to incur any withdrawal liability to any Multiemployer Plan that
could reasonably be expected to have a Material Adverse Effect.
4.14 REGULATIONS G AND U; INVESTMENT COMPANY ACT. No part of the
proceeds of any Loan hereunder will be used to purchase or carry, or to
extend credit to others for the purpose of purchasing or carrying, any Margin
Stock in violation of Regulations G and U. Neither Parent nor any of its
Subsidiaries is or is required to be registered as an "investment company"
under the Investment Company Act of 1940.
4.15 DISCLOSURE. No written statement made by a Senior Officer to
the Managing Agent or any Bank in connection with this Agreement, or in
connection with any Loan, as of the date thereof contained any untrue
statement of a material fact or omitted a material fact necessary to make the
statement made not misleading in light of all the circumstances existing at
the date the statement was made.
4.16 TAX LIABILITY. Parent and its Subsidiaries have filed all tax
returns which are required to be filed, and have paid, or made provision for
the payment of, all taxes with respect to the periods, Property or
transactions covered by said returns, or pursuant to any assessment received
by Parent or any of its Subsidiaries, EXCEPT (a) such taxes, if any, as are
being contested in good faith by appropriate proceedings and as to which
adequate reserves have been established and maintained and (b) immaterial
taxes so long as no material Property of Parent or any of its Subsidiaries
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is at impending risk of being seized, levied upon or forfeited.
4.17 HAZARDOUS MATERIALS. Except as described in SCHEDULE 4.17, as
of the Closing Date (a) none of Borrowers at any time has disposed of,
discharged, released or threatened the release of any Hazardous Materials on,
from or under the Real Property in violation of any Hazardous Materials Law
that would individually or in the aggregate constitute a Material Adverse
Effect, (b) to the best knowledge of Borrowers, no condition exists that
violates any Hazardous Material Law affecting any Real Property except for
such violations that would not individually or in the aggregate constitute a
Material Adverse Effect, (c) no Real Property or any portion thereof is or
has been utilized by Borrowers as a site for the manufacture of any Hazardous
Materials and (d) to the extent that any Hazardous Materials are used,
generated or stored by Borrowers on any Real Property, or transported to or
from such Real Property by Borrowers, such use, generation, storage and
transportation are in compliance with all Hazardous Materials Laws except for
such non-compliance that would not constitute a Material Adverse Effect or be
materially adverse to the interests of the Banks.
4.18 INITIAL POOL PROPERTIES. The Initial Pool Properties
described on SCHEDULE 4.18 are, as of the Closing Date, Qualified
Unencumbered Asset Pool Properties and comprise the initial Unencumbered
Asset Pool.
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Article 5
AFFIRMATIVE COVENANTS
(OTHER THAN INFORMATION AND
REPORTING REQUIREMENTS)
So long as any Advance remains unpaid, or any other Obligation
remains unpaid, or any portion of the Commitments remains in force, Borrowers
shall, unless the Managing Agent (with the written approval of the Requisite
Banks) otherwise consents:
5.1 PAYMENT OF TAXES AND OTHER POTENTIAL LIENS. Pay and discharge
promptly all taxes, assessments and governmental charges or levies imposed
upon any of them, upon their respective Property or any part thereof and upon
their respective income or profits or any part thereof, EXCEPT that Borrowers
shall not be required to pay or cause to be paid (a) any tax, assessment,
charge or levy that is not yet past due, or is being contested in good faith
by appropriate proceedings so long as the relevant entity has established and
maintains adequate reserves for the payment of the same or (b) any immaterial
tax so long as no material Property of Borrowers is at impending risk of
being seized, levied upon or forfeited.
5.2 PRESERVATION OF EXISTENCE. Preserve and maintain their
respective existences in the jurisdiction of their formation and all material
authorizations, rights, franchises, privileges, consents, approvals, orders,
licenses, permits, or registrations from any Governmental Agency that are
necessary for the transaction of their respective business and qualify and
remain qualified to transact business in each jurisdiction in which such
qualification is necessary in view of their respective business or the
ownership or leasing of their respective Properties EXCEPT (a) as otherwise
permitted by this Agreement and (b) where the failure to so qualify or remain
qualified would not constitute a Material Adverse Effect.
5.3 MAINTENANCE OF PROPERTIES. Maintain, preserve and protect all
of their respective Properties in good order and condition, subject to wear
and tear in the ordinary course of business, and not permit any waste of
their respective Properties, EXCEPT that the failure to maintain, preserve
and protect a particular item of Property that is at the end of its useful
life or that is not of significant value, either intrinsically or to the
operations of Borrowers, shall not constitute a violation of this covenant.
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5.4 MAINTENANCE OF INSURANCE. Maintain liability, casualty and
other insurance (subject to customary deductibles and retentions) with
responsible insurance companies in such amounts and against such risks as is
carried by responsible companies engaged in similar businesses and owning
similar assets in the general areas in which Borrowers operate.
5.5 COMPLIANCE WITH LAWS. Comply with all Requirements of Law
noncompliance with which constitutes a Material Adverse Effect, EXCEPT that
Borrowers need not comply with a Requirement of Law then being contested by
any of them in good faith by appropriate proceedings.
5.6 INSPECTION RIGHTS. Upon reasonable notice, at any time during
regular business hours and as often as reasonably requested (but not so as to
materially interfere with the business of Parent or any of its Subsidiaries)
permit the Managing Agent or any Bank, or any authorized employee, agent or
representative thereof, to examine, audit and make copies and abstracts from
the records and books of account of, and to visit and inspect the Properties
(subject to the rights of any tenants) of, Parent and its Subsidiaries and to
discuss the affairs, finances and accounts of Parent and its Subsidiaries
with any of their officers, key employees or accountants.
5.7 KEEPING OF RECORDS AND BOOKS OF ACCOUNT. Keep adequate records
and books of account reflecting all financial transactions in conformity with
Generally Accepted Accounting Principles, consistently applied, and in
material conformity with all applicable requirements of any Governmental
Agency having regulatory jurisdiction over Borrowers.
5.8 COMPLIANCE WITH AGREEMENTS. Promptly and fully comply with all
Contractual Obligations to which any one or more of them is a party, EXCEPT
for any such Contractual Obligations (a) the performance of which would cause
a Default or (b) then being contested by any of them in good faith by
appropriate proceedings or if the failure to comply with such agreements,
indentures, leases or instruments does not constitute a Material Adverse
Effect.
5.9 USE OF PROCEEDS. Use the proceeds of all Loans for working
capital and general corporate purposes of Borrowers, INCLUDING the
acquisition and/or improvement of Revenue-Producing Properties and
Undeveloped Properties.
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5.10 HAZARDOUS MATERIALS LAWS. Keep and maintain all Real Property
and each portion thereof in compliance in all material respects with all
applicable Hazardous Materials Laws and promptly notify the Managing Agent in
writing (attaching a copy of any pertinent written material) of (a) any and
all material enforcement, cleanup, removal or other governmental or
regulatory actions instituted, completed or threatened in writing by a
Governmental Agency pursuant to any applicable Hazardous Materials Laws, (b)
any and all material claims made or threatened in writing by any Person
against Borrowers relating to damage, contribution, cost recovery,
compensation, loss or injury resulting from any Hazardous Materials and (c)
discovery by any Senior Officer of any of Borrowers of any material
occurrence or condition on any real Property adjoining or in the vicinity of
such Real Property that could reasonably be expected to cause such Real
Property or any part thereof to be subject to any restrictions on the
ownership, occupancy, transferability or use of such Real Property under any
applicable Hazardous Materials Laws.
5.11 UNENCUMBERED ASSET POOL. Cause each Revenue-Producing Property
in the Unencumbered Asset Pool to remain a Qualified Unencumbered Asset Pool
Property so long as it is in the Unencumbered Asset Pool; PROVIDED that
nothing herein shall preclude the removal of any Revenue-Producing Property
from the Unencumbered Asset Pool pursuant to Section 2.11.
5.12 REIT STATUS. Maintain the status of Parent as a "real estate
investment trust" under Section 856 of the Code and comply with the dividend
and other requirements applicable under Section 857(a) of the Code.
5.13 ADDITIONAL BORROWERS. Cause each Wholly-Owned Subsidiary of
Parent which is not then a Borrower and which holds a Revenue-Producing
Property that is or will become part of the Unencumbered Asset Pool to
execute and deliver the Joinder Agreement concurrently with the addition of
such Revenue-Producing Property to the Unencumbered Asset Pool.
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Article 6
NEGATIVE COVENANTS
So long as any Advance remains unpaid, or any other Obligation
remains unpaid, or any portion of the Commitments remains in force, Borrowers
shall not, unless the Managing Agent (with the written approval of the
Requisite Banks or, if required by Section 11.2, of all of the Banks)
otherwise consents:
6.1 MERGERS. Merge or consolidate with or into any Person, EXCEPT
a merger or consolidation where Parent is the surviving corporation that does
not result in a Change in Control.
6.2 ERISA. (a) At any time, permit any Pension Plan to: (i)
engage in any non-exempt "prohibited transaction" (as defined in Section 4975
of the Code) which could reasonably be expected to result in a Material
Adverse Effect, (ii) fail to comply with ERISA which could reasonably be
expected to result in a Material Adverse Effect, (iii) incur any material
"accumulated funding deficiency" (as defined in Section 302 of ERISA) which
could reasonably be expected to result in a Material Adverse Effect or (iv)
terminate in any manner which could reasonably be expected to result in a
Material Adverse Effect, or (b) withdraw, completely or partially, from any
Multiemployer Plan if to do so could reasonably be expected to result in a
Material Adverse Effect.
6.3 CHANGE IN NATURE OF BUSINESS. Make any material change in the
nature of the business of Borrowers.
6.4 TRANSACTIONS WITH AFFILIATES. Enter into any transaction of
any kind with any Affiliate of Borrowers OTHER THAN (a) salary, bonus,
employee stock option, relocation assistance and other compensation
arrangements with directors or officers in the ordinary course of business,
(b) transactions that are fully disclosed to the board of directors of Parent
and expressly authorized by a resolution of the board of directors of Parent
which is approved by a majority of the directors not having an interest in
the transaction, (c) transactions expressly permitted by this Agreement, (d)
transactions between one Borrower and another Borrower and (e) transactions
on overall terms at least as favorable to Borrowers as would be the case in
an arm's-length transaction between unrelated parties of equal bargaining
power.
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6.5 LEVERAGE RATIO. Permit the Leverage Ratio, as of the last day
of any Fiscal Quarter, to be greater than .50 to 1.00.
6.6 INTEREST COVERAGE. Permit Interest Coverage, as of the last
day of any Fiscal Quarter, to be less than 2.50 to 1.00.
6.7 FIXED CHARGE COVERAGE. Permit Fixed Charge Coverage, as of the
last day of any Fiscal Quarter, to be less than 2.00 to 1.00.
6.8 DISTRIBUTIONS. Make any Distribution (a) with respect to any
Fiscal Quarter or Fiscal Year in excess of an amount equal to 95% of Funds
From Operations of Parent and its Subsidiaries for that Fiscal Quarter or
Fiscal Year or (b) during the continuance of an Event of Default, in excess
of the minimum amount necessary to comply with Section 857(a) of the Code.
6.9 MARKET NET WORTH. Permit Market Net Worth, as of the last day
of any Fiscal Quarter, to be less than $135,000,000.
6.10 UNDEVELOPED PROPERTY. Permit the aggregate amount expended by
Parent or any of its Subsidiaries for the acquisition and/or improvement
and/or leasing of Undeveloped Property (INCLUDING the acquisition cost of
land acquired after the Closing Date, all entitlement, zoning, design,
construction, leasing and all other "hard" and "soft" costs related to
Undeveloped Property, but EXCLUDING amounts expended for Undeveloped
Properties that have subsequently become Stabilized Revenue-Producing
Properties) to exceed an amount equal to 20% of Revenue-Producing Property
Value as of the most recently-ended Fiscal Quarter.
6.11 UNENCUMBERED REVENUE-PRODUCING PROPERTY. Permit the
Revenue-Producing Property Value of all Revenue-Producing Property that is
Unencumbered to be less than an amount equal to 50% of the Revenue-Producing
Property Value of all Revenue-Producing Property as of the most
recently-ended Fiscal Quarter.
6.12 SECURED RECOURSE DEBT. Permit Secured Recourse Debt to exceed
an amount equal to 15% of Revenue-Producing Property Value as of the most
recently-ended Fiscal Quarter.
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6.13 OTHER UNSECURED DEBT. Permit Other Unsecured Debt to exceed an
amount equal to 10% of Unencumbered Asset Pool Value as of the most
recently-ended Fiscal Quarter prior to the incurrence thereof.
