<PAGE>
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q/A
AMENDMENT NO. 1
(Mark One)
/X/ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended June 30, 1998
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 of (I.R.S. Employer Identification Number)
incorporation or organization)
135 North Los Robles Avenue, Suite 250, Pasadena, California 91101
(Address of principal executive offices)
(626) 578-0777
(Registrant's telephone number, including area code)
N/A
-----------------------------------------------------
(Former name, former address and former fiscal year,
if changed since last report)
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 / /
As of August 13, 1998, 12,564,631 shares of common stock, par value $.01 per
share, were outstanding.
<PAGE>
The undersigned registrant hereby amends its Quarterly Report on Form 10-Q
for the quarterly period ended June 30, 1998 for the purposes of restating
Item 6(a) of Part II-Other Information in its entirety and of adding the
required signatures. All other information contained in this Amendment,
including all financial information, is identical to the information in the
original report filed with the Commission on August 14, 1998.
INDEX
PART I - FINANCIAL INFORMATION
Item 1. FINANCIAL STATEMENTS (UNAUDITED)
Condensed Consolidated Balance Sheets of Alexandria Real Estate
Equities, Inc. and Subsidiaries as of June 30, 1998 and December 31,
1997
Condensed Consolidated Statements of Operations of Alexandria Real
Estate Equities, Inc. and Subsidiaries for the three months ended
June 30, 1998 and 1997 and the six months ended June 30, 1998 and
1997
Condensed Consolidated Statement of Stockholders' Equity of Alexandria
Real Estate Equities, Inc. and Subsidiaries for the six months ended
June 30, 1998
Condensed Consolidated Statements of Cash Flows of Alexandria Real
Estate Equities, Inc. and Subsidiaries for the six months ended
June 30, 1998 and 1997
Notes to Condensed Consolidated Financial Statements
Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
Item 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
PART II - OTHER INFORMATION
Item 1. LEGAL PROCEEDINGS
Item 2. CHANGES IN SECURITIES
Item 3. DEFAULTS UPON SENIOR SECURITIES
Item 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
Item 5. OTHER INFORMATION
Item 6. EXHIBITS AND REPORTS ON FORM 8-K
2
<PAGE>
Alexandria Real Estate Equities, Inc. and Subsidiaries
Condensed Consolidated Balance Sheets
(Unaudited)
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<TABLE>
<CAPTION>
JUNE 30, DECEMBER 31,
1998 1997
----------- ------------
<S> <C> <C>
ASSETS
Rental properties, net $376,195 $225,551
Land under development 14,281 4,419
Cash and cash equivalents 2,010 2,060
Tenant security deposits and other restricted cash 7,831 6,799
Secured note receivable 6,000 -
Tenant receivables and deferred rent 5,751 3,630
Other assets 8,829 5,995
-------- --------
Total assets $420,897 $248,454
-------- --------
-------- --------
LIABILITIES AND STOCKHOLDERS' EQUITY
Secured notes payable $ 96,409 $ 47,817
Unsecured line of credit 110,200 23,000
Accounts payable, accrued expenses and tenant
security deposits 9,360 6,158
Dividends payable 5,022 4,562
-------- --------
Total liabilities 220,991 81,537
Stockholders' equity:
Common stock, $0.01 par value per share,
100,000,000 shares authorized; 12,554,631 and
11,404,631 shares issued and outstanding at
June 30, 1998 and December 31, 1997,
respectively 126 114
Additional paid-in capital 199,780 173,735
Retained earnings (accumulated deficit) - (6,932)
-------- --------
Total stockholders' equity 199,906 166,917
Total liabilities and stockholders' equity $420,897 $248,454
-------- --------
-------- --------
</TABLE>
SEE ACCOMPANYING NOTES.
3
<PAGE>
Alexandria Real Estate Equities, Inc. and Subsidiaries
Condensed Consolidated Statements of Operations
(Unaudited)
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<TABLE>
<CAPTION>
THREE MONTHS ENDED SIX MONTHS ENDED
JUNE 30, JUNE 30,
1998 1997 1998 1997
----------- --------- ----------- ----------
<S> <C> <C> <C> <C>
Revenues:
Rental $ 11,903 $ 5,725 $ 21,043 $ 10,900
Tenant recoveries 2,949 1,806 5,312 3,703
Interest and other income 308 212 501 301
----------- --------- ----------- ----------
15,160 7,743 26,856 14,904
Expenses:
Rental operations 3,620 2,003 6,124 3,833
General and administrative 882 593 1,633 1,176
Stock compensation - 3,768 - 4,162
Post retirement benefit - - - 632
Special bonus - - - 353
Interest 3,478 2,066 5,563 4,575
Acquisition LLC financing costs - 6,973 - 6,973
Write-off of unamortized loan costs - 2,146 - 2,146
Depreciation and amortization 2,456 1,106 4,177 2,109
----------- --------- ----------- ----------
10,436 18,655 17,497 25,959
----------- --------- ----------- ----------
Net income (loss) $ 4,724 $ (10,912) $ 9,359 $ (11,055)
----------- --------- ----------- ----------
----------- --------- ----------- ----------
Net income allocated to preferred stockholders $ - 1,459 $ - $ 3,036
----------- --------- ----------- ----------
----------- --------- ----------- ----------
Net income (loss) allocated to common stockholders $ 4,724 $ (12,371) $ 9,359 $ (14,091)
----------- --------- ----------- ----------
----------- --------- ----------- ----------
Net income (loss) per share of common stock
(pro forma for 1997):
-Basic $ 0.40 $ (1.79) $ 0.81 $ (2.27)
----------- --------- ----------- ----------
----------- --------- ----------- ----------
-Diluted $ 0.39 $ (1.79) $ 0.79 $ (2.27)
----------- --------- ----------- ----------
----------- --------- ----------- ----------
Weighted average shares of common stock outstanding
(pro forma for 1997):
-Basic 11,821,664 6,098,381 11,614,300 4,870,256
----------- --------- ----------- ----------
----------- --------- ----------- ----------
-Diluted 12,053,983 6,098,381 11,854,843 4,870,256
----------- --------- ----------- ----------
----------- --------- ----------- ----------
</TABLE>
SEE ACCOMPANYING NOTES.
4
<PAGE>
Alexandria Real Estate Equities, Inc. and Subsidiaries
Condensed Consolidated Statement of Stockholders' Equity
Six months ended June 30, 1998
(Unaudited)
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
RETAINED
NUMBER OF ADDITIONAL EARNINGS
COMMON COMMON PAID-IN (ACCUMULATED
SHARES STOCK CAPITAL DEFICIT) TOTAL
------------ ------- ---------- ------------- ----------
<S> <C> <C> <C> <C> <C>
Balance at December 31, 1997 11,404,631 $114 $173,735 $(6,932) $166,917
Issuance of common stock 1,150,000 12 33,202 - 33,214
Dividends declared on common stock - - (7,157) (2,427) (9,584)
Net income - - - 9,359 9,359
---------- ---- -------- ------- ---------
Balance at June 30, 1998 12,554,631 $126 $199,780 $ - $199,906
---------- ---- -------- ------- ---------
---------- ---- -------- ------- ---------
</TABLE>
SEE ACCOMPANYING NOTES.
5
<PAGE>
Alexandria Real Estate Equities, Inc. and Subsidiaries
Condensed Consolidated Statements of Cash Flows
(Unaudited)
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
SIX MONTHS ENDED
JUNE 30,
1998 1997
--------- --------
<S> <C> <C>
Net cash provided by (used in) operating activities $ 10,580 $ (662)
INVESTING ACTIVITIES
Purchase of rental properties (145,345) (52,102)
Additions to rental properties (9,305) (1,720)
Additions to land under development (9,862) -
Note receivable (6,000) -
--------- --------
Net cash used in investing activities (170,512) (53,822)
FINANCING ACTIVITIES
Proceeds from secured notes payable 49,132 15,360
Net borrowings on unsecured line of credit 87,200 2,500
Proceeds from issuance of common stock 33,214 139,185
Redemption of Series T preferred stock - (1)
Decrease in due to Health Science Properties Holding
Corporation - (2,525)
Principal reductions of secured notes payable (540) (73,391)
Common dividends paid (9,124) (2,785)
Preferred dividends paid - (1,126)
--------- --------
Net cash provided by financing activities 159,882 74,717
Net (decrease) increase in cash and cash equivalents (50) 20,233
Cash and cash equivalents at beginning of period 2,060 1,696
--------- --------
Cash and cash equivalents at end of period $ 2,010 $ 21,929
--------- --------
--------- --------
</TABLE>
SEE ACCOMPANYING NOTES.
6
<PAGE>
Alexandria Real Estate Equities, Inc. and Subsidiaries
Notes to Condensed Consolidated Financial Statements
(Unaudited)
1. BACKGROUND AND BASIS OF PRESENTATION
BACKGROUND
Alexandria Real Estate Equities, Inc., a Maryland corporation (the
"Company"), was formed in October 1994 to acquire, manage, and selectively
develop properties for lease principally to the life science industry ("Life
Science Facilities"). As of June 30, 1998 and December 31, 1997, the Company
owned 41 and 22 Life Science Facilities, respectively.
The accompanying interim financial statements have been prepared by the
Company's management in accordance with generally accepted accounting
principles and in conformity with the rules and regulations of the Securities
and Exchange Commission. In the opinion of management, the interim financial
statements presented herein reflect all adjustments of a normal and recurring
nature that are necessary to fairly state the interim financial statements. The
results of operations for the interim period are not necessarily indicative of
the results that may be expected for the year ended December 31, 1998. These
financial statements should be read in conjunction with the financial
statements included in the Company's Annual Report on Form 10-K for the year
ended December 31, 1997.
BASIS OF PRESENTATION
The accompanying condensed 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 balances
and transactions have been eliminated.
RECLASSIFICATIONS
Certain prior year amounts have been reclassified to conform to the current
period presentation.
7
<PAGE>
2. RENTAL PROPERTIES
Rental properties consist of the following:
<TABLE>
<CAPTION>
JUNE 30, DECEMBER 31,
1998 1997
---------- ------------
(DOLLARS IN THOUSANDS)
<S> <C> <C>
Land $ 60,854 $ 41,970
Buildings and improvements 315,833 189,518
Tenant and other improvements 12,318 2,867
---------- --------
389,005 234,355
Less accumulated depreciation (12,810) (8,804)
---------- --------
$ 376,195 $225,551
---------- --------
---------- --------
</TABLE>
During the six months ended June 30, 1998, the Company acquired 19 Life Science
Facilities from various unrelated third parties for an aggregate purchase price
(including closing and transaction costs) of $145,345,000.
3. SECURED NOTE RECEIVABLE
In connection with the acquisition of a Life Science Facility in San Diego,
California in March 1998, the Company made a $6,000,000 loan to the sole tenant
of the property, fully secured by a first deed of trust on certain improvements
at the property. The loan bears interest at a rate of 11% per year, payable
monthly, and matures in March 2002. The loan is cross-defaulted to the lease
with the sole tenant. Under certain circumstances, the Company may obtain
title to the improvements that secure the loan, and, in such event, the Company
may also require the sole tenant at the property to lease such improvements
back from the Company for an additional rental amount.
4. UNSECURED LINE OF CREDIT
The Company has an unsecured line of credit providing for borrowings of up to
$150,000,000. Borrowings under the line of credit bear 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 period of
one, two, three or six months.
8
<PAGE>
4. UNSECURED LINE OF CREDIT (CONTINUED)
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. 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 June 30, 1998, borrowings under the line
of credit were limited to approximately $150,000,000, and $110,200,000 was
outstanding (leaving $39,800,000 available) at a weighted average interest rate
of 7.16%.
The line of credit expires May 31, 2000 and provides for annual extensions
(provided there is no default) for one-year periods upon notice by the Company
and consent of the participating banks.
In August 1998, the Company amended its unsecured line of credit to provide
for borrowings of up to $250 million. As under the original line, borrowings
under the line of credit, as amended, bear 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%. However, under
the line, as amended, the LIBOR based rate has been reduced, resulting in a
rate of 6.91% as of August 5, 1998. Financial covenants for the line of
credit, as amended, are substantially similar to those under the original
line. The line, as amended, expires 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.
5. SECURED NOTES PAYABLE
As of June 30, 1998, the Company had five notes payable to certain banks and an
insurance company, secured by first deeds of trust on eight Life Science
Facilities. The notes bear interest at fixed rates ranging from 7.17% to 9.00%
and are due at various dates through 2016.
6. STOCKHOLDERS EQUITY
On May 29, 1998, the Company sold 1,150,000 shares of common stock to
PaineWebber Incorporated for inclusion in the PaineWebber Equity Trust REIT
Series I, a unit investment trust. The shares were issued at a price of
$30.5625 per share (before discounts and commissions). The aggregate proceeds
to the Company, net of offering costs of $1.9 million, were approximately
$33.2 million.
On June 1, 1998, the Company declared a cash dividend on its common stock of
$5,022,000 ($ 0.40 per share) for the calendar quarter ended June 30, 1998. The
dividend was paid on July 17, 1998.
9
<PAGE>
7. COMMITMENTS
The Company is committed to complete the construction of a building and
certain improvements thereto in San Diego, California at a remaining cost of
approximately $4.8 million under the terms of two leases. In addition, the
Company is committed to complete the construction of a building and certain
improvements thereto in Gaithersburg, Maryland at a remaining cost of between
$9.1 million and $18.1 million (depending on the level of improvements to the
facility elected by the tenant) under the terms of a lease. Under the terms
of the lease, the tenant's rental rate will be adjusted depending on the
ultimate cost of the improvements.
