<PAGE>
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(Mark One)
X QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
- --- EXCHANGE ACT OF 1934
For the quarterly period ended March 31, 1999
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 May 14, 1999, 13,598,822 shares of common stock, par value $.01 per
share, were outstanding.
<PAGE>
TABLE OF CONTENTS
PART I - FINANCIAL INFORMATION
Item 1. FINANCIAL STATEMENTS (UNAUDITED)
Condensed Consolidated Balance Sheets of Alexandria Real Estate
Equities, Inc. and Subsidiaries as of March 31, 1999 and December 31,
1998
Condensed Consolidated Income Statements of Alexandria Real Estate
Equities, Inc. and Subsidiaries for the three months ended March 31,
1999 and 1998
Condensed Consolidated Statement of Stockholders' Equity of Alexandria
Real Estate Equities, Inc. and Subsidiaries for the three months ended
March 31, 1999
Condensed Consolidated Statements of Cash Flows of Alexandria Real
Estate Equities, Inc. and Subsidiaries for the three months ended
March 31, 1999 and 1998
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 AND USE OF PROCEEDS
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>
PART I - FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
3
<PAGE>
Alexandria Real Estate Equities, Inc. and Subsidiaries
Condensed Consolidated Balance Sheets
(Unaudited)
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<TABLE>
<CAPTION>
MARCH 31, DECEMBER 31,
1999 1998
--------------------------------
<S> <C> <C>
ASSETS
Rental properties, net $489,976 $471,907
Property under development 25,363 21,839
Cash and cash equivalents 1,450 1,554
Tenant security deposits and other restricted cash 4,559 7,491
Secured note receivable 6,000 6,000
Tenant receivables 2,915 2,884
Deferred rent 6,329 5,595
Other assets 13,291 13,026
--------------------------------
Total assets $549,883 $530,296
--------------------------------
--------------------------------
LIABILITIES AND STOCKHOLDERS' EQUITY
Secured notes payable $127,220 $115,829
Unsecured line of credit 172,000 194,000
Accounts payable, accrued expenses and tenant security
deposits 19,140 15,663
Dividends payable 5,440 5,035
--------------------------------
Total liabilities 323,800 330,527
Stockholders' equity:
Common stock, $0.01 par value per share, 100,000,000
shares authorized; 13,598,822 and 12,586,263 shares
issued and outstanding at March 31, 1999 and 136 126
December 31, 1998, respectively
Additional paid-in capital 225,947 199,643
Retained earnings -- --
--------------------------------
Total stockholders' equity 226,083 199,769
--------------------------------
Total liabilities and stockholders' equity $549,883 $530,296
--------------------------------
--------------------------------
</TABLE>
SEE ACCOMPANYING NOTES
4
<PAGE>
Alexandria Real Estate Equities, Inc. and Subsidiaries
Condensed Consolidated Income Statements
(Unaudited)
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<TABLE>
<CAPTION>
THREE MONTHS ENDED
MARCH 31,
1999 1998
----------------------------------
<S> <C> <C>
Revenues:
Rental $15,748 $9,140
Tenant recoveries 3,424 2,363
Interest and other income 367 193
----------------------------------
19,539 11,696
Expenses:
Rental operations 4,383 2,504
General and administrative 1,301 751
Interest 4,963 2,085
Depreciation and amortization 3,594 1,721
----------------------------------
14,241 7,061
----------------------------------
Net income $5,298 $4,635
----------------------------------
----------------------------------
Net income per share of common stock:
-Basic $0.41 $0.41
----------------------------------
----------------------------------
-Diluted $0.40 $0.40
----------------------------------
----------------------------------
Weighted average shares of common stock outstanding:
-Basic 13,025,303 11,404,631
----------------------------------
----------------------------------
-Diluted 13,163,695 11,652,772
----------------------------------
----------------------------------
</TABLE>
SEE ACCOMPANYING NOTES
<PAGE>
Alexandria Real Estate Equities, Inc. and Subsidiaries
Condensed Consolidated Statement of Stockholders' Equity
Three months ended March 31, 1999
(Unaudited)
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
NUMBER OF ADDITIONAL
COMMON COMMON PAID-IN RETAINED
SHARES STOCK CAPITAL EARNINGS TOTAL
---------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Balance at December 31, 1998 12,586,263 $126 $199,643 $ -- $199,769
Issuance of common stock, net of
offering costs 1,150,000 11 29,819 -- 29,830
Redemption and retirement of common stock (3,420)
(145,343) (1) (3,419) --
Exercise of stock options, net 7,902 -- 46 -- 46
Dividends declared on common stock -- -- (142) (5,298) (5,440)
Net income -- -- -- 5,298 5,298
---------------------------------------------------------------------------------
Balance at March 31, 1999 13,598,822 $136 $225,947 $ -- $226,083
---------------------------------------------------------------------------------
</TABLE>
SEE ACCOMPANYING NOTES.
6
<PAGE>
Alexandria Real Estate Equities, Inc. and Subsidiaries
Condensed Consolidated Statements of Cash Flows
(Unaudited)
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
THREE MONTHS ENDED
MARCH 31,
1999 1998
--------------------------------
<S> <C> <C>
Net cash provided by operating activities $14,003 $8,682
INVESTING ACTIVITIES
Purchase of rental properties (5,161) (117,517)
Additions to rental properties (4,177) (547)
Additions to property under development (3,524) (2,538)
Issuance of note receivable -- (6,000)
--------------------------------
Net cash used in investing activities (12,862) (126,602)
FINANCING ACTIVITIES
Proceeds from secured notes payable 624 12,641
Net proceeds from issuance of common stock 29,830 --
Redemption and retirement of common stock (3,420) --
Proceeds from exercise of stock options 46 --
Net (principal reductions) borrowings on unsecured line of credit (22,000) 109,500
Principal reductions of secured notes payable (1,290) (254)
Dividends paid on common stock (5,035) (4,562)
--------------------------------
Net cash (used in) provided by financing activities (1,245) 117,325
Net decrease in cash and cash equivalents (104) (595)
Cash and cash equivalents at beginning of period 1,554 2,060
--------------------------------
Cash and cash equivalents at end of period $ 1,450 $ 1,465
--------------------------------
--------------------------------
</TABLE>
SEE ACCOMPANYING NOTES.
7
<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. is a real estate investment trust ("REIT")
formed in 1994. We are engaged primarily in the acquisition, management, and
selective development of properties for lease principally to participants in the
life science industry (we refer to these properties as "Life Science
Facilities"). As of March 31, 1999, our portfolio consisted of 52 properties
with approximately 3,704,000 rentable square feet.
We have prepared the accompanying interim financial statements in accordance
with generally accepted accounting principles and in conformity with the rules
and regulations of the Securities and Exchange Commission. In our opinion, 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, 1999. These financial statements should be read in conjunction with
the financial statements included in our Annual Report on Form 10-K for the year
ended December 31, 1998.
BASIS OF PRESENTATION
The accompanying condensed consolidated financial statements include the
accounts of Alexandria and its subsidiaries. All significant intercompany
balances and transactions have been eliminated.
RECLASSIFICATIONS
Certain prior year amounts have been reclassified to conform to the current
period presentation.
8
<PAGE>
2. RENTAL PROPERTIES
Rental properties consist of the following (in thousands):
<TABLE>
<CAPTION>
MARCH 31, DECEMBER 31,
1999 1998
------------------------------
<S> <C> <C>
Land $ 78,988 $ 76,254
Buildings and improvements 409,258 393,728
Tenant and other improvements 23,743 20,536
------------------------------
511,989 490,518
Less accumulated depreciation (22,013) (18,611)
------------------------------
------------------------------
$ 489,976 $ 471,907
------------------------------
------------------------------
</TABLE>
During the three months ended March 31, 1999, we acquired a property containing
approximately 114,000 rentable square feet from an unrelated third party for an
aggregate purchase price (including closing and transaction costs) of $16.6
million.
3. SECURED NOTE RECEIVABLE
In connection with the acquisition of a Life Science Facility in San Diego,
California in March 1998, we 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, we may obtain title to the
improvements that secure the loan, and, in such event, we may also require the
sole tenant at the property to lease such improvements back from us for an
additional rental amount.
4. UNSECURED LINE OF CREDIT
We have an unsecured line of credit that provides for borrowings of up to $250
million. Borrowings under the line of credit bear interest at a floating rate
based on our 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, we must elect to fix the rate for a period of one, two, three or six
months.
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 we acquire
additional unencumbered properties, borrowings available under the line of
credit will increase, but may not exceed $250 million. As of March 31, 1999,
borrowings under the line of credit were limited to approximately $200,000,000,
and carried a weighted average interest rate of 6.36%.
9
<PAGE>
4. UNSECURED LINE OF CREDIT (CONTINUED)
The line of credit 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 March 31, 1999, we had seven notes payable to certain banks and an
insurance company, secured by first deeds of trust on 10 of our Life Science
Facilities. The notes bear interest at fixed rates ranging from 7.17% to 9.125%
and are due at various dates through 2016.
6. STOCKHOLDERS' EQUITY
On February 23, 1999, we completed a public offering of 1,150,000 shares of
common stock (including the shares issued upon exercise of the underwriters'
over-allotment option). The shares were issued at a price of $28.125 per
share, resulting in aggregate proceeds of approximately $29.8 million, net of
underwriters' discount and commissions, advisory fees and offering costs.
On March 16, 1999, we declared a cash dividend on our common stock
aggregating $5,440,000 ($ 0.40 per share) for the calendar quarter ended
March 31, 1999. We paid the dividend on April 12, 1999.
In March 1999, we completed a transaction with Health Science Properties
Holding Corporation ("Holdings"), one of our significant stockholders. In
connection with the transaction, Holdings delivered to us all of the
1,765,923 shares of our common stock it owned in exchange for (i) the
assumption by us of a $3,136,000 obligation of Holdings and (ii) the issuance
by us to Holdings of 1,620,580 new shares of our common stock. The number of
new shares we issued was computed by subtracting from the 1,765,923 shares
owned by Holdings prior to the transaction, a number of shares with an
aggregate market value equal to 2% of the value of the 1,765,923 shares, plus
the amount of the $3,136,000 loan. The new shares issued were not registered
under the Securities Act of 1933, as amended; however, we have granted
registration rights to the holders of new shares. In connection with the
issuance of the new shares, stockholders of Holdings have agreed to certain
limitations on transfer of any of the shares of our common stock received by
them upon the redemption or liquidation of Holdings, which occurred in March
1999.
10
<PAGE>
7. COMMITMENTS
In March 1999, we acquired an 85% tenancy-in-common interest in a 4.9 acre
parcel of land in Worcester, Massachusetts for $425,000. The seller retained
the remaining 15% tenancy-in-common interest. The site will be developed as a
life science facility (the "Facility"). We are committed to complete the
construction of a 94,000 square foot building and certain related
improvements at a remaining cost of approximately $14,840,000 under the terms
of a lease with a third party that will cover 45,000 square feet of the
completed Facility. The seller of the property has provided us with a
$2,625,000 loan for use in the construction of the Facility. The loan bears
interest at a rate of 9% and is due on the earlier of (i) twenty days after a
certificate of occupancy is issued for the Facility, or (ii) June 30, 2000.
Upon completion of the Facility, the ownership of the Facility will be
converted into a condominium structure and, concurrently, the seller may
convert its 15% tenancy-in-common interest into a condominium interest in
13,000 square feet of the completed Facility. We have the right to purchase
the seller's 15% tenancy-in-common interest at any time prior to such
conversion for $300,000.
8. NON-CASH TRANSACTIONS
As described in Note 6, we redeemed common stock in part in exchange for the
assumption of a $3,136,000 obligation. We repaid this obligation with funds
borrowed under our line of credit. In addition, we assumed a $11,297,000
secured note payable in connection with our acquisition of the property
described in Note 2.
9. NET INCOME (LOSS) PER SHARE
The following table shows the computation of net income per share of common
stock outstanding (dollars in thousands, except per share amounts):
<TABLE>
<CAPTION>
THREE MONTHS THREE MONTHS
ENDED ENDED
MARCH 31, 1999 MARCH 31, 1998
------------------------------
<S> <C> <C>
Net income $ 5,298 $ 4,635
------------------------------
------------------------------
Weighted average shares of common stock
outstanding - basic 13,025,303 11,404,631
Add: dilutive effect of stock options 138,392 248,141
------------------------------
Weighted average shares of common stock
outstanding - diluted 13,163,695 11,652,772
------------------------------
------------------------------
Net income per share:
- Basic $ 0.41 $ 0.41
------------------------------
------------------------------
- Diluted $ 0.40 $ 0.40
------------------------------
------------------------------
</TABLE>
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 that involve known and unknown risks and
uncertainties. Given these uncertainties, prospective and current investors
are cautioned not to place undue reliance on such forward-looking statements.
Our actual results, performance or achievements, or industry results, may be
materially different from any future results, performance or achievements
expressed or implied by such forward-looking statements as a result of many
factors. We disclaim any obligation to update any such factors or to publicly
announce the result of any revisions to any of the forward-looking statements
contained in this or any other document. Readers of this Form 10-Q should
also read our other publicly filed documents for further discussion regarding
such factors.
The following discussion should be read in conjunction with the financial
statements and notes appearing elsewhere in this report.
OVERVIEW
Since our formation in October 1994, we have continued to devote
substantially all of our resources to the acquisition, selective development
and management of high quality, strategically located Life Science Facilities
in our target markets.
Our primary source of revenue is rental income and tenant recoveries from leases
at the properties we own. Of the 52 properties we owned as of March 31, 1999,
four were acquired in calendar year 1994, eight in 1996, 10 in 1997, 29 in 1998
(the "1998 Acquired Properties") and one in 1999 (the "1999 Acquired Property").
As a result of our acquisition activities, the financial data shows significant
increases in total revenue and expenses for the three months ended March 31,
1999 compared to the three months ended March 31, 1998.
12
<PAGE>
RESULTS OF OPERATIONS
COMPARISON OF THREE MONTHS ENDED MARCH 31, 1999 ("FIRST QUARTER 1999") TO THREE
MONTHS ENDED MARCH 31, 1998 ("FIRST QUARTER 1998")
Rental revenue increased by $6.6 million, or 73%, to $15.7 million for First
Quarter 1999 compared to $9.1 million for First Quarter 1998. The increase
resulted primarily from rental revenue from the 1998 Acquired Properties
purchased after January 1, 1998 and from the 1999 Acquired Property. Rental
revenue from the Properties acquired before January 1, 1998 (the "First
Quarter Same Properties") increased by $185,000, or 2.8%, primarily due to
increases in rental rates.
Tenant recoveries increased by $1.0 million, or 42%, to $3.4 million for First
Quarter 1999 compared to $2.4 million for First Quarter 1998. The increase
resulted primarily from tenant recoveries from the 1998 Acquired Properties
purchased after January 1, 1998 and the 1999 Acquired Property. Tenant
recoveries from the First Quarter Same Properties increased by $18,000, or 1.1%,
generally due to the improved identification and recovery of costs at certain
properties.
Interest and other income increased by $174,000, or 90%, to $367,000 for First
Quarter 1999 compared to $193,000 for First Quarter 1998, resulting primarily
from interest income from the secured note receivable.
Rental operating expenses increased by $1.9 million, or 76%, to $4.4 million
for First Quarter 1999 compared to $2.5 million for First Quarter 1998. The
increase resulted primarily from the 1998 Acquired Properties purchased after
January 1, 1998 and the 1999 Acquired Property. Operating expenses for the
First Quarter Same Properties decreased by $30,000, or 1.8%, generally due to
lower premiums on our blanket property and liability insurance policies.
The following is a comparison of property operating data computed under
generally accepted accounting principles ("GAAP Basis") and under generally
accepted accounting principles, adjusted to exclude the effect of straight line
rent adjustments required by GAAP ("Cash Basis") for the First Quarter Same
Properties (in thousands, except percentage data):
<TABLE>
<CAPTION>
FOR THE THREE MONTHS
ENDED MARCH 31,
-----------------------
1999 1998 CHANGE
-------------------------------------
<S> <C> <C> <C>
GAAP BASIS:
Revenue $8,325 $8,107 2.7%
Rental operating expenses 1,679 1,709 -1.8%
-------------------------------------
Net operating income $6,646 $6,398 3.9%
-------------------------------------
-------------------------------------
CASH BASIS (1):
Revenue $7,746 $7,464 3.8%
Rental operating expenses 1,522 1,572 -3.2%
-------------------------------------
Net operating income $6,224 $5,892 5.6%
-------------------------------------
-------------------------------------
</TABLE>
13
<PAGE>
- ---------
(1)Revenue and operating expenses are computed in accordance with GAAP,
except that revenue excludes the effect of straight line rent
adjustments. In addition, the cash basis same property comparison
excludes the results for 1431 Harbor Bay Parkway, a property located in
Alameda, California. The lease for this property (which was in place when
the property was acquired by the company) contains significant step-down
provisions which affected the cash rent paid by the tenant beginning in
January 1999. As a result, cash rent paid was reduced from $737,000 per
quarter in 1998 to $538,000 for First Quarter 1999. The lease, which
expires in January 2014, requires another step-down in rent beginning in
January 2004 to $188,000 per quarter. If this property were included in
the cash basis same property comparison for the three months ended March
31, 1999, the comparison would show that revenue increased 1.1%, rental
operating expenses decreased 1.8% and net operating income increased
1.9%. On a GAAP basis, rental income from this property throughout 1998
and for the three months ended March 31, 1999 was $353,000 per quarter.
General and administrative expenses increased by $550,000, or 73%, to $1.3
million for First Quarter 1999 compared to $751,000 for First Quarter 1998. The
increase was primarily due to the continued increase in the scope of our
operations. A portion of this increase was due to $67,000 in abandoned projects
expense in First Quarter 1999.
Interest expense increased by $2.9 million, or 138%, to $5.0 million for First
Quarter 1999 compared to $2.1 million for First Quarter 1998. The increase
resulted primarily from the indebtedness incurred to acquire the 1998 Acquired
Properties purchased after January 1, 1998 and the 1999 Acquired Property.
Depreciation and amortization increased by $1.9 million, or 112%, to $3.6
million for First Quarter 1999 compared to $1.7 million for First Quarter 1998.
The increase resulted primarily from depreciation associated with the 1998
Acquired Properties purchased after January 1, 1998, and the addition of the
1999 Acquired Property.
As a result of the foregoing, net income was $5.3 million for First Quarter 1999
compared to $4.6 million for First Quarter 1998.
LIQUIDITY AND CAPITAL RESOURCES
CASH FLOWS
Net cash provided by operating activities for First Quarter 1999 increased by
$6.1 million to $14.8 million compared to $8.7 million for First Quarter 1998.
The increase resulted primarily from operating cash flows from the addition of
the 1998 Acquired Properties purchased after January 1, 1998 and the 1999
Acquired Property.
Net cash used in investing activities decreased by $112.9 million to $13.7
million for First Quarter 1999 compared to $126.6 million for First Quarter
1998. The decrease was primarily due to a lower level of property acquisitions
during First Quarter 1999 compared to First Quarter 1998.
14
<PAGE>
Net cash provided by financing activities decreased by $118.5 million to $1.2
million used in financing activities for First Quarter 1999 compared to $117.3
million provided by financing activities for First Quarter 1998. Cash used in
financing activities for First Quarter 1999 consisted of principal payments on
our unsecured line of credit, principal payments on our secured debt and
distributions to stockholders, partially offset by net proceeds from the
issuance/redemption of our common stock, exercise of stock options and secured
debt. Cash provided by financing activities for First Quarter 1998 consisted of
net proceeds from our unsecured line of credit and secured debt, partially
offset by distributions to stockholders.
COMMITMENTS
We are committed to complete the construction of buildings and certain related
improvements in San Diego, California and Gaithersburg, Maryland at a remaining
cost of between $10.2 million and $19.2 million under the terms of certain
leases (depending on the level of improvements to one of the facilities elected
by the tenant at that facility). Under the terms of this lease, the tenant's
rental rate will be adjusted depending on the ultimate cost of the improvements.
In March 1999, we acquired an 85% tenancy-in-common interest in a 4.9 acre
parcel of land in Worcester, Massachusetts for $425,000. The seller retained
the remaining 15% tenancy-in-common interest. The site will be developed as a
life science facility (the "Facility"). We are committed to complete the
construction of a 94,000 square foot building and certain related
improvements at a remaining cost of approximately $14,840,000 under the terms
of a lease with a third party that will cover 45,000 square feet of the
completed Facility. The seller of the property has provided us with a
$2,625,000 loan for use in the construction of the Facility. The loan bears
interest at a rate of 9% and is due on the earlier of (i) twenty days after a
certificate of occupancy is issued for the Facility, or (ii) June 30, 2000.
Upon completion of the Facility, the ownership of the Facility will be
converted into a condominium structure and, concurrently, the seller may
convert its 15% tenancy-in-common interest into a condominium interest in
13,000 square feet of the completed Facility. We have the right to purchase
the seller's 15% tenancy-in-common interest at any time prior to such
conversion for $300,000.
We are also committed to fund approximately $8.8 million for investments in
limited partnerships and rental properties, including the construction of tenant
improvements under the terms of various leases.
RESTRICTED CASH
As of March 31, 1999, we had $6.0 million in cash and cash equivalents,
including $4.6 million in restricted cash accounts. Of the $4.6 million in
restricted cash accounts, approximately $456,000 has been set aside to complete
the conversion of existing space into higher rent generic laboratory space (as
well as certain related improvements) at 1102/1124 Columbia Street,
approximately $3.2 million is held in trust as additional security required
under the terms of our secured notes payable and approximately $916,000 is held
in security deposit reserve accounts based on the terms of certain lease
agreements.
15
<PAGE>
SECURED DEBT
Secured debt as of March 31, 1999 consists of the following (dollars in
thousands):
<TABLE>
<CAPTION>
STATED
BALANCE AT INTEREST
COLLATERAL MARCH 31, 1999 RATE MATURITY DATE
- -----------------------------------------------------------------------------------------------
<S> <C> <C> <C>
3535/3565 General Atomics Court,
San Diego, CA $ 17,454 9.00% December 2014
1431 Harbor Bay Parkway,
Alameda, CA 7,682 7.165% January 2014
1102/1124 Columbia Street,
Seattle, WA 20,588 7.75% May 2016
100/800/801 Capitola Drive,
Durham, NC 12,529 8.68% December 2006
14225 Newbrook Drive, Chantilly,
VA and 3000/3018 Western Avenue,
Seattle, WA 36,236 7.22% May 2008
620 Memorial Drive,
Cambridge, MA (1) 20,074 9.125% Oct 2007
One Innovation Drive,
Worcester, MA (2) 12,033 8.75% January 2006
Five Biotech, development project
Worcester, MA (3) 624 9.0% June 2000
---------
$ 127,220
---------
---------
</TABLE>
- ---------
(1) The balance shown includes an unamortized premium of $2,213,000 so that
the effective rate of the loan is 7.25%.
(2) The balance shown includes an unamortized premium of $809,000 so that
the effective rate of the loan is 7.25%.
(3) The balance shown represents the amount drawn on the construction loan
provided by the seller in connection with the acquisition of the 85%
tenancy-in-common interest in the parcel of land. The loan provides for
borrowings of up to $2,625,000.
The following is a summary of the scheduled principal payments for our secured
debt as of March 31, 1999 (in thousands):
<TABLE>
<CAPTION>
YEAR AMOUNT
-------------------------------------------
<S> <C>
1999 $ 2,013
2000 3,861
2001 3,505
2002 3,788
2003 4,095
Thereafter 106,936
-------------
Subtotal 124,198
Unamortized premium 3,022
-------------
$ 127,220
-------------
-------------
</TABLE>
16
<PAGE>
UNSECURED LINE OF CREDIT
We have an unsecured line of credit that provides for borrowings of up to $250
million. Borrowings under the line of credit bear interest at a floating rate
based on our 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, we must elect to fix the rate for a period of one, two, three or six
months.
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 we acquire
additional unencumbered properties, borrowings available under the line of
credit will increase, but may not exceed $250 million. As of March 31, 1999,
borrowings under the line of credit were limited to approximately $200,000,000,
and carried a weighted average interest rate of 6.36%.
The line of credit 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.
In September 1998, we entered into an interest rate swap agreement with
BankBoston, N.A. (the "Bank") to hedge our exposure to variable interest
rates associated with our line of credit. Interest paid is calculated at a
fixed interest rate of 5.43% through May 31, 2000 on a notional amount of $50
million, and interest received is calculated at one month LIBOR. The net
difference between the interest paid and the interest received is reflected
as an adjustment to interest expense. The fair value of the swap agreement
and changes in the fair value as a result of changes in market interest rates
are not recognized in the financial statements. We are exposed to loss in the
event the Bank is unable to perform under the swap agreement or in the event
one month LIBOR is less than 5.43%.
OTHER RESOURCES AND LIQUIDITY REQUIREMENTS
On February 23, 1999, we completed a public offering of 1,150,000 shares of
common stock (including the shares issued upon exercise of the underwriters'
over-allotment option). The shares were issued at a price of $28.125 per
share, resulting in aggregate proceeds of approximately $29.8 million, net of
underwriters' discount and commissions, advisory fees and offering costs.
We expect to continue meeting our short-term liquidity and capital requirements
generally through our working capital and net cash provided by operating
activities. We believe that the net cash provided by operating activities will
continue to be sufficient to make distributions necessary to enable us to
continue qualifying as a real estate investment trust. We also believe that net
cash provided by operations will be sufficient to fund our recurring non-revenue
enhancing capital expenditures, tenant improvements and leasing commissions.