6.14 INVESTMENTS IN CERTAIN PERSONS. Make any Investment in any
Person that is not a Controlled Entity (OTHER THAN an Investment by a
Subsidiary of Parent in Parent) if, giving effect thereto, the aggregate of
all Investments made by Parent and its Subsidiaries in all such Persons would
exceed an amount equal to 15% of Tangible Net Worth as of the most
recently-ended Fiscal Quarter.
6.15 NEGATIVE PLEDGES. Grant to any Person a Negative Pledge on any
Property of Parent and its Subsidiaries that, as of the LATER OF the Closing
Date or the date of its acquisition, is not subject to a Lien (OTHER THAN
Permitted Encumbrances).
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Article 7
INFORMATION AND REPORTING REQUIREMENTS
7.1 FINANCIAL AND BUSINESS INFORMATION. So long as any Advance
remains unpaid, or any other Obligation remains unpaid, or any portion of the
Commitments remains in force, Borrowers shall, unless the Managing Agent
(with the written approval of the Requisite Banks) otherwise consents, at
Borrowers' sole expense, deliver to the Managing Agent for distribution by it
to the Banks, a sufficient number of copies for all of the Banks of the
following:
(a) As soon as practicable, and in any event within 60 days
after the end of each Fiscal Quarter (OTHER THAN the fourth Fiscal
Quarter in any Fiscal Year), the consolidated balance sheet of Parent
and its Subsidiaries as at the end of such Fiscal Quarter and the
consolidated statements of operations and cash flows for such Fiscal
Quarter, and the portion of the Fiscal Year ended with such Fiscal
Quarter, all in reasonable detail. Such financial statements shall be
certified by a Senior Officer of Parent as fairly presenting the
financial condition, results of operations and cash flows of Parent and
its Subsidiaries in accordance with Generally Accepted Accounting
Principles (other than footnote disclosures), consistently applied, as
at such date and for such periods, subject only to normal year-end
accruals and audit adjustments;
(b) As soon as practicable, and in any event within 60 days
after the end of each Fiscal Quarter, a Pricing Certificate setting
forth a calculation of the Leverage Ratio as of the last day of such
Fiscal Quarter, and providing reasonable detail as to the calculation
thereof, which calculations in the case of the fourth Fiscal Quarter in
any Fiscal Year shall be based on the preliminary unaudited financial
statements of Parent and its Subsidiaries for such Fiscal Quarter, and
as soon as practicable thereafter, in the event of any material variance
in the actual calculation of the Leverage Ratio from such preliminary
calculation, a revised Pricing Certificate setting forth the actual
calculation thereof;
(c) As soon as practicable, and in any event within 60 days
after the end of each Fiscal Quarter, statements of operating income for
such Fiscal Quarter and Fiscal Year to date for each of the
Revenue-Producing
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Properties in the Unencumbered Asset Pool, each in reasonable detail;
(d) As soon as practicable, and in any event within 60 days
after the end of each Fiscal Quarter, supplemental disclosure
information setting forth the effect on Net Income reflected in the
financial statements for such Fiscal Quarter and Fiscal Year to date of
any difference between the rents payable by tenants during the periods
covered by such financial statements and the "straight line" rents
payable over the terms of their respective leases, in reasonable detail;
(e) As soon as practicable, and in any event within 120 days
after the end of each Fiscal Year, the consolidated balance sheet of
Parent and its Subsidiaries as at the end of such Fiscal Year and the
consolidated statements of operations, stockholders' equity and cash
flows, in each case of Parent and its Subsidiaries for such Fiscal Year,
all in reasonable detail. Such financial statements shall be prepared
in accordance with Generally Accepted Accounting Principles,
consistently applied, and shall be accompanied by a report of Ernst &
Young LLP or other independent public accountants of recognized standing
selected by Parent and reasonably satisfactory to the Requisite Banks,
which report shall be prepared in accordance with generally accepted
auditing standards as at such date, and shall not be subject to any
qualifications or exceptions as to the scope of the audit nor to any
other qualification or exception determined by the Requisite Banks in
their good faith business judgment to be adverse to the interests of the
Banks;
(f) As soon as practicable, and in any event before the
commencement of each Fiscal Year, a budget and projection by Fiscal
Quarter for that Fiscal Year and by Fiscal Year for the next two
succeeding Fiscal Years, INCLUDING for the first such Fiscal Year,
projected consolidated balance sheets, statements of operations and
statements of cash flow and, for the second and third such Fiscal Years,
projected consolidated condensed balance sheets and statements of
operations and cash flows, of Parent and its Subsidiaries, all in
reasonable detail;
(g) Promptly after request by the Managing Agent or any Bank,
copies of any detailed audit reports, management letters or
recommendations submitted to the board of directors (or the audit
committee of the board of
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directors) of Parent by independent accountants in connection with the
accounts or books of Parent or any of its Subsidiaries, or any audit of
any of them;
(h) Promptly after the same are available, and in any event
within five (5) Banking Days after filing with the Securities and
Exchange Commission, copies of each annual report, proxy or financial
statement or other report or communication sent to the stockholders of
Parent, and copies of all annual, regular, periodic and special reports
and registration statements which Parent may file or be required to file
with the Securities and Exchange Commission under Section 13 or 15(d) of
the Securities Exchange Act of 1934, as amended, and not otherwise
required to be delivered to the Banks pursuant to other provisions of
this Section 8.1;
(i) Promptly after request by the Managing Agent or any Bank,
copies of any other report or other document that was filed by Borrowers
with any Governmental Agency;
(j) Promptly upon a Senior Officer becoming aware, and in any
event within five (5) Banking Days after becoming aware, of the
occurrence of any (i) "reportable event" (as such term is defined in
Section 4043 of ERISA, but EXCLUDING such events as to which the PBGC
has by regulation waived the requirement therein contained that it be
notified within thirty days of the occurrence of such event) or (ii)
non-exempt "prohibited transaction" (as such term is defined in Section
406 of ERISA or Section 4975 of the Code) involving any Pension Plan or
any trust created thereunder, telephonic notice specifying the nature
thereof, and, no more than two (2) Banking Days after such telephonic
notice, written notice again specifying the nature thereof and
specifying what action Borrowers are taking or propose to take with
respect thereto, and, when known, any action taken by the Internal
Revenue Service with respect thereto;
(k) As soon as practicable, and in any event within two (2)
Banking Days after a Senior Officer becomes aware of the existence of
any condition or event which constitutes a Default or Event of Default,
telephonic notice specifying the nature and period of existence thereof,
and, no more than two (2) Banking Days after such telephonic notice,
written notice again specifying the nature and period of existence
thereof and specifying what
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action Borrowers are taking or propose to take with respect thereto;
(l) Promptly upon a Senior Officer becoming aware that (i) any
Person has commenced a legal proceeding with respect to a claim against
Borrowers that is $1,000,000 or more in excess of the amount thereof
that is fully covered by insurance, (ii) any creditor under a credit
agreement involving Indebtedness of $1,000,000 or more or any lessor
under a lease involving aggregate rent of $1,000,000 or more has
asserted a default thereunder on the part of Borrowers or, (iii) any
Person has commenced a legal proceeding with respect to a claim against
Borrowers under a contract that is not a credit agreement or material
lease in excess of $1,000,000 or which otherwise may reasonably be
expected to result in a Material Adverse Effect, a written notice
describing the pertinent facts relating thereto and what action
Borrowers are taking or propose to take with respect thereto;
(m) Promptly upon a Senior Officer becoming aware of a change
in the credit rating given by a Rating Agency to Parent's long-term
senior unsecured debt, written notice of such change; and
(n) Such other data and information as from time to time may
be reasonably requested by the Managing Agent, any Bank (through the
Managing Agent) or the Requisite Banks.
7.2 COMPLIANCE CERTIFICATES. So long as any Advance remains
unpaid, or any other Obligation remains unpaid or unperformed, or any portion
of the Commitments remains outstanding, Borrowers shall, at Borrowers' sole
expense, deliver to the Managing Agent for distribution by it to the Banks
concurrently with the financial statements required pursuant to Sections
7.1(a) and 7.1(e), Compliance Certificates signed by a Senior Officer.
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Article 8
CONDITIONS
8.1 INITIAL ADVANCES. The obligation of each Bank to make the
initial Advance to be made by it is subject to the following conditions
precedent, each of which shall be satisfied prior to the making of the
initial Advances (unless all of the Banks, in their sole and absolute
discretion, shall agree otherwise):
(a) The Managing Agent shall have received all of the
following, each of which shall be originals unless otherwise specified,
each properly executed by a Responsible Official of each party thereto,
each dated as of the Closing Date and each in form and substance
satisfactory to the Managing Agent and its legal counsel (unless
otherwise specified or, in the case of the date of any of the following,
unless the Managing Agent otherwise agrees or directs):
(1) at least one (1) executed counterpart of this
Agreement, together with arrangements satisfactory to the Managing
Agent for additional executed counterparts, sufficient in number for
distribution to the Banks and Borrowers;
(2) Line A Notes executed by Borrowers in favor of each
Bank, each in a principal amount equal to that Bank's Pro Rata Share
of the Line A Commitment;
(3) Line B Notes executed by Borrowers in favor of each
Bank, each in a principal amount equal to that Bank's Pro Rata Share
of the Line B Commitment;
(4) Competitive Advance Notes executed by Borrowers in
favor of each Bank, each in the principal amount of $50,000,000;
(5) with respect to each of Borrowers, such documentation
as the Managing Agent may require to establish the due organization,
valid existence and good standing of each of Borrowers, its
qualification to engage in business in each material jurisdiction in
which
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it is engaged in business or required to be so qualified, its
authority to execute, deliver and perform the Loan Documents to
which it is a Party, the identity, authority and capacity of each
Responsible Official thereof authorized to act on its behalf,
INCLUDING certified copies of articles of incorporation and
amendments thereto, bylaws and amendments thereto, certificates of
good standing and/or qualification to engage in business, tax
clearance certificates, certificates of corporate resolutions,
incumbency certificates, Certificates of Responsible Officials, and
the like;
(6) the Opinions of Counsel;
(7) a Certificate of a Senior Officer of Parent stating
that Parent has received Cash of not less than $120,000,000 from the
issuance and sale of Common Stock subsequent to March 31, 1997;
(8) a Certificate of a Senior Officer of each of the
Borrowers certifying that the conditions specified in Sections
8.1(f) and 8.1(g) have been satisfied; and
(9) such other assurances, certificates, documents,
consents or opinions as the Managing Agent or the Requisite Banks
reasonably may require.
(b) The arrangement fee payable pursuant to Section 3.2 shall
have been paid.
(c) Any agency fees payable on the Closing Date pursuant to
Section 3.5 shall have been paid.
(d) All Indebtedness outstanding under the Prior Credit
Agreement shall have been (or shall concurrently be) paid and the same
shall have been (or shall concurrently be) terminated.
(e) The reasonable costs and expenses of the Managing Agent in
connection with the preparation of the Loan Documents payable pursuant
to Section 11.3, and invoiced to Borrowers prior to the Closing Date,
shall have
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been paid.
(f) The representations and warranties of Borrowers contained
in ARTICLE 4 shall be true and correct in all material respects.
(g) Borrowers and any other Parties shall be in compliance
with all the terms and provisions of the Loan Documents, and giving
effect to the initial Advance no Default or Event of Default shall have
occurred and be continuing.
(h) All legal matters relating to the Loan Documents shall be
satisfactory to Sheppard, Mullin, Richter & Hampton LLP, special counsel
to the Managing Agent.
(i) The Closing Date shall have occurred on or before July 31,
1997.
8.2 ANY ADVANCE. The obligation of each Bank to make any Advance
is subject to the following conditions precedent (unless the Requisite Banks,
in their sole and absolute discretion, shall agree otherwise):
(a) EXCEPT (i) for representations and warranties which
expressly speak as of a particular date or are no longer true and
correct as a result of a change which is permitted by this Agreement or
(ii) as disclosed by Borrowers and approved in writing by the Requisite
Banks, the representations and warranties contained in ARTICLE 4 (OTHER
THAN Sections 4.4, 4.6 (first sentence), 4.10 and 4.18) shall be true
and correct in all material respects on and as of the date of the
Advance as though made on that date;
(b) other than matters described in SCHEDULE 4.10 or not
required as of the Closing Date to be therein described, there shall not
be then pending or threatened any action, suit, proceeding or
investigation against or affecting Parent or any of its Subsidiaries or
any Property of any of them before any Governmental Agency that
constitutes a Material Adverse Effect;
(c) the Managing Agent shall have timely received a Request
for Loan in compliance with ARTICLE 2 (or telephonic or other request for
Loan
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referred to in the second sentence of Section 2.1(c), if applicable), in
compliance with ARTICLE 2; and
(d) the Managing Agent shall have received, in form and
substance satisfactory to the Managing Agent, such other assurances,
certificates, documents or consents related to the foregoing as the
Managing Agent or Requisite Banks reasonably may require.