The Company is also committed under the terms of various leases to construct
improvements for certain tenants totaling approximately $11.9 million. Of
this amount, approximately $5.3 million has been set aside in restricted cash
accounts to complete the conversion of existing space into higher rent
generic laboratory space (as well as certain related improvements to the
property) at 1102/1124 Columbia Street and 3000/3018 Western Avenue.
8. NET INCOME (LOSS) PER SHARE
The following table sets forth the computation of net income (loss) per pro
forma share of common stock outstanding.
<TABLE>
<CAPTION>
THREE MONTHS ENDED JUNE 30,
1998 1997
------------------------------------------------
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<S> <C> <C>
Net income (loss) $ 4,724 $ (10,912)
----------- ----------
----------- ----------
Weighted average shares of common stock
(pro forma for 1997) - basic 11,821,664 6,098,381
Add: dilutive effect of stock options 232,319 -
----------- ----------
Weighted average shares of common stock
(pro forma for 1997) - diluted 12,053,983 6,098,381
----------- ----------
----------- ----------
Net income (loss) per share - basic $ 0.40 $ (1.79)
----------- ----------
----------- ----------
Net income (loss) per share - diluted $ 0.39 $ (1.79)
----------- ----------
----------- ----------
</TABLE>
10
<PAGE>
8. NET INCOME (LOSS) PER SHARE (CONTINUED)
<TABLE>
<CAPTION>
SIX MONTHS ENDED JUNE 30,
1998 1997
------------------------------------------------
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<S> <C> <C>
Net income (loss) $ 9,359 $ (11,055)
----------- ----------
----------- ----------
Weighted average shares of common stock
(pro forma for 1997) - basic 11,614,300 4,870,256
Add: dilutive effect of stock options 240,543 -
----------- ----------
Weighted average shares of common stock
(pro forma for 1997) - diluted 11,854,843 4,870,256
----------- ----------
----------- ----------
Net income (loss) per share - basic $ 0.81 $ (2.27)
----------- ----------
----------- ----------
Net income (loss) per share - diluted $ 0.79 $ (2.27)
----------- ----------
----------- ----------
</TABLE>
Historical per share data has not been presented for the three or six months
ended June 30, 1997 because it is not meaningful due to the various changes in
the Company's capital structure in connection with the Company's initial
public offering on June 2, 1997 (the "Offering").
Pro forma shares of common stock outstanding for the three and six months
ended June 30, 1997 include all shares of common stock outstanding after
giving effect to a 1,765.923 to 1 stock split, the issuance of certain stock
grants, the issuance and exercise of substitute stock options and conversions
of preferred stock, each of which occurred in connection with the Offering.
In addition, shares issued to the public in connection with the Offering have
been weighted for the period of time they were outstanding.
11
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Certain information and statements included in this Quarterly Report on
Form 10-Q, including, without limitation, statements containing the words
"believes," "anticipates," "expects" and words of similar import, constitute
"forward-looking statements" within the meaning of the Private Securities
Litigation Reform Act of 1995 and involve known and unknown risks and
uncertainties that could result in actual results of the Company differing
materially from expected results expressed or implied by such forward-looking
information and statements. In the context of forward-looking information and
statements provided in this Form 10-Q and in other reports, please refer to
the discussion of risk factors detailed in, as well as the other information
contained in, the Company's filings with the Securities and Exchange
Commission, including but not limited to, those risk factors set forth under
the caption "Risk Factors" in the Company's Registration Statement on Form
S-11 (File No. 333-23545) initially filed with the Securities and Exchange
Commission on March 18, 1997.
The following discussion should be read in conjunction with the financial
statements and notes appearing elsewhere in this report.
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.
The Company's primary source of income is rental revenue (including tenant
recoveries) from its properties (the "Properties"). The Company has acquired
its current portfolio since the beginning of 1994, with four of the Properties
acquired in calendar year 1994, eight acquired in 1996, three acquired in 1997
in connection with the Offering, seven acquired in 1997 after the Offering
(together, the "1997 Acquired Properties") and 19 acquired in 1998 (the "1998
Acquired Properties"). As a result of the Company's acquisition activities in
1997 and 1998, the financial data shows significant increases in total revenue
and expenses for the 1998 periods compared to the 1997 periods.
12
<PAGE>
RESULTS OF OPERATIONS
COMPARISON OF THREE MONTHS ENDED JUNE 30, 1998 ("SECOND QUARTER 1998") TO THREE
MONTHS ENDED JUNE 30, 1997 ("SECOND QUARTER 1997")
Rental revenue increased by $6.2 million, or 109%, to $11.9 million for
Second Quarter 1998 compared to $5.7 million for Second Quarter 1997. The
increase resulted primarily from rental revenue from the 1997 Acquired
Properties purchased after April 1, 1997 and from the 1998 Acquired
Properties, which together added an additional $6.2 million of rental
revenue. Of this amount, $155,000 represents the receipt of a rental
termination payment associated with a lease at one of the Properties. Rental
revenue from the Properties acquired before April 1, 1997 (the "Second
Quarter Same Properties") increased by $28,000, or 1%, generally due to
increases in rental rates. Results for the Second Quarter Same Properties
for Second Quarter 1998 were impacted by the vacancy of approximately 68,000
square feet at 1102/1124 Columbia Street beginning May 31, 1998. The Company
is currently negotiating with tenants for substantially all of this vacant
space. Rental revenue for the Second Quarter Same Properties (excluding
1102/1124 Columbia Street) increased by $85,000, or 2%.
Tenant recoveries increased by $1.1 million, or 61%, to $2.9 million for
Second Quarter 1998 compared to $1.8 million for Second Quarter 1997. The
increase resulted primarily from the 1997 Acquired Properties purchased after
April 1, 1997 and the 1998 Acquired Properties, which together added an
additional $1.0 million of tenant recoveries. Tenant recoveries from the
Second Quarter Same Properties increased by $107,000, or 6%, primarily due to
an increase in rental operating expenses, improved identification and recovery
of costs at certain properties, and adjustments to tenant recoveries relating
to operating expenses for prior periods. Tenant recoveries for the Second
Quarter Same Properties (excluding 1102/1124 Columbia Street) increased by
$287,000, or 24%.
Interest and other income increased by $96,000, or 45%, to $308,000 for
Second Quarter 1998 compared to $212,000 for Second Quarter 1997, resulting
primarily from interest income from the secured note receivable.
Rental operating expenses increased by $1.6 million, or 80%, to $3.6 million
for Second Quarter 1998 compared to $2.0 million for Second Quarter 1997. The
increase resulted primarily from the 1997 Acquired Properties purchased after
April 1, 1997 and the 1998 Acquired Properties, which together added an
additional $1.6 million of rental operating expenses. Operating expenses for
the Second Quarter Same Properties increased by approximately $55,000, or 3%,
primarily due to an increase in utility expenses (due to greater usage) that
are passed through to the tenants. Rental operating expenses for the Second
Quarter Same Properties (excluding 1102/1124 Columbia Street) increased by
$37,000, or 3%.
General and administrative expenses increased by $289,000, or 49%, to $882,000
for Second Quarter 1998 compared to $593,000 for Second Quarter 1997, due to
the Company's larger scope of operations and increased costs incurred as a
result of being a public company in 1998.
13
<PAGE>
Stock compensation expense of $3.8 million was recorded for Second Quarter 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 $1.4 million, or 67%, to $3.5 million for
Second Quarter 1998 compared to $2.1 million for Second Quarter 1997. The
increase resulted primarily from the indebtedness incurred to acquire the
1997 Acquired Properties purchased after April 1, 1997 and the 1998 Acquired
Properties, offset by the decrease in interest expense due to the
indebtedness related to the Second Quarter Same Properties paid off in June
1997 with proceeds from the Offering.
Acquisition LLC financing costs of $6,973,000 were expensed in Second Quarter
1997, representing the portion of the purchase price of ARE Acquisitions, LLC
(the "Acquisition LLC") in excess of the cost incurred by it to acquire its
three Life Science Facilities.
Write-off of unamortized loan costs in Second Quarter 1997 represents the write-
off of loan costs associated with $72,698,000 of secured notes repaid with
proceeds of the Offering.
Depreciation and amortization increased by $1.4 million, or 127%, to $2.5
million for Second Quarter 1998 compared to $1.1 million for Second Quarter
1997. The increase resulted primarily from depreciation associated with the
1997 Acquired Properties purchased after April 1, 1997, and the addition of
the 1998 Acquired Properties.
As a result of the foregoing, there was net income of $4.7 million for Second
Quarter 1998 compared to a net loss of $10.9 million for Second Quarter 1997.
COMPARISON OF SIX MONTHS ENDED JUNE 30, 1998 ("SIX MONTHS 1998") TO SIX MONTHS
ENDED JUNE 30, 1997 ("SIX MONTHS 1997")
Rental revenue increased by $10.1 million, or 93%, to $21.0 million for Six
Months 1998 compared to $10.9 million for Six Months 1997. The increase
resulted primarily from the 1997 Acquired Properties purchased after January
1, 1997 and the 1998 Acquired Properties, which together added an additional
$10.0 million of rental revenue. Of this amount, $277,000 represents the
receipt of rental termination payments associated with leases at two of the
Properties. Rental revenue from the Properties acquired before January 1,
1997 (the "Same Properties") increased by $115,000, or 1%, generally due to
increases in rental rates. Results for the Same Properties for Six Months
1998 were impacted by the vacancy of approximately 68,000 square feet at
1102/1124 Columbia Street beginning May 31, 1998. The Company is currently
negotiating with tenants for substantially all of this vacant space. Rental
revenue for the Same Properties (excluding 1102/1124 Columbia Street)
increased by $165,000, or 2%.
14
<PAGE>
Tenant recoveries increased by $1.6 million, or 43%, to $5.3 million for Six
Months 1998 compared to $3.7 for Six Months 1997. The increase resulted
primarily from the 1997 Acquired Properties purchased after January 1, 1997
and the 1998 Acquired Properties, which together added an additional $1.5
million of tenant recoveries. Tenant recoveries for the Same Properties
increased by $96,000, or 2.6%, generally due to an increase in rental
operating expenses, improved identification and recovery of costs at certain
properties, and adjustments to tenant recoveries relating to operating
expenses for prior periods. Tenant recoveries for the Same Properties
(excluding 1102/1124 Columbia Street) increased by $292,000, or 11%.
Interest and other income increased by $200,000, or 66%, to $501,000 for Six
Months 1998 compared to $301,000 for Six Months 1997, resulting primarily
from interest income from the secured note receivable.
Rental operating expenses increased by $2.3 million, or 61%, to $6.1 million
for Six Months 1998 compared to $3.8 million for Six Months 1997. The
increases resulted primarily from the 1997 Acquired Properties purchased
after January 1, 1997 and the 1998 Acquired Properties, which together added
an additional $2.2 million of rental operating expenses. Operating expenses
for the Same Properties increased by $97,000, or 2.6%, primarily due to an
increase in utility expenses (due to greater usage) that are passed through
to the tenants. Rental operating expenses for the Same Properties (excluding
1102/1124 Columbia Street) increased by $141,000, or 5%.
General and administrative expenses increased by $457,000, or 39%, to
$1.6 million for Six Months 1998 compared to $1.2 million for Six Months 1997
due to the Company's larger scope of operations and increased costs incurred as
a result of being a public company in 1998.
The special bonus of $353,000 in Six Months 1997 was awarded to an officer of
the Company in connection with the Offering and accrued for the period ended
March 31, 1997. Post-retirement benefit expense of $632,000 in Six Months 1997
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 Six Months 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 $1.0 million, or 22%, to $5.6 million for Six
Months 1998 compared to $4.6 million for Six Months 1997. The increase
resulted primarily from indebtedness incurred to acquire the 1997 Acquired
Properties purchased after January 1, 1997 and the 1998 Acquired Properties.
Acquisition LLC financing costs of $6,973,000 were expensed in Six Months
1997, representing the portion of the purchase price of the Acquisition LLC
in excess of the cost incurred by it to acquire its three Life Science
Facilities.
Write-off of unamortized loan costs in Six Months 1997 represents the write-off
of loan costs associated with $72,698,000 of secured notes repaid with proceeds
of the Offering.
15
<PAGE>
Depreciation and amortization increased by $2.1 million, or 100%, to $4.2
million for Six Months 1998 compared to $2.1 million for Six Months 1997. The
increase resulted primarily from depreciation associated with the 1997
Acquired Properties purchased after January 1, 1997 and the 1998 Acquired
Properties.
As a result of the foregoing, there was net income of $9.4 million for Six
Months 1998 compared to a net loss of $11.1 million for Six Months 1997.
LIQUIDITY AND CAPITAL RESOURCES
CASH FLOWS
Net cash provided by operating activities for Six Months 1998 increased by
$11.2 million to $10.6 million compared to net cash used in operating
activities of $662,000 for Six Months 1997. The increase resulted primarily
from operating cash flows from the 1997 Acquired Properties purchased after
January 1, 1997 and the 1998 Acquired Properties.
Net cash used in investing activities increased by $116.7 million to
$170.5 million for Six Months 1998 compared to net cash used in investing
activities of $53.8 million for Six Months 1997. The increase resulted
primarily from the costs associated with the acquisition of the 1998 Acquired
Properties.
Net cash provided by financing activities increased by $85.2 million to
$159.9 million for Six Months 1998 compared to net cash provided by financing
activities of $74.7 million for Six Months 1997. The increase resulted
primarily from $49.1 million in proceeds from secured debt, $87.2 million in
net borrowings under the unsecured line of credit and $33.2 million in net
proceeds from the issuance of common stock, partially offset by payments of
$9.1 million in dividends payable on common stock.