17
<PAGE>
We expect 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 our
line of credit and the issuance of additional debt and/or equity securities.
EXPOSURE TO ENVIRONMENTAL LIABILITIES
In connection with the acquisition of all of our properties, we have obtained
Phase I environmental assessments to ascertain the existence of any
environmental liabilities or other issues. The Phase I environmental assessments
of our properties have not revealed any environmental liabilities that we
believe would have a material adverse effect on our financial condition or
results of operations taken as a whole, nor are we aware of any such material
environmental liabilities.
INFLATION
More than 79% of our 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 our 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, we do not believe that our
earnings or cash flow are subject to any significant risk of inflation. An
increase in inflation, however, could result in an increase in our variable rate
borrowing cost, including borrowings under the unsecured line of credit.
IMPACT OF THE 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 our
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, provide building services or engage in similar normal business
activities.
We rely on computer technologies to operate our business. In October 1998, we
formed an internal task force to identify, assess and evaluate our critical
systems to determine which year 2000 related problems may cause system errors or
failures. We have identified three major areas as critical systems: (i) internal
accounting systems, (ii) systems of significant tenants, vendors and financial
institutions; and (iii) internal building systems at our properties. We have
engaged consulting professionals from a nationally recognized accounting firm to
review our plans and assist us with our solutions.
The following discussion of our year 2000 project contains numerous
forward-looking statements based on inherently uncertain information. The cost
of our evaluation and the date on which we plan to complete our internal
evaluation and related remediation projects are based on our best estimates. We
derived these estimates using a number of assumptions of future events,
including the continued availability of internal and external resources,
third-party modifications and other factors. However, there can be no guarantee
that these estimates will be achieved, and actual results may be materially
different from those anticipated. Moreover, although we believe that
18
<PAGE>
we will be operating in a year 2000 compliant manner prior to December 31, 1999,
there can be no assurance that any failure to modify a critical system would not
have a material adverse effect on our operations.
READINESS
Our year 2000 project is designed to ensure that all critical systems have been
evaluated and will be suitable for continued use into and beyond the year 2000.
We completed our identification and initial evaluation of critical systems in
the first quarter of 1999, and we expect to implement substantially all of the
necessary remedial actions by mid-1999.
We have completed our review of our internal accounting systems. Our most
significant accounting systems, our general ledger system and our accounts
payable system, are currently year 2000 compliant. Our billing system is
currently not year 2000 compliant. We have been notified by the vendor that they
will be distributing the year 2000 compliant upgrade to the software at no
additional cost by June 1999. Once we receive this upgrade, all software
will be tested for compatibility and year 2000 compliance.
We place a high degree of reliance on computer systems of third parties, such
as tenants, vendors and financial institutions. Although we are assessing the
readiness of these third parties, there can be no guarantee that the failure
of these third parties to modify their systems in advance of December 31,
1999 would not have a material adverse effect on our operations. We have
surveyed our most significant third-party vendors and financial institutions,
and all surveyed indicated that they have implemented year 2000 programs. In
addition, we are in the process of surveying our significant tenants for
their year 2000 readiness. Approximately 40% of our tenants have returned
their surveys. Most have indicated that they have a year 2000 program in
place and expect to be year 2000 compliant by the end of 1999. A few have
indicated that they have some concerns regarding their systems. We intend to
monitor their status in this regard. We are in the process of contacting
those tenants who have not returned their surveys. We anticipate that this
process will be completed by mid-1999.
We are continually participating in surveys with new tenants, vendors and
other third-party suppliers. If future risk assessments of third-party suppliers
or tenants indicate significant exposure from a supplier's year 2000 problem,
the supplier or tenant will be asked to demonstrate how the problems will be
addressed. We believe that we have viable alternatives for each of our major
vendors.
The task force has completed its evaluation of internal systems in our
properties that may have embedded microprocessors with potential year 2000
problems, mainly building systems, including heating, ventilation and air
conditioning systems, elevators and security systems. Based on the results of
our review, seven of our properties have certain critical systems that must
be upgraded for year 2000 readiness. All upgrades are in progress. We
anticipate completion of these upgrades by mid-1999. We anticipate using the
services of outside experts to test and review our findings and to reconfirm
that our building systems are year 2000 compliant. We expect to complete this
part of the project in the third quarter of 1999.
19
<PAGE>
COST
We do not expect our year 2000 project costs, including the costs of any
remedial activities and outside experts, to be material. The aggregate cost of
purchasing conversion packages for the accounting systems and the cost to survey
tenants, vendors and financial institutions are not expected to be material. In
addition, any costs incurred to review the building systems and to replace or
upgrade them as appropriate constitute property maintenance costs, and are
therefore generally recoverable from the tenants pursuant to the terms of their
existing leases.
RISKS
We believe that the principal risks associated with the year 2000 issue include
the risk of disruption of our operations due to operational failures of third
parties, including tenants, vendors and financial institutions, and the risk of
business interruption due to building system failures. We do not believe that
the risk of disruptions due to operational failures of vendors or financial
institutions is significant, because our major vendors and financial
institutions are currently year 2000 compliant, and we believe we have viable
alternatives for such suppliers. If any of our major tenants do not become year
2000 compliant on schedule, such tenant's operations and financial condition
could be adversely affected, which may impact the tenant's ability to meet its
rent obligations. Similarly, if our building systems failed due to year 2000
problems, services to our properties and tenants, such as mechanical and
security services, could be interrupted, resulting in potential rent disputes
with the tenants. We believe, however, that our early involvement in
identifying, assessing and evaluating our critical systems should minimize the
risk of year 2000 problems to our operations.
CONTINGENCY PLANS
We believe that development of contingency plans for significant exposures to
potential year 2000 problems are integral to our planning process. Once we have
completed our evaluation of critical systems and have completed the subsequent
remedial action phase, we will again assess our exposure to year 2000 problems.
Based on this assessment, we intend to develop appropriate contingency plans for
the systems. Because we anticipate being substantially year 2000 compliant by
mid-1999, we believe that adequate time exists to ensure that alternatives can
be developed, assessed and implemented prior to the end of 1999. Based on our
assessment of the success or adequacy of these alternatives, we intend to
develop contingency plans. We cannot give assurance, however, that failure to
develop an alternative or an appropriate contingency plan would not have a
material adverse effect on our operations.
FUNDS FROM OPERATIONS
We believe 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, FFO
provides investors with an understanding of our ability to incur and service
debt, to make capital expenditures and to make distributions. We compute 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 used by other equity REITs, and, accordingly,
may not be comparable to such other REITs. Further, FFO does not represent
amounts available for our discretionary use because of needed capital
replacement or expansion, debt service obligations, or other
20
<PAGE>
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 our financial performance or to cash flows from
operating activities (determined in accordance with GAAP) as a measure of our
liquidity, nor is it indicative of funds available to fund our cash needs,
including our ability to make distributions.
The following table presents our FFO for the three months ended March 31, 1999
and 1998 on a historical basis (in thousands):
<TABLE>
<CAPTION>
THREE MONTHS ENDED THREE MONTHS ENDED
MARCH 31, 1999 MARCH 31, 1998
------------------------------------------
<S> <C> <C>
Net income $ 5,298 $ 4,635
Add:
Depreciation and amortization 3,594 1,721
------- -------
FFO $ 8,892 $ 6,356
------- -------
------- -------
</TABLE>
PROPERTY AND LEASE INFORMATION
The following table is a summary of our property portfolio as of March 31, 1999
(dollars in thousands):
<TABLE>
<CAPTION>
NUMBER OF RENTABLE ANNUALIZED OCCUPANCY
PROPERTIES SQUARE FEET BASE RENT PERCENTAGE
------------------------------------------------------------
<S> <C> <C> <C> <C>
REGION:
Suburban Washington D.C. 17 1,537,338 $ 20,807 96.1% (1)
California - San Diego 7 428,955 11,794 98.9%
California - San Francisco Bay 6 355,398 5,275 89.4% (1)
Southeast 4 254,230 3,672 100%
New Jersey/Suburban Philadelphia 5 273,048 3,481 100%
Eastern Massachusetts 6 392,888 10,031 100%
Washington - Seattle 3 328,556 8,666 94.8%
------------------------------------------------------------
Subtotal 48 3,570,413 63,726 96.6%
Renovation/Repositioning Properties 4 133,460 37 2.8%
------------------------------------------------------------
Total 52 3,703,873 $ 63,763 93.3%
------------------------------------------------------------
------------------------------------------------------------
</TABLE>
- ---------
(1) All, or substantially all, of the vacant space is office or warehouse space.
21
<PAGE>
The following table shows certain information with respect to the lease
expirations of our properties as of March 31, 1999:
<TABLE>
<CAPTION>
SQUARE PERCENTAGE OF ANNUALIZED BASE
YEAR OF NUMBER OF FOOTAGE OF AGGREGATE RENT OF EXPIRING
LEASE EXPIRING EXPIRING PORTFOLIO LEASE LEASES (PER
EXPIRATION LEASES LEASES SQUARE FOOT SQUARE FOOT)
----------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
1999 (1) 45 314,441 9.1% $ 18.78
2000 29 386,570 11.2% $ 17.02
2001 26 479,895 13.9% $ 19.14
2002 13 156,868 4.5% $ 13.21
2003 16 342,803 9.9% $ 15.86
Thereafter 36 1,773,378 51.4% $ 19.50
</TABLE>
- ---------
(1) Represents leases expiring between April 1, 1999 to December 31, 1999.
The following table is a summary of our lease activity for the quarter ended
March 31, 1999 computed under generally accepted accounting principles ("GAAP
Basis") and under generally accepted accounting principles, adjusted to
exclude the effect of straight line rent adjustments required by GAAP ("Cash
Basis"):
<TABLE>
<CAPTION>
CASH BASIS GAAP BASIS
--------------------------------------
<S> <C> <C>
EXPIRED LEASES
Square footage 113,731 113,731
Rental rate $14.03 $14.03
RENEWED/RELEASED SPACE
Square footage 96,018 96,018
Rental rate $13.73 $13.73
New rate $17.04 $18.69
Rental rate increase 24.1% 36.1%
</TABLE>
22
<PAGE>
The following table shows the breakdown of the renewed and released space for
the quarter ended March 31, 1999 computed under generally accepted accounting
principles ("GAAP Basis") and under generally accepted accounting principles,
adjusted to exclude the effect of straight line rent adjustments required by
GAAP ("Cash Basis"):
<TABLE>
<CAPTION>
CASH BASIS GAAP BASIS
----------------------------------------
<S> <C> <C>
NEW LEASES
Square footage 64,111 64,111
Expiring rate $10.82 $10.82
New rate $13.92 $16.31
Rental rate increase 28.7% 50.7%
RENEWAL LEASES
Square footage 25,070 25,070
Rental rate $20.26 $20.26
New rate $25.01 $25.22
Rental rate increase 23.4% 24.5%
MONTH-TO-MONTH LEASES
Square footage 6,837 6,837
Rental rate $17.06 $17.06
New rate $17.06 $17.06
Rental rate increase 0.0% 0.0%
</TABLE>
23
<PAGE>
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT
MARKET RISK
Market risk is the exposure to loss resulting from changes in interest rates,
foreign currency exchange rates, commodity prices and equity prices. The primary
market risk to which we are exposed is interest rate risk, which is sensitive to
many factors, including governmental monetary and tax policies, domestic and
international economic and political considerations and other factors that are
beyond our control.
In order to modify and manage the interest characteristics of our outstanding
debt and limit the effects of interest rates on our operations, we may utilize a
variety of financial instruments, including interest rate swaps, caps, floors
and other interest rate exchange contracts. The use of these types of
instruments to hedge our exposure to changes in interest rates carries
additional risks such as counter-party credit risk and legal enforceability of
hedging contracts.
Our future earnings, cash flows and fair values relating to financial
instruments are primarily dependent upon prevalent market rates of interest,
such as LIBOR. However, due to the purchase of our interest rate swap agreement,
the effects of interest rate changes are reduced. Based on interest rates at
March 31, 1999, a 1% increase in interest rates on our line of credit would
decrease annual future earnings and cash flows, after considering the effect of
our interest rate swap agreement, by approximately $1.2 million. A 1% decrease
in interest rates on our line of credit would increase annual future earnings
and cash flows, after considering the effect of our interest rate swap
agreement, by approximately $1.2 million. A 1% increase interest rates on our
secured debt and interest rate swap agreement would decrease their fair value by
approximately $8.4 million. A 1% decrease in interest rates on our secured debt
and interest rate swap agreement would increase their fair value by
approximately $9.5 million. A 1% increase or decrease in interest rates on our
secured note receivable would not have a material impact on its fair value.
These amounts are determined by considering the impact of the hypothetical
interest rates on our borrowing cost and interest rate swap agreement. These
analyses do not consider the effects of the reduced level of overall economic
activity that could exist in such an environment. Further, in the event of a
change of such magnitude, we would consider taking actions to further mitigate
our exposure to the change. However, due to the uncertainty of the specific
actions that would be taken and their possible effects, the sensitivity analysis
assumes no changes in our capital structure.
24
<PAGE>
PART II - OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
On August 10, 1998, we filed for arbitration against Mr. Alan Gold, our
former President, alleging various claims from his employment relationship
and seeking declaratory relief. On October 8, 1998, Mr. Gold filed a response
and alleged claims against us, arising from his employment relationship. The
arbitration took place April 19, 1999 to April 23, 1999. The Arbitrator found
in our favor with respect to all of Mr. Gold's claims against us.
To our knowledge, no other litigation is pending against us, other than routine
actions and administrative proceedings, substantially all of which are expected
to be covered by liability insurance or which, in the aggregate, are not
expected to have a material adverse effect on our financial condition, results
of operations or cash flows.
ITEM 2. CHANGES IN SECURITIES AND USE OF PROCEEDS
In March 1999, we completed a transaction with Health Science Properties
Holding Corporation ("Holdings"), one of our significant stockholders. In
connection with the transaction, Holdings delivered to us all of the
1,765,923 shares of our common stock it owned in exchange for (i) the
assumption by us of a $3,136,000 obligation of Holdings and (ii) the issuance
by us to Holdings of 1,620,580 new shares of our common stock. The number of
new shares we issued was computed by subtracting from the 1,765,923 shares
owned by Holdings prior to the transaction, a number of shares with an
aggregate market value equal to 2% of the value of the 1,765,923 shares, plus
the amount of the $3,136,000 loan. The new shares issued were not registered
under the Securities Act of 1933, as amended; however, we have granted
registration rights to the holders of new shares. In connection with the
issuance of the new shares, stockholders of Holdings have agreed to certain
limitations on transfer of any of the shares of our common stock received by
them upon the redemption or liquidation of Holdings, which occurred in March
1999
The issuance of the new shares was effected in reliance upon an exemption
from registration under Section 3(a)(9) of the Securities Act as an exchange
by the issuer with existing stockholders where no commission was paid for
soliciting the exchange.
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
None.
25
<PAGE>
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
None
ITEM 5. OTHER INFORMATION
None.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits
10.15 Share Exchange Agreement, dated as of February 26, 1999, between
Alexandria Real Estate Equities, Inc. and Health Science
Properties Holding Corporation
10.16 First Amendment to Share Exchange Agreement, dated as of March
10, 1999, by and between Alexandria Real Estate Equities, Inc.
and Health Science Properties Holding Corporation
10.17 Second Amendment to Share Exchange Agreement, dated as of March
11, 1999, by and between Alexandria Real Estate Equities, Inc.
and Health Science Properties Holding Corporation
10.18 Escrow and Security Agreement, dated as of March 11, 1999, among
Alexandria Real Estate Equities, Inc., Health Science Properties
Holding Corporation and Cedars Bank
10.19 Registration Rights Agreement, dated as of March 11, 1999, by and
among Alexandria Real Estate Equities, Inc. and Health Science
Properties Holding Corporation (together with its permitted
assigns)
12.1 Computation of Consolidated Ratio of Earnings to Combined Fixed
Charges and Preferred Stock Dividends
27.1 Financial Data Schedule
(b) Reports on Form 8-K.
On February 18, 1999, the Company filed a Current Report on Form 8-K, dated
February 18, 1999, to report the sale of 1,150,000 shares of common stock to
Goldman, Sachs & Co.
26
<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 May 17, 1999.
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)
27
<PAGE>
EXHIBIT 10.15
SHARE EXCHANGE AGREEMENT
DATED AS OF
FEBRUARY 26, 1999,
BETWEEN
ALEXANDRIA REAL ESTATE EQUITIES, INC.
AND
HEALTH SCIENCE PROPERTIES HOLDING CORPORATION
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C> <C>
ARTICLE I
DEFINITIONS
Section 1.1 DEFINITIONS.............................................................. 3
ARTICLE II EXCHANGE OF SHARES
Section 2.1 EXCHANGE OF SHARES....................................................... 9
Section 2.2 CLOSING.................................................................. 9
Section 2.3 RESALE RESTRICTIONS...................................................... 10
Section 2.4 OTHER COMPANY BUSINESS LIABILITIES NOT ASSUMED........................... 12
ARTICLE III REPRESENTATIONS AND
WARRANTIES OF THE COMPANY
Section 3.1 CORPORATE EXISTENCE AND POWER............................................ 12
Section 3.2 CORPORATE AUTHORIZATION.................................................. 12
Section 3.3 GOVERNMENTAL AUTHORIZATION............................................... 12
Section 3.4 NON-CONTRAVENTION........................................................ 13
Section 3.5 CAPITALIZATION........................................................... 13
Section 3.6 NO CONDUCT OF BUSINESS................................................... 14
Section 3.7 NO UNDISCLOSED COMPANY BUSINESS LIABILITIES.............................. 14
Section 3.8 LITIGATION............................................................... 14
Section 3.9 COMPLIANCE WITH LAWS AND COURT ORDERS.................................... 14
Section 3.10 TITLE TO OLD ALEXANDRIA SHARES........................................... 14
Section 3.11 FINDERS' FEES............................................................ 14
Section 3.12 ENVIRONMENTAL MATTERS.................................................... 14
ARTICLE IV REPRESENTATIONS AND
WARRANTIES OF ALEXANDRIA
Section 4.1 CORPORATE EXISTENCE AND POWER............................................ 15
Section 4.2 CORPORATE AUTHORIZATION.................................................. 15
Section 4.3 GOVERNMENTAL AUTHORIZATION............................................... 16
</TABLE>
i
<PAGE>
<TABLE>
<CAPTION>
PAGE
----
<S> <C> <C>
Section 4.4 NON-CONTRAVENTION........................................................ 16
Section 4.5 CAPITALIZATION........................................................... 16
Section 4.6 REPORTS AND FINANCIAL STATEMENTS......................................... 16
Section 4.7 LITIGATION............................................................... 17
Section 4.8 FINDERS' FEES............................................................ 17
ARTICLE V COVENANTS OF THE COMPANY
Section 5.1 CONDUCT OF COMPANY....................................................... 17
Section 5.2 OLD ALEXANDRIA SHARES.................................................... 18
Section 5.3 MEETING OF COMPANY STOCKHOLDERS.......................................... 18
Section 5.4 COMPANY PROXY STATEMENT.................................................. 18
ARTICLE VI ADDITIONAL COVENANTS
OF THE PARTIES
Section 6.1 ASSISTANCE............................................................... 19
Section 6.2 DISCHARGE OF OBLIGATION.................................................. 19
Section 6.3 CERTAIN FILINGS.......................................................... 19
Section 6.4 PUBLIC ANNOUNCEMENTS..................................................... 20
Section 6.5 NOTICES OF CERTAIN EVENTS................................................ 20
Section 6.6 COOPERATION WITH RESALE.................................................. 20
Section 6.7 TREATMENT OF ESCROW SHARES............................................... 21
Section 6.8 DIRECTORS AND OFFICERS INSURANCE......................................... 21
ARTICLE VII CONDITIONS TO CLOSING
Section 7.1 CONDITIONS TO OBLIGATIONS OF ALEXANDRIA AND THE COMPANY.................. 21
Section 7.2 CONDITIONS TO OBLIGATIONS OF ALEXANDRIA.................................. 22
Section 7.3 CONDITIONS TO OBLIGATIONS OF THE COMPANY................................. 23
ARTICLE VIII SURVIVAL; INDEMNIFICATION
Section 8.1 SURVIVAL................................................................. 24
</TABLE>
ii
<PAGE>
<TABLE>
<S> <C> <C>
PAGE
----
Section 8.2 INDEMNIFICATION.......................................................... 24
Section 8.3 PROCEDURES............................................................... 26
ARTICLE IX TERMINATION
Section 9.1 GROUNDS FOR TERMINATION................................................. 26
Section 9.2 EFFECT OF TERMINATION................................................... 28
ARTICLE X MISCELLANEOUS
Section 10.1 NOTICES................................................................. 28
Section 10.2 AMENDMENTS AND WAIVERS.................................................. 29
Section 10.3 EXPENSES................................................................ 30
Section 10.4 SUCCESSORS AND ASSIGNS.................................................. 30
Section 10.5 GOVERNING LAW........................................................... 30
Section 10.6 ARBITRATION............................................................. 30
Section 10.7 CONSENT TO JURISDICTION................................................. 31
Section 10.8 WAIVER OF JURY TRIAL.................................................... 31
Section 10.9 COUNTERPARTS; THIRD PARTY BENEFICIARIES................................. 31
Section 10.10 ENTIRE AGREEMENT........................................................ 32
</TABLE>
iii
<PAGE>
<TABLE>
<CAPTION>
EXHIBITS
<S> <C>
Exhibit 1 PLAN OF LIQUIDATION
Exhibit 2 AMENDMENTS TO COMPANY CHARTER
Exhibit 3 ESCROW AND SECURITY AGREEMENT
Exhibit 4 INSTRUMENT OF ASSIGNMENT AND ASSUMPTION
Exhibit 5 REGISTRATION RIGHTS AGREEMENT
Exhibit 6 LOCK-UP AGREEMENT
Exhibit 7.2(c) OPINION OF SASM&F TO ALEXANDRIA
Exhibit 7.2(d) OPINION OF SASM&F TO ALEXANDRIA
Exhibit 7.2(e) OPINION OF BALLARD SPAHR TO ALEXANDRIA
Exhibit 7.3(b) OPINION OF SASM&F TO THE COMPANY
Exhibit 7.3(c) OPINION OF COOLEY TO THE COMPANY
Exhibit 7.3(d) OPINION OF BALLARD SPAHR TO THE COMPANY
</TABLE>
iv
<PAGE>
SHARE EXCHANGE AGREEMENT
AGREEMENT, dated as of February 26, 1999 (the "AGREEMENT"), between
Alexandria Real Estate Equities, Inc., a Maryland corporation ("ALEXANDRIA"),
and Health Science Properties Holding Corporation, a Maryland corporation (the
"COMPANY" ).
WHEREAS, the Company is the owner of 1,765,923 shares (the "OLD
ALEXANDRIA SHARES") of the common stock, par value $.01 per share, of Alexandria
(the "ALEXANDRIA COMMON STOCK");
WHEREAS, the Company is currently the obligor on a margin account loan
in the principal amount of $3,100,000 owed to PaineWebber Incorporated
("PAINEWEBBER") (the Company's obligations to repay such loan, together with all
interest thereon, and any prepayment penalties and all other expenses associated
with the assumption and retirement thereof being hereinafter referred to as the
"OBLIGATION"), which Obligation is secured by 250,000 Old Alexandria Shares (the
"PLEDGED ALEXANDRIA SHARES").
WHEREAS, the Company desires to deliver the Old Alexandria Shares to
Alexandria in exchange for newly issued shares of Alexandria Common Stock (the
"NEW ALEXANDRIA SHARES") and the assumption of the Company's liabilities under
1
<PAGE>
the Obligation, and Alexandria is willing to enter into such transaction on the
terms and subject to the conditions set forth in this Agreement (such
transactions being hereinafter referred to as the "EXCHANGE");
WHEREAS, the Company is willing to consummate the Exchange to reduce
inefficiencies associated with the dual corporate structure of Holdings and
Alexandria, including eliminating the need for the Company to pay taxes and
management fees and maintain its REIT status;
WHEREAS, Alexandria is willing to consummate the Exchange in order to
facilitate ease of administration of Alexandria's status as a real estate
investment trust, to allow the management of Alexandria to focus exclusively
upon the operation of Alexandria's business, and to increase the number of
holders of Alexandria Common Stock;
WHEREAS, following the Exchange and pursuant to the Plan of
Reorganization (defined herein), the Company shall redeem (the "REDEMPTION") its
outstanding Series A Preferred Stock, par value $.01 per share (the "SERIES A
PREFERRED STOCK"), Series B Preferred Stock, par value $.01 per share (the
"SERIES B PREFERRED STOCK") and Series C Preferred Stock, par value $.01 per
share (the "SERIES C PREFERRED STOCK");
WHEREAS, following the Redemption and pursuant to the Plan of
Reorganization (defined herein), the Company shall distribute all existing and
future rights to the remaining New Alexandria Shares and all other assets of the
Company not necessary to satisfy the outstanding claims of the Company's
creditors, including the obligations under the Escrow Agreement (defined herein)
or hereunder, to the stockholders of the Company (the "COMPANY STOCKHOLDERS")
who hold common stock, par value $.01 per share, of the Company (the "COMMON
STOCKHOLDERS"), in complete liquidation of their interests in the Company (the
"LIQUIDATION"), pursuant to a plan of liquidation (the "PLAN OF LIQUIDATION")
adopted by the Common Stockholders in the form annexed hereto as Exhibit 1;
WHEREAS, for federal income tax purposes, it is intended that the
Exchange, the Redemption and the Liquidation shall qualify as a reorganization
under the provisions of Section 368(a) of the Internal Revenue Code of 1986, as
amended (the "CODE") (the "PLAN OF REORGANIZATION");
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WHEREAS, the obligation of the Company to consummate the Exchange is
subject to the approval by the Company Stockholders of the amendments to the
Company's charter (the "COMPANY CHARTER") set forth in Exhibit 2 hereto (the
"AMENDMENTS"), and approval by the Company Stockholders of the Liquidation, such
Amendments and Liquidation to take effect only if the Exchange is consummated;
WHEREAS, the Board of Directors of the Company (the "COMPANY BOARD OF
DIRECTORS") has approved this Agreement, the Redemption, the Amendments and the
Liquidation, subject to the approval of the Exchange, the Amendments and the
Liquidation by the Company Stockholders in accordance with this Agreement and
the requirements of the Maryland General Corporation Law (the "MGCL"); and
WHEREAS, the Board of Directors of Alexandria has approved this
Agreement.