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Article 9
EVENTS OF DEFAULT AND REMEDIES UPON EVENT OF DEFAULT
9.1 EVENTS OF DEFAULT. The existence or occurrence of any one or
more of the following events, whatever the reason therefor and under any
circumstances whatsoever, shall constitute an Event of Default:
(a) Borrowers fail to pay any principal on any of the
Notes, or any portion thereof, on the date when due; or
(b) Borrowers fail to pay any interest on any of the Notes,
or any fees under Sections 3.4 or 3.5, or any portion thereof, within
five (5) Banking Days after the date when due; or fail to pay any other
fee or amount payable to the Banks under any Loan Document, or any
portion thereof, within five (5) Banking Days after demand therefor; or
(c) Borrowers fail to comply with any of the covenants
contained in ARTICLE 6; or
(d) Borrowers fail to comply with Section 7.1(k) in any
respect that is materially adverse to the interests of the Banks; or
(e) Any Borrower or any other Party fails to perform or
observe any other covenant or agreement (not specified in clause (a),
(b), (c) or (d) above) contained in any Loan Document on its part to be
performed or observed within thirty (30) Banking Days after the giving
of notice by the Managing Agent on behalf of the Requisite Banks of
such Default or, if such Default is not reasonably susceptible of cure
within such period, within such longer period as is reasonably
necessary to effect a cure so long as such Borrower or such Party
continues to diligently pursue cure of such Default but not in any
event in excess of sixty (60) Banking Days; or
(f) Any representation or warranty of Borrowers made in any
Loan Document, or in any certificate or other writing delivered by
Borrowers or such Guarantor pursuant to any Loan Document, proves to
have been incorrect when made or reaffirmed in any respect that is
materially adverse to the
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interests of the Banks; or
(g) Borrowers (i) fail to pay the principal, or any
principal installment, of any present or future Indebtedness (OTHER
THAN Non-Recourse Debt) of $5,000,000 or more, or any guaranty of
present or future Indebtedness (OTHER THAN Non-Recourse Debt) of
$5,000,000 or more, on its part to be paid, when due (or within any
stated grace period), whether at the stated maturity, upon
acceleration, by reason of required prepayment or otherwise or (ii)
fails to perform or observe any other term, covenant or agreement on
its part to be performed or observed, or suffers any event of default
to occur, in connection with any present or future Indebtedness (OTHER
THAN Non-Recourse Debt) of $5,000,000 or more, or of any guaranty of
present or future Indebtedness (OTHER THAN Non-Recourse Debt) of
$5,000,000 or more, if as a result of such failure or sufferance any
holder or holders thereof (or an agent or trustee on its or their
behalf) has the right to declare such Indebtedness due before the date
on which it otherwise would become due or the right to require
Borrowers to redeem or purchase, or offer to redeem or purchase, all or
any portion of such Indebtedness (PROVIDED, that for the purpose of
this clause (g), the principal amount of Indebtedness consisting of a
Swap Agreement shall be the amount which is then payable by the
counterparty to close out the Swap Agreement); or
(h) Any Loan Document, at any time after its execution and
delivery and for any reason OTHER THAN the agreement or action (or
omission to act) of the Managing Agent or the Banks or satisfaction in
full of all the Obligations ceases to be in full force and effect or is
declared by a court of competent jurisdiction to be null and void,
invalid or unenforceable in any respect which is materially adverse to
the interests of the Banks; or any Party thereto denies in writing that
it has any or further liability or obligation under any Loan Document,
or purports to revoke, terminate or rescind same; or
(i) A final judgment against any of Borrowers is entered
for the payment of money in excess of $1,000,000 (not covered by
insurance or for which an insurer has reserved its rights) and, absent
procurement of a stay of execution, such judgment remains unsatisfied
for thirty (30) calendar days after the date of entry of judgment, or
in any event later than five (5) days prior to the date of any proposed
sale thereunder; or any writ or warrant of attachment or execution or
similar process is issued or levied against all or any material part of
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the Property of any such Person and is not released, vacated or fully
bonded within thirty (30) calendar days after its issue or levy; or
(j) Any of Borrowers institutes or consents to the
institution of any proceeding under a Debtor Relief Law relating to it
or to all or any material part of its Property, or is unable or admits
in writing its inability to pay its debts as they mature, or makes an
assignment for the benefit of creditors; or applies for or consents to
the appointment of any receiver, trustee, custodian, conservator,
liquidator, rehabilitator or similar officer for it or for all or any
material part of its Property; or any receiver, trustee, custodian,
conservator, liquidator, rehabilitator or similar officer is appointed
without the application or consent of that Person and the appointment
continues undischarged or unstayed for sixty (60) calendar days; or any
proceeding under a Debtor Relief Law relating to any such Person or to
all or any part of its Property is instituted without the consent of
that Person and continues undismissed or unstayed for sixty (60)
calendar days; or
(k) The occurrence of an Event of Default (as such term is
or may hereafter be specifically defined in any other Loan Document)
under any other Loan Document; or
(l) Any Pension Plan maintained by Borrowers is determined
to have a material "accumulated funding deficiency" as that term is
defined in Section 302 of ERISA in excess of an amount equal to 5% of
the combined total assets of Borrowers as of the most-recently ended
Fiscal Quarter.
9.2 REMEDIES UPON EVENT OF DEFAULT. Without limiting any other
rights or remedies of the Managing Agent or the Banks provided for elsewhere
in this Agreement, or the other Loan Documents, or by applicable Law, or in
equity, or otherwise:
(a) Upon the occurrence, and during the continuance, of any
Event of Default OTHER THAN an Event of Default described in Section
9.1(j):
(1) the Commitments to make Advances and all other
obligations of the Managing Agent or the Banks and all rights of
Borrowers and any other Parties under the Loan Documents shall
be
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suspended without notice to or demand upon Borrowers, which are
expressly waived by Borrowers, EXCEPT that all of the Banks or
the Requisite Banks (as the case may be, in accordance with
Section 11.2) may waive an Event of Default or, without waiving,
determine, upon terms and conditions satisfactory to the Banks
or Requisite Banks, as the case may be, to reinstate the
Commitments and such other obligations and rights and make
further Advances, which waiver or determination shall apply
equally to, and shall be binding upon, all the Banks; and
(2) the Requisite Banks may request the Managing Agent
to, and the Managing Agent thereupon shall, terminate the
Commitments and/or declare all or any part of the unpaid
principal of all Notes, all interest accrued and unpaid thereon
and all other amounts payable under the Loan Documents to be
forthwith due and payable, whereupon the same shall become and
be forthwith due and payable, without protest, presentment,
notice of dishonor, demand or further notice of any kind, all of
which are expressly waived by Borrowers.
(b) Upon the occurrence of any Event of Default described
in Section 9.1(j):
(1) the Commitments to make Advances and all other
obligations of the Managing Agent or the Banks and all rights of
Borrowers and any other Parties under the Loan Documents shall
terminate without notice to or demand upon Borrowers, which are
expressly waived by Borrowers, EXCEPT that all of the Banks may
waive the Event of Default or, without waiving, determine, upon
terms and conditions satisfactory to all the Banks, to reinstate
the Commitments and such other obligations and rights and make
further Advances, which determination shall apply equally to,
and shall be binding upon, all the Banks; and
(2) the unpaid principal of all Notes, all interest
accrued and unpaid thereon and all other amounts payable under
the Loan Documents shall be forthwith due and payable, without
protest, presentment, notice of dishonor, demand or further
notice of any kind, all of which are expressly waived by
Borrowers.
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(c) Upon the occurrence of any Event of Default, the Banks
and the Managing Agent, or any of them, without notice to (EXCEPT as
expressly provided for in any Loan Document) or demand upon Borrowers,
which are expressly waived by Borrowers (EXCEPT as to notices expressly
provided for in any Loan Document), may proceed (but only with the
consent of the Requisite Banks) to protect, exercise and enforce their
rights and remedies under the Loan Documents against Borrowers and any
other Party and such other rights and remedies as are provided by Law
or equity.
(d) The order and manner in which the Banks' rights and
remedies are to be exercised shall be determined by the Requisite Banks
in their sole discretion, and all payments received by the Managing
Agent and the Banks, or any of them, shall be applied first to the
costs and expenses (including reasonable attorneys' fees and
disbursements and the reasonably allocated costs of attorneys employed
by the Managing Agent or by any Bank) of the Managing Agent and of the
Banks, and thereafter paid pro rata to the Banks in the same
proportions that the aggregate Obligations owed to each Bank under the
Loan Documents bear to the aggregate Obligations owed under the Loan
Documents to all the Banks, without priority or preference among the
Banks. Regardless of how each Bank may treat payments for the purpose
of its own accounting, for the purpose of computing Borrowers'
Obligations hereunder and under the Notes, payments shall be applied
FIRST, to the costs and expenses of the Managing Agent and the Banks,
as set forth above, SECOND, to the payment of accrued and unpaid
interest due under any Loan Documents to and including the date of such
application (ratably, and without duplication, according to the accrued
and unpaid interest due under each of the Loan Documents), and THIRD,
to the payment of all other amounts (including principal and fees) then
owing to the Managing Agent or the Banks under the Loan Documents. No
application of payments will cure any Event of Default, or prevent
acceleration, or continued acceleration, of amounts payable under the
Loan Documents, or prevent the exercise, or continued exercise, of
rights or remedies of the Banks hereunder or thereunder or at Law or in
equity.
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Article 10
THE MANAGING AGENT
10.1 APPOINTMENT AND AUTHORIZATION. Subject to Section 10.8, each
Bank hereby irrevocably appoints and authorizes the Managing Agent to take
such action as agent on its behalf and to exercise such powers under the Loan
Documents as are delegated to the Managing Agent by the terms thereof or are
reasonably incidental, as determined by the Managing Agent, thereto. This
appointment and authorization is intended solely for the purpose of
facilitating the servicing of the Loans and does not constitute appointment
of the Managing Agent as trustee for any Bank or as representative of any
Bank for any other purpose and, EXCEPT as specifically set forth in the Loan
Documents to the contrary, the Managing Agent shall take such action and
exercise such powers only in an administrative and ministerial capacity.
10.2 MANAGING AGENT AND AFFILIATES. Bank of America National Trust
and Savings Association (and each successor Managing Agent) has the same
rights and powers under the Loan Documents as any other Bank and may exercise
the same as though it were not the Managing Agent, and the term "Bank" or
"Banks" includes Bank of America National Trust and Savings Association in
its individual capacity. Bank of America National Trust and Savings
Association (and each successor Managing Agent) and its Affiliates may accept
deposits from, lend money to and generally engage in any kind of banking,
trust or other business with Borrowers, any Subsidiary thereof, or any
Affiliate of Borrowers or any Subsidiary thereof, as if it were not the
Managing Agent and without any duty to account therefor to the Banks. Bank
of America National Trust and Savings Association (and each successor
Managing Agent) need not account to any other Bank for any monies received by
it for reimbursement of its costs and expenses as Managing Agent hereunder,
or for any monies received by it in its capacity as a Bank hereunder. The
Managing Agent shall not be deemed to hold a fiduciary relationship with any
Bank and no implied covenants, functions, responsibilities, duties,
obligations or liabilities shall be read into this Agreement or otherwise
exist against the Managing Agent.
10.3 PROPORTIONATE INTEREST IN ANY COLLATERAL. The Managing Agent,
on behalf of all the Banks, shall hold in accordance with the Loan Documents
all items of any collateral or interests therein received or held by the
Managing Agent. Subject to the Managing Agent's and the Banks' rights to
reimbursement for their costs and
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expenses hereunder (INCLUDING reasonable attorneys' fees and disbursements
and other professional services and the reasonably allocated costs of
attorneys employed by the Managing Agent or a Bank) and subject to the
application of payments in accordance with Section 9.2(d), each Bank shall
have an interest in the Banks' interest in such collateral or interests
therein in the same proportions that the aggregate Obligations owed such Bank
under the Loan Documents bear to the aggregate Obligations owed under the
Loan Documents to all the Banks, without priority or preference among the
Banks.
10.4 BANKS' CREDIT DECISIONS. Each Bank agrees that it has,
independently and without reliance upon the Managing Agent, any other Bank or
the directors, officers, agents, employees or attorneys of the Managing Agent
or of any other Bank, and instead in reliance upon information supplied to it
by or on behalf of Borrowers and upon such other information as it has deemed
appropriate, made its own independent credit analysis and decision to enter
into this Agreement. Each Bank also agrees that it shall, independently and
without reliance upon the Managing Agent, any other Bank or the directors,
officers, agents, employees or attorneys of the Managing Agent or of any
other Bank, continue to make its own independent credit analyses and
decisions in acting or not acting under the Loan Documents.
10.5 ACTION BY MANAGING AGENT.
(a) Absent actual knowledge of the Managing Agent of the
existence of a Default, the Managing Agent may assume that no Default
has occurred and is continuing, unless the Managing Agent (or the Bank
that is then the Managing Agent) has received notice from Borrowers
stating the nature of the Default or has received notice from a Bank
stating the nature of the Default and that such Bank considers the
Default to have occurred and to be continuing.