CAPITAL COMMITMENTS
The Company is committed to complete the construction of a building and
certain improvements thereto in San Diego, California at a remaining cost of
approximately $4.8 million under the terms of two leases. In addition, the
Company is committed to complete the construction of a building and certain
improvements thereto in Gaithersburg, Maryland at a remaining cost of between
$9.1 million and $18.1 million (depending on the level of improvements to the
facility elected by the tenant) under the terms of a lease. Under the terms
of the lease, the tenant's rental rate will be adjusted depending on the
ultimate cost of the improvements.
16
<PAGE>
The Company is also committed under terms of various leases to construct
improvements for tenants totaling approximately $11.9 million. Of this
amount, approximately $5.3 million has been set aside in restricted cash
accounts to complete the conversion of existing space into higher rent
generic laboratory space (as well as certain related improvements to the
property) at 1102/1124 Columbia Street and 3000/3018 Western Avenue.
RESTRICTED CASH
As of June 30, 1998, the Company had $9.8 million in cash and cash
equivalents, including $7.8 million in restricted cash accounts. Of the $7.8
million in restricted cash accounts, approximately $5.3 million has been set
aside to complete the conversions described under "--Capital Commitments",
approximately $1.7 million is held in trust as additional security required
under the terms of the Company's secured notes payable, and approximately
$850,000 is held in security deposit reserve accounts based on the terms of
certain lease agreements.
SECURED DEBT
As of June 30, 1998, the Company's secured debt is as follows:
<TABLE>
<CAPTION>
PRINCIPAL
BALANCE AT INTEREST MATURITY
COLLATERAL JUNE 30, 1998 RATE DATE
- -------------------------- --------------- --------- --------------
<S> <C> <C> <C>
3535/3565 General Atomics
Court, San Diego, CA $17,819,000 9.00% December 2014
1431 Harbor Bay Parkway
Alameda, CA 8,500,000 7.17% January 2014
1102/1124 Columbia Street
Seattle, WA 21,003,000 7.75% May 2016
100/800/801 Capitola Drive,
Durham, NC 12,608,000 8.68% December 2006
14225 Newbrook Drive,
Chantilly, VA and 3000/3018
Western Avenue, Seattle, WA 36,479,000 7.22% May 2008
-----------
$96,409,000
-----------
-----------
</TABLE>
UNSECURED LINE OF CREDIT
The Company has an unsecured line of credit providing for borrowings of up to
$150,000,000. Borrowings under the line of credit bear 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 period of
one, two, three or six months.
17
<PAGE>
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. 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 June 30, 1998, borrowings under the line
of credit were limited to approximately $150,000,000, and $110,200,000 was
outstanding (leaving $39,800,000 available) at a weighted average interest rate
of 7.16%.
The line of credit expires May 31, 2000 and provides for annual extensions
(provided there is no default) for one-year periods upon notice by the Company
and consent of the participating banks.
In August 1998, the Company amended its unsecured line of credit to provide
for borrowings of up to $250 million. As under the original line, borrowings
under the line of credit, as amended, bear 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%. However, under
the line, as amended, the LIBOR based rate has been reduced, resulting in a
rate of 6.91% as of August 5, 1998. Financial covenants for the line of
credit, as amended, are substantially similar to those under the original
line. The line, as amended, expires 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 bank.
LIQUIDITY AND CAPITAL RESOURCES
On May 29, 1998, the Company sold 1,150,000 shares of common stock to
PaineWebber Incorporated for inclusion in the PaineWebber Equity Trust REIT
Shares I, a unit investment trust. The shares were issued at a price of
$30.5625 per share (before discounts and commissions). The aggregate
proceeds to the Company, net of offering costs of $1.9 million, were
approximately $33.2 million.
The Company expects to continue meeting its short-term liquidity and capital
requirements generally through its working capital and net cash provided by
operating activities. The Company believes that the net cash provided by
operating activities will continue to be sufficient to pay any distributions
necessary to enable the Company to continue qualifying as a real estate
investment trust. 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, property development activities, scheduled debt
maturities, renovations, expansions and other non-recurring capital
improvements, through long-term secured and unsecured indebtedness, including
borrowings under the unsecured line of credit, and the issuance of additional
debt and/or equity securities.
18
<PAGE>
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.
INFLATION
More than 70% of the Company's leases (on a square footage basis) are 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, a majority 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 a CPI 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 YEAR 2000
The Year 2000 Issue is the result of computer programs being written using two
digits rather than four digits to define the applicable year. Any of the
Company's computer programs that have time-sensitive software may recognize a
date using "00" as the year 1900 rather than the year 2000. This could result
in a system failure or miscalculations causing disruptions of operations,
including, among other things, a temporary inability to process transactions,
send tenant invoices, or engage in similar normal business activities.
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
to date has not been material, and future impacts are 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.
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
19
<PAGE>
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 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 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 principles
("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.
The following tables present the Company's FFO on a historical basis (in
thousands):
<TABLE>
<CAPTION>
Three Months Ended June 30,
1998 1997
------------ ------------
(Unaudited)
<S> <C> <C>
Net income (loss) $4,724 $(10,912)
Add:
Stock compensation - 3,768
Acquisition LLC financing costs - 6,973
Write off of unamortized loan fees - 2,146
Depreciation and amortization 2,456 1,106
------ --------
FFO $7,180 $ 3,081
------ --------
------ --------
Six Months Ended June 30,
1998 1997
----------- -----------
(Unaudited)
<S> <C> <C>
Net income (loss) $ 9,359 $(11,055)
Add:
Stock compensation - 4,162
Post retirement benefit - 632
Special bonus - 353
Acquisition LLC financing costs - 6,973
Write off of unamortized loan fees - 2,146
Depreciation and amortization 4,177 2,109
------- --------
FFO $13,536 $ 5,320
------- --------
------- --------
</TABLE>
20
<PAGE>
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT
MARKET RISK
Not applicable.
PART II - OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
Since early 1998, the Company and its President, Alan D. Gold, have engaged
in discussions regarding the potential termination of Mr. Gold's full-time
employment and his entering into a consulting arrangement with the Company.
While these discussions were ongoing, the Company gave Mr. Gold written
notice that it did not wish to extend the term of his employment agreement
past its December 31, 1998 expiration date. On July 16, 1998, Mr. Gold gave
the Company written notice that he intended to terminate his employment
agreement, allegedly for "good reason," on or before August 16, 1998. The
Company disputes Mr. Gold's contention that he has "good reason" to terminate
his employment agreement and has submitted the disputes between the parties
to binding arbitration pursuant to the terms of Mr. Gold's employment
agreement. Mr. Gold has asserted claims against the Company that also will be
considered in the arbitration. The Company currently anticipates that Mr.
Gold will leave as of August 16, 1998 and that other executives of the
Company will assume Mr. Gold's responsibilities.
ITEM 2. CHANGES IN SECURITIES AND USE OF PROCEEDS
On May 27, 1998, the Company privately placed 1,150,000 shares of its common
stock, par value $.01 per share (the "Shares"), with PaineWebber Incorporated
at a price before discounts and commissions of $30.5625 per Share, resulting
in aggregate proceeds to the Company of approximately $33.2 million. Such
proceeds were used to repay borrowings under the Company's unesecured line of
credit. PaineWebber deposited the Shares with the trustee of PaineWebber
Equity Trust REIT Series I (A Unit Investment Trust) (the "Trust"), a
registered unit investment trust under the Investment Company Act of 1940, as
amended, for which PaineWebber acted as sponsor and depositor, in exchange
for units in the Trust. The issuance of the Shares was effected in reliance
upon an exemption from registration under Section 4(2) of the Securities Act
as a transaction by an issuer not involving a public offering. On June 9,
1998, the Company filed a Registration Statement (File No. 333-56449) on Form
S-3 with the Securities and Exchange Commission to register the Shares under
the Securities Act of 1933, as amended.
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
None.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
On May 15, 1998, the Company held its Annual Meeting of Stockholders.
At the meeting, eight directors were elected to serve for a one-year term and
until their successors are duly elected and qualify. The directors elected
were: Jerry M. Sudarsky, Joel S. Marcus, Alan D. Gold, Richard Jennings,
Joseph Elmaleh, Viren Mehta, David M. Petrone and Anthony Solomon. There are
no other directors of the Company. A total of 10,902,809 shares voted "for"
each of the directors, 0 voted "against" and 16,180 shares abstained.
21
<PAGE>
In addition, the stockholders voted to ratify the selection of Ernst & Young
LLP as the Company's independent public accountants for the fiscal year
ending December 31, 1998. A total of 10,906,149 shares voted "for" the
ratification, 7,300 voted "against" and 5,540 shares abstained.
The stockholders also voted to amend the Company's 1997 Stock Award and
Incentive Plan (the "Plan") to increase the number of shares of common stock
of the Company available for issuance thereunder from 900,000 shares to that
number of shares equal to 10% of the number of shares of common stock
outstanding at any time, PROVIDED, that in no event shall the number of
shares available for issuance under the Plan exceed 3,000,000 shares of
common stock. A total of 6,308,959 shares voted "for" the amendment,
3,803,380 voted "against" and 17,982 shares abstained.
ITEM 5. OTHER INFORMATION
None.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits
10.20* Amended and Restated 1997 Stock Award and Incentive Plan of the
Registrant
10.21 Amended and Restated Executive Employment Agreement by and between
the Registrant and Peter J. Nelson, dated May 20, 1998 and effective
as of January 1, 1998
10.22 Registration Rights Agreement by and between the Registrant and
Painewebber Incorporated, dated May 29, 1998
27.1* Financial Data Schedule
- -------------
* Incorporated by reference to the Registrant's Quarterly Report on
Form 10-Q for the quarterly period ended June 30, 1998, filed with the
Commission on August 14, 1998.
(b) Reports on Form 8-K.
On April 9, 1998, the Company filed a Current Report on Form 8-K, dated March
26, 1998, to report the acquisition of one Life Science Facility and certain
vacant land in San Diego, California.
On May 27, 1998, the Company filed a Current Report on Form 8-K, dated May 27,
1998, to report the acquisition of fourteen Life Science Facilities.
On June 23, 1998, the Company filed a Current Report on Form 8-K, dated May
27, 1998, to report the sale of 1,150,000 shares of common stock to
PaineWebber Incorporated for inclusion in the PaineWebber Equity Trust REIT
Series I, a unit investment trust.
22
<PAGE>
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized on August 18, 1998.
ALEXANDRIA REAL ESTATE EQUITIES, INC.
/s/ JOEL S. MARCUS
-------------------------------------------------
Joel S. Marcus
Chief Executive Officer
(Principal Executive Officer)
/s/ PETER J. NELSON
-------------------------------------------------
Peter J. Nelson
Chief Financial Officer, Treasurer and Secretary
(Principal Financial and Accounting Officer)
23
<PAGE>
EXHIBIT INDEX
EX. NO. DESCRIPTION
- ------- -----------
10.20* Amended and Restated 1997 Stock Award and Incentive Plan of the
Registrant
10.21 Amended and Restated Executive Employment Agreement by and between
the Registrant and Peter J. Nelson, dated May 20, 1998 and effective
as of January 1, 1998
10.22 Registration Rights Agreement by and between the Registrant and
Painewebber Incorporated, dated May 29, 1998
27.1* Financial Data Schedule
- -------------
* Incorporated by reference to the Registrant's Quarterly Report on
Form 10-Q for the quarterly period ended June 30, 1998, filed with the
Commission on August 14, 1998.