NOW, THEREFORE, the parties hereto agree as follows:
ARTICLE I
DEFINITIONS
SECTION 1.1 DEFINITIONS.
(a) The following terms, as used herein, have the following meanings:
"AFFILIATE" means, with respect to any Person, any other Person
directly or indirectly controlling, controlled by, or under common control with
such Person; PROVIDED that for purposes of this Agreement, unless express
provision is made to the contrary, (i) neither the Company nor any Company
Stockholder shall be considered an Affiliate of Alexandria and (ii) neither
Alexandria nor any of its Subsidiaries shall be considered an Affiliate of the
Company.
"APPROVED BROKER-DEALER" means any broker-dealer approved in writing by
Alexandria in advance of the sale by the holder of the New Alexandria Shares
proposed to be made through such broker-dealer; PROVIDED that Alexandria may
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withdraw its approval of a broker-dealer only upon written notice to all holders
of New Alexandria Shares.
"ASSUMED LOAN SHARES" means the number of shares of Alexandria Common
Stock obtained by dividing (i) the amount of the Obligation by (ii) the Market
Value.
"BENEFIT ARRANGEMENTS" means all life and health insurance,
hospitalization, savings, bonus, deferred compensation, incentive compensation,
holiday, vacation, severance pay, sick pay, sick leave, disability, retirement
benefits, tuition refund, service award, company car, scholarship, relocation,
fringe benefit, contracts, collective bargaining agreements, workers'
compensation, individual employment, consultancy or severance contracts and
other policies (whether written or oral) or practices of providing employee or
executive compensation or benefits to employees which in any such case is or was
maintained, administered or contributed to by the Company or its Subsidiaries or
in which the Company or its Subsidiaries participates or participated and which
provides benefits to current or former employees of the Company or its
Subsidiaries, other than Employee Benefit Plans.
"CLOSING DATE" means the date of the Closing.
"COMPANY BUSINESS LIABILITIES" means any and all obligations and
liabilities (Tax or otherwise) of any nature whatsoever, whether vested or
unvested, contingent or fixed, actual or potential, known or unknown, liquidated
or unliquidated, material or immaterial, disputed or undisputed, legal or
equitable, secured or unsecured, arising at any time (whether before or after
the Closing) from or in connection with the acts or omissions of, or otherwise
relating to, the Company, or its past or present employees or agents, including
without limitation (i) any Environmental Liabilities and any and all Damages of
Alexandria and each of its Affiliates (including without limitation reasonable
expenses of investigation by engineers, environmental consultants and similar
technical personnel and other agents and representatives of Alexandria) arising
out of, in respect of or in connection with such Environmental Liabilities, (ii)
any Employment Liabilities and any and all Damages of Alexandria and each of its
Affiliates (including without limitation reasonable expenses of investigation by
agents and representatives of Alexandria) arising out of, in respect of or in
connection with such Employment Liabilities, (iii) any liabilities arising out
of the business activities, operations, properties, agreements, arrangements or
interests conducted, owned or held by the Company (including any such items
formerly conducted, owned or held by the Company) or to which any such
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<PAGE>
entity was a party or by which it was bound as of the Closing or at any time
prior thereto, (iv) the obligations to pay Company Stockholders pursuant to the
Redemption and the Liquidation and (v) any liabilities arising out of the
transactions contemplated hereby. For the avoidance of doubt, "Company Business
Liabilities" include all estimated Tax liabilities of the Company (including
without limitation any Tax liabilities likely to result from any of the
transactions contemplated hereby).
"DISCOUNT SHARES" means the number of shares of Alexandria Common Stock
obtained by multiplying (i) the number of Old Alexandria Shares by (ii) .02.
"EMPLOYEE BENEFIT PLANS" means each and every "employee benefit plan"
as defined in Section 3(3) of the Employee Retirement Income Security Act of
1974, as amended ("ERISA"), which is or was maintained, administered or
contributed to by the Company or in which the Company participates or
participated and which provides benefits to current or former employees of the
Company, including (i) any such plan that is an "employee welfare benefit plan"
as defined in Section 3(1) of ERISA, including postretirement medical and life
insurance plans and (ii) any such plan that is an "employee pension benefit
plan" as defined in Section 3(2) of ERISA ("PENSION PLANS").
"EMPLOYMENT LIABILITIES" means any and all liabilities of or relating
to the Company (including any entity which is, in whole or in part, a
predecessor of the Company), whether vested or unvested, contingent or fixed,
actual or potential, known or unknown, liquidated or unliquidated, material or
immaterial, disputed or undisputed, legal or equitable, secured or unsecured, in
respect of any individuals who may be considered under federal, state or local
law to be, or to have been, employees, including without limitation liabilities
which arise under or relate to the Employee Benefit Plans, the Benefit
Arrangements, ERISA, the Code, the Worker Adjustment and Retraining Notification
Act or other employment related claims or litigation.
"ENVIRONMENTAL LAWS" means any and all federal, state, local and
foreign statutes, laws, judicial decisions, regulations, ordinances, rules,
judgments, orders, decrees, codes, plans, injunctions, permits, concessions,
grants, franchises, licenses, agreements and governmental restrictions, whether
now or hereafter in effect, relating to human health, the environment or to
emissions, discharges or releases of pollutants, contaminants, Hazardous
Substances or wastes into the environment, including without limitation ambient
air, surface water, ground water or land, or otherwise relating to the
manufacture, processing, distribution, use, treatment,
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storage, disposal, transport or handling of pollutants, contaminants, Hazardous
Substances or wastes or the clean-up or other remediation thereof.
"ENVIRONMENTAL LIABILITIES" means any and all liabilities of or
relating to the Company (including any entity which is, in whole or in part, a
predecessor of the Company), whether vested or unvested, contingent or fixed,
actual or potential, known or unknown, liquidated or unliquidated, material or
immaterial, disputed or undisputed, legal or equitable, secured or unsecured,
which arise under or relate to matters covered by Environmental Laws (including
without limitation any matters disclosed or required to be disclosed in Schedule
3.12 hereto).
"HAZARDOUS SUBSTANCES" means any toxic, radioactive, caustic or
otherwise hazardous substance, including petroleum, its derivatives, by-products
and other hydrocarbons, or any substance having any constituent elements
displaying any of the foregoing characteristics, including, without limitation,
any substance qualifying as a "hazardous substance" or "hazardous waste" or
otherwise regulated or subject to regulation under any Environmental Law.
"LIEN" means, with respect to any property or asset, any mortgage,
lien, pledge, charge, security interest, encumbrance, community property right
or other adverse claim of any kind in respect of such property or asset. For the
purposes of this Agreement, a Person shall be deemed to own subject to a Lien
any property or asset which it has acquired or holds subject to the interest of
a vendor or lessor under any conditional sale agreement, capital lease or other
title retention agreement relating to such property or asset.
"MARKET VALUE" means the average closing price of a share of Alexandria
Common Stock on the NYSE for the 20 trading day period ending 10 days prior to
the Closing, or if there be no trading in the Alexandria Common Stock on the
NYSE on any such day, the average of the closing bid and ask prices for a share
of Alexandria Common Stock on the NYSE on such day.
"MATERIAL ADVERSE EFFECT" means an effect that would (i) adversely
affect in any respect the title to the Old Alexandria Shares held by the Company
(other than the Lien on the Pledged Alexandria Shares) or the rights of the
Company with respect to such Old Alexandria Shares (other than changes in such
rights that are applicable to the Alexandria Common Stock as a class), or (ii)
adversely affect or delay in any material respect the consummation of the
transactions contemplated by this Agreement or (iii) cause the imposition on
Alexandria of any material liability
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for an obligation of the Company not intended to be assumed by Alexandria
hereunder.
"NYSE" means the New York Stock Exchange, Inc.
"1934 ACT" means the Securities Exchange Act of 1934, as amended, and
the rules and regulations promulgated thereunder.
"PERSON" means an individual, corporation, partnership, association,
trust or other entity or organization, including a government or political
subdivision or an agency or instrumentality thereof.
"REGULATED ENVIRONMENTAL ACTIVITY" means any generation, treatment,
storage, recycling, transportation or disposal of any Hazardous Substance.
"RELEASE" means any discharge, emission or release, including a Release
as defined in CERCLA at 42 U.S.C. '9601(22). The term "RELEASED" has a
corresponding meaning.
"SUBSIDIARY" means, with respect to any Person, any entity of which
securities or other ownership interests having ordinary voting power to elect a
majority of the board of directors or other persons performing similar functions
are at the time directly or indirectly owned by such Person.
"TAX" means any (i) tax, governmental fee or other like assessment or
charge of any kind whatsoever, including, without limitation, tax imposed under
Subtitle A of the Code and any net income, alternative or add-on minimum tax,
gross income, gross receipts, sales, use, ad valorem, value added, transfer,
franchise, profits, license, withholding on amounts paid to or by the Company or
any of its Subsidiaries, payroll, employment, excise, severance, stamp, capital
stock, occupation, premium, property, environmental or windfall profit tax,
custom or duty, together with, in each case, any interest, penalty, addition to
tax or additional amount imposed by any governmental authority (domestic or
foreign) responsible for the imposition of any such tax (ii) liability of the
Company or any of its Subsidiaries for the payment of any amounts of the type
described in clause (i) above as a result of being a member of an affiliated,
consolidated, combined or unitary group, or being a party to any agreement or
arrangement whereby liability of the Company or any of its Subsidiaries for
payment of such amounts was determined or taken into account with reference to
the liability of any other Person, and (iii) liability of the Company
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<PAGE>
or any of its Subsidiaries for the payment of any amounts as a result of being
party or subject to any tax sharing agreement.
(b) Each of the following terms is defined in the Section set forth
opposite such term:
<TABLE>
<CAPTION>
TERM SECTION
- ---- -------
<S> <C>
AAA Rules 10.6
Alexandria Indemnitee 8.2
Alexandria SEC Reports 4.6
Assumption 2.1
Closing 2.2
Company Indemnitee 8.2
Company Proxy Statement 5.4
Company Securities 3.5
Company Stockholders Meeting 5.3
Damages 8.2
Escrow Account 2.2
Escrow Agent 2.2
Escrow Agreement 2.2
Escrow Shares 2.2
Indemnified Party 8.3
Indemnifying Party 8.3
Lock-Up Agreement 2.3
Lock-Up Stockholder 2.3
Registration Rights Agreement 2.2
SDAT 3.3
SEC 4.6
</TABLE>
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ARTICLE II
EXCHANGE OF SHARES
SECTION 2.1 EXCHANGE OF SHARES. Upon the terms and subject to the
conditions of this Agreement, in exchange for the Old Alexandria Shares,
Alexandria shall (i) assume and agree to discharge the Obligation (the
"ASSUMPTION") and (ii) issue to the Company the number of New Alexandria Shares
equal to the number of Old Alexandria Shares less the Assumed Loan Shares and
the Discount Shares. No fractional shares shall be issued in connection with the
Exchange; rather, the Assumed Loan Shares and Discount Shares shall be
aggregated and the number of shares determined by subtracting the total so
determined from the number of Old Alexandria Shares shall be rounded down to the
nearest whole share of Alexandria Common Stock.
SECTION 2.2 CLOSING. The closing (the "CLOSING") of the Exchange shall
take place at the offices of Skadden, Arps, Slate, Meagher & Flom LLP, 300 South
Grand Avenue, Suite 3400, Los Angeles, California 90071, as soon as possible,
but in no event sooner than five business days nor later than 10 business days,
after satisfaction of the conditions set forth in Article VIII, or at such other
time or place as Alexandria and the Company may agree. At the Closing:
(1) The Company shall deliver to Alexandria certificates representing the
Old Alexandria Shares, duly endorsed or accompanied by stock powers duly
endorsed in blank, with any required transfer stamps affixed thereto.
(2) Alexandria shall deliver to the Company appropriately legended
certificates for the New Alexandria Shares, in such denominations and registered
as the Company shall advise Alexandria at least two days prior to the Closing.
(3) The Company shall deliver to Cedars Bank, as Escrow and Security Agent
(the "ESCROW AGENT"), certificates representing 10% of the New Alexandria Shares
(the "ESCROW SHARES"), registered in the name of the Company, with a duly
endorsed stock power attached, to be held in an escrow account (the "ESCROW
ACCOUNT") pursuant to an Escrow and Security Agreement substantially in the form
of Exhibit 3 hereto (the "ESCROW AGREEMENT").
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(4) Alexandria shall deliver to the Company the Instrument of Assignment
and Assumption annexed hereto as Exhibit 4, duly executed by Alexandria and with
the release attached thereto duly executed by PaineWebber.
(5) The Company and Alexandria will enter into a Registration Rights
Agreement substantially in the form annexed hereto as Exhibit 5 (the
"REGISTRATION RIGHTS AGREEMENT").
SECTION 2.3 RESALE RESTRICTIONS.
(1) Until March 31, 1999, neither the Company nor any Company Stockholder
who is to receive more than 99 New Alexandria Shares pursuant to the Plan of
Reorganization will be permitted to sell, transfer, pledge, hypothecate or
otherwise assign any of the New Alexandria Shares without the prior written
consent of Alexandria; PROVIDED that (i) the Company may (x) deposit the Escrow
Shares in the Escrow Account, and (y) distribute New Alexandria Shares to any
Company Stockholder who is to receive, pursuant to the Redemption and
Liquidation, fewer than 100 New Alexandria Shares, and to each other Company
Stockholder (a "LOCK-UP STOCKHOLDER") who delivers to Alexandria an executed
Lock-Up Agreement, substantially in the form of Exhibit 6 hereto (the "LOCK-UP
AGREEMENT"), and (ii) the Lock-Up Stockholders may distribute the New Alexandria
Shares in accordance with the terms of the Lock-Up Agreement.
(2) Until the second anniversary of the Closing, no Lock-Up Stockholder
will sell any New Alexandria Shares other than in transactions executed through
PaineWebber or another Approved Broker-Dealer; PROVIDED that (i) this
restriction shall not apply to the sale by any Lock-Up Stockholder, in any
30-day period, of not more than 1,000 New Alexandria Shares, (ii) any Lock-Up
Stockholder may request that Alexandria waive this restriction with respect to a
proposed sale by such Lock-Up Stockholder (it being intended that such requests
will not cover more than 20% of the New Alexandria Shares in the aggregate), and
(iii) this restriction shall not apply to any sale by any Lock-Up Stockholder
who has received prior written notice of Alexandria's waiver of such restriction
with respect to such sale.
(3) In addition to any other legend which may be required by the Company
Charter or otherwise, all certificates representing the New Alexandria Shares to
be distributed to Lock-Up Stockholders shall bear the following legend:
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THE SHARES OF COMMON STOCK REPRESENTED BY THIS CERTIFICATE ARE
SUBJECT TO THE PROVISIONS OF A SHARE EXCHANGE AGREEMENT, DATED
FEBRUARY 26, 1999 BETWEEN THE COMPANY AND HEALTH SCIENCE
PROPERTIES HOLDING CORPORATION, A COPY OF WHICH IS AVAILABLE
ON REQUEST FROM THE SECRETARY OF THE COMPANY. UNTIL MARCH 31,
1999, SUCH SHARES CANNOT BE SOLD, TRANSFERRED, PLEDGED,
HYPOTHECATED OR OTHERWISE ASSIGNED EXCEPT IN TRANSACTIONS
SPECIFIED IN THE SHARE EXCHANGE AGREEMENT OR IN A RELATED
LOCK-UP AGREEMENT BETWEEN THE STOCKHOLDER AND THE COMPANY.
THEREAFTER, AND UNTIL [ ], 2001, SUCH SHARES MAY ONLY
BE SOLD, TRANSFERRED, PLEDGED, HYPOTHECATED OR OTHERWISE
ASSIGNED IN TRANSACTIONS THROUGH A BROKER-DEALER PREVIOUSLY
APPROVED IN WRITING BY THE COMPANY; PROVIDED THAT SUCH
RESTRICTION WILL NOT PREVENT THE SALE BY ANY STOCKHOLDER OF
NOT MORE THAN 1,000 SHARES OF COMMON STOCK IN ANY 30-DAY
PERIOD. ANY BROKER-DEALER MAY RELY ON A WRITTEN
REPRESENTATION FROM THE COMPANY THAT THE INTENDED SALE IS
PERMITTED BY THE SHARE EXCHANGE AGREEMENT AND THE LOCK-UP
AGREEMENT.
Certificates representing New Alexandria Shares to be distributed to
holders of Series A Preferred Stock, Series B Preferred Stock and Series C
Preferred Stock upon Redemption shall also bear the following legend:
THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933 OR THE APPLICABLE
SECURITIES ACT OF ANY STATE. NO SALE, OFFER TO SELL OR OTHER
TRANSFER OF THE SECURITIES REPRESENTED BY THIS CERTIFICATE MAY
BE MADE UNLESS A REGISTRATION STATEMENT UNDER SAID ACTS IS IN
EFFECT WITH RESPECT TO THE
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SECURITIES, OR AN EXEMPTION FROM THE REGISTRATION PROVISIONS
OF SUCH ACTS IS THEN IN FACT APPLICABLE.
SECTION 2.4 OTHER COMPANY BUSINESS LIABILITIES NOT ASSUMED. Other than the
Obligation, Alexandria is not assuming, and is not to be deemed in any way
responsible for the satisfaction and discharge of, any Company Business
Liabilities.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
The Company represents and warrants to Alexandria that:
SECTION 3.1 CORPORATE EXISTENCE AND POWER. The Company is a corporation
duly incorporated, validly existing and in good standing under the laws of the
State of Maryland and has all corporate powers and all material governmental
licenses, authorizations, permits, consents and approvals required to carry on
its business as now conducted. The Company is duly qualified to do business as a
foreign corporation and is in good standing in each jurisdiction where such
qualification is necessary. The Company has heretofore delivered to Alexandria
true and complete copies of the Company Charter and Bylaws of the Company as
currently in effect.
SECTION 3.2 CORPORATE AUTHORIZATION. The execution, delivery and
performance by the Company of this Agreement and the other agreements to be
entered into in connection herewith are within the Company's corporate powers
and, subject to approval by the stockholders of the Company, have been duly
authorized by all necessary corporate action on the part of the Company and have
been duly executed and delivered by the Company. When such approval has been
obtained, this Agreement and each such other agreement will constitute a valid
and binding agreement of the Company, subject to applicable bankruptcy,
insolvency, fraudulent conveyance, reorganization, moratorium and similar laws
affecting creditors' rights generally and subject, as to enforceability, to
general principles of equity (regardless of whether enforcement is sought in a
proceeding at law or in equity).
SECTION 3.3 GOVERNMENTAL AUTHORIZATION. The execution, delivery and
performance by the Company of this Agreement and the other agreements to be
entered into in connection herewith require no action by or in respect of, or
filing with, any governmental body, agency or official other than the filing
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with and acceptance for record by the State Department of Assessment and
Taxation of Maryland (the "SDAT") of Articles of Transfer.
SECTION 3.4 NON-CONTRAVENTION. The execution, delivery and performance by
the Company of this Agreement and the other agreements to be entered into in
connection herewith do not and will not (a) violate the Company Charter or
Bylaws of the Company, (b) violate in any material respect any applicable law,
rule, regulation, judgment, injunction, order or decree, (c) require any consent
or other action by any Person under, constitute a default under, or give rise to
any right of termination, cancellation or acceleration of any right or
obligation of the Company or to a loss of any benefit to which the Company is
entitled under, any material agreement or other instrument binding upon the
Company or any material license, franchise, permit or other similar
authorization held by the Company or any of its Subsidiaries or (d) result in
the creation or imposition of any Lien on the Old Alexandria Shares.
SECTION 3.5 CAPITALIZATION. The number of shares of authorized stock of
the Company is 1,334,546, consisting of (i) 100,000 shares of Series A Preferred
Stock, of which 100,000 shares are outstanding as of the date hereof, (ii)
18,000 shares of Series B Preferred Stock, of which 14,685 shares are
outstanding as of the date hereof, (iii) 250 shares of Series C Preferred Stock,
of which 86 shares are outstanding as of the date hereof, and (iv) 500,000
shares of common stock, par value $.01 per share, of which 109,023 shares are
outstanding as of the date hereof (v) 49,023 shares of undesignated Preferred
Stock, par value $.01 per share, of which no shares are outstanding, and (vi)
667,273 shares of Excess Stock, par value $.01 per share, of which no shares are
outstanding. All outstanding shares of stock of the Company have been duly
authorized and validly issued and are fully paid and non-assessable. None of the
outstanding shares of stock of the Company has been issued in violation of, or
is subject to, any preemptive or subscription rights. Except as set forth in the
first sentence of this Section, there are no outstanding (a) shares of stock or
voting securities of the Company, (b) securities of the Company convertible into
or exchangeable for shares of stock or voting securities of the Company, or (c)
options or other rights to acquire from the Company, or other obligation of the
Company to issue, any stock, voting securities or securities convertible into or
exchangeable for stock or voting securities of the Company (the items in clauses
3.5(a), 3.5(b) and 3.5(c) being referred to collectively as the "COMPANY
SECURITIES"). There are no outstanding obligations of the Company to repurchase,
redeem or otherwise acquire any Company Securities, except as set forth in the
Company Charter.
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SECTION 3.6 NO CONDUCT OF BUSINESS. The Company conducts no business
other than acting as a holding company and its only significant assets are the
Old Alexandria Shares.
SECTION 3.7 NO UNDISCLOSED COMPANY BUSINESS LIABILITIES. As of the
Closing, except for the Obligation, to the best knowledge of the Company, the
Company shall have no Company Business Liabilities except those incurred in the
ordinary course.
SECTION 3.8 LITIGATION. There is no action, suit, investigation or
proceeding pending by or against or, to the knowledge of the Company, threatened
against or affecting, the Company before any court or arbitrator or any
governmental body, agency or official which in any manner challenges or seeks to
prevent, enjoin, alter or materially delay the transactions contemplated by this
Agreement.
SECTION 3.9 COMPLIANCE WITH LAWS AND COURT ORDERS. The Company is not in
violation in any material respect of any applicable law, rule, regulation,
judgment, injunction, order or decree.
SECTION 3.10 TITLE TO OLD ALEXANDRIA SHARES. The Company is the record and
beneficial owner of the Old Alexandria Shares free and clear of all Liens, other
than the Lien on the Pledged Alexandria Shares.
SECTION 3.11 FINDERS' FEES. There is no investment banker, broker, finder
or other intermediary which has been retained by or is authorized to act on
behalf of the Company who might be entitled to any fee or commission in
connection with the transactions contemplated by this Agreement.
SECTION 3.12 ENVIRONMENTAL MATTERS.
(1) The Company has received no notice, notification, demand, request for
information, citation, summons, complaint or order which remains pending, no
complaint has been filed which remains pending, no penalty has been assessed
which has not been paid and no investigation or review is pending, or to the
Company's knowledge, threatened by any governmental entity or other Person with
respect to any (i) alleged material violation by the Company of any
Environmental Law or material liability thereunder, (ii) alleged failure by the
Company to have any material permit, certificate, license, approval,
registration or authorization required under any
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Environmental Law in connection with the conduct of its business, (iii)
Regulated Environmental Activity or (iv) Release of Hazardous Substances, and
which in the case of 3.12(a)(iii) or 3.12(a)(iv) have had or may reasonably be
expected to have a Material Adverse Effect; no polychlorinated biphenyls,
radioactive material, urea formaldehyde, lead, asbestos, asbestos-containing
material or underground storage tank (active or abandoned) is or has been
present at any property now or previously owned, leased or operated by the
Company that is not now and has not previously been owned, leased, operated or
occupied by Alexandria; and there are no Environmental Liabilities, the
existence of which would have a Material Adverse Effect.
(2) Within the five years prior to the date hereof, there has been no
environmental investigation, study, audit, test, review or other analysis
conducted of which the Company has knowledge, and which involved any potential
material liability to the Company, in relation to the current or prior business
of the Company or any property or facility now or previously owned or leased by
the Company that is not now or previously owned or leased by Alexandria which
investigation, study, audit, test, review or analysis has not been delivered to
Alexandria prior to the date hereof.
(3) For purposes of this Section, the terms "COMPANY" shall include any
entity which is, in whole or in part, a predecessor of the Company.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF ALEXANDRIA
Alexandria represents and warrants to the Company that:
SECTION 4.1 CORPORATE EXISTENCE AND POWER. Alexandria is a corporation
duly incorporated, validly existing and in good standing under the laws of the
State of Maryland and has all corporate powers and all material governmental
licenses, authorizations, permits, consents and approvals required to carry on
its business as now conducted.