(b) The Managing Agent has only those obligations under the
Loan Documents as are expressly set forth therein.
(c) EXCEPT for any obligation expressly set forth in the
Loan Documents and as long as the Managing Agent may assume that no
Event of Default has occurred and is continuing, the Managing Agent
may, but shall not be required to, exercise its discretion to act or
not act, EXCEPT that the Managing Agent shall be required to act or not
act upon the instructions of the Requisite
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Banks (or of all the Banks, to the extent required by Section 11.2) and
those instructions shall be binding upon the Managing Agent and all the
Banks, PROVIDED that the Managing Agent shall not be required to act or
not act if to do so would be contrary to any Loan Document or to
applicable Law or would result, in the reasonable judgment of the
Managing Agent, in substantial risk of liability to the Managing Agent.
(d) If the Managing Agent has received a notice specified
in clause (a), the Managing Agent shall immediately give notice thereof
to the Banks and shall act or not act upon the instructions of the
Requisite Banks (or of all the Banks, to the extent required by Section
11.2), PROVIDED that the Managing Agent shall not be required to act or
not act if to do so would be contrary to any Loan Document or to
applicable Law or would result, in the reasonable judgment of the
Managing Agent, in substantial risk of liability to the Managing Agent,
and EXCEPT that if the Requisite Banks (or all the Banks, if required
under Section 11.2) fail, for five (5) Banking Days after the receipt
of notice from the Managing Agent, to instruct the Managing Agent, then
the Managing Agent, in its sole discretion, may act or not act as it
deems advisable for the protection of the interests of the Banks.
(e) The Managing Agent shall have no liability to any Bank
for acting, or not acting, as instructed by the Requisite Banks (or all
the Banks, if required under Section 11.2), notwithstanding any other
provision hereof.
10.6 LIABILITY OF MANAGING AGENT. Neither the Managing Agent nor
any of its directors, officers, agents, employees or attorneys shall be
liable for any action taken or not taken by them under or in connection with
the Loan Documents, EXCEPT for their own gross negligence or willful
misconduct. Without limitation on the foregoing, the Managing Agent and its
directors, officers, agents, employees and attorneys:
(a) May treat the payee of any Note as the holder thereof
until the Managing Agent receives notice of the assignment or transfer
thereof, in form satisfactory to the Managing Agent, signed by the
payee, and may treat each Bank as the owner of that Bank's interest in
the Obligations for all purposes of this Agreement until the Managing
Agent receives notice of the assignment or transfer thereof, in form
satisfactory to the Managing Agent,
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signed by that Bank;
(b) May consult with legal counsel (INCLUDING in-house
legal counsel), accountants (INCLUDING in-house accountants) and other
professionals or experts selected by it, or with legal counsel,
accountants or other professionals or experts for Borrowers and/or
their Subsidiaries or the Banks, and shall not be liable for any action
taken or not taken by it in good faith in accordance with any advice of
such legal counsel, accountants or other professionals or experts;
(c) Shall not be responsible to any Bank for any statement,
warranty or representation made in any of the Loan Documents or in any
notice, certificate, report, request or other statement (written or
oral) given or made in connection with any of the Loan Documents;
(d) EXCEPT to the extent expressly set forth in the Loan
Documents, shall have no duty to ask or inquire as to the performance
or observance by Borrowers or its Subsidiaries of any of the terms,
conditions or covenants of any of the Loan Documents or to inspect any
collateral or any Property, books or records of Borrowers or their
Subsidiaries;
(e) Will not be responsible to any Bank for the due
execution, legality, validity, enforceability, genuineness,
effectiveness, sufficiency or value of any Loan Document, any other
instrument or writing furnished pursuant thereto or in connection
therewith, or any collateral;
(f) Will not incur any liability by acting or not acting in
reliance upon any Loan Document, notice, consent, certificate,
statement, request or other instrument or writing believed in good
faith by it to be genuine and signed or sent by the proper party or
parties; and
(g) Will not incur any liability for any arithmetical error
in computing any amount paid or payable by the Borrowers or any
Subsidiary or Affiliate thereof or paid or payable to or received or
receivable from any Bank under any Loan Document, INCLUDING, without
limitation, principal, interest, commitment fees, Advances and other
amounts; PROVIDED that, promptly upon discovery of such an error in
computation, the Managing Agent, the Banks and
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(to the extent applicable) Borrowers and/or their Subsidiaries or
Affiliates shall make such adjustments as are necessary to correct such
error and to restore the parties to the position that they would have
occupied had the error not occurred.
10.7 INDEMNIFICATION. Each Bank shall, ratably in accordance with
its Pro Rata Share of the Commitments (if the Commitments are then in effect)
or in accordance with its proportion of the aggregate Indebtedness then
evidenced by the Notes (if the Commitments have then been terminated),
indemnify and hold the Managing Agent and its directors, officers, agents,
employees and attorneys harmless against any and all liabilities,
obligations, losses, damages, penalties, actions, judgments, suits, costs,
expenses or disbursements of any kind or nature whatsoever (INCLUDING
reasonable attorneys' fees and disbursements and allocated costs of attorneys
employed by the Managing Agent) that may be imposed on, incurred by or
asserted against it or them in any way relating to or arising out of the Loan
Documents (other than losses incurred by reason of the failure of Borrowers
to pay the Indebtedness represented by the Notes) or any action taken or not
taken by it as Managing Agent thereunder, EXCEPT such as result from its own
gross negligence or willful misconduct. Without limitation on the foregoing,
each Bank shall reimburse the Managing Agent upon demand for that Bank's Pro
Rata Share of any out-of-pocket cost or expense incurred by the Managing
Agent in connection with the negotiation, preparation, execution, delivery,
amendment, waiver, restructuring, reorganization (INCLUDING a bankruptcy
reorganization), enforcement or attempted enforcement of the Loan Documents,
to the extent that any Borrower or any other Party is required by Section
11.3 to pay that cost or expense but fails to do so upon demand. Nothing in
this Section 10.7 shall entitle the Managing Agent or any indemnitee referred
to above to recover any amount from the Banks if and to the extent that such
amount has theretofore been recovered from Borrowers or any of their
Subsidiaries. To the extent that the Managing Agent or any indemnitee
referred to above is later reimbursed such amount by Borrowers or any of its
Subsidiaries, it shall return the amounts paid to it by the Banks in respect
of such amount.
10.8 SUCCESSOR MANAGING AGENT. The Managing Agent may, and at the
request of the Requisite Banks shall, resign as Managing Agent upon
reasonable notice to the Banks and Borrowers effective upon acceptance of
appointment by a successor Managing Agent. If the Managing Agent shall
resign as Managing Agent under this Agreement, the Requisite Banks shall
appoint from among the Banks a successor Managing Agent for the Banks, which
successor Managing Agent shall be approved by
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Borrowers (and such approval shall not be unreasonably withheld or delayed).
If no successor Managing Agent is appointed prior to the effective date of
the resignation of the Managing Agent, the Managing Agent may appoint, after
consulting with the Banks and the Borrowers, a successor Managing Agent from
among the Banks. Upon the acceptance of its appointment as successor
Managing Agent hereunder, such successor Managing Agent shall succeed to all
the rights, powers and duties of the retiring Managing Agent and the term
"Managing Agent" shall mean such successor Managing Agent and the retiring
Managing Agent's appointment, powers and duties as Managing Agent shall be
terminated. After any retiring Managing Agent's resignation hereunder as
Managing Agent, the provisions of this ARTICLE 10, and Sections 11.3, 11.11
and 11.22, shall inure to its benefit as to any actions taken or omitted to
be taken by it while it was Managing Agent under this Agreement.
Notwithstanding the foregoing, if (a) the Managing Agent has not been paid
its agency fees under Section 3.5 or has not been reimbursed for any expense
reimbursable to it under Section 11.3, in either case for a period of at
least one (1) year and (b) no successor Managing Agent has accepted
appointment as Managing Agent by the date which is thirty (30) days following
a retiring Managing Agent's notice of resignation, the retiring Managing
Agent's resignation shall nevertheless thereupon become effective and the
Banks shall perform all of the duties of the Managing Agent hereunder until
such time, if any, as the Requisite Banks appoint a successor Managing Agent
as provided for above.
10.9 NO OBLIGATIONS OF BORROWERS. Nothing contained in this
Article 10 shall be deemed to impose upon Borrowers any obligation in respect
of the due and punctual performance by the Managing Agent of its obligations
to the Banks under any provision of this Agreement, and Borrowers shall have
no liability to the Managing Agent or any of the Banks in respect of any
failure by the Managing Agent or any Bank to perform any of its obligations
to the Managing Agent or the Banks under this Agreement. Without limiting
the generality of the foregoing, where any provision of this Agreement
relating to the payment of any amounts due and owing under the Loan Documents
provides that such payments shall be made by Borrowers to the Managing Agent
for the account of the Banks, Borrowers' obligations to the Banks in respect
of such payments shall be deemed to be satisfied upon the making of such
payments to the Managing Agent in the manner provided by this Agreement.
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Article 11
MISCELLANEOUS
11.1 CUMULATIVE REMEDIES; NO WAIVER. The rights, powers,
privileges and remedies of the Managing Agent and the Banks provided herein
or in any Note or other Loan Document are cumulative and not exclusive of any
right, power, privilege or remedy provided by Law or equity. No failure or
delay on the part of the Managing Agent or any Bank in exercising any right,
power, privilege or remedy may be, or may be deemed to be, a waiver thereof;
nor may any single or partial exercise of any right, power, privilege or
remedy preclude any other or further exercise of the same or any other right,
power, privilege or remedy. The terms and conditions of ARTICLE 8 hereof are
inserted for the sole benefit of the Managing Agent and the Banks; the same
may be waived in whole or in part, with or without terms or conditions, in
respect of any Loan without prejudicing the Managing Agent's or the Banks'
rights to assert them in whole or in part in respect of any other Loan.
11.2 AMENDMENTS; CONSENTS. No amendment, modification, supplement,
extension, termination or waiver of any provision of this Agreement or any
other Loan Document, no approval or consent thereunder, and no consent to any
departure by Borrowers or any other Party therefrom, may in any event be
effective unless in writing signed by the Requisite Banks (and, in the case
of any amendment, modification or supplement of or to any Loan Document to
which any of Borrowers is a Party, signed by each such Party, and, in the
case of any amendment, modification or supplement to ARTICLE 10, signed by
the Managing Agent), and then only in the specific instance and for the
specific purpose given; and, without the approval in writing of all the
Banks, no amendment, modification, supplement, termination, waiver or consent
may be effective:
(a) To amend or modify the principal of, or the amount of
principal, principal prepayments or the rate of interest payable on,
any Note, or the amount of the Commitments or the Pro Rata Share of any
Bank or the amount of any commitment fee payable to any Bank, or any
other fee or amount payable to any Bank under the Loan Documents or to
waive an Event of Default consisting of the failure of Borrowers to pay
when due principal, interest or any fee;
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(b) To postpone any date fixed for any payment of principal
of, prepayment of principal of or any installment of interest on, any
Note or any installment of any fee, or to extend the term of the
Commitments;
(c) To amend the provisions of the definition of "REQUISITE
BANKS" or "MATURITY DATE"; or
(d) To amend or waive ARTICLE 8 or this Section 11.2; or
(e) To amend any provision of this Agreement that expressly
requires the consent or approval of all the Banks.
Any amendment, modification, supplement, termination, waiver or consent
pursuant to this Section 11.2 shall apply equally to, and shall be binding
upon, all the Banks and the Managing Agent.
11.3 COSTS, EXPENSES AND TAXES. Borrowers shall pay within five
(5) Banking Days after demand, accompanied by an invoice therefor, the
reasonable costs and expenses of the Managing Agent in connection with the
negotiation, preparation, syndication, execution and delivery of the Loan
Documents (subject to the ceiling contained in a letter agreement between
Parent and the Managing Agent) and any amendment thereto or waiver thereof.