24
<PAGE>
EXHIBIT 10.21
- --------------------------------------------------------------------------------
AMENDED AND RESTATED
EXECUTIVE EMPLOYMENT AGREEMENT
by and between
ALEXANDRIA REAL ESTATE EQUITIES, INC.,
a Maryland corporation,
and
PETER J. NELSON,
an individual
_______________________________________________________________________________
<PAGE>
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 Adjustments in Base Salary. . . . . . . . . . . . . . . . . . 3
3.3 Discretionary Bonus . . . . . . . . . . . . . . . . . . . . . 3
3.4 Additional Benefits . . . . . . . . . . . . . . . . . . . . . 3
(a) Officer Benefits. . . . . . . . . . . . . . . . . . 3
(b) Vacation. . . . . . . . . . . . . . . . . . . . . . 4
(c) Life and Disability Insurance . . . . . . . . . . . 4
(d) Reimbursement for Expenses. . . . . . . . . . . . . 4
(e) Withholding . . . . . . . . . . . . . . . . . . . . 5
4. Termination of this 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) Termination For Good Reason Following a
Change in Control. . . . . . . . . . . . . . . . . 7
4.3 Effect of Termination . . . . . . . . . . . . . . . . . . . . 9
(a) Termination by Corporation. . . . . . . . . . . . . 9
(i) Termination Without Cause. . . . . . . . . . 9
(ii) Termination For Cause,
Death or Disability . . . . . . . . . . . . 9
(b) Termination by Officer. . . . . . . . . . . . . . . 10
(i) Termination Other Than For Good
Reason. . . . . . . . . . . . . . . . . . . 10
(ii) Termination For Good Reason. . . . . . . . . 10
4.4 Severance Payment . . . . . . . . . . . . . . . . . . . . . . 10
(a) Definition of "Severance Payment.". . . . . . . . . 10
i
<PAGE>
(b) Other Severance Benefits. . . . . . . . . . . . . . 11
(c) Full Settlement of All Obligations. . . . . . . . . 11
(d) Change in Control . . . . . . . . . . . . . . . . . 11
4.5 Gross-Up. . . . . . . . . . . . . . . . . . . . . . . . . . . 13
4.6 Offset. . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
5. Noncompetition/Nonsolicitation. . . . . . . . . . . . . . . . . . . . . 14
6. Miscellaneous . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
6.1 Payment Obligations . . . . . . . . . . . . . . . . . . . . . 14
6.2 Confidentiality . . . . . . . . . . . . . . . . . . . . . . . 15
6.3 Waiver. . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
6.4 Entire Agreement; Modifications . . . . . . . . . . . . . . . 15
6.5 Notices . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
6.6 Headings. . . . . . . . . . . . . . . . . . . . . . . . . . . 16
6.7 Arbitration . . . . . . . . . . . . . . . . . . . . . . . . . 16
6.8 Severability. . . . . . . . . . . . . . . . . . . . . . . . . 17
6.9 Survival of Corporation's Obligations . . . . . . . . . . . . 17
6.10 Survival of Certain Rights and Obligations . . . . . . . . . 17
6.11 Counterparts . . . . . . . . . . . . . . . . . . . . . . . . 18
6.12 Indemnification. . . . . . . . . . . . . . . . . . . . . . . 18
ii
<PAGE>
AMENDED AND RESTATED
EXECUTIVE EMPLOYMENT AGREEMENT
THIS AMENDED AND RESTATED EXECUTIVE EMPLOYMENT AGREEMENT (this
"Agreement") is entered into as of the day of February, 1998, effective
the 1st day of January, 1998 (the "Effective Date"), by and between
ALEXANDRIA REAL ESTATE EQUITIES, INC., a Maryland corporation (the
"Corporation"), and PETER J. NELSON, an individual (the "Officer")
(hereinafter, Corporation and Officer will be referred to collectively as the
"Parties"), to read as follows:
RECITAL
WHEREAS, Corporation desires to employ Officer as its Chief
Financial Officer, Treasurer and Secretary, and Officer is willing 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 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 Chief
Financial Officer, Treasurer, Secretary, and Senior Vice President
Administration 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 capacities. Officer shall devote such of
his full 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 Executive Officer of the Corporation or such other
officer as the Chief Executive Officer shall direct with the approval of the
Board, and at all times during the Term shall have powers and duties at least
commensurate with his position as a senior executive officer. Officer shall
be based at the principal executive offices of Corporation in the Los
1
<PAGE>
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 the Effective Date and ending on December 31, 1998 (the
"Termination Date"), unless terminated earlier pursuant to this Agreement
(the "Early Termination Date"); PROVIDED, HOWEVER, that 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
ninety (90) days 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 shall refer to both the initial
Term and any such extended Term.
3. COMPENSATION, BENEFITS AND REIMBURSEMENT.
3.1 BASE SALARY. During the Term, Officer shall be entitled to
the following base salary:
(a) MINIMUM BASE. During the Term and subject to the terms
and conditions set forth herein, Corporation agrees to pay to Officer an
annual "Base Salary" of One Hundred Seventy Five Thousand Dollars ($175,000),
or such other 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 base 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 partial monthly installment prorated on a
daily basis up to and including the applicable Termination Date.
2
<PAGE>
3.2 ADJUSTMENTS IN BASE SALARY. Officer's Base Salary shall be
reviewed for the possibility of adjustments 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); PROVIDED,
HOWEVER, that the first such review shall take place as soon as practicable
following the end of the Corporation's 1997 fiscal year. The Base Salary
payable to Officer may be increased on each such date (and such other times
as the Board or a committee of the Board may deem appropriate during the
Term) to an amount determined by the Chief Executive Officer with the
concurrence of the Board (or a committee of the Board). Each such new Base
Salary shall become the base for each successive year increase. 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 DISCRETIONARY BONUS. During the Term if Officer is in good
standing as finally determined by the Chief Executive Officer with the
concurrence of the Board (or a committee of the Board), the Officer may be
eligible for a performance bonus. Officer may be eligible to receive a
discretionary bonus for each fiscal year of Corporation (or portion thereof)
during the Term, with the actual amount of any such bonus to be determined by
the Chief Executive Officer with the concurrence of the Board (or a committee
of the Board) based upon an evaluation of the Corporation's and Officer's
performance during such year and such other factors and conditions as the
Chief Executive Officer with the concurrence of the Board (or a committee of
the Board) deems relevant. Any such bonus shall be payable within one
hundred and twenty (120) days after the end of Corporation's fiscal year to
which such bonus relates.
3.4 ADDITIONAL BENEFITS. During the Term, Officer shall be
entitled to the following additional benefits:
(a) OFFICER BENEFITS. During the Term, Officer shall be
eligible to participate in such Corporation's benefit and deferred compensation
plans as are made available to executive officers of Corporation in accordance
with the terms and conditions of such plans, including, without limitation,
Corporation's stock incentive plans, annual incentive
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compensation plans, profit sharing/pension plans, deferred compensation
plans, annual physical examinations, dental, vision, sick pay, disability,
and medical plans, personal catastrophe and accidental death insurance plans,
financial planning and automobile arrangements, retirement plans and
supplementary executive retirement plans, if any. During the Term,
Corporation shall pay one hundred percent (100%) of Officer's medical
premiums under Corporation's medical plan and any other welfare benefit plans
for which Officer qualifies that are in existence from time-to-time.
(b) VACATION. During the Term, Officer shall be entitled
to up to three (3) weeks of paid vacation annualized during each calendar
year during the Term and any extensions thereof, prorated for partial years.
Accrued vacation not taken during any calendar year may be carried forward to
subsequent years; PROVIDED, THAT Officer may not accrue more than six (6)
weeks of unused vacation at any time.
(c) LIFE AND DISABILITY INSURANCE. During the Term,
Corporation shall, at its sole cost and expense, procure and keep in effect
term life insurance 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.
During the Term, Corporation shall, at its sole cost and
expense, procure and keep in effect disability insurance, payable to Officer
in an annual amount not less than sixty percent (60%) of Officer's then
existing Base Salary ("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.
(d) REIMBURSEMENT FOR EXPENSES. During the Term,
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
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then existing 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.
(e) 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 termination by Corporation other than termination for Cause
(as defined in Paragraph 4.1(b) below) or by reason of Officer's death or
Disability (as defined in Paragraph 4.1(c) 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 Material breach, repudiation or failure to comply with
or perform any of the terms of this Agreement, any of Officer's
duties, or any of Corporation's policies or procedures (including
without limitation any such policies or procedures relating to
conflicts of interests or standards of business conduct) or
deliberate interference with the compliance by any other employee
of Corporation with any of the foregoing;
(ii) The conviction of Officer for, or pleading by Officer of no
contest (or similar plea) to, fraud, embezzlement,
misappropriation of assets, malicious mischief, or any felony,
other than
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a crime for which vicarious liability is imposed upon Officer
solely by reason of Officer's position with Corporation and not
by reason of Officer's conduct;
(iii) Any other act, omission, event or condition constituting cause
for the discharge of any employee under applicable law.
Before terminating the Agreement pursuant to this Paragraph 4.1(b),
Corporation first shall have given Officer written notice specifying the
nature of the breach, repudiation or failure to comply and thirty (30) days
thereafter in which to cure such breach, repudiation or failure to comply,
and Officer shall have failed to cure. For purposes of this Paragraph
4.1(b), "Material" shall mean a breach, repudiation or failure that 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 if Officer is unable to work by reason of disability
for 180 days during any 365 day period, for disability ("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(d) below), under the
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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) TERMINATION FOR GOOD REASON FOLLOWING A CHANGE IN
CONTROL. Following a Change in Control (as defined in Paragraph 4.4(d)
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 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
travel on Corporation's business to an extent not substantially
consistent with 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
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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 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.
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.
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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 Agreement 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 6.10 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 DISABILITY. In the event
that Corporation terminates this Agreement for Cause pursuant to
Paragraph 4.1(b) above or by reason of 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 expens-
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es; 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 a lump sum amount (payable
within ten (10) days following such termination) 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) Officer's target bonus as determined by the Board (or a Committee of the
Board) as of the date of termination (or if such target has not yet been
determined, 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
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earned)) (the "Average Bonus"); PROVIDED, HOWEVER, that in the event that,
following a Change in Control (as defined in Paragraph 4.4(d) 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 otherwise payable during the Severance Period and the Average Bonus.
(b) 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.
(c) FULL SETTLEMENT OF ALL OBLIGATIONS. Officer hereby
acknowledges and agrees that any Severance Payment paid to Officer hereunder
shall be conditioned upon full and complete settlement of all obligations of
Corporation under this Agreement.
(d) 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,
(other than (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) 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
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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
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
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(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 Internal Revenue Code of 1986, as amended (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, state and local
income tax and excise tax upon the payment provided for by this Paragraph,
shall be equal to the Total Payments. 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,
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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; PROVIDED, HOWEVER, that such offset under this Paragraph 4.6 shall
not apply in the event of a Termination Upon a Change in Control.
5. NONCOMPETITION/NONSOLICITATION.
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 (i) engage in any activity competitive with the business of
Corporation or (ii) solicit any employee of the Corporation (or its
affiliates) to work for any business, individual, partnership, firm,
corporation or other entity then in competition with the business of the
Corporation (or any of its affiliates).
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
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Charter and By-Laws, indemnify Officer for Officer's reasonable attorneys'
fees and disbursements incurred in such arbitration.
6.2 CONFIDENTIALITY. Without limiting the scope of the
Agreement Regarding Proprietary Information between the Parties, dated as of
December 30, 1997 (the "Proprietary Information Agreement"), 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, 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 Agreement Regarding
Proprietary Information and any other 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 this 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.
135 North Los Robles Avenue, Suite 250
Pasadena, California 91101
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Phone: (626) 578-0777
Facsimile: (626) 578-0770
If to Officer: Peter J. Nelson
11978 Shonshone Avenue
Granada Hills, California 91344
Phone: (818) 368-2465
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 take place in Los Angeles, California and 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 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 arbitra-
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tion; 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.
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, 6.7, 6.10, 6.11 and 6.12 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 Charter
and By-Laws, Corporation shall indemnify Officer at all times during and
after
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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.
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/ Peter J. Nelson
-----------------------
Peter J. Nelson
Date: 5/20/98
------------
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EXHIBIT 10.22
REGISTRATION RIGHTS AGREEMENT
THIS REGISTRATION RIGHTS AGREEMENT is made and entered into as of May
29, 1998 by and between Alexandria Real Estate Equities, Inc., a Maryland
corporation (the "COMPANY"), and PaineWebber Incorporated (the "INITIAL
PURCHASER") pursuant to the Purchase Agreement dated as of May 27, 1998 (the
"PURCHASE AGREEMENT") between the Company and the Initial Purchaser. In
order to induce the Initial Purchaser to enter into the Purchase Agreement,
the Company has agreed to provide the registration and other rights set forth
in this Agreement. The execution and delivery of this Agreement is a
condition to the closing under the Purchase Agreement.
The Company agrees with the Initial Purchaser, (i) for its benefit as
Initial Purchaser and (ii) for the benefit of the beneficial owners
(including the Initial Purchaser) from time to time of the Shares (as defined
herein) (each of the foregoing, a "HOLDER" and together the "HOLDERS"), it
being understood that for purposes of this Agreement, the term "beneficial
owner" shall not mean any person holding an interest in a unit investment
trust solely by reason of such holding, as follows:
SECTION 1. DEFINITIONS. Capitalized terms used herein without
definition shall have their respective meanings set forth in the Purchase
Agreement. As used in this Agreement, the following terms shall have the
following meanings:
AFFILIATE means with respect to any specified person, an "affiliate" of
such person as defined in Rule 144(a)(1).
AMENDMENT EFFECTIVENESS DEADLINE DATE has the meaning set forth in
Section 3(d) hereof.
BUSINESS DAY means each Monday, Tuesday, Wednesday, Thursday and Friday
that is not a day on which banking institutions in The City of New York are
authorized or obligated by law or executive order to close.
COMMON STOCK means the shares of common stock, $.01 par value per share,
of the Company.
DEFERRAL NOTICE has the meaning set forth in Section 4(i) hereof.
DEFERRAL PERIOD means the period during which the availability of any
Registration Statement and Prospectus is suspended pursuant to Section 4(i)
hereof.
EFFECTIVENESS DEADLINE DATE has the meaning set forth in Section 3(a)
hereof.
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EFFECTIVENESS PERIOD means the period commencing with the date hereof
and ending on the date that all Registrable Securities have ceased to be
Registrable Securities.
EXCHANGE ACT means the Securities Exchange Act of 1934, as amended, and
the rules and regulations of the SEC promulgated thereunder.
FILING DEADLINE DATE has the meaning set forth in Section 3(a) hereof.
HOLDER has the meaning set forth in the second paragraph of this
Agreement.
INITIAL PURCHASER has the meaning set forth in the first paragraph of
this Agreement.
INITIAL SHELF REGISTRATION STATEMENT has the meaning set forth in
Section 3(a) hereof.
MATERIAL EVENT has the meaning set forth in Section 4(i) hereof.
NOTICE AND QUESTIONNAIRE means a written notice delivered to the Company
containing substantially the information called for by the Selling
Securityholder Notice and Questionnaire attached as APPENDIX A hereto.
NOTICE HOLDER means on any date any Holder that has delivered a duly
completed Notice and Questionnaire to the Company on or prior to such date.
PROSPECTUS means the prospectus included in any Registration Statement
(including, without limitation, a prospectus that discloses information
previously omitted from a prospectus filed as part of an effective
registration statement in reliance upon Rule 430A promulgated under the
Securities Act), as amended or supplemented by any amendment or prospectus
supplement, including post-effective amendments, and all material
incorporated by reference in such Prospectus.