SECTION 4.2 CORPORATE AUTHORIZATION. The execution, delivery and
performance by Alexandria of this Agreement and the other agreements to be
entered into pursuant hereto are within the corporate powers of Alexandria and
have been duly authorized by the Board of Directors of Alexandria and by all
other necessary
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corporate action, and have been duly executed and delivered, by Alexandria. This
Agreement constitutes, and when the other agreements to be entered into in
connection herewith have been executed and delivered in accordance with this
Agreement, each of them will constitute, a valid and binding agreement of
Alexandria, subject to applicable bankruptcy, insolvency, fraudulent conveyance,
reorganization, moratorium and similar laws affecting creditors' rights
generally and subject, as to enforceability, to general principles of equity
(regardless of whether enforcement is sought in a proceeding at law or in
equity).
SECTION 4.3 GOVERNMENTAL AUTHORIZATION. The execution, delivery and
performance by Alexandria of this Agreement require no action by or in respect
of, or filing with, any governmental body, agency or official, other than filing
with and acceptance for record by the SDAT of Articles of Transfer.
SECTION 4.4 NON-CONTRAVENTION. The execution, delivery and performance by
Alexandria of this Agreement do not and will not (a) violate the charter or
bylaws of Alexandria or (b) violate any applicable law, rule, regulation,
judgment, injunction, order or decree which, singly or in the aggregate, (i) is
reasonably likely to have a material adverse effect on the condition, financial
or otherwise, or the earnings or business affairs of Alexandria and its
Subsidiaries, considered as one enterprise, or (ii) would adversely affect in
any material respect the consummation of the transactions contemplated by this
Agreement.
SECTION 4.5 CAPITALIZATION. The authorized stock of Alexandria consists
of (i) 100,000,000 shares of Preferred Stock, par value $.01 per share, of which
no shares are outstanding as of the date hereof and (ii) 100,000,000 shares of
common stock, par value $.01 per share, of which 13,736,263 shares are
outstanding as of the date hereof. The New Alexandria Shares to be issued
pursuant to this Agreement are duly authorized and, when delivered by Alexandria
pursuant to this Agreement, will be validly issued, fully paid and
nonassessable. The issuance of the New Alexandria Shares is not subject to
preemptive or other similar rights.
SECTION 4.6 REPORTS AND FINANCIAL STATEMENTS. Alexandria has previously
furnished to the Company true and complete copies of:
(1) Alexandria's Annual Reports on Form 10-K filed with the Securities and
Exchange Commission (the "SEC") for each of the years ended December 31, 1996
and 1997; and
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(2) each definitive proxy statement filed by Alexandria with the SEC since
January 1, 1996.
As of their respective dates, such reports and proxy statements
(collectively, the "ALEXANDRIA SEC REPORTS") (i) complied as to form in all
material respects with the applicable requirements of the 1934 Act, and the
rules and regulations thereunder and (ii) did not contain any untrue statement
of a material fact or omit to state a material fact required to be stated
therein or necessary to make the statements therein, in light of the
circumstances under which they were made, not misleading. The audited
consolidated financial statements included in the Alexandria SEC Reports
(including any related notes and schedules) fairly present the financial
position of Alexandria and its consolidated Subsidiaries as of the dates thereof
and the consolidated results of operations and cash flows for the periods or as
of the dates then ended (subject, where appropriate, to normal year-end
adjustments), in each case in accordance with past practice and generally
accepted accounting principles consistently applied during the periods involved
(except as otherwise disclosed in the notes thereto).
SECTION 4.7 LITIGATION. There is no action, suit, investigation or
proceeding pending against, or to the knowledge of Alexandria, threatened
against or affecting, Alexandria before any court or arbitrator or any
governmental body, agency or official which in any manner challenges or seeks to
prevent, enjoin, alter or materially delay the transactions contemplated by this
Agreement.
SECTION 4.8 FINDERS' FEES. Except for Ladenburg Thalmann & Co. Inc.,
there is no investment banker, broker, finder or other intermediary which has
been retained by or is authorized to act on behalf of Alexandria who might be
entitled to any fee or commission from the Company or any Company Stockholder
upon consummation of the transactions contemplated by this Agreement.
ARTICLE V
COVENANTS OF THE COMPANY
SECTION 5.1 CONDUCT OF COMPANY. From the date hereof through the Closing
Date, unless Alexandria shall otherwise agree in writing or as otherwise
expressly contemplated hereby, the Company shall not, directly or indirectly,
take (or agree, in writing or otherwise, to take) any action, including without
limitation,
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any merger, consolidation, or exchange of stock or assets with any other Person,
or any investment either by purchase of stock or securities, contributions to
capital, property transfer, or, except in the ordinary course of business,
purchase of any property or assets of any other Person, or the incurrence of any
indebtedness for money borrowed or the issuance of any debt securities or the
assumption or guarantee of any of the foregoing, except short-term indebtedness
incurred in the ordinary course of business and consistent with past practices,
(i) which would make any representation or warranty in Article III hereof untrue
or incorrect in any material respect, (ii) which would materially impair the
Company's ability to satisfy any of the conditions set forth in Section 7.1, 7.2
or 7.3 below or would have the effect of preventing or disabling the Company
from performing its obligations under this Agreement, or (iii) which could
reasonably result in preventing the consummation of the transactions
contemplated hereby. Notwithstanding anything herein to the contrary, the
Company shall be permitted to make distributions to Company Stockholders to the
extent reasonably necessary in order to enable the Company to maintain and
preserve its status as a real estate investment trust.
SECTION 5.2 OLD ALEXANDRIA SHARES. From the date hereof through the
Closing Date, the Company shall not sell, transfer or permit any Lien to exist
with respect to the Old Alexandria Shares, except for the Lien on the Pledged
Alexandria Shares.
SECTION 5.3 MEETING OF COMPANY STOCKHOLDERS. The Company shall take all
action necessary, in accordance with the MGCL and the Company Charter and Bylaws
of the Company, to duly call, give notice of, convene and hold a meeting of
Company Stockholders as promptly as practicable to consider and vote upon the
approval of this Agreement and the transactions contemplated hereby (such
meeting and any adjournment or postponement thereof is referred to as the
"COMPANY STOCKHOLDERS MEETING").
SECTION 5.4 COMPANY PROXY STATEMENT. As promptly as practicable after the
date hereof, the Company shall prepare and promptly shall mail to its
stockholders a proxy statement and form of proxy (the "COMPANY PROXY STATEMENT")
with respect to the Company Stockholders Meeting. Each of the Company and
Alexandria shall use its best efforts to obtain and furnish the information
required to be included in the Company Proxy Statement. The Company shall bear
the costs and expenses of printing and distributing the Company Proxy Statement
and related form of proxy to the Company Stockholders. The information provided
and to be provided by the Company and Alexandria, respectively, for use in the
Company Proxy
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Statement shall, on the date the Company Proxy Statement is first mailed to the
Company Stockholders, and in each case on the date of the Company Stockholders
Meeting, be true and correct in all material respects and shall not omit to
state a material fact necessary in order to make the statements made, in light
of the circumstances under which they were made, not misleading, and each of the
Company and Alexandria agree to correct any such information provided by it for
use in the Company Proxy Statement which shall have become false or misleading.
The Company Proxy Statement shall comply as to form in all material respects
with all applicable requirements of law. The Company Proxy Statement shall
contain the determinations and recommendations of the Board of Directors of the
Company as to the Exchange and the transactions contemplated hereby. The Company
shall use its best efforts to solicit from Company Stockholders proxies in favor
of approval of the Plan of Reorganization and the transactions contemplated
hereby and to take all other action necessary or, in the reasonable judgment of
Alexandria, helpful to secure the vote of Company Stockholders required by law
to effect the Plan of Reorganization and related transactions contemplated
hereby.
ARTICLE VI
ADDITIONAL COVENANTS OF THE PARTIES
The parties hereto agree that:
SECTION 6.1 ASSISTANCE. Subject to the terms and conditions of this
Agreement, each party shall use its commercially reasonable best efforts to
take, or cause to be taken, all actions and to do, or cause to be done, all
things necessary, proper or advisable under applicable laws and regulations to
consummate the transactions contemplated by this Agreement.
Section 6.2 DISCHARGE OF OBLIGATION. Alexandria shall repay in full the
Obligation no later than 30 days following the Closing Date and, if required by
PaineWebber, provide the necessary collateral to support the Obligation during
the period prior to such repayment so as to assist in securing the release at or
prior to the Closing of the Lien attaching to the Old Alexandria Shares.
SECTION 6.3 CERTAIN FILINGS. Each party shall cooperate with one another
(a) in determining whether any action by or in respect of, or filing with, any
governmental body, agency or official, or authority is required, or any actions,
consents,
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approvals or waivers are required to be obtained from parties to any material
contracts, in connection with the consummation of the transactions contemplated
by this Agreement and (b) in seeking any such actions, consents, approvals or
waivers or making any such filings, furnishing information required in
connection therewith and seeking timely to obtain any such actions, consents,
approvals or waivers.
SECTION 6.4 PUBLIC ANNOUNCEMENTS. The parties shall consult with each
other before issuing any press release or making any public statement with
respect to this Agreement and the transactions contemplated hereby and, except
as may be required by applicable law or any listing agreement with any national
securities exchange, no press release may be issued or public announcement made
unless Alexandria, in its sole and absolute discretion, shall have agreed to
such press release or public announcement prior to its issuance or release.
SECTION 6.5 NOTICES OF CERTAIN EVENTS. Each party shall promptly notify
each other party of:
(1) any notice or other communication from any Person alleging that the
consent of such Person is or may be required in connection with the transactions
contemplated by this Agreement;
(2) any notice or other communication from any governmental or regulatory
agency or authority in connection with the transactions contemplated by this
Agreement; and
(3) any actions, suits, claims, investigations or proceedings commenced
or, to the best of its knowledge threatened against, relating to or involving or
otherwise affecting the Company or Alexandria or which relate to the
consummation of the transactions contemplated by this Agreement.
SECTION 6.6 COOPERATION WITH RESALE. Alexandria shall cooperate fully
with any Lock-Up Stockholder that proposes to sell any New Alexandria Shares
under Section 2.3(b)(i), and in connection therewith, will, if such sale
complies with the terms of this Agreement and the Lock-Up Agreement, provide an
appropriate written instruction to the broker-dealer through which the sale is
being made, and to the transfer agent for the Alexandria Common Stock, that the
intended sale is permitted by the Share Exchange Agreement and the Lock-Up
Agreement.
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SECTION 6.7 TREATMENT OF ESCROW SHARES. Alexandria shall treat the Escrow
Shares as issued and outstanding pursuant to the financial statements of
Alexandria.
SECTION 6.8 DIRECTORS AND OFFICERS INSURANCE. Alexandria shall use its
reasonable best efforts to have the Liquidating Trust treated as a covered
entity under the directors and officers insurance policy of Alexandria until
such time as the Liquidating Trust terminates; PROVIDED that the cost of any
premium increment on account of such coverage will be borne by the Liquidating
Trust.
ARTICLE VII
CONDITIONS TO CLOSING
SECTION 7.1 CONDITIONS TO OBLIGATIONS OF ALEXANDRIA AND THE COMPANY. The
obligations of Alexandria and the Company to consummate the Closing are subject
to the satisfaction or waiver of the conditions that:
(1) No provision of any applicable law or regulation and no judgment,
injunction, order or decree shall prohibit the consummation of the Exchange.
(2) The NYSE shall have determined that the NYSE rules do not require that
stockholders of Alexandria approve the issuance of the New Alexandria Shares.
(3) The New Alexandria Shares to be issued pursuant to this Agreement
shall have been approved for listing on the NYSE, subject to notice of issuance.
(4) No event shall have occurred that has resulted or could reasonably be
expected to result in a material adverse change to the anticipated benefits of
the transactions contemplated hereby, or the imposition of any material
liability or restriction on account of this transaction, to Alexandria or the
Company.
(5) Upon Closing, no Company Stockholder shall have properly demanded and
not withdrawn rights as objecting stockholders in accordance with the MGCL;
PROVIDED that (i) the Company, with the consent of Alexandria, which consent may
be withheld in Alexandria's sole and absolute discretion, shall be permitted to
waive this prohibition, in which event Alexandria shall comply with the
requirements of a successor under Title 3, Subtitle 2 of the MGCL and (ii) if
any
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Company Stockholder shall properly demand and not withdraw rights as an
objecting stockholder and Alexandria and the Company waive the aforementioned
prohibition, Alexandria and the Company agree that they will confer in good
faith to amend this Agreement to make appropriate provision for the payment of
amounts determined to be owed to the objecting stockholder and as otherwise may
be necessary in connection with such exercise of rights.
(6) The Company and Alexandria shall have executed the Registration Rights
Agreement.
(7) The Company, Alexandria and the Escrow Agent shall have executed the
Escrow Agreement, and the Company shall have deposited the Escrow Shares in the
Escrow Account.
(8) The Exchange, Redemption, Amendments and Liquidation shall have been
approved in accordance with the requirements of the MGCL and the Company
Charter, and the Articles of Amendment shall have been filed with and accepted
for record by the SDAT.
SECTION 7.2 CONDITIONS TO OBLIGATIONS OF ALEXANDRIA. The obligation of
Alexandria to consummate the Closing is subject to the satisfaction or waiver of
the following further conditions:
(1) (i) The Company shall have performed in all material respects all of
its obligations hereunder required to be performed by it on or prior to the
Closing Date, (ii) the representations and warranties of the Company contained
herein shall be true and correct at and as of the Closing Date, as if made at
and as of such date and (iii) Alexandria shall have received a certificate
signed by the President of the Company to the foregoing effect.
(2) Each Lock-Up Stockholder shall have executed and delivered to
Alexandria a Lock-Up Agreement pursuant to which each of them shall agree that,
without the prior written consent of Alexandria, such Lock-Up Stockholder shall
not offer, sell, contract to sell, grant an option to purchase or otherwise
dispose of any New Alexandria Shares received by such Lock-Up Stockholder upon
Liquidation or Redemption before April 1, 1999 and that any sales made on or
after April 1, 1999 shall be made only in conformity with the provisions of the
Lock-Up Agreement.
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(3) Alexandria shall have received a legal opinion from Skadden, Arps,
Slate, Meagher & Flom LLP, counsel to the Company, substantially in the form of
Exhibit 7.2(c) hereto.
(4) Alexandria shall have received a legal opinion from Skadden, Arps,
Slate, Meagher & Flom LLP, counsel to the Company, substantially in the form of
Exhibit 7.2(d) hereto.
(5) Alexandria shall have received a legal opinion from Ballard Spahr
Andrews & Ingersoll, LLP, counsel to the Company, substantially in the form of
Exhibit 7.2(d) hereto.
(6) Alexandria shall have received all documents it may reasonably request
relating to the existence of the Company and the authority of the Company and
each Company Stockholder to enter into this Agreement and the other transaction
documents contemplated hereby, all in form and substance reasonably satisfactory
to Alexandria.
(7) Alexandria shall have received the Old Alexandria Shares free and clear
of all Liens (other than the Lien on the Pledged Alexandria Shares).
SECTION 7.3 CONDITIONS TO OBLIGATIONS OF THE COMPANY. The obligation of
the Company to consummate the Closing is subject to the satisfaction or waiver
of the following further conditions:
(1) (i) Alexandria shall have performed in all material respects all of its
obligations hereunder required to be performed by it at or prior to the Closing
Date, (ii) the representations and warranties of Alexandria shall be true and
correct in all material respects at and as of the Closing Date as if made at and
as of such date and (iii) the Company shall have received a certificate signed
by President or any Vice President of Alexandria to the foregoing effect.
(2) The Company shall have received a legal opinion of Skadden, Arps,
Slate, Meagher & Flom LLP, counsel to the Company, substantially in the form of
Exhibit 7.3(b) hereto.
(3) The Company shall have received a legal opinion of Cooley Godward LLP,
counsel to Alexandria, substantially in the form of Exhibit 7.3(c) hereto.
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(4) The Company shall have received a legal opinion of Ballard Spahr
Andrews & Ingersoll, LLP, counsel to Alexandria, substantially in the form of
Exhibit 7.3(d) hereto.
(5) The Company shall have received all documents it may reasonably request
relating to the existence of Alexandria and the authority of Alexandria to enter
into this Agreement, all in form and substance reasonably satisfactory to the
Company.
ARTICLE VIII
SURVIVAL; INDEMNIFICATION
SECTION 8.1 SURVIVAL. The covenants, agreements, representations and
warranties of the parties hereto contained in this Agreement or in any
certificate or other writing delivered pursuant hereto or in connection herewith
shall survive the Closing, except as provided in Section 9.2(c).
SECTION 8.2 INDEMNIFICATION.
(1) The Company hereby indemnifies Alexandria, its Affiliates, their
respective officers, directors, employees and other representatives (each an
"ALEXANDRIA INDEMNITEE") against, and agrees to hold each of them harmless (net
of any Tax benefits resulting therefrom) from, without duplication, any and all
damage, loss, liability, expense, assessment, settlement and judgment
(including, without limitation, reasonable expenses of investigation and
reasonable attorneys' fees and expenses, whether or not incurred in connection
with any action, suit, proceeding or governmental investigation) ("DAMAGES")
incurred or suffered by an Alexandria Indemnitee arising out of:
(1) any misrepresentation or breach of a representation or a
warranty by the Company contained in Article III;
(2) any breach of any covenant or agreement made or to be made by
the Company pursuant to this Agreement or the other agreements to be
entered into in connection herewith;
(3) any Company Business Liabilities; and
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(4) any claim asserted, or any action, suit or proceeding pursued
against any Alexandria Indemnitee, arising out of or relating to this
Agreement or the transactions contemplated hereby and thereby (including
the Redemption and Liquidation).
In connection with such indemnification, the Company shall deposit
the Escrow Shares in the Escrow Account at the Closing. Alexandria agrees that
it will seek recovery of any Damages incurred by an Alexandria Indemnitee first
from the amounts held in the Escrow Account, and only if such amounts are
insufficient to cover all Damages incurred, against the Company or, following
the Liquidation, the Liquidating Trust established by the Company pursuant to
the Plan of Liquidation. Alexandria further agrees that, prior to the time a
determination shall have been made pursuant to the Escrow Agreement that any of
the Escrow Shares are to be returned to Alexandria to reimburse an Alexandria
Indemnitee for Damages covered by the indemnification provided hereby, the
Company (and, following the Liquidation, the Trustees of the Liquidating Trust
on behalf of the Common Stockholders) will be entitled to exercise all rights of
ownership with respect to the Escrow Shares, including without limitation the
right to vote the Escrow Shares and to receive dividends thereon, all as more
fully set forth in the Escrow Agreement.
(2) Alexandria hereby indemnifies the Company, its Affiliates, their
respective officers, directors and other representatives (each, a "COMPANY
INDEMNITEE") and agrees to hold harmless (net of any Tax benefits resulting
therefrom) from any and all Damages incurred or suffered by such Company
Indemnitee arising out of any misrepresentation or breach of warranty or
covenant or agreement to be performed by Alexandria after the Closing pursuant
to this Agreement. Any payments made by Alexandria pursuant to this provision
shall be made through the delivery to the Company of fully paid, nonassessable
shares of Alexandria Common Stock having a Market Value, as of the date of
delivery thereof, equal to the Damages being paid.
(3) The indemnity obligations provided for in this Section 8.2 as to any
claim shall expire at such time as such claim is barred by the applicable
statute of limitations with respect to such claim; PROVIDED that the
Indemnifying Party (as defined below) shall continue to be obligated to
indemnify each Indemnified Party (as defined below) for any Damages incurred by
such Indemnified Party in establishing that such claim is barred by the
applicable statute of limitations.
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SECTION 8.3 PROCEDURES.
(1) The party seeking indemnification under Section 8.2 (the "INDEMNIFIED
PARTY") agrees to give prompt notice to the party against whom indemnity is
sought (the "INDEMNIFYING PARTY") of the assertion of any claim, or the
commencement of any suit, action or proceeding in respect of which indemnity may
be sought under such Section; PROVIDED that failure or delay on the part of any
Indemnified Party to give such notice shall not operate as a waiver of its right
to indemnification hereunder unless such failure or delay has a material adverse
effect on the relevant Indemnifying Party. The Indemnifying Party may, and at
the request of the Indemnified Party shall, participate in and control the
defense of any such suit, action or proceeding at its own expense; PROVIDED that
the Indemnifying Party shall have delivered to the Indemnified Party a written
acknowledgment of the Indemnifying Party's obligations to indemnify against
amounts described in Section 8.2 to which the suit, action or proceeding
relates. The Indemnifying Party shall not be liable under Section 8.2 for any
settlement of a claim, litigation or proceeding by any Indemnified Party without
the prior written consent of the Indemnifying Party unless the Indemnifying
Party has elected not to undertake the defense of such claim, litigation or
proceeding within 30 days after the Indemnifying Party's receipt of notice from
the Indemnified Party.
(2) Any payment required to be made under Section 8.2 shall be made not
later than 30 days after receipt by an Indemnifying Party of written notice from
the Indemnified Party stating that the Indemnified Party has incurred the amount
described in Section 8.2 for which it is seeking indemnification.
ARTICLE IX
TERMINATION
SECTION 9.1 GROUNDS FOR TERMINATION. This Agreement may be terminated at
any time prior to the Closing:
(1) by mutual written agreement of the Company and Alexandria;
(2) by either the Company or Alexandria if the Closing shall not have been
consummated on or before June 30, 1999;
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(3) by either the Company or Alexandria if there shall be any law or
regulation that makes consummation of the transactions contemplated hereby
illegal or otherwise prohibited or if consummation of the transactions
contemplated hereby would violate any nonappealable final order, decree or
judgment of any court or governmental body having competent jurisdiction;
(4) by either the Company or Alexandria if an event shall have occurred
that has resulted or could reasonably be expected to result in a material
adverse change to the anticipated benefits of the transactions contemplated
hereby, or the imposition of any material liability or restriction on account of
this transaction, to the Company or Alexandria;
(5) by either the Company or Alexandria if there has been (i) a
misrepresentation or breach of warranty on the part of Alexandria (in the case
of termination by the Company) that would have a material adverse effect on the
business or operations of Alexandria and its subsidiaries taken as a whole, or
(ii) a misrepresentation or breach of warranty by the Company (in the case of
termination by Alexandria) that would have a Material Adverse Effect, in each
case in the representations and warranties contained herein, and such
misrepresentation or breach is not capable of being cured through commercially
reasonable best efforts prior to June 30, 1999, or any condition to such party's
obligations hereunder becomes incapable of fulfillment through no fault of such
party and is not waived by such party;
(6) by the Company if, upon a vote at a duly held meeting of the Company
Stockholders or any adjournment thereof, any approval of this Agreement, the
Amendments or the Liquidation by the Company Stockholders required by the MGCL
or this Agreement has not been obtained;
(7) by either the Company or Alexandria if its respective Board of
Directors has determined, in the exercise of its duties under the MGCL, to
withdraw its recommendation of the transactions contemplated by this Agreement;
or
(8) by the Company if (i) legislation is enacted before completion of the
Exchange, or (ii) the Company in good faith believes that, based on advice of
counsel, proposed legislation likely will be enacted with an effective date that
will make it applicable to the proposed Exchange, and, in each case, the Company
has been advised by counsel that such legislation likely will have an adverse
effect on the Company or the Company Stockholders.
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The party desiring to terminate this Agreement shall give notice of such
termination to the other party.
SECTION 9.2 EFFECT OF TERMINATION. If this Agreement is terminated as
permitted by Section 9.1, subject to Section 10.3, termination shall be without
liability of any party (or any stockholder, director, officer, employee, agent,
consultant or representative of such party) to the other party to this
Agreement; PROVIDED that if such termination shall result from the willful
failure of any party to fulfill a condition to the performance of the
obligations of the other party, willful failure to perform a covenant of this
Agreement or willful breach by any party hereto of any representation or
warranty or agreement contained herein, such party shall be fully liable for any
and all Damages incurred or suffered by the other party as a result of such
failure or breach. The provision of Section 10.3 shall survive any termination
hereof pursuant to Section 9.1.
ARTICLE X
MISCELLANEOUS
SECTION 10.1 NOTICES. All notices, requests and other communications to
any party hereunder shall be in writing (including facsimile transmission) and
shall be given,
if to Alexandria, to:
Alexandria Real Estate Equities, Inc.
135 N. Los Robles Avenue
Suite 250
Pasadena, California 91101
Attention: Joel S. Marcus, Chief Executive Officer
Fax: (626) 578-0770
and to the Special Committee of the Board of Directors in care of:
Rogers & Wells LLP
200 Park Avenue
New York, NY 10166-0153
Attention: Jay Bernstein, Esq.
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Fax: (212) 878-8375
if to the Company, to:
Health Sciences Properties Holding Corporation
135 N. Los Robles Avenue
Suite 250
Pasadena, CA 91101
Attention: Jerry M. Sudarsky, Chairman of the Board
Fax: (626) 578-0770
and after the Liquidation, to the Trustee under the
Liquidating Trust established pursuant to the Plan of
Liquidation,
in each such case with a copy to:
Skadden, Arps, Slate, Meagher & Flom LLP
300 South Grand Avenue
34th Floor
Los Angeles, CA 90071
Attention: Jerome L. Coben, Esq.