Borrowers shall also pay on demand, accompanied by an invoice therefor, the
reasonable costs and expenses of the Managing Agent and the Banks in
connection with the refinancing, restructuring, reorganization (INCLUDING a
bankruptcy reorganization) and enforcement or attempted enforcement of the
Loan Documents, and any matter related thereto. The foregoing costs and
expenses shall include filing fees, recording fees, title insurance fees,
appraisal fees, search fees, and other out-of-pocket expenses and the
reasonable fees and out-of-pocket expenses of any legal counsel (INCLUDING
reasonably allocated costs of legal counsel employed by the Managing Agent or
any Bank), independent public accountants and other outside experts retained
by the Managing Agent or any Bank, whether or not such costs and expenses are
incurred or suffered by the Managing Agent or any Bank in connection with or
during the course of any bankruptcy or insolvency proceedings of any of
Borrowers or any Subsidiary thereof. Borrowers shall pay any and all
documentary and other taxes, EXCLUDING (i) taxes imposed on or measured in
whole or in part by its overall net income imposed on it by (A) any
jurisdiction (or political subdivision thereof) in which it is organized or
maintains its principal office
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or Eurodollar Lending Office or (B) any jurisdiction (or political
subdivision thereof) in which it is "doing business" or (ii) any withholding
taxes or other taxes based on gross income imposed by the United States of
America for any period with respect to which it has failed to provide
Borrowers with the appropriate form or forms required by Section 11.21, to
the extent such forms are then required by applicable Laws, and all costs,
expenses, fees and charges payable or determined to be payable in connection
with the filing or recording of this Agreement, any other Loan Document or
any other instrument or writing to be delivered hereunder or thereunder, or
in connection with any transaction pursuant hereto or thereto, and shall
reimburse, hold harmless and indemnify on the terms set forth in 11.11 the
Managing Agent and the Banks from and against any and all loss, liability or
legal or other expense with respect to or resulting from any delay in paying
or failure to pay any such tax, cost, expense, fee or charge or that any of
them may suffer or incur by reason of the failure of any Party to perform any
of its Obligations. Any amount payable to the Managing Agent or any Bank
under this Section 11.3 shall bear interest from the fifth Banking Day
following the date of demand for payment at the Default Rate.
11.4 NATURE OF BANKS' OBLIGATIONS. The obligations of the Banks
hereunder are several and not joint or joint and several. Nothing contained
in this Agreement or any other Loan Document and no action taken by the
Managing Agent or the Banks or any of them pursuant hereto or thereto may, or
may be deemed to, make the Banks a partnership, an association, a joint
venture or other entity, either among themselves or with the Borrowers or any
Affiliate of any of Borrowers. A default by any Bank will not increase the
Pro Rata Share of the Commitments attributable to any other Bank. Any Bank
not in default may, if it desires, assume in such proportion as the
nondefaulting Banks agree the obligations of any Bank in default, but is not
obligated to do so. The Managing Agent agrees that it will use its best
efforts either to induce the other Banks to assume the obligations of a Bank
in default or to obtain another Bank, reasonably satisfactory to Borrowers,
to replace such a Bank in default.
11.5 SURVIVAL OF REPRESENTATIONS AND WARRANTIES. All
representations and warranties contained herein or in any other Loan
Document, or in any certificate or other writing delivered by or on behalf of
any one or more of the Parties to any Loan Document, will survive the making
of the Loans hereunder and the execution and delivery of the Notes, and have
been or will be relied upon by the Managing Agent and each Bank,
notwithstanding any investigation made by the Managing Agent or any
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Bank or on their behalf.
11.6 NOTICES. EXCEPT as otherwise expressly provided in the Loan
Documents, all notices, requests, demands, directions and other
communications provided for hereunder or under any other Loan Document must
be in writing and must be mailed, telegraphed, telecopied, dispatched by
commercial courier or delivered to the appropriate party at the address set
forth on the signature pages of this Agreement or other applicable Loan
Document or, as to any party to any Loan Document, at any other address as
may be designated by it in a written notice sent to all other parties to such
Loan Document in accordance with this Section. EXCEPT as otherwise expressly
provided in any Loan Document, if any notice, request, demand, direction or
other communication required or permitted by any Loan Document is given by
mail it will be effective on the earlier of receipt or the fourth Banking Day
after deposit in the United States mail with first class or airmail postage
prepaid; if given by telegraph or cable, when delivered to the telegraph
company with charges prepaid; if given by telecopier, when sent; if
dispatched by commercial courier, on the scheduled delivery date; or if given
by personal delivery, when delivered.
11.7 EXECUTION OF LOAN DOCUMENTS. Unless the Managing Agent
otherwise specifies with respect to any Loan Document, (a) this Agreement and
any other Loan Document may be executed in any number of counterparts and any
party hereto or thereto may execute any counterpart, each of which when
executed and delivered will be deemed to be an original and all of which
counterparts of this Agreement or any other Loan Document, as the case may
be, when taken together will be deemed to be but one and the same instrument
and (b) execution of any such counterpart may be evidenced by a telecopier
transmission of the signature of such party. The execution of this Agreement
or any other Loan Document by any party hereto or thereto will not become
effective until counterparts hereof or thereof, as the case may be, have been
executed by all the parties hereto or thereto.
11.8 BINDING EFFECT; ASSIGNMENT.
(a) This Agreement and the other Loan Documents to which
Borrowers are a Party will be binding upon and inure to the benefit of
Borrowers, the Managing Agent, each of the Banks, and their respective
successors and assigns, EXCEPT that Borrowers may not assign their
rights hereunder or thereunder or any interest herein or therein
without the prior
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written consent of all the Banks. Each Bank represents that it is not
acquiring its Note with a view to the distribution thereof within the
meaning of the Securities Act of 1933, as amended (subject to any
requirement that disposition of such Note must be within the control of
such Bank). Any Bank may at any time pledge its Note or any other
instrument evidencing its rights as a Bank under this Agreement to a
Federal Reserve Bank, but no such pledge shall release that Bank from
its obligations hereunder or grant to such Federal Reserve Bank the
rights of a Bank hereunder absent foreclosure of such pledge.
(b) From time to time following the Closing Date, each Bank
may assign to one or more Eligible Assignees all or any portion of its
Pro Rata Share of the Commitments; PROVIDED that (i) such Eligible
Assignee, if not then a Bank or an Affiliate of the assigning Bank,
shall be approved by the Managing Agent and (if no Event of Default
then exists) Borrowers (neither of which approvals shall be
unreasonably withheld or delayed), (ii) such assignment shall be
evidenced by a Commitments Assignment and Acceptance, a copy of which
shall be furnished to the Managing Agent as hereinbelow provided, (iii)
EXCEPT in the case of an assignment to an Affiliate of the assigning
Bank, to another Bank or of the entire remaining Commitments of the
assigning Bank, the assignment shall not assign a Pro Rata Share of the
Commitments that is equivalent to less than $10,000,000, (iv) the
assignment shall assign the same Pro Rata Share of the Line A
Commitment and the Line B Commitment and (v) the effective date of any
such assignment shall be as specified in the Commitments Assignment and
Acceptance, but not earlier than the date which is five (5) Banking
Days after the date the Managing Agent has received the Commitments
Assignment and Acceptance. Upon the effective date of such Commitments
Assignment and Acceptance, the Eligible Assignee named therein shall be
a Bank for all purposes of this Agreement, with the Pro Rata Share of
the Commitments therein set forth and, to the extent of such Pro Rata
Share, the assigning Bank shall be released from its further
obligations under this Agreement. Borrowers agree that they shall
execute and deliver (against delivery by the assigning Bank to
Borrowers of its Note) to such assignee Bank, Notes evidencing that
assignee Bank's Pro Rata Share of the Commitments, and to the assigning
Bank, Notes evidencing the remaining balance Pro Rata Share retained by
the assigning Bank.
(c) By executing and delivering a Commitments Assignment
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and Acceptance, the Eligible Assignee thereunder acknowledges and
agrees that: (i) other than the representation and warranty that it is
the legal and beneficial owner of the Pro Rata Share of the Commitments
being assigned thereby free and clear of any adverse claim, the
assigning Bank has made no representation or warranty and assumes no
responsibility with respect to any statements, warranties or
representations made in or in connection with this Agreement or the
execution, legality, validity, enforceability, genuineness or
sufficiency of this Agreement or any other Loan Document; (ii) the
assigning Bank has made no representation or warranty and assumes no
responsibility with respect to the financial condition of Borrowers or
the performance by Borrowers of the Obligations; (iii) it has received
a copy of this Agreement, together with copies of the most recent
financial statements delivered pursuant to Section 7.1 and such other
documents and information as it has deemed appropriate to make its own
credit analysis and decision to enter into such Commitments Assignment
and Acceptance; (iv) it will, independently and without reliance upon
the Managing Agent or any Bank and based on such documents and
information as it shall deem appropriate at the time, continue to make
its own credit decisions in taking or not taking action under this
Agreement; (v) it appoints and authorizes the Managing Agent to take
such action and to exercise such powers under this Agreement as are
delegated to the Managing Agent by this Agreement; and (vi) it will
perform in accordance with their terms all of the obligations which by
the terms of this Agreement are required to be performed by it as a
Bank.
(d) The Managing Agent shall maintain at the Managing
Agent's Office a copy of each Commitments Assignment and Acceptance
delivered to it and a register (the "Register") of the names and
address of each of the Banks and the Pro Rata Share of the Commitments
held by each Bank, giving effect to each Commitments Assignment and
Acceptance. The Register shall be available during normal business
hours for inspection by Borrowers or any Bank upon reasonable prior
notice to the Managing Agent. After receipt of a completed Commitments
Assignment and Acceptance executed by any Bank and an Eligible
Assignee, and receipt of an assignment fee of $2,500 from such Bank or
Eligible Assignee, the Managing Agent shall, promptly following the
effective date thereof, provide to Borrowers and the Banks a revised
SCHEDULE 1.1 giving effect thereto. Borrowers, the Managing Agent and
the Banks shall deem and treat the Persons listed as Banks in the
Register as the
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holders and owners of the Pro Rata Share of the Commitments listed
therein for all purposes hereof, and no assignment or transfer of any
such Pro Rata Share of the Commitments shall be effective, in each case
unless and until a Commitments Assignment and Acceptance effecting the
assignment or transfer thereof shall have been accepted by the Managing
Agent and recorded in the Register as provided above. Prior to such
recordation, all amounts owed with respect to the applicable Pro Rata
Share of the Commitments shall be owed to the Bank listed in the
Register as the owner thereof, and any request, authority or consent of
any Person who, at the time of making such request or giving such
authority or consent, is listed in the Register as a Bank shall be
conclusive and binding on any subsequent holder, assignee or transferee
of the corresponding Pro Rata Share of the Commitments.
(e) Each Bank may from time to time grant participations to
one or more banks or other financial institutions (INCLUDING another
Bank but EXCLUDING an Employee Plan) in a portion of its Pro Rata Share
of the Commitments; PROVIDED, HOWEVER, that (i) such Bank's obligations
under this Agreement shall remain unchanged, (ii) such Bank shall
remain solely responsible to the other parties hereto for the
performance of such obligations, (iii) the participating banks or other
financial institutions shall not be a Bank hereunder for any purpose
EXCEPT, if the participation agreement so provides, for the purposes of
Sections 3.7, 3.8, 11.11 and 11.22 but only to the extent that the cost
of such benefits to Borrowers does not exceed the cost which Borrowers
would have incurred in respect of such Bank absent the participation,
(iv) Borrowers, the Managing Agent and the other Banks shall continue
to deal solely and directly with such Bank in connection with such
Bank's rights and obligations under this Agreement, (v) the
participation interest shall be expressed as a percentage of the
granting Bank's Pro Rata Share of the Commitments as it then exists and
shall not restrict an increase in the Commitments, or in the granting
Bank's Pro Rata Share of the Commitments, so long as the amount of the
participation interest is not affected thereby and (vi) the consent of
the holder of such participation interest shall not be required for
amendments or waivers of provisions of the Loan Documents OTHER THAN
those which (A) extend any Amortization Date, the Maturity Date or any
other date upon which any payment of money is due to the Banks, or (B)
reduce the rate of interest on the Notes, any fee or any other monetary
amount payable to the Banks or (C) reduce the amount of any installment
of principal due under
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the Notes.
11.9 RIGHT OF SETOFF. If an Event of Default has occurred and is
continuing, the Managing Agent or any Bank (but in each case only with the
consent of the Requisite Banks) may exercise its rights under Article 9 of
the Uniform Commercial Code and other applicable Laws and, to the extent
permitted by applicable Laws, apply any funds in any deposit account
maintained with it by Borrowers and/or any Property of Borrowers in its
possession against the Obligations.