PURCHASE AGREEMENT has the meaning set forth in the first paragraph of
this Agreement.
REGISTRABLE SECURITIES means the Shares and any securities into or for
which the Shares have been converted or exchanged, and any security issued
with respect thereto upon any stock dividend, split or similar event until,
in the case of any such security (A) the earliest of (i) its sale under an
effective Registration Statement, (ii) expiration of the holding period
required under Rule 144(k) were it not held by an affiliate of the Company or
(iii) its sale pursuant to Rule 144 and (B) as a result of the event or
circumstance described in the foregoing clauses (A)(i) through (A)(iii), the
legends with respect to transfer restrictions required pursuant to the
Purchase Agreement are removed (x) (i) due to compliance with the terms of
Rule 144 or (ii) pursuant to an effective Registration Statement and (y)
pursuant to the policies and procedures of the Transfer Agent and Registrar.
REGISTRATION STATEMENT means any registration statement of the Company that
covers any of the Registrable Securities pursuant to the provisions of this
Agreement, including the
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Prospectus, amendments and supplements to such registration statement,
including post-effective amendments, all exhibits, and all material
incorporated by reference in such registration statement.
RULE 144 means Rule 144 under the Securities Act, as such Rule may be
amended from time to time, or any similar rule or regulation hereafter
adopted by the SEC.
RULE 144A means Rule 144A under the Securities Act, as such Rule may be
amended from time to time, or any similar rule or regulation hereafter
adopted by the SEC.
SALE NOTICE has the meaning set forth in Section 2 hereof.
SEC means the Securities and Exchange Commission.
SECURITIES ACT means the Securities Act of 1933, as amended, and the
rules and regulations promulgated by the SEC thereunder.
SHARES means the shares of Common Stock to be purchased by the Initial
Purchaser pursuant to the Purchase Agreement.
SHELF REGISTRATION STATEMENT means the Initial Shelf Registration
Statement or a Subsequent Shelf Registration Statement.
SUBSEQUENT SHELF REGISTRATION STATEMENT has the meaning set forth in
Section 3(b) hereof.
TRANSFER AGENT AND REGISTRAR means American Stock Transfer & Trust
Company (or any successor entity), as the transfer agent and registrar for
the Common Stock.
SECTION 2. SALES OF REGISTRABLE SECURITIES. At any time prior to the
expiration of the Effectiveness Period, if a Registration Statement is not
then in effect (including, without limitation, because of a Deferral Period),
upon notice (a "SALE NOTICE") from any Notice Holder of such Notice Holder's
intent to sell Registrable Securities (which notice shall indicate the number
of Registrable Securities to be sold), the Company shall have the following
rights and obligations with respect to such Sale Notice and the sale and/or
purchase of such Registrable Securities:
(a) (i) If the Sale Notice is delivered to the Company prior to
5:00 p.m. New York time on any Business Day, the Company shall have until the
close of trading on the first succeeding Business Day on which trading of the
Common Stock occurs on the principal exchange or quotation system on which
the Common Stock is traded or quoted to offer to purchase such Registrable
Securities at a price per share in cash equal to the closing sales price for
the Common Stock on the principal exchange or quotation system for the Common
Stock (the "EXCHANGE") on the date of such Sale Notice (or at such other
price mutually agreed between the Company and the relevant Notice Holder); or
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(ii) If the Sale Notice is delivered to the Company after 5:00
P.M. New York time on any Business Day (or at any time on any day which is
not a Business Day), the Company shall have until the commencement of
trading on the earlier of (x) the second succeeding Business Day on which
trading of the Common Stock occurs on the principal exchange or quotation
system on which the Common Stock is traded or quoted or (y) the second
succeeding Business Day to offer to purchase such Registrable Securities at
a price per share in cash equal to the closing sales price for the Common
Stock on the principal exchange or quotation system on which the Common
Stock is traded or quoted on the last day on which trading of the Common
Stock occurs thereon immediately prior to the date of such Sale Notice (or
at such other price mutually agreed between the Company and the relevant
Notice Holder).
(b) If the Company shall have offered to purchase the Registrable
Securities indicated in a Sale Notice in accordance with Section 2(a) hereof,
the Company shall be obligated to purchase, and the relevant Notice Holder
shall be obligated to sell, such Registrable Securities, with settlement to
occur in accordance with the rules and regulations of the SEC and the
principal exchange or quotation system on which the Common Stock is traded or
quoted, and the Company and the relevant Notice Holder shall enter into
customary documentation appropriate to such purchase and sale.
(c) If the Company shall have failed to offer to purchase the
Registrable Securities indicated in a Sale Notice pursuant to Section 2(a)
hereof, the Notice Holder shall be entitled to negotiate and enter into a
contract for the sale of such Registrable Securities (for cash) with any
other party in its sole discretion. In connection with the negotiation and
execution of any sale contract pursuant to this Section 2(c), if requested
the Company agrees to (i) make reasonably available for inspection by the
relevant Notice Holder and any parties to whom such Notice Holder intends to
sell Registrable Securities and any attorneys and accountants retained by any
such party, all relevant financial and other records, pertinent corporate
documents and properties of the Company and its subsidiaries, and (ii) cause
the executive officers, directors and designated employees of the Company and
its subsidiaries to make reasonably available for inspection all relevant
information reasonably requested by such parties or any such attorneys or
accountants in connection with such sale; PROVIDED, HOWEVER, that any
information that is designated by the Company, in good faith, as confidential
at the time of delivery of such information shall be kept confidential by
such parties or any such attorney or accountant, unless such disclosure is
made in connection with a court proceeding or is required by law, or such
information becomes available to the public generally or through a third
party without an accompanying obligation of confidentiality.
(d) The Company agrees that it shall promptly upon demand pay to
any Notice Holder that sells Registrable Securities pursuant to Section 2(c)
hereof an amount in cash equal to the difference between (x) the last sales
price of the Common Stock on the principal exchange or quotation system on
which the Common Stock is traded or quoted immediately preceding the date and
time at which the relevant purchase and sale agreement is executed multiplied
by the number of shares of Common Stock sold and (y) the aggregate
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price at which such Registrable Securities are sold pursuant to Section 2(c)
hereof; PROVIDED, HOWEVER, that, with respect to any sale, the Company shall
not be liable to any Holder pursuant to this sentence for in excess of 5.0%
of the amount determined pursuant to clause (x) of this sentence. The
Company shall also bear or reimburse each Notice Holder for such Holder's
reasonable out-of-pocket expenses (including reasonable fees and
disbursements of counsel) in connection with the negotiation and execution of
any such sale contract, whether or not consummated.
SECTION 3. SHELF REGISTRATION.
(a) The Company shall prepare and file with the SEC, as soon as
practicable but in any event by the date (the "FILING DEADLINE DATE") 30 days
after the date hereof, a registration statement for an offering to be made on
a delayed or continuous basis pursuant to Rule 415 of the Securities Act, as
such Rule may be amended from time to time, or any similar rule or regulation
hereafter adopted by the SEC, registering the resale from time to time by
Holders thereof of all of the Registrable Securities (the "INITIAL SHELF
REGISTRATION STATEMENT"). The Initial Shelf Registration Statement shall be
on Form S-3 or another appropriate form permitting registration of such
Registrable Securities for resale by such Holders in accordance with the
methods of distribution elected by the Holders and set forth in the Initial
Shelf Registration Statement. The Company shall use its best efforts to
cause the Initial Shelf Registration Statement to become effective under the
Securities Act as promptly as is practicable but in any event by the date
(the "EFFECTIVENESS DEADLINE DATE") 90 days after the date hereof, and to
keep the Initial Shelf Registration Statement continuously effective under
the Securities Act until the expiration of the Effectiveness Period. At the
time the Initial Shelf Registration Statement becomes effective, each Holder
shall be named as a selling securityholder in the Initial Shelf Registration
Statement and the related Prospectus in such a manner as to permit such
Holder to deliver such Prospectus to purchasers of Registrable Securities in
accordance with applicable law; PROVIDED, HOWEVER, that the Company shall not
be obligated to include such Holder as a selling securityholder if the
Company shall have reasonably requested additional information from such
Holder and the Holder shall have failed to provide such information at least
ten days prior to such time of effectiveness.
(b) If a Shelf Registration Statement ceases to be effective for
any reason at any time during the Effectiveness Period, the Company shall use
its best efforts to obtain the prompt withdrawal of any order suspending the
effectiveness thereof, and in any event shall within 15 days of such
cessation of effectiveness amend the Shelf Registration Statement in a manner
reasonably expected to obtain the withdrawal of the order suspending the
effectiveness thereof, or file an additional Shelf Registration Statement
covering all of the securities that as of the date of such filing are
Registrable Securities (a "SUBSEQUENT SHELF REGISTRATION STATEMENT"). If a
Subsequent Shelf Registration Statement is filed, the Company shall use its
best efforts to cause the Subsequent Shelf Registration Statement to become
effective as promptly as is practicable after such filing and to keep the
Subsequent Registration Statement continuously effective until the end of the
Effectiveness Period.
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(c) The Company shall supplement and amend the Shelf Registration
Statement if reasonably requested by the holders of a majority of shares
constituting Registrable Securities unless it is determined, in writing, by
counsel for the Company not to be required by the Securities Act taking into
consideration all relevant facts and circumstances, including, without
limitation, the Holders' anticipated methods of distribution of the
Registrable Securities.
(d) Each Holder wishing to sell Registrable Securities pursuant to
a Shelf Registration Statement and related Prospectus agrees to deliver a
duly completed Notice and Questionnaire to the Company at least ten Business
Days prior to the initial intended distribution of Registrable Securities by
such Holder under the Shelf Registration Statement. From and after the date
the Initial Shelf Registration Statement becomes effective, the Company
shall, as promptly as is practicable after the date a Notice and
Questionnaire is delivered, and in any event within seven Business Days after
receipt of a completed Notice and Questionnaire:
(i) if required by applicable law, file with the SEC a
post-effective amendment to the Shelf Registration Statement or prepare and,
if required by applicable law, file a supplement to the related Prospectus or
a supplement or amendment to any document incorporated therein by reference
or file any other required document so that the Holder delivering such Notice
and Questionnaire is named as a selling securityholder in the Shelf
Registration Statement and the related Prospectus in such a manner as to
permit such Holder to deliver such Prospectus to purchasers of the
Registrable Securities in accordance with applicable law; PROVIDED, HOWEVER,
that the Company shall not be obligated to include such Notice Holder as a
selling securityholder if the Company shall have reasonably requested
additional information from such Notice Holder until the Notice Holder shall
have provided such requested information; and, if the Company shall file a
post-effective amendment to the Shelf Registration Statement, the Company
shall use its best efforts to cause such post-effective amendment to become
effective under the Securities Act as promptly as is practicable, but in any
event by the date (the "AMENDMENT EFFECTIVENESS DEADLINE DATE") 45 days after
the date such post-effective amendment is required by this clause to be filed;
(ii) provide such Holder a copy of any documents filed
pursuant to Section 3(d)(i) hereof; and
(iii) notify such Holder as promptly as practicable after
the effectiveness under the Securities Act of any post-effective amendment
filed pursuant to Section 3(d)(i) hereof; PROVIDED, HOWEVER, that if such
Notice and Questionnaire is delivered during a Deferral Period, the Company
shall so inform the Holder delivering such Notice and Questionnaire and shall
take the actions set forth in clauses (i), (ii) and (iii) above, to the
extent necessary, upon expiration of the Deferral Period in accordance with
Section 4(i). The Company shall be under no obligation to name any Holder
that is not a Notice Holder as a selling securityholder in any Shelf
Registration Statement or related Prospectus.
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SECTION 4. REGISTRATION PROCEDURES. In connection with the
registration obligations of the Company under Section 3 hereof, the Company
shall:
(a) Before filing any Registration Statement or Prospectus or any
amendments or supplements thereto with the SEC, furnish to the Initial
Purchaser three copies of all such documents proposed to be filed.
(b) Prepare and file with the SEC such amendments and
post-effective amendments to each Registration Statement as may be necessary
to keep such Registration Statement continuously effective from the
Effectiveness Deadline Date to the expiration of the Effectiveness Period;
cause the related Prospectus to be supplemented by any required prospectus
supplement, and as so supplemented to be filed pursuant to Rule 424 (or any
similar provisions then in force) under the Securities Act; and use its best
efforts to comply with the provisions of the Securities Act applicable to it
with respect to the disposition of all securities covered by such
Registration Statement until the expiration of the Effectiveness Period in
accordance with the intended methods of disposition by the sellers thereof
set forth in such Registration Statement as so amended or such Prospectus as
so supplemented.
(c) As promptly as practicable, give notice to the Holders and the
Initial Purchaser (i) when any Prospectus, prospectus supplement,
Registration Statement or post-effective amendment to a Registration
Statement has been filed with the SEC and, with respect to a Registration
Statement or any post-effective amendment, when the same has become
effective, (ii) of any request, following the effectiveness of the Initial
Shelf Registration Statement under the Securities Act, by the SEC or any
other federal or state governmental authority for amendments or supplements
to any Registration Statement or related Prospectus or for additional
information, (iii) of the issuance by the SEC or any other federal or state
governmental authority of any stop order suspending the effectiveness of any
Registration Statement or the initiation or threatening 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 occurrence of a Material Event and (vi) of the
determination by the Company that a post-effective amendment to a
Registration Statement would be appropriate, which notice may, at the
discretion of the Company (or as required pursuant to Section 4(i)), state
that it constitutes a Deferral Notice, in which event the provisions of
Section 4(i) shall apply.