Fax: (213) 687-5600
All such notices, requests and other communications shall be deemed
received on the date of receipt by the recipient thereof if received prior to 5
p.m. in the place of receipt and such day is a business day in the place of
receipt. Otherwise, any such notice, request or communication shall be deemed
not to have been received until the next succeeding business day in the place of
receipt.
SECTION 10.2 AMENDMENTS AND WAIVERS. (a) Any provision of this Agreement
may be amended or waived prior to the Closing Date if, but only if, such
amendment or waiver is in writing and is signed, in the case of an amendment, by
each party to this Agreement, or in the case of a waiver, by the party against
whom the waiver is to be effective.
(1) No failure or delay by any party in exercising any right, power or
privilege hereunder shall operate as a waiver thereof nor shall any single or
partial exercise thereof preclude any other or further exercise thereof or the
exercise of any
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other right, power or privilege. The rights and remedies herein provided shall
be cumulative and not exclusive of any rights or remedies provided by law.
SECTION 10.3 EXPENSES.
(1) All costs and expenses incurred in connection with this Agreement and
the transactions contemplated hereby, including without limitation all costs and
expenses of counsel, accountants, investment bankers and other representatives
for Alexandria and for the Company, shall be paid by the party incurring such
expense.
(2) In the event that any party is involved in any suit, action or
proceeding against any other party or parties arising out of or relating to this
Agreement or the transactions contemplated hereby, the prevailing party in that
action, suit or proceeding shall be entitled to recover from the non-prevailing
party or parties its costs and expenses (including the costs and expenses of
counsel) incurred in connection with that action, suit or proceeding.
SECTION 10.4 SUCCESSORS AND ASSIGNS. The provisions of this Agreement
shall be binding upon and inure to the benefit of the parties hereto and their
respective successors and assigns.
SECTION 10.5 GOVERNING LAW. This Agreement shall be governed by and
construed in accordance with the law of the State of California, without regard
to the conflicts of law rules of such state.
SECTION 10.6 ARBITRATION. Any dispute arising out of or in connection with
this Agreement shall be settled by binding arbitration between Alexandria and
the Company in Los Angeles, California. All disputes shall be settled by a
single arbitrator mutually agreeable to Alexandria and the Company, or if they
cannot agree to a single arbitrator in 30 days, by three arbitrators, in
accordance with the Commercial Arbitration Rules then in effect of the American
Arbitration Association (the "AAA RULES"). If a single arbitrator has not been
mutually agreed upon, the Company and Alexandria shall each designate one
arbitrator within 45 days of the demand for arbitration by either party. The
Company and Alexandria shall cause such designated arbitrators mutually to agree
upon and designate a third arbitrator; PROVIDED that (i) failing such agreement
within 30 days of the appointment of their respective arbitrators by the Company
and Alexandria, the third arbitrator shall be appointed in accordance with the
AAA Rules, and (ii) if either the Company or Alexandria fails to timely
designate an arbitrator, the dispute shall be resolved by the
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one arbitrator timely designated. The Company and Alexandria shall pay the fees
and expenses of their respectively designated arbitrators and shall bear equally
the fees and expenses of the third arbitrator (or of the sole arbitrator, in the
event a single arbitrator decides the matter). The Company and Alexandria shall
cause the arbitrators to decide the matter to be arbitrated pursuant hereto
within 60 days after the appointment of the last arbitrator. The final decision
of the arbitrator, or the majority of the arbitrators in the case of three
arbitrators, shall be furnished to the Company, Alexandria and the Escrow Agent
in writing and shall constitute a conclusive determination of the issue in
question, binding upon the Company, Alexandria and the Escrow Agent, and shall
not be contested by any of them. Judgment upon any decision may be entered in
any court of competent jurisdiction; PROVIDED that such decision may be used in
such court only for the purpose of seeking enforcement of the arbitrators'
award. The Escrow Agent shall promptly follow any directions contained in the
written decision of the arbitrator or arbitrators.
SECTION 10.7 CONSENT TO JURISDICTION. Any suit, action or proceeding
seeking to enforce any arbitration award arising out of or in connection with
this Agreement or the transactions contemplated hereby may be brought in the
United States District Court for the Central District of California or any other
California court sitting in Los Angeles County, and each of the parties hereby
consents to the exclusive jurisdiction of such courts (and of the appropriate
appellate courts therefrom) in any such suit, action or proceeding and
irrevocably waives, to the fullest extent permitted by law, any objection which
it may now or hereafter have to the laying of the venue of any such suit, action
or proceeding in any such court or that any such suit, action or proceeding
which is brought in any such court has been brought in an inconvenient forum.
Process in any such suit, action or proceeding may be served on any party
anywhere in the world, whether within or without the jurisdiction of any such
court. Without limiting the foregoing, each party agrees that service of process
on such party as provided in Section 10.1 shall be deemed effective service of
process on such party.
SECTION 10.8 WAIVER OF JURY TRIAL. THE PARTIES TO THIS AGREEMENT
IRREVOCABLY WAIVE ANY AND ALL RIGHTS TO TRIAL BY JURY IN ANY LEGAL PROCEEDING
ARISING OUT OF OR RELATING TO THIS AGREEMENT OR TO THE TRANSACTIONS CONTEMPLATED
HEREBY.
SECTION 10.9 COUNTERPARTS; THIRD PARTY BENEFICIARIES. This Agreement may
be signed in any number of counterparts, each of which shall be an original,
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with the same effect as if the signatures thereto and hereto were upon the same
instrument. No provision of this Agreement is intended to confer upon any Person
other than the parties hereto and the Company Stockholders any rights or
remedies hereunder.
SECTION 10.10 ENTIRE AGREEMENT. This Agreement and the other instruments
and documents executed and delivered pursuant hereto constitute the entire
agreement among the parties with respect to the subject matter of this Agreement
and supersede all prior agreements and understandings, both oral and written,
among the parties with respect to the subject matter of this Agreement. No
representation, inducement, promise, understanding, condition or warranty not
set forth herein has been made or relied upon by party hereto.
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IN WITNESS WHEREOF each party has caused this Agreement to be duly
executed by its respective authorized officers or representatives as of the day
and year first above written.
ALEXANDRIA REAL ESTATE EQUITIES, INC.
By: /s/ Joel S. Marcus
------------------------------------------
Name: Joel S. Marcus
Title: Chief Executive Officer
HEALTH SCIENCE PROPERTIES HOLDING
CORPORATION
By: /s/ Jerry M. Sudarsky
------------------------------------------
Name: Jerry M. Sudarsky
Title: Chairman of the Board
33
<PAGE>
Exhibit 10.16
FIRST AMENDMENT TO SHARE EXCHANGE AGREEMENT
BY AND BETWEEN
ALEXANDRIA REAL ESTATE EQUITIES, INC.
AND
HEALTH SCIENCE PROPERTIES HOLDING CORPORATION
THIS FIRST AMENDMENT dated March 10, 1999 (the "Amendment"), to the
Share Exchange Agreement (the "Share Exchange Agreement"), dated as of February
26, 1999, by and between Alexandria Real Estate Equities, Inc., a Maryland
corporation ("Alexandria"), and Health Science Properties Holding Corporation, a
Maryland Corporation (the "Company").
WITNESSETH
WHEREAS, pursuant to the Share Exchange Agreement, it is intended that
the Company will exchange (the "Exchange") all of the shares of common stock,
par value $.01 per share ("Alexandria Common Stock"), of Alexandria Real Estate
Equities, Inc., a Maryland corporation ("Alexandria"), held by the Company
(1,765,923 shares) (the "Old Alexandria Shares") for (x) a number of newly
issued shares of Alexandria Common Stock (the "New Alexandria Shares") equal to
the number of Old Alexandria Shares less the Assumed Loan Shares and the
Discount Shares, and (y) the assumption by Alexandria of the obligations of
Holdings under a margin account loan in the principal amount of $3,100,000, plus
interest accruing thereon and all other amounts owed by Holdings with respect
thereto (the "Obligation"), which Obligation is secured by 250,000 Old
Alexandria Shares; and
WHEREAS, Alexandria and the Company have agreed that, in order to
facilitate the consummation of the Exchange, it is appropriate to modify the
sequence of events leading to such consummation and to provide for certain other
matters;
NOW, THEREFORE, in consideration of the mutual covenants and agreement
contained herein, the parties hereto agree as follows:
SECTION 1.1 As used herein, unless otherwise defined, defined terms
shall have the meanings ascribed to them in the Share Exchange Agreement.
<PAGE>
SECTION 1.2 Consummation of the Exchange shall occur in the following
order:
(a) On March 10, 1999, following approval of the Exchange by the
Company Stockholders, Alexandria will assume the Obligation (the "Assumption"),
pursuant to the Instrument of Assignment and Assumption in the form annexed
hereto as Exhibit A (which supersedes the form thereof annexed to the Share
Exchange Agreement);
(b) On or after March 11, 1999, Alexandria will discharge the
Obligation in full and Alexandria and the Company will consummate the remaining
transactions comprising the Exchange.
SECTION 1.3 If the issuance of the New Alexandria Shares in exchange
for the Old Alexandria Shares, as provided for in Section 2.1 of the Share
Exchange Agreement as part of the Exchange, does not take place, and if the
Exchange does not in any event occur on or before March 15, 1999, the Assumption
will be of no force or effect, and the Company will remain solely liable for the
Obligation.
SECTION 1.4 In anticipation of the consummation of the Exchange on
March 11, 1999, and in reliance on information provided to Alexandria regarding
the total amount of the Obligation through such date, Alexandria caused the
issuance of certificates evidencing in the aggregate 1,620,527 New Alexandria
Shares, for delivery to the Company at the Closing. Alexandria is now advised
that the total amount of the Obligation is less than previously anticipated,
requiring the delivery to the Company of an additional 384 New Alexandria Shares
(the "Additional Shares"), Alexandria covenants that it will cause the Transfer
Agent for the Alexandria Common Stock to issue certificates representing the
Additional Shares within 72 hours of the Closing and deliver such certificates
to the Company.
SECTION 1.5 The Company covenants that, upon receipt of the
certificates representing the Additional Shares, it will deliver to Cedars Bank,
as escrow agent under the Escrow Agreement, a certificate representing an
additional 38 New Alexandria Shares, pursuant to Section 2.2 of the Share
Agreement, which Section provides that 10% of the New Alexandria Shares received
in the Exchange will be deposited in the Escrow Account.
SECTION 1.6 Except as modified hereby, all other provisions of the
Share Exchange Agreement remain in full force and effect.
<PAGE>
SECTION 1.7 This Agreement may be executed in counterparts all of
which, when executed by each of the parties hereto, will constitute one and the
same agreement.
3
<PAGE>
IN WITNESS WHEREOF each party has caused this Agreement to be duly
executed by its respective authorized officers or representatives as of the day
and year first above written.
ALEXANDRIA REAL ESTATE EQUITIES, INC.
By: /s/ Joel S. Marcus
-------------------------------------
Name: Joel S. Marcus
Title: Chief Executive Officer
HEALTH SCIENCE PROPERTIES HOLDING COR-
PORATION
By: /s/ Jerry M. Sudarsky
-------------------------------------
Name: Jerry M. Sudarsky
Title: Chairman of the Board
4
<PAGE>
Exhibit 10.17
SECOND AMENDMENT TO SHARE EXCHANGE AGREEMENT
BY AND BETWEEN
ALEXANDRIA REAL ESTATE EQUITIES, INC.
AND
HEALTH SCIENCE PROPERTIES HOLDING CORPORATION
THIS SECOND AMENDMENT dated March 11, 1999 (the "Amendment"), to the
Share Exchange Agreement (the "Share Exchange Agreement"), dated as of February
26, 1999, by and between Alexandria Real Estate Equities, Inc., a Maryland
corporation ("Alexandria"), and Health Science Properties Holding Corporation, a
Maryland Corporation (the "Company"), as amended on March 10, 1999.
WITNESSETH
WHEREAS, pursuant to the Share Exchange Agreement, it is intended that
the Company will exchange (the "Exchange") all of the shares of common stock,
par value $.01 per share ("Alexandria Common Stock"), of Alexandria Real Estate
Equities, Inc., a Maryland corporation ("Alexandria"), held by the Company
(1,765,923 shares) (the "Old Alexandria Shares") for (x) a number of newly
issued shares of Alexandria Common Stock (the "New Alexandria Shares") equal to
the number of Old Alexandria Shares less the Assumed Loan Shares and the
Discount Shares, and (y) the assumption by Alexandria of the obligations of
Holdings under a margin account loan in the principal amount of $3,100,000, plus
interest accruing thereon and all other amounts owed by Holdings with respect
thereto (the "Obligation"), which Obligation is secured by 250,000 Old
Alexandria Shares; and
WHEREAS, Alexandria is now advised that the total amount of the
Obligation is more than anticipated by the original Share Exchange Agreement
and less than anticipated by the First Amendment to the Share Exchange
Agreement.
NOW, THEREFORE, in consideration of the mutual covenants and
agreement contained herein, the parties hereto agree as follows:
SECTION 1.1 As used herein, unless otherwise defined, defined terms
shall have the meanings ascribed to them in the Share Exchange Agreement.
1
<PAGE>
SECTION 1.2 Section 1.4 and Section 1.5 of the First Amendment to the
Share Exchange Agreement is hereby deleted in its entirety and shall be of no
force or effect.
SECTION 1.3 In anticipation of the consummation of the Exchange on
March 11, 1999, and in reliance on information provided to Alexandria regarding
the total amount of the Obligation through such date, Alexandria caused the
issuance of certificates evidencing in the aggregate 1,620,527 New Alexandria
Shares, for delivery to the Company at the Closing. Alexandria is now advised
that the total amount of the Obligation is less than previously anticipated,
requiring the delivery to the Company of an additional 53 New Alexandria Shares
(the "Additional Shares"), Alexandria covenants that it will cause the Transfer
Agent for the Alexandria Common Stock to issue certificates representing the
Additional Shares within 72 hours of the Closing and deliver such certificates
to the Company.
SECTION 1.4 The Company covenants that, upon receipt of the
certificates representing the Additional Shares, it will deliver to Cedars Bank,
as escrow agent under the Escrow Agreement, a certificate representing an
additional 6 New Alexandria Shares, pursuant to Section 2.2 of the Share
Agreement, which Section provides that 10% of the New Alexandria Shares received
in the Exchange will be deposited in the Escrow Account.
SECTION 1.6 Except as modified hereby, all other provisions of the
Share Exchange Agreement, as previously amended, remain in full force and
effect.
SECTION 1.7 This Agreement may be executed in counterparts all of
which, when executed by each of the parties hereto, will constitute one and the
same agreement.
2
<PAGE>
IN WITNESS WHEREOF each party has caused this Agreement to be duly
executed by its respective authorized officers or representatives as of the day
and year first above written.
ALEXANDRIA REAL ESTATE EQUITIES, INC.
By: /s/ Joel S. Marcus
-------------------------------------
Name: Joel S. Marcus
Title: Chief Executive Officer
HEALTH SCIENCE PROPERTIES HOLDING CORPORATION
By: /s/ Jerry M. Sudarsky
-------------------------------------
Name: Jerry M. Sudarsky
Title: Chairman of the Board
3
<PAGE>
EXHIBIT 10.18
ESCROW AND SECURITY AGREEMENT
ESCROW AND SECURITY AGREEMENT (as amended and supplemented in
accordance with the terms hereof, and in effect from time to time, this
"AGREEMENT") dated as of March 11, 1999 among:
ALEXANDRIA REAL ESTATE EQUITIES, INC., a corporation
incorporated under the laws of the State of Maryland (together with its
successors, "ALEXANDRIA");
HEALTH SCIENCE PROPERTIES HOLDING CORPORATION, a corporation
incorporated under the laws of the State of Maryland (together with its
successors, "HOLDINGS"); and
Cedars Bank, a corporation incorporated under the laws of the
State of California, as Escrow and Security Agent (together with its successors,
the "ESCROW AGENT").
W I T N E S S E T H:
WHEREAS, Alexandria and Holdings have previously entered into
a Share Exchange Agreement dated as of February 26, 1999, (the "SHARE EXCHANGE
AGREEMENT"), as amended on March 10, 1999 and March 11, 1999, which provides,
among other things, for the issuance by Alexandria of 1,620,580 shares (the "NEW
ALEXANDRIA SHARES") of its common stock, par value $ .01 per share
(the "ALEXANDRIA COMMON STOCK") to Holdings in exchange for 1,765,923 shares of
Alexandria Common Stock held by Holdings;
WHEREAS, the Share Exchange Agreement provides that Holdings
shall establish an escrow account for the purpose of depositing therein a
portion of the New Alexandria Shares to secure the indemnification obligations
of Holdings to Alexandria in Article VIII of the Share Exchange Agreement on the
terms and conditions set forth herein; and
WHEREAS, the Escrow Agent has agreed to serve in accordance
with the terms and conditions of this Agreement.
1
<PAGE>
NOW, THEREFORE, in consideration of the mutual covenants and
agreements contained herein, the parties hereto agree as follows:
ARTICLE I
DEFINITIONS
Section 1.1 DEFINITIONS. All defined terms used but not
defined herein shall be used as defined in the Share Exchange Agreement. The
following terms, as used herein, have the following meanings:
"AAA RULES" has the meaning set forth in Section 3.2.
"ADDITIONAL ESCROW SHARES" has the meaning set forth in
Section 2.3.
"AGREED AMOUNT" has the meaning set forth in Section 3.2.
"ARBITRATOR" and "ARBITRATORS" have the meanings set forth in
Section 3.2.
"CASH EQUIVALENTS" means (i) direct obligations of the United
States or any agency thereof, or obligations guaranteed by the United States or
any agency thereof and (ii) savings accounts maintained at or certificates of
deposit issued by any bank or trust company having capital and surplus of at
least $50,000,000; PROVIDED that each such instrument (other than a passbook
savings account) matures within one year from the date of deposit thereof in the
Escrow Account.
"CLAIMED AMOUNT" has the meaning set forth in Section 3.2.
"CLAIM NOTICE" has the meaning set forth in Section 3.2.
"CLOSING" means the consummation of the transactions
contemplated by the Share Exchange Agreement.
"CLOSING DATE" means the date on which the Closing occurs.
"CONTESTED AMOUNT" has the meaning set forth in Section 3.2.
2
<PAGE>
"DAMAGES" has the meaning set forth in Section 8.2 of the
Share Exchange Agreement.
"ESCROW ACCOUNT" has the meaning set forth in Section 2.2.
"ESCROW SHARES" has the meaning set forth in Section 2.3.
"ESCROW TERMINATION DATE" has the meaning set forth in
Section 3.3.
"ESTIMATED DAMAGES" has the meaning set forth in Section 3.3
"FAIR MARKET VALUE" means (i) with respect to the Escrow
Shares, the average of the closing price per share of Alexandria Common Stock on
the New York Stock Exchange (the "NYSE") (or if there be no trading in the
Alexandria Common Stock on the NYSE on any such day, the average of the closing
bid and ask prices per share of Alexandria Common Stock on the NYSE on such day)
on the 20 trading days ending 10 days prior to the date of determination,
multiplied by the number of Escrow Shares and (ii) with respect to any other
property, the value determined by the mutual agreement of Holdings and
Alexandria.
"GOOD FAITH NEGOTIATION PERIOD" has the meaning set forth in
Section 5.5.
"INITIAL ESCROW SHARES" has the meaning set forth in Section
2.3.
"MEMORANDUM" has the meaning set forth in Section 3.2.
"PARTIAL ESCROW RELEASE DATE" has the meaning set forth in
Section 3.3.
"PERSON" means an individual, corporation, partnership,
association, trust, limited liability company or any other entity or
organization, including a government or political subdivision or an agency, unit
or instrumentality thereof.
"RESPONSE NOTICE" has the meaning set forth in Section 3.2.
"SUBSIDIARY" means, with respect to any Person, entity of
which securities or other ownership interests having ordinary voting power to
elect a
3
<PAGE>
majority of the board of directors or other persons performing similar functions
are at the time directly or indirectly owned by such Person.
ARTICLE II
THE ESCROW ACCOUNT
Section 2.1 APPOINTMENT OF ESCROW AGENT. Alexandria and
Holdings hereby appoint Cedars Bank to act as Escrow Agent under the terms and
conditions set forth in this Agreement, and Cedars Bank hereby acknowledges its
receipt of the Share Exchange Agreement and accepts such appointment on the
terms and condi tions herein.
Section 2.2 ESTABLISHMENT OF ESCROW ACCOUNT. Holdings hereby
establishes and, at all times after the date hereof until this Agreement is
terminated pursuant to Section 5.1, shall maintain, at the Los Angeles office of
the Escrow Agent, in the name of the Escrow Agent for the benefit of Alexandria,
a custodial account (the "ESCROW ACCOUNT") entitled the "Escrow Account under
Escrow and Security Agreement dated as of March 11, 1999, among Alexandria Real
Estate Equities, Inc., a Maryland corporation, Health Science Properties
Holdings Corporation, a Maryland corporation, and Cedars Bank, as Escrow
Agent."
Section 2.3 DEPOSIT OF ESCROW SHARES. On the date hereof,
Holdings has deposited into the Escrow Account certificates, registered in the
name of Holdings, with duly executed stock powers attached, evidencing 162,052
shares of Alexandria Common Stock (the "INITIAL ESCROW SHARES"). As soon as is
practicable following the date hereof, following receipt thereof from
Alexandria, Holdings will deposit into the Escrow Account certificates,
registered in the name of Holdings, with duly executed stock powers attached,
evidencing an additional 6 shares of Alexandria Common Stock (the "ADDITIONAL
ESCROW SHARES," together with the Initial Escrow Shares, the "ESCROW SHARES").
Section 2.4 SECURITY INTERESTS IN ESCROW ACCOUNT.
(a) As collateral security for the prompt payment in
full when due of any indemnification obligations of Holdings to Alexandria under
Article VIII of the Share Exchange Agreement, Holdings hereby grants to the
Escrow Agent for the sole benefit of Alexandria an exclusive first priority
continuing security interest in all of its rights, title and interest in and to
the Escrow Account.
4
<PAGE>
(b) Holdings will, from time to time, at its
expense, execute, deliver, file and record any statement, assignment,
instrument, document, agreement or other paper and take any other action
(including any actions required under the laws of the State of California or
any other applicable laws) that from time to time may be reasonably necessary
or desirable, or that the Escrow Agent may reasonably request (including upon
any change of such laws) in order to create, preserve, perfect, confirm or
validate the Escrow Agent's security interest (acting in its capacity as the
security agent under this Agreement). To the extent permitted by applicable
law, in the event Holdings shall fail to comply with its obligations under
the preceding sentence within 20 days following a written request by the
Escrow Agent, Holdings authorizes the Escrow Agent and Alexandria to take any
of the actions enumerated in the previous sentence that from time to time may
be necessary or desirable, in the reasonable judgment of the Escrow Agent or
Alexandria (including upon any change of such laws) in order to create,
preserve, perfect, confirm or validate the Escrow Agent's (acting in its
capacity as the security agent under this Agreement) security interest and to
file and record any statement, assignment, instrument, document, agreement or
other paper required in connection with such action. Holdings hereby appoints
the Escrow Agent as its attorney-in-fact with full power and authority to act
as agent and in the place and stead of Holdings solely for the purpose of
providing the signature of Holdings on such statement, assignment,
instrument, document, agreement or other paper. Holdings agrees that a
carbon, photographic, photostatic or other reproduction of this Agreement or
of a financing statement is sufficient as a financing statement. Holdings
shall pay the costs of, or incidental to, any recording or filing of any
financing or continuation statements.
ARTICLE III
ADMINISTRATION OF THE ESCROW ACCOUNT
Section 3.1 ADMINISTRATION OF THE ESCROW ACCOUNT. The Escrow
Agent shall administer the Escrow Account as follows:
(a) PROPERTY IN THE ESCROW ACCOUNT. The Escrow Agent
shall promptly deposit, upon receipt, all shares of Alexandria Common Stock and
any other securities or property received by it hereunder, into the Escrow
Account and shall hold and safeguard such amounts to protect and secure the
rights of Alexandria under Article VIII of the Share Exchange Agreement. The
Escrow Agent shall invest any cash in the Escrow Account (including any accrued
interest earned thereon) only in Cash Equivalents.
5
<PAGE>
(b) The Escrow Agent shall have the right to
liquidate any property held in the Escrow Account in order to provide funds
necessary to make required payments under this Agreement. The Escrow Agent in
its capacity as escrow agent hereunder shall not have any liability for any loss
sustained as a result of any diminution in value of the Escrow Shares made
pursuant to the terms hereof or as a result of any liquidation of any property
held in the Escrow Account or for the failure of the parties to give the Escrow
Agent instructions to invest or re-invest the Escrow Amount or any earnings
thereon.
(c) The Escrow Agent shall distribute and pay to
Holdings or to such person or persons as Holdings shall direct, on at least a
quarterly basis, all dividends, interest and other cash distributions received
with respect to the Escrow Shares or with respect to any other property held in
the Escrow Account.
(d) Prior to the release of the Escrow Shares from
the Escrow Account pursuant to Section 3.3, Holdings shall have the exclusive
right to exercise any voting privileges associated with the Escrow Shares.
Section 3.2 CLAIMS AGAINST THE ESCROW ACCOUNT.