11.10 SHARING OF SETOFFS. Each Bank severally agrees that if it,
through the exercise of any right of setoff, banker's lien or counterclaim
against Borrowers, or otherwise, receives payment of the Obligations held by
it that is ratably more than any other Bank, through any means, receives in
payment of the Obligations held by that Bank, then, subject to applicable
Laws: (a) the Bank exercising the right of setoff, banker's lien or
counterclaim or otherwise receiving such payment shall purchase, and shall be
deemed to have simultaneously purchased, from each of the other Banks a
participation in the Obligations held by the other Banks and shall pay to the
other Banks a purchase price in an amount so that the share of the
Obligations held by each Bank after the exercise of the right of setoff,
banker's lien or counterclaim or receipt of payment shall be in the same
proportion that existed prior to the exercise of the right of setoff,
banker's lien or counterclaim or receipt of payment; and (b) such other
adjustments and purchases of participations shall be made from time to time
as shall be equitable to ensure that all of the Banks share any payment
obtained in respect of the Obligations ratably in accordance with each Bank's
share of the Obligations immediately prior to, and without taking into
account, the payment; PROVIDED that, if all or any portion of a
disproportionate payment obtained as a result of the exercise of the right of
setoff, banker's lien, counterclaim or otherwise is thereafter recovered from
the purchasing Bank by Borrowers or any Person claiming through or succeeding
to the rights of Borrowers, the purchase of a participation shall be
rescinded and the purchase price thereof shall be restored to the extent of
the recovery, but without interest. Each Bank that purchases a participation
in the Obligations pursuant to this Section 11.10 shall from and after the
purchase have the right to give all notices, requests, demands, directions
and other communications under this Agreement with respect to the portion of
the Obligations purchased to the same extent as though the purchasing Bank
were the original owner of the Obligations purchased. Borrowers expressly
consent to the foregoing arrangements and agree that any Bank holding a
participation in an Obligation so purchased pursuant to this Section 11.10
may exercise any and all rights of
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setoff, banker's lien or counterclaim with respect to the participation as
fully as if the Bank were the original owner of the Obligation purchased.
11.11 INDEMNITY BY BORROWERS. Borrowers agree to indemnify, save
and hold harmless the Managing Agent and each Bank and their respective
directors, officers, agents, attorneys and employees (collectively the
"INDEMNITEES") from and against: (a) any and all claims, demands, actions or
causes of action (EXCEPT a claim, demand, action, or cause of action for any
amount excluded from the definition of "Taxes" in Section 3.12(d)) if the
claim, demand, action or cause of action arises out of or relates to any act
or omission (or alleged act or omission) of Borrowers, their Affiliates or
any of their officers, directors or stockholders relating to the Commitments,
the use or contemplated use of proceeds of any Loan, or the relationship of
Borrowers and the Banks under this Agreement; (b) any administrative or
investigative proceeding by any Governmental Agency arising out of or related
to a claim, demand, action or cause of action described in clause (a) above;
and (c) any and all liabilities, losses, costs or expenses (INCLUDING
reasonable attorneys' fees and the reasonably allocated costs of attorneys
employed by any Indemnitee and disbursements of such attorneys and other
professional services) that any Indemnitee suffers or incurs as a result of
the assertion of any foregoing claim, demand, action or cause of action;
PROVIDED that no Indemnitee shall be entitled to indemnification for any loss
caused by its own gross negligence or willful misconduct or for any loss
asserted against it by another Indemnitee. If any claim, demand, action or
cause of action is asserted against any Indemnitee, such Indemnitee shall
promptly notify Borrowers, but the failure to so promptly notify Borrowers
shall not affect Borrowers' obligations under this Section unless such
failure materially prejudices Borrowers' right to participate in the contest
of such claim, demand, action or cause of action, as hereinafter provided.
Such Indemnitee may (and shall, if requested by Borrowers in writing) contest
the validity, applicability and amount of such claim, demand, action or cause
of action and shall permit Borrowers to participate in such contest. Any
Indemnitee that proposes to settle or compromise any claim or proceeding for
which Borrowers may be liable for payment of indemnity hereunder shall give
Borrowers written notice of the terms of such proposed settlement or
compromise reasonably in advance of settling or compromising such claim or
proceeding and shall obtain Borrowers' prior consent (which shall not be
unreasonably withheld or delayed). In connection with any claim, demand,
action or cause of action covered by this Section 11.11 against more than one
Indemnitee, all such Indemnitees shall be represented by the same legal
counsel (which may be a law firm engaged by the Indemnitees or attorneys
employed by an
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Indemnitee or a combination of the foregoing) selected by the Indemnitees and
reasonably acceptable to Borrowers; PROVIDED, that if such legal counsel
determines in good faith that representing all such Indemnitees would or
could result in a conflict of interest under Laws or ethical principles
applicable to such legal counsel or that a defense or counterclaim is
available to an Indemnitee that is not available to all such Indemnitees,
then to the extent reasonably necessary to avoid such a conflict of interest
or to permit unqualified assertion of such a defense or counterclaim, each
affected Indemnitee shall be entitled to separate representation by legal
counsel selected by that Indemnitee and reasonably acceptable to Borrowers,
with all such legal counsel using reasonable efforts to avoid unnecessary
duplication of effort by counsel for all Indemnitees; and FURTHER PROVIDED
that the Managing Agent (as an Indemnitee) shall at all times be entitled to
representation by separate legal counsel (which may be a law firm or
attorneys employed by the Managing Agent or a combination of the foregoing).
Any obligation or liability of Borrowers to any Indemnitee under this Section
11.11 shall survive the expiration or termination of this Agreement and the
repayment of all Loans and the payment and performance of all other
Obligations owed to the Banks.
11.12 NONLIABILITY OF THE BANKS. Borrowers acknowledge and agree
that:
(a) Any inspections of any Property of Borrowers made by or
through the Managing Agent or the Banks are for purposes of
administration of the Loan only and Borrowers are not entitled to rely
upon the same (whether or not such inspections are at the expense of
Borrowers);
(b) By accepting or approving anything required to be
observed, performed, fulfilled or given to the Managing Agent or the
Banks pursuant to the Loan Documents, neither the Managing Agent nor
the Banks shall be deemed to have warranted or represented the
sufficiency, legality, effectiveness or legal effect of the same, or of
any term, provision or condition thereof, and such acceptance or
approval thereof shall not constitute a warranty or representation to
anyone with respect thereto by the Managing Agent or the Banks;
(c) The relationship between Borrowers and the Managing
Agent and the Banks is, and shall at all times remain, solely that of
borrowers and lenders; neither the Managing Agent nor the Banks shall
under any
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circumstance be construed to be partners or joint venturers of Borrowers
or their Affiliates; neither the Managing Agent nor the Banks shall
under any circumstance be deemed to be in a relationship of confidence
or trust or a fiduciary relationship with Borrowers or their Affiliates,
or to owe any fiduciary duty to Borrowers or their Affiliates; neither
the Managing Agent nor the Banks undertake or assume any responsibility
or duty to Borrowers or their Affiliates to select, review, inspect,
supervise, pass judgment upon or inform Borrowers or their Affiliates of
any matter in connection with their Property or the operations of
Borrowers or their Affiliates; Borrowers and their Affiliates shall rely
entirely upon their own judgment with respect to such matters; and any
review, inspection, supervision, exercise of judgment or supply of
information undertaken or assumed by the Managing Agent or the Banks in
connection with such matters is solely for the protection of the
Managing Agent and the Banks and neither Borrowers nor any other Person
is entitled to rely thereon; and
(d) The Managing Agent and the Banks shall not be responsible or
liable to any Person for any loss, damage, liability or claim of any
kind relating to injury or death to Persons or damage to Property caused
by the actions, inaction or negligence of Borrowers and/or its
Affiliates and Borrowers hereby indemnify and hold the Managing Agent
and the Banks harmless on the terms set forth in Section 11.11 from any
such loss, damage, liability or claim.
11.13 NO THIRD PARTIES BENEFITED. This Agreement is made for the
purpose of defining and setting forth certain obligations, rights and duties
of Borrowers, the Managing Agent and the Banks in connection with the Loans,
and is made for the sole benefit of Borrowers, the Managing Agent and the
Banks, and the Managing Agent's and the Banks' successors and assigns.
EXCEPT as provided in Sections 11.8 and 11.11, no other Person shall have any
rights of any nature hereunder or by reason hereof.
11.14 CONFIDENTIALITY. Each Bank agrees to hold any confidential
information that it may receive from Borrowers pursuant to this Agreement in
confidence, EXCEPT for disclosure: (a) to other Banks; (b) to legal counsel
and accountants for Borrowers or any Bank; (c) to other professional advisors
to Borrowers or any Bank, provided that the recipient has accepted such
information subject to a confidentiality agreement substantially similar to
this Section 11.14; (d) to regulatory officials having jurisdiction over that
Bank; (e) as required by Law or legal process,
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provided that each Bank agrees to notify Borrowers of any such disclosures
unless prohibited by applicable Laws, or in connection with any legal
proceeding to which that Bank and any of Borrowers are adverse parties; and
(f) to another financial institution in connection with a disposition or
proposed disposition to that financial institution of all or part of that
Bank's interests hereunder or a participation interest in its Notes, provided
that the recipient has accepted such information subject to a confidentiality
agreement substantially similar to this Section 11.14. For purposes of the
foregoing, "confidential information" shall mean any information respecting
Parent or its Subsidiaries reasonably considered by Borrowers to be
confidential, OTHER THAN (i) information previously filed with any
Governmental Agency and available to the public, (ii) information previously
published in any public medium from a source other than, directly or
indirectly, that Bank, and (iii) information previously disclosed by
Borrowers to any Person not associated with Borrowers which does not owe a
professional duty of confidentiality to Borrowers or which has not executed
an appropriate confidentiality agreement with Borrowers. Nothing in this
Section shall be construed to create or give rise to any fiduciary duty on
the part of the Managing Agent or the Banks to Borrowers.
11.15 FURTHER ASSURANCES. Borrowers shall, at their expense and
without expense to the Banks or the Managing Agent, do, execute and deliver
such further acts and documents as the Requisite Banks or the Managing Agent
from time to time reasonably require for the assuring and confirming unto the
Banks or the Managing Agent of the rights hereby created or intended now or
hereafter so to be, or for carrying out the intention or facilitating the
performance of the terms of any Loan Document.
11.16 INTEGRATION. This Agreement, together with the other Loan
Documents and the letter agreements referred to in Sections 3.2, 3.5 and
11.3, comprises the complete and integrated agreement of the parties on the
subject matter hereof and supersedes all prior agreements, written or oral,
on the subject matter hereof. In the event of any conflict between the
provisions of this Agreement and those of any other Loan Document, the
provisions of this Agreement shall control and govern; PROVIDED that the
inclusion of supplemental rights or remedies in favor of the Managing Agent
or the Banks in any other Loan Document shall not be deemed a conflict with
this Agreement. Each Loan Document was drafted with the joint participation
of the respective parties thereto and shall be construed neither against nor
in favor of any party, but rather in accordance with the fair meaning thereof.
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11.17 GOVERNING LAW. EXCEPT to the extent otherwise provided
therein, each Loan Document shall be governed by, and construed and enforced
in accordance with, the Laws of California applicable to contracts made and
performed in California.
11.18 SEVERABILITY OF PROVISIONS. Any provision in any Loan
Document that is held to be inoperative, unenforceable or invalid as to any
party or in any jurisdiction shall, as to that party or jurisdiction, be
inoperative, unenforceable or invalid without affecting the remaining
provisions or the operation, enforceability or validity of that provision as
to any other party or in any other jurisdiction, and to this end the
provisions of all Loan Documents are declared to be severable.
11.19 HEADINGS. Article and Section headings in this Agreement
and the other Loan Documents are included for convenience of reference only
and are not part of this Agreement or the other Loan Documents for any other
purpose.
11.20 TIME OF THE ESSENCE. Time is of the essence of the Loan
Documents.
11.21 FOREIGN BANKS AND PARTICIPANTS. Each Bank that is
incorporated or otherwise organized under the Laws of a jurisdiction other
than the United States of America or any State thereof or the District of
Columbia shall deliver to Borrowers (with a copy to the Managing Agent), on
or before the Closing Date (or on or before accepting an assignment or
receiving a participation interest herein pursuant to Section 11.8, if
applicable) two duly completed copies, signed by a Responsible Official, of
either Form 1001 (relating to such Bank and entitling it to a complete
exemption from withholding on all payments to be made to such Bank by
Borrowers pursuant to this Agreement) or Form 4224 (relating to all payments
to be made to such Bank by the Borrowers pursuant to this Agreement) of the
United States Internal Revenue Service or such other evidence (INCLUDING, if
reasonably necessary, Form W-9) satisfactory to Borrowers and the Managing
Agent that no withholding under the federal income tax laws is required with
respect to such Bank. Thereafter and from time to time, each such Bank shall
(a) promptly submit to Borrowers (with a copy to the Managing Agent), such
additional duly completed and signed copies of one of such forms (or such
successor forms as shall be adopted from time to time by the relevant United
States taxing authorities) as may then be available under then current United
States laws and regulations to avoid, or such evidence as is satisfactory to
Borrowers and the Managing Agent of any available exemption from, United
States withholding
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taxes in respect of all payments to be made to such Bank by Borrowers
pursuant to this Agreement and (b) take such steps as shall not be materially
disadvantageous to it, in the reasonable judgment of such Bank, and as may be
reasonably necessary (including the re-designation of its Eurodollar Lending
Office, if any) to avoid any requirement of applicable Laws that Borrowers
make any deduction or withholding for taxes from amounts payable to such
Bank. In the event that Borrowers or the Managing Agent become aware that a
participation has been granted pursuant to Section 11.8(e) to a financial
institution that is incorporated or otherwise organized under the Laws of a
jurisdiction other than the United States of America, any State thereof or
the District of Columbia, then, upon request made by Borrowers or the
Managing Agent to the Bank which granted such participation, such Bank shall
cause such participant financial institution to deliver the same documents
and information to Borrowers and the Managing Agent as would be required
under this Section if such financial institution were a Bank.