(d) Use its best efforts to 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
of the Registrable Securities for sale in any jurisdiction in which they have
been qualified for sale, in either case as promptly as reasonably practicable.
(e) If reasonably requested by the Initial Purchaser or any Notice
Holder, as promptly as practicable incorporate in a prospectus supplement or
post-effective amendment to a Registration Statement such information as the
Initial Purchaser or such Notice Holder shall,
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based on the advice of counsel, determine to be required to be included
therein by applicable law and make any required filings of such prospectus
supplement or such post-effective amendment; PROVIDED, HOWEVER, that the
Company shall not be required to take any actions under this Section 4(e)
that are not, based on the written advice of counsel for the Company, in
compliance with applicable law or during a Deferral Period.
(f) As promptly as practicable furnish to each Notice Holder and
the Initial Purchaser, without charge, at least one conformed copy of any
Registration Statement and any amendment thereto, including exhibits, and all
documents incorporated or deemed to be incorporated therein by reference.
(g) Deliver to each Notice Holder in connection with any sale of
Registrable Securities pursuant to a Registration Statement, without charge,
as many copies of the Prospectus relating to such Registrable Securities
(including each preliminary prospectus) and any amendment or supplement
thereto as such Notice Holder may reasonably request; and the Company hereby
consents to the use of the Prospectus and each amendment or supplement
thereto by each Notice Holder in connection with any offering and sale of the
Registrable Securities covered by such Prospectus or any amendment or
supplement thereto in the manner set forth therein.
(h) Prior to any public offering of the Registrable Securities,
register or qualify or cooperate with the Notice Holders in connection with
the registration or qualification (or exemption from such registration or
qualification) of such Registrable Securities for offer and sale under the
securities or Blue Sky laws of such jurisdictions within the United States as
any Notice Holder reasonably requests in writing (which request shall be
included in the Notice and Questionnaire); keep each such registration or
qualification (or exemption therefrom) effective during the Effectiveness
Period and do any and all other acts or things necessary or advisable to
enable the disposition in such jurisdictions of such Registrable Securities
in the manner set forth in the applicable Registration Statement and the
related Prospectus; PROVIDED, HOWEVER, that the Company shall not be required
to register or qualify as a foreign corporation where it is not now so
qualified or to take any action that would subject it to the service of
process in suits or to taxation, other than as to matters and transactions
relating to the Registration Statement and the related Prospectus, in any
jurisdiction where it is not now so subject.
(i) Upon (A) the issuance by the SEC of a stop order suspending
the effectiveness of the Shelf Registration Statement or the initiation of
proceedings with respect to the Shelf Registration Statement under Section
8(d) or 8(e) of the Securities Act, (B) the occurrence of any event or the
existence of any fact (a "MATERIAL EVENT") as a result of which any
Registration Statement shall 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, or any Prospectus shall
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 the light of the circumstances under which they were made, not
misleading, or (C) the occurrence or existence of any pending corporate
development or public filing with the
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SEC that, in the discretion of the Company, makes it appropriate to suspend
the availability of the Shelf Registration Statement and the related
Prospectus, the Company shall:
(i) in the case of clause (B) above, subject to the next
sentence, as promptly as practicable prepare and file, if necessary pursuant
to applicable law, a 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 that would be
incorporated by reference into such Registration Statement and Prospectus so
that such Registration Statement does 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 such
Prospectus does 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 the light of the circumstances under which they
were made, not misleading, as thereafter delivered to the purchasers of the
Registrable Securities being sold thereunder, and, in the case of a
post-effective amendment to a Registration Statement, subject to the next
sentence, use its best efforts to cause such Registration Statement to become
effective as promptly as is practicable, and
(ii) give notice to the Notice Holders that the
availability of the Shelf Registration Statement is suspended (a "DEFERRAL
NOTICE") and, upon receipt of any Deferral Notice, each Notice Holder shall
not sell any Registrable Securities pursuant to the Registration Statement
until such Notice Holder's receipt of copies of the supplemented or amended
Prospectus provided for in clause (i) above, or until it (x) is advised in
writing by counsel for the Company that the Prospectus may be used and (y)
has received copies of any additional or supplemental filings that are
incorporated or deemed incorporated by reference in such Prospectus.
The Company will use its best efforts to ensure that the use of the
Prospectus may be resumed (x) in the case of clause (A) above, as promptly as
is practicable, (y) in the case of clause (B) above, as soon as, in the sole
judgment of the Company, public disclosure of such Material Event would not
be prejudicial to or contrary to the interests of the Company or, if
necessary to avoid unreasonable burden or expense, as soon as practicable
thereafter and (z) in the case of clause (C) above, as soon as, in the
discretion of the Company, such suspension is no longer appropriate.
Notwithstanding the foregoing, the Company may not (i) impose in excess of
two Deferral Periods (which together shall not exceed 60 days) during any
12-month period or (ii) at any time, impose a Deferral Period if a Deferral
Period has been in effect within the preceding seven days.
(j) Enter into such customary agreements and take all such other
customary actions in connection therewith (including those requested by the
Holders of a majority of the Shares constituting Registrable Securities being
sold) in order to expedite or facilitate the disposition of such Registrable
Securities including, but not limited to, an underwritten offering and in
connection therewith:
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(i) provide customary indemnities to underwriters in
connection with underwritten offerings and to the extent possible, make such
representations and warranties to the Holders and any underwriters of such
Registrable Securities with respect to the business of the Company and its
subsidiaries, the Registration Statement, Prospectus and documents
incorporated by reference therein, if any, in each case, in form, substance
and scope as are customarily made by issuers to underwriters in underwritten
offerings and confirm the same if and when requested;
(ii) obtain opinions of counsel to the Company and
updates thereof (which counsel and opinions, in form, scope and substance,
shall be reasonably satisfactory to the Holders of a majority of the Shares
constituting Registrable Securities being sold, such underwriters and their
respective counsel) addressed to each selling Holder and underwriter of
Registrable Securities, covering the matters customarily covered in opinions
requested in underwritten offerings;
(iii) obtain "cold comfort" letters and updates thereof
from the independent certified public accountants of the Company (and, if
necessary, any other certified public accountant of any subsidiary of the
Company, or of any business acquired or to be acquired by the Company for
which financial statements and financial data are or are required to be
included in the Registration Statement) addressed to each selling Holder and
underwriter of Registrable Securities, such letters to be in customary form
and covering matters of the type customarily covered in "cold comfort"
letters in connection with underwritten offerings; and
(iv) deliver such documents and certificates as may be
reasonably requested by the Holders of a majority of the Shares constituting
Registrable Securities being sold, the underwriters and their respective
counsel to evidence the continued validity of the representations and
warranties of the Company made pursuant to clause (i) above and to evidence
compliance with any customary conditions contained in the underwriting
agreement or other agreement entered into by the Company.
The above shall be done at each closing under such underwriting or similar
agreement as and to the extent required thereunder.
(k) If requested in connection with a disposition of Registrable
Securities pursuant to a Registration Statement, make reasonably available
for inspection by the Notice Holders of such Registrable Securities and any
broker-dealers, attorneys and accountants retained by such Notice Holders,
all relevant financial and other records, pertinent corporate documents and
properties of the Company and its subsidiaries that are not otherwise
publicly available, and cause the executive officers, directors and
designated employees of the Company and its subsidiaries to make reasonably
available for inspection all relevant information reasonably requested by
such Notice Holders or any such broker-dealers, attorneys or accountants that
is not otherwise publicly available in connection with such disposition, in
each case as is customary for similar "due diligence" examinations; PROVIDED,
HOWEVER, that any information that is designated by the Company, in good
faith, as confidential at the time of delivery of such information shall be
kept confidential by such
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Notice Holders or any such broker-dealer, attorney or accountant, unless such
disclosure is made in connection with a court proceeding or is required by
law, or such information becomes available to the public generally or through
a third party without an accompanying obligation of confidentiality.
(l) Comply with all applicable rules and regulations of the SEC
and make generally available to its securityholders earning statements (which
need not be audited) satisfying the provisions of Section 11(a) of the
Securities Act and Rule 158 thereunder (or any similar rule promulgated under
the Securities Act) no later than 45 days after the end of any 12-month
period (or 90 days after the end of any 12-month period if such period is a
fiscal year) commencing on the first day of the first fiscal quarter of the
Company commencing after the effective date of a Registration Statement,
which statements shall cover said 12-month period.
(m) Cooperate with each Notice Holder to facilitate the timely
preparation and delivery of certificates representing Registrable Securities
to be sold pursuant to a Registration Statement, which certificates shall not
bear any restrictive legends, and cause such Registrable Securities to be in
such denominations and registered in such names as such Notice Holder may
request.
(n) Provide a CUSIP number for all Registrable Securities not
later than the effective date of the Initial Shelf Registration Statement and
provide the Transfer Agent and Registrar with printed certificates for the
Registrable Securities that are in a form eligible for deposit with the
Depository Trust Company.
(o) Provide such information as is required for any filings
required to be made with NASD Regulation, Inc.
SECTION 5. HOLDER'S OBLIGATIONS. Each Holder agrees, by acquisition
of the Registrable Securities, that no Holder of Registrable Securities shall
be entitled to sell any of such Registrable Securities pursuant to a
Registration Statement or to receive a Prospectus relating thereto, or to
receive the benefits of Section 2 or 3 hereof, unless such Holder has
furnished the Company with a Notice and Questionnaire as required pursuant to
Section 3(d) hereof (including the information required to be included in
such Notice and Questionnaire) and the information set forth in the next
sentence. Each Notice Holder shall promptly furnish to the Company all
information required to be disclosed in order to make the information
previously furnished to the Company by such Notice Holder not misleading and
any other information regarding such Notice Holder and the distribution of
such Registrable Securities as the Company may from time to time reasonably
request. Any sale of any Registrable Securities by any Holder pursuant to a
Registration Statement shall constitute a representation and warranty by such
Holder that the information relating to such Holder and its plan of
distribution is as set forth in the Prospectus delivered by such Holder in
connection with such disposition, that such Prospectus does not as of the
time of such sale contain any untrue statement of a material fact relating to
or provided by such Holder or relating to its plan of distribution and that
such Prospectus does not as of the time of such sale omit to state any
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material fact relating to or provided by such Holder or relating to its plan
of distribution necessary to make the statements in such Prospectus, in the
light of the circumstances under which they were made, not misleading.
SECTION 6. EXPENSES. The Company shall bear all fees and expenses
incurred in connection with the performance by the Company of its obligations
under Sections 2, 3 and 4 hereof whether or not any Registration Statement
becomes effective. Such fees and expenses shall include, without limitation,
(i) all registration and filing fees (including, without limitation, fees and
expenses (x) with respect to filings required to be made with NASD
Regulation, Inc. and (y) to comply with federal and state securities or Blue
Sky laws), (ii) reasonable printing expenses (including, without limitation,
expenses of printing certificates for Registrable Securities in a form
eligible for deposit with The Depository Trust Company), (iii) reasonable
duplication expenses relating to copies of any Registration Statement or
Prospectus delivered to any Holders hereunder, (iv) fees and disbursements of
counsel for the Company in connection with any Shelf Registration Statement
and any opinion reasonably requested of such counsel by the Transfer Agent
and Registrar and (v) reasonable fees and disbursements of the Transfer Agent
and Registrar. In addition, the Company shall pay the internal expenses of
the Company (including, without limitation, all salaries and expenses of
officers and employees performing legal or accounting duties), the expense of
any annual audit, the fees and expenses incurred in connection with the
listing of the Registrable Securities on any securities exchange on which
similar securities of the Company are then listed and the fees and expenses
of any person, including special experts, retained by the Company.
Notwithstanding the provisions of this Section 6, each seller of Registrable
Securities shall pay all registration expenses to the extent the Company is
prohibited by applicable Blue Sky laws from paying such expenses for or on
behalf of such seller of Registrable Securities. In addition, the Company
shall bear the fees and expenses described in Section 2(d) hereof.
SECTION 7. INDEMNIFICATION.
(a) The Company will indemnify and hold harmless the Initial
Purchaser and each Holder, the directors, officers, employees and agents of
the Initial Purchaser and each Holder, and each person, if any, who controls
the Initial Purchaser and each Holder within the meaning of Section 15 of the
Securities Act or Section 20 of the Exchange Act, from and against any and
all losses, claims, liabilities, expenses and damages (including, but not
limited to, any and all investigative, legal and other expenses reasonably
incurred (in accordance with subsection (c) below) in connection with, and
any and all amounts paid in settlement of, any action, suit or proceeding
between any of the indemnified parties and any indemnifying parties or
between any indemnified party and any third party, or otherwise, or any claim
asserted), as and when incurred, to which any such person, may become subject
under the Securities Act, the Exchange Act or other Federal or state
statutory law or regulation, at common law or otherwise, insofar as such
losses, claims, liabilities, expenses or damages arise out of or are based on
(i) any untrue statement or alleged untrue statement of a material fact
contained in any Registration Statement or any amendment or supplement
thereto, or in any application or other document executed by the Company
filed in any jurisdiction in order to qualify the
12
<PAGE>
Shares under the securities laws thereof or filed with the SEC, (ii) the
omission or alleged omission to state in such document a material fact
required to be stated in it or necessary to make the statements in it not
misleading or (iii) any act or failure to act or any alleged act or failure
to act by the Initial Purchaser or such Holder in connection with, or
relating in any manner to, the Shares or the private placement contemplated
hereby, and which is included as part of or referred to in any loss, claim,
liability, expense or damage arising out of or based upon matters covered by
clause (i) or (ii) above (provided that the Company shall not be liable under
this clause (iii) to the extent it is finally judicially determined by a
court of competent jurisdiction that such loss, claim, liability, expense or
damage resulted directly from any such acts or failures to act undertaken or
omitted to be taken by the Initial Purchaser or such Holder through its gross
negligence or willful misconduct); provided that the Company will not be
liable to the extent that such loss, claim, liability, expense or damage
arises from the sale of the Shares in the offering to any person by the
Initial Purchaser or such Holder and results solely from an untrue statement
of a material fact contained in, or the omission of a material fact from,
such Registration Statement, which untrue statement or omission was
completely corrected in the Registration Statement (as then amended or
supplemented) if the Company shall sustain the burden of proving the Initial
Purchaser or such Holder sold Shares to the person alleging such loss, claim,
liability, expense or damage without sending or giving, at or prior to the
written confirmation of such sale, a copy of the Registration Statement (as
then amended or supplemented) if the Company had previously furnished copies
thereof to the Initial Purchaser or such Holder within a reasonable amount of
time (which in any event shall be no less than 24 hours) prior to the sale of
the Shares to the person asserting such loss, claim, liability, expense or
damage, and the Initial Purchaser or such Holder failed to deliver the
corrected Registration Statement, if required by law to have so delivered it
and if delivered would have been a complete defense against the person
asserting such loss, claim, liability, expense or damage. This indemnity
agreement will be in addition to any liability that the Company might
otherwise have.