(a) If Alexandria has incurred or suffered damages
for which it is entitled to indemnification under Article VIII of the Share
Exchange Agreement, it shall, immediately upon becoming aware of such damages or
claim, and in any event prior to the Escrow Termination Date (as defined in
Section 3.3) give written notice of such claim (a "CLAIM NOTICE") to Holdings
and the Escrow Agent. Each Claim Notice shall state the amount of claimed
damages (the "CLAIMED AMOUNT") and the basis for such claim. Claims for
indemnification involving a claim or legal proceeding by a third party shall be
made in accordance with the procedures set forth in Article VIII of the Share
Exchange Agreement. For indemnification claims not involving any claim or legal
proceeding by a third party, the procedures herein shall apply. Within 30 days
after delivery of a Claim Notice, Holdings shall provide to Alexandria, with a
copy to the Escrow Agent, a written response (the "RESPONSE NOTICE") in which
Holdings shall: (i) agree that some or all of the Escrow Account having a Fair
Market Value equal to the full Claimed Amount may be released to Alexandria,
(ii) agree that some of the Escrow Account having a Fair Market Value equal to
part, but not all, of the Claimed Amount (the "AGREED AMOUNT") may be released
to Alexandria, or (iii) contest that any of the Escrow Account may be released
to Alexandria. Holdings may contest the release of property in the Escrow
6
<PAGE>
Account to satisfy a Claim Notice only based upon a good faith belief that all
or a portion of the Claimed Amount does not constitute Damages for which
Alexandria is entitled to indemnification under Article VIII of the Share
Exchange Agreement or that the amount of such Damage has not yet been finally
determined. If no Response Notice is delivered by Holdings within such 30-day
period, Holdings shall be deemed to have agreed that property in the Escrow
Account having a Fair Market Value equal to the Claimed Amount may be released
to Alexandria.
(b) If Holdings in the Response Notice agrees (or is
deemed to have agreed) that property in the Escrow Account having a Fair Market
Value equal to the Claimed Amount may be released to Alexandria from the Escrow
Account, the Escrow Agent shall, according to the written directions of
Alexandria, promptly following the earlier of the required delivery date for the
Response Notice or the delivery of the Response Notice, transfer, deliver and
assign to Alexandria Escrow Shares or other property held in the Escrow Account
which has a Fair Market Value equal to the Claimed Amount (or such lesser amount
of Escrow Shares or other property as is then held in the Escrow Account or is
available for distribution). Selection of the property to be distributed will be
within the sole discretion of the Escrow Agent.
(c) If Holdings in the Response Notice agrees that
property in the Escrow Account having a Fair Market Value equal to any part of
the Claimed Amount may be released to Alexandria from the Escrow Account, the
Escrow Agent shall promptly following the delivery of the Response Notice
transfer, deliver and assign to Alexandria Escrow Shares or other property held
in the Escrow Account having a Fair Market Value equal to the Agreed Amount (or
such lesser amount of Escrow Shares or other property as is then held in the
Escrow Account). If Holdings in the Response Notice contests the release of
property having a Fair Market Value equal to part or all of the Claimed Amount
(the "CONTESTED AMOUNT"), Holdings and Alexandria shall attempt promptly and in
good faith to agree upon the rights of the parties with respect to the Contested
Amount. If Holdings and Alexandria should so agree, a memorandum (the
"MEMORANDUM") setting forth such agreement shall be prepared and signed by both
parties and, if such Memorandum provides that all or a portion of the Contested
Amount is to be paid to Alexandria, the Escrow Agent shall transfer, assign and
deliver to Alexandria from the Escrow Account Escrow Shares or other property
having a Fair Market Value equal to the amount so agreed (or such lesser amount
of Escrow Shares or other property as is then held in the Escrow Account). If no
such agreement can be reached between Holdings and Alexandria after good faith
negotiation over a period of 30 days (or such longer
7
<PAGE>
period as Holdings and Alexandria may mutually agree), the unresolved
indemnification claims of Alexandria shall be settled by binding arbitration
between Alexandria and Holdings (to which the Escrow Agent shall not be a party)
in Los Angeles, California. All claims shall be settled by a single arbitrator
mutually agreeable to Alexandria and Holdings (the "ARBITRATOR"), or if they
cannot agree to a single arbitrator in 30 days, by three arbitrators (the
"ARBITRATORS"), in accordance with the Commercial Arbitration Rules then in
effect of the American Arbitration Association (the "AAA RULES"). If a single
arbitrator has not been mutually agreed upon, Holdings and Alexandria shall each
designate one arbitrator within 45 days of the delivery of Holdings' Response
Notice contesting the Claimed Amount. Holdings and Alexandria shall cause such
designated arbitrators mutually to agree upon and designate a third arbitrator;
provided, however, that (i) failing such agreement within 75 days of delivery of
Holdings' Response Notice, the third arbitrator shall be appointed in accordance
with the AAA Rules, and (ii) if either Holdings or Alexandria fail to timely
designate an Arbitrator, the dispute shall be resolved by the one arbitrator
timely designated. Holdings and Alexandria shall pay the fees and expenses of
their respectively designated arbitrators and shall bear equally the fees and
expenses of the third arbitrator (or of the sole arbitrator, in the event a
single arbitrator decides the matter). Holdings and Alexandria shall cause the
Arbitrators to decide the matter to be arbitrated pursuant hereto within 60 days
after the appointment of the last arbitrator. The Arbitrators' decision shall
relate solely to whether Alexandria is entitled to receive the Contested Amount
(or a portion thereof) pursuant to the applicable terms of the Share Exchange
Agreement and this Agreement. The final decision of the Arbitrator, or the
majority of the Arbitrators in the case of three arbitrators, shall be furnished
to Holdings, Alexandria and the Escrow Agent in writing and shall constitute a
conclusive determination of the issue in question, binding upon the Holdings,
Alexandria and the Escrow Agent, and shall not be contested by any of them. Such
decision may be used in a court of law only for the purpose of seeking
enforcement of the Arbitrator's or Arbitrators' award. The Escrow Agent shall
promptly follow any directions contained in the written decision of the
Arbitrator or Arbitrators.
(d) After delivery of a Response Notice that the
Claimed Amount is contested by Holdings, or, if a Claim Notice has been
delivered within 30 days of the Partial Escrow Release Date or the Escrow
Termination Date, after delivery of such Claim Notice, the Escrow Agent shall
continue to hold in the Escrow Account Escrow Shares and other property having a
Fair Market Value sufficient to cover the Contested Amount (up to the amount of
Escrow Shares and other property then available in the Escrow Account),
notwithstanding the occur-
8
<PAGE>
rence of the Escrow Termination Date until (i) delivery of a copy of a
settlement agreement executed by Alexandria and Holdings setting forth
instructions to the Escrow Agent as to the release of Escrow Shares and other
property, if any, that shall be made with respect to the Contested Amount, or
(ii) delivery of a copy of the final award of the arbitrator, or a majority of
the arbitrators in the case of three arbitrators, setting forth instructions to
the Escrow Agent as to the release of Escrow Shares and other property, if any,
that shall be made with respect to the Contested Amount. The Escrow Agent shall
thereupon release Escrow Shares and other property from the Escrow Account (to
the extent Escrow Shares and other property is then held in the Escrow Account
in accordance with such agreement or instructions).
(e) If, as a result of any third-party claim or legal
proceeding subject to the indemnification procedures set forth in Article VIII
of the Share Exchange Agreement, any settlement has been entered into, or any
judgment entered against Alexandria in favor of any third party (which is not
subject to further appeal), Alexandria may give notice of the resulting Damages
to the Escrow Agent and the Escrow Agent shall, promptly following the receipt
of such notice, transfer, deliver and assign to Alexandria Escrow Shares and
other property held in the Escrow Account having a Fair Market Value equal to
such Damages (or such lesser amount of Escrow Shares and other property as is
then held in the Escrow Account).
Section 3.3 RELEASE OF ESCROW SHARES.
(a) Within 30 days after the date which is the later
of the first anniversary of the Closing and the date on which the audited annual
financial statements of Alexandria for the fiscal year ended December 31, 1999
are first released to the public (the "PARTIAL ESCROW RELEASE DATE"), the Escrow
Agent shall pay and distribute to Holdings Escrow Shares or other property, if
any, then remaining in the Escrow Account as of the Partial Escrow Release
Date, having a Fair Market Value equal to fifty percent (50%) of the amount
determined by subtracting (i) amounts claimed by Alexandria against the Escrow
Account, as reflected in Claim Notice(s) delivered to the Escrow Agent, and not
yet finally determined as of the Partial Escrow Release Date from (ii) the Fair
Market Value of the Escrow Account; PROVIDED that, if Alexandria has given
notice to Holdings and the Escrow Agent specifying in reasonable detail and in
good faith the nature of any other claim it may have under Article VIII of the
Share Exchange Agreement with respect to which it is unable to specify Damages,
but believes in good faith would result in Damages in an amount set forth in
such notice, including a brief analysis of the rationale used to compute such
Damages (the "ESTIMATED DAMAGES"), Escrow Shares or other
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<PAGE>
property having a Fair Market Value equal to the Estimated Damages will be
retained by the Escrow Agent as if such Estimated Damages had been included on a
Claim Notice delivered to the Escrow Agent prior to the Partial Escrow Release
Date until the earlier of (a) receipt by the Escrow Agent of joint written
instructions of Holdings and Alexandria, (b) delivery to the Escrow Agent of a
written decision of the Arbitrator or Arbitrators regarding the disposition of
the property in the Escrow Account and (c) delivery by Alexandria of a Claim
Notice setting forth specific Damages that were previously considered Estimated
Damages, at which time the Escrow Agent shall release from the Escrow Account
Escrow Shares or other property, if any, then remaining in the Escrow Account
having a Fair Market Value equal to fifty percent (50%) of the amount by which
the Estimated Damages exceed the amount of Damages set forth in the Claim Notice
relating thereto.
(b) The Escrow Account will terminate on March 11,
2001 (the "ESCROW TERMINATION DATE"). Within 30 days after the Escrow
Termination Date, the Escrow Agent shall pay and distribute to Holdings all of
the Escrow Shares or other property, if any, then remaining in the Escrow
Account, unless (i) any Claim Notice(s) previously delivered to the Escrow Agent
is pending as of the Escrow Termination Date, in which case the Escrow Agent
shall retain in the Escrow Account Escrow Shares or other property having a Fair
Market Value equal to the full amount claimed in such Claim Notice(s) or (ii)
Alexandria has given notice to Holdings and the Escrow Agent specifying in
reasonable detail and in good faith the nature of any other claim it may have
under Article VIII of the Share Exchange Agreement, including a brief analysis
of the rationale used to compute the Estimated Damages, in which case Escrow
Shares or other property having a Fair Market Value equal to the Estimated
Damages will be retained by the Escrow Agent as if such Estimated Damages had
been included on a Claim Notice delivered to the Escrow Agent prior to the
Escrow Termination Date until the earlier of (a) receipt by the Escrow Agent of
joint written instructions of Holdings and Alexandria, (b) delivery to the
Escrow Agent of a written decision of the Arbitrator or Arbitrators regarding
the disposition of the property in the Escrow Account and (c) delivery by
Alexandria of a Claim Notice setting forth specific Damages that were previously
considered Estimated Damages, at which time the Escrow Agent shall release from
the Escrow Account Escrow Shares or other property, if any, then remaining in
the Escrow Account having a Fair Market Value equal to the amount by which the
Estimated Damages exceed the amount of Damages set forth in the Claim Notice
relating thereto.
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ARTICLE IV
THE ESCROW AGENT
Section 4.1 RESIGNATION AND REMOVAL OF ESCROW AGENT.
(a) The Escrow Agent may resign by giving notice in
writing of such resignation to each other party to this Agreement, specifying a
date not less than 90 days after the date of such notice when such resignation
shall become effective. The Escrow Agent may be removed at any time by
Alexandria with the written consent of Holdings. If the Escrow Agent shall
resign or be removed, Alexandria and Holdings shall appoint, as soon as
possible, a successor Escrow Agent.
(b) Any successor Escrow Agent shall be deemed to
have qualified as Escrow Agent and to have accepted the responsibilities
hereunder when such successor shall have executed and delivered one counterpart
of this Agreement to Alexandria and Holdings. Upon such qualification and
acceptance, the original Escrow Agent shall be fully released and relieved of
all duties, responsibilities and obligations under this Agreement, subject to
Section 4.3(a), and rights, powers, duties and obligations of the original
Escrow Agent shall be possessed and assumed by the successor Escrow Agent with
the same effect as though such successor had originally been the Escrow Agent
under this Agreement.
Section 4.2 MAINTENANCE OF RECORDS, REPORTS. The Escrow Agent
shall maintain and, promptly upon request, disclose to Alexandria and Holdings
adequate records relating to the receipts and disbursements of, and the balance
in, the Escrow Account.
Section 4.3 LIABILITY OF ESCROW AGENT.
(a) The Escrow Agent undertakes to perform only such
duties and obligations as are expressly set forth herein, and no implied duties
or obligations shall be read into this Agreement. The Escrow Agent may rely, as
to the truth of the statements expressed herein, upon any document, instrument,
certification, authorization or notice the Escrow Agent believes in good faith
to be genuine and to have been presented or signed by the proper party or
parties. The Escrow Agent will incur no liability under this Agreement except
for its willful misconduct or gross negligence, provided that in no event shall
the Escrow Agent be liable for special, indirect
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or consequential loss or damage of any kind whatsoever (including but not
limited to lost profits), even if the Escrow Agent has been advised of the
likelihood of such loss or damage and regardless of the form of action.
(b) The Escrow Agent shall not have any liability or
responsi bility in connection with any representations, warranties or covenants
of other parties contained in, or any other provisions of, the Share Exchange
Agreement or any document delivered thereunder and in particular shall not have
any liability or responsibility for determining whether any amounts deposited
with the Escrow Agent under this Agreement and the Share Exchange Agreement are
in the amounts required under the Share Exchange Agreement to be so deposited
and as to whether and when such amounts are required to be so deposited with it
thereunder.
(c) Any certificate or other communication from
Alexandria or Holdings contemplated by this Agreement shall be sufficiently
evidenced to the Escrow Agent if executed by the President or any Vice President
of Alexandria or Holdings, as the case may be.
(d) The Escrow Agent may consult with counsel and the
written advice of such counsel shall be full and complete authorization and
protection in respect of any action taken, suffered or omitted by it under this
Agreement in good faith in reliance on such advice.
(e) In the event the Escrow Agent shall be uncertain
as to its duties or rights hereunder or shall receive instructions, claims or
demands from any party hereto which, in its opinion based upon advice of its
counsel, conflict with any of the provisions of this Agreement, the Escrow Agent
shall give a notice of such conflict to Alexandria and Holdings, and it shall be
entitled to refrain from taking any action until such conflict is resolved, and
the Escrow Agent's sole obligation shall be to keep safely all property held in
escrow until it shall be directed otherwise in writing by Alexandria and
Holdings or by a final order or judgment of a court of competent jurisdiction.
(f) In the event transfer instructions are given
pursuant to Article III, the Escrow Agent is authorized to seek confirmation of
such instructions by telephone call-back to the person or persons designated on
Schedule 2 hereto, and the Escrow Agent may rely upon the confirmation of anyone
purporting to the person or persons so designated. The persons and telephone
numbers for call-backs may be changed only in a writing signed by the President
or any Vice President of Alexan-
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dria or Holdings, as the case may be, that is actually received and acknowledged
by the Escrow Agent. The parties hereto acknowledge that such security procedure
is commercially reasonable.
Section 4.4 FEES, EXPENSES AND INDEMNITIES.
(a) The Escrow Agent shall receive such fees for its
services performed under this Agreement as it normally charges for similar
escrow services as described on Schedule 1 attached hereto or as shall otherwise
be agreed by it with Holdings. In addition, the Escrow Agent shall be entitled
to reimbursement for all reasonable expenses, disbursements, and advances,
including reasonable attorneys' fees, incurred by the Escrow Agent hereunder.
All such fees shall be paid by Holdings promptly upon presentation of an invoice
therefor and all supporting documentation.
(b) Holdings and Alexandria agree to indemnify, hold
harmless and defend the Escrow Agent from and against any and all claims,
damages or losses (including the reasonable fees of its counsel), which it may
suffer or incur hereunder except such as shall result from Escrow Agent's own
gross negligence or willful misconduct.
(c) The Escrow Agent hereby expressly acknowledges
and agrees that it shall have neither a lien nor any other right or claim on any
amounts deposited in the Escrow Account on its own account (including, without
limitation, in respect of its fees, expenses or any other claims).
Section 4.5 ROLE OF ESCROW AGENT. It is acknowledged and
agreed by all parties to this Agreement that the Escrow Agent is acting in the
dual capacities of escrow agent and security agent with respect to the Escrow
Account. In its capacity as security agent holding the security interests in the
collateral for Alexandria, it shall act as bailee for, and on behalf of,
Alexandria only.
ARTICLE V
MISCELLANEOUS
Section 5.1 TERM. This Agreement shall terminate upon the
latest of (i) the Escrow Termination Date or (ii) the distribution by the Escrow
Agent of all Escrow Shares or other property in accordance with this Agreement.
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Section 5.2 NOTICES. All notices and other communications
under this Agreement shall be in writing and shall be deemed to have been given:
(a) if mailed by first class registered or certified
mail postage prepaid, upon actual receipt or refusal to accept, or
(b) if deposited for overnight delivery with a
recognized courier service, upon actual receipt or refusal to accept, or
(c) if delivered by hand or in the form of a
facsimile transmis sion, when received, in each case addressed or directed as
follows:
if to the Escrow Agent, to:
Cedars Bank
444 South Flower Street
14th Floor
Los Angeles, CA 90071
Attention: Norman Morales
Fax: (213) 627-1033
if to Alexandria Real Estate Equities, Inc., to:
Alexandria Real Estate Equities, Inc.
135 North Los Robles Avenue, Suite 250
Pasadena, CA 91101
Attention: Joel S. Marcus
Fax: (626) 578-0770
if to Health Science Properties Holding Corporation, to:
Health Science Properties Holding Corporation
135 North Los Robles Avenue, Suite 250
Pasadena, CA 91101
Attention: Jerry M. Sudarsky
Fax: (626) 578-0770
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if to the Trustee under the Liquidating Trust, to such address
as the Trustee shall provide to the Escrow Agent and Alexandria in accordance
with the provisions hereof.
Each of the parties to this Agreement shall have the right to
change its notice address specified above by giving written notice of such
change as provided above.
Section 5.3 AMENDMENT AND WAIVERS. None of the provisions of
this Agreement may be modified or amended, nor any compliance therewith be
waived, without the prior written consent of Holdings, Alexandria and, with
respect to any amendment that would adversely affect the Escrow Agent, the
Escrow Agent. Following the liquidation of Holdings, no amendment or waiver
shall be effective as against any of the Holdings Stockholders unless the same
shall have been approved by the Trustee under the Liquidating Trust established
pursuant to the Plan of Liquidation.
Section 5.4 SUCCESSORS AND ASSIGNS. All of the covenants,
promises and agreements contained in this Agreement shall be binding upon, and
inure to the benefit of, each of the parties hereto and each of their respective
successors, assigns and beneficiaries. Neither this Agreement nor any right or
interest hereunder may be assigned in whole or in part by (i) the Escrow Agent
without the prior consent of each of Holdings and Alexandria or (ii) Holdings or
Alexandria without the prior notice to the other parties hereto. The foregoing
notwithstanding, following the liquidation of Holdings and the distribution of
its assets pursuant to the Plan of Liquidation, the Trustee(s) under the
Liquidating Trust established pursuant to the Plan of Liquidation shall succeed
to the position of Holdings hereunder.
Section 5.5 GOVERNING LAW. This Agreement shall be governed by
and construed in accordance with the law of the State of California, without
regard to the conflicts of law rules of such state.
Section 5.6 ARBITRATION. Any dispute arising out of or in
connection with this Agreement shall first be subject to good faith negotiation
between Holdings and Alexandria over a 30 day period (or such longer period as
Holdings and Alexan dria may mutually agree) (the "GOOD FAITH NEGOTIATION
PERIOD"). If no such agreement can be reached over such period, disputes shall
be
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settled by binding arbitration between Alexandria and Holdings in Los Angeles,
California. All disputes shall be settled by a single arbitrator mutually
agreeable to Alexandria and Holdings, or if they cannot agree to a single
arbitrator in 30 days, by three arbitrators, in accordance with the AAA Rules.
If a single arbitrator has not been mutually agreed upon, Holdings and
Alexandria shall each designate one arbitrator within 45 days of the end of the
Good Faith Negotiation Period. Holdings and Alexandria shall cause such
designated arbitrators mutually to agree upon and designate a third arbitrator;
provided, however, that (i) failing such agreement within 75 days of the end of
the Good Faith Negotiation Period the third arbitrator shall be appointed in
accordance with the AAA Rules, and (ii) if either Holdings or Alexandria fail to
timely designate an arbitrator, the dispute shall be resolved by the one
arbitrator timely designated. Holdings and Alexandria shall pay the fees and
expenses of their respectively designated arbitrators and shall bear equally the
fees and expenses of the third arbitrator (or of the sole arbitrator, in the
event a single arbitrator decides the matter). Holdings and Alexandria shall
cause the arbitrators to decide the matter to be arbitrated pursuant hereto
within 60 days after the appointment of the last arbitra tor. The final decision
of the arbitrator, or the majority of the arbitrators in the case of three
arbitrators, shall be furnished to Holdings, Alexandria and the Escrow Agent in
writing and shall constitute a conclusive determination of the issue in
question, binding upon the Holdings, Alexandria and the Escrow Agent, and shall
not be contested by any of them. Judgment upon any decision may be entered in
any court of competent jurisdiction; PROVIDED that such decision may be used in
such court only for the purpose of seeking enforcement of the arbitrators'
award. The Escrow Agent shall promptly follow any directions contained in the
written decision of the arbitrator or arbitrators.
Section 5.7 CONSENT TO JURISDICTION. Any suit, action or
proceeding seeking to enforce any arbitration award arising out of or in
connection with this Agreement or the transactions contemplated hereby may be
brought in the United States District Court for the Central District of
California or any other California court sitting in Los Angeles County, and each
of the parties hereby consents to the non-exclusive jurisdiction of such courts
(and of the appropriate appellate courts therefrom) in any such suit, action or
proceeding and irrevocably waives, to the fullest extent permitted by law, any
objection which it may now or hereafter have to the laying of the venue of any
such suit, action or proceeding in any such court or that any such suit, action
or proceeding which is brought in any such court has been brought in an
inconvenient forum. Process in any such suit, action or proceeding may be served
on any party anywhere in the world, whether within or without the jurisdiction
of any such court. Without limiting the foregoing, each party
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agrees that service of process on such party as provided in Section 5.2 shall be
deemed effective service of process on such party.
SECTION 5.8 WAIVER OF JURY TRIAL. THE PARTIES TO THIS
AGREEMENT IRREVOCABLY WAIVE ANY AND ALL RIGHTS TO TRIAL BY JURY IN ANY LEGAL
PROCEEDING ARISING OUT OF OR RELATING TO THIS AGREEMENT OR THE TRANSACTIONS
CONTEMPLATED HEREBY.
Section 5.9 HEADINGS. Section headings in this Agreement are
inserted for convenience only and shall be ignored in construing this Agreement.
Section 5.10 COUNTERPARTS. This Agreement may be executed in
any number of counterparts, each of which shall be deemed an original, and all
of which together shall constitute one and the same instrument.
Section 5.11 SEVERABILITY. If any provision of this Agreement
is invalid or unenforceable in any jurisdiction, then, to the fullest extent
permitted by law, (i) the other provisions in this Agreement shall remain in
full force and effect in such jurisdiction and shall be liberally construed in
favor of the Escrow Agent in order to carry out the intentions of the parties to
this Agreement as nearly as may be possible; and (ii) the invalidity or
unenforceability of any provision of this Agreement in any jurisdiction shall
not affect the validity or enforceability of such provision in any other
jurisdiction.
Section 5.12 TAX REPORTING. Each party hereto, except the
Escrow Agent, shall provide the Escrow Agent with its Tax Identification Number
(TIN) as assigned by the Internal Revenue Service. All interest or other income
earned under this Agreement shall be allocated and paid as provided herein and
reported by the recipient to the Internal Revenue Service as having been so
allocated and paid.
Section 5.13 CORPORATE SUCCESSORS TO ESCROW AGENT. Any
corporation into which the Escrow Agent in its individual capacity may be
merged or converted or with which it may be consolidated, or any corporation
resulting from any merger, conversion or consolidation to which the Escrow
Agent in its individual capacity shall be a party, or any corporation to
which substantially all the corporate trust business of the Escrow Agent in
its individual capacity may be transferred, shall be the Escrow Agent under
this Agreement without any further act.
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IN WITNESS WHEREOF, each party hereto has caused this Agree-
ment to be duly executed by its respective authorized officers or
representatives as of the day and year first above written.
ALEXANDRIA REAL ESTATE EQUITIES,
INC.
By: /s/ Joel S. Marcus
------------------------------------------
Name: Joel S. Marcus
Title: Chief Executive Officer
HEALTH SCIENCE PROPERTIES
HOLDING CORPORATION
By: /s/ Jerry M. Sudarsky
------------------------------------------
Name: Jerry M. Sudarsky
Title: Chairman of the Board
Address:
CEDARS BANK,
AS ESCROW AND SECURITY AGENT
By: /s/ William A. Hanna
--------------------------------
Name: William A. Hanna
Title: President
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SCHEDULE I
ANNUAL ESCROW AGENT FEE: $2500.00
Per quarter or portion thereof (billed in advance)
Includes review and negotiation of the Escrow Agreement, establishment of
records, procedures and controls, and other customary Escrow Agent's duties.
Payable upon establishment of the Escrow Account.