11.22 HAZARDOUS MATERIAL INDEMNITY. Each of Borrowers hereby
agrees to indemnify, hold harmless and defend (by counsel reasonably
satisfactory to the Managing Agent) the Managing Agent and each of the Banks
and their respective directors, officers, employees, agents, successors and
assigns from and against any and all claims, losses, damages, liabilities,
fines, penalties, charges, administrative and judicial proceedings and
orders, judgments, remedial action requirements, enforcement actions of any
kind, and all costs and expenses incurred in connection therewith (including
but not limited to reasonable attorneys' fees and the reasonably allocated
costs of attorneys employed by the Managing Agent or any Bank, and expenses
to the extent that the defense of any such action has not been assumed by
Borrowers), arising directly or indirectly out of (i) the presence on, in,
under or about any Real Property of any Hazardous Materials, or any releases
or discharges of any Hazardous Materials on, under or from any Real Property
and (ii) any activity carried on or undertaken on or off any Real Property by
Borrowers or any of its predecessors in title, whether prior to or during the
term of this Agreement, and whether by Borrowers or any predecessor in title
or any employees, agents, contractors or subcontractors of Borrowers or any
predecessor in title, or any third persons at any time occupying or present
on any Real Property, in connection with the handling, treatment, removal,
storage, decontamination, clean-up, transport or disposal of any Hazardous
Materials at any time located or present on, in, under or about any Real
Property. The foregoing indemnity shall further apply to any residual
contamination on, in, under or about any Real Property, or affecting any
natural resources, and to any contamination of any Property or natural
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<PAGE>
resources arising in connection with the generation, use, handling, storage,
transport or disposal of any such Hazardous Materials, and irrespective of
whether any of such activities were or will be undertaken in accordance with
applicable Laws, but the foregoing indemnity shall not apply to Hazardous
Materials on any Real Property, the presence of which is caused by the
Managing Agent or the Banks. Borrowers hereby acknowledge and agree that,
notwithstanding any other provision of this Agreement or any of the other
Loan Documents to the contrary, the obligations of Borrowers under this
Section (and under Sections 4.18 and 5.10) shall be unlimited corporate
obligations of Borrowers and shall NOT be secured by any Lien on any Real
Property. Any obligation or liability of Borrowers to any Indemnitee under
this Section 11.22 shall survive the expiration or termination of this
Agreement and the repayment of all Loans and the payment and performance of
all other Obligations owed to the Banks.
11.23 JOINT AND SEVERAL. Each of Borrowers shall be obligated for
all of the Obligations on a joint and several basis, notwithstanding which of
Borrowers may have directly received the proceeds of any particular Loan.
Each of Borrowers acknowledges and agrees that, for purposes of the Loan
Documents, Borrowers constitute a single integrated financial enterprise and
that each receives a benefit from the availability of credit under this
Agreement to all of Borrowers. Each of Borrowers waive all defenses arising
under the Laws of suretyship, to the extent such Laws are applicable, in
connection with its joint and several obligations under this Agreement.
Without limiting the foregoing, each of Borrowers agrees to the Joint
Borrower Provisions set forth in EXHIBIT L, incorporated by this reference.
11.24 REMOVAL OF A BANK. As provided in Sections 2.9, 3.7 and
3.8, Borrowers shall have the right to remove a Bank as a party to this
Agreement if such Bank refuses (under certain circumstances) to consent to an
extension of the Revolver Termination Date made pursuant to Section 2.9 or if
such Bank is paid a material amount by Borrowers pursuant to Section 3.7 or
Section 3.8. Upon notice from Borrowers, such Bank shall execute and deliver
a Commitment Assignment and Acceptance covering that Bank's Pro Rata Share of
the Commitments in favor of such Eligible Assignee as Borrowers may
designate, subject to payment in full by such Eligible Assignee of all
principal, interest and fees owing to such Bank through the date of
assignment. In addition (but only if Borrowers' right to remove the Bank
arises under Section 2.9(b)), Borrowers may reduce the Commitments pursuant
to Section 2.7 (and, for this purpose, the numerical requirements of such
Section shall not apply) by an amount equal to that Bank's Pro Rata Share of
the Commitments, pay to such Bank all principal, interest and fees owing to
such Bank and release such Bank from its Pro
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Rata Share of the Commitments.
11.25 WAIVER OF RIGHT TO TRIAL BY JURY. EACH PARTY TO THIS
AGREEMENT HEREBY EXPRESSLY WAIVES ANY RIGHT TO TRIAL BY JURY OF ANY CLAIM,
DEMAND, ACTION OR CAUSE OF ACTION ARISING UNDER ANY LOAN DOCUMENT OR IN ANY
WAY CONNECTED WITH OR RELATED OR INCIDENTAL TO THE DEALINGS OF THE PARTY
HERETO OR ANY OF THEM WITH RESPECT TO ANY LOAN DOCUMENT, OR THE TRANSACTIONS
RELATED THERETO, IN EACH CASE WHETHER NOW EXISTING OR HEREAFTER ARISING, AND
WHETHER SOUNDING IN CONTRACT OR TORT OR OTHERWISE; AND EACH PARTY HEREBY
AGREES AND CONSENTS THAT ANY SUCH CLAIM, DEMAND, ACTION OR CAUSE OF ACTION
SHALL BE DECIDED BY COURT TRIAL WITHOUT A JURY, AND THAT ANY PARTY TO THIS
AGREEMENT MAY FILE AN ORIGINAL COUNTERPART OR A COPY OF THIS SECTION WITH ANY
COURT AS WRITTEN EVIDENCE OF THE CONSENT OF THE SIGNATORIES HERETO TO THE
WAIVER OF THEIR RIGHT TO TRIAL BY JURY.
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11.26 PURPORTED ORAL AMENDMENTS. BORROWERS EXPRESSLY ACKNOWLEDGE
THAT THIS AGREEMENT AND THE OTHER LOAN DOCUMENTS MAY ONLY BE AMENDED OR
MODIFIED, OR THE PROVISIONS HEREOF OR THEREOF WAIVED OR SUPPLEMENTED, BY AN
INSTRUMENT IN WRITING THAT COMPLIES WITH SECTION 11.2. BORROWERS AGREE THAT
THEY WILL NOT RELY ON ANY COURSE OF DEALING, COURSE OF PERFORMANCE, OR ORAL
OR WRITTEN STATEMENTS BY ANY REPRESENTATIVE OF THE MANAGING AGENT OR ANY BANK
THAT DOES NOT COMPLY WITH SECTION 11.2 TO EFFECT AN AMENDMENT, MODIFICATION,
WAIVER OR SUPPLEMENT TO THIS AGREEMENT OR THE OTHER LOAN DOCUMENTS.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be duly
executed as of the date first above written.
ALEXANDRIA REAL ESTATE EQUITIES, INC.
By: /s/ Joel S. Marcus
---------------------------------
Joel S. Marcus
Chief Executive Officer
ARE-QRS, INC. [sic]
By: /s/ Joel S. Marcus
---------------------------------
Its: Chief Executive Officer
----------------------------
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ARE ACQUISITIONS, LLC
By: ARE-QRS Corp., its Managing Member
By: /s/ Joel S. Marcus
---------------------------------
Its: Chief Executive Officer
----------------------------
Address for all the foregoing:
Alexandria Real Estate Equities, Inc.
251 South Lake Avenue
Pasadena, California 91101
Attn: Joel S. Marcus
Chief Executive Officer
Telecopier: (818) 578-0770
Telephone: (818) 578-0777
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<PAGE>
BANK OF AMERICA NATIONAL TRUST AND
SAVINGS ASSOCIATION, as Managing Agent
By: /s/ William Rothman
---------------------------------
William Rothman
Regional Vice President
Address:
Bank of America National Trust and
Savings Association
CRESG
555 South Flower Street, 6th Floor
Los Angeles, California 90071
Attn: William Rothman
Telecopier: (213) 228-5389
Telephone: (213) 228-4153
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BANK OF AMERICA NATIONAL TRUST AND
SAVINGS ASSOCIATION, as a Bank
By: /s/ Carol Settles
---------------------------------
Carol Settles
Vice President
Address:
Bank of America National Trust and
Savings Association,
555 South Flower Street, 6th Floor
Los Angeles, California 90071
Attn: Carol Settles
Telecopier: (213) 228-5389
Telephone: (213) 228-5286
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AMENDMENT NO. 1 TO REVOLVING LOAN AGREEMENT
This Amendment No. 1 to Revolving Loan Agreement (this "Amendment")
is entered into with reference to the Revolving Loan Agreement dated as of
June 2, 1997, (the "Loan Agreement") among Alexandria Real Estate Equities,
Inc., ARE-QRS Corp. and ARE Acquisitions, LLC (collectively, "Borrowers"),
the Banks party thereto, and Bank of America National Trust and Savings
Association, as Managing Agent (the "Loan Agreement). Capitalized terms used
but not defined herein are used with the meanings set forth for those terms
in the Loan Agreement.
Borrowers and the Managing Agent, acting with the consent of all of
the Banks pursuant to Section 11.2 of the Loan Agreement, agree as follows:
1. AMENDMENT TO SECTION 1.1 REVISED DEFINITION. Section 1.1 of the
Loan Agreement is amended by adding the following clause at the end of the
definition of "Eligible Assignee" therein contained:
"; and PROVIDED THAT, notwithstanding the
foregoing, Cedars Bank shall in any event be an
Eligible Assignee."
2. AMENDMENT TO SECTION 1.1 -- NEW DEFINITION. Section 1.1 of the
Loan Agreement is amended by adding the following new defined term at the
appropriate alphabetical place:
"CO-AGENTS" means BankBoston, N.A. and such other
Co-Agents as may from time to time be appointed by
the Managing Agent with the approval of Borrower.
The Co-Agents shall have no rights, duties or
responsibilities under the Loan Documents beyond
those of a Bank."
3. AMENDMENT TO SECTION 2.4. Section 2.4 of the Loan Agreement is
amended by (a) adding the following phrase at the end of Section 2.4(o) thereof:
", EXCEPT as required pursuant to Section 3.1(d)." and (b) adding a new clause
(p) at the end thereof to read as follows:
"(p) Notwithstanding any provision in this Section 2.4 or
Section 3.1(e) to the contrary, the following provisions
shall apply
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<PAGE>
at all times when Parent does not hold a Credit
Rating of BBB- (or its equivalent) or better:
(i) Borrowers may not request Competitive Bids if,
giving effect thereto, the aggregate principal
amount outstanding under the Competitive Advance
Notes would exceed 50% of the aggregate principal
amount outstanding under the Notes;
(ii) EXCEPT as required pursuant to Section 3.1(d),
Borrowers may not prepay any principal amount
outstanding under the Line A Notes or the Line B
Notes if, giving effect thereto, the aggregate
principal amount outstanding under the Competitive
Advance Notes would exceed 50% of the aggregate
principal amount outstanding under the Notes; and
(iii) No Bank may make a Competitive Bid with a
Maximum Competitive Advance in an amount
which, when added to the aggregate
outstanding Competitive Advances made by that
Bank, would exceed $25,000,000.
This clause (p) shall not apply during any period when Parent
holds a Credit Rating of BBB- (or its equivalent) or better."
4. AMENDMENT TO SECTION 3.1. Section 3.1 of the Loan Agreement is
amended by adding the following phrase (a) at the end of Section 3.1(d)(ii)
thereof and (b) after the word "follows" in the sixth line of
Section 3.1(d)(iii) thereof:
", which prepayment shall be applied
first to the Line A Notes, second to the
Line B Notes and third pro-rata to the
Competitive Advance Notes"
5. WAIVER OF SECTION 11.8 (b) (III). Section 11.8(b)(iii) of the
Loan Agreement is hereby waived to the extent required to permit the assignment
by Bank of America, N.T. & S.A. of a Pro Rata Share of the Commitments
equivalent to $3,000,000 to Cedars Bank; PROVIDED that such Section shall
continue to apply to any future assignment by any Bank (INCLUDING Bank of
America, N.T. & S.A. and Cedars Bank) to any other Person.
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<PAGE>
6. CONDITIONS PRECEDENT. The effectiveness of this Amendment shall
be conditioned upon the receipt by the Managing Agent of all of the following,
each properly executed by a Responsible Official of each party thereto and dated
as of the date hereof:
(a) Counterparts of this Amendment executed by all
parties hereto; and
(b) Written consent of all of the Banks as required
under Section 11.2 of the Loan Agreement in the
form of Exhibit A to this Amendment.