(b) The Initial Purchaser and each Holder severally agrees to
indemnify and hold harmless the Company, 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 and each director of the Company to the same extent as
the foregoing indemnity from the Company to the Initial Purchaser and such
Holder, but only insofar as losses, claims, liabilities, expenses and damages
arise out of or are based on any untrue statement or omission or alleged
untrue statement or omission made in reliance on and in conformity with
information relating to the Initial Purchaser or such Holder furnished to the
Company by the Initial Purchaser or such Holder expressly for use in the
Registration Statement. This indemnity will be in addition to any liability
that the Initial Purchaser and such Holder might otherwise have; provided,
however, that in no case shall the Initial Purchaser or any Holder be liable
or responsible for any amount in excess of the net proceeds received by the
Initial Purchaser or such Holder from the sale of Registrable Securities
pursuant to the Registration Statement that gave rise to the indemnification
claim pursuant to this Section 7(b).
(c) Any party that proposes to assert the right to be indemnified
under this Section 7 will, promptly after receipt of notice of commencement
of any action against such
13
<PAGE>
party in respect of which a claim is to be made against an indemnifying party
or parties under this Section 7, notify each such indemnifying party of the
commencement of such action, enclosing a copy of all papers served, but the
omission so to notify such indemnifying party will not relieve it from any
liability that it may have to any indemnified party under the foregoing
provisions of this Section 7 unless, and only to the extent that, such
omission results in the forfeiture of substantive rights or defenses by the
indemnifying party. If any such action is brought against any indemnified
party and it notifies the indemnifying party of its commencement, the
indemnifying party will be entitled to participate in and, to the extent that
it elects by delivering written notice to the indemnified party promptly
after receiving notice of the commencement of the action from the indemnified
party, jointly with any other indemnifying party similarly notified, to
assume the defense of the action, with counsel reasonably satisfactory to the
indemnified party, and after notice from the indemnifying party to the
indemnified party of its election to assume the defense, the indemnifying
party will not be liable to the indemnified party for any legal fees or other
expenses of counsel in defending such action except as provided below and
except for the reasonable costs of investigation subsequently incurred by the
indemnified party in connection with the defense. The indemnified party will
have the right to employ its own counsel in any such action, but the fees,
expenses and other charges of such counsel will be at the expense of such
indemnified party unless (1) the employment of counsel by the indemnified
party has been authorized in writing by the indemnifying party, (2) the
indemnified party has reasonably concluded (based on advice of counsel) that
there may be legal defenses available to it or other indemnified parties that
are different from or in addition to those available to the indemnifying
party, (3) a conflict or potential conflict exists (based on advice of
counsel to the indemnified party) between the indemnified party and the
indemnifying party (in which case the indemnifying party will not have the
right to direct the defense of such action on behalf of the indemnified
party) or (4) the indemnifying party has not in fact employed counsel to
assume the defense of such action within a reasonable time after receiving
notice of the commencement of the action, in each of which cases the
reasonable fees, disbursements and other charges of counsel selected by the
indemnified party will be at the expense of the indemnifying party or
parties. It is understood that the indemnifying party or parties shall not,
in connection with any proceeding or related proceedings in the same
jurisdiction, be liable for the reasonable fees, disbursements and other
charges of more than one separate firm admitted to practice in such
jurisdiction at any one time for all such indemnified parties not having
actual or potential differing interests among themselves. All such fees,
disbursements and other charges will be reimbursed by the indemnifying party
promptly as they are incurred. An indemnifying party will not be liable for
any settlement of any action or claim effected without its written consent
(which consent will not be unreasonably withheld). No indemnifying party
shall, without the prior written consent of each indemnified party, settle or
compromise or consent to the entry of any judgment in any pending or
threatened claim, action or proceeding relating to the matters contemplated
by this Section 7 (whether or not any indemnified party is a party thereto),
unless such settlement, compromise or consent includes an unconditional
release of each indemnified party from all liability arising or that may
arise out of such claim, action or proceeding.
14
<PAGE>
(d) In order to provide for just and equitable contribution in
circumstances in which the indemnification provided for in the foregoing
paragraphs of this Section 7 is applicable in accordance with its terms but
for any reason is held to be unavailable from the Company on the one hand or
the Initial Purchaser and such Holder on the other, the Company on the one
hand and the Initial Purchaser and such Holder on the other will contribute
to the total losses, claims, liabilities, expenses and damages (including any
investigative, legal and other expenses reasonably incurred in connection
with, and any amount paid in settlement of, any action, suit or proceeding or
any claim asserted, but after deducting any contribution received by the
Company from persons other than the Initial Purchaser and such Holder, such
as persons who control the Company within the meaning of the Securities Act
and directors of the Company, who also may be liable for contribution) to
which the Company on the one hand and the Initial Purchaser and such Holders
on the other may be subject in such proportion as shall be appropriate to
reflect the relative benefits received by each. The relative benefits
received by the Company on the one hand and the Initial Purchaser on the
other shall be deemed to be in the same proportion as the total net proceeds
from the initial private placement by the Company (before deducting expenses)
of the Registrable Securities received by the Company bear to the total fees
received by the Initial Purchaser under the Purchase Agreement, in each case
as set forth in the Registration Statement; the relative benefits received by
the Company on the one hand and each Holder on the other shall be deemed to
be in the same proportion as the total net proceeds from the initial private
placement by the Company (before deducting expenses) of the Registrable
Securities to which such losses, claims, damages or liabilities relate bears
to the value to the Holder of receiving Registrable Securities that are
registered under the Securities Act. If, but only if, the allocation
provided by the foregoing sentence is not permitted by applicable law, the
allocation of contribution shall be made in such proportion as is appropriate
to reflect not only the relative benefits referred to in the foregoing
sentence but also the relative fault of the Company, on the one hand, and the
Initial Purchaser or such Holder, on the other, with respect to the
statements or omissions which resulted in such loss, claim, liability,
expense or damage, or action in respect thereof, as well as any other
relevant equitable considerations with respect to such private placement.
Such relative fault shall be determined by reference to whether the untrue or
alleged untrue statement of a material fact or omission or alleged omission
to state a material fact relates to information supplied by the Company or
the Initial Purchaser and such Holder, the intent of the parties and their
relative knowledge, access to information and opportunity to correct or
prevent such statement or omission. The Company, the Initial Purchaser and
such Holder agree that it would not be just and equitable if contributions
pursuant to this Section 7(d) were to be determined by pro rata allocation or
by any other method of allocation which does not take into account the
equitable considerations referred to herein. The amount paid or payable by
an indemnified party as a result of the loss, claim, liability, expense or
damage, or action in respect thereof, referred to above in this Section 7(d)
shall be deemed to include, for purpose of this Section 7(d), 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 7(d), the Initial Purchaser shall not be required
to contribute any amount in excess of the fees received by it under the
Purchase Agreement, no Holder shall be required to contribute any amount in
excess of the net proceeds received by such Holder from the sale of the
Registrable Securities that gave rise to the contribution
15
<PAGE>
obligation, and no person found guilty of fraudulent misrepresentation
(within the meaning of Section 11(f) of the Securities Act) will be entitled
to contribution from any person who was not guilty of such fraudulent
misrepresentation. For purposes of this Section 7(d), any person who
controls a party to this Agreement or a Holder within the meaning of the
Securities Act will have the same rights to contribution as that party,
subject in each case to the provisions hereof. Any party entitled to
contribution, promptly after receipt of notice of commencement of any action
against such party in respect of which a claim for contribution may be made
under this Section 7(d), will notify any such party or parties from whom
contribution may be sought, but the omission so to notify will not relieve
the party or parties from whom contribution may be sought from any other
obligation it or they may have under this Section 7(d). No party will be
liable for contribution with respect to any action or claim settled without
its written consent (which consent will not be unreasonably withheld).
(e) The indemnity and contribution agreements contained in this
Section 6 and the representations and warranties of the Company contained in
this Agreement shall remain operative and in full force and effect regardless
of (i) any investigation made by or on behalf of the Initial Purchaser or any
Holder, (ii) acceptance of any of the Registrable Securities and payment
therefor or (iii) any termination of this Agreement. A successor to the
Holder or any person controlling the Holder, or to the Company, its directors
or officers, or any person controlling the Company, shall be entitled to the
benefits of the indemnity, contribution and reimbursement agreements
contained in this Section 7.
SECTION 8. INFORMATION REQUIREMENTS. The Company shall file the
reports required to be filed by it under the Exchange Act, and, if at any
time before the end of the Effectiveness Period the Company is not subject to
the reporting requirements of the Exchange Act, it will cooperate with any
Holder of Registrable Securities and take such further reasonable action as
any Holder of Registrable Securities may reasonably request (including,
without limitation, making such reasonable representations as any such Holder
may reasonably request), all to the extent required from time to time to
enable such Holder to sell Registrable Securities without registration under
the Securities Act within the limitation of the exemptions provided by Rule
144 and Rule 144A. Upon the request of any Holder of Registrable Securities,
the Company shall deliver to such Holder a written statement as to whether it
has complied with such filing requirements, unless such a statement has been
included in the Company's most recent report required to be filed and filed
pursuant to Section 13 or Section 15(d) of Exchange Act.
SECTION 9. MISCELLANEOUS.
(a) NO CONFLICTING AGREEMENTS. The Company has not entered, as of
the date hereof, nor shall it, on or after the date of this Agreement enter,
into any agreement with respect to its securities that conflicts with the rights
granted to the Holders in this Agreement. The Company represents and warrants
that the rights granted to the Holders hereunder do not in any way conflict with
the rights granted to the holders of the Company's securities under any other
agreements.
16
<PAGE>
(b) AMENDMENTS AND WAIVERS. The provisions of this Agreement,
including the provisions of this sentence, may not be amended, modified or
supplemented, and waivers or consents to departures from the provisions
hereof may not be given, unless the Company has obtained the written consent
of Holders of a majority of the Shares then constituting Registrable
Securities. Notwithstanding the foregoing, a waiver or consent to depart from
the provisions hereof with respect to a matter that relates exclusively to
the rights of Holders whose securities are being sold pursuant to a
Registration Statement and that does not directly or indirectly affect the
rights of other Holders may be given by Holders of at least a majority of the
Shares then constituting Registrable Securities being sold by such Holders
pursuant to such Registration Statement; PROVIDED, HOWEVER, that the
provisions of this sentence may not be amended, modified, or supplemented
except in accordance with the provisions of the immediately preceding
sentence.
(c) NOTICES. Notice given pursuant to any of the provisions of
this Agreement shall be in writing and, unless otherwise specified, shall be
mailed or delivered (a) if to the Company, at the office of the Company, 135
N. Los Robles Avenue, Suite 250, Pasadena, California 91101, Attention:
Chief Executive Officer, (b) if to the Initial Purchaser at the offices of
PaineWebber Incorporated, 1285 Avenue of the Americas, New York, New York
10019, Attention: Corporate Finance Department, or (c) if to a Holder of the
Registrable Securities, at the most current address given by such Holder to
the Company in a Notice and Questionnaire or any amendment thereto. Any such
notice shall be effective one day after being sent by next day mail service,
five days after being sent by U.S. mail and upon receipt when sent by
facsimile.
(d) APPROVAL OF HOLDERS. Whenever the consent or approval of
Holders of a specified percentage of Registrable Securities is required
hereunder, Registrable Securities held by the Company or its affiliates (as
such term is defined in Rule 405 under the Securities Act) (other than the
Initial Purchaser or subsequent Holders of Registrable Securities if such
subsequent Holders are deemed to be such affiliates solely by reason of their
holdings of such Registrable Securities) shall not be counted in determining
whether such consent or approval was given by the Holders of such required
percentage.
(e) SUCCESSORS AND ASSIGNS. Any person who purchases any
Registrable Securities from the Initial Purchaser shall be deemed, for
purposes of this Agreement, to be an assignee of the Initial Purchaser. This
Agreement shall inure to the benefit of and be binding upon the successors
and assigns of each of the parties and shall inure to the benefit of and be
binding upon each Holder of any Registrable Securities.
(f) COUNTERPARTS. This Agreement may be signed in two or more
counterparts with the same effect as if the signatures thereto and hereto
were upon the same instrument.