ACTIVITY FEES
Check issuance: each $10.00
Wire transfers
Incoming, each $25.00
Outgoing, each $25.00
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SCHEDULE II
TELEPHONE NUMBERS FOR CALL BACKS AND PERSONS DESIGNATED TO CONFIRM TRANSFER
INSTRUCTIONS:
1. For Alexandria [ ] - [ ]
------------ ------------
2. For Holdings [ ] - [ ]
------------ ------------
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Exhibit 10.19
REGISTRATION RIGHTS AGREEMENT
This REGISTRATION RIGHTS AGREEMENT (the "AGREEMENT") is
entered into as of this 11th day of March, 1999, by and among Alexandria Real
Estate Equities, Inc., a Maryland corporation (the "COMPANY"), and Health
Science Properties Holding Corporation, a Maryland corporation (together with
its permitted assigns, "HOLDINGS").
NOW, THEREFORE, the parties hereto hereby agree as follows:
ARTICLE I
DEFINITIONS
Section 1.1 DEFINITIONS. The following terms shall have the
meanings ascribed to them below:
"AFFILIATE" as applied to any Person, shall mean any other
Person directly or indirectly controlling or controlled by or under direct or
indirect common control with such Person.
"CLOSING DATE" shall mean the date on which the Shares are
distributed to Holdings.
"COMMISSION" shall mean the United States Securities and
Exchange Commission.
"COMMON STOCK" shall mean the common stock of the Company, par
value $.01 per share, or any other class of Common Stock of the Company.
"CONTROL" when used with respect to any Person, shall mean the
power to direct the management and policies of such Person, directly or
indirectly, whether through the ownership of voting securities, by contract or
otherwise; and the terms "controlling" and "controlled" have meanings
correlative to the foregoing.
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"CONTROLLING PERSON" shall mean each Person, if any, who
controls such Selling Holder within the meaning of Section 15 of the Securities
Act or Section 20 of the Exchange Act, together with the partners, officers,
directors, employees and agents of such controlling Person.
"DAMAGES" shall mean any loss, claim, damage, liability,
reasonable attorneys' fee, cost or expense and costs and expenses of
investigating and defending any such claim.
"DEMANDING HOLDER" shall mean any Holder who has initiated a
registration request in compliance with Section 2.1(a); PROVIDED that (i)
"Demanding Holders" shall include each Holder who has requested to have included
in a Demand Registration Registrable Securities pursuant to the notice provision
of Section 2.1(a), and (ii) any action required or permitted to be taken under
this Agreement by any Demanding Holders shall be taken by action of the holders
of a majority of the Registrable Securities held by such Demanding Holders.
"DEMAND NOTICE" shall have the meaning set forth in Section
2.1 hereof.
"DEMAND REGISTRATION" shall mean a Shelf Registration of
Registrable Securities under the Securities Act pursuant to a request made under
Section 2.1 hereof.
"EXCHANGE ACT" shall mean the Securities Exchange Act of 1934,
as amended, and the rules and regulations thereunder.
"HOLDER" shall mean Holdings in its capacity as holder of
Registrable Securities and any Person(s) who shall hereafter acquire Registrable
Securities from Holdings or another Holder.
"HOLDINGS" shall mean Health Science Properties Holding
Corporation, a Maryland corporation.
"HOLDINGS STOCKHOLDERS" shall mean stockholders of Holdings as
of the date of the Share Exchange Transaction and at any time up to and
including the Liquidation of Holdings.
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"INDEMNIFIED PARTY" shall have the meaning set forth in
Section 4.3 hereof.
"INDEMNIFYING PARTY" shall have the meaning set forth in
Section 4.3 hereof.
"INSPECTORS" shall have the meaning set forth in Section
3.1(i) hereof.
"LIQUIDATION" shall mean the complete liquidation and
dissolution of Holdings following the Share Exchange Transaction.
"NASD" shall mean the National Association of Securities
Dealers, Inc.
"NOTICES" shall have the meaning set forth in Section 5.7
hereof.
"PERSON" shall mean an individual or a corporation,
partnership, trust, or any other entity or organization, including a government
or political subdivision or an agency or instrumentality thereof.
"PIGGY-BACK HOLDERS" shall have the meaning set forth in
Section 2.2 hereof.
"PIGGY-BACK REGISTRATION" shall have the meaning set forth in
Section 2.2 hereof.
"RECORDS" shall have the meaning set forth in Section 3.1(i)
hereof.
"REGISTRABLE SECURITY" shall mean each Share until such share
(i) has been effectively registered under the Securities Act and disposed of
pursuant to an effective registration statement, (ii) is sold under
circumstances in which all of the applicable conditions of Rule 144 (or any
similar provisions then in force) under the Securities Act are met, including a
sale pursuant to the provisions of Rule 144(k) or (iii) has been otherwise
transferred and may be resold by the person receiving such certificate without
registration under the Securities Act. The foregoing notwithstanding, a Share
will not be considered a Registrable Security on any date such Share is salable
by the holder thereof under the provisions of Rule 144(k).
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"REQUISITE SHARE NUMBER" on any date shall mean a number of
Registrable Securities representing not less than 50% of the issued and
outstanding Registrable Securities held in the aggregate on such date by the
Holders.
"RULE 144" shall mean Rule 144 under the Securities Act, as
such Rule may be amended from time to time, or any similar rule (other than Rule
144A) or regulation hereafter adopted by the Commission.
"SECURITIES ACT" shall mean the Securities Act of 1933, as
amended, and the rules and regulations thereunder.
"SELLING HOLDER" shall mean a Holder who sells or proposes to
sell Registrable Securities pursuant to a registration statement under the
Securities Act.
"SHARE EXCHANGE AGREEMENT" shall mean the share exchange
agreement between the Company and Holdings, dated February 26, 1999, as amended
on March 10, 1999 and March 11, 1999.
"SHARE EXCHANGE TRANSACTION" shall mean the transaction
pursuant to the Share Exchange Agreement whereby Holdings delivers to the
Company the shares of Common Stock of the Company owned by it in exchange for
new shares of Common Stock of the Company.
"SHARES" shall mean the shares of Common Stock initially held
by Holdings upon consummation of the Share Exchange Transaction and distributed
to Holdings in the Share Exchange Transaction (including those shares of Common
Stock placed in an escrow account to secure the indemnification obligations of
Holdings to the Company under the Share Exchange Agreement), and any securities
received as a dividend thereon or with respect thereto (including, without
limitation, by way of merger, consolidation, recapitalization or otherwise).
"SHELF REGISTRATION" shall have the meaning set forth in
Section 3.1 hereof.
"UNDERWRITER" shall mean a securities dealer who purchases any
Registrable Securities as principal in a Public Offering and not as part of such
dealer's market-making activities.
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ARTICLE II
REGISTRATION RIGHTS
Section 2.1 DEMAND REGISTRATION.
(a) REQUEST FOR REGISTRATION BY THE HOLDERS. At any time and
from time to time on or after April 1, 1999, Holders owning, individually or in
the aggregate, at least the Requisite Share Number may make written request (the
"DEMAND NOTICE") for a Demand Registration of not less than 40% of the
Registrable Securities held by all Holders. Such request shall specify the
number of Registrable Securities proposed to be sold and the intended method of
disposition thereof. The Company shall be required to effect only two Demand
Registrations under this Section 2.1.
The Company shall give written notice of any registration
request by the Holders, which request complies with this Section 2.1(a), within
10 days after the receipt thereof, to each Holder who did not initially join in
such request. Within 20 days after receipt of such notice, any such Holder may
request in writing that Registrable Securities owned by it be included in such
registration. Each such request shall specify the number of shares of
Registrable Securities proposed to be sold and the intended method of
disposition thereof.
Subject to Section 2.3, the Company shall use its commercially
reasonable efforts to effect the registration under the Securities Act of the
Registrable Securities of each Demanding Holder that the Company has been so
requested to register; PROVIDED that: (i) the Company shall not be obligated to
file or cause to become effective any registration statement (x) during any
period in which any other registration statement (other than a registration
statement on Form S-4 or S-8 or any substitute form that may be adopted by the
Commission) pursuant to which shares of Common Stock are to be or were sold has
been filed and not withdrawn or has been declared effective within the prior 30
days or (y) covering Shares that are salable pursuant to Rule 144 (or any
similar provisions then in force) under the Securities Act so long as the
Company has delivered written notice to the Demanding Holder that the Company
will fully cooperate with such sale; and (ii) the Company may delay the filing
of a registration statement for a period of not more than 60 days after the date
of receipt of a request in accordance with Section 2.1 if the Company reasonably
determines that such a filing would adversely affect any proposed financing or
acquisition by the Company and furnishes to the Demanding
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Holder a certificate signed by an executive officer of the Company to such
effect. If the Company delays the filing of a Registration Statement, it shall
promptly notify the Demanding Holders in writing when the events or
circumstances permitting such postponement have ended.
(b) EFFECTIVE REGISTRATION. A registration shall not be deemed
to have been effected as a Demand Registration unless it has been declared
effective by the Commission and the Company has complied in all material
respects with its obligations under this Agreement with respect thereto;
PROVIDED that if, after the registration statement relating to such Demand
Registration has been declared effective and prior to the sale of the
Registrable Securities covered by such registration statement, the offering of
Registrable Securities pursuant to such registration is or becomes the subject
of any stop order, injunction or other order or requirement of the Commission
or any other governmental or administrative agency, or if any court prevents or
otherwise limits the sale of Registrable Securities pursuant to the registration
(for any reason other than the acts or omissions of the Selling Holders), such
registration shall be deemed not to have been effected. If (i) a Shelf
Registration requested pursuant to this Section 2.1 is deemed not to have been
effected or (ii) the Shelf Registration does not remain effective until the
earlier to occur of 180 days after the effective date thereof or the
consummation of the distribution by the Selling Holders of the Registrable
Securities included in such registration statement, then such registration
statement shall not count as a Demand Registration that may be requested by the
Demanding Holder(s) in question and the Company shall continue to be obligated
to effect a registration pursuant to this Section 2.1.
The Demanding Holders may withdraw all or any part of the
Registrable Securities from a Demand Registration at any time (whether before or
after the filing or effective date of such Demand Registration), and if all such
Registrable Securities are withdrawn, to withdraw the demand related thereto;
PROVIDED that if such withdrawal is effected after the effective date of the
registration statement relating to such Demand Registration, such Demand
Registration shall count as a Demand Registration pursuant to this Section 2.1.
If at any time a registration statement is filed pursuant to a Demand
Registration, and subsequently a sufficient number of Registrable Securities are
withdrawn from a Demand Registration so that such registration statement does
not cover at least the required amounts specified by Section 2.1(a), and an
additional number of Registrable Securities is not so included, the Company may
(or shall, if requested by the Demanding Holders) withdraw the registration
statement; and such registration statement shall count as a Demand Registration
pursuant to this Section 2.1.
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(c) SELECTION OF UNDERWRITER. If the Demanding Holders so
elect, the offering of Registrable Securities pursuant to a Demand Registration
shall be in the form of an underwritten public offering. The Demanding Holders
shall select one or more nationally recognized firms of investment bankers to
act as the bookrunning managing Underwriter or Underwriters in connection with
such offering and shall select any additional investment bankers and managers to
be used in connection with the offering; PROVIDED that such investment bankers
and managers must be reasonably satisfactory to the Company.
Section 2.2 PIGGY-BACK REGISTRATION. If at any time the
Company proposes to file a registration statement under the Securities Act with
respect to an offering of equity securities by the Company for its own account
or for the account of any securityholders of any class of its equity securities
(other than (i) a registration statement on Form S-4 or S-8 (or any substitute
form that may be adopted by the Commission) or (ii) a registration statement
filed in connection with an exchange offer or offering of securities solely to
the Company's existing securityholders), including a registration statement
relating to a Demand Registration, then the Company shall give written notice of
such proposed filing to the Holders as soon as practicable (but in no event less
than 20 days before the anticipated filing date), and such notice shall offer
such Holders the opportunity to register such number of shares of Registrable
Securities as each such Holder may request (which request shall specify the
Registrable Securities intended to be disposed of by such Holder and the
intended method of distribution thereof) (a "PIGGY-BACK REGISTRATION").
The Company shall use its best efforts to cause the managing
Underwriter or Underwriters of a proposed underwritten public offering to
permit the Registrable Securities requested by the Holders thereof to be
included in a Piggy-Back Registration (the "PIGGY-BACK HOLDERS") on the same
terms and conditions as any similar securities of the Company or any other
securityholder included therein and to permit the sale or other disposition of
such Registrable Securities in accordance with the intended method of
distribution thereof. Any Holder shall have the right to withdraw its request
for inclusion of its Registrable Securities in any registration statement
pursuant to this Section 2.2 by giving written notice to the Company of its
request to withdraw not less than five days prior to the effective date of such
registration statement. Subject to the provisions of Section 2.1, the Company
may withdraw a Piggy-Back Registration at any time prior to the time it becomes
effective; PROVIDED that the Company shall reimburse the Piggy-Back Holders for
all reasonable out-of-pocket expenses (including counsel fees and expenses)
incurred prior to such withdrawal.
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No registration effected under this Section 2.2, and no
failure to effect a registration under this Section 2.2, shall relieve the
Company of its obligations pursuant to Section 2.1, and no failure to effect a
registration under this Section 2.2 and to complete the sale of Shares in
connection therewith shall relieve the Company of any other obligation under
this Agreement (including, without limitation, the Company's obligations under
Sections 3.2 and 4.1).
Section 2.3 REDUCTION OF OFFERING.
(a) DEMAND REGISTRATION. The Company may include in a
Demand Registration shares of Common Stock for the account of the Company and
Registrable Securities for the account of the Piggy-Back Holders and shares
of Common Stock for the account of other holders thereof exercising
contractual piggy-back rights, on the same terms and conditions as the
Registrable Securities to be included therein for the account of the
Demanding Holders; PROVIDED that (i) if the managing Underwriter or
Underwriters of any underwritten public offering described in Section 2.1
have informed the Company in writing that it is their opinion that the total
number of shares which the Demanding Holders, the Company, any Piggy-Back
Holders and any such other holders intend to include in such offering is such
as to materially and adversely affect the success of such offering, then (x)
the number of shares to be offered for the account of the Company (if any)
shall be reduced (to zero, if necessary) and (y) thereafter, if necessary,
the number of shares to be offered for the account of such Piggy-Back Holders
and such other holders shall be reduced (to zero, if necessary), in the case
of this clause (y) PRO RATA in proportion to the respective number of shares
requested to be registered to the extent necessary to reduce the total number
of shares requested to be included in such offering to the number of shares,
if any, recommended by such managing Underwriters; and if the number of
shares to be offered for the account of each such Person has been reduced to
zero, and the number of Shares requested to be registered by the Demanding
Holders exceeds the number of shares recommended by such managing
Underwriters, then the number of Shares to be offered for the account of the
Demanding Holders shall be reduced PRO RATA in proportion to the respective
number of Shares requested to be registered by the Demanding Holders and (ii)
if the offering is not underwritten, no other party (other than Piggy-Back
Holders), including the Company, shall be permitted to offer securities under
any such Demand Registration unless a majority of the Shares held by the
Demanding Holder or Holders consent to the inclusion of such shares therein.
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(b) PIGGY-BACK REGISTRATION. Notwithstanding anything
contained herein, if the managing Underwriter or Underwriters of any public
offering described in Section 2.2 have informed, in writing, the Piggy-Back
Holders that it is their opinion that the total number of shares that the
Company and Holders of Registrable Securities and any other Persons desiring
to participate in such registration intend to include in such offering is
such as to materially and adversely affect the success of such offering, then
the number of shares to be offered for the account of the Piggy-Back Holders
and all such other Persons (other than the Company) participating in such
registration shall be reduced (to zero, if necessary) or limited PRO RATA in
proportion to the respective number of shares requested to be registered to
the extent necessary to reduce the total number of shares requested to be
included in such offering to the number of shares, if any, recommended by
such managing Underwriters; PROVIDED that (i) if such offering is effected
for the account of Demanding Holders pursuant to Section 2.1, then the number
of shares to be offered for the account of each Person shall be reduced in
accordance with Section 2.3(a), and (ii) if such offering is effected for the
account of any other securityholder of the Company pursuant to the demand
registration rights of such securityholder, then the number of shares to be
offered for the account of each Person shall be reduced in accordance with
the instrument granting such demand registration rights, if any, and, in the
absence of such instrument (x) the number of shares to be offered for the
account of the Company, if any, shall be reduced (to zero, if necessary) and
(y) thereafter, if necessary, the number of shares to be offered for the
account of the Piggy-Back Holders and any other Persons that have requested
to include shares in such registration (but not such securityholders who have
exercised their demand registration rights) shall be reduced (to zero, if
necessary), in the case of this clause (y) PRO RATA in proportion to the
respective number of shares requested to be registered, to the extent
necessary to reduce the total number of shares requested to be included in
such offering to the number of shares, if any, recommended by such managing
Underwriters.
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ARTICLE III
REGISTRATION PROCEDURES
Section 3.1 FILINGS: INFORMATION. Whenever the Company is
required to effect or cause the registration of Registrable Securities pursuant
to Section 2.1, the Company shall use its commercially reasonable efforts to
effect the registration and the sale of such Registrable Securities in
accordance with the intended method of disposition thereof as quickly as
practicable, and in connection with any such request:
(a) The Company shall use its commercially reasonable efforts
(subject to any procedures or limitations imposed by the staff of the
Commission) (i) to prepare and file with the Commission, within 30 days
following receipt of the Demand Notice, a registration statement on an
appropriate form for an offering on a delayed or continuous basis (the "SHELF
REGISTRATION"), (ii) to cause the Shelf Registration to be declared effective
under the Securities Act within 90 days following the receipt of the Demand
Notice and (iii) to keep such Shelf Registration continuously effective under
the Securities Act for a period of the shorter of (a) two years from the
effective date of the Shelf Registration, (b) such period that shall terminate
when all of the Registrable Securities are freely transferable without
restriction under any applicable rules and regulations under the Securities Act
or (c) such period that shall terminate when all of the Registrable Securities
have been traded or sold to parties other than the Holdings Stockholders.
(b) The Company shall as expeditiously as possible prepare and
file with the Commission such amendments and supplements to such registration
statement and the prospectus used in connection therewith as may be necessary to
keep such registration statement continuously effective (subject to the
penultimate paragraph of this Section 3.1) during the period with respect to the
disposition of all securities covered by such registration statement as provided
herein (but not before the expiration of the 90-day period referred to in
Section 4(3) of the Securities Act and Rule 174 thereunder, if applicable) and
comply with the provisions of the Securities Act with respect to the disposition
of all securities covered by such registration statement during such period in
accordance with the intended methods of disposition by each Selling Holder
thereof set forth in such registration statement.
(c) The Company shall, prior to filing a registration
statement or prospectus or any amendment or supplement thereto, furnish to each
Selling Holder,
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counsel representing such Selling Holders, and each Underwriter, if any, of the
Registrable Securities covered by such registration statement copies of such
registration statement as proposed to be filed, together with exhibits thereto
if so requested, which documents shall be subject to review and comment by the
foregoing within five days after delivery, and thereafter furnish to such
Selling Holder, counsel and Underwriter, if any, for their review and comment
such number of copies of such registration statement, each amendment and
supplement thereto (in each case including all exhibits thereto if so
requested), the prospectus included in such registration statement (including
each preliminary prospectus) and such other documents or information as such
Selling Holder, counsel or Underwriter may reasonably request in order to
facilitate the disposition of the Registrable Securities owned by such Selling
Holder.
(d) After the filing of the registration statement, the
Company shall promptly notify each Selling Holder of Registrable Securities
covered by such registration statement (i) when a prospectus or any prospectus
supplement or post-effective amendment has been filed and, with respect to a
registration statement or any post-effective amendment, when the same has become
effective, (ii) of any request by the Commission or any other federal or state
governmental authority for amendments or supplements to a registration statement
or related prospectus or for additional information, (iii) of the issuance by
the Commission or any other federal or state governmental authority of any stop
order suspending the effectiveness of a registration statement or the initiation
of any proceedings for that purpose, (iv) of the receipt by the Company of any
notification with respect to the suspension of the qualification or exemption
from qualification of any of the Registrable Securities for sale in any
jurisdiction or the initiation or threatening of any proceeding for such
purpose, (v) of the happening of any event that makes any statement made in such
registration statement or related prospectus or any document incorporated or
deemed to be incorporated therein by reference untrue in any material respect or
that requires the making of any changes in a registration statement, prospectus
or documents incorporated therein by reference so that, in the case of the
registration statement, it will not contain any untrue statement of a material
fact or omit to state any material fact required to be stated therein or
necessary to make the statements therein not misleading, and that in the case of
the prospectus, it will not contain any untrue statement of a material fact or
omit to state any material fact required to be stated therein or necessary to
make the statements therein, in light of the circumstances under which they were
made, not misleading, and (vi) of the Company's reasonable determination that a
post-effective amendment to a registration statement would be necessary.
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(e) The Company shall use its best efforts to (i) register or
qualify the Registrable Securities under such other securities or blue sky laws
of such jurisdictions in the United States as any Selling Holder reasonably (in
light of such Selling Holder's intended plan of distribution) requests, and (ii)
cause such Registrable Securities to be registered with or approved by such
other governmental agencies or authorities in the United States as may be
necessary by virtue of the business and operations of the Company and do any and
all other acts and things that may be reasonably necessary or advisable to
enable such Selling Holder to consummate the disposition of the Registrable
Securities owned by such Selling Holder; PROVIDED that the Company shall not be
required to (A) qualify generally to do business in any jurisdiction where it
would not otherwise be required to qualify but for this paragraph (e), (B)
subject itself to taxation in any such jurisdiction or (C) consent to general
service of process in any such jurisdiction.
(f) The Company shall take all reasonable actions required to
prevent the entry, or obtain the withdrawal, of any order suspending the
effectiveness of a registration statement, or the lifting of any suspension of
the qualification (or exemption from qualification) of any Registrable
Securities for sale in any jurisdiction, at the earliest moment.
(g) Upon the occurrence of any event contemplated by paragraph
3.1(d)(v) or 3.1(d)(vi) above, the Company shall (i) prepare a supplement or
post-effective amendment to such registration statement or a supplement to the
related prospectus or any document incorporated therein by reference or file any
other required document so that, as thereafter delivered to the purchasers of
the Registrable Securities being sold thereunder, such prospectus shall not
contain an untrue statement of a material fact or omit to state a material fact
required to be stated therein or necessary to make the statements therein, in
light of the circumstances under which they were made, not misleading, and (ii)
promptly make available to each Selling Holder any such supplement or amendment.
(h) The Company shall enter into customary agreements
(including, if applicable, an underwriting agreement in customary form and
reasonably satisfactory to the Company) and take such other actions as are
reasonably required in order to expedite or facilitate the disposition of such
Registrable Securities (the Selling Holders may, at their option, require that
any or all of the representations, warranties and covenants of the Company to or
for the benefit of such Underwriters also be made to and for the benefit of such
Selling Holders).
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(i) The Company shall make available to each Selling Holder
(and their counsel) and each Underwriter, if any, subject to restrictions
imposed by the United States federal government or any agency or instrumentality
thereof, copies of all correspondence between the Commission and the Company,
its counsel or auditors and shall also make available for inspection by any
Selling Holder, any Underwriter participating in any disposition pursuant to
such registration statement and any attorney, accountant or other professional
retained by any such Selling Holder or Underwriter (collectively, the
"INSPECTORS"), all financial and other records, pertinent corporate documents
and properties of the Company (collectively, the "RECORDS") as shall be
reasonably necessary to enable them to exercise their due diligence
responsibility, and cause the Company's officers and employees to supply all
information reasonably requested by any Inspectors in connection with such
registration statement. Records that the Company determines, in good faith, are
confidential, and of which determination the Company so notifies the Inspectors,
shall not be disclosed by the Inspectors unless (i) the disclosure of such
Records is necessary to avoid or correct a misstatement or omission in such
registration statement or (ii) the disclosure or release of such Records is
requested or required pursuant to oral questions, interrogatories, requests for
information or documents or a subpoena or other order from a court of competent
jurisdiction or other process; PROVIDED that prior to any disclosure or release
pursuant to clause (ii), the Inspectors shall provide the Company with prompt
notice of any such request or requirement so that the Company may seek an
appropriate protective order or waive such Inspectors' obligation not to
disclose such Records; and, PROVIDED FURTHER, that if, failing the entry of a
protective order or the waiver by the Company permitting the disclosure or
release of such Records, the Inspectors, upon advice of counsel, are compelled
to disclose such Records, the Inspectors may disclose only that portion of the
Records that counsel has advised them that they are compelled to disclose. Each
Selling Holder agrees that information obtained by it solely as a result of such
inspections shall be deemed confidential and shall not be used by it as the
basis for any market transactions in the securities of the Company or its
Affiliates unless and until such information is made generally available to the
public.
(j) The Company shall furnish to each Selling Holder and to
each Underwriter, if any, a signed counterpart, addressed to such Selling Holder
or Underwriter, of (i) an opinion or opinions of counsel to the Company, and
(ii) a comfort letter or comfort letters from the Company's independent public
accountants, each in customary form and covering such matters of the type
customarily covered by opinions or comfort letters, as the case may be, as the
Selling Holders or the managing Underwriter therefor reasonably requests.
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(k) The Company shall otherwise use its best efforts to comply
with all applicable rules and regulations of the Commission, and make available
to its securityholders, as soon as reasonably practicable, an earnings statement
covering a period of 12 months, beginning within three months after the
effective date of the registration statement, which earnings statement shall
satisfy the provisions of Section 11(a) of the Securities Act.