7. REPRESENTATION AND WARRANTY. Borrowers represent and warrant to
the Managing Agent and the Banks that no Default or Event of Default has
occurred and remains continuing.
8. CONFIRMATION. In all other respects, the terms of the Loan
Agreement and the other Loan Documents are hereby confirmed.
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<PAGE>
IN WITNESS WHEREOF, Borrowers and the Managing Agent have executed
this Amendment as of September 9, 1997 by their duly authorized
representatives.
ALEXANDRIA REAL ESTATE EQUITIES, INC.
ARE-QRS CORP.
ARE ACQUISITIONS, LLC
By: /s/ Joel S. Marcus
----------------------------------
Joel S. Marcus
Chief Executive Officer
BANK OF AMERICA NATIONAL TRUST AND
SAVINGS ASSOCIATION, as Managing Agent
By /s/ William Rothman
----------------------------------
William Rothman
Regional Vice President
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<PAGE>
Exhibit A to Amendment
CONSENT OF BANK
Reference is hereby made to that certain Revolving Loan Agreement
dated as of June 2, 1997, (the "Loan Agreement") among Alexandria Real Estate
Equities, Inc., ARE-QRS Corp. and ARE Acquisitions, LLC (collectively,
"Borrowers"), the Banks party thereto, and Bank of America National Trust and
Savings Association, as Managing Agent (the "Loan Agreement). Capitalized terms
used but not defined herein are used with the meanings set forth for those terms
in the Loan Agreement.
The undersigned Bank hereby consents to the execution and delivery of
Amendment No. 1 to Revolving Loan Agreement by the Managing Agent on its behalf,
substantially in the form of a draft dated on or about September 3, 1997
presented to the undersigned Bank.
Date: September ___, 1997
-------------------------------------
[Name of Institution]
By
----------------------------------
-------------------------------------
[Printed Name and Title]
<PAGE>
AMENDMENT NO. 2 TO REVOLVING LOAN AGREEMENT
This Amendment No. 2 to Revolving Loan Agreement (this "Amendment") is
entered into with reference to the Revolving Loan Agreement dated as of June 2,
1997, (as heretofore amended, the "Loan Agreement") among Alexandria Real
Estate Equities, Inc., ARE-QRS Corp. and ARE Acquisitions, LLC (collectively,
"Borrowers"), the Banks party thereto, and Bank of America National Trust and
Savings Association, as Managing Agent (the "Loan Agreement). Capitalized terms
used but not defined herein are used with the meanings set forth for those terms
in the Loan Agreement.
Borrowers and the Managing Agent, acting with the consent of the
Requisite Banks pursuant to Section 11.2 of the Loan Agreement, agree as
follows:
1. AMENDMENT TO SECTION 1.1. Section 1.1 of the Loan Agreement is
amended by adding the following proviso at the end of the definition of
"Adjusted EBITDA":
"; PROVIDED, that Adjusted EBITDA for the Interim
Calculation Period shall be calculated, as of any
date of determination, by multiplying Adjusted
EBITDA for the period commencing on July 1, 1997
through the last day of the then most-recently
ended Fiscal Quarter by the appropriate factor so
as to result in annualized Adjusted EBITDA for
such period."
2. AMENDMENT TO SECTION 1.1. Section 1.1 of the Loan Agreement is
further amended by adding the following proviso at the end of the definition of
"Adjusted NOI":
"; PROVIDED, that Adjusted NOI for the Interim
Calculation Period shall be calculated, as of any
date of determination, by multiplying Adjusted NOI
for the period commencing on July 1, 1997 through
the last day of the then most-recently ended
Fiscal Quarter by the appropriate factor so as to
result in annualized Adjusted NOI for such
period."
-1-
<PAGE>
3. SECTION 1.1. Section 1.1 of the Loan Agreement is further
amended by SUBSTITUTING the phrase "for the fiscal period consisting of the
applicable Calculation Period" for the phrase "for the fiscal period
consisting of that Fiscal Quarter and the three immediately preceding
Fiscal Quarters" in each of the following definitions:
"Fixed Charge Coverage"
"Interest Coverage"
"Gross Asset Value"
"Revenue-Producing Property Value"
"Unencumbered Asset Pool Value"
4. SECTION 1.1. Section 1.1 of the Loan Agreement is further
amended by SUBSTITUTING the phrase "for the applicable Calculation Period" for
the phrase "for that Fiscal Quarter and the three immediately preceding Fiscal
Quarters" in the definition of "Mortgage Amount."
5. SECTION 1.1. Section 1.1 of the Loan Agreement is further
amended by SUBSTITUTING the following for the definition of "Consent
Criteria":
"CONSENT CRITERIA" means, as of any date of
determination, that as of that date EITHER
(a) Parent holds a Credit Rating of BBB- (or its
equivalent) or better or (b) as of the last day of
the Fiscal Quarter then most recently-ended, the
RATIO OF (i) Adjusted NOI of all Revenue-Producing
Properties (PROVIDED, however, in the case of any
Revenue-Producing Property (a "New Property") that
within the preceding sixty (60) day period has
been purchased by a Borrower from a Person that is
now a tenant occupying 100% of such New Property,
that Adjusted NOI for such New Property shall be
the Adjusted NOI for the first year of such lease
as reflected in a pro-forma income statement for
this New Property prepared by Parent in good faith
using reasonable assumptions consistent with all
facts known to Parent) for the fiscal period
consisting of the appropriate Calculation Period
to (ii) the sum of (A) Interest Charges for such
fiscal period PLUS (B) all scheduled principal
payments on Indebtedness of Parent (INCLUDING the
principal portion of rent under Capital Lease
Obligations)
-2-
<PAGE>
made during such fiscal period, other
than payments made at the maturity date of such
Indebtedness, was 3.50 to 1.00 or greater.
6. SECTION 1.1. Section 1.1 of the Loan Agreement is further
amended by adding the following new definitions at the appropriate
alphabetical places:
"CALCULATION PERIOD" means (a) with respect to the
last day of each Fiscal Quarter ending before
June 30, 1998, the related Interim Calculation
Period and (b) with respect to the last day of
each Fiscal Quarter ending on or after June 30,
1998, the period consisting of that Fiscal Quarter
and the three immediately preceding Fiscal
Quarters.
"INTERIM CALCULATION PERIOD" means, with respect
to the last day of each Fiscal Quarter ending
before June 30, 1998, the period commencing on
July 1, 1997 and ending on such last day of the
Fiscal Quarter.
7. COMPLIANCE CERTIFICATE . Exhibit E to the Loan Agreement is
amended to read as set forth in Attachment I to this Amendment.
8. PRIOR COMPLIANCE CERTIFICATES. The Banks recognize that the
Compliance Certificates submitted by Borrower for the Fiscal Quarters ended
June 30, 1997 and September 30, 1997 utilized a different annualization
calculation method for Fixed Charge Coverage and Interest Coverage from that
which is implemented by this Amendment, and agree that such Compliance
Certificates were and are acceptable to the Banks to evidence Borrower's
compliance with the Loan Agreement as of the dates thereof.
9. CONDITIONS PRECEDENT. The effectiveness of this Amendment shall
be conditioned upon the receipt by the Managing Agent of all of the following,
each properly executed by a Responsible Official of each party thereto and
dated as of the date hereof:
(a) Counterparts of this Amendment executed by all
parties hereto; and
-3-
<PAGE>
(b) Written consent of the Requisite Banks as required
under Section 11.2 of the Loan Agreement in the
form of Exhibit A to this Amendment.
10. REPRESENTATION AND WARRANTY. Borrowers represent and warrant to
the Managing Agent and the Banks that no Default or Event of Default has
occurred and remains continuing.
11. CONFIRMATION. In all other respects, the terms of the Loan
Agreement and the other Loan Documents are hereby confirmed.
IN WITNESS WHEREOF, Borrowers and the Managing Agent have executed
this Amendment as of January 28, 1998 by their duly authorized
representatives.
ALEXANDRIA REAL ESTATE EQUITIES, INC.
ARE-QRS CORP.
ARE ACQUISITIONS, LLC
By: /s/ Joel S. Marcus
---------------------------------
Joel S. Marcus
Chief Executive Officer
BANK OF AMERICA NATIONAL TRUST AND
SAVINGS ASSOCIATION, as Managing Agent
By /s/ William Rothman
---------------------------------
William Rothman
Regional Vice President
-4-
<PAGE>
Exhibit A to Amendment
CONSENT OF BANK
Reference is hereby made to that certain Revolving Loan Agreement
dated as of June 2, 1997 (as heretofore amended, the "Loan Agreement") among
Alexandria Real Estate Equities, Inc., ARE-QRS Corp. and ARE Acquisitions, LLC
(collectively, "Borrowers"), the Banks party thereto, and Bank of America
National Trust and Savings Association, as Managing Agent (the "Loan Agreement).
Capitalized terms used but not defined herein are used with the meanings set
forth for those terms in the Loan Agreement.
The undersigned Bank hereby consents to the execution and delivery of
Amendment No. 2 to Revolving Loan Agreement by the Managing Agent on its behalf,
substantially in the form of a draft dated on or about January __, 1998
presented to the undersigned Bank.
Date: January __, 1998
-----------------------------------
[Name of Institution]
By:
---------------------------------
---------------------------------
[Printed Name and Title]
<PAGE>
EXHIBIT 21.1
Subsidiaries of Alexandria Real Estate Equities, Inc.*
As of March 27, 1998
ARE-QRS Corp.
ARE-GP Holdings QRS Corp.
ARE-3535/3565 General Atomics Court, LLC
ARE-10933 North Torrey Pines, LLC
ARE-11099 North Torrey Pines, LLC
Alexandria Real Estate Equities, L.P.
ARE Acquisitions, LLC
ARE-1431 Harbor Bay, LLC
ARE-John Hopkins Court, LLC
ARE-708 Quince Orchard, LLC
ARE-940 Clopper Road, LLC
ARE-1201 Harbor Bay, LLC
ARE-1401 Research Boulevard, LLC
ARE-1500 East Gude, LLC
AREE-Holdings, L.P.
ARE-100/800/801 Capitola, LLC
ARE-215 College, LLC
ARE-4757 Nexus Centre, LLC
ARE-819/863 Mitten Road, LLC
ARE-Nexus Centre II, LLC
ARE-3000/3018 Western, LLC
ARE-8000/9000/10000 Virginia Manor, LLC
ARE-10150 Old Columbia, LLC
ARE-11025 Roselle Street, LLC
ARE-Metropolitan Grove I, LLC
ARE-6166 Nancy Ridge, LLC
ARE-79/96 Charlestown Navy Yard, LLC
ARE-5100/5110 Campus Drive, L.P.
ARE-702 Electronic Drive, L.P.
*All of the Subsidiaries were organized in Delaware, other than ARE-QRS Corp.,
which was organized in Maryland.
<PAGE>
EXHIBIT 23.1
CONSENT OF INDEPENDENT AUDITORS
We consent to the incorporation by reference in the Registration Statement
dated August 22, 1997 (Form S-8 No. 333-34223) pertaining to the 1997 Stock
Award and Incentive Plan of Alexandria Real Estate Equities, Inc. of our
report dated January 30, 1998, with respect to the consolidated balance
sheets of Alexandria Real Estate Equities, Inc. and subsidiaries as of
December 31, 1997 and 1996, and the related consolidated statements of
operations, stockholders' equity, and cash flows for the years ended December
31, 1997, 1996 and 1995, and the consolidated financial statement Schedule
III, rental properties and accumulated depreciation, which are included in
the Form 10-K of Alexandria Real Estate Equities, Inc. for the year ended
December 31, 1997.
/s/ ERNST & YOUNG LLP
-----------------------
Los Angeles, California
March 26, 1998
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM (IDENTIFY
SPECIFIC FINANCIAL STATEMENTS HERE) THE CONDENSED CONSOLIDATED FINANCIAL
STATEMENTS OF THE THE COMPANY
</LEGEND>
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-START> JAN-01-1997
<PERIOD-END> DEC-31-1997
<CASH> 2,060,000
<SECURITIES> 0
<RECEIVABLES> 3,630,000
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 0
<PP&E> 238,774,000
<DEPRECIATION> 8,804,000
<TOTAL-ASSETS> 248,454,000
<CURRENT-LIABILITIES> 10,720,000
<BONDS> 70,817,000
0
0
<COMMON> 114,000
<OTHER-SE> 166,803,000
<TOTAL-LIABILITY-AND-EQUITY> 248,454,000
<SALES> 0
<TOTAL-REVENUES> 34,846,000
<CGS> 0
<TOTAL-COSTS> 8,766,000
<OTHER-EXPENSES> 28,877,000
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 7,043,000
<INCOME-PRETAX> (2,797,000)
<INCOME-TAX> 0
<INCOME-CONTINUING> (2,797,000)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (2,797,000)
<EPS-PRIMARY> (0.35)
<EPS-DILUTED> (0.35)
</TABLE>