(g) HEADINGS. The headings in this Agreement are for convenience
of reference only and shall not limit or otherwise affect the meaning hereof.
17
<PAGE>
(h) GOVERNING LAW. THIS AGREEMENT SHALL BE GOVERNED BY AND
CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK INCLUDING,
WITHOUT LIMITATION, SECTION 5-401 OF THE NEW YORK GENERAL OBLIGATIONS LAW.
(i) SEVERABILITY. In case any provision in this Agreement shall
be invalid, illegal or unenforceable, the validity, legality and
enforceability of the remaining provisions shall not in any way be affected
or impaired thereby.
(j) ENTIRE AGREEMENT. This Agreement is intended by the parties
as a final expression of their agreement and is intended to be a complete and
exclusive statement of the agreement and understanding of the parties hereto
in respect of the subject matter contained herein and the registration rights
granted by the Company with respect to the Registrable Securities. Except as
provided in the Purchase Agreement, there are no restrictions, promises,
warranties or undertakings, other than those set forth or referred to herein,
with respect to the registration rights granted by the Company with respect
to the Registrable Securities. This Agreement supersedes all prior
agreements and undertakings among the parties with respect to such
registration rights. No party hereto shall have any rights, duties or
obligations other than those specifically set forth in this Agreement.
(k) TERMINATION. This Agreement and the obligations of the
parties hereunder shall terminate upon the end of the Effectiveness Period,
except for any liabilities or obligations under Sections 5 or 7 hereof, each
of which shall remain in effect in accordance with its terms.
[Signatures begin on following page.]
18
<PAGE>
IN WITNESS WHEREOF, the parties have executed this Agreement as of the date
first written above.
ALEXANDRIA REAL ESTATE EQUITIES, INC.
By: /s/ Joel S. Marcus
---------------------
Name:
Title:
Accepted as of the date first
above written:
PAINEWEBBER INCORPORATED
(for its benefit and for the benefit of the Holders)
By: /s/ Malcolm F. MacLean IV
---------------------------
Name:
Title:
19
<PAGE>
APPENDIX A
ALEXANDRIA REAL ESTATE EQUITIES, INC.
SELLING SECURITYHOLDER NOTICE AND QUESTIONNAIRE
The undersigned beneficial holder of shares of Common Stock, $.01 par
value per share (the "REGISTRABLE SECURITIES"), of Alexandria Real Estate
Equities, Inc. (the "COMPANY" or "REGISTRANT") understands that the
Registrant has filed or intends to file with the Securities and Exchange
Commission a registration statement on Form S-3 (as more fully defined in the
Registration Rights Agreement referred to below, the "SHELF REGISTRATION
STATEMENT") for the registration and resale under Rule 415 of the Securities
Act of 1933, as amended (the "SECURITIES ACT"), of the Registrable
Securities, in accordance with the terms of the Registration Rights
Agreement, dated as of May 29, 1998 (the "REGISTRATION RIGHTS AGREEMENT"),
between the Company and the Initial Purchaser named therein. A copy of the
Registration Rights Agreement is available from the Company upon request at
the address set forth below. Each capitalized term not otherwise defined
herein shall have the meaning ascribed thereto in the Registration Rights
Agreement.
Each beneficial owner of Registrable Securities is entitled to the
benefits of the Registration Rights Agreement. In order to sell or otherwise
dispose of any Registrable Securities pursuant to the Shelf Registration
Statement, a beneficial owner of Registrable Securities generally will be
required to be named as a selling securityholder in the related prospectus,
deliver a prospectus to purchasers of Registrable Securities and be bound by
those provisions of the Registration Rights Agreement applicable to such
beneficial owner (including certain indemnification provisions, as described
below). BENEFICIAL OWNERS THAT DO NOT COMPLETE THIS NOTICE AND QUESTIONNAIRE
AND DELIVER IT TO THE COMPANY AS PROVIDED BELOW WILL NOT BE PERMITTED TO SELL
ANY REGISTRABLE SECURITIES PURSUANT TO THE SHELF REGISTRATION STATEMENT.
Beneficial owners are encouraged to complete and deliver this Notice and
Questionnaire prior to the effectiveness of the Shelf Registration Statement
so that such beneficial owners will be eligible to sell their Registrable
Securities pursuant to the prospectus at the time of effectiveness. Upon
receipt of a completed Notice and Questionnaire from a beneficial owner
following the effectiveness of the Shelf Registration Statement, the Company
will, as promptly as practicable but in any event within seven Business Days
of such receipt, file such amendments to the Shelf Registration Statement or
supplements to the related prospectus as are necessary to permit such holder
to deliver such prospectus to purchasers of Registrable Securities.
Certain legal consequences arise from being named as a selling
securityholder in the Shelf Registration Statement and related prospectus.
Accordingly, holders and beneficial owners of Registrable Securities are
advised to consult their own securities law counsel regarding the
consequences of being named or not being named as a selling securityholder in
the Shelf Registration Statement and related prospectus.
A-1
<PAGE>
NOTICE
The undersigned beneficial owner (the "SELLING SECURITYHOLDER") of
Registrable Securities hereby gives notice to the Company of its intention to
sell or otherwise dispose of Registrable Securities beneficially owned by it
and listed below in Item 3 (unless otherwise specified under Item 3) pursuant
to the Shelf Registration Statement. The undersigned, by signing and
returning this Notice and Questionnaire, understands that it will be bound by
the terms and conditions of this Notice and Questionnaire and the
Registration Rights Agreement.
Pursuant to the Registration Rights Agreement, the undersigned has
agreed to indemnify and hold harmless the Company, the Company's directors,
the Company's officers who sign the Shelf Registration Statement, each
person, if any, who controls the Company within the meaning of either Section
15 of the Securities Act or Section 20 or the Securities Exchange Act of
1934, as amended (the "EXCHANGE ACT"), each other Holder of Registrable
Securities and each person, if any, who controls any Holder of Registrable
Securities within the meaning of Section 15 of the Securities Act or Section
20 of the Exchange Act from and against certain losses arising in connection
with statements concerning the undersigned or its Plan of Distribution made
in the Shelf Registration Statement or related prospectus in reliance upon
the information provided in this Notice and Questionnaire.
The undersigned hereby provides the following information to the Company
and represents and warrants that such information is accurate and complete:
QUESTIONNAIRE
1. (a) Full Legal Name of Selling Securityholder:
____________________________________________________________________
(b) Full Legal Name of Registered Holder (if not the same as (a) above)
through which Registrable Securities listed in (3) below are held:
____________________________________________________________________
(c) Full Legal Name of DTC Participant (if applicable and if not the
same as (b) above) through which Registrable Securities listed in
(3) below are held:
____________________________________________________________________
2. Address for Notices to Selling Securityholder:
_________________________________________________________________________
_________________________________________________________________________
_________________________________________________________________________
_________________________________________________________________________
Telephone: ______________________________________________________________
A-2
<PAGE>
Fax: ___________________________________________________________________
Contact Person: ________________________________________________________
3. Beneficial Ownership of Registrable Securities:
Number of shares beneficially owned:
__________________________________________________________________
__________________________________________________________________
4. Beneficial Ownership of Other Securities of the Company owned by the
Selling Securityholder:
EXCEPT AS SET FORTH BELOW IN THIS ITEM (4), THE UNDERSIGNED IS NOT THE
BENEFICIAL OR REGISTERED OWNER OF ANY SECURITIES OF THE COMPANY OTHER THAN THE
REGISTRABLE SECURITIES LISTED ABOVE IN ITEM (3).
(a) Type and amount of other securities of the Company beneficially owned
by the Selling Securityholder:
__________________________________________________________________
__________________________________________________________________
(b) CUSIP No(s). of such other securities beneficially owned:
__________________________________________________________________
__________________________________________________________________
5. Relationships with the Company:
EXCEPT AS SET FORTH BELOW, NEITHER THE UNDERSIGNED NOR ANY OF ITS
AFFILIATES, OFFICERS, DIRECTORS OR PRINCIPAL EQUITY HOLDERS (5% OR MORE)
HAS HELD ANY POSITION OR OFFICE OR HAS HAD ANY OTHER MATERIAL RELATIONSHIP
WITH THE COMPANY (OR ITS PREDECESSORS OR AFFILIATES) DURING THE PAST THREE
YEARS.
State any exception here: _______________________________________________
_________________________________________________________________________
_________________________________________________________________________
6. Plan of Distribution
EXCEPT AS SET FORTH BELOW, THE UNDERSIGNED (INCLUDING ITS DONEES OR
PLEDGEES) INTENDS TO DISTRIBUTE THE REGISTRABLE SECURITIES LISTED ABOVE IN
ITEM (3) PURSUANT TO THE SHELF REGISTRATION STATEMENT ONLY AS FOLLOWS (IF
AT ALL): SUCH REGISTRABLE SECURITIES MAY BE SOLD FROM TIME TO TIME DIRECTLY
BY THE UNDERSIGNED OR, ALTERNATIVELY, THROUGH UNDERWRITERS, BROKER-DEALERS
OR AGENTS. IF THE REGISTRABLE SECURITIES ARE SOLD THROUGH UNDERWRITERS OR
BROKER-DEALERS, THE SELLING SECURITYHOLDER WILL BE RESPONSIBLE FOR
UNDERWRITING DISCOUNTS OR COMMISSIONS OR AGENT'S COMMISSIONS. SUCH
REGISTRABLE
A-3
<PAGE>
SECURITIES MAY BE SOLD IN ONE OR MORE TRANSACTIONS AT FIXED PRICES, AT
PREVAILING MARKET PRICES AT THE TIME OF SALE, AT VARYING PRICES DETERMINED
AT THE TIME OF SALE, OR AT NEGOTIATED PRICES. SUCH SALES MAY BE EFFECTED
IN TRANSACTIONS (WHICH MAY INVOLVE CROSSES OR BLOCK TRANSACTIONS) (I) ON
ANY NATIONAL SECURITIES EXCHANGE OR QUOTATION SERVICE ON WHICH THE
REGISTRABLE SECURITIES MAY BE LISTED OR QUOTED AT THE TIME OF SALE, (II) IN
THE OVER-THE-COUNTER MARKET, (III) IN TRANSACTIONS OTHERWISE THAN ON SUCH
EXCHANGES OR SERVICES OR IN THE OVER-THE-COUNTER MARKET, OR (IV) THROUGH
THE WRITING OF OPTIONS. IN CONNECTION WITH SALES OF THE REGISTRABLE
SECURITIES OR OTHERWISE, THE UNDERSIGNED MAY ENTER INTO HEDGING
TRANSACTIONS WITH BROKER-DEALERS, WHICH MAY IN TURN ENGAGE IN SHORT SALES
OF THE REGISTRABLE SECURITIES IN THE COURSE OF HEDGING IN POSITIONS THEY
ASSUME. THE UNDERSIGNED MAY ALSO SELL REGISTRABLE SECURITIES SHORT AND
DELIVER REGISTRABLE SECURITIES TO CLOSE OUT SHORT POSITIONS, OR LOAN OR
PLEDGE REGISTRABLE SECURITIES TO BROKER-DEALERS THAT IN TURN MAY SELL SUCH
SECURITIES.
State any exceptions here: ______________________________________________
_________________________________________________________________________
The undersigned acknowledges that it understands its obligations to
comply with the provisions of the Exchange Act and the rules thereunder
relating to stock manipulation, particularly Regulation M thereunder (or any
successor rules or regulations), in connection with any offering of
Registrable Securities pursuant to the Shelf Registration Statement. The
undersigned agrees that neither it nor any person acting on its behalf will
engage in any transaction in violation of such provisions.
The Selling Securityholder hereby acknowledges its obligations under the
Registration Rights Agreement to indemnify and hold harmless certain persons
as set forth therein.
Pursuant to the Registration Rights Agreement, the Company has agreed
under certain circumstances to indemnify the Selling Securityholder against
certain liabilities.
Pursuant to the Registration Rights Agreement, the Selling
Securityholder is obligated to pay (a) all registration expenses to the
extent the Company is prohibited by applicable Blue Sky laws from paying for
or on behalf of such Selling Securityholder and (b) to the extent incurred by
such Selling Stockholder, all (i) legal fees, (ii) brokerage fees and sales
commissions and (iii) out of pocket expenses.
In accordance with the undersigned's obligation under the Registration
Rights Agreement to provide such information as may be required by law for
inclusion in the Shelf Registration Statement, the undersigned agrees to
promptly notify the Company of any inaccuracies or changes in the information
provided herein that may occur subsequent to the date hereof at any time
while the Shelf Registration Statement remains effective. All notices
hereunder and pursuant to the Registration Rights Agreement shall be made in
writing at the address set forth below.
A-4
<PAGE>
By signing below, the undersigned consents to the disclosure of the
information contained herein in its answers to Items (1) through (6) above
and the inclusion of such information in the Shelf Registration Statement and
the related prospectus. The undersigned understands that such information
will be relied upon by the Company in connection with the preparation or
amendment of the Shelf Registration Statement and the related prospectus.
IN WITNESS WHEREOF, the undersigned, by authority duly given, has caused
this Notice and Questionnaire to be executed and delivered either in person
or by its duly authorized agent.
Date:
___________________________________________
(Beneficial Owner)
By: _______________________________________
Name: _____________________________________
Title: ____________________________________
A-5
<PAGE>
PLEASE RETURN THE COMPLETED AND EXECUTED NOTICE AND QUESTIONNAIRE TO THE
COMPANY AT:
Alexandria Real Estate Equities, Inc.
135 N. Los Robles Avenue, Suite 250
Pasadena, California 91101
Attention: _________________
Telecopy No.: _________________
A-6