(l) The Company shall use its best efforts (i) to cause any
class of Registrable Securities to be listed on a national securities exchange
(if such shares are not already so listed) and on each additional national
securities exchange on which similar securities issued by the Company are then
listed (if any), if the listing of such Registrable Securities is then permitted
under the rules of such exchange or (ii) to secure designation of all such
Registrable Securities covered by such registration statement as a NASDAQ
"national market system security" within the meaning of Rule 11Aa2-1 of the
Commission or, failing that, to secure NASDAQ authorization for such
Registrable Securities.
(m) In connection with an underwritten public offering, the
Company shall participate, to the extent reasonably requested by the managing
Underwriter for the offering or the Selling Holders, in customary efforts to
sell the securities under the offering, including, without limitation,
participating in "road shows"; PROVIDED that the Company shall not be obligated
so to participate in more than one such offering in any 12-month period.
The Company may require each Selling Holder to promptly
furnish in writing to the Company such information regarding the distribution of
the Registrable Securities by such Selling Holder as the Company may from time
to time reasonably request and such other information as may be legally required
in connection with such registration including, without limitation, all such
information as may be requested by the Commission or the NASD. The Company may
exclude from such registration any Holder who fails to provide such information.
Each Selling Holder agrees that, upon receipt of any notice
from the Company of the happening of any event of the kind described in Sections
3.1(d)(iii), (iv), (v) and (vi) hereof, such Selling Holder shall forthwith
discontinue disposition of Registrable Securities pursuant to the registration
statement covering such Registrable Securities until such Selling Holder's
receipt of the copies of the supplemented or amended prospectus contemplated by
Section 3.1(g) hereof, and, if so directed by the Company, such Selling Holder
shall deliver to the Company all
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copies, other than permanent file copies, then in such Selling Holder's
possession of the most recent prospectus covering such Registrable Securities at
the time of receipt of such notice. In the event the Company shall give such
notice, the Company shall extend the period during which such registration
statement shall be maintained effective as provided herein by the number of days
during the period from and including the date of the giving of notice pursuant
to Section 3.1(d)(iii), (iv), (v) or (vi) hereof to the date when the Company
shall make available to the Selling Holders a prospectus supplemented or amended
to conform with the requirements of Section 3.1(g) hereof.
In connection with any registration of Registrable Securities
pursuant to Section 2.2, the Company shall take the actions contemplated by
paragraphs (c), (d), (e), (g), (i), (j), (k) and (l) above.
Section 6.4 REGISTRATION EXPENSES. In connection with a Demand
Registration pursuant to Section 2.1 hereof, and any registration statement
filed pursuant to Section 2.2 hereof, the Company shall pay the following
registration expenses incurred in connection with the registration hereunder (i)
all registration and filing fees, (ii) fees and expenses of compliance with
securities or blue sky laws (including reasonable fees and disbursements of
counsel in connection with blue sky qualifications of the Registrable
Securities), (iii) printing expenses, (iv) the Company's internal expenses
(including, without limitation, all salaries and expenses of its officers and
employees performing legal or accounting duties) and all fees and expenses
incident to the performance of or compliance with this Agreement by the Company,
(v) the fees and expenses incurred in connection with the listing of the
Registrable Securities, (vi) reasonable fees and disbursements of counsel for
the Company and customary fees and expenses for independent certified public
accountants retained by the Company (including the expenses of any comfort
letters or costs associated with the delivery by independent certified public
accountants of a comfort letter or comfort letters requested pursuant to Section
3.1(j) hereof) and (vii) the reasonable fees and expenses of any special experts
retained by the Company in connection with such registration. The Company shall
have no obligation to pay any underwriting fees, discounts or commissions
attributable to the sale of Registrable Securities.
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ARTICLE IV
INDEMNIFICATION AND CONTRIBUTION
Section 4.1 INDEMNIFICATION BY THE COMPANY. The Company
agrees to indemnify and hold harmless each Selling Holder, its partners,
officers, directors, employees, agents, and Controlling Persons from and against
any and all Damages, joint or several, and any action in respect thereof to
which such Selling Holder, its partners, officers, directors, employees and
agents, and any such Controlling Person may become subject under the Securities
Act or otherwise, insofar as such Damages (or proceedings in respect thereof)
arise out of, or are based upon, any untrue statement or alleged untrue
statement of a material fact contained in any registration statement or
prospectus relating to the Registrable Securities or any preliminary prospectus,
or arises out of, or are based upon, any omission or alleged omission to state
therein a material fact required to be stated therein or necessary to make the
statements therein not misleading, except insofar as the same are based upon
information furnished to the Company by a Selling Holder or Underwriter
expressly for use therein, and shall reimburse each Selling Holder, its
partners, officers, directors, employees and agents, and each such Controlling
Person for any legal and other expenses reasonably incurred by that Selling
Holder, its partners, officers, directors, employees and agents, or any such
Controlling Person in investigating or defending or preparing to defend against
any such Damages or proceedings; PROVIDED that the Company shall not be liable
to any Selling Holder to the extent that (a) any such Damages arise out of or
are based upon an untrue statement or omission made in any preliminary
prospectus if (i) such Selling Holder failed to send or deliver a copy of the
final prospectus with or prior to the delivery of written confirmation of the
sale by such Selling Holder to the Person asserting the claim from which such
Damages arise, and (ii) the final prospectus would have corrected such untrue
statement or such omission; or (b) any such Damages arise out of or are based
upon an untrue statement or omission in any prospectus if (x) such untrue
statement or omission is corrected in an amendment or supplement to such
prospectus, and (y) having previously been furnished by or on behalf of the
Company with copies of such prospectus as so amended or supplemented, such
Selling Holder thereafter fails to deliver such prospectus as so amended or
supplemented prior to or concurrently with the sale of a Registrable Security to
the Person asserting the claim from which such Damages arise; or (c) any such
Damages arise out of or are based upon an untrue statement or omission in any
prospectus if such Selling Holder has violated any covenant contained in Section
3.1 of this Agreement.
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Section 4.2 INDEMNIFICATION BY SELLING HOLDERS. Each Selling
Holder agrees, severally but not jointly, to indemnify and hold harmless the
Company, its officers, directors, employees and agents and each Person, if any,
who controls the Company within the meaning of Section 15 of the Securities Act
or Section 20 of the Exchange Act, together with the partners, officers,
directors, employees and agents of such controlling Person, to the same extent
as the foregoing indemnity from the Company to such Selling Holder, but only
with reference to information related to such Selling Holder or its plan of
distribution, as furnished by such Selling Holder or on such Selling Holder's
behalf expressly for use in any registration statement or prospectus relating to
the Registrable Securities, or any amendment or supplement thereto, or any
preliminary prospectus. In case any action or proceeding shall be brought
against the Company or its officers, directors, employees or agents or any such
controlling Person or its partners, officers, directors, employees or agents, in
respect of which indemnity may be sought against such Selling Holder, such
Selling Holder shall have the rights and duties given to the Company, and the
Company or its officers, directors, employees or agents, controlling Person, or
its partners, officers, directors, employees or agents, shall have the rights
and duties given to such Selling Holder, under Section 4.1. Each Selling Holder
also agrees to indemnify and hold harmless each other Selling Holder and any
Underwriters of the Registrable Securities, and their respective officers and
directors and each Person who controls each such other Selling Holder or
Underwriter on substantially the same basis as that of the indemnification of
the Company provided in this Section 4.2. The Company shall be entitled to
receive indemnities from Underwriters, selling brokers, dealer managers and
similar securities industry professionals participating in the distribu tion, to
the same extent as provided above, with respect to information so furnished by
such Persons specifically for inclusion in any prospectus or registration
statement. In no event shall the liability of any Selling Holder be greater in
amount than the dollar amount of the proceeds (net of payment of all expenses)
received by such Selling Holder upon the sale of the Registrable Securities
giving rise to such indem nification obligation.
Section 4.3 CONDUCT OF INDEMNIFICATION PROCEEDINGS.
Promptly after receipt by any Person in respect of which indemnity may be
sought pursuant to Section 4.1 or 4.2 (an "INDEMNIFIED PARTY") of notice of
any claim or the commencement of any action, the Indemnified Party shall, if
a claim in respect thereof is to be made against the Person against whom such
indemnity may be sought (an "INDEMNIFYING PARTY"), notify the Indemnifying
Party in writing of the claim or the commencement of such action, PROVIDED
that the failure to notify the Indemnifying Party shall not relieve the
Indemnifying
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Party from any liability except to the extent of any material prejudice
resulting therefrom. If any such claim or action shall be brought against an
Indemnified Party, and it shall notify the Indemnifying Party thereof, the
Indemnifying Party shall be entitled to participate therein, and, to the extent
that it wishes, jointly with any other similarly notified Indemnifying Party, to
assume the defense thereof with counsel reasonably satisfactory to the
Indemnified Party. After notice from the Indemnifying Party to the Indemnified
Party of its election to assume the defense of such claim or action, the
Indemnifying Party shall not be liable to the Indemnified Party for any legal or
other expenses subsequently incurred by the Indemnified Party in connection with
the defense thereof other than reasonable costs of investigation; PROVIDED that
the Indemnified Party shall have the right to employ separate counsel to
represent the Indemnified Party and its controlling Persons who may be subject
to liability arising out of any claim in respect of which indemnity may be
sought by the Indemnified Party against the Indemnifying Party, but the fees and
expenses of such counsel shall be for the account of such Indemnified Party
unless (i) the Indemnifying Party and the Indemnified Party shall have mutually
agreed to the retention of such counsel or (ii) in the reasonable judgment of
the Indemnifying Party and such Indemnified Party, representation of both
parties by the same counsel would be inappropriate due to actual or potential
conflicts of interest between them, it being understood however, that the
Indemnifying Party shall not, in connection with any one such claim or action
or separate but substantially similar or related claims or actions in the same
jurisdiction arising out of the same general allegations or circumstances, be
liable for the fees and expenses of more than one separate firm of attorneys
(together with appropriate local counsel) at any time for all Indemnified
Parties, or for fees and expenses that are not reason able. No Indemnifying
Party shall, without the prior written consent of the Indemnified Party, effect
any settlement of any claim or pending or threatened proceeding in respect of
which the Indemnified Party is or could have been a party and indemnity could
have been sought hereunder by such Indemnified Party, unless such settlement
includes an unconditional release of such Indemnified Party from all liability
arising out of such claim or proceeding. Whether or not the defense of any claim
or action is assumed by the Indemnifying Party, such Indemnifying Party shall
not be subject to any liability for any settlement made without its consent,
which consent shall not be unreasonably withheld.
Section 4.4 CONTRIBUTION. If the indemnification provided for
in this Article IV is unavailable to the Indemnified Parties in respect of any
Damages referred to herein, then each Indemnifying Party, in lieu of
indemnifying such Indemnified Party, shall contribute to the amount paid or
payable by such Indemni-
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fied Party as a result of such Damages (i) as between the Company and the
Selling Holders on the one hand and the Underwriters on the other, in such
proportion as is appropriate to reflect the relative benefits received by the
Company and the Selling Holders on the one hand and the Underwriters on the
other from the offering of the Registrable Securities, or if such allocation is
not permitted by applicable law, in such proportion as is appropriate to reflect
not only the relative benefits but also the relative fault of the Company and
the Selling Holders on the one hand and of the Underwriters on the other in
connection with the statements or omissions which resulted in such Damages, as
well as any other relevant equitable considerations, and (ii) as between the
Company on the one hand and each Selling Holder on the other, in such proportion
as is appropriate to reflect the relative fault of the Company and of each
Selling Holder in connection with such statements or omissions, as well as any
other relevant equitable considerations. The relative benefits received by the
Company and the Selling Holders on the one hand and the Underwriters on the
other shall be deemed to be in the same proportion as the total proceeds from
the offering (net of underwriting discounts and commissions but before deducting
expenses) received by the Company and the Selling Holders bear to the total
underwriting discounts and commissions received by the Underwriters, in each
case as set forth in the table on the cover page of the prospectus. The relative
fault of the Company and the Selling Holders on the one hand and of the
Underwriters on the other shall be determined by reference to, among other
things, whether the untrue or alleged untrue statement of a material fact or the
omission or alleged omission to state a material fact relates to information
supplied by the Company and the Selling Holders or by the Underwriters. The
relative fault of the Company on the one hand and of each Selling Holder on the
other shall be determined by reference to, among other things, whether the
untrue or alleged untrue statement of a material fact or the omission or alleged
omission to state a material fact relates to information supplied by such party,
and the parties' relative intent, knowledge, access to information and
opportunity to correct or prevent such statement or omission.
The Company and the Selling Holders agree that it would not be
just and equitable if contribution pursuant to this Section 4.4 were determined
by pro rata allocation (even if the Underwriters were treated as one entity for
such purpose) or by any other method of allocation which does not take account
of the equitable considerations referred to in the immediately preceding
paragraph. The amount paid or payable by an Indemnified Party as a result of the
Damages referred to in the immediately preceding paragraph shall be deemed to
include, subject to the limitations set forth above, any legal or other
expenses reasonably incurred by such Indemnified Party in connection with
investigating or defending any such action or
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claim. Notwithstanding the provisions of this Section 4.4, no Underwriter shall
be required to contribute any amount in excess of the amount by which the total
price at which the Registrable Securities underwritten by it and distributed to
the public were offered to the public exceeds the amount of any damages which
such Underwriter has otherwise been required to pay by reason of such untrue or
alleged untrue statement or omission or alleged omission, and no Selling Holder
shall be required to contribute any amount in excess of the amount by which the
total price at which the Registrable Securities of such Selling Holder were
offered to the public (less underwriting discounts and commissions) exceeds the
amount of any damages which such Selling Holder has otherwise been required to
pay by reason of such untrue or alleged untrue statement or omission or alleged
omission. No Person guilty of fraudulent misrepresentation (within the meaning
of Section 11(f) of the Securities Act) shall be entitled to contribution from
any Person who was not guilty of such fraudulent misrepresentation. Each Selling
Holder's obligation to contribute pursuant to this Section 4.4 is several and
not joint.
The indemnity, contribution and expense reimbursement
obligations contained in this Article IV are in addition to any liability any
Indemnifying Party may otherwise have to an Indemnified Party or otherwise. The
provisions of this Article IV shall survive, notwithstanding any transfer of the
Registrable Securities by any Holder or any termination of this Agreement.
ARTICLE V
MISCELLANEOUS
Section 5.1 PARTICIPATION IN UNDERWRITTEN REGISTRATIONS. No
Person may participate in any underwritten registration hereunder unless such
Person (a) agrees to sell such Person's securities on the basis provided in any
underwriting arrangements approved by the Persons entitled hereunder to approve
such arrangements, and (b) completes and executes all questionnaires,
indemnities, underwriting agreements, lock-up agreements and other documents
reasonably required under the terms of such underwriting arrangements and these
registration rights; PROVIDED that (i) no Selling Holder shall be required to
make any representations or warranties except those which relate solely to such
Selling Holder and its intended method of distribution, and (ii) the liability
of each such Selling Holder to any Underwriter under such underwriting agreement
shall be limited to liability arising from misstatements or omissions regarding
such Selling Holder and its intended method of distribution and any such
liability shall not exceed an amount equal to the amount of
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net proceeds such Holder derives from such registration; PROVIDED that in an
offering by the Company in which any Holder requests to be included in a
Piggy-Back Registration, the Company shall use its best efforts to arrange the
terms of the offering such that the provisions set forth in clauses (i) and (ii)
of this Section 5.1 are true; PROVIDED FURTHER, that if the Company fails in its
best efforts to so arrange the terms, the Holder may withdraw all or any part of
its Registrable Securities from the Piggy-Back Registration and the Company
shall reimburse such Holder for all reasonable out-of-pocket expenses (including
counsel fees and expenses) incurred prior to such withdrawal.
Section 5.2 RULE 144. The Company covenants that it shall
file any reports required to be filed by it under the Securities Act and the
Exchange Act and that it shall take such further action as any Holder may
reasonably request, all to the extent required from time to time to enable
Holders to sell Registrable Securities without registration under the Securities
Act within the limitation of the exemptions provided by Rule 144. Upon the
request of any Holder, the Company shall deliver to such Holder a written
statement as to whether it has complied with such requirements.
Section 5.3 AMENDMENT AND MODIFICATION. Any provision of this
Agreement may be waived, PROVIDED that such waiver is set forth in a writing
executed by the party against whom the enforcement of such waiver is sought.
This Agreement may not be amended, modified or supplemented other than by a
written instrument signed by (a) the Company and (b) a majority of the Holders
of Registrable Securities. No course of dealing between or among any Persons
having any interest in this Agreement shall be deemed effective to modify, amend
or discharge any part of this Agreement or any rights or obligations of any
Person under or by reason of this Agreement.
Section 5.4 SUCCESSORS AND ASSIGNS: ENTIRE AGREEMENT.
(a) This Agreement and all of the provisions hereof shall be
binding upon and inure to the benefit of the parties hereto and their respective
successors and assigns and executors, administrators and heirs. The Company
acknowledges specifically that Holdings Stockholders are to benefit from this
Agreement, as successors to Holdings pursuant to the Liquidation.
(b) This Agreement sets forth the entire agreement and
understanding between the parties as to the subject matter hereof and merges and
supersedes all
21
<PAGE>
prior discussions, agreements and understandings of any and every nature among
them.
Section 5.5 SEVERABILITY. In the event that any provision of
this Agreement or the application of any provision hereof is declared to be
illegal, invalid or otherwise unenforceable by a court of competent
jurisdiction, the remainder of this Agreement shall not be affected except to
the extent necessary to delete such illegal, invalid or unenforceable provision
unless that provision held invalid shall substantially impair the benefits of
the remaining portions of this Agreement.
Section 5.6 NOTICES. All notices, demands, requests,
consents or approvals (collectively, "NOTICES") required or permitted to be
given hereunder or which are given with respect to this Agreement shall be in
writing and shall be personally delivered or delivered by a reputable overnight
courier service with charges prepaid, or transmitted by hand delivery, telegram,
telex or facsimile, addressed as set forth below, or such other address as such
party shall have specified most recently by written notice. Notice shall be
deemed given or delivered on the date of service or transmission if personally
served or transmitted by telegram, telex or facsimile. Notice otherwise sent as
provided herein shall be deemed given or delivered on the next business day
following delivery of such notice to a reputable overnight courier service.
To the Company:
Alexandria Real Estate Equities, Inc.
135 N. Los Robles Avenue
Suite 250
Pasadena, California 91101
Attn: Joel S. Marcus
Fax: (626) 578-0770
22
<PAGE>
with a copy (which shall not constitute notice) to:
Cooley Godward LLP
5 Palo Alto Square, 30 Camino Real
Palo Alto, CA 94306
Attn: Alan Mendelson
Fax: (650) 857-0663
To Holdings:
Health Science Properties Holding Corporation
135 N. Los Robles Avenue
Suite 250
Pasadena, California 91101
Attn:Jerry M. Sudarsky
Fax: (626) 578-0770
with a copy (which shall not constitute notice) to:
Skadden, Arps, Slate, Meagher & Flom LLP
300 South Grand Avenue
34th Floor
Los Angeles, California 90071
Attn: Jerome L. Coben, Esq.
Fax: (213) 687-5600
To any other Holder:
To the address specified in the notice provided to
the Company upon such Person becoming a Holder.
Section 5.7 GOVERNING LAW. This Agreement shall be governed
by and construed in accordance with the internal law of the State of California,
without giving effect to principles of conflicts of law.
Section 5.8 HEADINGS. The headings in this Agreement are for
convenience of reference only and shall not constitute a part of this Agreement,
nor shall they affect their meaning, construction or effect.
23
<PAGE>
Section 5.9 COUNTERPARTS. This Agreement may be executed in
any number of counterparts, each of which shall be deemed to be an original
instrument and all of which together shall constitute one and the same
instrument.
Section 5.10 FURTHER ASSURANCES. Each party shall cooperate
and take such action as may be reasonably requested by another party in order to
carry out the provisions and purposes of this Agreement and the transactions
contemplated hereby.
Section 5.11 TERMINATION OF PRIOR AGREEMENT. The Registration
Rights Agreement dated June 2, 1997 by and among the Company and Holdings is
hereby terminated and superseded by this Agreement.
Section 5.12 TERMINATION. Unless sooner terminated in
accordance with its terms or as otherwise herein provided, this Agreement shall
terminate upon the earlier to occur of (i) the mutual agreement by the parties
hereto, (ii) with respect to any Holder, such Holder ceasing to own any
Registrable Securities or (iii) the second anniversary of the Closing Date.
Section 5.13 REMEDIES. In the event of a breach or a
threatened breach by any party to this Agreement of its obligations under this
Agreement, any party injured or to be injured by such breach shall be entitled
to specific performance of its rights under this Agreement or to injunctive
relief, in addition to being entitled to exercise all rights provided in this
Agreement and granted by law. The parties agree that the provisions of this
Agreement shall be specifically enforceable, it being agreed by the parties that
the remedy at law, including monetary damage, for breach of any such provision
shall be inadequate compensation for any loss and that any defense or objection
in any action for specific performance or injunctive relief that a remedy at law
would be adequate is waived.
Section 5.14 PRONOUNS. Whenever the context may require, any
pronouns used herein shall be deemed also to include the corresponding neuter,
masculine or feminine forms.
24
<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as
of the date first above written.
ALEXANDRIA REAL ESTATE EQUITIES, INC.
By: /s/ Joel S. Marcus
-----------------------------------
Name: Joel S. Marcus
Title: Chief Executive Officer
HEALTH SCIENCE PROPERTIES HOLDING
CORPORATION
By: /s/ Jerry M. Sudarsky
-----------------------------------
Name: Jerry M. Sudarsky
Title: Chairman of the Board
25
<PAGE>
EXHIBIT 12.1
ALEXANDRIA REAL ESTATE EQUITIES, INC.
COMPUTATION OF CONSOLIDATED RATIO OF EARNINGS TO COMBINED FIXED
CHARGES AND PREFERRED STOCK DIVIDENDS
(in thousands, except ratios)
<TABLE>
<CAPTION>
The Period
October 27,
1994
For the (inception)
Three Months Year Ended December 31, though
Ended March 31, --------------------------------------- December 31,
1999 1998 1997 1996 1995 1994
--------------- ------- -------- ------ ------ ------------
<S> <C> <C> <C> <C> <C>
Earnings (Loss):................................ $ 5,298 $19,403 $(2,797) $2,175 $ 866 $(648)
Add back:
Interest Expense............................ 4,963 14,033 7,043 6,327 3,553 328
Write-Off of Unamortized Loan Costs......... -- -- 2,295 -- -- --
Acquisition LLC Financing Costs............. -- -- 6,973 -- -- --
------- ------- ------- ------ ------ ------
Earnings Available for Fixed Charges.... 10,261 33,436 $13,514 $8,502 $4,419 $(320)
------- ------- ------- ------ ------ ------
Combined Fixed Charges:
Interest Incurred........................... 5,710 16,232 $ 7,139 $6,327 $3,553 $ 328
Write-Off of Unamortized Loan Costs(a)...... -- -- 2,295 -- -- --
Acquisition LLC Financing Costs(b).......... -- -- 6,973 -- -- --
Preferred Dividends......................... -- -- 3,038 1,590 -- --
------- ------- ------- ------ ------ ------
Fixed Charges........................... 5,710 16,232 $19,445 $7,917 $3,553 $ 328
------- ------- ------- ------ ------ ------
Ratio of Earnings to Fixed Charges and Preferred
Stock Dividends(c).......................... 1.80 2.06 0.69 1.07 1.24 --
Excess of Fixed Charges Over Earnings........... -- $ -- $ 5,931 $ -- $ -- $ 648
</TABLE>
- ------------------------
(a) This amount represents unamortized loan costs associated with debt retired
in connection with the IPO.
(b) This amount represents the portion of the purchase price of the
membership interests in ARE Acquisitions, LLC (the "Acquisition LLC") paid
by the Company in excess of the cost incurred by the Acquisition LLC to
acquire the three Life Science Facilities owned by it.
(c) For purposes of calculating the consolidated ratio of earnings to
combined fixed charges and preferred stock dividends, earnings consist
of earnings before income taxes and fixed charges. Fixed charges consist
of interest incurred (including amortization of deferred financing costs
and capitalized interest), write-off of unamortized loan costs,
Acquisition LLC Financing Costs (see Note (b)), and preferred stock
dividends.
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
CONDENSED CONSOLIDATED BALANCE SHEETS AND CONDENSED CONSOLIDATED INCOME
STATEMENTS FOUND IN THE COMPANY'S FORM 10-Q.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-START> JAN-01-1999
<PERIOD-END> MAR-31-1999
<CASH> 6,009
<SECURITIES> 0
<RECEIVABLES> 8,915
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 0
<PP&E> 537,352
<DEPRECIATION> 22,013
<TOTAL-ASSETS> 549,883
<CURRENT-LIABILITIES> 0
<BONDS> 299,220
0
0
<COMMON> 136
<OTHER-SE> 225,947
<TOTAL-LIABILITY-AND-EQUITY> 549,883
<SALES> 0
<TOTAL-REVENUES> 19,539
<CGS> 0
<TOTAL-COSTS> 4,383
<OTHER-EXPENSES> 4,895
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 4,963
<INCOME-PRETAX> 5,298
<INCOME-TAX> 0
<INCOME-CONTINUING> 5,298
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 5,298
<EPS-PRIMARY> 0.41
<EPS-DILUTED> 0.40
</TABLE>
